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Technology Stocks : IDT *(idtc) following this new issue?* -- Ignore unavailable to you. Want to Upgrade?

To: Aye Min who wrote (12719)	8/5/1999 12:56:00 AM
From: Hawaii60	Respond to of 30916

ALGX: Paul Allen Investment Huge Positive Salomon Smith Barney Wednesday, August 04, 1999 --SUMMARY:--Allegiance Telecom, Inc.--Telecommunications Services Paul Allen will buy 1.5 million shs of ALGX at $50 per sh from existing venture capitalists.Paul Allen has option to buy an additional 5 million shs at $56 per sh through 11/1/99. If he exercises options he will own 10% of the company.This is a smart investor taking out venture capitalists who would have sold their stk in the open mkt & if he exercises his option will take out other insider shs that likely would have come to mkt over the next yr.This is Paul Allen's 1st investment in a CLEC & this is clearly a significant endorsement for ALGX's strategy and operating capabilities.*This development underscores our bullishness on the stk and makes our $55 price target seem clearly too conservative. Paul Allen's Vulcan investment arm will buy 1.5 million shares of Allegiance stock from existing private equity holders for $50 per share. In addition, Mr. Allen will have an option to buy an additional 5 million shares at $56 per share up until 11/1/99. The additional 5 million shares will come from existing shareholders including insiders who have restricted stock that will need to have some liquidity. If Mr. Allen exercises his option, which we believe he will, he will own 10% of Allegiance's stock with the collateral benefit of having taken out venture capitalists and other insiders of stock that would have otherwise hit the market and potentially dampened the share price. More importantly, this is Paul Allen's first investment in a CLEC, or for that matter, a telecom company of any ilk. We believe Mr. Allen views Allegiance as a distribution channel for Mr. Allen's various internet portal operations. In particular, given that Allegiance will be co-located in 800-1,000 Bell central offices, addressing close to 30 million business lines with DSL capabilities on top of voice capabilities, Paul Allen clearly views this type of footprint as a very powerful means of distributing his content assets to a wide array of business customers. From an Allegiance perspective, they have a smart investor investing in the company taking out venture capitalists who would have dumped the stock given their natural tendencies once the company is public and Allegiance is Paul Allen's first investment in this space--which is a tremendous endorsement of Allegiance's strategy and management. Clearly, this development on top of the operating results Allegiance reported for 2Q (see our company note this morning) underscores our bullishness on Allegiance and our view that Allegiance truly is one of the blue-chip companies in the CLEC space. We believe this is a watershed event that will increase the perceived value of all CLEC assets but in particular, clearly is a boost for Allegiance. What Mr. Allen is realizing is that CLECs, like Allegiance and others who are building modern network assets in major markets with strong distribution capabilities, present a very attractive way to distribute content to end-users. We believe Mr. Allen's investment only marks the beginning of what could be other strategic investors entering this space. NET/NET: Allegiance is one of our very favorite names in this space solely based on their operating and management capabilities. The Paul Allen investment only underscores our bullishness on the stock and clearly our $55 price target is likely to be increased.