Lengthy response to G* shorts arguments (via LOR yahoo thread)
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Services>LOR (Loral Space/Communication)
Loral... a quick clarification- (sarge)
by: pharmacon2k
19681 of 19700
>>>G* is Loral's best great hope.
Actually, SS/L is Loral's most profitable and stable division, booked for just under 3 years into the future,
able to crank out a bird in a week if need be, and able to be sold in a 30 second phone call. If Loral needs
money they can always spin off SS/L, release a tracking stock, or simply sell off the unit. However, owning
the top rated means of production is a great advantage.
>>>All these launches the next few weeks mean very little, since they are not programs owned by Loral,
and are simply SS/L sats already factored into earnings estimates.
Actually, you know nothing about the upcoming lanch slate. SS/L birds for other services are going up;
however, Loral unit birds are also scheduled for the near future. Consider T* 8 and 9 (Chinasat footprint
conversion), continued G*, planned C* (News from within?), Orion, etc.
>>>Bottom line will by G* success or failure.
Bottom line? LOR could sell off SS/L and recoup much of the cost of G*. You forget the partnership. Loral
isn't the only one involved here: ALA, Dacom, FTE, QCOM, etc.
>>>Now G* says the real global telephony connectivity won't be >>>until 11/2000. And roll out in
important markets like North >>>America will be 2/2000 at the earliest and possibly much >>>later.
I've heard no such news from LOR, G*, partners, public news, analysts, insiders, employees. Real global
connectivity means total worldwide access vs. select market. Don't forghet that G* uses the PSTNs,
therefore select market implementation, like the current Sprint PCS (etc.) will work just fine for the majority
of initially projected users. US rollout by 2/2000? Well, that would contradict recent public statements. NA
coverage is in place now. If you have a phone, you'll be online. However, there's a select list of people and
organizations who will be provided phones in NA first.
>>>Bernie says he sees no reason to lower prices of phones and >>>service, even though G*'s chief rival
totally failed to find >>>a market due to high pricing, and is in bankruptcy.
There's a hugge difference between G* current pricing and I* initial pricing (for both hardware and service).
Furthermore, there is the technology issue (TDMA vs. CDMA). There is an issue re: hardware dimmensions
(size and weight of phones). In short, there are a number of factors that make G* different, and I*'s demise
was multi-faceted.
>>>G* has a huge burden of debt payments to make and will see >>>more in the year ahead, as they
plunge further into debt and >>>closer to bankruptcy like I*.
G* has not been a huge debt payment burden, and that is due in part to the collection of partners, including
big money private finance from investors like George Soros. They already have the credit lines and some
level of secured income; therefore, they will not plunge further into debt. Moreover, as for going closer to
chapter 11 like I*... G* does not have to enroll subscribers on its own in order to stay afloat. Rather, G*
makes licensing revenue from phone production by phone makers, who in turn make money from bulk sales
to distributors like Cell Star, who in turn make money from sales to retail outlets, who in turn make money
from sales to consumers. G* makes service revenue from contract sales of bulk link and use time, re:
gateways and sats, by service provider wholesale divisions, who in turn make money by selling smaller untis
of time to local outlets, who in turn make money by selling even smaller units of time to individual users.
Posted: 9/19/1999 8:26 pm EDT as a reply to: Msg 19677 by SargeJhcky
LOR- quick clarification cont.-
by: pharmacon2k
19682 of 19700
>>>Bernie makes absurd promises about 1.2 million subscribers to >>>G* in the year 2000, all of them
making 160 minutes of sat >>>phone calls a month! When Wall Street sees how enormously >>>short the
mark, G* hits compared to Bernie promises, both >>>company's stocks collapse to single digit share
prices.
BLS's predictions are actually very conservative in terms of global population and % possible access vs. G*
capacity. Furthermore, 160 min monthly use is very much in line with mobile wireless solution averages. US
use average is 270 minutes per month. EU average is more like 480 minutes per month. In fact, my personal
average is currently 210 minutes per month- a stat provided by ATT since I first became an ATT Wireless
subscriber, a very long time ago. However, like many, I pay for more time than that.
>>>G* is Loral's biggest gamble.
I beg to differ, I don't think those in the know, re: sat telecom / space communications would say that LOR
gambled at all. In reality, the gamble is the local store who buys phones, service, etc. and does so based on
predictions of local demand.
>>>Loral not only owns 45% of G*, but has also put most of their >>>future revenue hopes in G*, and also
backed G*'s latest 500 >>>mill. debt agreement with Loral assets.
Actually, since G* is a partnership, Loral is not the only one with risk. The $500 million credit facility is
backed by a number of things, mostly the calculated projected ability for loral and partners to make the
coupon payments in the event that G* cannot, at certain dates in the future, based on an examination of
internal cash flow to earnings vs. projected future earnings / credit rating. :o) If G* can't pay, Loral isn't going
to lose a real business unit in exchange.
>>>G* will fail as an earnings venture, at least for the next 2 >>>to 3 years minimum.
Given the predictions, estimates, some basic accounting, the real structure of money-making at various
levels, and the debt/payment structure, the fact that you say such a thing only further illustrates your lack of
understanding, re: LOR/G*, investment finance generally.
>>>Loral will go down with the ship.
This is absolutely absurd. Loral has many other profitable subsidiaries. LOR is a parent corp that mainly
engages in acquisition, management, strategic development. Corporate shields and insurance policies more
than protect the core from the shortcoming of any single subsidiary. If for some reason, that did not hold
true, re: G*, as was previously stated, another single unit could easily be sold (ex: ss/L) in order to remain
afloat. Therefore, LOR will not go down with the ship, so to speak.
Posted: 9/19/1999 8:28 pm EDT as a reply to: Msg 19681 by pharmacon2k
LOR- quick clarification cont. +
by: pharmacon2k
19683 of 19700
>>>Huge losses ahead for shareholders in either one.
Under the circumstances, I would not bet against either LOR or G*. However, if you are of the mind that
both are going down, than you must also believe that a few other corporations are going down as well. For
example, G* partner, technology developer, and hardware developer and provider QCOM, major
distributor and Globalstar Americas sole provider Cell Star, G* partner and French telecom giant Alcatel
(who is a 50/50 partner with LOR in the development of Skybridge -slated for 2002-), France Telecom
(FTE)-handling service in So.Am., and other parts of the world, British telecom giant Vodaphone (VOD)-
providing service in most of the world [partly due to No.Am. purchase of AirTouch], Korean telecom
consortium Dacom - of which Hyundai is part owner (Hyundai previously owned partnership interests in G*,
but sold off to LOR at LOR's request after slow systems integration progess), Alsthom-Alenia, Telital,
Ericsson, LG, etc.
Wow, that's a line up! You'd be talking about a major shortfall for a large number of companies if this thing
doesn't work out. Of course, if it is in mgmt. interests / as well as fiduciary responsibility / to maximize
shareholder value, thereby doing whatever is reasonable and foreseeably possible to maintain or increase
market cap / share price, then maybe those same companies would sign on for service just to keep G*
afloat. Of course, they would only need the cash flow, if even from credit lines, to pay for the G* contracts,
because in the end they'll deduct it as a business expense, thereby laying the cost of their use upon the
taxpayers.
>>>Sad but obvious.
The only thing that is sad and obvious is that you know nothing at all. You make irrational statements without
properly analyzing the environment. You have no idea what you're talking about. Are all the analysts crazy
and stupid in comparison to you? Are all the bulls blind? Well, whatever BLS said, numbers, estimates,
prjections, etc., they analyzed it, found it reasonable and safe enough to keep their money in and their ratings
stable. If none of it was reasonable, there would have been a sell off frenzy and G* would be dead. LOR
would be significantly devalued, but not dead (due to the profitability of other units). If you simply find this
too risky to be in, mainly because you don't understand the business, then stay out and don't invest.
However, I would strongly caution against long-term short positions. In fact, I generally refrain from shorting
whatsoever. The majority of stocks and markets have a tendency to rise over time; therefore, betting on
them going down any longer than a short term pop is very risky. Even timing the short term pop can be risky.
If you think LOR is goiong lowwer short term, that is one thing, and maybe a reason to short. HOwever, if
you tell me LOR is dead, and you're shorting until it files for chapter 11 protection, I'll warn that you're a
fool. Re-examine the sector technicals and fundamentals from all angles relative to G* success. I think you'll
find that G* total capacity is easy to reach in a short time period... even shorter than BLS predicted publicly.
Some Basic Stats:
Global population ~ 6.5 billion. US population ~ 275 million.
US cell users ~ 30% (82.5 million){estimated to be up another 10-15% by 12/00). G* total capacity ~ 7
million. % US pop to fill G* sys ~ 2.55%. % US cell users needed to fill G* sys ~ 8.48% (and decreasing
over the next year, as US cell user % increases).
Posted: 9/19/1999 8:28 pm EDT as a reply to: Msg 19682 by pharmacon2k |
