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Technology Stocks : Broadband Wireless Access [WCII, NXLK, WCOM, satellite..] -- Ignore unavailable to you. Want to Upgrade?

To: SteveG who wrote (697)	9/29/1999 11:02:00 AM
From: SteveG	Respond to of 1860

WCII: NEW CY 2000 GUIDANCE RATTLES STREET EXPECTATIONS--STRONG BUY Deutsche Banc Alex. Brown - US Equities Bo Fifer,Jeffrey L. Hines September 29, 1999 --------------------------------------------------------------------------- ---- WINSTAR COMMUNICATIONS INC. [WCII] "STRONG BUY" New CY2000 Guidance Rattles Street Expectations --------------------------------------------------------------------------- ---- Date: 09/28/1999 EPS 1998A 1999E 2000E Price: 42.19 1Q (2.51) (3.72) (3.51) 52-Wk Range: 64 - 10 2Q (2.77) (3.53)A (3.38) Ann Dividend: 0.0 3Q (2.83) (3.62) (3.20) Ann Div Yld: 0.00% 4Q (3.80) (3.44) (3.01) Mkt Cap (mm): 3,472 FY(Dec.) (11.89) (14.31) (13.11) 3-Yr Growth: FY P/EPS NM NM NM CY EPS (11.89) (14.31) (13.11) Est. Changed Yes CY P/EPS NM NM NM --------------------------------------------------------------------------- ---- Industry: COMMUNICATIONS Shares Outstanding(Mil.): 82.3 Return On Equity (1998) : 0.0% --------------------------------------------------------------------------- ---- HIGHLIGHTS: --WinStar stock fell 22% yesterday (versus a basically flat S&P 500) as the company released guidance on year 2000 estimates that was significantly below Street consensus on the top line, a sell off we believe was WAY overblown given the following four details: 1) While top line guidance is lower than the Street was prepared for, EBITDA breakeven is still projected in early 2001. 2) Gross margin guidance near 50% for CY2000 (exiting in the low-mid 50%s) is (possibly much) stronger than consensus expectations, we believe. 3) The revenue guidance reflects the Company's current outlook on 2000 staffing (salespeople and installers), rather than a lack of demand, equipment, or capital. 4) We believe there is potential upside to the guidance since we do not see any clear reason why incremental quarterly revenue gains should decline in light of point #3. --NEW ESTIMATES: We believe management's objectives (see table below) are easily attainable. We have not materially altered our 1999 forecasts, and we believe 3Q 1999 will be quite strong. We have modestly reduced our 2000 revenue estimate to $700M from $716M to reflect a small decline in access line growth, and increased our EBITDA loss to $129M from $85M to reflect higher SG&A expenses and the somewhat lower revenue. Management DBAB DBAB Metric Guidance New Est. Old Est. 2000 Revenue $650 MM $700 MM $716 MM 2000 Gross Margin 48 % 47 % 48 % 2000 EBITDA -$150 MM -$129 MM -$86 MM 2000 Access Lines -- 0.978 MM 1.033 MM Source: Company data, Deutsche Banc Alex. Brown Inc. estimates. --NET-NET: We believe management credibility was clearly compromised by the "sloppy" handling of Street expectations. We do NOT believe that WinStar's fundamental opportunity has changed in any way, however, and in fact see some signs of improvement (gross margin expansion) going forward. We maintain our "strong buy" investment rating with a new 12- month price objective of $68/share based on our DCF, down $3 which reflects our slightly tempered expectations.

To: SteveG who wrote (697)	9/29/1999 11:04:00 AM
From: SteveG	Respond to of 1860

Paine Webber's John Hodulik: WCII: Revising 2000 estimates, business remains strong September 29, 1999 KEY POINTS * We are reducing our estimates for 2000 revenues to $645 million from $757 million based on efforts by the company to focus on higher margin growth. This equates to 51% growth over 1999 estimates of $428 million versus earlier estimates for 77% growth. * Essentially, WinStar will sell fewer resold lines that we had previously forecast. Resold lines contribute very little gross margin and negative operating cash flow and therefore have no economic value. * Improving profitability of the company largely compensates for the effects this change would otherwise have on our model. Our EBITDA estimates go from a loss of $127 million to $158 million in 2000 but improve more rapidly going forward, with 2001 numbers boosted to $52 million of positive EBITDA versus our earlier estimate for just $1 million. * We believe the reaction by the market was overblown and reflects continued jitters on the part of investors caused by other negative news in the CLEC sector. The truth is, business at WinStar has never been stronger and the company continues to roll-out network at an increasing rate. * Improvements in fixed wireless technology and the company's partnership with Lucent have allowed WinStar to refocus its efforts solely on facilities-based service that leverage its unique capabilities while increasing the value of the company to wired competitors looking to extend the reach of their fiber networks. * After these changes and the subsequent pullback in WinStar shares, the company now trades at roughly 8.0x our estimate for 2000 revenues compared to 18.0x for NEXTLINK, and 22.6x for Teligent despite its leadership position in fixed wireless and improving profitability. * We continue to believe the company's third quarter will show strong revenue growth and continued gross margin expansion that have characterized recent results of the company. * Based on its position as the leading provider of fixed wireless services in the US, we believe WinStar remains the best way to play the advances in technology and increasing demand for broadband services that have led to billion dollar FW investments by MCI WorldCom, Sprint and NEXTLINK during the past twelve months. * We are reiterating our Buy based on the strength of the company's business, its improving profitability and the continued acceptance of FW as a means to solve the bottleneck of the last mile. Our 12-month price target remains $62 per share based on our DCF analysis. Risks Risks include technological change, effects of adverse regulatory rulings, increasing competition from larger carriers, substantial operating losses and continued dependence on the capital markets to fund growth.

To: SteveG who wrote (697)	9/29/1999 11:09:00 AM
From: SteveG	Respond to of 1860

CSFB John Doughty: WinStar Communications WCII Lowering Estimates Based on Conversations with Management; Reiterate Buy Rating Summary We are lowering our 2000YE revenue estimate to $652 million from $760 million and increasing our EBITDA loss estimate to $148 million from a loss of $141 million. As a result, our 2000 loss per share estimate has increased to $11. 65 from a loss of $11.26. In addition, we are lowering our estimate of line adds in 2000 to 396,000 from 422,100. According to management, the 2000 revenue shortfall is due to the fact that the company is focusing on the burgeoning data market and, in fact, is willing to discount voice service pricing to garner data business. Over the longer term, this is expected to result in an expansion in the 10-year model . In addition, the company has indicated that it will focus more on lit- buildings to further penetrate those premises (this is not to say that they are not aggressively gaining roof rights to additional buildings - 8,000 estimated by year-end 1999). The 26% drop in the stock price today reflects the fact that management had not provided the Street with forward-looking revenue and EBITDA guidance. As such, Street revenue estimates for the year 2000 range between the low $600 million range to the mid-$900 million range. Net/Net: WinStar is in a unique position to capitalize on the demand for local broadband. The company is making solid progress in its market expansion and marketing of multiple services and on-net lines. Point-to-multipoint services are on schedule to be rolled out in the fourth quarter. We continue to view WCII as a core holding in the CLEC group and would be buyers on any weakness. Price Target Mkt.Value 52-Week 9/27/991 (12mo.) Div. Yield (MM) Price Range 54.00 $70 None $3,763.8 $10-64 Annual Prev. Abs. Rel. EV/ EBITDA/ EPS EPS P/E P/E EBITDA Share 12/00 (11.65) (11.26) 12/99E (13.45) NA NA (5.85) 12/98A (11.94) NA NA (5.52) March June Sept. Dec. FY End 1999E (3.72)A (3.53)A (3.29) (2.97) Dec. 31 1998A (2.54) (2.77) (2.83) (3.80) ROIC (6/99) (23.6%) Total Debt (6/99) $2.5 Bil Book Value/Share (6/99) NM WACC (6/99) 12.3% Debt/Total Capital (6/99) 107% Common Shares3 69.7mil. EP Trend2 Est. 5-Yr EPS Growth NM Est. 5-Yr. Div. Growth NM 1On 9/27/99 DJIA closed at 10303.39 and S&P 500 at 1283.31. 2Economic profit trend. 3Shares outstanding reflect fully diluted shares. WinStar is a competitive local exchange provider using 38 GHz technology to build out local telecom networks in major markets throughout the country.

To: SteveG who wrote (697)	9/29/1999 11:16:00 AM
From: SteveG	Respond to of 1860

BOFA's (nee NBMO) Mike Renegar and Brian Tanner: Lowering 1999 & 2000 numbers; Maintain Buy Rating and $67 Price Target - We are revising our 1999 numbers as follows: revenue remains at $436 million, but EBITDA losses are increased from $281 million to $300 million. This adjustment reflects slower than expected improvement in margins and SG&A as a % of revenue. - We are revising our 2000 numbers as follows: lowering revenue from $713 million to $660 million and increasing EBITDA losses from $107 million to $157 million. The company plans to focus on selling and upselling to buildings where its network is built out and stop the use of resale (selling the Bell network) in existing markets and in markets where its network is not yet built. Increased EBITDA losses are due to slower improvements in SG&A as a % of revenue. - We believe WinStar had some aggressive targets established for 2000 and is now managing expectations. While the stock could continue to see some pressure in the short term as the company communicates these changes to the Street, we believe the long-term outlook remains positive. We maintain our Buy rating and $67 price target. Refer to the table below to see our model changes. Model Changes New 3Q99 Old 3Q99 New 4Q99 Old 4Q99 New 1999 Old 1999 New 2000 Old 2000 Revenue ($M) $113.9 $114.2 $137.1 $134.5 $435.6 $435.8 $660.2 $712.9 EBITDA ($M) (75.2) (69.7) (61.7) (47.1) (299.7) (280.6) (156.5) (106.9) While we do not have specifics at this time, we believe WCII will be aggressive on penetration in existing buildings by lowering pricing. This will have the effect of lowering top line growth over the near term and have a slight margin impact as well. We expect to get details later today although the company may talk to this at their presentation on Wednesday afternoon at the Banc of America Securities investor conference. We will be back with details as we get information. Our thought at this time is that the stock could move into the low $40s without giving investors a solid reason for the lower anticipated numbers. We would be aggressive buyers at these levels with our long-term assumptions unchanged.

To: SteveG who wrote (697)	9/29/1999 11:21:00 AM
From: SteveG	Read Replies (2) \| Respond to of 1860

WCII: Stock Way Oversold; Reiterate Buy & $70 Target Salomon Smith Barney Jack Grubman Wednesday, September 29, 1999 --SUMMARY:--WinStar Communications, Inc.--Telecommunications Services WCII closed down more than 20% amid concerns regarding Q3'99 & 2000 est. We are updating our numbers for 2000 due to guidance from WCII, however, we are maintaining our Q3'99 est. of $115.5 mil in revs, $74 mil in EBITDA losses & 75,000 net adds for Q3'99. Our new rev est is $651 mil (was $688), our EBITDA loss est is $156 mil (was $151), & our net adds estimate is 390,000 (was 415,000). Our new net adds est implies 5,000 incremental net adds/qtr & may prove to be conservative.No change to avg rev/line or gross margin est of 48% for 2000 There is NO change to our DCF driven price target of $70. Strategic importance of the asset is still in tact. We believe WCII was way oversold yesterday & would be aggressive buyers on any continued weakness in WCII. We reiterate our Buy & $70 price target. --EARNINGS PER SHARE-------------------------------------------------------- FYE 1 Qtr 2 Qtr 3 Qtr 4 Qtr Year Actual 12/98 EPS $(2.54)A $(2.77)A $(2.83)A $(3.80)A $(12.61)A Previous 12/99 EPS $(3.72)A $(3.53)A $(3.40)E $(3.30)E $(13.95)E Current 12/99 EPS $(3.72)A $(3.53)A $(3.40)E $(3.30)E $(13.95)E Previous 12/00 EPS $N/A $N/A $N/A $N/A $(15.45)E Current 12/00 EPS $N/A $N/A $N/A $N/A $(13.40)E Previous 12/01 EPS $N/A $N/A $N/A $N/A $N/A Current 12/01 EPS $N/A $N/A $N/A $N/A $N/A Footnotes: --FUNDAMENTALS-------------------------------------------------------------- Current Rank........:1S Prior:No Change Price (9/28/99).....:$42.19 P/E Ratio 12/99.....:N/Ax Target Price..:$70.00 Prior:No Change P/E Ratio 12/00.....:N/Ax Proj.5yr EPS Grth...:0.0% Return on Eqty 98...:N/A% Book Value/Shr(99)..:-5.30 LT Debt-to-Capital(a)N/A% Dividend............:$N/A Revenue (99)........:440.00mil Yield...............:N/A% Shares Outstanding..:79.0mil Convertible.........:Yes Mkt. Capitalization.:3333.0mil Hedge Clause(s).....:# Comments............:(a) Data as of the most recently reported quarter. Comments............: --OPINION:------------------------------------------------------------------ WinStar closed down more than 20% amid concerns regarding Q3'99 and 2000 estimates. We are updating our numbers for 2000 due to guidance from WCII, however, we are maintaining our Q3'99 estimates of $115.5 million in revenues, $74 million in EBITDA losses and 75,000 net additional lines for Q3'99 (which were reconfirmed by WCII's CEO and which have not changed since the company reported its Q2'99 results in mid-August). We updated our model to reflect new guidance for 2000 and as a result we are reducing our revenue estimates from $688 million to $651 million, our EBITDA loss estimate from $151 million to a loss of $156 million, and our net adds estimate from 415,000 to 390,000. Our new net adds estimate of 390,000 for 2000 implies 5,000 incremental net adds per quarter and may prove to be conservative. We are not reducing our average revenue per line or our gross margin estimate of 48% for 2000 as we expect the company to see gross margins improve as more lines are brought on their own network. During last quarter the percentage of all lines that were on-net was 27% and is expected to reach 30% during Q3'99 with gross margins expected to improve sequentially from 24% in Q2'99 to 30% in Q3'99. On a per share basis our loss estimate for 2000 actually improved from $15.45 per share to $13.40 per share due to lower interest expense than our previous estimate. While we understand that the range was wide on the Street for both revenues and EBITDA losses, our previous revenue and EBITDA estimates were within 5% of the company's guidance for 2000 and we do not view this as a significant change for a high growth company on figures that are one year out. Said another way, if an aggressive growth company like WCII can come within 5% of our revenue estimate and 3% of our EBITDA estimate then we believe the company is doing well. There is NO change to our DCF driven price target of $70. 2000 previous 2000 new Revenues $688.2 $651.3 EBITDA loss (151.4) (156.3) Net line adds 415,000 390,000 We believe WCII was greatly oversold yesterday in reaction to this adjustment in 2000 numbers. In fact, WCII's market cap based on fully diluted shares outstanding of 79 million was reduced by more than $900 million for a only a 5% reduction in revenue, which implies that WCII should be a $18-$19 billion market cap company. The stock is only trading at 6.7x 2000 revenues vs 9.0x on average for the CLECs that we cover. We would like to reiterate the strategic importance of WCII's assets and know of several RBOCs which will be using WCII technology to attack each other where they have contiguous suburban properties. NET/NET: We continue to believe WCII is a good strategic asset whose operations will only improve as more lines are brought on their own network. We believe the stock was way oversold yesterday and would be aggressive buyers on any continued weakness in WCII. We reiterate our Buy and $70 price target.