Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Global Crossing - GX (formerly GBLX) -- Ignore unavailable to you. Want to Upgrade?

To: Theophile who wrote (4377)	2/18/2000 9:17:00 AM
From: Mr. Palau	Read Replies (1) \| Respond to of 15615

Briefing.com view seems positive: 08:50 ET ****** Global Crossing (GBLX) 61 1/16: Global Crossings earnings report takes quite a while to unravel. The company, by virtue of acquisitions, now is in three major businesses: telecom carrier business (leasing of fiber optic networks), telecom services delivery (consumer and commercial services), and "installation and maintenance." All have different sets of criteria. However, Global describes its three businesses as: Telecommunications, Installation and Maintenance, and ILEC (Incumbent Local Exchange Carrier). They group the pure "carrier" business, which we think is the best business, in with the telecom services businesses. This makes it harder to really see the pure fiber network business of global crossing. We think it is important to really take time and understand each segment. First, the installation and maintenance business (Global Marine) can almost be ignored. Global Marine primarily services Global Crossing's own network. Most of what shows up as revenue on their line is an expense in another group. So just forget about analyzing that group. Second, the ILEC business is small, as a percentage of revenue, (just $186 million pro forma, of $1.13 billion total), is growing slowly, at 5%, but it is very profitable (at an EBITDA of 51%). But on the whole, it isn't what Global Crossing is about. So that brings us to the carrier and carrier services businesses. Originally, Global Crossing was only in the carrier business: they own a massive fiber network, and customers lease "space" on it. Now, with the Frontier and Racal Telecom business, Global Crossing also sells services to customers. The difference is critical, because the carrier business criteria for success is very difference. The unique economics of the fiber optic world favor large, existing networks. As demand grows, it costs less for an existing network to add capacity than it does for a new network to be built. In addition, it costs less for a large network to add capacity than it does for an existing smaller network. Scale matters. And Global Crossing has one of the largest, if not the largest pure fiber network (it gets difficult to verify "who" has the largest network, because there are so many shared components of the global network.) But the carrier services businesses is as competitive as it gets. Global clearly feels that having the suite of services enhances the value of their existing network, but both the acquisitions and the business model of the services business put a drag on Global's earnings numbers. We think you should still view Global as a fiber optic play. This means focusing on the revenue number of the pure carrier segment. That more than doubled, from $203 million to $477 million, and still constitutes about 45% of the total revenue. (Note that the $203 million number was Global Crossing's 1998 total revenue when it was 100% in the carrier business.) That tells the real story: Global's network is in great demand. They expanded the network by acquisitions, which also brought some models that dilute the pure carrier business model. Many will focus on the losses in today's report. They aren't that important. The value of Global's worldwide fiber network will only continue to increase as demand for bandwidth increases, and today's report shows demand is still very strong. - RVG