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Technology Stocks : GST Telecom (GSTX) 4th quarter earning -- Ignore unavailable to you. Want to Upgrade?

To: MangoBoy who wrote (301)	2/23/2000 12:11:00 PM
From: Rob Preuss	Respond to of 369

[GSTX: A Hot Regional Telecom.] Wednesday February 23, 9:29 am Eastern Time worldlyinvestor.com Sector of the Day Local Call: A Hot Regional Telcom By Casey Freymuth, Telecom Columnist Smaller but focused telecoms are more efficient and have more upside than larger competitors. Telecom companies can't be all things to all people and do it well, especially with the broad range of online applications and services entering the markets every day. Likewise, when investing in telecom, you should consider narrowing your choices to smaller companies with tight regional focuses, which are more likely to succeed than major players, no matter how big. Immediate examples of regional plays are integrated communications providers (ICPs) GST (Nasdaq:GSTX - news) and Network Plus (Nasdaq:NPLS - news). Pac-West Telecom (Nasdaq:PACW - news), which isn't as well known, may hold the most potential. Pac-West is a next-generation telecom and Internet company based in Stockton, Calif. It went public last October, and just released impressive results. With Internet applications and services rapidly emerging in the product mixes of today's communications companies, the differentiation between and incorporation of the two is becoming increasingly important. Generally speaking, applications are deployed horizontally, meaning they can be applied to many business types. Services outside of access are deployed vertically to meet the needs of certain niche markets. When playing the Internet sector, understanding and investing in these models is fairly straightforward. If you invest in Ariba (Nasdaq:ARBA - news), you're going horizontal. If you're investing in Proxicom (Nasdaq:PXCM - news), you're going vertical. However, it becomes a little more complex when you jump into telecoms. If a company is a major, generic player and deploys Internet or e-commerce enabling services, determining the company's strategic focus may prove to be a difficult task. The advantage of regionally focused ICPs is that they are a proven model for delivering a wide arsenal of services that represent the telecom industry as it continues to adopt Internet services and applications in its overall product mix. Regionally focused firms are better able to deliver a variety of services to their customer bases than counterparts that try to serve broader markets. This is especially true with services delivered through strategic partnerships. In the world of end-to-end solutions, regionally controlled expansion is more manageable and cost effective than blanketed national expansion or geographically scattered expansion. For obvious management and infrastructure reasons, a firm located in the state of Washington can more easily extend a complete package of services to customers in Oregon than Florida. Another reason to go regional is that clustering is a well- documented, highly effective method of achieving above- average value in the communications industry. From cable companies to cellular operations, providers that have positioned themselves as strategic targets for bigger fish have achieved significant value. Pac-West fits the model well. Fourth-quarter revenues grew 120% to $28.2 million from $12.8 million a year ago. Pac-West was profitable for the year ended Dec. 31, but 1999 revenues of $95.5 million included reciprocal compensation settlements of $6.3 million from GTE (NYSE:GTE - news) and $20 million from SBC Communications' (NYSE:SBC - news) Pacific Bell unit. Pac-West is pursuing an expansion strategy that focuses its power in 10 regional states. The company plans a healthy combination of strategic acquisitions and organic growth via a ``smart build' network deployment strategy, leasing excess capacity to other telecom players and Internet service providers (ISPs). Currently, the company serves 85 ISPs and delivers the whole kit and kaboodle of equipment and services to small and mid-sized retail customers. As this column was drafted, the company was trading in the low 30s, and analysts have indicated that the company's strong financial position could easily propel it into the 50s. Casey Freymuth is president of Group IV Inc. (www.groupiv.com), a Phoenix-based consulting, research and publishing firm specializing in strategic and operational for global telecommunications, utility and Internet companies. His weekly column uncovers investing opportunities in telecom stocks. Go to www.worldlyinvestor.com to see all of our latest stories.