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Technology Stocks : Williams Communications Group - WCG -- Ignore unavailable to you. Want to Upgrade?

To: H James Morris who wrote (418)	3/14/2000 9:15:00 AM
From: samoyed	Read Replies (1) \| Respond to of 609

Bandwidth Trading and Williams Communications The Motley Fool - March 14, 2000 06:10 This past week, I spoke to Mrs. Sharon Crow, Vice President of Broadband Trading, Gil Broyle, Director of Internal and External Communications, and Paul Savill, Vice President of Network Planning from Williams Communications Group (NYSE: WCG) . We discussed broadband trading both in general and how it will apply to Williams Communications and its competitors. One of the important items to come out of this interview is that standards are still being developed to define the market. The big problem is, of course, how do you describe "bandwidth"? Such items as units of measurement, pricing terms, settlement terms, and credit still have to be worked out. Ultimately, the idea is to have a way to trade this as a commodity back and forth between the carriers and the users to minimize risk for both. At this time, a meeting of proposed market players is being organized by a third party as an initial step to setting standards. We discussed the competitive environment, and as we've discussed previously in this column, Enron (NYSE: ENE) will be in bandwidth trading, and so will El Paso Energy (NYSE: EPG) . Mrs. Crow did not feel having additional bandwidth traders would hurt her company or others. A larger number of companies involved in this would add "liquidity to the market." She said "all could be winners if trading for different reasons." For Williams Communications, trading bandwidth would be a way to provide risk management to existing customers. How does this provide risk management? One example that they gave me was in the case of a client that may need additional bandwidth for an event three weeks in duration sometime in the future (such as a sporting event). Currently, it is very difficult to lease fiber for that short of a period of time. With the trading operation, it could be possible to get the capability. Additionally, the carrier leasing it would be able to more efficiently utilize its network. They feel that companies that have the communications infrastructure will benefit greatly from bandwidth trading because of this increased efficiency. Also, the bandwidth trading and communications network should be building upon each other for increasing business. I asked how much bandwidth trading would add to the revenues. They didn't want to put a figure on this. Mr. Savill did say that the "revenue plan does not depend on bandwidth trading." He did say it "holds a lot of potential for entirely new markets" and that there will be a "big expansion in the market for broadband media in the next five years." So, let me sum up this interview. First, it's not as important as I thought as to who is the "first mover" in this market. It's not a "them or us" market for those trading in broadband. This fact will help Williams Communications in particular because it has an extensive network in place that they will be better able to market, and that network will allow them to build more business in their broadband trading. Let's see what Enron has to say about this when I speak to them this week. Finally, back to our Foolish readers. We have an easy-to-understand explanation of ATM vs. IP networks from joetangerine in our Drip Companies board. Joe, thanks for the information!

To: H James Morris who wrote (418)	3/29/2000 7:35:00 PM
From: samoyed	Respond to of 609

With the lock up expiration behind us, this may explain the events of the last week and may be some insight on the future. The last ô really hits WCG over the last few days. From the st.com, bholmes author: Why should you pay attention to expiring lockup periods? Good question. For some of you this will be the first time you've heard the term lockup, for others it'll be old hat. Let me give a quick explanation so that we're all up to speed, then we can move on to examine how such an event is viewed by investors: Lockup period: For a preset number of days following an IPO, certain classes of shareholders are restricted from selling their shares. This "lockup period" is designed to protect a newly issued stock from undue selling pressure from insiders. At the end of the lockup period, these restricted shareholders may sell some or all of their shares. Now, most people I talk to, or whose stuff I read, take the position that an expiring lockup is a guaranteed net-negative for a stock. They jump to the quick and almost universal conclusion that the resulting increase in the float will damage the stock price and make for an obvious short. I disagree: An increase in a newly issued stock's float can actually be a good thing. How? Consider the following. Most institutional investors -- mutual funds, pensions, etc. -- have clearly established investment criteria that define the characteristics of securities that they may buy. A common qualifying feature for allowing investment in a particular stock is its liquidity. One of the measures of a stock's liquidity is, you guessed it, the size of the float. One fund manager I talk with complains that she is held back from participating in many of the super-hot IPOs because of her fund's investment criteria, specifically the restriction prohibiting her from owning stocks with floats of fewer than 5 million shares. Obviously not all institutions are prevented from buying small-float IPOs. Some of these simply wait for the lockups to expire and for shareholders to sell enough stock to qualify that issue for investment. The most important thing to consider when using expiring lockups as the basis for putting on a trade, whether long or short, is that every stock is different. Some will weaken or even collapse as a result of the event, while others will flourish. Quite frequently, a stock will dip a few days in advance of the lockup expiration, but then quickly recover and rise even higher than before. In effect, this reflects a combination of these twin influences on the stock.