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To: GST who wrote (101994)	4/23/2000 7:57:00 PM
From: H James Morris	Respond to of 164684

>BusinessWeek Investor -- The Barker Portfolio The Static in That AT&T Wireless IPO Wall Street's frenzy, combined with the AT&T name, mask important red flags for investors If all goes according to plan, Planet Earth's last human unclipped to either cell phone or pager will be me. Yet even I can't escape all the buzzing right now over everything wireless. There's Verizon Wireless, which is Bell Atlantic and Vodafone AirTouch's just-merged wireless unit. GTE expects to join Verizon soon, while SBC Communications and BellSouth are merging their own wireless forces, too. Nextel just introduced global service, and Sprint PCS is being bought by MCI WorldCom. The loudest buzz? AT&T, which is set to take its wireless biz public on Apr. 26. It aims to raise over $10 billion--by far, the richest U.S. initial public offering ever. With an IPO this large, AT&T must have something hot to sell. Whether you should buy is another question. AT&T execs are keeping quiet ahead of the deal, but securities filings spell out the details. In the past two years, AT&T Wireless Group has seen cellular subscribers soar past 12 million from 8 million, thanks to the popular Digital One Rate service launched in May, 1998. Last year, revenues surged 41%, to $7.6 billion. Never mind the sinking stock indexes: If Wall Street can't sell a deal with this pedigree, it had better close up shop. As Craig Ellis, manager of Orbitex Info-Tech & Communications Fund, says, ``Even in this market, that deal is going to walk right off the shelf.' Yet before you usher AT&T Wireless into your portfolio, think twice. Actually, think four times. TRACKING STOCK. First, consider the peculiarities of the deal. Instead of selling straight stock, parent AT&T is offering what Wall Street calls tracking stock--shares designed to reflect the performance of a particular operation. Buy a share of AT&T Wireless and you'll have equity in the parent, not the wireless unit. So what? Among other dangers, tracking stock nearly precludes the chance AT&T Wireless will get bought out without AT&T's consent. With telecoms merging constantly, why short yourself on that route to a capital gain? Second, think over the coming supply. AT&T is selling shares that represent only about 16% of AT&T Wireless. It plans to distribute to AT&T stockholders some or all of the rest. The timing is uncertain, but eventually you can expect to see plenty of AT&T Wireless shares floating around. Investors also may be asked this year to soak up shares in Verizon Wireless and potentially in SBC-BellSouth's still-unnamed wireless venture. If demand doesn't rise to meet a growing supply of wireless stock, guess what will happen to prices? Third, think over AT&T Wireless' market position and profitability. With the advent of Verizon and the SBC-BellSouth deal, AT&T Wireless is far from leading the U.S. market in subscribers and revenues (table). ``As a result,' AT&T's filing notes, ``these competitors may be able to offer nationwide services and plans more quickly and more economically.' To get where it is now, AT&T had to spend freely. Last year, it paid $367 to win each new subscriber. GTE and Vodafone AirTouch, two-thirds of the Verizon group, spent $269 and $238, respectively. The third part, Bell Atlantic, last year averaged $172 per new subscriber. It expects Verizon's average to run under $200. From $70 million in 1997, AT&T Wireless' operating loss swelled to $666 million in 1999. Verizon hasn't posted a comparable figure, but GTE and Bell Atlantic's combined 1999 wireless operating profit neared $1.4 billion. SBC and BellSouth's topped $1.6 billion. Fourth, and finally, think about how much a share of AT&T Wireless will cost. The IPO is set to go for $26 to $32 a share. Even at 26, the unit would command a market value of $60 billion, or almost eight times sales. AT&T, eight times bigger by sales, goes for $163 billion. Do you hear that buzz, too? Don't rush to answer.

To: GST who wrote (101994)	4/23/2000 10:58:00 PM
From: Glenn D. Rudolph	Respond to of 164684

Business Week: May 1, 2000 BusinessWeek Investor: Stocks Here's a Tech Play That Still Looks Solid What's Jabil Circuit? Think Cisco, but cheaper Manufacturing isn't glamorous, right? Don't tell that to the fans of Jabil Circuit, the St. Petersburg (Fla.) manufacturer of printed-circuit boards for high-end computing and network products ranging from routers to notebook computers to medical gear. After climbing 140% from the beginning of 1999 to the tech-stock peak on Mar. 10, Jabil has retreated 28%, to around 32. But analysts argue that Jabil's business remains strong and its valuation more reasonable than many of its peers. Indeed, immediately after Jabil sank 6% in the Apr. 14 stock market rout, CIBC World markets analyst Michael Zimm boosted his recommendation on Jabil from ``buy' to ``strong buy.' Among Jabil's biggest customers are such industry leaders as Cisco Systems, Nortel Networks, Lucent Technologies, and Dell Computer. Eric Gomberg, an analyst at Thomas Weisel Partners, says that such brand-name companies rely on Jabil and other contract manufacturers because they ``can bring a product to market more quickly and cost-efficiently. The outsourcing trend is the tailwind driving Jabil's growth.' Along with making circuit boards, Jabil (pronounced jay-bill) handles such tasks as leasing factories and handling complicated supply-chain management. Its sales, which reached $2 billion in 1999, have grown at a torrid 39% annual rate in the past five years. Its earnings gains have been even more breathtaking: Over the same half-decade, Jabil's profits have grown 58% a year, on average, and analysts think earnings will continue to increase about 30% annually over the next five years. Amy Lubas of SG Cowen Securities expects the company's revenues to soar 55% in 2000. ``It's a problem most companies would love to have,' she says. Despite such heady growth, Jabil is valued more cheaply than many tech stocks. Its price-earnings ratio, based on estimated 2000 net income, is 42, roughly twice that of the Standard & Poor's 500-stock index and less than half that of Cisco, the Net infrastructure superstar. Its price-to-sales ratio, meanwhile, is a modest 2.4, less than half that of Lucent or Dell, and a mere fifteenth of Cisco's. ``FANTASTICALLY MANAGED.' One possible reason why Jabil trails in valuations is its lower profit margins. Cisco boasts a gross profit margin of 65%, while Jabil manages just 11%. But Bear Stearns analyst Thomas Hopkins argues that when measured by return on assets and return on equity, Jabil looks better. Jabil's ROE is a strong 25%. While only slightly better than the 24.3% average ROE for the S&P 500 in 1999, it is about the same as Cisco's. And Jabil's closest rival, Solectron, had an ROE of just 16.7%. True, Jabil's 11.9% return on assets trails Cisco's by six percentage points. But it beats the average S&P 500 company's 9.9% and Solectron's 8.5%. ``Jabil is fantastically managed,' says Hopkins. ``That's why they're able to get such a great return on capital.' Another reason why Jabil has attracted loyal followers is the evolution of its business. Its design team, which a few years ago was more of a problem-solving operation, is now involved in the basic design of over 50% of the products Jabil makes. That adds to the value Jabil offers customers and also helps the company run more efficiently. Moreover, it's continuing to expand globally. Jabil recently bought a factory in Brazil, is purchasing space in China and Hungary, and is opening a facility in Mexico. ``This company is producing the backbone of the Internet economy,' says Gomberg. That's what analysts say about Cisco, too. Perhaps Jabil isn't as glamorous, but it is much more affordable--especially after the tech-stock rout.