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

To: Curtis E. Bemis who wrote (5914)	4/28/2000 9:38:00 AM
From: quidditch	Respond to of 15615

A few thoughts on your question, Curtis: First, in the initial spin-off IPO, GBLX will continue to own 80%+ or - of Global Center and it will still be consolidated with GBLX: financially, little will change for GBLX. Nonetheless, as a separate entity, GC does need to establish a policy on charges that will withstand arm's length scrutiny, as you suggest. Second, I'll have to go back through CC notes to see if management has already established some sort of enterprise transfer pricing that reflects GC's cost of transit. Certainly, the the projections being prepared for the underwriters, GC has factored this in. What I don't know is whether EXDS and others in the business pass on some % of transit costs to their customers as part of the hosting charges. Perhaps Robert knows. Third, inasmuch as EXDS is also a customer of GBLX (and the spin-off may be a way of keeping this so once other global fiber footprints are made), it incurs similar charges, so it can not be a competitive disadvantage for GC. If anything, I have to believe that, having "grown up" together, with GC expanding as GBLX put more of its network in place, the network links for GC should be seamless, and therefore advantageous. Fourth, the GBLX business model assumes price elasticity, lower charges as more data fills up the pipes. GC's service orientation can only benefit as the cost of transit declines as a % of the overall cost of services sold. jmo Steve