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Strategies & Market Trends : The New Economy and its Winners -- Ignore unavailable to you. Want to Upgrade?

To: Mark Fowler who wrote (6687)	4/29/2001 2:08:21 PM
From: tbigb	Read Replies (1) \| Respond to of 57684

re: EXDS : see the balance sheet as of Jan 1 2001 They lost $ 256 million after accounting for interest payments last year. Their losses may even climb this year as some people pull out of DCs. They have about $900 MM in cash and about $400MM in 'working capital'. Although I don't know what this 'working capital' is -- they essentially have no more than $1.3 BB at most. They also have $2.5 Billion in debt and almost $300 MM in short term line of credit loans. They claim that their assets (buildings etc) are worth $4 BB approximately. I suspect that the value of these buildings is actually falling currently. Their interest expense is about $200MM a year and I don't know if that goes up. Hence they need to start making at least $300MM more per year on the same revenue (or find $300MM a year in profits from someplace). At the current rate, they will run out of money in 3 years or so. Probably a year earlier since a lot of those lines of credit will vanish as they sink. The only way to retire the debt in the absence of an increasing stock price is to sell more than half their buildings. However, those buildings may actually be losing value as we speak. EXDS as a company should be worth no more than $4BB - $2.5BB + $1BB = $2.5 BB Since it is at risk, I would cut that in half to account for the possibility of losing all your money in EXDS stock. That would be $1.25 BB. Their market cap is $4.9 BB and their stock price is $9 Their stock price should be no more than $9 * (1.25/4.9) = $2.25 a share. That is a big fall from current prices. Now double the price to account for their DC hosting skill set which is not easy to duplicate - you have a price of $5 / share. Unless there is a resurgence in DC hosting, I expect EXDS stock price may well fall below $5 again. I don't see where the resurgence in DC spending will come from. Companies are in no hurry to expand web sites and ASPs are not taking off for many more years. Hosted .NET like services can easily take 2-5 years to get off the ground. I expect EXDS to become bankrupt and then get taken over by QWEST or British Telecom or Bell South or some other Telco with a good balance sheet. Where is my logic faulty ? Am I reading numbers Incorrectly ? I haven't looked at their balance sheet after this quarter yet - but all indications are that things got worse - not better.