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

To: Sir Francis Drake who wrote (13190)	8/5/2001 2:48:24 PM
From: Ally	Read Replies (1) \| Respond to of 15615

Morgan, your point is well taken that due to the drop in selling prices of optical equipment and fiber it may be possible to build a network from scratch the likes of GX's global capability for less than $10B. I wasn't referring to whether GX could sell the current network for that amount. Obviously not, because technology capability evolves all the time, quickly, and at much lower cost.... just like computers, the longer one waits, a computer is better and cheaper. I was referring to the replacement cost of building a network from scratch, which has at least, if not more, the capability and reach of the GX current network. How much will it cost to build the assets today? We don't know this do we, unless we are cost engineers in the business of building a network. The replacement cost may be more, or may be less, who knows. But I do know that it cost GX $10B to build the network so that's the basis of my estimate. My understanding is that a high percentage of the cost is labour... laying fibre in terrestial and sub-sea channels, installing the optical equipment, testings, and monitoring stations. So cheapness of current equipment may not be a material factor. Also, from what I read, GX's current network can be upgraded by recently invented gizmos to split light in many more ways, and travel faster. Obviously whatever the upgrades are, they would never come equal to a new network built from scratch using today's technology. However, does it matter in terms of meeting the practical needs of businesses? The Bells have 1/2 century old copper technology, patched here and there, still servicing their business customers. I would think the customers that need IP technology would go to GX, irrespective of whether GX's equipment is 4 years ago and may not be worth $10B if sold today. It's the capability of the assets to generate revenue and not how much the assets will fetch if sold.

To: Sir Francis Drake who wrote (13190)	8/5/2001 5:47:05 PM
From: KJ. Moy	Respond to of 15615

<<Equipment costs have come down dramatically and the fact that equipment manufacturers are under pressure from weak demand means you can get even further reductions in price. >> While your point is valid, some equipment costs may be lower than at the time GX paid for theirs. However, the total replacement cost IMO is higher, much higher. IMO the actual cost was in the neighborhood of $15B, not $10B. Big bulk of the replacement cost are in physical labor, top talent planning, sophisticated testing and seamlessly tying the network together. There is no way IMO in today's cost structure to replace GX's network at a lower cost even with lower equipment cost. We'll never know. Will we? Concert, (the joint venture of AT@T and BT), does not have the same focus like GX. As contract are expiring with their enterprise customers (it's the majority BTW) the next three years, GX is at a great advantage to take business from them.