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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (12947)	8/15/2001 12:17:55 PM
From: Brendan W	Respond to of 78764

I recall-always suspect-GLK as Simpson buy. EOM.

To: Paul Senior who wrote (12947)	8/15/2001 12:31:09 PM
From: RRICH4	Read Replies (1) \| Respond to of 78764

Interesting article on ITXC The Teleconomist ITXC Rightly Takes the Road Less Traveled By Cody Willard Special to TheStreet.com 8/14/01 2:55 PM ET URL: thestreet.com Many different business models exist in the long-distance world. Companies like Level 3 (LVLT:Nasdaq) and Global Crossing (GX:NYSE) spend billions covering the globe with fiber and then lease the unlit fiber to other carriers. Or they can also light the fiber themselves (which means that they'll install the equipment on either end of the fiber to send and receive signals, thus enabling communications over the fiber) and sell access to other carriers. Alternatively, other carriers can buy the lit-fiber services from these service providers and resell the services to other telecommunications companies. A company called ITXC (ITXC:Nasdaq) employs a rather different model. Rather than laying or leasing entire routes from one far-off place (read: wherever you are) to another (read: wherever your mom lives, even if it's in the Republic of Chad), ITXC uses a little thing called the Internet to route long-distance calls. You've heard of the Internet, no? Because ITXC doesn't have to spend billions laying fiber or hundreds of millions leasing and lighting fiber to send long-distance calls to the far reaches of the globe, it can get a nice return on its capital investment really quickly. Even better, it can offer long-distance services at much lower prices than anyone else. A few other companies have tried to employ the same network, but this is a business of economies and network effects. As Metcalfe's Law says, the usefulness, or utility, of a network equals the square of the number of users. (Robert Metcalfe, the founder of 3Com and the inventor of the Ethernet protocol, came up with this theory.) In other words, every time ITXC gains access to another country, the value of its network increases exponentially. Let's say you're a long-distance company that sells services to businesses, and you have to choose between ITXC and its competitor, ABC. ABC can send your traffic into 20 countries. For the same price (or cheaper because of economies of scale), ITXC can get you into 99 countries. You're probably gonna pick ITXC. As the company hits critical mass and extends its network to the far reaches of the earth before anyone else, I believe the rate of revenue growth could accelerate, as this network design is extremely scalable. Concerns about the quality of the calls routed over the Internet (or simply over private networks using voice-over IP) are quickly fading. In fact, many telephone companies already are using ITXC for calls, and you might not even know it. The company uses proprietary real-time network-monitoring systems to route calls over the Internet in the most efficient way. ITXC has contracts with six of the 10 largest carriers in the world and 14 of the top 15 U.S. long-distance carriers. Also, ITXC's network is by far the largest of its kind, with 559 points of presence in more than 318 cities in 117 countries. For all of the advantages of its network and model, what really makes ITXC compelling is its financials. If the company executes on its current business plan, which I fully expect it will, it will reach EBITDA-positive paradise -- earnings before interest, taxes, depreciation and amortization -- in the first quarter of next year. When it gets there, it'll still have $100 million in the bank. This is a company that, as James Cramer puts it, raised money when it could, not when it had to. ITXC Gets Pummeled Wall Street has punished this stock to extremes The stock price blew through the company's cash position, hitting a 52-week low of $3 last week. But I think the Street, in its typical swinging to extremes, has punished this stock far beyond any reasonable value. In my book, that makes ITXC a buy, which is exactly what I'll be doing this week. -------------------------------------------------------------------------------- Cody Willard is director of wholesale product management at Broadview Networks. He is also president of a telecom consultancy and founder of TelEconomist.com, a Web site devoted to news and analysis of telecommunications stocks. At time of publication, Willard had no position in any of the stocks mentioned in this article, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Willard appreciates your feedback and invites you to send it to clwillard@teleconomist.com. --------------------------------------------------------------------------------