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Technology Stocks : WCOM -- Ignore unavailable to you. Want to Upgrade?

To: Rob S. who wrote (9114)	2/5/2002 8:06:55 PM
From: mad dog from over there	Read Replies (1) \| Respond to of 11568

1st they lumped worldcom into the same heap as global crossing. Real assets are probably 100 times the size of GX. The author also doesnt take into account that while price have gone down bandwidth requirements have gone up 1000 fold in the last decade. Also the ability for the equipment to handle the larger demand for bandwidth has gone up as well. There is no situation where bandwidth or LD become free. As the cost per call decrease so does the cost to deliver the call. While the demand has gone up. Maybe not enough to support a zillion c-lecs and guys working out of their garage but there is more than enough business out there to keep WorldCom out of bankruptcy. The argument that c-lecs with bankruptcy protection will rule the day is equally flawed. While their old debts are erased they will need capital and cash flow to keep going. Do you know how many GX customers are not looking at other options to transport their data? Exactly none. Data is too valuable to not be able to access it for the 30- 60 business days it would take to get service from another provider if GX stops operating tomorrow. The companies that are most diverse will survive. Worldcom makes money from LD, Local, Internet, Wireless, and High speed data- domestic and international, managed services and professional services, and web hosting. Not many other companies can offer one stop shopping or dicounts through all products. In this economy this gives worldcom a leg up on GX, Qwest, Level 3 and the others. The only house of cards I see is the authors articles. Lots of doubt but very few facts and even less telecom experience. The only problem I see is possible accoutning practices by AA. But even if they reset earnings they cannot be much lower. If this stock goes much lower it will be on consumer fear not a house of cards

To: Rob S. who wrote (9114)	2/5/2002 10:04:59 PM
From: Oeconomicus	Read Replies (1) \| Respond to of 11568

Gee, Rob, I think I've already covered all his screwy arguments right here, mostly in response to posts from you. Do you get all your material from Chris Byron? Sorry, that just slipped out. I'm not sure what irritates me more - ignorant business journalists who've obviously never taken an accounting or finance class in their lives or the people who assume that because they get a byline in some rag, they know what the hell they're talking about. His "arguments": 1) That WCOM has never made a dime. Gee, I don't think SI's servers are big enough to handle all the reasons that's complete crap, but I'll hit a few of the more obvious ones. a) Over the five years ended 12/31/00, WCOM earned a cumulative operating profit of $14.1 billion and cumulative net income available to common shareholders of $3 billion (the difference is mostly interest expense, taxes and preferred dividends). b) Don't trust GAAP numbers? OK, how about net cash from operating activities? Oops, that's a GAAP number too, but it does factor in (or take out) any non-cash accounting gains and adjustments as well the changes in working capital required to support the business. Good enough? After all, he did call WCOM "a business that simply can’t turn a profit on a cash-flow basis." Well, here's how they did since 1998: $4.2 billion that year, $11 billion in 1999 and $7.7 billion in 2000, for a cumulative $22.9 billion. And that's before counting proceeds of investment sales. c) Don't like that number? OK, let's leave GAAP and use my favorite number, EBITDA, the best measure of the underlying cash generating capacity of most any business. 1998: $5 billion, 1999: $12 billion, and 2000: $12.6 billion. I think Byron is probably wrong. What do you think? 2) He talks about a "$50 billion ... mountain of fake assets" as if they are some arbitrary creation of WCOM to inflate its balance sheet. Wrong, they are an arbitrary creation of accounting rules and anyone who understands even the basics of business valuation, as he would like us all to believe he does, would know to ignore them. I don't know of a single theory for valuing a business based on the book value of its intangible assets. 3) He talks of $30 billion of debt and $10 billion of "unpaid bills." Well, he has only proved he doesn't understand that cash and receivables (which become cash as they are collected from the millions of customers with "unpaid bills") are then used to pay the "unpaid bills" as they come due. I wonder if he can even balance his own checkbook. But his worst offense here is the inflammatory language ("unpaid bills" as if they were delinquent) he uses to help sell his bullshit story. 4) He says "With roughly 3 billion shares outstanding, and tangible net worth of less than $8 billion, the whole company has a meltdown value of not much more than $2.50 per share." Well, again, he only shows his ignorance about investments. As I said here a day or two ago, book value of equity is virtually meaningless in valuing any business except one in financial services, especially if the company has ever made an acquisition using purchase accounting. 5) In closing, he notes that "... investors no longer care about accrual earnings. The [sic] want instead to see companies that can stand on its own and generate cash by itself at the trough of a business cycle." Ignoring his poor grammar and apparent lack of an editor, he has demonstrated by this statement that he couldn't be bothered to listen to last quarter's conference call or do any other research into WCOM's financial guidance. He's talking, whether he realizes it or not, about "free cash flow" or cash before financing activities. Had he done some checking, he'd know that this is exactly what WCOM has said they will produce in the first half of this year - free cash flow. His last lines: "Two weeks ago we had Global Crossing. Sooner or later it will be the turn of WorldCom as well." He wants his readers to believe, without evidence and just on his word, that the bankruptcy of WCOM is inevitable, a forgone conclusion. Well, he wants to scare people and probably did so, but that pretty much flies in the face of S&P's comment that the rumor of a downgrade in WCOM's investment grade debt was "nonsense," doesn't it? Who would you believe? A hack writer who doesn't know squat about finance, but needs to hype a story to make a living or the cautious ratings agencies who are downgrading companies left and right on the whiff of a worry these days to avoid being caught off guard like they were with Enron? Take your pick. Regards, Bob