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Technology Stocks : PSIX up 26.5%, Takeover(?) -- Ignore unavailable to you. Want to Upgrade?

To: bob zagorin who wrote (1479)	11/10/1997 6:08:00 PM
From: bob zagorin	Read Replies (1) \| Respond to of 5650

Internet Access Numbers Explode (10/22/97; 12:20 p.m. EDT) By Margie Semilof, Computer Reseller News Gut instincts that the Internet access market is growing at a frenzied pace are nobody's imagination. According to a study published by consultancy Maloff Group International, from April 1996 to October 1997, the ISP marketplace exploded, growing to $8.4 billion from an estimated $1.9 billion. In March 1994, the ISP market was calculated to be about $50 million, according to Maloff. In 1995, it was estimated at $150 million. At these rates, Maloff Group said it predicts the market should hit $10.8 billion by April 1998 and exceed $14 billion by October 1998. Joel Maloff, president of Maloff Group, in Dexter, Mich., said the figures include ISPs such as Uunet Technologies and GTE Internetworking, as well as content providers such as America Online and CompuServe. Maloff said to reach his figures, he took into account current monthly figures for the number of customers, the price of the services, and, for standard ISPs, the percentage for each product type. Maloff said he believed the wild growth rate coincided with when AT&T jumped into the ISP market in a big way, followed by other super-sized service providers. "They [AT&T] sort of legitimized the market," he said. "Then all the other telcos jumped in. WorldCom started buying up the market, and IBM is quietly growing its Internet access business. That's a lot different than pitching PSINet against Uunet." Maloff said the top ISPs this year have changed from recent years. MCI and AT&T, which were both in the top five in recent years, have fallen back. The top five carriers contributed $5.8 billion compared with $449 million in April 1996, according to the report. The top 10 carriers in terms of dial-up access are AOL, CompuServe, IBM, Microsoft Network, Uunet, Netcom, Concentric, Prodigy, AT&T, and PSINet. Maloff said he is able to identify 20 million dial-up users, but cannot count the millions of users hiding behind corporate T1 lines. "It's easy to see the market is over 40 [million] to 50 million users," he said. "There is also a lot of electronic commerce -- corporations with EDI applications. Intranets and extranets. Reposted from ASND thread.

To: bob zagorin who wrote (1479)	11/11/1997 11:54:00 AM
From: Ken Turetzky	Read Replies (1) \| Respond to of 5650

MORNING MEETING NOTES - November 11, 1997 09:08am EST 11-Nov-97 Gerard Klauer Mattison & Co. GKMAM PSIX AAPL SUMMARY MORNING MEETING NOTES November 11, 1997 Rating and Estimate Changes NONE PSINet/PSIX HOLD ARTHUR NEWMAN (212) 885-4054 ___________________________________________________________________ Price 52-Week Earnings Per Share P/E Ratio 12-Month 11/10/97 Range 1996 1997E 1998E 1997E 1998E Target 7.66 14.50-5.50 (1.32) (1.22) (0.75) N.M. N.M. N.A. ___________________________________________________________________ PSIX+-- To Acquire iStar, a Canadian ISP for $25 Million in Stock --HOLD o PSIX to acquire iStar, a leading Canadian ISP, for $25 million in stock. PSINet Limited, a wholly owned Canadian subsidiary of PSIX, has entered into a definitive agreement for the acquisition of iSTAR for $25 million in PSIX convertible preferred stock and an immediate payment of approximately $3.6 million in short-term financing. We estimate PSIX paid less than 1x annualized iSTAR trailing quarter revenue, significantly less than other recent acquisitions in the sector. We maintain our HOLD rating. o Maintain estimates. The transaction is scheduled to close in 1Q98; thus, we maintain our 1997 estimates. Our 1998 estimates are under review pending further details of the transaction. Management estimates that the merged Canadian company should achieve annual revenues of about $34 million. It is unclear whether the transaction will be dilutive in 1998. o iSTAR currently serves about 1,350 corporate and web service customers as well as 66,000 dial-up customers through 30 POPs across Canada. For the 8/31/97 quarter, iSTAR reported about $7.6 million in revenues and $(3.4) million in EBITDA. PSINet Limited (Canada), headquarted in Toronto, currently has 81 employees and iSTAR employs about 200 people in various offices throughout Canada. The combined corporate headquarters will be in Toronto. o PSIX remains potential acquisition target. Nonetheless, we are hesitant to recommend purchase solely on this possibility. Despite recent deals for BBN and Digex, PSIX may continue to be left at the altar. IIXC agreement could reduce PSIX's attractiveness to facilities-based carriers. o PSIX conference call at 10:00 a.m. EST (612) 332-0345. INVESTMENT CONCLUSION We believe PSIX faces significant competition in the US, and is encountering difficulties in acquiring subscribers, growing revenues and achieving positive EBITDA; thus, PSIX may be trying to grow its business through international expansion. On a valuation basis, we believe PSIX paid less than 1x annualized trailing quarter revenues for iSTAR, substantially less than other recent acquisitions in the sector. We believe PSIX is trying to fill capacity created through its agreement with IXC. We remain cautious regarding our estimates as PSIX transitions to its goal of achieving positive EBITDA. Until the company's ability to grow revenues, leverage operating expenses and achieve positive EBITDA and EPS become clearer, we maintain our HOLD rating.

To: bob zagorin who wrote (1479)	11/11/1997 4:43:00 PM
From: Sandie	Read Replies (1) \| Respond to of 5650

Bob: I just don't see PSIX as a potential acquiree of BT. BT is looking for a strong marketing and national presence within the US. One of the skills they had hoped to import from MCI was its proven marketing savvy and market-share winning ways over the last 15 years against BT's U.S. equivalent, AT&T. Keep in mind that BT is a recently de-regulated utility with 94% market share of the UK's local access lines, bloated labor costs, etc. It also has high hopes in the European market which will be de-regulated as of Jan 1, 1998. I would think PSI is not even on the radar screen. Yes, Sprint is in many ways even more attractive than MCI as it has a very large LEC business. But Sprint is tied up in the Global One alliance with FT and DT. In fact, I would guess that Sprint was BT's first choice and MCI second, but just a guess. Perhaps a Global One/BT alliance with BT effectively bringing over the Concert business? If you really wanted to get wired into the US telecom market why wouldn't you ally with an RBOC (or maybe GTE) rather than an IXC? BT already got burned in the costly fiasco of MCI's attempted entry into the US local market. Maybe this tme it would prefer to get closer to the source? How about BT/Cable & Wireless... a fellow Brit and 5th largest LD provider in the US? Ebbers at Worldcom has already said he doesn't want the residential LD business (the regulators will make him pay for that remark). Might he sell it to someone? BT/C&W/MCI residential? Ah, the mind spins at the permutations. Two interesting partners would be BA/Nynex with their huge Northeastern/multinational customer base (a lot of Eurpoean toll traffic) or maybe BellSouth with a big international cellular business. Again PSINet is too small to be on BT's strategic plate any time soon.