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

To: Oeconomicus who wrote (1667)	12/22/1997 7:32:00 AM
From: JAMES P. McVEIGH	Respond to of 5650

I cannot agree more about the hindsight of Wall Street analyists. CNBC is always knocking them for lowering their ratings on stocks that dropped huge percentages of their market value the day previous to the lowering. Remember the analyist predicting $50 for PSIX? The future of PSIX will be positive in the eyes of analyists after the big money has been made by those who buy at these fire sale prices.

To: Oeconomicus who wrote (1667)	12/22/1997 11:30:00 AM
From: Ken Turetzky	Respond to of 5650

R.D., as previously noted here, Gerard Klauer Mattison included PSIX on its list of stocks that could benefit from the "January Effect." Here's another (However, note the "risks" portion of this report): PSIX: PSINet is developing skills and resources it needs to stand alone 10:53am EST 19-Dec-97 Friedman, Billings, Ramsey &Co (Ulric Weil 703-312-9565) Friedman, Billings, Ramsey & Co., Inc. 1001 Nineteenth Street North Arlington, VA 22200-1722 RESEARCH Technology Brief PSINet (PSIX - $4 31/32) ACCUMULATE PSINet is developing the skills and resources it needs to stand alone Ulric Weil (703) 312-9565 uweil@fbr.com Dan MacKeigan (703) 312-9666 dmackeigan@fbr.com December 19, 1997 * On December 15, PSINet presented to analysts their upbeat forecasts. * The company is determined to go at it alone to become a global player. * PSINet is responding to changes in the competitive marketplace. * Investors' attitude towards the stock is "show me". 52-Week Range: $13 3/8 - $5 1/4 Shares Outstanding: 40.4 MM Float: 34.75 MM Avg. Daily Volume 305,000 Market Capitalization: 200.7 MM Institutional Holdings: 17.5% Insider Holdings: 16.0% Cash & Equivalents (9/97): 43.5 MM Shareholders Equity (9/97): 58.8 MM Long Term Debt (9/97): $26.9 MM Book Value Per Share (9/97): $1.46 FY ROE P/E Revenue 1996A NM NM $89.8 MM 1997E NM NM $122.6 MM 1998E NM NM $236.4 MM Quarterly EPS 96A 97E 98E Q1 (0.39) (0.33) A (0.24) Q2 (0.28) (0.28) A (0.15) Q3 (0.31) (0.26) A (0.10) Q4 (0.42) (0.35) (0.02) Full Year EPS ($1.40) ($1.22) ($0.51) The company is determined to go at it alone to become a global player. On December 15, management entertained analysts with a star-studded slide-show of acquisition strategies/stages, the build-out of the company's regional support centers and Giga POPs. Investors wishing for a potential suitor for the holidays will be disappointed. In light of the recent Worldcom/MCI merger, PSINet has seen its competition change. The company admits that they have seen their sales cycle lengthen in the 4Q. This may be due more to damaging busy signals Mindspring (MSPG) customers continue to receive (remember AOL) than from the mega-merger. PSINet may be positioned nicely to pounce on the second tier market leaving the big dogs to fight over the fewer lucrative top tier Fortune 100 clients; there are likely thousands of small regional\local players in that market. Investors' attitude towards the stock stock is "show me". Management intends to spend an additional $3-5 million in 4Q on connectivity, marketing and support. Going forward the company's internal goals are also quite ambitious. PSINet intends to spend substantially on its network build-out supplementing the delivery of IXC's OC-48; this may reduce some of the expected cost savings from data communications (COGS). Recommendation: Positive EBITDA may not be achievable until 2Q98 and no earnings until mid- 1999. On our revenue estimates PSINet has a 1.7 times market cap to 1997-revenue ratio and 1.0 times on 1998 revenue. At their current price, the shares have little downside risk, however, PSINet shares may not be a rewarding investment until EBITDA profitability is achieved. Risks: If the share price does not significantly rise above $6 over the next 3years, PSINet would topple into the hands of IXC; the latter holding 20% of PSINet equity. IXC has a call at $23.65 per share with the difference payable in PSINet stock or cash which at $6-$15 would be a considerable penalty. Additional information on the securities mentioned in this report is available upon request. Friedman, Billings, Ramsey & Company, Inc. is a market maker in PSINet. This report is based on data obtained from sources we believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete. Because of individual client objectives, this report should not be construed as advice designed to meet the particular investment needs of any investor. Any opinions herein are subject to change. This report is not to be construed as an offer or the solicitation of an offer to buy or sell the securities herein mentioned. From time to time, this firm and/or its directors, officers, employees or members of their immediate families may have a long or short position in the securities mentioned in this report. These securities may be sold to or purchased from customers or other wise by this firm, its directors, officers, employees or members of their immediate families, as principal or agent.