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

To: Rob S. who wrote (2511)	1/27/1998 11:07:00 AM
From: Rob S.	Read Replies (1) \| Respond to of 2806

The conference call went fairly well. SG & A costs grew to 32% and the company plans to bring that down to around 30% through cost cutting and efficiencies. The migration to the Telco network is a large part of the reason for the shorfal in earnings for this quarter as hs already been discussed in prior releases. That migration is now going well and is expected to get back on tract to be in line with targets established at the time of the acquisition - aprox. 70% of minutes by mid '99. Excel thinks that "time is on our side" in migrating business and negotiating for additional fiber optic capacity. Several companies are agressively deploying additional fiber optic capacity and are expected to offer low cost capacity into the market. That will augment Excel's low-cost Telco capacity. Cleveland, L.A., Chicago, Sacremento & Dallas have had new switches intalled that make the migration to Telco posible. This also allows offering of enhanced billing and routing services. Excel grew minutes by 7% in the last quarter compared to the previous quarter and 28% annualized. Excel believes that competitive rates are now in place to more effectively compete in all markets, including the new commercial markets. The rates of the two commercial programs are similar to the rates that have proven very successful in sales by Telco direct commercial sales force Excel was reserved in their comments about future growth and did not give sales projections for the commercial program. Excel does not give out numbers for total IRs but did say that the number of IRs that have been with Excel for more than one year has quadruppled since last year. The conference call was received fairly well with a lot of the focus being on future growth prospects. Analysts congradulated the Kenny and jack on the growth but there was also some concern expressed about the delay in migration to the Telco network. This migration from Worldcom and other providers is expected to save $80 million. With the costs of the Telco merger out of the way, these savings are expected to flow to the bottom line. I don't expect any fireworks in the stock price for the next several weeks. The effects of the write-off and earnings have already been factored into the price and any uptick or downward movement should be muted. The appreciation of the price is going to be tied to continued growth - if we see growth at the 28%/year level and costs are marginally reduced, the earnings should grow substantially. If that growth lets up, then the price will also stay put. There is good reason to think that the commercial sales programs, (an additional com. program for large accounts is in trial), will help to keep growth at or higher than current levels.