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

To: bob zagorin who wrote (2042)	2/18/1998 10:15:00 AM
From: David N. Kunkel	Read Replies (1) \| Respond to of 5650

Dear Bob, Very good, tough question. Hope you can understand from my previous post that we are at the forefront of development of a global market. In addition, we recognize the necessity to develop a successful, profitable business. By most metrics, we are successful. As for profitability, I think the question is more "when" than "if". I recognize that many shareholders want to see short-term profitability, which would come at some cost to long term growth. Many others feel the long term view is preferable, in that it would lead to a more successful, more profitable company. So, there is a real dynamic tension here. It might be helpful to understand that we have seen a growth pattern to our business, which repeats itself in various business units and geographical areas. For example, our U.S. corporate connectivity business, the original business unit of the company (and our largest), is currently EBITDA positive; our U.K. business, which we acquired in 1995, has grown to be bottom-line profitable (in the 4th quarter of 1997). We see other parts of our business becoming EBITDA positive, and thereafter profitable, on different timetables, depending on various country or business factors. As more parts of the business become EBITDA positive and then profitable, the overall company will do the same. We are managing this process carefully. At the same time, opportunities in Europe, Asia and other parts of the world will continue to present themselves, and we will undoubtedly want to take advantage of the good ones. In the U.S., we will have the additional advantage of OC-48 backbone bandwidth to help grow transit business and to develop web/value added services centers. So, you can expect continued investments by PSINet, either by acquisition or organic growth. These investments always, in the short term, affect the profitability side of the equation. In the long term, they should make for a strong, global market player. So I guess the short answer to you is that we are trying to do both things, and are certainly aiming for profitability. At the same time, the Internet and our business continues to evolve. We have a saying, "In the Internet, everything changes; and the rate at which it changes constantly increases." Hope this helps.