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Technology Stocks : Winstar Comm. (WCII) -- Ignore unavailable to you. Want to Upgrade?

To: Louis savarese who wrote (5414)	4/23/1998 9:32:00 PM
From: Jason Cogan	Read Replies (2) \| Respond to of 12468

Louis and others: I have been going back and reading some of the earlier discussions regarding Winstar. It is enlightening, and certainly refreshing, to see so many unabashed advocates of a stock. But the thread is filled with many "untruths." Most of the misstatements are about financial matters. At the risk of stepping into the fire I feel the need to point these out. Rather than antagonizing, I was hoping those of you with substantial investments could adress these very real concerns. <<Winstar has a billion dollars in cash.>> Winstar does not have a billion dollars. Nowhere close. If you read the 10-K, you will see that Winsar has only $400 million in cash. It does have over $900 million in debt and preferred liabilities, meaning that the common stockholders have a negative net worth. <<Winstar can make a number of strategic acquistions>> It's difficult to see how Winstar will make strategic acquisitions without issuing more debt, or diluting their non-existent equity. At the rate of $200 million ($-188 million EBIT)in losses per year, Winstar is quickly buring through their available cash. <<The oversubscription of the debt offerings shows that Winstar is getting funds for cheap.>> Not true. Another look at the 10-K reveals that their average cost of debt appears to be over 12.5%. The preferred equity, which counts on the balance sheet as equity but is really debt senior to the common stockholders, represents another $175 million in debt. 12.5% cost of funds does not appear particularly cheap, especially when US long bonds are around 6%. There are a number of other troubling figures as well. Over half their revenue last year came from non-CLEC related services. Essentially, this is money received by Winstar's documentary film group. Maybe not a bad business, but certainly not what everyone is betting on regarding broadband wireless. As for the technology, I follow wireless pretty closely, having done some work for Qualcomm. I am no means a wireless expert, but wireless, even broadband, will never have the same reliability as fiber. You can call it wireless fiber all you want. But it's not the same thing as fiber, and I anticipate Winstar will have trouble convincing large customers to rely on wireless local loop for all their telecommunication needs. Winstar may get a piece of this business, but it won't come without a fight. I certainly don't see $1.2 billion in EBITDA anytime in the near future. I can appreciate those of you who feel broadband wireless may be the next great solution to local loop congestion. Personally, I have my doubts. But financially, Winstar appears to have some serious difficulty. By the way, when Winstar announces an annual loss of -$7.50/share, whose $7.50 do you think they're losing? As always, any and all thoughts appreciated. Regards, Jason Cogan