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

To: bob glass who wrote (5418)	4/24/1998 3:08:00 AM
From: Jason Cogan	Read Replies (3) \| Respond to of 12468

Bob, Richard, and others: I don't doubt that Winstar will get some customers to use its broadband wireless for some of their services. There will always be room for alternative access providers, particularly businesses. Some might use Winstar as an backup system, or maybe for ATM quality internet service. But I think you're missing the point. I take issue with a couple of points you made in your posts. Let me address them. <<WinStar has already convinced large companies to use the service, and the reliability issue is "old news". Pac Bell signed a deal almost a year and a half ago, and quality has never been an issue.>> Reliability when it comes to wireless services is never "old news". There are always problems with wireless, even the most sophisticated CDMA systems. As you add more complex routing features, and multi-functional networks (voice, video, data), wireless problems multiply. This won't stop people from using wireless systems, but remember, wireless systems don't occur in a vacuum. Landline services are always available. The competitive threat from RBOCs, CLECs, and other alternative systems remains. If anything, it gets stronger every day, making ultimate pricing freedom more and more unlikely for Winstar. Nobody's going to pay more for Winstar when they can get "superior fiber performance" for less. The revenue numbers speak for themselves. <<As it is, In the Wireless business, you return virtually 50 % or more of your investment the following year.>> If this is true, why were revenues only $80 million last year? (Actually $40 million was from documentary productions, not wireless services). Why are the margins on Winstar's business deteriorating? Why are they losing more and more money every quarter, with losses of over $300 million last year. When somebody loses $300 million of your money, don't you get a little nervous? <<As neither an accountant, nor an analyst, I have to depend on "experts" for financial projections, and the experts are pretty convinced that WinStar's future is extremely bright.>> Again, these thoughts are dangerous, and lead me to question the validity of this entire bull market frenzy. Why do you think the experts can predict revenues, expenses, and earnings two years from now? Why do you think they are any better at assessing the complicated telecommunications landscape? I'm sure Bill Gates doesn't know which delivery system will succeed. Why should they? Be careful. Don't always believe the salesman when he's selling. <<I guess, if you went back to the earliest days of any success story growth company, you would probably come up with the same analysis; losses, debt etc.>> Not true. Microsoft never had significant losses, nor a large amount of debt. It's why Bill Gates is the richest man in the world. His business generated the necessary cash flow, and enabled him to keep all the stock. The same can not be said of Winstar. They are selling securities (stock, debt, preferred) like it's going out of style. Look at the share growth if you don't believe me. <<That's why this stock is such a good buy right now.>> I disagree. I see risk everywhere, both in the underlying business model and the valuation. Winstar may penetrate some businesses, and may in fact sell a great deal of services. But the cost of implementation is putting them out of business. As equity buyers, you are buying shares of an entity that is already $500 million in the hole, and going further into the read all the time. The bondholders will not wait for profits. They will demand that the first $900 million of profits go to them before the common stockholders get anything. And the meter continues to run. Why do you think your shares should be more valuable than they are right now? Why can't they be worth less? Significantly less. After all, what's a money losing access provider worth anyway? As always, any and all thoughts appreciated. Regards, Jason Cogan