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Technology Stocks : Premiere Technologies (PTEK) -- Ignore unavailable to you. Want to Upgrade?

To: Claude Edelson who wrote (359)	5/21/1998 12:00:00 PM
From: Richard Singer	Read Replies (2) \| Respond to of 1270

Here's a DLJ update posted yesterday: 08:05ÿ FDL PREMIERE TECHNOLOGIES: Shares Remain Weak, Business Remains Str ÿÿÿ ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ ÿÿÿÿÿ DLJ **** DONALDSON, LUFKIN & JENRETTE **** DLJÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ May 20, 1998ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Timothy N. Weller (212) 892-4200ÿÿÿ ÿÿÿ ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Stephen F. Mahedy (212) 892-8958ÿÿÿÿÿÿÿ ÿÿÿ ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ PREMIERE TECHNOLOGIES (PTEK: $23.375) +ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ Shares Remain Weak, Business Remains Strongÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ Range:ÿÿÿÿÿÿÿÿÿÿÿ Earnings Per Shareÿÿÿÿÿÿÿÿÿÿÿÿÿ 1998 vs 1997ÿÿ % Chgÿÿÿ ÿÿÿ $38.50-$20.875ÿÿÿ Oldÿÿÿ Newÿÿ P/E Ratiosÿ F1QA $0.25ÿ vsÿ 0.14ÿÿ +79%ÿÿÿ ÿÿÿ (FY:Dec.) 1999Eÿÿ $1.80 $ÿÿÿÿÿÿÿ 13.0ÿÿÿÿÿ F2QEÿ 0.28ÿ vsÿ 0.14ÿ +100%ÿÿÿ ÿÿÿ ÿÿÿÿÿÿÿÿÿÿ 1998Eÿÿÿ 1.25ÿÿÿÿÿÿÿÿÿ 18.7ÿÿÿÿÿ F3QEÿ 0.34ÿ vsÿ 0.17ÿ +100%ÿÿÿ ÿÿÿ ÿÿÿÿÿÿÿÿÿÿ 1997Aÿÿÿ 0.70ÿÿÿÿÿÿÿÿÿ 33.4ÿÿÿÿÿ F4QEÿ 0.39ÿ vsÿ 0.25ÿÿ +56%ÿÿÿ ÿÿÿ ÿÿÿÿÿÿÿÿÿÿ 1996Aÿÿÿ 0.26ÿÿÿÿÿÿÿÿÿ 89.9ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ Yield: %ÿÿÿÿÿÿÿÿÿÿÿ Market Cap.: $972 millionÿÿÿÿ 5-Yr. Growth Rate: 50%ÿ ÿÿÿ Dividend: $0.0ÿÿÿÿÿ Avg. Trading Vol.(000): 701ÿÿ Book Value: $2.0ÿÿÿÿÿÿÿ ÿÿÿ ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ RATING: Buy Change: None 12-Mo. Target: $54ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ VIEWPOINT: Premiere Technologies (PTEK)# shares have continued to be weak ÿÿÿ as momentum investors dump their holdings, growth investors continue toÿÿ ÿÿÿ panic, and value investors smell smoke and assume there's fire somewhere. ÿÿÿ Topping it all off, while buyers' appetites are low, there seems to beÿÿÿ ÿÿÿ plenty of shares around for sale. In spite of frustration, we wouldÿÿÿÿÿÿ ÿÿÿ absolutely buy PTEK on weakness. At the risk of repeating ourselves let's ÿÿÿ tackle the issues again one by one.ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ 1. STOCK OVERHANGÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ Yes, the company filed a registration statement last month for Voice-Telÿ ÿÿÿ shareholders who had demand registration rights. That has come and gone andÿÿÿ we believe those shares have largely been placed. While it's true thatÿÿÿ ÿÿÿ other registered semi-insider shares exist, these are increasingly small asÿÿÿ a percentage of the total shares, and no seller is looking for the door in ÿÿÿ the sub-$30 range. The CEO sold just over 300,000 shares in April, wellÿÿ ÿÿÿ under10% of his holdings, a not uncommon event around tax season. The fact ÿÿÿ is that PTEK has a no better or worse stock overhang than your typicalÿÿÿ ÿÿÿ small-cap growth nameÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ 2. FIRST QUARTER REVENUE WAS ON THE MARK AT $119 MILLIONÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ Investors seemed to be worried about 1Q98 revenue coming up short, but the ÿÿÿ fact is it was right on top of our number. One competitor was ahead of the ÿÿÿ Street by quite a bit and seemed to imply that the company missed itsÿÿÿÿ ÿÿÿ revenue number, but this analyst continue to recommend the stock and hasÿ ÿÿÿ retuned his model.ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ 3. SHARE COUNT AND TAX RATE OF 39% ARE OKÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ Another competitor implied that the 1Q98 share count was cooked. We've seenÿÿÿ lots of accounting irregularities in the telecom industry in our day, but ÿÿÿ it's hard to conceive of not counting the shares correctly. This is soÿÿÿ ÿÿÿ ridiculous as to not warrant comment except that many investors seem toÿÿ ÿÿÿ have picked up on it. There have also been complaints about the tax rateÿ ÿÿÿ and our current model uses a full 39% for the 1998 to get to our $1.25. No ÿÿÿ games here.ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ 4. LOW BARRIERS TO ENTRYÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ Once a month it seems that some analyst discovers that the computerÿÿÿÿÿÿ ÿÿÿ telephony and information services business have low barriers to entry.ÿÿ ÿÿÿ True for most companies we cover. However, the barriers to success are veryÿÿÿ high. We've been seeing dozens of look-alike services for years now andÿÿ ÿÿÿ only Premiere as a pure-play has made the numbers. Also, we've been hearingÿÿÿ about AT&T(T#), MCI(MCIC), and the RBOCs coming out with ubiquitousÿÿÿÿÿ ÿÿÿ anytime, anywhere services for years, and not only do the services neverÿ ÿÿÿ quite arrive, but when they do, few people seem to take them. Frankly, if ÿÿÿ the larger players could establish the market for some of the newÿÿÿÿÿÿÿÿ ÿÿÿ integrated messaging services, Premiere could out-hustle them and draft offÿÿÿ of their growth. The company successfully competes with many others in its ÿÿÿ existing markets, why should integrated messaging be any different. These ÿÿÿ are all huge markets with room for many, many successful players.ÿÿÿÿÿÿÿÿ ÿÿÿ ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ 5. SLOW GROWTH AT VOICE-TEL AND VOICECOMÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ Again, one of those facts that gets rediscovered. Premier bought both Voice-ÿÿ Tel and VoiceCom for their distribution and customer bases. Voice-Tel has ÿÿÿ already returned to good growth under the new nationwide salesforceÿÿÿÿÿÿ ÿÿÿ structure. We have always modeled VoiceCom as shrinking slightly in 1998ÿ ÿÿÿ before returning to grow slightly in 1999. Recall that VoiceCom is <2% of ÿÿÿ Premiere's revenue so keep some perspective on this issue.ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ BOTTOM LINE: We believe PTEK shares are the single best opportunity in our ÿÿÿ coverage universe at these levels. The company has great stand-aloneÿÿÿÿÿ ÿÿÿ businesses in calling cards, fax services, e-mail services, conferencing, ÿÿÿ and voice-mail. It is a pioneer in the integration of these services andÿ ÿÿÿ will be there as the new market explodes, with or without competition from ÿÿÿ the large telecom carriers. This stock is trading at 13 times our $1.80ÿÿ ÿÿÿ estimate for 1999 and an astonishing below-S&P multiple of 19 times ourÿÿ ÿÿÿ 1998 current year estimate of $1.25, with 30-40% internal top-line growth ÿÿÿ and 50% bottom line growth for the next several years. The company willÿÿ ÿÿÿ return to free cash flow positive in the 2H98. Our 12-month target is $54, ÿÿÿ based on a 20 times multiple of our 2000 estimate of $2.70. Maintainÿ Buy ÿÿÿ rating.ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ WITHIN THE PAST THREE YEARS DONALDSON, LUFKIN & JENRETTE SECURITIESÿÿÿÿÿÿ ÿÿÿ CORPORATION HAS BEEN A MANAGING OR CO-MANAGING UNDERWRITER OF THE COMPANY'Sÿÿÿ SECURITIES.ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ c Donaldson, Lufkin & Jenrette Securities Corporation, 1996ÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ Additional information is available upon request.ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ First Call Corporation - all rights reserved. 617/345-2500ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ ÿÿÿ ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ END OF NOTEÿÿÿÿ