Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : MindSpring Enterprises (MSPG) Another ISP. -- Ignore unavailable to you. Want to Upgrade?

To: Surfer who wrote (354)	7/24/1998 1:57:00 AM
From: Ultimate Investor	Read Replies (3) \| Respond to of 1434

You cannot value a company based on some journalist speculating a buyout. do you really think bell South is going to pay $1.2 Bil to acquire 391,000 retail customers. MCI sold its entire internet business with some heavy duty network, business accounts and ISP customers and more than 391,000 retail customers for $1.7 Bil. Think again here are my thoughts on relative valuation: Look basically there is no such thing as absolute valuation (and some would say nothing like absolute truth either but I would disagree there!). If you compare Psix to other pure internet plays, it is still way undervalued. Yes, it has gone up quite a bit, and that should make us all longs happy but wait there is more. Do I think p6 just on its own merit (absent takeovers etc)is a great buy?--honestly, I do not know. But if you ask me, is it a great buy compared to the valuation put on its peers--the answer is a resounding and a very emphatic yes. Of course, there are some negatives to this stock and I have written about them before and even made statements regarding them in annual shareholder's meetings--because as owners we have a right to be critical of the management and also a responsibility to appreciate and support them when they are right and I have done both. I think that the management has been doing the right things and they are firm believers in the company but they are not impeccable--actually quite far from it. but look, I am mentioning it again--Schrader has not sold his shares and that gives me a lot of comfort. Now for the relative valuation: Mindspring--a fine company with 391,000 individual subscribers (high churn rate by default), $25 mil in Q2, $2 mil in profits but no network, no international presence and market cap $1.2 bil. Verio--$1 Bil in market cap--need I say more. look these guys are doing an arbitrage--they pay about 2 times rev to buy ISPs and then trade at 6 times or even 12 times rev (in case of mspg). now there is synergy and good management premium to it but how much?? not 600 per cent (2 times vs 12 times). obviously, this arbitrage is very expensive and cannot be supported in the long run. One of the things Psix is doing is also arbitrage but they have a state of the art network to back it up that companies like vrio and mspg do not. That leveraging of their network, a network which has put the company in the red, is what brings value to this arbitrage. Of course, this is just part of psix strategy. So in a more sane and just world (that is without the pea brained portfolio managers running the buy side show and the sell side analysts who are ever ready to prostitute themselves to get business)psix will be valued more than verio and mspg. I have taken mspg and vrio as examples even though they may not be in identical businesses but there is some sense of similarities. Since price is part perception and part value, I think Psix gets an A on value and well let us say C in perception. When that perception changes to A grade, the price will explode and we are already seeing it happening. I think compared to its peers, psix is way way undervalued. if verio were trading at 250 mil and mspg at 250 mil, would I be so bullish on psix--no, absolutely not. But they are not, and so here I am folks, saying p6 is a strong buy.