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

To: Bernard Levy who wrote (7573)	8/6/1998 2:44:00 PM
From: SteveG	Read Replies (1) \| Respond to of 12468

(Also H&Q comments) <..roof rights target for 99 is very challenging (doubling from 4K in late 98 to 8K in late 99)...> Hi Bernard- It may be an impressive feat, but Rouhana has recently been saying that they should easily get to 8K and possibly 10K by end of next year. A bottleneck DOES kick in when trying to get to the 5-10 times that number of buildings (50K to 100K) which makes use of the P-MP's capabilities. Here's what H&Q's Joe Noel had to say (I've received hard copies of several others, but am awaiting email versions to post) (No one had any thoughts on the likelihood that WCII gets vendor financing from LU as their "surprise" - and how that "safety nets" their build prospects?) ============= Yesterday, WinStar communications announced its 2nd quarter results. The company reported a loss of ($2.77) on revenues of $57.2 million. Our estimates were for a loss of ($2.89) on revenues of $57.1 million. First Call consensus estimate was for a loss of ($2.88). - We believe these results represent a solid "business as usual" execution of the WinStar business plan. The company continues to meet and exceed the metrics it has put in place to measure its progress, including, installed lines, roof rights acquisition, and EBITDA improvement. - CLEC revenues were $30.0 million for the quarter. This translates to a $134 million annual run rate. This was achieved through strong line growth, a 58% growth of its broadband data services from the first quarter, and integration of approximately $2 million in traffic from its Midcom acquisition. - Network deployment continues on pace for the company. The company has deployed 19 switches, compared to 8 at the end of 1997, with 60 hub sites. The company is offering services in 26 markets, which puts it in good shape to reach its goal of 30 markets by year end. WinStar has deployed at least a switch and 3 hub sites in 11 of these markets. - This deployment of switches and hub sites should be seen as sign of maturing markets for the carrier. Mature markets mean higher gross margins. For instance, in NYC, the carrier's most mature market, gross margins have reached 37%. This compares to 19% for the company as a whole. We expect that as the company's other markets mature that the overall gross margin for WinStar will expand quickly. - WinStar has now acquired roof rights for over 3,000 buildings. To put this in perspective, all of the fiber-based CLECs combined have approximately 7,000 buildings wired, and it underscores the size of the opportunity which WinStar has to reach customers that do not have other competitive options. WinStar added roof rights for over 500 buildings in Q2. - Recommendation: We believe that the fundamentals for WinStar continue to be strong. WinStar continues to execute on its plan to deploy networks and move CLEC customers onto its network. We expect this process to accelerate for WinStar as we move into the second half of the year and 1999. With it, we expect improvement in gross margin and continued improvement on the EBITDA line. WinStar continues to have limited facilities-based competition for its target small to mid-sized business customers, and with the RBOCs focused on competing with IXCs for the largest of customers, we believe that this will continue to be a fertile market for emerging competitive carriers such as WinStar. We continue to rate WCII a BUY. And numbers were upped: Estimate Q1 Q2 Q3 Q4 FY '98 Rev-New 47.4 57.2 66.1E 77.4E 248.3E '98 Rev-Old 47.4 57.1E 63.3E 70.7E 238.6E '98 EPS-New (2.54) (2.77) (2.89)E (2.94)E (11.19)E '98 EPS-Old (2.54) (2.89)E (2.96)E (2.99)E (11.38)E '99 Rev-New 89.2E 100.9E 116.3E 132.0E 439.4E '99 Rev-Old 78.4E 86.7E 96.0E 106.2E 367.3E '99 EPS-New (2.85)E (2.63)E (2.41)E (2.14)E (10.03)E '99 EPS-Old (2.89)E (2.69)E (2.51)E (2.29)E (10.38)E Revenue Estimates in Millions