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Technology Stocks : Loral Space & Communications -- Ignore unavailable to you. Want to Upgrade?

To: jim black who wrote (4552)	9/12/1998 10:08:00 AM
From: Valueman	Read Replies (2) \| Respond to of 10852

Well folks, the bar has been raised. Risk in G* is now at a higher level, evidenced by the 24% yield on its bonds now. There is no room for a mistake in the business plan. Everything must execute perfectly. I have always held a much larger Loral stake, and did not start buying G* until I knew the launch delays had been priced in and I was comfortable with Zenit performance(oops). That was a mistake on my part. The removal of my Zenit hedge was also a mistake. We live and learn. What to do now? I believe Loral is extremely undervalued, even if G* is worth zero. Unfortunately, its fate is now tied to G* in absence of significant revenues being generated by Skynet, SatMex, Orion, Cyberstar, SS/L, etc. The G* cloud and drag will slowly disperse as sats reach orbit successfully. Ideally, the comfort level will rise after each launch. By the time 32 sats are in place, those doubts about the ability to raise additional monies should have dissipated. Loral's picture will change as Telstar 6 and SatMex 5 are launched, Cyberstar begins service, Orion 3 is launched,etc. If things go to plan, by May 99 we should have perhaps 5 additional GEOs in orbit and 36 total G* sats in orbit. The risks loom large though. What are they? --The G* launch schedule--it MUST go off on time--nobody seems to believe Mr. Schwartz that it will go as planned --Service start--once again, there is major doubt about this happening only 3 months behind --Iridium--if it falters out of the gate, financing may be impossible, and Loral or other partners will have to cough up the dough --Software/handset delays are still possible, even with this added breathing room--they need sats in orbit to really test the system What about positives? --I think ICO, ECCO, and Ellipso will have a tough go in the financing department--ICO bonds are at 25% yield as well--nobody will be able to raise money for these other systems--expect them to cancel or be significantly delayed--Teledesic? Not now. --A perfect execution does what Mr. Schwartz says--delays us 3 months and costs us $185 million extra--peanuts in the grand scheme --The stocks of both are cheap--they would make a perfect addition to the portfolio of a sat industry laggard like GE, already an owner of G* stock --for current buyers, a 20% annual return until 2002 will only require Loral to be 29 in that year(little solace there for those who bought at 29) I don't think anyone can second guess the choice of using the Zenit. If it had worked, you would all be cheering(you WERE cheering actually, before the real news came out). It appears it was a software problem, perhaps having to do with the dispensing software interfering with the second stage control software---who knows. Obviously, it worked the two times in July just fine. That is water under the bridge now. They have now gone with the most reliable launcher on earth. You CAN fault them for not doing anything from April to September--they should have slipped in another launch or two then. But, once again, my hindsight is perfect. I will hang in here with these companies, but I am going to be closely watching results, and they BETTER match projections. I will no longer be so forgiving with missed numbers at Orion, Skynet, SS/L, etc. It is time for management to perform--I'll be watching.