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Technology Stocks : NEXTEL -- Ignore unavailable to you. Want to Upgrade?

To: Richard Chowning who wrote (9149)	5/10/1999 12:50:00 PM
From: SteveG	Read Replies (2) \| Respond to of 10227

BTAB: NXTL: Microsoft And Nextel Team Up For Wireless Internet-Based Services Bankers Trust Research/BT Alex. Brown Research Jeffrey Hines, Bo Fifer May 10, 1999 HIGHLIGHTS: --Nextel and Microsoft announced an agreement on Monday (10-May) that will enable Nextel subscribers to access Internet-based services through a co- branded version of the MSN Internet portal. --Microsoft will also purchase $600 million of Nextel stock at $36/share (approximately 16.67 million or 4.4% share dilution). --POSITIVE NEW NEWS: 1. Microsoft as a partner (and to think last week investors were excited about the possibility of MCI WorldCom). The focus will be on utilizing the MSN portal to provide an Internet platform for Nextel subscribers via the company's Nextel Online offering. The focus is apparently threefold: i) Internet-based customer services: Nextel Online subscribers will be able to interact with Nextel via the Internet and terms of various customer services (e.g., rate plans, coverage, purchase of phones and equipment, etc.), billing services (viewing and paying), short messaging services, etc. ii) Co-branded services and applications: Nextel Online subscribers will have access to various services through the co-branded MSN portal, e.g., E- mail, calendar, address book, and Web-based content services such as stock quotes, weather, news services and sports results. iii) Applications developed by third parties: Nextel indicated that more than 90 software developers/organizations have joined Nextel's Developers Program. These developers will be developing specialized applications and services for Nextel subscribers. 2. Validation of Nextel's wireless Internet strategy. We believe that the fact that Microsoft is entering this alliance only reinforces Nextel's position as a provider of wireless-based Internet services and the capability of Motorola's iDEN technology. We note that Motorola is committed to 2Q 1999 commercialization of the i1000plus, or Internet- enabled phone. 3. $600 million of cash to Nextel. As part of the venture, Microsoft will take a roughly 4.4% position in Nextel. While Nextel's U.S. business was "fully-funded" for 1999 and 2000, Nextel International was not. We would expect that some of these funds will be funnelled toward the build out of Nextel International as well as perhaps a faster roll-out of Nextel's wireless data services. --NEGATIVE NEW NEWS: To the extent that it is negative, Nextel is seeing a share dilution of approximately 4.4% more shares. With no changes made to our underlying forecast for growth, revenues, churn, etc., our 12-month price objective based on our DCF has "fallen" to $46-50/share, from $47-51/share. Certainly this is offset, in our view, by the additional capital (less risk), a strong additional partner with Microsoft, and likely increased probability of Nextel exceeding our expectations. --CONFERENCE CALL AT 14:30 EDT. THERE WILL BE A CONFERENCE CALL ON MONDAY, 10-MAY, AT 14:30 EDT. THE CALL-IN NUMBER IS 1-888-955-8942. THE PASS CODE IS "NEXTEL" OR "MICROSOFT." --VALUATION: Reiterate "strong buy" investment rating on NXTL shares with a 12-month price objective based on our DCF of $50/share. With an additional $600 million of capital that could be used for, amongst other things, Nextel International, we are no longer more heavily discounting the International operations from the U.S. side and thus are using a price objective of $50/share as opposed to a range of $46-50/share (the lower part of the range had indicated the more heavily discounted international operations).