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Technology Stocks : Broadband Wireless Access [WCII, NXLK, WCOM, satellite..] -- Ignore unavailable to you. Want to Upgrade?

To: SteveG who wrote (186)	5/13/1999 4:35:00 PM
From: TheSlowLane	Read Replies (2) \| Respond to of 1860

Yes, the reports would be deeply appreciated. Did you listen to the conf. call? What did you think? I left my notes at home, but overall I thought it was more of the same - an outstanding performance. Bill did not have the slight, edgy tone of exasperation that I sensed during the last call (I think that the fact that it seems that the analysts are starting to get it helps). I like the comments regarding the "critical mass" of network that has been achieved and what that means going forward. Whether we get another big announcement in the next few weeks or not (don't get me wrong, I'll take it if it comes) - my feeling is that the next few years will be a very good time to be in WCII!

To: SteveG who wrote (186)	5/13/1999 11:01:00 PM
From: Bill Lotozo	Read Replies (3) \| Respond to of 1860

SteveG, What do you see as the likelyhood that Winstar will pull back under $50 before moving up. I've been waiting to add to my holdings since its climb from $30 -- waiting for it to pull back 20% like it has so often in the past after a big run up. Thanks Bill

To: SteveG who wrote (186)	5/15/1999 4:19:00 PM
From: DubM	Read Replies (1) \| Respond to of 1860

Steve, if you have any updates since the conference call, those would be most appreciated. Dub

To: SteveG who wrote (186)	5/19/1999 12:46:00 AM
From: SteveG	Respond to of 1860

I'll start with some very recent comments out of SSB's High Yield (like Grubman, ALSO an II #1 rated) analyst: WinStar Breaks Out The Evolution of WinStar - On May 12, 1999, WinStar Communications, Inc. (WCII) (Caa1/CCC+) announced its results for the first quarter of 1999. The company's core telecom revenues in the first quarter of 1999 increased 23% to $69 million from $56 million in the fourth quarter of 1998. Annualizing the first quarter, WinStar has a core telecom revenue run rate of $274 million, a $52 million increase from the company's run rate of $222 million during the previous quarter. WCII's reported total consolidated revenue increased 9% to $88 million from $81 million in the fourth quarter of 1998. During the quarter, gross margins improved as well with an increase to 23%, more than double the 11% gross margin in the prior period. The company stated that the purchase of long-haul fiber from Williams and its increased penetration in network buildings contributed to the increase in its gross margins. For the first quarter, SG&A was 113% of sales up from 107% quarter to quarter due to increased expenditures by the company for the expansion of its business. However, the company believes that this percentage will decrease to the mid-seventies by the end of the year. The Company's EBITDA loss was relatively flat widening by $600,000 which is impressive given the expenditures for the company's business expansion. On its balance sheet, WCII increased its cash reserves, including short-term investments, to $410 million as a result of its recent equity offering. The company currently has $1.8 billion in debt, $209 million in exchangeable preferred stock and $200 million in convertible preferred stock. During the first quarter, the company spent $224 million in capital expenditures. The company still believes that it will hit its target of $600 million in total capital expenditures for 1999. WinStar's improvement is to its solid quarterly operational performance. In the first quarter of 1999, the company installed 65,000 lines, a 5% increase from the previous quarter of 62,000, raising the current total to over 380,000 lines. The percentage of on-net line installations increased to over 40% of newly added lines this quarter, bringing the cumulative on-net line total to 24% as of March 31, 1999 up from 20% during the fourth quarter of 1998. Penetration in the first quarter was 14% on average which was well above WCII's long-term goal of 10%. In addition, the company added over 600 building access rights during the quarter, the fourth consecutive quarter in which over 500 building access rights had been added. At the end of the quarter, the company had obtained a total of more than 4,800 building access rights in U.S. markets. Furthermore, the company completed 17 new hub sites, raising its total in service to 79. There are 36 hub sites currently under construction with 21 set to begin construction in the near future. Also, relationships with Lucent and Williams have enabled the company to improve its technology and construct a fiber backbone covering the top 60 U.S. markets, respectively, making the company a true end-to-end player. The company gave specific insight into New York, its first market. In New York, the company significantly increased its positive EBITDA for the second consecutive quarter, increasing its revenues and on-net percentages. The percentage of newly added customer lines fully on the WinStar network in New York increased to 72% in the quarter, bringing the total of on-net lines at the end of the quarter to 56%. Furthermore, during the quarter, 100% of all lines added in New York were on the company's switches. The company's other older markets such as Los Angeles, Chicago, Boston and Dallas also experienced similar growth. As a result, the percentage of on-net customer lines in mature markets increased to 39%. As for Project Millenium, its on-net marketing strategy, WCII has been particularly pleased with its performance, and credits the program with vastly improving the company's performance. The program contributed significantly to raising the percentage of on-net lines added in the quarter to over 40% from under 15% a year ago. Project Millenium increased levels of multiple service orders, one-call sales closings and long-term contracts. In addition, the project has increased the percentage of new customers buying multiple services to 60%, more than double the 25% figure from the period a year-ago. OPINION: In light of the company's strong operational and financial performance during the quarter, we are raising our value opinion on the debt of WCII to Low Single B with a positive credit trend from High Triple C with a stable credit trend. During the past 18 months, WCII's management team assembled a base of assets that transformed the company from a pure CLEC to an Integrated Communications Provider ("ICP"). WCII's network is a hybrid of fiber and wireless assets. During its quarterly call, WCII's management stated that they had 20 to 30 buildings connected on fiber which is an evolution from a 100% wireless connectivity platform. WCII's new network platform has the capability to provide a complete suite of communications services to business customers on an end-to-end basis in major markets throughout the United States. In addition, WCII's Internet and New Media businesses provide content and more importantly traffic for the network. We believe the company is only at the early stages of its operational momentum. The company has learned the lessons of the past two years and has become more focused in acquiring roof rights as well as more intelligent in marketing to targeted areas and buildings. The company's increased building penetration is evidence to the new approach. WCII's access line growth, particularly the growing on-net and on-switch percentage, is a base for which the company will propel its gross margin improvement. Looking at the assembled network assets coupled with the growing operational and financial profile, WCII has clearly taken the next evolutionary step. The company is poised to increase its equity base by $75 million to $100 million through a mandatory conversion of its 14% senior subordinated convertible discount notes. This could occur during the next two weeks if the company's stock price remains above $42.375. With growing business momentum, we are taking a more definitive step in our investment position on the company. We are reiterating our buy recommendation on the company's bonds both on a fundamental and relative value basis. In addition, we are upgrading WCII to our core wireline portfolio from our technical portfolio. WCII has put together a management team that has assembled an end-to-end facilities-based network with a business plan that is on par with our top recommendations in the high yield telecommunications market, and we believe the company has earned its place as a core holding in telecommunications portfolios.

To: SteveG who wrote (186)	5/19/1999 12:49:00 AM
From: SteveG	Respond to of 1860

From BTAB WCII: ON-NET GROWTH LEADS TO STRONG GROSS MARGINS IN 1Q 1999--STRONG BUY Bankers Trust Research/BT Alex. Brown Research Bo Fifer,Jeffrey Hines May 13, 1999 --------------------------------------------------------------------------- ---- WINSTAR COMMUNICATIONS INC. [WCII] "STRONG BUY" On-Net Growth Leads To Strong Gross Margins In 1Q 1999 --------------------------------------------------------------------------- ---- Date: 05/12/1999 EPS 1998A 1999E 2000E Price: 52.88 1Q (2.54) (3.72)A NE 52-Wk Range: 55 - 10 2Q (2.77) (3.89) NE Ann Dividend: 0.0 3Q (2.83) (3.64) NE Ann Div Yld: 0.00% 4Q (3.80) (3.48) NE Mkt Cap (mm): 4,066 FY(Dec.) (11.96) (14.73) (12.66) 3-Yr Growth: FY P/EPS NM NM NM CY EPS (11.96) (14.73) (12.66) Est. Changed Yes CY P/EPS NM NM NM --------------------------------------------------------------------------- ---- HIGHLIGHTS: --WinStar reported 1Q 1999 results last night (12-May) after the market close that demonstrated strong financial performance in line with the strong access line growth (particularly on-net growth) previewed in early May. --HEADLINE PERFORMANCE METRICS Metric 4Q98A 1Q99E 1Q99A Revenue $81.1M $89.5M $88.1M EBITDA -$79.8M -$82.6M -$79.8M Access Line Additions* 62,000 65,000 65,000 Gross Margin 11% 23% 23% % On-Net Lines* 20% 24% 24% * Reported on 6-May-99. Source: Company documents, BT Alex. Brown Incorporated. --POSITIVE NEW NEWS: We are becoming increasingly confident that WinStar can meet our expectations of 40% gross margins by YE 1999 while management has raised its internal objective to 35%-40%. Total "high- margin" lines (including data) represented about 69% of total line additions. WinStar also announced the availability of point-to-point OC- 3 (155 Mbps) radios last week, which should ultimately help drive further improvements in the gross margin. --STOCK PRICE PERFORMANCE: YTD, WCII is up 36% versus a 66% gain in our CLEC Index and an 11% gain in the S&P 500. --NET-NET: The sharp sequential improvement in gross margin (23% versus 11% in 4Q 1998) speaks to the success WinStar is having in generating more on-net traffic. For proof that this strategy is paying off, we note that WinStar's most mature market, New York City, reported its second quarter of positive EBITDA after just 2 years in operation, with gross margins already pushing 50% and on-net lines at 56%. Based on our 10- year DCF, using a 20% equity discount rate and 10x terminating multiple, our 12-month price objective on WCII is $63/share. Maintain "strong buy (1)" rating. DETAILS: WinStar reported 1Q 1999 results last night (12-May) after the market close that demonstrated strong financial performance in line with the strong access line growth (particularly on-net growth) previewed in early May. HEADLINE PERFORMANCE METRICS Metric 4Q98A 1Q99E 1Q99A Revenue $81.1M $89.5M $88.1M EBITDA -$79.8M -$82.6M -$79.8M Access Line Additions* 62,000 65,000 65,000 Gross Margin 11% 23% 23% % On-Net Lines* 20% 24% 24% * Reported on 6-May-99. Source: Company documents, BT Alex. Brown Incorporated. ACCESS LINE GROWTH WEIGHTED TOWARD HIGH-MARGIN LINES WinStar previewed access line growth in 1Q 1999 on 6-May. By way of recap, WinStar outpaced our model by every measure reported. While the absolute number of lines added beat our estimates, what really impressed us was the mix of lines added in the quarter: Metric 1Q99E 1Q99A 1Q98A Access lines (Mil.) 0.379 0.384 0.145 % On-Net 22% 24% 15% % On-Switch 39% 45% 30% % Resale 39% 31% 55% Net Lines Add's (Mil.) 0.060 0.065 0.045 % On-Net 31% 44% NE Source: Company data, BT Alex. Brown Incorporated estimates. As of 1Q 1999, WinStar's access line breakdown was as follows: Lines in Millions 1Q 99 4Q 98 On-Net Lines 0.092 0.064 On Switch Lines 0.172 0.144 Data Lines 0.096 0.080 Voice Lines 0.077 0.064 Resale Lines 0.119 0.112 Total Lines 0.384 0.319 Source: Company data, BT Alex. Brown Incorporated estimates. "High margin" lines include on-net and on-switch data lines. On-net lines consist of voice lines (and a small amount of fax or fractional T1s that are allocated partially to voice and partially to data) that reach the WinStar switch via a wireless last-mile connection. On-switch data lines are leased local loops connected to WinStar's switch and going through WinStar's Internet POPs which, because of the pricing atmosphere for data services, enjoy a relatively high margin as well. THANK YOU PROJECT MILLENNIUM Behind the outstanding access line performance was the success of WinStar's Millennium project, which was designed to drive penetration of on-net buildings, and again gross margin. Thanks in (large) part to this marketing program, WinStar has achieved several impressive milestones in 1Q 99: --WinStar reached an average penetration of 14% in Millennium buildings (versus a long-term goal of 10%) --WinStar doubled its rate of first-visit sales to 19% from 7% sequentially --60% of new customers signed three year contracts --60% of new lines were for multiple services INCREASING CONFIDENCE IN 1999 ESTIMATES We are becoming increasingly confident that WinStar can meet our expectations of 40% gross margins by YE 1999, while management increased its internal objective to 35%-40%. On-net lines as a percentage of total line additions in 1Q 1999 reached 44%, and when including off-net data lines (which carry a much higher margin because of the pricing atmosphere for data), total "high-margin" lines represented about 69% of total lines additions. WinStar also announced the availability of point-to-point OC-3 (155 Mbps) radios last week, which should ultimately help drive further improvements in the gross margin. This theme is apparent to us in the Company's strategic moves--from acquiring long haul fiber to intra-city fiber and ultimately even "last mile" fiber--WinStar is making a concentrated effort to serve its customers with the most economical technology. INTERNET SERVICES ALSO RAMPING WITH OFFICE.COM DEAL WinStar announced a deal with CBS in April whereby CBS will take a 33% equity stake in WinStar's business-to-business "virtual consultant" web portal--Office.com--for $42 million in advertising over the next 6 years. Through Office.com, users can access information on industry events, suppliers, professional services--basically any information that a business would need to drive growth. The WinStar suite of products/services includes broadband local access, competitive long-distance, and high-speed data, while ultimately driving their own broadband demand through Office.com and other content vehicles. WinStar's data services consist of four key parts, which, in aggregate, have achieved a $100M revenue run rate as of March 1999. 1) High speed local access on a global basis 2) Long haul transport over a tier 1 backbone in the top 60 US markets 3) Web consulting/hosting/design 4) Content (including WinStar New Media and Office.com) STRONG STRATEGIC "FAMILY" Over the past six months, WinStar has received some important endorsements of its wireless network and strategy. In October 1998, Lucent stepped up to the plate with a $2 billion facility for equipment at rates of around 8% (with a discount on pricing and the ability to go outside of Lucent with 30% of that facility for equipment purchases). In December, telecom wholesaler Williams Communications agreed to buy 2% of WinStar's capacity for $400 million in a deal that gave William's customers a broadband connection to their end users. And now CBS has expanded its Internet holdings (which include hollywood.com, storerunner.com, sportsline.com, and marketwatch.com) to include WinStar's Office.com. Although we are not modeling a large incremental revenue kick from Office.com, since WinStar already owns high- capacity web hosting and access facilities the major cost would have been in advertising to build the awareness of the Office.com portal, which now falls on CBS' capable shoulders. NET-NET The sharp sequential improvement in gross margin (23% versus 11% in 4Q 1998) speaks to the success WinStar is having in generating more on-net traffic. For proof that this strategy is paying off, we note that WinStar's most mature market, New York City, reported its second quarter of positive EBITDA after just 2 years in operation, with gross margins already pushing 50% and on-net lines at 56%. Based on our 10-year DCF, using a 20% equity discount rate and 10x terminating multiple, our 12-month price objective on WCII is $63/share.

To: SteveG who wrote (186)	5/19/1999 12:51:00 AM
From: SteveG	Read Replies (1) \| Respond to of 1860

NBMO on WCII: WinStar Begins 1999 With Solid Results & Strong Gross Margin Performance u WinStar reported 1Q99 revenue of $88.1 million, which was a 9% sequential improvement from the previous quarter, and was $4.6 million above our estimate of $88.1 million. EBITDA for the quarter was a loss of $79.2 million, which was in line with our estimate of $82.7 million. u Gross margins for the quarter improved to 23% from 11% in the previous quarter and were better than our 14% expectations. Due to the increased on-net traffic, higher margin data revenue and improved backbone costs, the company's margins more than doubled and we expect to see a sequential increase for next quarter. u Project Millennium and increased on-net building penetration led to another solid quarter of line additions. The company installed 65,000 lines in the quarter, in line with our expectations, with total lines at the end of the quarter reaching 384,000. More than 40% of line installations were on-net, bringing the total customer base to 24% on-net. u The increased focus on new on-net buildings and increased penetration into existing on-net buildings is beginning to drive improved gross margins ahead of schedule. We expect these trends to continue and have increased confidence in WinStar's ability to continue driving shareholder value. We reiterate our BUY recommendation and $54 price target. First Quarter Results Revenues & EBITDA Total revenues were $88.1 million up 8.6% sequentially and $4.6 million above our expectations of $83.5 million. Core telecommunication services revenue totaled $68.6 million, $8.6 million more than we expected, and up 23% sequentially over 4Q98 revenue of $55.6 million. Both data services revenue and voice revenue (formerly know as CLEC revenue) showed approximately 23% sequential improvement. We estimate data services to be about 30% of core telecom revenue with the remaining being attributable to voice revenue, except for the $1.1 million booked this quarter related to sale of capacity to Williams (WMB, $48 1/4) that is starting to be recognized. Project Millennium continues to prove successful with more than 60% of new customers in 1Q99 signing 3-year agreements. These contracts provide up to $1,000 per month of free local phone charges when they sign a 3-year contract. We feel this program helps market the WinStar brand and develops long-term relationships, which creates opportunities to sell additional services. This leads to "sticky" revenue as these customers rely on WinStar for multiple communication needs. WinStar's bundled offering is already experiencing success as 60% of new lines this quarter took multiple services, up from 25% in 1Q98. Gross margins for the quarter improved to 23% from 11% in the previous quarter and were better than our 14% expectations. Due to the increased on-net traffic, higher margin data revenue and improved backbone costs, the company's margins more than doubled and we expect to see a sequential increase for next quarter ending the year at approximately 40%. The company continues to market heavily to on-net buildings with penetration levels in on-net building averaging 14%. WinStar's presence in existing buildings continues to be enhanced by its numerous marketing efforts resulting in an increased percentage of one-call sales closings from 7% 4Q98 to 19% 1Q99. Also, as the Williams backbone is integrated into the business it's driving the cost of revenue down because WinStar has an owned asset that gives them more capacity instead of paying out long distance charges for limited capacity. EBITDA for the quarter was a loss of $79.2 million, which was better than our estimate of $82.7 million. Although SG&A increased as a percentage of revenue from 108% in 4Q98 to 113% in 1Q99 this was in line with our expectations. We expect the company to continue incurring significant SG&A costs as they expand into additional markets. Line Additions & Building Acquisitions WinStar added 65,000 installed lines in the quarter, bringing its total installed lines to 384,000. The company continues to focus on selling to on-net customers and is only doing resale where they need to accommodate a customer. Of the 65K lines added 40% were on-net bringing the total on-net percentage to 24% up from 20% in 4Q98 and we expect this on-net percentage to accelerate in 1999 due to the success of Project Millennium and the continued expansion of the network. The company obtained building access rights, which is the first step in the process of bringing a building on-net, to more than 600 buildings in 1Q99, bringing the current total to more than 4,800. This puts WinStar on target to reach their 1999 goal of 8,000 building access rights. Capital Position WinStar ended the quarter with $409.564 million in cash. The company has been drawing on the $2 billion Lucent vendor financing facility and we estimate they've accumulated approximately $185- 200 million worth of drawdowns to date. Capital expenditures for the quarter were $224 million. Of the total spent in CAPX approximately $35 million was cash that WinStar disbursed, the remaining CAPX was funded through the Lucent & Williams transactions. We feel this is a significant point as WinStar was able to deploy $224 million worth of capital in the quarter using $35 million of its own cash and by leveraging the financing arrangements it has with Lucent & Williams. With its cash position and the Lucent financing, the company should be funded through 1999. We expect capital expenditures for 1999 to be $600 million, primarily focused on the network buildout, operational support systems, and payments for the William's network. Conclusion WinStar continues to execute on the plans the company laid out in the fourth quarter and has started out 1999 with a solid first quarter. With the accelerated network buildout, the expansion into 21 new markets in 1999, and the continued focus to drive customers on-net, we expect WinStar to continue to execute on its strategy and to drive shareholder value. We reiterate our BUY recommendation and $54 price target.

To: SteveG who wrote (186)	5/19/1999 1:03:00 AM
From: SteveG	Read Replies (1) \| Respond to of 1860

JP, Oppy, Goldman, AGEd, Fahnestock, Legg and Southeast when I get the chance - maybe this week, but will be very busy. Fwiw, Bill Rouhana will be speaking at NationsBanc Montgomery's Telecom conference next week, as well as at Bob Metcalfe's CEO Telecom Summit. And WCII (I believe Rohana, I didn't attend) presented at SSB's high yield yesterday.

To: SteveG who wrote (186)	5/19/1999 1:12:00 AM
From: SteveG	Read Replies (1) \| Respond to of 1860

Fahnestock from earlier last week: Investment Opinion: We are reiterating our BUY rating on WinStar Communications. Our revised year-end asset value of $86 per share reflects a 13% increase over our prior estimate of $76. The change reflects a very modest increase in our data forecast (which we believe is still understated). Our new $60 target reflects a 30% public market discount. Key points: · Yesterday WCII shares surged 6 points (12%) on volume of nearly 4 million shares. In talking with management last night, it was noted that Tuesday was the second day of NEXTLINK's road show (the company is selling 9 million shares of stock and $750 million of Notes). As the largest holder of LMDS (28 GHz wireless) licenses in the world, NEXTLINK is heavily promoting the benefits of wireless access on its road show. Specifically; (we're paraphrasing from NEXTLINK's recently filed S-3) “by using fixed wireless as an alternative means for reaching customers, the company can further reduce its reliance on the ILEC, thereby relieving its provisioning bottleneck, accelerating installation time, and increasing the number of on-net buildings served.” As the largest holder of MMDS (38 GHz wireless) licenses in the world, WinStar enjoys the same benefits. · Longer term, NEXTLINK may have more wireless customers than fiber customers. During NEXTLINK's 1Q99 conference call Steve Hooper (NEXTLINK's recently elected COO) noted that fiber connections (while preferable) may be overtaken by wireless connections as “the predominant means of accessing customers over the long term.” As a pure wireless CLEC play, WinStar will clearly benefit if this vision comes to pass. · The magnitude of the fundamental rebound is finally sinking in. During 4Q 1998 WinStar's gross margins “collapsed” (from 25% in 3Q99 to 11% in 4Q99) reflecting a confluence of “temporary” costs associated with the kick off of the Company's Millennium marketing program. Skeptics (who have been waiting on the sideline for hard evidence that these costs were indeed temporary) will have their proof after the market closes today. We expect gross margins to rebound into the high teens. Our current forecast calls for gross margins to average 35% by the fourth quarter of this year. However, management has started to hint that 40% may be achievable. · We have revised our data forecast for WinStar upward – but only slightly. Data still represents a tiny fraction of our 2009 revenue forecast (less than 15%). We consider this estimate little more than a “place marker.” As the visibility of data revenues improves over the next two quarters, we intend to raise this estimate considerably. As a result, we would be disinclined to sell WCII shares despite the recent strength.