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Preliminary info, the reverse merger may not be complete, although there is a PR from 2000 that says they did complete it. Possibly a few details still left to iron out. In any case I see they've filed and could be listed on OTCBB soon. WEB SITE ======== indiginet.com ANALYST REPORT ============== indiginet.com Projected 2002* Revenues: $ 98,000,000 Projected 2002 Net Income: $3,600,000 Date: Wednesday, November 08, 2000, 8:57 AM Ray Dirks Dirks & Co. 18 E. 53rd Street New York, New York 10022 Tel: 212-832-6700 Indiginet, Inc. Integrating Digital Networks Shares Outstanding: 5,500,000 (pre funding) Projected 2001* Revenues: $ 25,000,000 Projected 2001 Net Income: $ 420,000 Projected 2002* Revenues: $ 98,000,000 Projected 2002 Net Income: $3,600,000 *Assumes funding and acquisition schedule for 2000 is completed. Summary & Conclusion Indiginet has developed an exciting strategy to capitalize on a common problem facing small and medium sized businesses. Most of these businesses obtain their communications services from several providers. These may include a long distance provider, a local phone provider, an Internet provider, a data service provider, a paging provider and cellular provider. Pricing is confusing. Billing is unwieldy. Management often lacks the expertise to select the best and most cost-efficient combination of providers. Responsibility is often disclaimed with providers blaming one another for breakdowns. Indiginet plans to eliminate this problem for the business owner by providing all of these services, plus supervision and issuing one bill. Additional features and cost-cutting benefits will also be provided. Interestingly, part of the solution for Indiginet is another big problem. Many of the independent Internet Service Providers (ISPs) are in trouble. Many are losing money, are low on capital, and need to be rescued. These are available at bargain basement prices. Indiginet has identified and entered into exploratory acquisition discussions with several ISPs that would fit in with the Company's business plan. Using the customer base of the ISPs as a foundation, Indiginet will offer to integrate additional communications services to the customer with pricing discounts. Indiginet will assume total responsibility for overall efficiency, hardware, software, NetWare, phone lines wireless, etc. We envision Indiginet rapidly becoming a sizeable and highly profitable entity, which delivers an integrated array of communication services to small and medium sized businesses. Member SIPC (Hedge clause) No statement or expression of opinion or any other matter contained herein contained is, or is deemed to be an offer or a solicitation of an offer to buy or sell the security referred to above. The information contained herein is taken from sources believed to be reliable, but its accuracy cannot be guaranteed. The principals and employees of this company may trade its securities subject to self-imposed restrictions. Background The Telecommunications Act of 1996 basically fosters robust competition at all levels of the industry. The Local Exchange Carriers (LECs) must make interconnection services and unbundled network elements available to the common carriers at wholesale prices so that, in turn the common carriers may re-offer these services at competitive retail prices to their subscribers. The benefit to Indiginet is precisely that. They will utilize the customer base of acquired ISPs and sell them integrated additional services at competitive prices. The inducement for the customer is greater functionality at a lower cost. In addition, with Indiginet assuming responsibility for efficiency, maintenance, equipment, security etc., the customer is unburdened of multiple headaches. . Whereas everyone from Ma Bell to Sprint to has been only moderately successful in integrating services, they have failed to identify the factors that will get the customer to respond. The key to success in this area lies in being able to provide an additional layer of expertise and service not available through the LECs or other service providers. Indiginet can do that. Strategy To date, a common platform to provide total communication service has not as yet been created. Indigent's intention is to acquire ISP's with their business customer bases, appears to be an efficient method of establishing a total communications platform. Technical support, service and billing across the whole spectrum of communications services are accessed through one toll-free number. Indiginet will access various carriers' networks and superimpose a "virtual " network that would allow monitoring, redundancy, and enhanced reliability. The monthly cost of leased point-to-point connections would be eliminated. Although Internet Protocol is not a universal standard yet, equipment manufacturers and software companies are progressing toward that goal. Equipment is available that can multiplex communications services simultaneously over a direct connection on a single line to a carrier. Eventually, Internet Protocol could become the most efficient and widely used standard for transmission of voice as well as data. It is the Company's intention to partner with top- tiered service providers, and lease access lines from carriers to upgrade the acquired ISPs. By building a "virtual backbone" the Company will be able to focus internally on providing high quality services to the end-user. Markets The total domestic communications market is rapidly approaching $ 1 trillion. The principal segments are voice (local and long distance,) wireless and data services including the Internet. Voice: The once exclusive domain of AT&T is now shared with several regional and local telephone companies as well as national and regional long distance companies. Each is vying for greater market share, offering additional services and offering discounts. Typically, a long distance provider such as AT&T is soliciting its long distance customers to subscribe to local service or the local service provider is offering long distance service to its customer base. However, neither offers a comprehensive package for the small or medium sized business owner. In addition, this effort is offset by the high cost of soliciting new customers and a general customer perception of poor or inadequate service. Wireless: Paging: There are now over 60 million paging units in operation domestically. Growth is expected to continue robust, strengthened by development of more advanced messaging equipments and firming pricing trends. Domestically, growth is driven by convenience and low cost. For Indiginet, the ability to attract and keep clients will derive from the customer satisfaction experienced with the ISP service, coupled with the convenience and cost discounting associated with bundling and the benefits derived from integration. Mobile: It's not difficult to see that there are close to 100 million mobile phone users domestically, up from about 30 million as recently as 1995. It seems that just about every other person one passes on the street or passes you in his or her car is on the phone. Laptops, hand-held, personal digital assistants are everywhere. These items have become necessities in today's business environment. Overall growth is being sparked by convenience, cost, speed, and range. Indiginet could capitalize on this growth by offering a unified, integrated platform with the most cost efficient combination of equipments. Internet Services There are still several million businesses not on line. A good guess is that more than one million will get on line this year. More than half of all small and medium sized businesses have web sites. These sites send and receive E-mail, reduce mailing and advertising costs, improve customer service and increase business. No one ISP really dominates the business market. There are roughly 5000 independent ISPs in operation with nearly all in some difficulty. The number appears likely to drop precipitously in the next few years to less than 1000. The cause is the shift in market conditions making capital less readily available. Many of the ISPs financed early by venture groups and IPO's failed to deliver on expectations. There was no historical proven business plan. There were only some unproven ideas on how to latch on to the explosive growth of the Internet. The necessity for capital to invest in equipment, marketing, expansion and to provide first class service is a given. Therefore, many of the ISPs are losing money and looking to be acquired even at historically low prices. The opportunity for Indiginet at this point in time is to take advantage of these circumstances with a realistic updated business model. The Business Model Indiginet has targeted a specific group of ISPs for acquisition. Preliminary negotiations have been initiated with several. One group of ISPs can be classified as hubs. Another group may be classified as spokes. A hub acquisition would be expected to generate annual revenues of $1,000,000 and, whereas a spoke would generate revenues approximating roughly $ 150,000. Several hubs and spokes would consist of a region generating several million dollars in the first year. These ISPs have residential dial-up customers and business accounts. Indiginet intends to sell off the residential accounts and focus on the business client. Selling off the residential clients will help pay for the acquisition. Focusing on the business client will pay off by insuring the highest quality service, and pave the way for marketing integrated additional services. We believe marketing integrated services will work because the business customer will receive a comprehensive solution for his communications needs on a cost-effective basis. The overall responsibility will be shifted from several communication services and, in some instances, the customer's middle managers, to Indiginet. Third party providers who will lease telecommunications and wireless network access functions to Indiginet will handle most of Indiginet's costly operations. Cost savings and operating margin improvements would thereby accrue to the Company. Indiginet will focus on sales, marketing and customer service. In addition, the Company will establish technical standards and apply them uniformly across all acquired companies. Internal communications will be seamless over the company's intranet. By standardizing all equipment and software the company will derive the benefit of volume discounts. Acquisition Tactics The ideal acquisition candidate would have a high proportion of business clients, existing strategic relationships, a strong sales force and a capable management willing to stay involved with growing the business. Owners of the hub companies to be acquired would receive cash, stock and long-term debt in Indiginet in exchange for all of their outstanding shares. Spoke acquisitions would receive 50% of the purchase price in cash with the balance to be held by the previous owners for 24 months. Purchases would be valued at a multiple of revenues, which is the standard industry practice. In recent years prices have fallen dramatically from an average of 1.5 times revenues to 0.5 times recently. Variations in the multiple would reflect such things as financial condition, operating margins, the proportion of business clients, size etc. Management of the acquired companies that are retained would have strong incentives to grow sales and sell additional products as well as penalties in the way of note adjustments for failure to meet revenues as per acquisition negotiations. The inducement to the acquired management, other than being rescued in some instances, is that with upgraded equipment, a broader product line, centralized marketing, advertising, sales and support, they can envision a path to growth and profitability beyond their present circumstances. SELECTED FINANCIAL PROJECTIONS* Year 2001 2002 Revenues $25,000,000 $98,000,000 EBITDA 3,100,000 23,500,000 Net Income 420,000 3,6000,000 * Assumes financing plan and acquisition program for 2000 are completed. Additional Information is available on request | ||||||||||||
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