Windstream Gambles On Vegas

|
 |  About: Windstream Holdings, Inc. (WIN)
by: Mel Daris

As technology continues to evolve, businesses must adapt to these changes quickly to remain competitive, regardless of the industry. To do so, businesses rely on telecommunications companies like Windstream (NASDAQ:WIN) to provide a variety of essential services like high-speed Internet, VOIP (Voice Over Internet Protocol), and cloud computing so employees can share files and other electronic information quickly. Windstream recently announced its plans to offer these types of services to businesses based in and around Las Vegas, Nevada.

Windstream has continuously expanded into new territories. Starting out as a landline phone service, the company now caters to both business and residential customers offering phone, Internet, and other communications services and products.

With the increased demand of cloud computing services, companies like Windstream can provide file sharing capabilities to businesses that have multiple offices, large groups of remote employees, and provide a safe place to share files when employees travel for business purposes. Windstream also provides data recovery services that help businesses recover lost files after a server crash, virus attack, or other technical issue.

Expanding into New Territories

Windstream currently provides telecommunications services to businesses in over 48 states. With call centers in Arizona, North Carolina, and other areas, customers can contact the company to report issues with service, discuss adding or removing services, and any other issues that need further investigation.

Expanding into new territories comes with added responsibility, however, as breaking into a new territory means increased competition from other telecom companies, additional marketing and advertising costs, and having to make the most of local economies that may not be the most stable at the moment.

Las Vegas Commerce

Hit hard by a plummeting housing and jobs markets over the last few years, Las Vegas, like other areas in the west and south west United States, has seen many businesses and residents leave the area. What it will take to make the region stable again, no one knows for sure. Businesses that remain need to stay competitive, so a need for the latest telecom products and services is present. An upsurge in the economy could drive business growth, which would only further economic recovery throughout the region.

It seems that Las Vegas and surrounding areas have seen an increase in job growth recently. And even though many experts agree the local economy has a long way to go before it will be strong and stable again, an increase in jobs could also increase the need for even more telecom products and services. For companies like Windstream, expanding now with the hopes of becoming more profitable over time could be a sound marketing strategy - but only if that recovery happens as planned.

Windstream's Gamble

While it's always a gamble for companies to expand into new territory, especially those hit hard by economic downturns, investors should look at this latest expansion by Windstream as a potentially profitable one. Providing advanced communication services to businesses typically results in more output from these businesses, which can stimulate local economies. Also, if Windstream is successful in bringing top-notch services to the area, other businesses could sign up to receive these services as well.

On the other hand, if business continues to remain stagnant or decrease in the Las Vegas area, fewer businesses will need advanced communication services from any communications company. Investors should familiarize themselves with the Las Vegas market and some of the other markets Windstream currently serves to determine if the company's services will turn a profit or not. This does not mean every single market Windstream enters must be profitable, it just means that investors should remain aware of the economic conditions of the areas in which the company expands going forward.

Luckily, since Windstream has expanded into both small and large markets across the US over the years, those that are more profitable will make up for losses in less profitable ones.

Strong Competition

In addition to catering to a local economy that's slow to recover, Windstream also has some hefty competition from other telecom companies like CenturyLink (NYSE:CTL), Verizon (NYSE:VZ), Comcast (NYSE:CCS) and AT&T (NYSE:T), which all provide similar products and services to the Las Vegas area. With a local economy still struggling, the intense competition from other companies may have an effect on Windstream's profits.

Breaking into already saturated markets is never easy, but when mixed with an unstable economy, building a brand requires more work, innovation, and creativity. Investors need to be aware of the competition Windstream faces, as this just makes the challenge of providing products and services to a recovering area all the more difficult.

In the End

The level of profit Windstream hopes to generate by expanding into the Las Vegas area remains unknown. Perhaps the company just wants to further its brand by moving into new areas regardless of competition. The overall marketing strategy may be to expand and then consider each region's needs as necessary. For investors, this may be an exciting time or a fearful one. Since marketing strategies can change in an instant, depending on potential profits and losses, investors should take into account more than just service expansion.

For example, Windstream just announced it will cut up to 400 management positions in an attempt to restructure the company. The company claims it will be more competitive and be able to expand into more territories by cutting its workforce. Investors should be a little wary when companies cut their workforce to find the money necessary to continue expansion. In order to remain profitable, telecom companies must continue to offer products and services in new territories to gain additional customers. I would just be careful that Windstream doesn't spread itself too thin by expanding too quickly without the appropriate amount of employees needed to operate and manage the company successfully.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.