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F1Q10 Earnings Call

July 9, 2009 4:30 pm ET

Sprint (S) on Thursday said it would outsource its network to Ericsson (ERIC) in a seven-year deal valued at $4.5 billion to $5 billion.

The deal (statement, Techmeme) allows Sprint to offload the costs associated with running its network. Sprint will transfer 6,000 employees to Ericsson. Ericsson will now handle all the day-to-day operations, maintenance, climbing cell towers and other items. The transfer of the network and the employees that go with them will happen in by the end of the third quarter.

The iPhone growth story has been written and reported ad nauseam so I will keep this brief: the iPhone trumps the competition. RIMM is a great company with a strong business (and growing consumer) presence but it lacks the breadth of apps or ease of use to really compete with the iPhone. Palm’s (PALM) Pre is the talk of the town but it will have severe difficulty breaching Apple’s walled garden or being able to reach critical mass with consumers. There is little debate that the iPhone has been anointed as the de-facto popular smart phone right now so investors may as well enjoy the ride similar to MOT (MOT) during the Razor craze (take note of MOT’s chart before, during, and after the Razor era for a warning tale).

cBeyond's (CBEY) stock price is failing fast. The TTM net margin is already near zero. This means it is actually below zero currently (i.e. the company is losing money). It had an operating loss both of the last two quarters. The churn rate has increased from less than 1% per month to 1.5% per month (i.e. from <10% to 18% per year). It was 1.3% in the 2008 year ago quarter. This means the average retention beyond the original contract date has been shortened by almost 3 years to 2 years and 7 months. The company says the churn rate is stable now, but in this environment it could easily go to 2.0% per month (24% annualized). This would make CBEY lose even more money.

cBeyond, Inc. is a small player in a “big boy” niche. It provides managed Internet protocol-based communications services to small businesses in the United States. Its services include local and long distance voice services, broadband Internet access, mobile voice and data, email, voicemail, Web hosting, secure backup and file sharing, fax-to-email, virtual private network, and other communications and information technology (IT) services.

Yesterday, Redknee (RKNEF.PK) announced its second major contract in two days, and the third in less than a month. See the post from June 6th.

The trend for Redknee continues to be international with the June contract located in the Middle East, Monday's multi-million dollar contract with a Tier1 operator in Europe, and then Tuesday's announced contract in Pacific-Asia. Investors should expect this trend to continue as operators in these regions look for mobile infrastructure and middleware solutions to support significant growing demand for mobile data services.

Intel (INTC) was once a superb investment. If you had bought $10,000 of INTC at the end of 1974, the year Craig Barrett joined the company (three years after the IPO) you would have had about $18.5 million at the stock’s peak in 2000 … or nearly $4 million today.

But Intel’s glory days are gone; your job today is to find the next Intel.

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Note: The Hitwise data featured is based on US market share of visits as defined by the IAB, which is the percentage of online traffic to the domain or category, from the Hitwise sample of 10 million US internet users. Hitwise measures more than 1 million unique websites on a daily basis, including sub-domains of larger websites. Hitwise categorizes websites into industries on the basis of subject matter and content, as well as market orientation and competitive context. The market share of visits percentage does not include traffic for all sub-domains of certain websites that could be reported on separately.

Disclosure: No positions

This great chart (click to enlarge) gives a detailed picture of data speed by wireless carrier. It shows exactly how horrible AT&T's (T) network really is. "Thank you for choosing AT&T".

In some cases, you don't really have a choice. This is also interesting within the context of the increasing pressure from government on monopoly like practices which allow AT&T to do all sorts of things to its customers and not invest in its network.

NXHZ [OTC:NXHZ] a month ago looked like any other struggling Cable aggregator, however that changed dramatically with 3 announcements. The first was an upgrade to the latest technology that on the face of it looked like over kill for the size of the firm's current subscriber base.

That was quickly followed by news the company was building an extra 1200 mile of Fiber-Optic cable in California which made the technology announcement look more realistic, but then came the big news, the acquisition of a cable operator in Mexico more than doubling the size of operations immediately and giving them the ability to expand into one of the world’s biggest Cable Markets, South America.

First Qualcomm (QCOM), now Apple (AAPL). Remember the GSM vs CDMA phone standards wars some 15+ years ago? The European Union [EU] at that time turned against Qualcomm in favor of the Nokia (NOK)-Ericsson (ERIC)-Alcatel (ALU)-Siemens (SI) backed GSM standard, mandating it in Europe and therefore limiting what would have been an even greater potential for Qualcomm.

Fast forward some 15+ years, and they’re baaack! The EU is now mandating that all cell phones be compatible with 3rd-party MicroUSB chargers by January 1, 2012. I first wrote about this subject on SeekingAlpha on December 24, 2008, and this development is now reaching its final stages of lawmaking in Europe.

Vodafone's (VOD) share price rose 1.14% Monday on news that it is exploring a bid to buy T-Mobile U.K. in a move that would make it the U.K.'s largest mobile phone operator. Vodafone's share price over the last 3 months has fluctuated somewhat. However, it is only down 2.4% over this time. Deutsche Telekom (DT) the owner of T-Mobile U.K. stock price rose 2.42% Monday.

The potential deal, whether it be a joint venture or outright acquisition will need regulators to approve it as Vodafone will acquire another 15% of the market taking it past O2 (27%) to 40% of the U.K. mobile phone market.

The short base (as measured by the percent of shares outstanding on loan) in Clearwire Corp (CLWR) has risen over the past month by 14.17% to 0.95%. CLWR operates a wireless broadband network that provides services to nearly 400,000 subscribers primarily in the U.S. and Europe. The short base of CLWR is somewhat diluted because Intel Corp. (INTC) owns more than 18% of its shares outstanding.

Many believe that utilization (which measures the supply and demand in the securities lending market) can give a better indication of the ‘popularity’ of a short position. CLWR has a utilization of 69.88%, which has increased by 24.95% over the past month. CLWR’s share price is trading just under 5 dollars which makes it down only 1.22% YTD, but well off its high of $32.50 in July 2007.

Analysts said Monday that Shaw Communications Inc.'s transition toward offering wireless services is becoming a matter of "when" not "if."

Until now, the Calgary-based cable operator's management had been speaking about whether Shaw would enter a wireless market where start-up costs are enormous and the scale of competition even more so (Shaw reported revenue of $861-million in its third-quarter earnings release Friday. Revenue for Rogers Communications Inc. (RCI) last quarter was $2.7-billion).

By Dr. Declan Fallon

From Bloomberg:

Novo Nordisk (NVO) added 3.3 percent to 279 kroner, rebounding from last week’s 5.3 percent drop. The European Association for the Study of Diabetes said its research into the cancer risk from a Sanofi-Aventis SA (SNY) diabetes drug didn’t include Novo Nordisk’s competing product, Levemir. Sanofi, which tumbled 16 percent last week, gained 0.5 percent to 41.05 euros.

A thread on the Financial Webring discussion forum asks “How safe is BCE’s Dividend?” One poster said the dividend on the common stock, now yielding 6.4%, was getting too “yummy” and possibly signaling trouble ahead. Another referenced a Globe and Mail article highlighting increased rivalry between BCE and Rogers Communication (RCI) in central Canada and the prospect of more competition to come as new firms entered the wireless market early next year.

Q3 2009 Earnings Call

June 26, 2009 10:00 am ET