Square Circle's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/233852/comments http://seekingalpha.com/article/113029-metropcs-a-short-for-2009?source=feed#comment-345968 345968
1. Unit economics - this is the main reason why MetroPCS has a competitive advantage at the low-cost end of the spectrum. By focusing on low mobility, lower-end customers in major metro areas, MetroPCS can be much more efficient with its capital expenditures, spectrum acquisitions, marketing dollars, etc. Maintaining a nationwide network PREVENTS Verizon, AT&T, etc. from being able to be cost competitive at Metro's levels. This allows PCS to offer its wireless service at a much lower price point and maintain profitability.

2. FCC auction prices are fairly standardized and there are numerous comps to look at. $2.4 billion is a good estimate of fair value.

3. Growth in core markets where there is little investment capex is highly accretive to cash flows. As Metro's markets gain maturity (like 2009 will show), subscriber growth translates into a large amount of free cash flow.

4. If your thesis is based partly on a difficult economy, PCS is just about the worst short among US wireless carriers. They compete well on cost, which is of ultimate importance to an injured consumer. Switching costs have also been substantially reduced by the use of Houdini software.]]> Sun, 04 Jan 2009 22:51:07 -0500
1. Unit economics - this is the main reason why MetroPCS has a competitive advantage at the low-cost end of the spectrum. By focusing on low mobility, lower-end customers in major metro areas, MetroPCS can be much more efficient with its capital expenditures, spectrum acquisitions, marketing dollars, etc. Maintaining a nationwide network PREVENTS Verizon, AT&T, etc. from being able to be cost competitive at Metro's levels. This allows PCS to offer its wireless service at a much lower price point and maintain profitability.

2. FCC auction prices are fairly standardized and there are numerous comps to look at. $2.4 billion is a good estimate of fair value.

3. Growth in core markets where there is little investment capex is highly accretive to cash flows. As Metro's markets gain maturity (like 2009 will show), subscriber growth translates into a large amount of free cash flow.

4. If your thesis is based partly on a difficult economy, PCS is just about the worst short among US wireless carriers. They compete well on cost, which is of ultimate importance to an injured consumer. Switching costs have also been substantially reduced by the use of Houdini software.]]> http://seekingalpha.com/article/106704-my-reconsideration-why-share-buybacks-are-pointless?source=feed#comment-310497 310497
Buybacks are a way for a company's management to efficiently give value back to their shareholder base. Think about this -- if you increase the dividend, then all recipients of said dividend have to pay income tax on the increase. If you instead use that money to retire shares, each shareholder owns a larger percentage of the business (and future cash flows) and does NOT have to foot an increased and clearly suboptimal tax burden. The shareholder can realize this stored value when convenient and pay only long-term capital gains on this, as opposed to normal income tax.
]]> Thu, 20 Nov 2008 00:36:57 -0500
Buybacks are a way for a company's management to efficiently give value back to their shareholder base. Think about this -- if you increase the dividend, then all recipients of said dividend have to pay income tax on the increase. If you instead use that money to retire shares, each shareholder owns a larger percentage of the business (and future cash flows) and does NOT have to foot an increased and clearly suboptimal tax burden. The shareholder can realize this stored value when convenient and pay only long-term capital gains on this, as opposed to normal income tax.
]]> http://seekingalpha.com/article/106704-my-reconsideration-why-share-buybacks-are-pointless?source=feed#comment-310496 310496
Buybacks are a way for a company's management to efficiently give value back to their shareholder base. Think about this -- if you increase the dividend, then all recipients of said dividend have to pay income tax on the increase. If you instead use that money to retire shares, each shareholder owns a larger percentage of the business (and future cash flows) and does NOT have to foot an increased and clearly suboptimal tax burden. The shareholder can realize this stored value when convenient and pay only long-term capital gains on this, as opposed to normal income tax.
]]> Thu, 20 Nov 2008 00:36:57 -0500
Buybacks are a way for a company's management to efficiently give value back to their shareholder base. Think about this -- if you increase the dividend, then all recipients of said dividend have to pay income tax on the increase. If you instead use that money to retire shares, each shareholder owns a larger percentage of the business (and future cash flows) and does NOT have to foot an increased and clearly suboptimal tax burden. The shareholder can realize this stored value when convenient and pay only long-term capital gains on this, as opposed to normal income tax.
]]> http://seekingalpha.com/article/94241-seeing-three-scenarios-for-geoeye?source=feed#comment-248498 248498 Mon, 08 Sep 2008 12:50:11 -0400 http://seekingalpha.com/article/94241-seeing-three-scenarios-for-geoeye?source=feed#comment-248408 248408
For what it's worth, I looked at this as much as a discussion of options strategy as a specific treatise on GEOY. Also, a successful launch does not necessarily mean that the satellite will function as planned.]]> Mon, 08 Sep 2008 11:52:26 -0400
For what it's worth, I looked at this as much as a discussion of options strategy as a specific treatise on GEOY. Also, a successful launch does not necessarily mean that the satellite will function as planned.]]> http://seekingalpha.com/article/93728-crown-castle-and-the-tower-operators-the-foundation-for-next-gen-wireless?source=feed#comment-246380 246380
Here are a few of the main reasons:

1. Lower share base allows for increased participation in earnings, buyback-related accretion, etc.
2. Margin expansion potential for Global Signal towers
3. Superior locations of tower assets
4. Lower risk international strategy]]> Fri, 05 Sep 2008 13:09:41 -0400
Here are a few of the main reasons:

1. Lower share base allows for increased participation in earnings, buyback-related accretion, etc.
2. Margin expansion potential for Global Signal towers
3. Superior locations of tower assets
4. Lower risk international strategy]]> http://seekingalpha.com/article/93728-crown-castle-and-the-tower-operators-the-foundation-for-next-gen-wireless?source=feed#comment-244889 244889
Nanotube: I would suggest you take a peek at the current and projected free cash flows, as well as the 10-K to gain more comfort with the capital structure and related covenants. Remember the superior revenue and expense visibility that companies like this have.

Nathan: Any data to support your theory and/or information that would help quantify this risk? CCI is more a REIT than a technology provider, so my guess is this liability would lie much more with equipment manufacturers and service providers than the tower operators.

]]> Wed, 03 Sep 2008 17:04:46 -0400
Nanotube: I would suggest you take a peek at the current and projected free cash flows, as well as the 10-K to gain more comfort with the capital structure and related covenants. Remember the superior revenue and expense visibility that companies like this have.

Nathan: Any data to support your theory and/or information that would help quantify this risk? CCI is more a REIT than a technology provider, so my guess is this liability would lie much more with equipment manufacturers and service providers than the tower operators.

]]> http://seekingalpha.com/article/90198-monster-rally-produces-pricey-valuation-for-fuel-systems-solutions?source=feed#comment-228993 228993
How can you justify this, especially risk-adjusted?

Correct me if I'm wrong, but this seems borderline irresponsible.]]> Tue, 12 Aug 2008 20:20:06 -0400
How can you justify this, especially risk-adjusted?

Correct me if I'm wrong, but this seems borderline irresponsible.]]> http://seekingalpha.com/article/88769-authentic-a-real-buy-at-sub-ipo-price?source=feed#comment-227387 227387
1. Market size - PC market is well understood, and limited in size, due to a combination of factors, including lack of compelling use case for consumers (and enterprises, for that matter), and low price point. Mobile opportunity is much smaller but faster growing, and likely driven by m-commerce, which has been predicted to take off for years, and has limited adoption outside of Asia.

2. Competition - UPEK and Validity are formidable, while point product chip vendors always have to consider the threat from new market entrants (especially entrance through tech buys). See Sirf vs. Broadcom/Global Locate or look at Omnivision for examples of this. What is Authentec's sustainable competitive advantage? If you don't understand this, you better not invest. FYI, IP is a very limited defense (and is almost always fleeting in nature). If this ends up being a commodity product, good luck competing with the large IC vendors.

3. Valuation - you mention relative multiples (i.e. P/E vs. comps), P/E vs. growth and DCF as your methods for valuing the business, but fail to elaborate on the inputs for the DCF, and your ability to confidently forecast earnings in a nascent, and some would say, niche market. If the "E" and "E growth" are significantly lower, a compelling P/E doesn't really mean much. Analysts often are wrong, and always are conflicted, so it is poor form to agree without providing justification (3rd party research is wrong more often that the Street).

4. What do people misunderstand about the opportunity that leads them to value it incorrectly?

]]> Sun, 10 Aug 2008 21:00:09 -0400
1. Market size - PC market is well understood, and limited in size, due to a combination of factors, including lack of compelling use case for consumers (and enterprises, for that matter), and low price point. Mobile opportunity is much smaller but faster growing, and likely driven by m-commerce, which has been predicted to take off for years, and has limited adoption outside of Asia.

2. Competition - UPEK and Validity are formidable, while point product chip vendors always have to consider the threat from new market entrants (especially entrance through tech buys). See Sirf vs. Broadcom/Global Locate or look at Omnivision for examples of this. What is Authentec's sustainable competitive advantage? If you don't understand this, you better not invest. FYI, IP is a very limited defense (and is almost always fleeting in nature). If this ends up being a commodity product, good luck competing with the large IC vendors.

3. Valuation - you mention relative multiples (i.e. P/E vs. comps), P/E vs. growth and DCF as your methods for valuing the business, but fail to elaborate on the inputs for the DCF, and your ability to confidently forecast earnings in a nascent, and some would say, niche market. If the "E" and "E growth" are significantly lower, a compelling P/E doesn't really mean much. Analysts often are wrong, and always are conflicted, so it is poor form to agree without providing justification (3rd party research is wrong more often that the Street).

4. What do people misunderstand about the opportunity that leads them to value it incorrectly?

]]> http://seekingalpha.com/article/87347-why-visa-should-thrive?source=feed#comment-217004 217004
As some have touched on, Visa enjoys an unmatched suite of merchants. It isn't even close. This is an extremely difficult thing to do and is one of the primary reasons why switching costs for banks are so high. Think -- would a bank who is already enjoying 90% of the fee revenue through Visa really care about 1-5% more of the pie when it means *major* sacrifices of breadth and therefore revenue? Conversely, would a merchant switch networks if it meant that it would dramatically inconvenience potential customers? The answer to both is an emphatic no, and is an enormous barrier to entry for V.

For an easy example of this, look to Google. There are massive network effects in search (and, more importantly, search advertising).

In the network business, scale begets scale and is tremendously difficult to overcome for the competition.]]> Mon, 28 Jul 2008 21:19:10 -0400
As some have touched on, Visa enjoys an unmatched suite of merchants. It isn't even close. This is an extremely difficult thing to do and is one of the primary reasons why switching costs for banks are so high. Think -- would a bank who is already enjoying 90% of the fee revenue through Visa really care about 1-5% more of the pie when it means *major* sacrifices of breadth and therefore revenue? Conversely, would a merchant switch networks if it meant that it would dramatically inconvenience potential customers? The answer to both is an emphatic no, and is an enormous barrier to entry for V.

For an easy example of this, look to Google. There are massive network effects in search (and, more importantly, search advertising).

In the network business, scale begets scale and is tremendously difficult to overcome for the competition.]]>