XO Holdings: Raise Morale and Open Communications

Apr. 15, 2008 10:27 AM ETXOCM, S, TWTC, GLBC, LUMN12 Comments
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Tech101
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The lack of liquidity and worries/uncertainty over XO's (XOHO.OB) finance and possible dilution with stock "right offer" have brought its stock down to all time low. However, based on the following facts and analysis:

  1. XO is basically a healthy telecom company BUSINESS-WISE, and it is getting more and more healthy with its higher margin IP, data and Internet business growing 30-50% annually, offsetting its legacy voice business;
  2. There are heated PR activities around XO business progress, executive interviews, conference keynote speeches, panel meetings, plus many full-page XO advertisements in major telecom trading journals;
  3. XO owns the largest fixed wireless spectrum [LDMS] in the nation;
  4. No executives have left the company for the past several years even though the stock option exercise price is still set at 5+?
  5. The fact itself that Icahn is willing to swap up debts by equity (if he indeed wants to) shows the business is healthy since debts ownership only made sense to him when a company would go under;
  6. In terms of stock performance, no evidence shows selling by "large" minority shareholders -- all acquired the stock at price of $4+;
  7. Financially, XO doesn't need to borrow for almost another 12 months with its cash position of $183 million, and possibly additional $70 million in process, making it a total of $253 million;
  8. Home owners with good credit are still getting home equity line at 4.9% today. No law says that a company can only borrow 3-4 times of its EBITDA run rate as some worried. Why can not XO – a company with $1430 million revenue and positive EBITDA -- refinance a total of $900 millions in the next several years – step by step without 400%-500% dilution as some people assume? Remember that Level 3 borrowed $7 billions, Global Crossing owes $1450 million and TWTC has $1380 million in debts. They could still survive, grow, or even be prosperous;

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Tech101 profile picture
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Tech101 is a scientist, educator, author and investor with a Ph. D. in computer science and engineering. He taught at universities and later becomes a principal consultant in various high-tech companies in the Silicon Valley. Tech101 frequently writes about technology innovation to educate the high-tech investor communities on Seeking Alpha and Silicon Investors, as well as the Yahoo Finance message board. His good sense in value and deep understanding of technologies, along with his common sense approach makes investment productive and fun.

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