Why Gogo Inc. Shares Crashed and Burned Today

Is this meaningful or just another movement?

Apr 29, 2014 at 4:20PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Gogo (NASDAQ:GOGO) lost roughly 28% of their value today on news (issued after Monday's closing bell) that dominant wireless telecom company AT&T (NYSE:T) would launch a competing in-flight Internet connection service by the end of 2015.

So what: AT&T and Honeywell (NYSE:HON), a major supplier of avionics (the electronics systems used in aircraft and other air- or space-borne systems), will team up to provide 4G LTE service for air travelers by late next year. This will be similar to the airborne Wi-Fi technology Gogo already supplies to the vast majority of commercial aircraft that traverse the United States. Honeywell estimates that its deal with AT&T should result in roughly $1 billion in revenue over the next decade as the partners build out the service. AT&T has declined to project any revenue figures of its own.

Now what: At $100 million per year to Honeywell alone, AT&T's equipment spending would likely outstrip Gogo's expenses -- the latter first exceeded $100 million in trailing 12-month capital expenditures last year, but it was barely two years ago that Gogo was spending less than $50 million a year on capex. AT&T is bound to spend more than $1 billion on Honeywell's equipment to fully kit out airlines with its Wi-Fi offerings, and in the process it may very well ignite an unprecedented price war in the currently noncompetitive in-flight connectivity market.

However, it's worth noting that AT&T's path runs through several regulatory hurdles, which include Gogo's ownership of spectrum licensed for air-to-ground communications and the lag time between application for and approval of new spectrum in the space. AT&T is also entering the space at a time when Gogo is transitioning toward a satellite-based aircraft communications network that would work on international flights and would boast connectivity speeds similar to those offered by land-based high-speed providers (Gogo's existing service is capable of roughly 10 megabits per second of download speed).

Analysts at William Blair believe Gogo is attractively valued today, but investors must keep in mind that the company has never reported a profit or positive free cash flow. Competition from deep-pocketed AT&T is likely to make it harder to push toward profitability in the coming years. Keep an eye on this from the sidelines, but don't choose your in-flight Wi-Fi team just yet.

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A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

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