I have always considered my LVLT stock to be my "speculative bet," not really an investment. As such, I evaluate it differently than I do CAT or PFE, which have relatively safe balance sheets, a history of positive cash flow, & actual earnings. Become a Complete Fool
With LVLT, I have always tried to determine if it would end up on top in the IP (formerly telecom) world, regardless what was happening in the moment.
LVLT saw way more problems than I anticipated. Each time it weathered a storm, I bought a little more "on the dip," figuring that it would soon start to dominate the IP world. Problem was, the IP world wasn't as big as I thought it would be. Then when I thought it was finally turning the corner earlier this year, the AOL announcement was made -- telling me that deterioration in the dialup business would be quicker than I anticipated.
Now, however, I'm starting to think that LVLT is a "lock." Here's why:
1. Nobody else is hiring -- see my last post. If things are so bad for LVLT, why does it have more than 140 job openings?
2. LVLT has rapidly expanded its capex [capital expenditures]. We do not see AT&T, MCI, Global Crossing, WilTel, or Sprint doing this. The RBOCs are spending, but to upgrade the last mile, not to compete in LVLT's markets.
3. LVLT has to replace some declining income (dialup), but this is nothing compared to what the legacy companies face --- rapidly declining local & long distance revenues, burdensome benefits programs left over from the legacy network, and a capital market that still turns its nose up to anything "telecom." Even LVLT's most formidable "next generation" competition, AT&T, Qwest, & MCI, face huge revenue losses that they cannot replace quickly. LVLT seems to have replaced its AOL revenues already.
4. LVLT is still making smart acquisitions. I don't see anyone else making acquisitions at all, much less with the precision and payback LVLT seems to get.
5. LVLT is not scrambling around, hanging on by its fingernails to an outdated way of doing business. It's scrambling around, hanging on by its fingernails while it develops new ways to disrupt the old way of doing business.
6. I see LVLT winning VoIP contract after contract. I do NOT see Qwest or WilTel winning contracts to the extent LVLT is winning them. Also, IMHO, LVLT is a driving force behind AT&T's VoIP offerings (just speculation -- although I try not to do that when investing, I allow myself to speculate when betting) -- so AT&T's VoIP wins are also LVLT's wins.
7. I have finally concluded that we (trepanne included) were looking at VoIP's possibilities in the wrong light. We looked at it in terms of the transport aspect of the business -- voice doesn't take up much of the pipeline compared to data, so it won't add much in terms of transport revenues. What we did not look at was the value of voice as a value-added service. If LVLT can make $5-$20 per customer per month, voice has a lot of value. This looks like the application that can finally take LVLT over the top.
For a "speculative bet," LVLT is looking more & more like a lock to me.
Caveat -- I don't expect to see any significant results Oct. 27. It was interesting, however, that in Crowe's talk this week he referred to it as an "earnings call." I think we will see results in the January call (Q4 '04) and in April (Q1 '04 results).
S.O.S. -- somebody help me, I'm starting to drown in koolaid. I only have a small % of my funds available for investment devoted to LVLT. Somebody keep me from selling my dog & buying more LVLT stock.
Dan a/k/a "lemming"
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I have always considered my LVLT stock to be my "speculative bet," not really an investment. As such, I evaluate it differently than I do CAT or PFE, which have relatively safe balance sheets, a history of positive cash flow, & actual earnings.
Become a Complete Fool