If you think nobody cares about you, try missing a couple of payments. –S. Wright
Everything has been said before, but since nobody listens we have to keep going back and beginning all over again.” –Andre Gide
Part 1 of this case was presented yesterday here: http://wp.me/p1PgpH-hj
If readers don’t grasp the significance of this case then I will QUIT posting and join them: http://www.youtube.com/watch?v=J_kRDcfTKrg
Invest in Global Crossing February 2000
Part 2: You are about to meet the fund manager in 30 minutes to give your recommendation. Take a glance at Global Crossing’s 10-K. http://www.scribd.com/doc/77824423/Global-Crossing-1999-10-K What’s it worth? The price is near $61 or about $37 billion in market cap.
Forget the financials you think, after reading Gilder’s Technology Report (background on George Gilder, the Guru of the Telecosm: http://www.wired.com/wired/archive/10.07/gilder_pr.html) on the telecosmic Global Grossing, your confidence increases because growth will double every 100 days.
Since you leave nothing to chance, you call up David Cleevely, the managing director of Analysys, in Cambridge, England. Cleevely is a well-regarded observer of the new telecommunications economics. He tells you, “The key thing to understand is the huge advantage of the fat pipe (or high-capacity fiber optic channels). Remember that the cost of laying fiber is mainly the cost of right-of-way and digging or of laying it under the ocean. Recent advances let companies install enormous capacity at no more cost than building a narrow pipe. The economies of scale of the fat pipe are decisive. The fat pipe wins.”
Next you pull a slide from the company’s power point presentation on Where is the Company is Going.
The company will be in a market with EXPLOSIVE growth, competition, capacity on demand, no capital required from telecom carriers, and responsive to market demands.
Your secretary knocks on the door and asks whether you want to read about strategic logic from csinvesing? You are handed some papers, and you immediately slam dunk the research into the circular file (waste-basket). “Who needs this bullsh@t,” you mutter.
You are thinking of the riches you will make and what you will do with your new car: http://www.youtube.com/watch?v=uo5E-2_2mgg&feature=related
You know that economies of scale are important. The logic seems simple—the fat pipes of the new-wave telecom builders and operators gave them much lower average unit costs (Think about how average cost curves are formed). I sat back and thought a moment about fat pipes, scale economies, and telephone calls. What was the “cost” of moving one telephone call, or one megabyte of date, under the Atlantic Ocean?
But the thoughts of massive wealth kept interrupting my thoughts. “Would putting in a fur-lined sink be in bad taste?” I wondered.
What critical aspect of analysis is missing here? If you need a hint go back to the connection between industry structure and profit.
The time is late February 2000 and with your supporting materials and 10-K you wait here for the big boss to arrive. http://www.youtube.com/watch?v=TulxjdKsROI
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