LVLT - Level 3

[ericd1]

VC and brker,

 

I appreciate your responses and many thanks for sharing your insight...

 

I certainly doubt that 3 has built a bridge to nowhere!

 

As I think through the situation here's the conclusion I'm coming to...It appears "if you build it, they will come" hasn't worked in the past because the major users/players, didn't need 3's pipe when they had their own and the AKAM fix was capable of handing many third party requirements. But now because throughput is increasing exponentially and third parties want/need faster delivery L3 is the best/only game in town. Absent a new game-changing technology 3 is positioned to reap the benefits.

 

 

[brker_guy]

Mixed feelings as to whether Crowe stays or goes at this juncture. I lean towards stay, but I'm a sucker for great visionaries! Strangely enough, you and I have a similar story on the quality of this management team/construction company inclusive of a certain NJ sub, who once told me about how "smart" these people in the Kiewit organization, extended to (3) are. imo

 

You have got to handed to the management of (3).  They found a way to survive during the tech bubble by buying Spectrum Software to satisfy their debt covenants and finding the Super Value Savors to help keep Icahn of the world at bay.  They were the first ones to start the consolidation when the industry rebounded.  They were also the first ones to see the value in metro and started buying up assets in that space.  Finally, they were the first ones to see the value in CDN and leverage their fiber asset into this space by buying CDN IPs and assets from IBM, Savvis/C&W/Exodus and ServeCast respectively.  This last move by them created a bunch of copycats with the likes of GLBC(reselling LLNW and Edgecast), T-Rex, VZ, Tata(reselling BitGravity), BT, DT etc...  I think their move into this space and with the win from NFLX show that their competitive advantages that the ones don't have.  LVLT's problems have been their executions and keeping the factory churning.  They might have the greatest ideas; but execution is still an art form.  I think they are finding lights within the forest to navigate, and will soon see daylights.  We will see some proofs of this after this quarter...

 

.It appears "if you build it, they will come" hasn't worked in the past because the major users/players, didn't need 3's pipe when they had their own and the AKAM fix was capable of handing many third party requirements. But now because throughput is increasing exponentially and third parties want/need faster delivery L3 is the best/only game in town.

 

I can assure you, Ericd1.  No matter how many servers that AKAM and LLNW provision at the data centers, co-location or at the edge to try and solve the BW problem for streaming, it's NOTHING compared to the fiber network itself.  Video is a totally different type of media!!!!

[brker_guy]

Carl,

 

Looks like Thornburg added 23MIL more shares to its existing LVLT position:

 

http://www.nasdaq.com/asp/holdings.asp?symbol=LVLT&selected=LVLT&FormType=Institutional

 

 

[Guest ValueCarl]

That's sweet news, Brker-guy! For every seller, Bill Miller, there is a buyer, Vanguard, I guess! It reminds me of Yings and Yangs.  ;D

 

There was some Japanese interest which caught my attention this Q, too, as well as this Air Force Academy investment guru with UCLA tentacles and not too far from (3) in Colorado. He upped his stake quite nicely, by over 500K shares above the 5MM share count.

 

http://www.jvbruni.com/philosophy2.htm

 

Wentworth Hauser's new position of nearly 10MM shares was also interesting.

 

Even Goldman loves Limelight, and don't forget Akamai too, added to their (3) shares in the Q by one third above 3MM shares now. Nothing to write home about, yet, of course.

This young Goldman named Scott who was on the call, might do his brothers and sisters over there some justice, by getting on the (3) freight train this Q, one would think!     

 

Did I ever tell you that Dr. Leonard Kleinrock concurred with me on infrastructure and content owner principles, not too long ago, by the way?

 

After market this news disappointed me, however.  With all the upside in CDN for players with the right margins, it's sad to see LLNW insiders jumping ship, as if they were white mice being "pressured" out of their boat's " plastic conduits" to make room for "new bandwidth" which they do not own in advance of drowning. 

 

 

http://www.thestreet.com/_yahoo/story/10921760/1/limelight-files-for-150m-secondary-offer.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

 

In its Form S-3 filing with the Securities and Exchange Commission, Limelight said certain existing shareholders would be eligible to sell up to 15 million common shares under the new prospectus. These shareholders include those who participated in private placements ahead of the company's initial public offering; directors, officers and employees who received stock as compensation; those issued stock as part of acquisitions.

 

 

[brker_guy]

Carl, although Legg Mason is late to filing its 13F, I was able to track it down last night that they did indeed unload their LVLT position in their LMOPX. 

 

Interesting link on J.V. Bruni.  Haven't heard of them before.  Can we safely say that half of the shares that Legg was selling go to Thornburg and the rest are spread around the other institutions?

 

Of all the tech writers out there, I like Dan Rayburn.  He is quite fair and balanced(to borrow the words from Fox).  He understands the industry quite well.  Rob at Telecom Ramblings is also good. 

 

http://seekingalpha.com/article/236899-netflix-s-recent-cdn-deal-with-level-3-is-not-an-indication-of-new-pricing-wars?source=yahoo

 

I take that you are a UCLA alumn? :-)  Years ago, I did get a chance to hear Dr. Kleinrock lecture.  This was when I was a dumb and stupid college student.  I am still dumb and stupid. :-)

 

Wow! Interesting news on LLNW.  I guess insiders have realized now is the time to monetize their shares since they just book a very big fish in the CDN space.  The shares are down another 5% today.  Compare to (3) float, it's miniscule, but 15mil shares offering from insiders of LLNW is quite a bit considering how many they have outstanding...

 

It took a bearish day to thawl the momentum of (3) today.  That's good news for us to end the year on a good note considering what we have gone through...

 

[Guest ValueCarl]

I spoke to Dr. K., personally, last year, while attending a parent forum as a result of my son's own attendance there. He did a presentation on the internet's "origin," representing one of its "founding fathers." I believe Dr. "Know" would be appropriate for this gifted luminary and MIT grad. He is keenly aware that chicken/egg stories do not exist when weighing infrastructure over content owners. However, he was very concerned for what was directly in front of many infrastructure owners today. It wouldn't get easier for them according to him. Because he is a wise man, he would not discuss the merits or shortcomings of any one, specific security. Of course, he knew exactly who (3) was, naturally. 

 

Referring to T-Rex during the internet's nascent years while they were being offered opportunities to get involved, he spoke as though he was Ben Graham's brother, stating, "In the short term, AT&T was right circa 1969, while in the long term, they were very, very wrong." In a nutshell, he believes like I do that, a symbiotic relationship should be developed. If that were to occur, it's easy for investors who remained aware of (3)'s network elements, "in the beginning", to forecast which infrastructure owner properly planned for the cataclysmic shift to video, something we have all been waiting longer than we may have wished otherwise. Without a doubt, Dr. K gave great kudos to Al Gore, legislatively speaking, much to my surprise, and might I also say, chagrin!  ;D

 

The question was, "Dr. Kleinrock, did Al Gore really invent the internet!"  :D

 

I like how you keep tickling me, brker_guy! There is much to be learned from both Rayburn and Powell as respects the cdn and telecom spaces. Dan attempted nicely to give them clues that, this Netflix win was not about price, and clearly about quality, but Wall Street has "other reasons" for not listening, besides being completely tone deaf! 

 

 

If the market were perfectly efficient(EMT) at going down on its knee to hit their daily curve balls out of the park, something they seemed to be able to do in uncanny ways with (3) by focusing intensely on the "debt albatross" all of these years, they would SLAM Goldman's LLNW all the way back down to the false start from $3.50, before heading to nearly nine, and not give those INSIDERS an inflated way out to SELL!   

 

       

[brker_guy]

He is keenly aware that chicken/egg stories do not exist when weighing infrastructure over content owners.

 

Very interesting you brought that up, Carl.  Do you follow Mary Meeker?  She gave a very good presentation today at Web 2.0.  Take a look at her presentation:

 

http://assets.en.oreilly.com/1/event/39/Internet%20Trends%20Presentation.pdf

 

Talk about content owners weighing on infrastructure eh?  My favorite is her prediction of the smart phone growth sector:

 

http://voices.washingtonpost.com/posttech/2010/11/smartphone_sales_to_pass_compu.html

 

How can you deal with so many wireless devices like that globally?

 

A few days ago, you brought the stealthy issue that very few people are thinking about when it comes to the infrastructure business and (3) in particularly, namely "network security".  Have you ever read a book called "Fatal System Error"?  It's a great book, and I highly recommend it.  I had to read it recently for a work assignment.  So, behold the next war:  Cyber War!

 

Don't know if you saw this today either:

 

http://r.reuters.com/seq75q

 

If you are someone like (3), owning your own infrastructure will prevent something from happening repeatedly in the future...

 

[Guest ValueCarl]

Great stuff, especially on security, Brker_guy. One of (3)'s more recent disappointments(< two years) stemmed from a meeting in which a Rockefeller descendant, Senator Jay from Virginia, refused Jim Crowe's request to modify "securities law" during the wake of the sub prime implosion. That law surrounds "change of control" principles, in which violations would cause the loss of important NOL's by capital intense corp.'s building carry forward losses against future profits, similar to (3). His refusal to be flexible was another shot across the bow of our (3) ship, and an absolute disgrace by a public servant who continues to maintain a life long tenure in our government.

 

If your article continues to be ignored by our politicians, inclusive of them not moving to adopt an exclusive, air tight, secure US network with a "dedicated pipe" and "fiber" in lieu of the current "status quo," one which includes T REX outsourcing sensitive government data to Global Crossing with a Singapore entity as its controlling shareholder, nothing else will.    

 

Aside from this global expansionism, mostly predicated upon enterprise corruption along with the exploitation of labor, if there was ever a need for a sovereign network, one which protects and preserves the interests of the United States of America, this is it.

 

I see we're reaching our more "direct" tentacles to Latin America as of this morning too.

 

http://www.level3.com/index.cfm?pageID=491&PR=960

 

I will look into your recommended reading book, as I recommend "The Long Tail" as another good one for coming to terms with how and why (3) moved ahead of the curve into CDN  some years ago now. It enhances and substantiates the "centrally distributed" internet model over the more "localized" one which we have been discussing.        

       

[brker_guy]

Carl, more good news for us.  Don't know if you saw this:

 

http://www.prnewswire.com/news-releases/first-ever-multi-network-multi-vendor-100gige-wide-area-network-demo-to-take-place-at-sc10-108180424.html

[brker_guy]

Aside from this global expansionism, mostly predicated upon enterprise corruption along with the exploitation of labor, if there was ever a need for a sovereign network, one which protects and preserves the interests of the United States of America, this is it.

 

I see we're reaching our more "direct" tentacles to Latin America as of this morning too.

 

Very cool, Carl!  Now, we can finally go toes-to-toes with GLBC and put them out of their misery.  Hopefully!  I always thought that LVLT needed to grow a leg down south.  ;D

 

Definitely, I am for one agreeing with you on this one here: 

why (3) moved ahead of the curve into CDN  some years ago now. It enhances and substantiates the "centrally distributed" internet model over the more "localized" one which we have been discussing.

 

I have heard about that "The Long Tail" book.  I will take a look for sure now.

[Guest ValueCarl]

You sir, are an incessant pool of knowledge that keeps cascading water wisdom down upon those looking for their thirst to be quenched versus the starving masses who are being devastated by Wall Street via dubious machinations and manipulations inside of their dry, hot, sandy, desolate desert!  >:(

 

Considering the symbiotic relationship between the US and China, one that more often than not is described "falsely" as "contentious" or worse, you will notice this company's intended plans to enter the US market, not unlike Clearwire, while they will be seeking solace in a "neutral" terrestrial fiber partner at some point soon.

 

The Lightsquared satellite being launched in Kazakhstan, by the way, is a strategic location where passage ways including roads and rails are currently being built by the Chinese along with US military supervision; thus providing trade through a new Silk Road as part of the Dzungarian Gate here:

 

http://en.wikipedia.org/wiki/Dzungarian_Gate

 

 

http://www.aviationweek.com/aw/generic/story_channel.jsp?channel=space&id=news/asd/2010/11/17/09.xml&headline=Lightsquared%20Launches%20First%20Satellite

 

Lightsquared (formerly SkyTerra Communications) signed an agreement in August to build a nationwide wholesale hybrid satellite/terrestrial 4G/LTE wireless network in partnership with Nokia Siemens Systems. The network, consisting of two satellites and 40,000 ground towers, will permit high-speed data and phone service via dual-mode smart phones and other portable computing devices that can switch seamlessly between satellite and terrestrial sources. It is to be rolled out in 2011 in several U.S. cities and expected to cover 92% of the nation’s population by 2015. 

 

[Guest ValueCarl]

It seems (3) may be ready to monetize at least one of their two coal mining assets.

 

<Coal Mining

 

      Level 3, through its two consolidated 50% owned joint-venture surface mines, one each in Montana and Wyoming, sells coal primarily through long-term contracts with public utilities. The long-term contracts for the delivery of coal establish the price, volume, and quality requirements of the coal to be delivered. Revenue under these and other contracts is generally recognized when coal is shipped to the customer.>

 

http://www.washingtonexaminer.com/economy/coal-industry-seeks-to-ramp-up-exports-of-mont-wyo-coal-through-west-coast-ports-108526694.html

 

 

According to the Montana Department of Commerce, the company was in talks late last to buy the East Decker Mine near Decker, Mont., currently owned by Level 3 Communications.

Level 3 spokeswoman Jennifer Swonger said Tuesday that East Decker has not been sold, but declined further comment.

In February 2009, Ambre executives visiting Montana said they planned to build a $375 million plant in the state that would produce high-efficiency coal and synthetic crude oil.

 

 

Read more at the Washington Examiner: http://www.washingtonexaminer.com/economy/coal-industry-seeks-to-ramp-up-exports-of-mont-wyo-coal-through-west-coast-ports-108526694.html#ixzz15ZBl7G77

[brker_guy]

Carl,  VERY INTERESTING news on LVLT's plan of selling their coal ownership.  I guess the train has finally begun to leave the station eh? :-)  All aboard!!!! :-)

 

(3) has held that coal asset forever, it seems!  Hey, may be they can go and negotiate with Mr. Watsa about floating International Coal (ICO) some cheap money so that ICO can take this little coal puppy off (3)'s hands so (3) can focused on just being a real Internet company for a change. :-)

 

Carl, thank you for the kind words.  You are also full of wisdom and knowledge yourself.  it's nice to be chatting with someone who understand this business and this industry for a BIG CHANGE! 

 

I owe all of my knowledge to one person:  Thank you Mr. Charlie T. Munger!!!  He taught me how to accummulate knowledge, and I am practicing it everyday.

 

It's funny how how you brought up SkyTerra.  I started out my career in the satellite industry.  Back then, it was really a very cool job.  There were A LOT of innovations back in those days.  Sigh!!!  Those were the days!!!  You got the GPS industry beginning to mushroom.  You got the geosynchronous satellites(Hughes SatCom, Loral, Inmarsat etc)  trying to transmit other media other than government sensitive info.  You got the Iridium and the GlobalStar of the world trying to establish itself.  Then, the roof caved in, and all went to mush!  Only thing that survived were GPS and the geosynchronous satellites doing DirecTV, EchoStar, Sirius and XM.  GlobalStar died a horrible death, and Iridium is now owned by a Private Capital shop that is gouging the US Govt with their obscene prices!  Oh, I forgot mention that along the way, Bernard Schwartz got filthy rich from Loral and became a major Democrats supporter... :-)

 

Then, came along these guys: SkyTerra which is now LightSquared.  How many years has it been since anything like that come along?  A very long time. :-)

Speaking of SkyTerra, you seen any of these articles?

 

http://online.wsj.com/article/SB10001424052702304898004575556460087350910.html

 

http://www.bloomberg.com/news/2010-09-29/from-subprime-to-satellites.html

 

See?  I still keep up with my roots. :-)

 

 

 

 

 

[Guest ValueCarl]

With "BIG CHANGE," brker_guy, you bring sweet music to my ears!

 

Imagine if Obama finally fulfills his promise of real "change" to the American people. In my feeble mind, that sweeping "change" would be one that accelerates using "the network partner you can rely on" for advancing all kinds of business and consumer applications, ones that empower people whether in the home or at work, assuming work must leave the home. He's going to have to knock a few monopolies down in the last mile, sooner rather than later, in order for that to occur, however. Whether like or unlike the auto industry, those dinosaurs wouldn't be missed! 

 

Paint me a picture, with plenty of "color" surrounding your comments here, brker_guy. Thank you, as well.

 

<Hey, may be they can go and negotiate with Mr. Watsa about floating International Coal (ICO) some cheap money so that ICO can take this little coal puppy off (3)'s hands so (3) can focused on just being a real Internet company for a change. :-)>

 

 

[brker_guy]

Carl,  I was just dreaming out loud. :-)  My thinking was this.  Prem is the largest shareholder of ICO.  He is the second largest shareholder of LVLT.  Since both of these companies are in his portfolio, why not do asset consolidation? :-) :-)  That way, he can float some loan to ICO to do this coal consolidation, and LVLT gets the capital it needs as well as getting out of the coal business..

 

This is like taking money in the right pocket and putting it in the left pocket or vice versa...

 

I think the days will come when we will anounce a vision and a broadband plan like Australia.  "Real" broadband access and "real" broadband speed for EVERYONE!  May be Obama should promote this a little more in his speeches.  That way, we will get distracted from all of these bad economic news. :-)

 

Disclosure: I own shares in both ICO and LVLT.  So, it's a win-win for Prem and me. :-)

[brker_guy]

Carl, did you hear the presentation today from (3)?

 

Good old Ana Koshka doesn't waste anytime getting to the NFLX' deal. :-)  Sunit's answers about video streaming is very telling of what I said earlier...

 

http://www.veracast.com/webcasts/bas/credit2010/id28268230.cfm

[Guest ValueCarl]

I like the way you think, Brker_guy!

 

Ana Goshko! Did I ever tell you how I named her, "The Barking Dog Lady"?  ;D

 

Many years ago, she conferenced in from her home with a yapping dog in the background! Apparently she didn't take (3) serious enough in those days, but let's hope that changes soon!

 

I wonder what happens when you mix Barking Dog and Mouse Ladies together inside of an empty plastic conduit?

 

To Ana's plus, she did get a little worried as I did, at the point where cash went under $500MM.    

 

Sunit hits up, "The Citi that Never Sleeps," tomorrow!     

[brker_guy]

"The Barking Dog Lady"?

 

Carl, you are very creative with names for these analysts.

 

Every time I think of her or hear her on the Q&A queue, my eyes would roll, and I would think to myself, "Here we go again with Ana and her balance sheet liquidity question" because for the longest time, that's all she would ask about every time she got on.  I was like, "Does she have another set of intelligent questions?"  Thanks goodness, this quarter, she did have something else to ask about. ;-)  Does BofA really need 2 analysts to cover (3)?  I just can not imagine the waste that these investment houses have...

 

Yep, tomorrow, "Citi will never sleep". :-)

[Guest ValueCarl]

My smell has been working over time for a few months now on Yahoo, Brker_guy. Not that I'll miss those mostly useless Yahooligans in their boiler rooms, but their main site including all of its components is a drag!

 

Either they're not paying their bills for network services, or maybe, they're switching to a new cdn provider as I write? This is a (3) customer in the "large enterprise" space for "transport" minimally. 

 

I see that Bill and Ballmer are worried too. imo

 

http://www.businessinsider.com/microsoft-is-very-worried-about-the-stability-of-yahoo-2010-11 

[brker_guy]

Carl,  I think your brain cells are much better utilized at sites like this one, Rob's or Dan Rayburn's.  I ride the train to work everyday, and eveyday, I would see this guy on my train dressed in all Yahoo! clothings.  The guy would be their message boards. May be monitoring those message boards?  I don't know, but everyday, he would be on there. 

 

So, I think there is something sinister going on within Yahoo!  I could care less about that site ever since I lost my "brker_guy" alias there.  I have had that alias since the day Yahoo! was up and running.

 

I think they will pay their bills.  Yahoo! still owns a lot of wonderful "net assets" that they don't know what to do with.  They need to do something about those spammers.  More and more, I am regulating myself to using my "Gmail" account because of spammers on Yahoo!. If more people are moving those eyeballs away from Yahoo! to Gmail, they are going to be in trouble.

 

Interesting story I heard yesterday on Marketplace on web innovations:

 

http://marketplace.publicradio.org/display/web/2010/11/17/pm-tech-companies-taking-chances-with-new-ventures/

 

We NEED more web traffic!!!  ;D

[brker_guy]

Carl, I see the FOOL.BOMB are on an all out assualt to get their AKAM position up.  In one article, they are touting how "The Skeptics Are Still Wrong about Akamai", and another they are sticking it to NFLX on "How Netflix Fails You".

 

It's like an investor arbitraging, but instead they are doing it with their words.  Amazing!  Those FOOLS! 

 

How they survived all of these years is beyond me! 

[Guest ValueCarl]

Brker_guy, what do you think of CSCO's prospects, "As the World Turns" to IP connected devices x all paradigms, and the number of networks comes closer to "one network for all," and the technological advancements enable greater distances between optical components, etc.?

 

I know they're partnered with (3) in cdn as well as live broadcasting, in addition to being involved in Internet 2 at the research and academia levels, but my understanding is (3)'s network was never CSCO dependent versus others, especially this new Chinese player(HWT.UL), in addition to Infinera(INFN) which (3) was an early adopter/first mover of their technology while being a venture capitalist/investor/owner, who later sold their shares after the IPO.

 

Could CSCO go the way of the Dodo Bird, in the next five years?

 

<He also said the network equipment maker was unlikely to lose market share in its core business of routing and switching, although he noted strong competition and named Huawei Technologies Co Ltd [HWT.UL] as its biggest rival.> 

 

http://www.reuters.com/article/idUSN1810301620101118?feedType=RSS&feedName=companyNews&rpc=43

[brker_guy]

Carl, whew, this is a very tough one to answer.  Back in the go-go '90s and '00s days, I would answer that with a definite "yes" without any hesitation.  Today, that is not so easy.  I am just going to stick to just CSCO's competitive edge only and discuss that without going through their finances, okay?  Competitively speaking, I really don't know what is CSCO's competitive advantage these days.  In the massive router market, JNPR is giving them a run for their money(I will touch on Huawei soon).  As both CSCO and JNPR are going toes-to-toes in the BFR (Big Freaking Router) market, Huawei is happy to sit there and reverse-engineer everything they do and compete on price.  In the long-haul market, CIEN is still a big threat to them in the DWDM technology.  With CIEN winning the auction for Nortel optical business, I am sure they will try hard to increase their push in that space.  Then, there is the space that INFN competes in which is PIC space.  Recently, an CSCO engineer and a CSCO sales person visited my office to help put together a plan for an optical project I am working on, I asked them if they are aware of INFN and PIC technology.  I got two stone-cold faces staring right back at me.  So, I think INFN and HWT are still have good niche in this PIC space.  So, how can CSCO take control of these two optical segments and be dominant it them?  Is it through pricing or technological innovations?  Long gone are the days of CSCO's overpaying for assets with their inflated stocks.  Now, they have to pay with cash or compete on price.  If they compete on price, who do you think will win?

 

In the wireless space, they bought up quite a few companies in the WiFi space and some in the WiMax space, but they are being pummeled by some very nimble start-ups in the Enterprise WiFi space with the likes of Aruba Networks and Trapeze(which was bought by JNPR the other day). On the consumer side of WiFi space, they are getting manhandled by cheap Chinese made wireless routers from the likes of Netgear, D-Link, Buffalo etc.  That Linksys purchase was a big $500MIL waste.  In the long-distance wireless space (i.e. WiMax or LTE), I don't think they have anything that is worth writing home about.  Companies like Intel, Samsung, Qualcomm, Ericsson, Nokia, ZTE and Huawei have been eating their breakfast, lunch and dinner. 

 

Let's move to their video market since they bought some really wonderful video assets like Scientific Atlanta (SFA), Tandberg, and a number of video start-ups with some really wonderful IPs.  Here is the problem. They haven't been able to maximize those investment well.  The two same CSCO reps who visited me that one day promised me that they would bring their enterprise video people to come and present to me what their enterprise video solutions (from surveillance to video conference) can do for me has not come through with their promise.  To this day, I am still waiting for that to happen. That was 6 months ago. :-)

 

So, let me touch on HWT which you like to know.  Nine years ago, I visited one of HWT R&D centers in Shanghai to do a video streaming trial, and what I saw then really scared me to this day.  Do you remember how Charlie and Warren sing the praises of the tenacity of the BYD and how innovative they are at reverse-engineering everything?  Well, when I visited HWT back then, I had that similar feeling about HWT.  They were hungry and extremely motivated.  Besides having a staff full of PhDs, they were poor, smart and determined (PSD).  8)  Needless to say, HWT has cornered CSCO into a corner.  In the BFR market, they are willing and have proven able to do what it takes to take market shares from CSCO.  Outside of the US, the IP litigation battles that CSCO engage in with HWT won't help CSCO much because in other places, low price wins, and HWT has the price advantage.  LVLT has proven that by going to HWT as an alternative source to INFN shows that HWT is an up-and-comer in this PIC space.  I also think LVLT went with HWT because of price. 

 

So, Mr. Chambers was right to be looking over shoulders for HWT.  He should be VERY WORRIED!  Did I give too much of a long-winded answer there?

[Guest ValueCarl]

Not at all, you showed the depth and breadth of your industry knowledge while providing plenty of "color" for me. :-) Thank you.

 

For clarification purposes, did you mean "no" to CSCO's possible extinction five years from the "go, go" days, if you had been asked back then, as opposed to your "yes" answer? 

 

<whew, this is a very tough one to answer.  Back in the go-go '90s and '00s days, I would answer that with a definite "yes" without any hesitation.>

 

On a side note, I'd put them on a long list of other cash flush, tech based behemoths who would ensure their personal test of time by purchasing (3).   

 

Shifting focus back to (3), please share your impressions based upon our CFO's two presentations to those "color blind" analysts this week? Please be specific with your estimates on how much revenue in year one, as well as the three aggregate years this new netflix contract may represent?

[brker_guy]

Hi Carl, sorry for the confusion.  Thanks for the clarification.  You are correct.  Back in the go-go days of the '90s and '00s, I would say that CSCO would NOT go the way of the Dodo Bird and become extinct.  They were TOO BIG and TOO STRONG back then.  In those days, I always thought that Mr. Chambers was working for the Federal Reserves on the side and have some kind of printing press at the basement of CSCO somewhere.  Every company they bought was through their inflated stock prices that they didn't have to expense.  They had in place an "ever-green" stock option plan.  So, they couldn't lose.

 

Long gone are those days.  Now, CSCO is sitting on a mountain of cash and can't seem to figure out what they want to do when they grow up.  For sure they want controling their enterprise space and be good at it.  Then, they are trying very hard to be closer to the consumer via the Linksys purchase, the SFA purchase and come up with a device similar to the iPad.  Even though I understand the technologies of CSCO, I still would put it in the "Too Hard" to figure out pile because I can't tell what they want to be when they grow up.  Mr. Chambers is a very intelligent and extremely charming salesperson, but he is no Steve Jobs.  A Steve Jobs is what CSCO needs to kick-start its engine, not a bunch of commercials about "The Human Network" powered by Cisco.

 

As for the Citi presenation yesterday, I listened through 80% of it before I had to catch my train.  I think Sunit was too honest with those Wall St. monks.  I thought his answers to how they would go about covering their debt for the next few years gave fuels to the sell-off today.  He said something like some debt they would repay through cash from operations and some they would refinance.  He said that (3) would handle their debt maturity in "bite size chunks".  Well, that's like pouring gasoline onto the fire.  The debt market is quite tight these days already, and he just gave them reasons to short the shares because in their mind, it says, "Oh, more debt refinancing and convertible notes!  Let's short hell of this puppy."  I am sure the "white mice lady" and the "banking dog lady" would love the smell of that!

 

Oh, I notice that the FOOL.BOMB has gone on another assault of (3) today eh?  These guys must be in cahoots with the boiler room operators who are out to short (3) and at the same time to pump up LLNW and AKAM.  They know the important relationship of the fiber and the CDN coupling together.  Soon, they will learn!

 

http://www.fool.com/investing/general/2010/11/19/is-level-3s-cash-flow-just-for-show.aspx