Forum Archive Index - January 2000

[Phil Eriksen <phil@acepay.co.nz>]

> --
> 
> Now, I have to admit that this came as a great surprise to me.  Newcall's
> purchase of an ISP, yes, that fits within my idea of a telecommunications
> company, but an electricity reseller??  Even though this purchase isn't very
> significant to their balance sheet, it does distort my view of the company.
> 
> What do other members of the forum think about this move?  I'd be interested
> in finding out other people's opinions...
> 
> Benjamin Dutton


It could be a good move, it could be a bad move.  It's certainly an
interesting one.  From a "share price" point of view, it may not be the
best move.  An electricity reseller is nowhere near as trendy as
americas cup software, telecommunications and whatever it is that
Strathmore actually does.  Who knows, it could result in Newcall being
revalued as a 'real" company, which probably isn't good from a share
price point of view.

>From a "company/actually making a dollar" point of view, it could be a
very good move.  While I know nothing about the company that has been
acquired, and I'm not aware of any figures or statistics being
presented, ponder this : The great power of Telecom isn't their service,
their pricing or their staff.  Their strength is that they have a piece
of paper (an invoice) going into virtually every home and business every
month.  Because of this, they are in a great position to offer other
products and services, whether they are related to telecommunications,
or not.  I'm with Xtra - they ain't the best, they ain't the cheapest,
but it's on my Telecom statement, it's clear enough to follow, and
dammit, i'm lazy enough not to change.

Newcall is apparently focussed on the small and medium business market. 
Theres two things basically every business has - phones, and
electricity.  The sort of person who *isn't* too lazy to change from
Telecom, is probably the same sort of person who wants to save a couple
bucks, and would change their electricity reseller if possible.  If
Newcall can bundle/package the services in an attractive way, they could
find it's a valuable acquisition.

Ben, i'd be interested to know exactly why this puchase distorts your
view of the company?  In my mind, it doesn't matter whether you purchase
an ISP, an electricity reseller, a chicken farmer or an escort agency. 
What matters is that all of the companies have competitive advantages,
are either low cost providers or offer important differentiation, and
most importantly, are profitable or have a very good excuse for not
being so.  While buying similar businesses is "conventional" and is
often done for "synergy" reasons, theres no reason not to buy *any*
business, as long as the the numbers stack up.

In Newcalls case, it sounds like there could actually be some synergy
between the two companies.  As for the numbers, I haven't seen them but
(a) on the good side, i'd rather be an electricity reseller than an ISP
- i haven't seen www.free-electricity.com yet(although i note the
domains registered!!), but ISP's will increasingly face this
competition, but (b) if EOL was sold for $600,000, paid by shares in a
speculative stock, you must wonder about the substance/potential of the
company for the founders to dispose of it for such an uncertain payoff.

It will be interesting to observe what happens - from a distance, in my
case.

Cheers,
Phil

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