Subject: [NEXTEL-1] Friends of Bill

From: Marcel <[email-masked]>
Date: Mon, 02 Dec 2002 18:45:25 -0500

http://biz.yahoo.com/smart/021202/20021202one_wond_2.html

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Friends of Bill
Monday December 2, 4:40 pm ET

By Lawrence Carrel

Nextel Partners Inc. (NASDAQ:NXTP - News)

Share price as of Friday's close: $6.60

Share price now: $8.05

Change: 22%

Volume: 3.6 million shares, daily average 694,000 shares

Last time this high: March 12, 2002

52-week high: $12.95

52-week low: $2.12

Forward P/E before announcement: n/a

Forward P/E after announcement: n/a

ADVERTISEMENT

THE WORLD'S RICHEST man must know something.
That seems to be the reasoning behind Monday's 22% jump in shares of Nextel Partners (NASDAQ:NXTP - News).
The gain came after Microsoft (NASDAQ:MSFT - News) Chairman and top global tycoon Bill Gates boosted his stake in the Kirkland, Wash., wireless carrier through his private investment arm, Cascade Investment. Cascade bought 3.75 million shares of Nextel Partners common stock Friday from founder Craig McCaw's Eagle River Investments for $6.89 each, for a total price tag of $25.8 million.
Nextel Partners operates in 58 midsize markets that complement the large metropolitan areas served by Nextel (NASDAQ:NXTL - News), an affiliated but separate entity using the same telecommunications network. The pair's market share has risen in recent months thanks to Nextel Direct Connect, a digital walkie-talkie standard popular with techies and construction crews.
Gates and his money managers may have been drawn to the 72% annual revenue growth Nextel Partners posted for its third quarter, or to the 81% year-over-year increase in subscribers.
The stock also benefited from Morgan Stanley's upgrade of the wireless-telecom sector to Attractive. Analyst Luiz Carvalho argued that lower capital expenditures, higher sales and improving margins could produce a return on the industry's huge infrastructure investment by the middle of next year. "With free cash flow on the horizon, valuations appear compelling," wrote Carvalho. Morgan Stanley's top sector pick is AT&T Wireless (NYSE:AWE - News), but Nextel Partners also fits the bill. For although the company posted a net loss of 27 cents a share in the latest quarter, it did produce $7.9 million in earnings before interest, taxes, depreciation and amortization, its first positive Ebitda. (Carvalho doesn't own shares of Nextel Partners, but Morgan Stanley does have an investment banking relationship with the company.)
"We expect to have positive Ebitda for 2002, which is a year earlier than guidance," says Nextel Partners spokeswoman Susan Johnston. "And we're on the road to being free-cash-flow positive in 2004."
Gates has been waiting for a while for this payoff. Cascade Investments was an original investor in Nextel Partners, purchasing nearly five million shares in 1998, two years before the company went public. The latest purchase boosts Cascade's stake in the firm to 5.2%, still behind McCaw's 6.4% share.
On that score, it's worth noting that rich guys, especially rich guys who made their billions in tech, have proven anything but infallible during the recent bear market. In fact, the cushion provided by their wealth may have led them to take on greater risks.
Take Paul Allen, who co-founded Microsoft with Gates. While Allen still owns a lordly stake in Microsoft, he quit the company in 1983, using his fortune to pursue other projects. These have included ill-fated investments in such losers as the cable operator Charter Communications (NASDAQ:CHTR - News) and online travel discounter Priceline.com (NASDAQ:PCLN - News). Gates himself has taken a hair-raising ride on shares of Six Flags (NYSE:PKS - News), the amusement-park chain. But published reports suggest Cascade has had better luck with recent purchases of stock in Cox Communications (NYSE:COX - News), Fisher Communications (NASDAQ:FSCI - News) and Avista (NYSE:AVA - News).
Quote:

"Any time Bill Gates puts in money, people consider it smart money," says Blaylock & Partners senior telecom analyst Rick Black. "He's made some good bets. Nextel Partners has a product in Direct Connect that is well regarded and could soon move to a national basis. When you look at Nextel Partners against its peers, Triton (NYSE:TPC - News) or Alamosa (NYSE:APS - News), it's capturing more than its fair share of market share. It is doing extremely well in terms of net subscriber additions. Nextel Partners is competing in second- and third-tier markets, which have less competition, and it has a distinct advantage with the Direct Connect feature. It also has the lowest churn rate among all wireless carriers, at 1.6% a month. It's well on its way to becoming free-cash-flow positive." (Black doesn't own shares of Nextel Partners; Blaylock doesn't have an investment-banking relationship with the company.)

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