IT and Telecommunications Sector

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IT and Telecommunications Sector
Ray Bishop Victor Coker-Appiah Michael Mangino
Brian Stevens
Adil Ahsan
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Current Holdings

• IT SIM SP Weight
• Microsoft 5.51 3.05 80.7
• Intel 2.61 1.71 52.6
• IBM 2.83 1.54 83.8
• Telecom
• Alltel 1.49 0.16 831
• Verizon 1.08 1.07 9.3
• ATT Wireless 0.95 0.23 313

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Information Technology Sector

• Lack of strong catalysts
• Varying sector indicators
• Recommendation
• Hold current positions in MSFT, IBM, INTC

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Telecommunications Sector

• Current analysis reveals ATT Wireless may be
  overvalued
  
• Additionally ATT Wireless may continue to
  under-perform

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AWE

• P/E to growth ratio suggests stock may be
  severely overvalued
  
• ZERO new product lines this year, few last 3
  years
  
• T-Mobile, ATT Wireless, and Cingular Wireless
  have no current PTT plans
  
• Little guidance

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Not your typical growth company
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AWE Cash Flows
O
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AWE Margin Check
O
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AWE Valuation
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NXTL Catalysts

• Nationwide Push-To-Talk (Connects faster than new
  competition)
  
• Increasing business purchases of cell phones
• Innovative new features

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Nextel

• Business Plan New Products
• Long-Range Digital Walkie-Talkie
• Nextel Communications, Inc. announced the
  availability of the Motorola Visual APB Plus
  application for federal, state and local law
  enforcement agencies on Motorola's i95cl phones
  for Nextel. With Visual APB Plus, first
  responders can broadcast full-color digital
  images such as mug shots or photos of missing
  children to other law enforcement personnel in
  the field.
• Nextel Communications, Inc., Motorola, Inc. and
  Symbol Technologies, Inc. announced the
  availability of the first bar code scanner
  attachment for mobile phones. The Symbol PSM20i
  allows mobile workers to use their phones to
  collect information wirelessly and in real time.
  This solution combines the accuracy and
  reliability in laser-based bar code scanning with
  the extensive voice, data and application
  capabilities of Nextel's Java technology-enabled
  phones from Motorola.
• Nextel Communications, Inc. Introduces Its First
  GPS-Enabled Phone
  

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Nextel

• Valuation
• P/E to growth ratio suggests stock may be
  undervalued
  
• Raised guidance 3 times in last 14 months
• Earnings growth in the past year has accelerated
  moderately compared to earnings growth in the
  past three years.
  
• The price-to-earnings multiple is lower than
  average for all stocks in SP index.
  
• The ratio of NXTL's price-to-earnings multiple to
  its five-year growth rate is above the average of
  all stocks in SP index.

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Much better growth

• Rumors of PCS VZW Push To Talk plans, however
  it takes as long to use PTT as a regular call!
  

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Comparison of AWE to NXTL
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Comparison of AWE to NXTL
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Comparison of AWE to NXTL
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NXTL Margin Check
O
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NXTL Cash Flows
O
O
O
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Summary

• AWE does not appear to be following a growth
  strategy, with no new products and no clear
  strategy, we do not feel they are a good long
  term bet.
• NXTL has become profitable, and while it will
  gain competition in the PTT market, the
  competition has significant problems copying the
  Nextel strategy.