The message below and the following discussion was posted at http://www.11wall.com and might be of interest here. 11Wall is a moderated discussion board. As such it has no spam or flame wars and is generally civil and thoughtful. You might visit if postings like this interest you, whether you agree with them or not. I don't read here, so please post any responses at 11Wall. ****************************************** Gap: KABThe Wall Board: Stocks (Misc): STOCKS NOT OTHERWISE LISTED: Gap: KAB By Igodard on Tuesday, December 7, 1999 - 08:36 pm:[Strange mix. Your comparison to a utility is quite appropriate. Pipelines are highlyregulated and therefore basically subject to govt. price controls. Pipelines can only significantly grow revenue by increasingthroughput. How does the IS piece "fit"? Unless the techies are focusing on pipeline-related issues, it seems an awfullystrange combination. Disturbing, even, from an investment point of view, because the businesses are so vastly different. ] Exactly. [What's their loss reserve? Some "bad" pipelines go as high as 10% of revenue, while othersare less than a percent.] Essentially none directly, because the real owner of the line is KPP. They have thesweetheart management contract and 1/3 of the equity. Gets them out of the suit exposuretoo. [How did they end up with the IS division? What sort of work do they take? Are they a "bodyshop" (recruiter, taking $x per hour)? Or do they do full life cycle development on a project basis? ] The IS side is mostly a a systems integration house. It seems to have nothing whatsoever todo with the line - they do mostly Beltway Bandit work for the government (and are DClocated) with diversification into financial ops and a mention of software to handleinsurance claims for large employers if I remember. SI and VAR - a lot of hardware sales inthe mix too. No mention of body shop work, which I would have red flagged (I don't like thebusiness for anything but short term as it's hypercyclical). I don't know how it started - didn't look that far back - but I'd guess that the new CEO a coupleof years ago decided to hitch onto the rising ting with the extra money. Since then there'sbeen acquisitions (which seem to have been integrated well) and they expect more. Therecap that produced KPP was a 'clear the decks for action' move, and this seems to be thedirection of the action. Yet they are pretty flexible - the wholesale fuel business was the another recent buy, andthat's a quite conventional vertical move in the petro distrobution business. Some hodgepodges seem to be mere reflections of CEO hubris (James Link comes to mind)but this one seems to be a lot better than that to me. Disclosure: accumulating Ivan
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