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No. of Recommendations: 30
In the frenzied winds of the wirless tornado,I see GLOBALSTAR as a fast-growing infant gorilla.The demands for CDMA voice capability anywhere in the world can only be handled by GLOBALSTAR. No other satellite company handles CDMA. This satellite CDMA is vital for systems on planes and auto use of internet and voice because 85% of the world is not covered by cellular. As of now GLOBALSTAR is in Moore's pre-tornado Bowling Alley stage. In the " bowling alley" the strategy is to develop niche markets where customers are under-served and have a compelling reason to buy. The goal is to become the undisputed leader and develop a loyal customer base that will spread the word about the enabling value and reliability of the product. One example of GLOBALSTAR's niche with compelling reasons to buy would be voice communication for emergency services as in the Red Cross contract or voice in Australia.
The sales force is a consultative one. They are working out the kinks allowing the next phase to be ready for the mass market. It is developing their niche base to help promote their product while generating income. After the mistrust engendered by Iridium's failure, it is imperative the GLOBALSTAR develops this base of customers that will testify to GLOBALSTAR's superb enabling product. To advertise to the masses who are still very skeptical would be a waste of time and resources. As GLOBALSTAR's customers report glowingly about the technology(as IFN's trials demonstrated), marketing will soon reach out to the masses.
The strategy in the bowling alley is to expand into other related niches within similar segments or applications. The new niche would be the same application for voice but now applied for example to military services as seen by GLOBALSTAR's GSA contract, or advertise to sailors as the VAR Wireless Zone is doing or help QCOM deliver voice in China where there is very little landline infrastructure. The cascade effect of becoming the leader in each subsequent related niches means you are knocking down the pins and right now the pins are flying and competitors are years away.
Globalstar has other applications such as internet access, two-way messaging, remote metering, and SCADA (Supervisory Control and Data Acquisition). GLOBALSTAR's relationship with Qualcomm's OmniTracs, Inflight internet access, the automobile telematics (via Ford and Qualcomm) all suggests that GLOBALSTAR is correctly positioning itself to be swept up in the tornado generated by the worldwide switch to 3G CDMA and wireless internet and data access. Once in the tornado the demand will be great enough that GLOBALSTAR will not need much of a sales force. The demand will be great enough and the VAR's are already in place and invested in GLOBALSTAR .
I believe that GLOBALSTAR is quickly approaching the tornado. It will be further escalated by QCOMS fast approaching global tornado that will dwarf the local US one witnessed last year. Furthermore because there is no competition in CDMA satellite voice, GLOBALSTAR will quickly become a leader the value chain must rally around. The tornado is marked by demand being much greater than supply. InFlight Network's CEO stated last week that there services alone could use all of Globalstar's present capacity. If GLOBALSTAR is going to take care of their IFN contract plus the Red Cross contract plus the new GSA contract plus all the gateways from Australia to Saudi Arabia to China to Canada, then they will need to raise more money. Not because they are in danger of going bankrupt like the technologically differnt Iridium, but to launch more satellites to handle the rising demands of the tornado. The demands for CDMA voice capability anywhere in the world can only be handled by GLOBALSTAR, a young Gorilla that will grow to King Kong size.

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No. of Recommendations: 8
Great first post Mr.Steele...keep them coming..and many recommendations...I have been thinking along the same way,,,,just a bit early yet for the winds to blow..

http://www.technologyreports.com/misc/gorillaexcerpts/gorillawhen.html

The biggest downside risk is when an enabling technology simply does not tornado. You can lose a big chunk of your investment the day the market wakes up to this outcome. That is why we recommend against investing in any pre-tornado concept plays. Yes, if the market does tornado, people who bought in advance of this event will make a huge killing, and that could have been you, had you only . . . But that way lies madness. Instead we recommend you be a little late to the tornado party, making sure it is authentically under way, just to protect yourself.

http://www.technologyreports.com/misc/gorillaexcerpts/alleycru.html
The reason niche markets are called the "bowling alley" is that ongoing market growth will be niche to niche, each entry into a new niche being eased by leveraging the prior niche's solution set and reference base of customers. By this mechanism companies can continue to grow their marketplace in advance of gaining widespread mass market support. Each new niche creates a moment of "micro-hypergrowth," as all the pragmatists in that niche follow the micro-herd to adopt the new technology. But it does not create "macro-hypergrowth"—that is what happens when entire mass markets adopt the stuff from which true gorillas are made. For that to occur the market must transition to the tornado.

Buy at the start of the Tornado.

HoF
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No. of Recommendations: 3
One difference between G* and a normal GG is that there is no tech 'basket' to buy. Currently there is only one company (that I know of) that stands a chance to make it in this market, and that is G*. The two primary factors working against G* are the cost of the service and the [spectacularly negative] track records of previous attempts by other companies. The potential for this company has been listed quite well by Mr. Steele. At this point it looks like G* is probably (better than 50/50) going to make it. To me, it is an educated gamble. Keeping in mind that there is a real chance you could lose your entire investment on this one, it is still worth it since there is (IMO) a stronger chance that the returns in two to five years could easily be ten to one. A sat co is eventually going to dominate this market. Hoping it will be G*.
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No. of Recommendations: 3
I agree. Eventhough my analysis puts Globalstar only in the Bowling Alley, I went long at prices between 7 and 10. My understanding is the reason to wait for the tornado is to buy stock in the emrging gorilla candidates and then switch to the gorilla. In Globalstar's case there is only one Gorilla candidate on the horizon for at least a year. One question was will the technology work and the IN-Flight Service demonstration of Globalstar suggests it exceeds all the high expectations.
The only remaining question is will satellite voice and data market go into a tornado and IMHO there is every indication it is beginning. There are several announcements about with differnt companies vying for automobile telematics and inflight services. A french company has said they can use Globalstar to allow passengers to use their own cell phones during a flight. This is all great news. To me the greatest selling point is the Globalstar-Qualcom alliance. Qualcom is the Gorilla as the wireless infrastructure switches to 3G CDMA. The final product is a communication system that can provide voice and data anywhere. Qualcom's investment in Globalstar was a great forward looking chess move to provide this service. Qualcom's soon to be released HDR will accelerate the tornado. Globalstar's initial phones are bimodal (I think even trimodal) to allow switching to GSM and TDMA protocols to make this truly a universal phone that can be used in any contry despite their current wireless protocol and provides an intermediate and easily upgradable step to 3G CDMA. China's developing wirless infrastructure will require much use of satellite coverage and Globalstar is the answer as QCOM's CDMA 2000 is installed. Saudi Arabia as well is onboard, and the list will grow rapidly.
I may be breaking the rules of GG investing by taking a position in the bowling alley but this is a valid exception at an exceptional price opportunity.
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No. of Recommendations: 11
Jim,

I share your enthusiasm for GSTRF and actually do see it as a discontinuous innovation with open, proprietary architecture, a large value chain, and high switching costs on the part of the value chain.

However, lets not fool ourselves. Globalstar is still in its infancy. It is not even up to the visionaries yet. It is still with the early adopters and far from crossing the chasm. The bowling alley is across the chasm, and we are no where near to even entering this alley, if we ever do.

I bought into GSTRF because of all the negative publicity brought about by Iridium and ICO have made GSTRF so cheap that the risk reward is worthwhile my buying in now, and early. The other reason I am buying in now is that I see the future greatness and practicaly monopoly position that Globalstar will hold should it get to the chasm. Heck its so cheap right now that just getting to the chasm could result in a ten bagger.

But remember it ain't there. It ain't even close yet. It is even further away from the bowling alley. Don't buy into GSTRF looking at it as just another Gorilla candidate. Its a Gorilla candidate like QCOM was in 1993, only riskier. And buying Globalstar now has a lot to do with very advanced gorilla gaming and my entrepreneurial take on stock investing. It has nothing to do with gorilla gaming. It is far, far, far, far too early to put anything in but money you are willing to lose given the great risk/reward scenario and the gorilla traits that GSTRF will most likely take on should it survive long enough to hit the chasm.

Tinker
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No. of Recommendations: 5
Tinker,

But remember it ain't there. It ain't even close yet. It is even further away from the bowling alley. Don't buy into GSTRF looking at it as just another Gorilla candidate. Its a Gorilla candidate like QCOM was in 1993, only riskier...It is far, far, far, far too early to put anything in but money you are willing to lose given the great risk/reward scenario and the gorilla traits that GSTRF will most likely take on should it survive long enough to hit the chasm.

Whew, what a relief. I thought you were going to warn me to exercise some caution or something. Now, since we determined we have such a significant margin of safety here, I guess the second mortgage on my house is practical, huh? :)

Regards,

Scott
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No. of Recommendations: 10
Tinker,
I disagree heartily about G* not being in the Bowling Alley or even across the chasm. However this may be due to my lack of understanding. It would be helpful to express why you think G* is only in its earliest adoption phase. You made many pronouncements but no explanation.
My understanding is that the early stage which is just supported by visionaries generates a product that needs to be customized for that visionaries particular needs.t A company crosses the chasm when it broadens its product's appeal by establishing itself in a niche market. As it expands into other niches it creates a product that can be marketed to the mass market. G* very nature of global sattelite voice and data is aready designed to to accommodate the mass market. Niiches in voice in underserved cellular market's like China, Saudi Arabia, Australia, and where ever else there are gateways certainly is establishing themselves in that niche. There is no competition to worry about. The service for airlines such as IN -Flight Services certainly establishes in that niche. THe adoption by the Red Cross certainly establishes them in the emergency services niche. The lack of competition and the CDMA capability that will be the 3G world standard has them poised to take advantage of any tornado activity in the wireless sector. There only need is to show that it is workable, which by all accounts seems to be that it is an excellent piece of technology.
Their next step is to provide a smaller phone that can appeal to a wider market. That is rumored to be out within 6 months. That will begin the sales of a phone service that can go anywhere, which I think will be the beginning of a tornado.
Why on earth( or in the heaven's) do you think it isn't even to the chasm yet???

Jim
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No. of Recommendations: 8
Jim,

It is pretty easy to substantiate this. Globalstar had 10,000 subscribers after last quarter. They had less than one million in revenues. Their offerings in Saudi Arabia, South America, etc. are just that, offerings.

Establishing where a product is in the adoption scheme is not addressing where it is being offered but addressing who is buying it. So far 10,000 people, and some projects to come in the future. If you call this crossing the chasm we might as well throw the manual out because it is for certain that every fuel cell company in the world has also crossed the chasm and is in the bowling alley, so is solar energy, electric cars, superconductors, you name it.

By your assertion Iridium, with 50,000 subscribers was across the chasm and in the bowling alley. Not even close. These 50,000 were early adopters, nothing more. They were not even visionaries who was a strategic need and competitive advantage in the product.

Early adopters are about 2% of the adoptees of the technology. GSTRF estimates an addressable market of 40 million alone. 800,000 of these are so should be early adopters.

This is not to say that all 800,000 early adopters will buy first then smoothly transition into the visionaries. There will be intermingling. But it is to say that 10,000 customers equates to approximately 1.25% market penetration into the early adopter market. Much less into the visionary market, the chasm, and then finally some pragmatist adoption.

On GSTRF's side they have been approved by the GSA for government purchasing. When and if government departments begin buying for their departments in some quantity, you may see evidence of visionary adoption. Government departments, who buy in quantity, generally do so out of a visionary need and not out of a need to use new technology (as would be the early adopters).


Tinker
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No. of Recommendations: 1
To put it into greater perspective these 10,000 people represent approximately .025% of the addressable market. Products don't tend to hit the steep part of the curve until product adoption is somewhere around 20-30%.

Picture a hocket stick. We are at the tip of the blade. Visionaries will represent that part of the stick at the end of the blade up to the curve that connects the blade and the stick. Where this curve ends is the chasm. When GSTRF gets across this chasm, and in the bowling alley it will be on the bottom of the shaft with all that steep growth ahead of it.

To repeat: We are at the tip of the blade. No more.

Tinker
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No. of Recommendations: 0

Sounds good to me

I have a few of these in the portfolio.

TC
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No. of Recommendations: 5
Buying QCOM is obviously the easiest and safest way to play GSTRF, which for now is nothing more than a chimp hooked up to a life support machine. QCOM has a sizeable investment in Globalstar, provides the enabling technology for Globalstar, gets paid its toll on everything Globalstar. If Globalstar ever becomes anything near a gorilla, doesn't that mean QCOM is the dark overlord?
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No. of Recommendations: 3
Tinker,

When and if government departments begin buying for their departments in some quantity, you may see evidence of visionary adoption. Government departments, who buy in quantity, generally do so out of a visionary need and not out of a need to use new technology (as would be the early adopters).

Government and visionary in the same sentence???????

ROTFLMAO

Visionary in the sense they might, heaven forbid, loose their job if they don't buy the same thing that industry has been using for up to five years, or more.

JMHO of government procurement practices.

Harry


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No. of Recommendations: 11
Tinker,
I find your analysis that Globalstar is not in the Bowling Alley and only in the earliest of adoption phases to be very misleading for 5 reasons.
1. Your use of subscribers and percentage of potential subscribers is misleading. It is minutes of use (MOU's) that will be important. How many subscribers do you think the In Flight Network is worth? The IFN CEO talked about using all G* capacity. The number of subscribers wasn't applicable.
2. You are narrowly looking in your rear view mirror as your current subscriber numbers only reflect last quarters results when the G* had only been up an running for 1 quarter. You ignore recent announcements. It is future earnings potential that raises a stock's value. More Gateways are opening. countries like Saudi Arabia, Australia, and China will have a large demand for Satellite voice and data. In Flight Networks, QCOM and G* demonstrated instant, clear voice and speedy internet connections before a group of "over eleven hundred invited officials of the airline & entertainment industries, as well as the press". Air Canada already signed on. Even if you just took the last quarter results you can detect a nice measure of growth that you ignored as "mou's more than doubled, gross service revenues increased 173 %, spending on operations was down, they now have 463 mill in cash, now have 17 gateways instead of 11, average weekly mobile mou's for june up 83% over mays, commercial data service remains on schedule for USA this autumn.and in europe in early 2001."
3. Your comparison of Iridium to Globalstar is comparing rotten apples to oranges. They had/have much different technologies and different business models. Again it is not the number of subscribers that will be important but MOU's. Your marriage to that concept erroneously led you to a comparison with Iridium, using subscribers. You made up a criteria, applied it to Iridium and then think you have discredited my beliefs in G*. My G* perspective is more involved as this reply indicates. You made quite a stretch. Although both are LEOs, Iridium was much more expensive, was not CDMA but TDMA which couldn't be upgradable to the new 3G standards. Iridium had a game plane of invading the turf of cellular giants before it made a beach head in the niche markets as G* has done and G* continues to do. Iridium could not upgrade on the ground like G* can and Iridium's TDMA wastes valuable bandwidth so that it needed a far greater investment in the infrastructure to supply the same capacity as G*'s CDMA. It is misleading comparison's like yours to Iridium that keep the stock at bargain basement prices, but this won't last more than six months. Thanks, I have been taking good advantage of the low prices.
4. The wireless industry is in the midst of a tornado. It includes Voice and data, cellular and satellite, airline services and auto industry telematics, Qualcom and G*,among others. The momentum of the industry will help carry G* into a tornado as there are several sectors with compelling needs for satellite use. You can not just look at G* voice subscribers in isolation. Because of the penetration of cellular services to date people see how valuable and useful wireless is. G* does not disrupt any cultural trends for the use of wireless but magnificently extends it, broadening its availability and uses. There will be no paradigm shock to slow down G* adoption. G* only needs to demonstrate its effectiveness. After the IFN demonstration Ladenburg Thalmann & Co. Inc., who were at the IFN demonstration reiterated their STRONG BUY for G*http://biz.yahoo.com/prnews/000920/ny_ladenbu.html. They were convinced about G*'s effectiveness.
There are no other satellite competitors yet that can handle CDMA voice and internet, so there is only one company for the value chain to rally around. A French engineering team is developing a system that would allow airline passengers to use their own personal cellular telephones on board commercial transports, and they choose G* http://aviationnow.com/TwoShare/getPage/AWContent/AWST/awst_main_airtransport. As the new users climb on the shooting Globalstar, the broadening base of users allows G* to lower it's price and generate phones comparable to cellular's cost and convenience. Further down the road , it will begin to take market share from cellular.

5. Your arbitrary use of G*'s less than 2% of 40 million possible subscribers as an indicator that G* is only in the earliest of adoption phase lumps everything together into a nebulous mass of missed subscribers. I've already harped on the MOU's as being more relevant. Such a statement also clouds the fact that there are several mini-tornadoes in related markets and G* is supremely positioned to take advantage of all of them. Again airline service, automobile telematics, voice and internet where fiber and cellular do not reach. Data delivery systems such as QCOM's Omnitrac or Arcom's data delivery systems that again will use Globalstar (http://www.arcom.cc/pr/released/eSCADA_pr.htm). As these markets create a global demand that is much greater than the supply, i.e. G*'s total current capacity, then G* becomes closer to being in a tornado not your early adoption phase. In Flight Network alone thinks that they can use all of G* present capacity. Pre-chasm crossing companies are stuck in customizing their product for a very few visionaries. A company in the Bowling Alley, like I believe G* is in, attacks several niches to broaden its company's base. While doing so it refines its product to be more globally acceptable. G*, along with QCOM's help, will be upgrading it's system to carry wireless internet services at speeds comparable or exceeding present land line speed. G* is the only CDMA satellite company ready to support the new world 3G standard. This does not describe a company stuck in the early adoption phaes, (customizing it's product for a few isolated visionaries).
Moore wrote pages using qualitative analysis of the offerings and strategies of the different phase of the Technology Adoption Life Cycle. Moore showed a graph of the percentages of the market that belong to each phase. I assume that is where you got your 2% from. However I don't remember him dwelling on a particular percentage as a way to determine what stage the company is in. I thought he was trying to show the buying power of each phase. Using those percentages are useless if your estimate of potential buyers is wrong; or if you use subscribers instead of MOU's. If you use more of Moore's qualitative parameters for each phase you will realize G* has already hurdled the chasm.
Together with QCOM, G* will soon ride the tornado winds of wireless.
Sincerely, Jim
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No. of Recommendations: 0
Although G* (Globalstar)is pretty definitely going to become a Gorilla, and is now at a price which is hard to pass up, I would still advise learning to access the timing of purchases by studying the http://masteryprogram.com course. Or a comparable course (don't really know of a comparable though).
Hy
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No. of Recommendations: 0
What about Toys 'R Us?
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No. of Recommendations: 8
You are narrowly looking in your rear view mirror as your current subscriber numbers

The gorilla game is precisely about this. You don't buy into an enabling technology until it has tornadoed. Ie, but looking at the rear view mirror.

IT is niceto say that G*will soon ride the waves of QCOM. And I have a very nice and lucrative position. But I am not fooling myself, you should not fool yourself, and neither should anyone else. GSTRF is at the early adopter stage. It is no where near to crossing the chasm, much less the bowling alley.

In regard to lumping everyone together: Well, if you have studied the product adoption model which Moore uses, a model which was borrowed from Rogers and others before him. You find outwhy the product adoptoin cycle is as it is. IT almost always (almost without exception) turns into a normal curve. Why? Because people do by default become lumped into categories of early adopters, visionaries etc. And that these people turn out to be normally distributed throughout the population.

Jim, while I appreciate your enthusiasm, and I agree wiht it as my own money indicates. I have to say, and I don't think I have ever said this before on a Fool board: I a right. There is no credible way to say that GSTRF is anywhere near the chasm. You cannot rely on Gorilla game metrics to invest in Globalstar. To represent that it is, is throwing hte entire gorilla framework out hte window. There is no other way to say it.

On the other hand, I agree that Globalstar, should it manage to survive into and through the chasm, will most likely occupy a gorilla position. And I haveinvested. And expect an enormous return. But on a gorilla basis, no one in their right mind would invest in Globalstarat this time. No one. You and Iare inveting early based on other factors than pure gorilla gaming. This is Qualcomm, perhaps, but Qualcomm in 1993 or 1994, or Rambus in 1994. Most likely Globalstar will ramp up quicker. But you can't ay anything more. For every company wit great potential like this, more will fail than succeed from this early stage of development.

Tinker
Not fooling myself, yet at the same time rock certain and confident in my long-term Globalstar investment
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No. of Recommendations: 3
Tinker,

I am glad we agree that G* is a potential Gorilla. I am glad we agree it will ramp up very quickly. I am glad that we agree that it will be a very profitable investment.
However I still contend that it is a solid investment based on Gorilla Game theory. You are using Gorilla Game analysis like a narrow cook book recipe and are missing many points. I am not throwing out the book but applying the underlying principles and analysis to a situation that was not covered inMOore's book.I agree I am buying early,because the roadblocks are few, and recent demonstrations like IFN clearly show that G* is an enabling technology and there is a big market for it.A market of MOU's that will not be measured just by subscribers.

Much of my disagreement with you is your analysis of the population that will use MOU's. It is the way you define the population that leads to your belief this isn't a GG based assessment. Most people look at G* market too narrowly. Often people negatively inclined towards G* try to conjure up African Bushman needing G*. They overlook the airlines and auotmobile and data markets. They overlook the effect of internet capabilities of CDMA wirless. In the airlines alone picture how many seats have a phone that will be replaced, and multiply by how many planes, and how many passengers. Think how much more valuable availability of voice and phone on a plane will be compared to a subscriber in Suburbia. The plane voice/internet use will get much more intense use. IFN is signing people up for this changeover to voice and data service now. What percentage of just this market is G* going to control? There is no one else. This just one of the many mini-tornadoes that will launch G*.
Your feeling that G* will ramp quickly is based on the Technology Adoption Life cycle. The pragamatist will be the ones to propel G* to the heavens, up that curve, or your hockey stick. I completely understand that curve that you keep talking about. What keeps the pragmatist from jumping on board? They are waiting to see if the technology works and is applicable. They are waiting to see if there are better offers from the competition. They jump all at once because they don't want to be left behind if the new tech is a good thing.
I am buying early, again it is now in the Bowling Alley, because I think the pragmatist will be jumping in soon. There is no better technology, and there won't be a worthy competitor for years. The IFN demonstrations clearly showed that it is a wonderfully working technology. That are no other roadblocks to the tornado. The pragmatist need to jump in soon or be left behind as IFN takes over the airline industry. That's why everyone believes intuitively that G* will ramp quickly. It is truly an analysis base on GG principles, with a twist. Usually we are not offered a chance to see who the Gorilla will be because the candidates will need to battle it out in the tornado. G* and Qualcom's great vison positioned themselves to be way ahead of the crowd. THey won't waste their time in battling a competitor, they will fly to Gorilla Status. G* will be launched ever higher by a series of mini tornados in the markets I described in earlier posts. Within the year G* will be in a tornado. I don't think that this was a good time to say you were right.

Sincerely,
Jim

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No. of Recommendations: 5
Jim,

I think we both agree. We are both using "advanced gorilla tactics." Ie, reading the tea leaves in analyzing the market and trying to catch the initial run-up before it is a gorilla.

But where we will have to disagree is that GSTRF is in the bowling alley. That is just not the case. There is no evidence of current mass adoption. IFN contract is great, but not expected to get started until the end of 2001. Even there IFN does not have any agreements in place yet. When the gorilla call on Qualcomm was made CDMA subscriber numbers was in the tens of millions, not 10,000.

Gorilla gaming is inherently backward looking. We wait for the market to verify a company's standing. No matter how much you and I are confident in our tea leave reading, that is all it is. Enormous profits may
indeed come our way. But there is no evidence other than speculation that GSTRF is across the chasm. All the evidence points to the fact that is seems likely to get there. There is nothing to say it is there. A company does not cross the chasm with potential. It actually gets there.

My point is that it makes a big difference in regard to risk/reward. True gorilla gamers knowingly sacrifice much of the run-up to avoid the extra risk. You and I have discounted the risk due to our very confident tea leave reading. It is just important to distinquish between this and to actually having solid evidence of crossing the chasm. It is just not there.

But here is to us being right! I may take the day off of work to celebrate;)

Jim, look forward to talking with you more about Globalstar and I agree with your enthusiasm.

Tinker
practicing "advanced gorilla tactics" since December 1999 (so you know I know what I'm doing;) ). We shall see how this Globalstar play, plays out. I'm confident but certainly not secure. That is the difference between buying across the actual chasm, and buying Globalstar now. Much more risk, much more potential reward. No certainty.
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No. of Recommendations: 0
Jim,

Two statements of yours makes me wonder about the "footings" for your arguement.

Think how much more valuable availability of voice and phone on a plane will be compared to a subscriber in Suburbia.

There is no better technology, and there won't be a worthy competitor for years.


On the first, you are looking at some very small numbers as to usage on the airlines, or planes in general, in comparsion to the numbers in the general public. Why are so many millions buying cell phones every day?

The second brings to mind the usual question, What's going to happen tomorrow? This technology is brand new and it's no telling what we might see tomorrow. Once it passes further along the trail we may see that it is indeed where you think it is today.

Me. I'm not as positive as you.

Harry
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No. of Recommendations: 4
Just an addendum to my "advanced gorilla tactic" comments. RMBS was on the verge of hitting its Tornado when I bought in. The market was just not aware of it. You had to see through all the FUD. The same would be true with Qualcomm if you bought in prior to March 1999. But the same is not true of Globalstar. Globalstar is not on the verge of dominating an enormous industry. It is in the very early stages of beginning an industry.

Thus, for those who followed me on my Rambus decision in December, Globalstar is not the same thing. I in no way have the same degree of certainty. What I do strongly feel is that Globalstar will work. That when it does work it will dominate. And that at this price level it is well worth the risk/reward to take a good solid position. But my reason for doing so is far different than my timing in regard to Rambus, or I expect, the timing of many in regards to Qualcomm. Globalstar is simply not there yet.

Tinker
Again, I do hold a large Globalstar position in Jan 2003 LEAPS. I expect to make a bundle. But this is not Rambus. It is not on the verge of a tornado.

Now that I've re-expressed that warning. What I do see is Globalstar inevitably succeeding brilliantly. Particularly in regard to its current valuation. The risk/reward is just too compelling for me to ignore. Thus, I'm willing to invest this early in its business development. I honestly think I'll make a lot of money. But this is intuition, based partially on gorilla terms and my understanding of technology markets. This is not gorilla certainty.
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No. of Recommendations: 0
Harry,
My comparison of IFN as a subscriber to a subscriber in Suburbia was to emphasize that just looking at the number of subscribers is misleading. If you see IFN as one subscriber it will provide thousands and thousands of times more MOU's than one subscriber using it in Suburbia.
Some of the technology is new, some like CDMA, is not so untested. I have not heard one comment to suggest that G*'s technology has any glitches. Qualcom's technology has become the global standard so it must be viewed as reliable. Qcom's strategy is to offer products that easily allow upgrades as the new generations of CDMA progress. G* is easily upgraded along with Qualcom-upgradable on the ground, not by launching a new satrellite like Iridium woud have needed. New technology well may replace what we have now but I don't see CDMA or LEOs being replaced anytime soon by a disruptive technology.

Jim
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No. of Recommendations: 0
Tinker,

I, and I would imagine some others on this board, do not dabble in options and know little of how they can be beneficial in a portfolio...

If you get the free time, could you respond to this post by comparing how your LEAPS make for a better investment than simply buying GSTRF stock now?

I am a little familiar with commodities options, but am unsure if stock options are exercised in the same manner...

Anything you can say to enlighten me on the differences of using options (and potential benefits vs typical shares) would be greatly appreciated...

Thanks,

Dreamer
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No. of Recommendations: 7
Dreamer,

I can give you an example with Rambus. When I bought Rambus in December of this year I only had so much money I could invest. I'll make up a sum to illustrate. Lets say I had $10,000 to invest.

At the pre-split adjusted prices I could have bought 144 shares of the underlying stock or 3 LEAP contracts with $250 left over. This is when Rambus was at $69 dollars or so (pre-split)

When Rambus hit $300 (pre-split again) the 141 shares were worth $43,200. The 3 LEAPS contracts were worth (and this varies, but I had the $75 strike price) $67,500 + the time value remaining in the options. This time value was substantial at the time and was around $20,000-$30,000. So around $80,000-$90,000. So for $250 less I had upside of 50%-100%.

Another way to look at LEAPS is to minimize your capital exposure. That is what I'm doing with Globalstar. Again, just an example. Lets say I desire to hold 5000 shares of Globalstar. At its recent price of $9 this would have cost $45,000. I would need to put $45,000 at risk. However, to control 5000 shares of Globalstar with LEAPS I would need to buy 50 LEAP contracts. Each contract was going for around $425 at the time (with a strike price of $15). Capital outlay of $21,250 vs. $45,000 to buy the underlying shares. I have effectively reduced my risk as my capital exposed to this risk is cut in half.

Upside. Should GSTRF hit $100 on Jan 17, 2003. The underlying shares will be worth $500,000. The LEAPS will be worth $100-$15 strike price x 100 x 50 = $425,000. Now, if GSTRF were to hit $100 say in 2001 early in 2002 to this total I could add significant time value and approach $500,000. So in this instance my capital exposure is less than 1/2 of owning the underlying shares but my upside is nearly equal.

The only time I use long-term options (LEAPS) is when they have a duratio of at least two years and if the stock I am buying has been mercilessly and mistakenly beaten to a pulp. Qualcomm in 1999, Rambus in 2000, Globalstar in 2000. I also made a lot of money with BRCM in 2000. I luckily sold it near its peak at $243 just before the market crash. So I don't recommend this BRCM type option play. In fact I got so lucky that I was able ot buy BRCM back at $115 a few weeks later. Make no mistake about it, this is pure luck. I could have gotten burned on the BRCM play. It differed from the RMBS and GSTRF plays from my perspective.

But after experimenting I only use then in situations like RMBS or GSTRF. Generally FUD induced value plays. I will not use them again in momentum plays like I luckily and lucratively did with BRCM. I don't like gambling.

So that is a couple basic scenarios. I suggest going to Amazon or Barnes and Noble and getting Roth's book called LEAPS. Also, you might want to pick up Thomsett's book called "Getting Started in Options" to learn how to use options to reduce risk, and not as a means to gamble. I know a lot of people who got killed on their shorter term option plays in March.

Tinker
P.S. Another factor I like about LEAPS. Unlike short-term options when you have to be paranoid with time, with LEAPS you don't. For example, I don't care what Globalstar's price is. The value of my LEAPS on them have gone up and down many tens of thousands of dollars over the past week. All I care about is that I have the rest of this year, next year and the year after for Globalstar to fulfill its destiny.

Just my perspective on usage of LEAPS.
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No. of Recommendations: 22
Tinker,
I value your insight, and like you I believe G* will succeed, like you I also bought G* LEAPS, and like you I also think “my” analysis is right, except I see G* in the Bowling Alley and I am putting out a Tornado Watch .
I am much newer to this Gorilla Game analysis than you. I see you as a knowledgeable, gracious and as a worthy “adversary” to critically evaluate my analysis and I look forward to your critiques. However I was bothered by your statement that my assessment was not nor could not be based on any Gorilla Game metrics. Having loaned my Gorilla Game book out, I didn't have specific references to support my claim. However when I took my 6 year old son to Borders to buy the “Adventures of Captain Underpants” I quickly scanned a copy of the Gorilla Game from the shelves, seeking support for my evaluation. From what I read, I feel more positive than ever. Unfortunately I was unable to concentrate fully and can not provide more accurate quotes and page numbers to back up my assertions because my concentration was continuously interrupted by tugs and giggles about “Professor Poopy Pants” and the “Talking Toilets”. Nonetheless my paraphrasing (for the Gorilla Game) should prove reliable.

In the Gorilla Game when describing the different phases of the Tech Adoption Life Cycle, Moore stated it is very important to distinguish between the Early Adoption phase and early Tornado (Bowling Alley), intimating it was a common problem (imagine that!?). His stated method of distinguishing which phase the company is in relies on the fact in the early adoption/visionary market a company is trying to please a specific customer within a specific segment of an industry. For that reason they would usually have only a single partner/customer who is trying to gain an advantage over others in that segment. However in the Bowling Alley, they are trying to gain shares in the whole segment and would thus have several competing partners/customers in that segment who all want to take part n the upcoming hyper growth. The latter best describes G*
In the satellite voice and data market we can identify at least three layers that contribute to the value chain: The Space layer controlled by Globalstar, the handset/ end user layer, and the service provider layer. The G* consortium consists of over 100 service providers in 125 countries and they own 32% of the company. For more narrowly defined segments of these service providers as in the airlines industry, there is IFN and the French In-Flight Telecom System (IFTS). For in-auto telematics (mostly via QCOM) there is DCX's (Daimler-Chrysler) and Ford-QCOM's Wingcast as well as an European auto company whose name slipped my mind (Senior moment not my son's fault).
For handsets there is Qualcom, and Ericsson (which just released a sleeker, cheaper version) and at least one other. This list of several partners withn the same segment suggests G* is more aligned to the Bowling Alley Analysis than the Early Adoption Analysis. I couldn't find a place hwere Moore used a specific number or percentage as you did to determine which phase the company is in. (We could also identify other layers such as communications protocol with QCOM's CDMA, and the telcos that G* would link to.)

Moore also states two important criteria for a tornado to proceed which describes G* perfectly and is why I think a tornado watch is warranted.
1) The product offering is a continuous innovation for the end users.
This is so true as G* simply extends the rapidly increasing use of wireless voice and the use of the internet where cellular is ineffective. The coming tornado of internet B2B and wireless internt via HDR and other applications will only serve to increase the demand for G* type services. G* is also the only trimodal phone that can offer CDMA, AMPS or GSM protocols.
2) The product is a discontinuous innovation in terms that it installs a
new value chain. Qualcom, IFN, the auto industry and many of the new service providers will be part of this new value chain.

When stalking the Gorilla and looking for hyper-growth markets he
stressed asking these questions:

1) Can a tornado happen in this market?
I don't think that anyone doubts that a 100% wireless voice and internet service that you can access anywhere in the world is now highly desirable and capable of a tornado market.

2) What are the roadblocks to the tornado?
He suggests that it is inevitably caused by a break in the value chain. I think G* has beautifully encouraged a value chain as demonstrated by its list of partners and service providers partially named above. I don't see a break or weak link in the chain. The only negative is that it is just establishing itself, but by most accounts everything should be running well by end of 2001. I think that the real roadblock is the disappointment of two bankrupt LEO's -Iridium and Orbcom and the distrust their failures have engendered in investors. I think investors perceive that the technology is the weak part of the chain and the market is not large enough to warrant the expense.

3) Can the roadblocks be removed?
Iridium and Orbcom satellite companies were not CDMA and were not able to find broad applications. G* with CDMA can offer more cost effective voice and data (same capacity and better quality at1/20th of the cost of Iridum) Gilder has tauted the supremacy of this satellite technology for several years, and it looks like G* is the only one still standing. As G* and QCOM offer better data communications with future upgrades, G* will be the complete package. Technologically it has removed the roadblock

But it still needs to prove that it works, that it is reliable and that it is will find a large enough market. G* is demonstrating now that there are broad applications in the airline services and automotive telematics as well as SCADA applications like Orbcom and voice like Iridium.. Every day that proof is mounting that it works wonderfully. If G* operates at full capacity it stands to generate $5 billion a year. G* breaks even if it generates about $100 million annually. The CEO of IFN suggest that they alone will use all of G* capacity, not to mention the many other uses of G*. So high profitability seems to be rapidly approaching.
G* is not in the early stages of adoption as you contend but in the early stages of revenue generation. With the growing value chain already in place, it appears that the revenues will ramp up quickly to capacity within 2 years. The remaining doubt is will G* go broke before reaching profitability. Partners like QCOM and IFN have too much to gain to let them fail. Bear Sterns seems to think they are still worth financing. G* does not need to worry about battling the cellular giants like Iridium. G* is simply extending wireless into uncontested niches not served by cellular. First quarter results were lower than expected but displayed strong measures of growth. There is no reason too think G* will go broke unless you only see G* as another Iridium.
What metrics does a Gorilla Game analysis use. Moore warned that although earnings are important that earnings often are wisely used to build out the technology to insure the capture the majority of the market share. He said that a much better metric of a tornado and Gorilla capabilities is market share. Since G* is the only voice/internet satellite provider it has the total market share and it is theirs to lose. He also stated that the tornado is characterized by a time when demand overwhelms supply. Although deal with IFN have not yet produced rvenues, it suggests the demand to generate tornado conditions is fast approaching.
Finally Moore suggests that forward-looking approach is an important aspect of Gorilla Game analysis. Talking about the tornado watch, he states there are only two ways to outperform the market. You either out-react or out-think it. The professionals are too well equipped to let the average investor out react them. The other is to out think them by using Gorilla Game tactics to identify the oncoming of the tornado and identify the Gorilla. Gilder also suggests that you can out think the market by identifying the superior technology. He has identified G* 's superior capabilities in terms that make perfect sense to me. Looking forward with a technological analysis and a value chain analysis, as well as a risk/reward analysis all point to the sky as the only place G* stock prices can go.
Currently the price of G* is held back by the many analysts who still erroneously see G* in terms of Iridium and fail to see the value chain that is developing. Every negative G* accounts has a paragraph that simplistically compares G* to the failed Iridium. They fail to differentiate G*'s superior technology. They fil to see the growing value chain and the new untapped markets. However as more partners like IFN announce their satellite based offerings analyst will start to see the vast market for satellite voice and internet. They will see G* is the only one the value chain can rally around and soon to be Gorilla (It won't even need the help of Captain Underpants) Without competition G* will soon be the obvious Gorilla to everyone. A rare opportunity in a highly competitive market place. I don't think the herd of investors will hesitate for much longer. It is a good time to buy and hold.

Sincerely, JimSteele
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No. of Recommendations: 4
Jim,

Excellent response in regard to Globalstar. From the perspective of the value chain it would look as if GSTRF is trying to head across the chasm and straight into the bowling alley by-passing the other steps along the way.

Given GSTRF's unique business model of having to make tons of money now or go bankrupt, this may be a necessity. It also helps that the wireless industry is already developed to allow GSTRF to piggy-back on and possibly speed the process.

But my perspective is not on the value chain. My perspective with GSTRF is on the actual end users of the system. 10,000 subscribers. Focusing on this metric you can see that GSTRF will have a hard time by-passing the technology adoption road map. I will agree with you though, that Globalstar has managed to gain a very large value chain of suppliers and distributors; a value chain which could place it in the bowling alley and across the chasm. Its customer base has to catch up, however. If and {when:)} it does Globalstar may indeed be up for gorillahood. Lets see what the next quarter or two hold for subscriber growth. I hear that there are 120,000 phones in the pipeline and more gates opening up all the time.

Adn I do agree with you, as you know, about the rare opportunity this provides investors. And I do think that now is the time to buy and hold. But I think most of us must agree that to do so now is much riskier than to do so after the confirmation of a tornado.

Tinker
I told my wife last spring when she asked me "whose your next Qualcomm or Rambus?" I matter of factly stated "Globalstar." I waited until this summer when I saw more and more clues of its inevitability. But until they get more subscribers, all this great infrastructure and value-chain could just be expensive trappings. Not the certainty of a gorilla game tornado. We shall see if my wife continues to allow me to handle our money;)
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No. of Recommendations: 1
I would have to agree with Tinker that GSTRF has yet to cross the Chasm, although the IFN news could soon represent a Bowling Pin. The value chain certainly appears to be extensive...several interesting potential niches out there, like this one that caught my eye:

http://www.qualcomm.com/globalstar/applications/scada.html


I look for GSTRF to likely enter the tornado with the advent of 3G, data-intensive services. Interesting that "partners" like France Telecom and Vodaphone Air Touch will uniquely profit from the business that they themselves send to GSTRF.


rex

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No. of Recommendations: 0
BTW...does OmniTracs represent a Bowling Pin?

http://www.qualcomm.com/qwbs/products/omnitracs.html


I'm asuming that OmniTracs utilizes Globalstar's LEOs...no? If not, then whose? If so, why does Globalstar show no revenues?


rex
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No. of Recommendations: 3
Tinker and KingRex,
I continue to foolishly "quibble" G* being in the Bowling Alley because I think it will help me soldify when to corectly use the terminology. I think your analysis using subscriptions tells us how well G* is capturing the potential market share not what phase of the Technology Adoption Life Cycle (TALC)it is in. My placement of G* in the Bowling Alley is based on a marketing strategy that correctly positions itself to fully take advantage of the wireless industry tornado.Moore put a lot of emphasis on the Value Chain analysis to determine which phase and potential Gorilla-hood. Then we look at the metrics of earning and market share to see how well the company is progressing with its strategy.
Maybe it is because I first read Moore's "Inside the Tornado" and later the "Gorilla GAame" and "Living on the Fault Line", but I see Moore's analyses as part of his job to advise companies about perceiving their correct position within the Technology Adoption Life Cycle and thus providing a paradigm for analyzing their execution. The same ananlysis allows investors to judge the potential and execution of the company.
Moore's example of Documentum's early market beginnings and it's subsequent Bowling Alley progression is very clear. Documentum's first roll out was not a product that was inherently poised to capture the global market and could have easily got stuck in the chasm unless it adopted a bowling alley strategy to expand it's niche markets. Moore advises company to expand into niches where the competition is small so precious resources are not wasted on battling a Gorilla in that niche.
The very essence of G*'s service postions them to capture the global market. G* is not fighting any end users'paradigm shock. It is extending technology that is very desirable. Simply look at all the people using cellular phones and the internet.Thus G* can "skip" the earlier phases. In a sense G*'s early phase was setting up it's value chain of service providers andother partners. It has chosen to go into niches where there are no gorillas or kings to fight. Iridium's battle with cellular coupled with a choice of a less efficient and thus more costly technology led to its demise. As it captures the airline, autotelematics,SCADA, Emergency Services, and non-celllular voice markets it will become a Gorilla. Cellular will still dominate in certain areas but as G* approaches Main Street it will take some shares of the celllular business.
G* is will also be swept into a tornado by the industry. Moore often mentions that it is the industry's tornado status that is most important to correctly perceive. G*'s partnership with QCOM positions them to fully take advantage of 3G infrastructure changeover and be QCOM's satellite arm for all it's services that lie outside of cellular towers. Add to this the synergy of the next wave in Mobile commerce. G* correct market strategy was to position itself for this ride.
The low subscritpion rates should be a concern, but only if they persist to be low. Instead of actual subscriptions,I would look at growth both real and potential. G* has just set up it's gateways and launched it's final satellite in early 2000. So although the numbers are were low and missed expectations they are only a rear view look at merely the 1st quarter. To dwell on them would be misguided microanalysis. All the new announcements(i.e.IFN,etc.) suggest suggest the market potential to quickly reach full capacity is there. The overwhelming majority think CDMA is clearly the best technological communication protocol. The market is G*'s to lose. If G*'s MOU's(minutes of use) do not show rapid growth over the next two quater's then then that would signal that something is wrong that I can't see and I would lighten my position in G*. Then G* may die, but it died in the Bowling Alley.
However I don't think that will happen and it is more than wishful thinking to be rich. G* and their partners are opening more gateways and plan on launching more satellites in the near future. Do they seem concerned about the lack on MOU's not filling their capacity. Those are moves that suggest they are concerned about theri lack of capacity and a desire to meet the the sprialing demand. Their trimodal phones allow them to grow no matter how the GSM/CDMA battles fare.
If you see more partnerships in the airline and auto industry and the MOU's at least double each of the next quaters it will be a sure sign that G* is a winner.But I think there will be a big move in stock price before then.
Sincerely JimSteele

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No. of Recommendations: 4
There's the axiom that an investor should be able to briefly describe a company's business in one sentence. Similarly, I think we should be able to describe a company's proprietary architecture in one sentence, probably ten words or less. Considering all the recent discussion in the folder about Globalstar's bid to become a gorilla, what is its proprietary, open architecture?

--Mike Buckley
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Mike wrote;
"I think we should be able to describe a company's proprietary architecture in one sentence, probably ten words or less. Considering all the recent discussion in the folder about Globalstar's bid to become a gorilla, what is its proprietary, open architecture?"


G* operates low-earth orbit satellite-based digital telecommunications to serve every populated area of the world.

HoF
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I agree with Mike:

Microsoft - Window's API, Oracle - SQL, Intel - x86 instruction set, Qualcom - CDMA. If you can't name it easily, you cannot sell it. Gorilla's want to sell their open, proprietary architecture.

Paul
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As for the open-proprietary architecture: it is the myriad of gates and its software which enables voice and data communication irrespective of your position on the planet earth (including altitude). This functionality includes broadband Internet at 35,000 feet and moving at 700 m.p.h.

As for discontinuousness it is the partners investments into the gates and the specialized phones.

As for high-switching costs: critical mass of phones. Once Globalstar has the phones and customers in place no one is going to switch to a competing system.

It also helps that GSTRF is also continuous to the user once they invest in a GSTRF enabled phone. They keep their current calling plan.

Tinker
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HoF,

Thanks for the quick response! However, ... :)

G* operates low-earth orbit satellite-based digital telecommunications to serve every populated area of the world.

In my mind, that's a great description of what Globalstar does but I don't think it's a description of an architecture. To use examples of the latter, Qualcomm's innovations of CDMA comprise their proprietary, open architecture. Siebel Systems architecture is their softwaren licensed to businesses. Gemstar's proprietary architectures are their technology that make it easier to operate find, record and store a television program on a VCR, the EPG technology that makes it possible to determine, select and tune upcoming television programs, and the technology that makes it possible to securely download and read text on an e-book.

--Mike Buckley
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Great answer, Tinker!

it is the myriad of gates and its software which enables voice and data communication irrespective of your position on the planet earth (including altitude).

My follow-up question: is that architecture really proprietary? In other words, if a competitor decides to use the same technology, are its alternatives limited to using a competing technology or licensing the same technology from Globalstar?

--Mike Buckley
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No. of Recommendations: 4
Mike,

I believe it is easy to see G* has an open architecture if it is defined as an architecture that allows the system to be connected easily to devices and programs made by other manufacturers. QCOM's modems for SCADA, their trimodal phones to take advantage of all communication protocols, the French IFNS use to enable cell phones on flight,or IFN's airline services, and the list could go on and on.
Proprietary archictecture may create a technical argument. Anyone can launch a LEO satellite, and the CDMA patents are the property of QCOM. However G* has been given exclusive CDMA rights to QCOM's CDMA technology. Right now many companies are trying to find a way around QCOMs CDMA patents. Whether the competition succeeds or not QCOM's part ownership of G* insures that G* will stay ahead of the competition with all of QCOM's future advances in CDMA like HDR and share in QCOM's barriers to entry, be they patents or superb execution and superior R&D. I see the separation of QCOM (and the soon to be SPINCO)and G* as allowing each company to focus on their core competencies while working synergistically, developing a tremendous competitive advantage in creating the total wireless/anywhere product. It is a very capable version of an outsourcing business model. What better setup than to allow QCOM to focus on it technological leadership in CDMA while G* focuses on the Satellite business. (An example of QCOM's competitve advantage whether it is propietary or not can be seen by Nokia. Nokia refused to accept QCOM's CDMA patent. They tried to market their own chips that from surfacing reports did not compare in quality to QCOM's. Even the chip Gorilla Intel gave up realizing it can not compete with QCOMs core competency of increasingly superior CDMA technology.CDMA is hard to do.)

In addition G*'s first mover advantage places them years ahead of the competition that will enable them to solidify their value chain. All in all barriers to entry for any other competing company will be huge and thus I see G* reaping the rewards of gorilla status for many years with a longevity that will equal INTEL's gorilla status.
If for strict technical reasons you narrowly define barriers to entry as absolute ownership of the proprietary CDMA then you will only be able to call G* a king, King Kong. I think however such a narrow view would lead to underestimating the ultimately important principle of barriers to entry. Even Gorillas get disrupted or grow old. G* is postioned to more flexibly adapt to the evolving wireless world.
Whatever you wishI don't care, call it a Gorilla or call it King Kong, on Globalstar, I am going way way long. (Hey I'm rapping)

Sincerely, JimSteele
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No. of Recommendations: 4
Jim,

I hadn't remembered that Globalstar has exclusive rights to CDMA. Thanks for mentioning it.

In that light, I agree with your comment that in this specific case the distinction between royalty and primate is very small. The distinction becomes more important as we learn to apply it to other companies. Otherwise, we misapply it. That's why in my book I prefer to think of Globalstar as a royalty play that has exclusive rights to a proprietary, open architecture that is critical to their core operations. Appreciating it in that context separates it from the typical royalty play and at the same time shows that it isn't in control of its own proprietary architecture as all gorillas do.

For me, that last point about not owning the proprietary architecture can become important because only the owner wields the massive power over its value chain. Still, I suspect that just as JDSU might be the most powerful of royalty plays Globalstar might have the opportunity to become equally powerful, maybe moreso depending on the success of CDMA, the need for access to voice and data from virtually anywhere on the planet, and the relative cost at which that info can be accessed.

--Mike Buckley

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<< Globalstar might have the opportunity to become equally powerful, maybe moreso depending on the success of CDMA, the need for access to voice and data from virtually anywhere on the planet, and the relative cost at which that info can be accessed. >>


And don't forget those future space colonies and space stations...satellites broadcast in all directions, right?

C - CDMA
D - Does
M - Mars
A - Alright!


rex ;)
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No. of Recommendations: 1

I greatly appreciate your comments and all the others (TinkerShaw,Mike,HandoFate,etc.) that have participated in this thread. I post occassionally (but lurk alot)on the Gilder Technology Forum. As much as I highly value his technological expertise and illuminating paradigms, I found a need to apply Gorilla Analysis to these stocks to better determine when to invest in new technology. Many of Gilder's fans have been high on G* for for years. As much as I liked the G* gameplan I didn't think it's time had come yet to warrant the investmentuntil now. On the GTR it has been very difficult to get a Gorilla analysis thread going (although much of what I learned technologically came from there).
To be able to hone my Gorilla analytical skills and learn from all your question s and criticsms about applying Gorilla Analysis has been a great first 4 days on this board. You have all hooked me into visiting this board more often as well. Now I just need to find a way to tell my wife I can't see her so often.
Sincerely, JimSteele
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That's a pretty accurate summary of Globalstar, Mike. And you didn't even have to pony up the annual fee for the 8 page monthly Gilder reports. Of course for that fee, you could probably have picked up several thousand shares of GSTRF this past summer. <ggg>

If you think Qualcomm took a haircut with the 74% drop from $200 to $52, Globalstar investors were treated to a sporty 89% military buzz job this year. Having a sibling work for Iridium perhaps has tainted my view of the 'vision', but I certainly hope for all investors in both Globalstar and Qualcomm that the years of patience will pay off. It will take some time, but that's what investing is all about.

Tortoise BB
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Another low-earth orbit system that I had been following was Orbcomm, a subsidiary of Orbital Sciences. Alas, Orbcomm met with a fate similar to Iridium. Hope Globalstar fares better.

http://biz.yahoo.com/mf/000921/hill_000921.html

Long QCOM,

Hjelmerus
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Hjelmerus,
Orbcom was another LEO but not CDMA. Orbcom continually had technological problems whereas (other than a failed launch) G* has had only excellent reports. Orbcom was financially backed by a struggling Orbital Sciences, G* by CDMA powerhouse QCOM plus several others. Orbcom's non-CDMA technology severly limited the niches it could pursue. CDMA allows G* to pursue seveal niches and evolve into a universal product. I would not be surprised to see Orbcom's customers defect to G* and QCOM's SCADA services.

Sincerely, JimSteele
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No. of Recommendations: 1
JimSteele,

I certainly hope that you're right. However, I believe the fundamental problem with both Orbcomm and Iridium was an overly optimistic view of a satellite infrastructure of global, versus merely regional, reach and an overly pessimistic view of the pace of technological development in land-based wireless and wireline alternatives.

How many people need communication links from the middle of the Sahara, the polar regions and the middle of the Pacific? Most of the world's critical assets and population is heavily concentrated in the world's major metropolitan areas. Sure it would be terribly difficult to duplicate the global coverage of a Iridium, Orbcomm or Globalstar with land-based wireless and wireline systems, but perhaps all you need is are regional, or system of regional, wireless or wireless systems to cover 95% of the most valuable data/voice customers. Is it worth it to go after the other 90% of the earth's surface to cover the remaining 5% of revenues?

I am just making the numbers up, but I believe this is the crux of the fundamental market miscalculation of satellite system developers.

Long QCOM,

Hjelmerus
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hjelmerus,

I believe this is the crux of the fundamental market miscalculation of satellite system developers.

Time will tell whether or not it proves to be a miscalculation, but that is indeed the risk. My contention isn't that Iridium failed because of an inefficient spectrum as much as having to sink too many dollars into the system so long before any reasonable product adoption began.

Similarly, investors putting their dollars into Globalstar stock should be reminded of the reasons to wait until the tornado forms before investing. The tornado may never form. If it does form, the tornado may take a lot longer to form than anyone thinks. All of that adds up to a risk/reward scenario that has far greter risk than purist gorilla gamers want to accept, especially considering the amount of reward they can reap if they wait until safer times.

If you really want to invest in Globalstar now because you think the opportunity is terrific, an investment in Qualcomm is also an investment in Globalstar along with the risk of Globalstar not paying Qualcomm the $600 million that it owes.

--Mike Buckley

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Hjelmerus,
Many wary investors share that view but I think it is very limited. Do not think strictly in terms of population centers, but also in MOUs (minutes of use). First about 85% of the world is not covered by wireless. There are many smaller commuities, whether they be scattered throughout China, the Australian outback, Canada, much of South America or the mountainous regions of United States are currently uncovered by cellular. A fixed wireless satellite solution would be their most cost effective coverage. Travellers are very often outside of cellular especillay on aircraft or sea cruises, but also on automobile journeys to the mountains or deserts. Don't just think of vacationers but think of businessmen where information and timely response is vital and add to that the push for mobile commerce. InFLight Networks alone thinks they can use all of G*'s MOUs by itself. Add to that jobs like loggers, surveyors, highway and construction, Forest Service, oil riggers, fisherman and add to that emergency services, remote data retreival like Orbcom was foucsing on, Freight tracking with QCOMs Omnitracs,etc. CDMA and QCOM will help open up satellite's robust solutions in several areas.
You may be uncertain now but watch the next few quarters for increased MOUs and partnerships that will probaly add to the potential markets that G* can fulfill, markets that I have yet to mention or envision. If the following 12 months play out as I suspect and G* solidifies its Gorilla potential, there will be plenty of time to enjoy the ride.

Sincerely, JimSteele
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The other misunderstanding of Globalstar is that they don't need the world to sign on to be enormously profitable. They will break even at between 500,000 and 1 million subscribers and earn billions in profits with 2-5 million people out of the entire world population.

In addition, sometime this decade, I do foresee GSTRF service becoming so ubiquitous that you won't even know you have it. It will become a must have, too much of a nuisance not to ahve feature for normal cell phone plans. When your out of range your phone will automatically switch to satellite. You probably won't even be aware of it. But GSTRF will be there. You will never move out of range again. I could foresee a few hundred million or more people involved with this sort of cell phone extension service.

But just to finish following up on Mr. Steele's last post. 20 miles outside of Minneapolis, MN, on my way to some smaller town courthouses, my AT&T phone would clog out and I'd be stuck with nothing until I reached the town I needed to go to. My cell phone was such a necessity that I took it into the bathroom with me. Believe me, I'd have bought a car kit. And so would a good majority of travelling salesmen, truckers, etc., who desire to stay in touch both with data and voice whereever they are.

So it is a fallacy that no market exists for Globalstar. What is not a fallacy, as Mike points out, is that the financial realities facing the large upfront expense mandate that a satellite company move quickly through the chasm in order to not go bankrupt. This is the point GSTRF is at now. It is looking like it will make it.

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Excellent thread you guys have going here. Thank you for that. Very entertaining and informative.

I wonder if you would mind if I took a moment to talk about ways to invest in the possibilities for Globalstar. After all... one key thing is the actual stock and the other key thing is exactly how to make your investment to get a desired return.

I see both Jim and Tinker are buying LEAPS. Also I noticed Lucid Dreamer asked a question about LEAPS so I'm hoping this is not too far off topic.

Tinker (I think) said he has the January 2003 LEAPS at a strike price of $15. I also believe he said he bought them at around $400 a contract. They are still selling at right around that price. I wonder if you guys ever considered selling a LEAP and buying a lower strike price one at the same time. For instance you can buy the $5 strike price for $600 a contract. You can sell a $15 strike price one at the same time for around $400 a contract. This makes your net cost $200 per contract. Let's say you have $20,000 to invest. You buy and sell 100 contracts. If the stock price moves to $15 you would make $10 a share or $1000 a contract. So you would have $100,000 from the trade. I believe this is a 4 bagger from what I recall of the famous bagger discussion at "that French board". Or is it a 5 bagger? Seems like a nice risk to reward ratio either way. Alternatively, let's say the stock stays around $9. The $15 contract you sold becomes steadily more worthless as the time value runs out and you just keep the money. If you execute the $5 contract with the stock at $9 and buy the stock for $5 as your contract allows you still make $4 a share as the stock has a market value of $9. So you would get back $40000 on your $20,000. The only way you would lose all your money is if the stock goes below $5 and stays there. Your breakeven is if the stock hits January 2003 at a price of $7. That's not counting the time value of money.
So... is this math correct? I recently read Roth's book on LEAPS and frankly I'm really surprised we don't talk about them more on these boards. LEAPS are not like regular options. You can be along term buy and holder with LEAPS. In fact I think the 2004 LEAPS should be out soon. If you buy them it gives you 39 months to be right.
Here's the quotes on GSTRF options and LEAPS.
http://quote.cboe.com/QuoteTable.asp?TICKER=GSTRF&ALL=2

Please... please... please! I beg of you . If you have no experience with options don't do this strategy. I post this for discussion purposes. I'd be happy to discuss it though with anyone!

It's one thing to be right and it's another thing to make actual money from being right.
Best of luck.
Glenn
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Glenn,

You can be along term buy and holder with LEAPS. In fact I think the 2004 LEAPS should be out soon. If you buy them it gives you 39 months to be right.

That depends on your frame of reference. Though I own Qualcom LEAPS, I don't view the tactic as a LTB&H tactic because it can't be held for decades. And if the LEAPS aren't in a tax-deferred account, the consequences of paying taxes eats greatly into the returns. Maybe the best way to describe it is medium-term B&H.

If the underlying stock doesn't do well, you'll have less than the life of the contract to be right, probably about 9 months less. That's because the time value of the LEAPS will begin eroding fairly rapidly.

--Mike Buckley
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The other misunderstanding of Globalstar is that they don't need the world to sign on to be enormously profitable. They will break even at between 500,000 and 1 million subscribers and earn billions in profits with 2-5 million people out of the entire world population.

That is really important. 1 million subscribers is tiny - its just about the break even for most UMTS networks who expect to get 5-10 million subs.

If G* satellites can be upgraded to support 3G CDMA of some kind without hiring a space shuttle then G* has the potential to upstage every terrestrial network. OTOH if you have to do a hardware upgrade then G* has probably got a horrible upgrade path and thus could easily be marginalized - after all you want to be very sure that what you put up in space does NOT need a ahrdware change to fix bugs or improve services.

But just to finish following up on Mr. Steele's last post. 20 miles outside of Minneapolis, MN, on my way to some smaller town courthouses, my AT&T phone would clog out and I'd be stuck with nothing until I reached the town I needed to go to.

Interesting - this seems to be a US problem and a common one at that.

[Digression: Without wishing to cast aspersions on CDMA, my US friends who use Sprint PCS (i.e CDMA) seem to have more problems that those who use Pac Bell (i.e GSM) - but this is a trivial sample limited to Silicon Valley and San Diego. It could be more that the competiton between TDMA, CDMA, GSM and Nextel just reduces the flexibility to provide good coverage]

In Europe I have yet to lose signal except in the metro - it even works 3842 metres up at the Aiguille du Midi on Mont Blanc (I checked - reception was patchy inside the buiding but OK outside) and in relatively backward nations such as Slovakia. Interesting note - while returning from Slovakia to Vienna Airport it took a long while for my phone to lose the Slovak Signal and roam back to an Austrian carrier. This may explain why - Europe is just MUCH smaller and more densly populated than the US - but it also means that G* is going to have a hard time competeing with tower based infrastructures

My cell phone was such a necessity that I took it into the bathroom with me. And isn't it embarassing when it rings and you are occupied (as it were)....

DD
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Interesting note - while returning from Slovakia to Vienna Airport it took a long while for my phone to lose the Slovak Signal and roam back to an Austrian carrier. This may explain why - Europe is just MUCH smaller and more densly populated than the US - but it also means that G* is going to have a hard time competeing with tower based infrastructures

Don't forget that the Vienna airport is about the mid point between the city of Vienna and the city of Bratislava where the Slovak signal is. I play golf on the border every now and then which has me making that drive with my phone in the car. I've experienced the same thing when using the roaming function. If your phone has the option to chose a network, you could easily have chosen one of the Austrian networks at the airport. Roaming will pick up whatever signal is coming in strong and available at the moment.

BB
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Dirty Dingus says
<<<In Europe I have yet to lose signal except in the metro - it even works 3842 metres up at the Aiguille du Midi on Mont Blanc (I checked - reception was patchy inside the buiding but OK outside)>>>

Say Dingus...
I don't know about the rest of these guys but your willingness to climb out on a ledge of a building 10,000 feet up just to check phone reception for your buddies here at the Fool really impressed the hell out of me. I know a lot of us make small sacrifices to contribute but you should get some kind of special recognition for this. Perhaps one of those nice Motley Fool caps to wear out onto those cold ledges.
Thanks
Glenn
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Hi Mike!
Thanks for responding to my post! Here's what you said:

<<<That depends on your frame of reference. Though I own Qualcom LEAPS, I don't view the tactic as a LTB&H tactic because it can't be held for decades. And if the LEAPS aren't in a tax-deferred account, the consequences of paying taxes eats greatly into the returns. Maybe the best way to describe it is medium-term B&H.

If the underlying stock doesn't do well, you'll have less than the life of the contract to be right, probably about 9 months less. That's because the time value of the LEAPS will begin eroding fairly rapidly.>>>

Here's my response:
When I said you could use this technique for long term buy and hold I meant that you could actually exercise the contract. I don't know what your intention is with your QCOM LEAPS. I think Tinker mentioned earlier in this thread that he intends to exercise his option and keep his GSTRF shares. I also am not sure what Jim Steele's intention is with his LEAPS on GSTRF.
Anyway the short version is:
1. Pick a company thats been beaten severely about the head and face for no good reason. If it's a Gorilla or potential Gorilla... so much the better. QCOM and GSTRF come to mind. Or actually a SEBL or NTAP during the macro sell-off we had in April when SEBL dipped to about $80 (pre-split) and NTAP hit the 40's. I mention SEBL because I know you have long championed that company here and at SI.
2. Use the leverage in LEAPS to control more shares than you could simply by buying shares outright.
3. Wait. If that doesn't work... wait some more.
4.If a company explodes straight out of the gate perhaps you will want to sell some or all of your LEAPS and pay the tax bite. Tinker did this I believe on his much ballyhooed RMBS LEAP purchase. You can sell the LEAPS anywhere along the path. You will have to pay taxes on your profit. If you hold and exercise their is no tax bite. Not the way I understand it. The cost of the LEAP contract and the cost of the stock purchase both get rolled together and become your basis in the stock. You will need the money to exercise though. Keep that in mind.

I think it was Uncle Frank on the SI G&K thread that was talking about trading in stock for LEAPS during a huge macro downturn. Was it? Do you recall? This works if the market takes a sudden downturn and you end up underwater on a stock you still really like. Sell the stock. This gives you a tax loss. Now buy the LEAP. This increases your leverage and when (and if) the company recovers you amplify your profits quite a bit.

One more thing Mike. Why do you say 9 months or less? I agree that you start to lose time value. It gradually erodes over the course of the contract. But why nine months? For this to work at some point during the contract the market has to realize that they have made a grave mistake in regard to company XYZ and the price has to go up. This is what we are all looking for with GSTRF and with QCOM. Why does the nine months matter particularly? I'm curious why you pick nine months. The time value erodes from the moment you buy them till they expire. Why single out nine months? Perhaps if your wife were pregnant...
Thanks again for responding.
Glenn

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It looks like all the partners believe in G* as new funding "guarantees" the build out.

09/25 09:05 GLOBALSTAR <GSTRF.O> SAYS IT GETS $56 MLN IN FURTHER EQUITY
INVESTMENTS


NEW YORK, Sept 25 (Reuters) - Satellite telecommunications firm Globalstar Telecommunications Ltd. <GSTRF.O> said on Monday five of its founding partners will provide it with further equity financing.

Under the terms of their agreements, Loral Space & Communications Ltd. <LOR.N>, Vodafone Group Plc. <VOD.L>, Qualcomm Inc. <QCOM.O>, Elsacom, and a France Telecom/Alcatel partnership will purchase 5.2 million shares of common stock of Globalstar for $56 million. Loral will purchase $12 million of this total.

A sixth partner, ChinaSat, has indicated an intent to purchase an additional $12 million of Globalstar shares upon receipt of government approval.

The share purchases are based on a price of $10.7125 per share. The transaction is expected to close by September 29. New York-based Globalstar said it will use the proceeds for general corporate purposes including capital expenditures, marketing and distribution of phones and services, and interest expense. Shares of Globalstar rose 5/16 to $10 in early Monday morning Nasdaq trading. The stock's 52-week range is between $5-13/16 and $53-3/4.


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Glenn,

Thank goodness my wife isn't pregnant! :)

I don't pretend to understand LEAPS or options enough to understand why the time value apparently tends to erode rather quickly during the last nine months of a LEAPS contract. I get that information from people who have lots of anecdotal experience in their personal accounts. While you're of course right that the time value begins to erode from day one, when a stock such as Qualcomm explodes 500% as it did in the last 1 1/2 years, the intrinsic value of the LEAPS increase so much that we really don't care if all of the time value has eroded. That's why it's really only a concern when a stock doesn't perform as we hope.

A purchase of the LEAPS with the intention of exercising the contract makes sense within the LTB&H scheme, but as a technicality I content that the LTB&H portion of the tactic is coming up with the funds needed to exercise (buy the common stock.)

You remember correctly about Frank often mentioning the tactic of using LEAPS to get leverage on dips in the common stock. He was a huge fan of Roth's Leaps Substitution Therapy until tech stocks falthered widely last spring. While he still appreciates the upside potential, he now also has a better appreciation for the fact that leverage works in both directions.

There are a lot of ways to make money in the stock market ... and lose it. Whereas gorilla gaming focuses on limiting risk while increasing opportunity for reward, I believe LEAPS adds both risk and reward but not the same reward comensurate with the risk. That's why I use LEAPS relatively sparingly and only with one company whose long-term fundamentals justify it in my mind.

--Mike Buckley
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DirtyDingus,
Have no fear about upgrades! G* has what's referred to as "Bent pipe" technology which basically just amplifies and redirects the incoming message. All the upgrades happen on the ground (something that also hurt Iridium because their upgrades basically required a new satellite.)The G* and QCOM game plan was to initially have G* provide mostly voice, work out the bugs, then upgrade to better accommodate data with HDR and whatever 3G innovations surface. These companies had excellent vision and execution.

JimSteele

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djackn writes:
The two primary factors working against G* are the cost of the service and the [spectacularly negative] track records of previous attempts by other companies


The link below is an article that talks about Inmarsat as being profitable and successful in several niche markets. The article's author seems to be ignorant of the value-added offered by CDMA/3G. I guess you would say that 3G services offered by G* will render Inmarsat obsolete? If that is the case, shouldn't the Inmarsat customer base be G*'s target for going after the niche markets? Does anybody have data on how many Inmarsat customers have switched to G*?
http://www.chicagotribune.com/tech/news/article/0,2669,ART-47100,FF.html
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Hello,

Do you know the story of Iridium?
Globalstar could have the same fate. ;-{
Everybody has to do his own DD before buying such a speculative stock.

Fool on,
Efti
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Do you know the story of Iridium?
Globalstar could have the same fate. ;-{
Everybody has to do his own DD before buying such a speculative stock.


Anyone doing their homework will tell you Globalstar is not Iridium. Globalstar is not Iridium. Anymore than Palm is Newton.

Do your DD. It is up to you to decide if GSTRF is a winner or not. But one thing I am confident that you will conclude is that Globalstar is not Iridium.

Tinker

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I agree with shellfish. QCOM is the "picks and shovels" needed for GSTRF's buildout. Why wade into the thickets of pre-chasm competition when you can own the underlying IP that makes 3G successful?
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. QCOM is the "picks and shovels" needed for GSTRF's buildout. Why wade into the thickets of pre-chasm competition when you can own the underlying IP that makes 3G successful?


In 2 words: upside potential

I fully concur that QCOM has a bright future. But I don't think it will be a (say) 10-bagger in the next 2-3 years.

On the other hand, if GSTRF survives, it could conceivably...even realistically... bring 10-fold returns within 2 years.

Yes....this is a high-risk play. But I, for one, like to have a couple very risky bets in my portfolio.

GSTRF is one my current, high-stakes gambles.

Alan
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Neuronnorth,
I would agree if G* was in a pre-chasm battle. However I contend it is in the Bowling Alley and use value chain analyses to support that cotention. (see post http://boards.fool.com/Message.asp?mid=13355723 )

Sincerely JimSteele
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Tinker,

You're a bright guy, and I follow you analysis of companies closely. However, you're only presenting the bright side of LEAPS. What happens if you're dead wrong about Globalstar, and its stock price languishes in the $10 range past your LEAP expiration date? Wouldn't you lose your entire $21,000 investment? On the other hand, if I owned the stock, wouldn't I still have my $45,000 original investment.

If Global star survives, but it takes longer than expected to cross the chasm, couldn't you miss the show entirely, and lose all your capital?

Is this not true?
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What happens if you're dead wrong about Globalstar, and its stock price languishes in the $10 range past your LEAP expiration date? Wouldn't you lose your entire $21,000 investment? On the other hand, if I owned the stock, wouldn't I still have my $45,000 original investment

Mhm your missing two points about this strategy with GSTRF. And those points are (1) the stock is so cheap because many people fear that GSTRF will go bankrupt within the next 12 months. If this is the case I will lose all my money, and the owner of the actual shares will lose all their money.

But, I'll lose less money as I have minimized my capital exposure with LEAPS.

(2) If GSTRF does not go bankrupt, and the fear subsides the stock will go up, possibly in an irrational frenzy for awhile. All well before 2003.

(3) Finally, if I'm totally wrong, and things don't begin to improve around early 2002, either I'll sell the LEAPS there and then, or I'll just hold on.

But the most likely by far two outcomes with GSTRF are (1) bankrupt, everyone loses, or (2)the stock returns to reasonable valuations, everyone wins. This will happen well before 2003. By 2003, if GSTRF hasn't turned into a thriving little enterprise, it never will. This is not a company that has time on its hands. It has about $500 million a year in operating expenses it must meet. Its partners and the markets are not gonna keep financing it year after year. It either will begin to work in the next 12-18 months or it goes under.

Thus the rationale for LEAPS in this particular case.

Tinker
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Jim,

I agree with you, and as you say the price risk/reward is so good at this point it could be worth a nibble, with more bites later should it near the chasm.

craig
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