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I posted this reply to someone's message on the GX board and thought it might be of interest to people on the TCM board:

GX also has an undersea cable laying operation which they own. GX lays its own cables. I don't know about manufacturing. What things does TyCom manufacture? Do they make cable? I doubt it.

You're quite right regarding Global Crossing's cable maintance and installation operation (named Global Marine Systems). They have about 20 ships of various design that they leased out or use for their own subsea cable construction and maintenance projects.

You are incorrect, however, regarding TyCom's manufacturing and installation capability:
TyCom has approximately 40% of the world's subsea fiber optic cable manufacturing capacity. Some background: Tyco bought what is now TyCom from AT&T back in the mid-90s. At that time I think the unit was called AT&T Submarine Systems Installation (SSI). In any case, the unit was combined with Tyco's own cable manufacturing capability to form what is now TyCom Ltd. From SEC filings, the company controls somewhere around 60,000 km/yr worth of cable manufacturing capacity. So as you can see, this is a capability that Global Crossing lacks.

Global Crossing focuses on operations instead of manufacturing and offers a combined terrestrial/subsea global telecommunications solution. TyCom, on the other hand, is an integrated manufacturing / installation / operations company with a focus on global IRU and fiber pair sales, but only on subsea routes. They are not terrestrially focused. There's a rumor that this will change in the future, however, they're expertise is on the subsea portion of the bandwidth equation. This is another facet where Global Crossing is much different than TyCom. Global Crossing focuses on value-added retail sales. TyCom is more of a wholesale non-differentiated product seller. They're bet is on superior gross margins due to their unique integrated manufacturing base.

TyCom built approximately half of all subsea cables in existence. Their primary competitor is Alcatel, which built the majority of the other half of cables. The third, and distant, competitor is KDD, according to the propaganda I've read.

Personally, I'd feel more comfortable sinking money into TCM than in GX. The reasons are as follows:

1) TyCom has a much lower level of debt than Global Crossing. Global Crossing carries with it significant financial distress risk if it misses numbers and requires additional capital.

2) If all else fails and the world market for subsea IRUs goes bust, TyCom still has its manufacturing and installation business to fall back on. As I said before, this business is probably worth $11 or $12 per share on its own. I arrived at this value by looking at the company's reported net income before it diversified into cable operations (in the SEC filings) and slapping a slightly below market PE multiple on it. Not scientific, but effective.

3) TyCom is supported by the mother ship: Tyco. The parent company is an implicit guarantor of TyCom's debt, if for no other reason than Tyco is TyCom's biggest creditor (a la the strategy GE uses with its subsidiaries).

Thoughts on this view would be appreciated,

N.
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