Enron Corp. - University of California | Office of The President

Broadband Services
In our view, Enron Broadband Services is the key new value creation driver for the
company. Management revealed that since the beginning of the year, EBS has made
over 50 standardized transactions with 17 different counterparties .... [T]hese
numbers are ahead of our expectations. In our view, these numbers validate the
credibility in this important new market, whose ultimate value could exceed the
energy commodity market within 5 years. We expect transactions to pick up steam
from this level over the next 6-12 months.
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On the content delivery side (the other half of Enron's bandwidth strategy), Enron
executed $19 million in content delivery service contracts in the quarter, including
a 20-year exclusive agreement with Blockbuster to stream on-demand movies over
Enron's network.... [W]e consider this a marquee contract, highlighting the
viability of Enron's content delivery platform, and, incidentally we think this will
attract new investors to Enron's stock. As part of the effort in content delivery,
Enron continues the development of its own network. To date, 5,325 miles of
Enron's fiber-optic network are complete, with another 9,175 miles expected to be
finished by the end of the year.
250. On 7/24 and 7/25/00, Merrill Lynch issued reports on Enron. They rated Enron a
"Buy" with a $95 price target and increased Enron's forecasted 00 and 01 EPS to $1.40 and $1.61
with an 18% five-year EPS growth rate for Enron. They also stated:
• We are reiterating our Buy opinions on Enron based on our $95 price
objective ....
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• We think ENE will continue to experience strong growth in its existing core
businesses, while the seeds have been planted for potentially hyper-growth stemming
from its Enron Broadband Services unit.
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• ENE posted 2Q'00 operating EPS of $0.34 versus $0.27 last year .... We were
looking for $0.32/sh ....
• Going forward, '00E EPS moves from $1.37 to $1.40 and '01 EPS moves
from $1.55 to $1.61.
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