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       from Gilder Publishing
         THE FRIDAY LETTER
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Issue 30.0/October 19, 2001

HEADLINES:

* The Week/ GX's sell-by date
* Friday Feature/ Go Googly
* Friday Bonus/ Free Words
* Friday Bonus 2/ Internet Taxation
* Friday Bonus 3/ Network Centric Warfare
* Poll Question/ Ground Troops?
* Readings
* Conference Calendar
* Subscribe / Unsubscribe Information

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THE WEEK/ GX's sell-by date

"Global Crossing probably has two years left to prove that it commands a
potentially thriving business. The company now has just short of $8
billion in debt and $2.4 billion in cash, including the $1.7 billion line
of credit the company drew down this summer. In this, the last year of the
network build-out, it will spend another $1 billion on cap-ex in the
fourth quarter, plus make interest payments of approximately $150 million.
Assuming the worst possible case, zero EBITDA in the fourth quarter, and
no IRU swaps at all to lay off some of the cap-ex, GX would end the year
with $1.25 billion in cash.

"With completion of the network, next year's cap-ex budget drops some 70
percent to only $1.25 billion, which is approximately equal to cash on
hand at the beginning of the year, in this worst case scenario. But unlike
this year's cap-ex budget, much of next year's is variable, consisting of
the labor and equipment needed to light up lambda capacity for immediate
sale, or to provide Internet services. No sales, no cap-ex, or at least a
lot less. In addition, the company needs to come up with $600 million in
interest payments. How daunting is this?

"Last year, recurring adjusted EBITDA was $1.5 billion. In the first half
of 2001 alone, GX sold $1.1 billion in IRUs at margins around 70 percent.
Even in the disastrous third quarter, GX sold $250 million in IRUs. Next
year it could make its interest payments and get through the year even if
the entire business -- IRUs and all -- should shrink by 75 percent in the
face of still booming Internet traffic. Forbes and the market are assuming
World War III. But with World War III, Global Crossing could cut out half
its cap-ex and pile up cash by selling assets. Planned asset sales,
including IPC and Global Marine, the undersea cable laying group, for
which there are already buyers lining up, should produce somewhere between
$750 million and $1 billion, leaving GX's cash position at the beginning
of 2003 better than 2002.

"Ultimately, for GX to succeed, IRU sales must come back and the global
Internet services business must take off, with GX winning contracts from
Forbes 1,000 customers as the primary or secondary carrier, not just a few
goodwill gambits tossed to the new kid on the block.  Grim as it seems
now, the IRU sales side is the most likely place for good news next year,
in part because the Internet business, while growing 100 percent a year is
still relatively small. Expecting total traffic growth of 75 percent this
year, the world's carriers built their inventories accordingly a year or
more ago. The recession intervened, overall traffic growth was closer to
50 percent, inventories clogged, carriers did everything possible to cut
costs, and IRU sales fell off a cliff.

"Today, however, most major carriers are running their networks at 50
percent of capacity or more.  This rate is much too high for comfort for
the bursty Internet data that is the target of Global Crossing's IP
network. The Internet today is around 20 percent of the total growing four
times faster than the rest of the business.  But in the telopolies the
bandwidth buyers are still playing chicken, looking for bargains from next
generation carrier sellers desperate for revenue.  Sellers, including GX
last quarter, have begun to say no. Even with "modest" 50 percent a year
traffic growth, the sellers that survive must eventually have their way,
almost certainly before the end of next year."

From the Gilder Technology Report, posted today for subscribers at
http://www.gildertech.com/
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FRIDAY FEATURE/ Eric Schmidt Goes Googly

Eric Schmidt is both a lord of the geeks and one of our favorite
all-around observers of the high-tech scene. Silicon Valley pedigrees
don't get any bluer-chip: Bell Labs, Xerox's legendary PARC research
center, Sun Microsystems, then chairman and (until earlier this year) CEO
of networking software stalwart Novell. This summer he piled on two more
titles: chairman and CEO of Google, the upstart (and current runaway
leader) Internet search engine. And he still finds time to think high
thoughts, about everything from the architecture of the Net to the
lobbying game in Washington. American Spectator caught up with him in
August.
Go to http://www.gilder.com/ to read the interview

~~~~~~~~~~
FRIDAY BONUS/ Free Words
The Internet is certainly a wealth of information, but would you believe
12 volumes, more than half-million definitions, 22 million searchable
words? All available online and for free! Yes, free. Well believe it. Just
point your browsers to http://www.global-language.com/century/ to view
"The Century Dictionary," a century-old language resource that is now the
largest, freely available dictionary on the World Wide Web. In order to
view the pages, you'll need to download the DjVu plug-in by clicking on
the icon in the bottom left-hand menu bar, or just go to
http://www.lizardtech.com/ Once installed, you can view actual pages of
the dictionary, search, scroll, scale, do virtually everything you could
want but actually feel the parchment. DjVu, a product of LizardTech
(http://www.lizrdtech), is an amazingly flexible image compression
technology developed at AT&T Labs that allows very high quality page
images to be compressed to a size suitable for delivery over the Internet.
Well worth checking out.
~~~~~~~~~~
FRIDAY BONUS 2/ Internet Taxation

With the Senate failing to act on extending the Internet tax moratorium
and lawmakers not returning to session before its October 21 expiration,
the moratorium on new and discriminatory Internet taxes and the ban on
Internet access taxes will lapse, opening the door to "economic mischief"
by local and state taxing authorities and implanting further uncertainty
in the already crippled technology market.

If you believe that the net should remain free, head over to the Center
for Individual Freedom's Internet Taxation section,
http://www.cfif.org/legis/federal/internet/tax/index.html, and read up on
the fight against Internet taxation.
~~~~~~~~~~
FRIDAY BONUS 3/ Network Centric Warfare

"We must build forces that draw upon the revolutionary advances in the
technology of war... one that relies ore heavily on stealth, precision
weaponry, and information technologies."
--George W. Bush, Commander in Chief

To that end, the Department of Defense filed a report to Congress on
"Network Centric Warfare." http://www.c3i.osd.mil/NCW/ Included in the
report is the book, "Understanding Information Warfare" by David S.
Alberts, John J. Garstka, Richard E. Hayes and David A. Signori --
available for download in PDF format, free.

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GET THE GILDER TECHNOLOGY REPORT
Monthly, From the Heart of the Telecosm
http://www.gildertech.com/
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Electrons Matter
http://www.digitalpowerreport.com/
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http://www.dynamicsilicon.com/
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~~~~~~~~~~~~
Gilder.com Poll Results

Question: Will mobile Internet overtake fixed-line Internet?
Results: 30% Yes; 30% No;
40% Doesn't matter, it's the information stupid

Up Next: Should the US send ground troops into Afghanistan?
Weigh in now at http://www.gilder.com/
~~~~~~~~~~~~
READINGS

Global Crossing Talks Debt Swap
http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT32WTK5TSC

Sun Micro smiles on auctions
http://globalarchive.ft.com/globalarchive/article.html?id=011015000134

Williams Deploys Corvis
http://www.lightreading.com/document.asp?doc_id=8920

Concert Plays Its Last Note
http://www.internetweek.com/story/INW20011017S0001

Attractive Telecoms?
http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT36CMA1TSC

China's Big Three in Telecom
http://globalarchive.ft.com/globalarchive/article.html?id=011017002045

Intel Calls Bottom
http://www.nytimes.com/2001/10/17/technology/17CHIP.html
(Registration Required)

Apple Exceeds
http://www.nytimes.com/2001/10/18/technology/18APPL.html
(Registration Required)

Nextwave Deadline
http://www.nytimes.com/2001/10/19/technology/19SPEC.html
(Registration Required)

Handspring's Treo
http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT34MNH7TSC

Sprint: GPS Cell Phones
http://news.cnet.com/news/0-1004-200-7363200.html?tag=mn_hd

Motorola: Gas Powered Cell Phones
http://www.zdnet.com/zdnn/stories/news/0%2C4586%2C5097726%2C00.html

Power Saving Chips
http://www.nytimes.com/2001/10/16/technology/16CHIP.html
(Registration Required)

How Bad Software Pays Dividends
http://www.cio.com/archive/101501/wasting.html

Windows XP May Spark Ultimate Battle to Own the Net
http://news.cnet.com/news/0-1003-201-7540650-0.html

Technology on the Molecular Scale
http://www.nytimes.com/2001/10/18/science/18TRAN.html
(Registration Required)

Physicists: Redefining Reality
http://www.nytimes.com/2001/10/16/science/physical/16ESSA.html
(Registration Required)

Investigating Online Music
http://www.nytimes.com/2001/10/16/technology/16MUSI.html
(Registration Required)

RIAA Wants To Hack Your PC
http://wired.com/news/conflict/0,2100,47552,00.html

EU "Punishes Efficiency"
http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT3BG4U8TSC

FTC Shuts Down Pop-Up Trapping Sites
http://news.cnet.com/news/0-1005-200-7371736.html?tag=mn_hd

E-mail Turns 30
http://dailynews.yahoo.com/h/nm/20011001/tc/tech_email_anniversary_dc_1.html

Annual Oregon Salmon Run Is Strongest Since 1938
http://www.cnn.com/2001/TECH/science/10/18/many.salmon.ap/index.html

-=-=-=-=-=-=-=-=-=-==-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-
GILDER CONFERENCE CALENDAR

**Telecosm Conference Rescheduled**

Telecosm 2001: Charge of the Light Brigade
November 4-6, 2001 at The Fairmont * San Francisco, CA
For more details, visit http://www.gilder.com/telecosm

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FRIDAY LETTER STAFF
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Dave Dortman (ddortman@gilder.com)
John Hammill (jhammill@gilder.com)

E-Mail Wizard Bob Sauve (rsauve@gilder.com)

CONTRIBUTORS THIS WEEK: John Hammill, Dave Dortman, Spencer Reiss, Sandy
Fleischmann, Aaron Charlwood, filterdblue

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