Internet Financial Connection:
Galileo Intl. (GLC)
August 26, 1998
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Eric McKissack of Ariel Capital Management provides the
following stock ideas on Galileo International (GLC 37
1/2). Below is the write up.
Galileo International is a leading provider of electronic
global distribution services for the travel industry,
utilizing a computerized reservation system, primarily
plane tickets for airlines. Their services include the
ability to access schedule and fare information, book
reservations and issue tickets.
Eric McKissack of Ariel Capital Management finds the
shares of Galileo very attractive. He particularly likes
Galileo because, "it is a very profitable company
that throws off a lot of free cash flow and is a leader
in their field." Their competitors include, SABRE
Group Holdings, Amadeus and Worldspan. Galileo and SABRE
are the primary competitors in this industry and both
have a very high market share.
Galileo has developed relationships with many of the
emerging players in the Internet area
Questions have been raised about the bookings of
reservations over the Internet and the effect that would
have with Galileo. Eric modestly points out that even
when flight reservations are made over the Internet, a
computerized reservation system must be used (unless the
customer books directly with the airline) in order to
provide flight and scheduling information. Galileo has
developed relationships with many of the emerging players
in the Internet area. "There are high barriers to
enter and develop a computerized reservation system...
Galileo has developed and created an intricate computer
reservation system... They have key relationships with
many airline carriers," says Eric. United Air Lines
and KLM own 32% and 10% (respectively) of Galileo.
He estimates Galileo will earn $1.85 in 1998 and $2.14 in
1999. Eric views the recent pullback in their stock as a
very attractive entry point. He thinks their shares can
hit the high 40's sometime over the next year and the low
60's looking out longer term.
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