Mr. Pink, I can understand that it reminds you of DBCC. However, this case is differant. For one, management here is selling a small fraction of their holdings. They did so in conjunction with some options that came available to them due to a clause on their employee options agreements which allowed them to exercise on some additional options because of the IPO. I don't blame them Most people on yahoo sold out between 28-35 on IPO speculation. Management sold towards the low end. They obviously were not in collusion on the Softbank leak either or they would have sold at $35. Howard Jonas redeems about 25,ooo shares a month for donation to charity. The rest of the people have to live. Many of them are paid less than 100,000 per year plus bonuses. Anyway, when management seels a small % pf their holdings, I am not usually concerned.
Now, as to the prepaid margins. I have to differ with you. Wholesale and resold minutes carries a very low margin. However prepaid cards are like gravy when it comes to margins. The reason is because the money is paid up front. It is not booked by trhe company until actually used. Therefore they can invest it in repos or whatever for a higer return before booking. Additionally because the calls are mostly ethnicly genetrated. They actually cross IDT's system during non peak times when the capacity us underutilyed anyway. The only reason marhins deteriated a few q's ago in this area was because IDT had purchased a company who was supposed to have had long term contracts in place for ld service. These contrats expired prematurely forcing the company to buy ld at spot or turn away customers. That problem has since been straightened out and the margins expanded in the last Q and will expand even more.
Here is a quote from their last Q which says it better than I can.
<RETAIL
IDT's retail division continues to sustain very strong sales
levels, validating our long-term positive views of this market. In
particular, the Company's prepaid business continues to be a strong
source of high margin business, allowing the Company to augment its
carrier business with higher-margin retail traffic. In addition,
prepaid calling allows for an efficient and targeted way to build
traffic on specific routes where IDT maintains and builds network
facilities, through marketing "destination-specific" cards.>
Additionally, I have spoken with Chris Edgecomb CEO of STRX. He confirms trhat this business is THE BEST when it comes to margins.
Last Q after the previosu Q's problems were solved with favorable long tem contracts on bulk ld rates. IDT's margins expanded a full 120 basis points in this area.
See:
<For the third quarter, IDT's retail division posted a record
$98.8 million in revenues. For the quarter, prepaid calling revenue
was up an impressive 255.6% over the same period last year, and a
strong 11.5% quarter-over-quarter. With the expansion of the Company's
network facilities, gross margins on IDT-branded calling cards
increased by 120 basis points during the third quarter, to 26.9% for
Q3, up from 25.7% during the second quarter of this year.>
Please let me know if I can provide anything further for you here. Not trying to start any kind of war of wills. Just simply hoping for a friendly debate on any issues you may have pause about. |
