From CBSMarketwatch and Wallstreet City
Net phones still ringing
You would've thought, with all the hype about Internet telephones a couple of
years ago, we'd all be making our calls over the 'Net these days. You may not
be yet, but there is a dedicated core of people who are. And maybe America
Online's (AOL: news, msgs) Midas touch is what's needed to bring the
concept into the mainstream.
Here's a company that's both the backbone and the phone company.
IDT Corp (IDT: news, msgs) owns or leases lines and switches both here and
in Europe. And it's also a majority owner of Net2Phone (NTOP: news, msgs),
which went public last week.
And here's the argument from Chris Connor, of Wall Street City. IDT gets a
cut of Net2Phone's business. And Net2Phone has a deal to embed its software
exclusively into new versions of the browser of America Online's Netscape
Communications. The company also signed a deal with a subsidiary of AOL to
provide Internet telephony to its members. Connor says the AOL deal will
bring Net2Phone's products to the consumer more quickly than it ever could
have done on its own. And with IDT as its parent, it enjoys something its
competition doesn't. It can manage the network.
IDT does have its risks. Connor notes that while other ISPs are enjoying a
growth in sales, IDT's ISP unit has seen its sales decline in the last nine
months. A problem it hopes to address by starting to offer high speed Internet
access in some markets. And Connor says the Net2Phone unit represents only
a fraction of its revenues. In short, IDT has investment potential with its
prepaid calling card business, its wholesale carrier services and its majority
stake in Net2Phone, but Connor says the company needs to cut costs. The
Net2Phone connection may generate a lot of short term potential, but over the
long term, IDT's a speculative buy unless it can improve its bottom line. |
