bought in on secondary at 55 and a lot more in aftermarket at 53 1/4.
here are comments out today by H&Q's (lead underwriter) new sector analyst David Levy:
Voice Enabling the Web
· Net2Phone is a leading provider of Internet telephony service and the company best positioned
to capitalize on voice enabling the Web.
· The company has exclusive distribution agreements with leading Web properties including ICQ,
Netscape, InfoSpace, and Go2Net.
· Most recently, Net2Phone added AOL Instant Messenger and Priceline.com to its list of
distribution partners.
· Our rating on Net2Phone is Buy.
Company Background
Net2Phone is the leading provider of IP telephony services, with 40% market share in 1998,
according to IDC. The company, however, is more than just low cost calls over the Internet.
Rather, Net2Phone brings a voice to the otherwise mute World Wide Web. By voice enabling
content and commerce Web sites, Net2Phone significantly enhances the user experience, which
could lead to greater advertising and commerce revenue for Web properties that implement
Net2Phone technology. We believe that by empowering such Web properties, Net2Phone stands
to benefit from not only its own success as a provider of Internet telephony services, but from the
good fortune of Web content and commerce companies as well.
Net2Phone maintains exclusive distribution relationships with some of the Web's most popular
properties, including AOL Netscape, AOL ICQ, Go2Net, and InfoSpace. Most recently, the
company announced an enhanced relationship with AOL and a distribution agreement with
Priceline.com.
America Online
The enhanced AOL relationship includes the following initiatives:
1. AOL will integrate Net2Phone's Internet telephony services into its AOL Instant Messenger
(AIM) service, which currently has roughly 70 million registered users.
2. The two companies will co-brand a prepaid Phone2Phone calling card with the AIM service.
3. Net2Phone will be the exclusive provider of these services for a period in excess of two
years.
4. AOL will receive warrants to purchase an additional 0.5% of Net2Phone shares on a fully
diluted basis (on top of warrants to purchase 3.0% of Net2Phone that AOL already owns)
subsequent to meeting certain revenue milestones.
Concurrent with the AOL announcement, Net2Phone announced a similar marketing agreement
with AOL's CompuServe division. The two-year agreement (which is exclusive for the first
year) calls for CompuServe to market Net2Phone's Internet telephony calling card services to its
US subscriber base.
Priceline.com
In November 1999, Net2Phone announced its participation in Priceline.com's campaign to allow
users to set their own price for long distance telephone calls. We expect Net2Phone to become
the preferred provider for telephony services through Priceline.com. The two companies have
also signed a co-marketing agreement that extends through the end of the year.
Conclusion
Net2Phone's robust financial performance and growing roster of Web partners reflect the
popularity and increasing ubiquity of the Net2Phone service. We believe Net2Phone has locked
up significant Internet real estate that will provide the company with increased minute volume
and additional customers. Additionally, we are encouraged by management's proactive approach
to providing Web-based services like unified messaging to augment minute-based revenue.
Furthermore, Net2Phone, in our opinion, is on the cusp of getting a boost in its usage as the
service goes live with various AOL Web properties (ICQ, Instant Messenger, Netscape, and
CompuServe). We continue to believe that Net2Phone is well positioned to be the de facto
standard for voice enabling the Internet. |
