Pat, interesting article... brian
netstocks.com
iBasis and Deltathree: Post IPO Report
Wednesday, December 01, 1999 6:39 PM
by A. Sahoo
The past few months have seen a dramatic increase in the number of Internet telephony IPOs: NTOP, ITXC, and CLRN, just to name a few. In November, two new IT companies debuted - iBasis (IBAS), a wholesale voice over Internet Protocol provider, and Deltathree (DDDC), a retail VoIP company. So far, both seem well positioned to move upward.
IBAS sells capacity on its worldwide network to telcos and other major carriers. It shares the rapidly growing wholesale IT market - estimated to grow to $2 billion by 2004 by International Data Corp. - with just a handful of other providers: AT many senior execs come from the telco business and other IT firms. Venture backing has come from 3 of the top VC firms, and the underwriting was managed by Hambrecht and Quist. The company posted 1998 revenues of $1.7 million, with a loss of $5.7 million. (ITXC's 1998 numbers were similar - revenues of $1.5 million and loss of $7.2 million). Although IBAS was priced at $16 per share, it opened on November 10 at $35, and except for a brief pullback into the low $30s, has been maintaining the $35 - 40 range for the past 3 weeks. When IBAS' quiet period ends on December 10, and analysts may release coverage recommendations, many expect that its price will continue moving up.
Deltathree also boasts a pedigree, via ownership stakes from Yahoo! (YHOO) and AOL (AOL), and Lehman Brothers as its IPO's lead underwriter. DDDC competes in the larger consumer IT market (estimated to grow to $16 billion by 2004 by IDC), and has successfully established co-marketing relationships for its PC-to-phone and phone-to-phone calling with Xoom.com, Tribal Voice, and other large consumer-oriented websites. Competitors in this market include Net2Phone (NTOP), IPO-ed at $15 in June, and currently trading at $75. DDDC also provides a unified messaging service, called "D3Box" that offers users a unique telephone number and email address at which they may collect voice messages, faxes and email. Sure enough, it's easy to use: I opened my own Deltathree unified messaging account last week, and within minutes I was up, running and collecting messages at my new number. It makes my old Bell Atlantic voicemail account look like a Model T.
Compared with IBAS and ITXC, DDDC's sales look gargantuan: 1998 revenues of $5.6 million, and loss of $7.1 million. (Market leader NTOP, with 59% of all Internet telephony minutes carried, recorded 1998 sales of $12.0 million, with a loss of $3.5 million).
Priced at $15, DDDC opened on November 23 at $33, then dipped into the high $20s. Typical of newly trading IPOs, the market seems to be testing this one, as it fluctuates by 2 - 3 points each day on relatively high initial volumes of 400,000 shares per day.
Both the wholesale and retail IT markets are still in their infancy, so market dominance is still up for grabs. At least in the short term, though, both IBAS and DDDC look like good plays for investors wanting to capitalize on this exploding sector.
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