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Technology Stocks : IDT *(idtc) following this new issue?*

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From: Hawaii60	10/6/2000 12:24:11 PM
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Analyst report on NTOP Bowen, Michael G. (410) 895-++++ 10/05/2000 Deutsche Banc Alex. Brown ------------------------------------------------------------------------------- NET2PHONE INC. [NTOP] "BUY" Solid F4Q00 Results. Adjusting Revenue and Losses Higher. Maintain Buy Rating. ------------------------------------------------------------------------------- Date: 10/05/2000 EPS 1999A 2000A 2001E Price: 25.0 1Q (0.04) (0.11) (0.31) 52-Wk Range: 77 - 21 2Q (0.03) (0.17) (0.29) Ann Dividend: 0.0 3Q (0.03) (0.21) (0.30) Ann Div Yld: 0.00% 4Q (0.10) (0.29) (0.27) Mkt Cap (mm): 1,450 FY(Jul.) (0.20) (0.80)A (1.17) 3-Yr Growth: 69% FY P/EPS NM NM NM CY EPS (0.49) (1.10) NE Est. Changed Yes CY P/EPS NM NM NM ------------------------------------------------------------------------------- Industry: E-TELECOM Shares Outstanding(Mil.): 58.0 Return On Equity (1999) : 0.0% ------------------------------------------------------------------------------- HIGHLIGHTS: - Exceeded revenue estimate by $1.9 million and generated 167 million MOU as compared to 121 million MOU last quarter. - Sustained pricing drove better-than-expected gross margin of 41.0% in the quarter versus our estimated 39.2%. - Net2Phone announced a share repurchase of up to 5 million shares, or approximately 9% of its common stock. - The company’s Microsoft relationship is generating minutes of use ahead of plan and its click-to-talk initiative has been rolled out to approximately 30,000 Web sites. ADIR is reportedly about two quarters away from generating meaningful revenue incremental to the model. - Financial estimates a mixed bag. We are increasing our top line revenue estimates again as the company continues to generate stronger-than-anticipated results. However, we are lowering our gross margins, EBITDA and EPS estimates moving forward due to initiatives surrounding ADIR and Microsoft. - Management indicated they would be guiding estimates upward in approximately three-weeks time to reflect its agreement with AT&T in which Net2Phone is jointly developing new Internet voice applications for AT&T’s emerging cable plant-based local telephony offerings and AT&T business customers. - We maintain our BUY investment rating on the shares. We will be revisiting our price target subsequent to the company providing detailed guidance on its AT&T relationship. DETAILS: Investment Thesis Overweight Net-Centric Services Providers (NSPs): We continue to stress that those companies concentrating their efforts on the Internet/data-related infrastructure services market should present investors with one of the largest opportunities in the telecommunications sector. Internet/data-related enabler plays include Internet telephony providers, Web/Application hosting, ISP/WANs and broadband local infrastructure (digital subscriber line providers). These companies are key to moving communications and computing from traditional telephony media to IP-based services. Web-based Internet telephony services, which enable customers to conduct calls and send faxes over the Internet using personal computers as well as basic Internet telephony services over traditional telephones and fax machines, are communications enablers for the Web. Projections from International Data Corporation for commerce over the Internet reach $1.3 trillion by 2003. Investment success of the sector continues to be evidenced by our Net-Centric Services index, which continues to substantially outperform the market.

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