iBasis, Inc., (Nasdaq: IBAS, news, msgs), the
leader in advanced Internet-based communications, today issued the following open letter to investors from its
co-founder, president and CEO, Ofer Gneezy:
Dear iBasis Investors:
I am writing to provide an update on our operational progress at iBasis, Inc.
and to address concerns that may have been raised by the recent weakness
in our stock price.
Despite the obvious pressure on our stock price, we continue to see an
extraordinary market opportunity for iBasis as a global service provider of
IP-based communications services -- a market that industry analysts such as
IDC predict will be worth $18 billion by 2004. Fast-growing Internet Telephony
Service Providers like iBasis and our competitor ITXC have barely tapped the
enormous potential of the market for IP-based voice services. VoIP accounted
for just 1.6 percent of global cross-border voice traffic in 1999, according to
analyst publication Telegeography 2001. Around the world, the larger carriers
have just begun to signal their intentions to shift their closed, legacy
circuit-switched infrastructure to next generation networks built on open,
enhanced service-friendly IP/packet technologies -- precisely the sort of infrastructure that iBasis has deployed
worldwide and over which many of these carriers already route voice and fax traffic. And to the extent that
these large carriers begin to convert their own environments and an increasing percentage of their traffic base
to VoIP, iBasis will more easily be able to interconnect and use our complementary global routes to carry even
larger volumes of traffic from these providers.
However, the remarkable opportunity in our current VoIP business is only the beginning. We look forward to
delivering on what is perhaps the greatest promise of IP-based communications -- its potential as a platform for
enhanced services, including speech-driven Web services such as voice-enabled email, instant messaging,
Unified Communications, eCommerce, Content and Customer Service applications. All of these new services
describe a world in which the telephone, whether mobile or fixed, becomes an Internet-access device,
increasing by an order of magnitude participation in the next Internet revolution, which we believe will be driven
by Voice. We encourage investors to consider that we are nearing a future in which we will deliver the
infrastructure for a voice-enabled Web and will begin to leverage the full and extraordinary potential of the global
iBasis Network. Going forward, we believe this can become an important, margin-rich driver of our business
over the next several years, and we remain extremely enthusiastic with respect to the potential for this
segment of the company's business.
I would also like to highlight our excellent cash and liquidity positions, which seem to be obscured by the
current investor climate. As of September 30, 2000, iBasis had in excess of $340 million in cash and cash
equivalents with total current assets of nearly $358 million. Our recent quarterly cash burn rate was
approximately $14 million, and we conservatively estimate that this burn rate will continue in the range of
$14-16 million for at least the next several quarters. Of note, the financial models of all eight independent,
sell-side research analysts tracked by First Call who publish research reports on iBasis show iBasis with
sufficient cash to reach positive EBITDA (cash flow) and positive net income. In addition, we have similarly
previously provided public guidance that we anticipate that we have more than enough cash on the present
business model to see us through to positive EBITDA without having to again access the capital markets. In
other words, with more than $3 in net cash per share, the Company is fully funded to reach profitability.
We are working to accelerate the increase in utilization of our existing global infrastructure. We are nearing
completion on our previously announced plans to deploy Internet Central Office switching facilities worldwide
and, going forward, intend to defer additional ICO deployments until we have achieved higher utilization rates on
our network infrastructure. The intention of this change is to demonstrate our ability to reduce capital
expenditure and accelerate EBITDA break-even, while maintaining a high-revenue growth rate in accordance
with existing guidance. This approach to deployment should also enable us to more quickly demonstrate the
underlying positive gross margin in our core VoIP business on a network-wide basis.
Due to the current inhospitable stock climate, we are also evaluating our options for "financial engineering",
including possible share and/or debt buy-back initiatives. While the company has not yet determined that it will
engage in such initiatives, these options to improve our net cash position remain open to us thanks to our
excellent liquidity position.
We understand that this is a difficult time for our investors. We want to communicate to you our continuing
strong enthusiasm for our business model and reiterate that we are well on our way to achieving our business
and financial goals for growth and profitability. We will continue to work hard to earn the trust you have placed
in us.
Regards,
Ofer Gneezy
President and CEO |
