Net2Phone Announces Initiative to Achieve Profitability Through Reduced Costs and Increased Margins Focus on profitable business lines, synergies with Liberty Media and IDT, and maximizing shareholder value
NEWARK, N.J., Nov 7, 2001 (BUSINESS WIRE) -- Net2Phone Inc. (NASDAQ: NTOP chart, msgs), the leading provider of voice and enhanced services on IP networks, today announced a cost reduction program, expected to result in an estimated annualized cost savings of approximately $23 million.
Through this cost cutting initiative, which includes a 43% reduction in workforce as well as a reduction of outsourced services, the company expects to deliver on its forecasts for bottom line growth within the organization, reaching EBITDA breakeven by July 2002. The company expects to take an $8 million restructuring charge, which includes severance payments, office closure charges, and consolidation efforts attributable to Q1 FY01.
The company is examining its business lines, with the goal of exiting unprofitable businesses, eliminating redundancies across divisions, increasing operational efficiencies, and narrowing the scope of research and development efforts and expenditures.
Net2Phone will also focus on becoming the solution for cable and video telephony. Leveraging its innovative and proprietary technology, Net2Phone can deliver end-to-end solutions for the wholesale and broadband markets. Through its existing relationship with Liberty Media, the company plans to roll out services that will enable cable providers to offer their customers telephony services utilizing broadband networks.
Over the past two quarters, Net2Phone dramatically accelerated its business focus and efforts towards profitability above all else. Accordingly, as stated previously on the company's earnings conference call, the company believes that bottom line performance will improve dramatically. This trend had started showing traction at the end of the company's last fiscal year as was evidenced by Q4 2000's EBITDA improvement of 37%. The company expects EBITDA to continue to improve quarter-over-quarter, with continued sequential improvement thereafter. Revenues for Q1 are anticipated to be approximately $42 million, with gross margins trending toward 41-43%.
While the company continues to reign in expenses and control cash expenditures, it expects a confluence of one-time charges to impact its efforts in Q1. This is attributable to 1) the net cash cost for the acquisition of NetSpeak Corporation by Adir Technologies, 2) the pay down of certain accounts payable and restructuring obligations and 3) a decrease in the value of publicly traded investments. The company anticipates a significant narrowing of these costs and capital expenditures in future quarters.
"Even in a challenging economic environment we continue to improve our EBITDA losses, and the reduction in force, though painful and difficult, is necessary to better position Net2Phone to meet and exceed internal profitability targets," commented Stephen Greenberg, CEO of Net2Phone. "On a go-forward basis, we will be just as aggressive with controlling capital expenditures and other cash outlays as we have been in controlling operating expenses."
Voting control of Net2Phone was recently acquired by IDT Corporation as a result of the formation by IDT, Liberty Media and AT&T of a limited liability company controlled by IDT holding 64% of the voting stock of Net2Phone.
Please join Stephen Greenberg, CEO and Ilan Slasky, CFO for further commentary on Net2Phone's recent corporate developments as they present at JPMorgan H&Q's Millenium.01 Global Telecommunications & Media Conference on Wednesday, November 7, 2001 at 1:30PM EST. A live webcast and replay is available at.
About Net2Phone
Founded in 1995, Net2Phone is a leading provider of voice and enhanced services over IP networks to consumers, businesses and carriers worldwide. With millions of users around the world, Net2Phone enables toll-quality calls between computers, telephones, and broadband devices utilizing IP networks. Recognized as the first company to bridge the Internet with the public switched telephone network, Net2Phone has routed more than 1.5 billion minutes of traffic over its award-winning network. Traded on the NASDAQ under the symbol NTOP, Net2Phone's strategic partners and investors include AT&T, America Online, and Yahoo!. Net2Phone also offers enhanced hosted service solutions, including voice recognition, for businesses around the world. For more information about Net2Phone's products and services, please visit www.net2phone.com.
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward- looking statements involve risks and uncertainties and actual results could differ materially from those discussed in the forward-looking statements. For this purpose, any statements contained in this press release that are not statements of historical fact may be deemed to be forward-looking statements. Factors which may affect the Company's results include, but are not limited to, the Company's ability to expand its customer base, the Company's ability to develop additional and leverage its existing distribution channels for its products and solutions, dependence on strategic and channel partners including their ability to distribute the Company's products and meet or renew their financial commitments, the Company's ability to address international markets, the effectiveness of the Company's sales and marketing activities, the acceptance of the Company's products in the marketplace, the timing and scope of deployments of the Company's products by customers, fluctuations in customer sales cycles, customers' ability to obtain additional funding, technical difficulties with respect to the Company's products or products in development, the need for ongoing product development in an environment of rapid technological change, the emergence of new competitors in the marketplace, the Company's ability to compete successfully against established competitors with greater resources, the uncertainty of future governmental regulation, the Company's ability to manage growth, obtain patent protection, and obtain additional funds, general economic conditions and other risks discussed in this Report and in the Company's other filings with the Securities and Exchange Commission. All forward-looking statements and risk factors included in this document are made as of the date hereof, based on information available to the Company as of the date thereof, and the Company assumes no obligation to update any forward-looking statement or risk factors. |
