RESEARCH ALERT - IDT downgraded to hold
Reuters Story - January 19, 1999 14:49
NEW YORK, Jan 19 (Reuters) - Lazard Freres & Co. said it downgraded IDT Corp. to hold from buy.
-- said cut the second quarter earnings estimate to $0.05 a share from $0.16 a share.
-- said believes IDT's rapid minutes growth has reduced the company's ability to effectively manage its traffic, resulting in continued erosion of gross margins.
-- said IDT's expected earnings shortfall is a result of gross margin compression.
-- said gross margins are now expected to be about 20 percent instead of 25 percent as originally expected.
-- said in the past, IDT has been able to offset its eroding gross margins by reducing selling, general and administrative spending. This quarter, Lazard believes the company will be unable to reduce SG&A, resulting from the need to increase spending in preparation for the planned spin-off/sale of its Internet division.
-- said the spin-off or sale , which is likely to occur in the near future, may remove a substantial burden on earnings. But the fundamental problems seen in the company's core long distance business will not be solved by the removal of a dilutive division, Lazard said.
-- shares of IDT gained 1-25/32 to 11-11/16.
-- separately, IDT said its Net2Phone unit will launch the first Web shopping portal to be powered by Internet telephony. The new site, EZSurf, will integrate voice, graphics and eventually video. |
