Is IDT: e-commerce missing link?
By Thom Calandra, CBS MarketWatch
Last Update: 9:49 AM ET Jan 25, 1999 Calandra on Evening News
SAN FRANCISCO (CBS.MW) -- Where do you go when everyone has been there already?
Glenn Cutler, a former California fund manager whose personal investment picks allowed him to move away from the investment fray several years ago, says he wants to buy Internet stocks.
"I just don't want to jump into the speculative bubble," Cutler says about the high-flying group of online stocks.
Old 'stand-bys'
Cutler says there's nothing wrong with using the old "stand-bys" of Microsoft and Cisco Systems as proxies for the Internet. (Especially after a 2-for-1 stock split from Microsoft, announced Monday.)
"But I am looking for something different," says Cutler, who as a small-cap fund manager used to seek little-known companies on the verge of dominating a new industry.
His pick: "I believe Internet telephony is the technology that has not been played yet -- one that has serious upside potential. I believe it is a missing link in the formula for all this e-commerce and inter-portal connections," he says.
To be sure, some companies seeking to reshape the phone landscape via the Internet have seen their stocks soar and plunge amid euphoria, hype and disappointment.
One of those companies is IDT Corp. (IDTC), a New Jersey company whose Net2Phone Direct just won 1998 Product of the Year award from Internet Telephony magazine.
Fast-growing carrier
Cutler likes the fact that IDT is a multinational phone carrier with global aspirations. "It has the advantage of already being a profitable, fast-growing long-distance telephone company.
Alas, the company's market cap of $278 million is down sharply from a year ago. The company's shares on Nasdaq sell for about 12, down from a one-year high of 40 1/4.
Taking their toll: analyst downgrades, mostly because of declining profit margins. The company is spending money to develop, cheap, reliable and rapid Internet communication devices and services.
IDT is also spending money on a Web site that will use Internet phones as the spending link for Web shoppers. The company claims its www.ezsurf.com site will be the first Web shopping portal powered by Internet telephony. The new site will use voice, graphics and video. Sounds like a shopping channel, doesn't it?
Cutler says IDT, which doubles as an Internet service provider, will soon spin off part of itself to investors. Or perhaps sell new shares of the Internet telephony part of its business.
"Now that the first big Internet stock wave is cooling off, I believe there will emerge new leaders in the next Internet wave. And I have a strong notion IDT will be in that wave," he says.
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