Net2Phone to Double Customer Base, May Buy Companies: Forum
Hackensack, New Jersey, Aug. 25 (Bloomberg) -- Net2Phone Inc., which provides low-cost long-distance telephone service by routing calls over the Internet, could buy companies to improve its technology and speed, Chief Executive Howard Balter said.
''Today, we're the leader in Internet telephony; we want to maintain that leadership and take advantage of it,'' he said. ''If we would do an acquisition, it probably would be to accelerate the roll out of products by buying technology companies.''
Hackensack, New Jersey-based Net2Phone isn't currently in talks with acquisition targets, Balter said. Likely purchases would be software makers and others with products that would complement Net2Phone's services, he said. Net2Phone's technology can enable online shoppers to talk to sales representatives at Internet stores by clicking a button on retailers' Web sites.
Net2Phone shares have more than tripled from their initial offering price of $15 on July 29. The shares rose 6 to 53 1/8 yesterday, their eighth consecutive increase, after earlier touching a record high of 58 1/4.
Investors are enthusiastic about the company's technology, which allows computer users to make calls from anywhere in the world back to the U.S. for a flat rate of 10 cents a minute. They're also encouraged by Net2Phone's partnerships, which include marketing agreements with No. 1 U.S. personal-computer maker Compaq Computer Corp., top Internet service America Online Inc.'s ICQ chat service and Netscape Navigator Web-browsing software.
''We're doing things that are unique, that nobody else is doing,'' Balter said.
He said the company is pleased with the performance of its IPO, which generated proceeds of $95 million, and said it plans to spend $50 million of that over the next 18 months to sell and market its services.
300,000 Users
Having $95 million to play with doesn't rule out returning to the capital markets, though. ''If other opportunities come up, maybe acquisitions or more aggressive deployment of our products, or greater marketing initiatives,'' the company could pursue additional funding, Balter said. ''But today we're not thinking in those areas.''
Balter said he worries most about competitors selling a product similar to Net2Phone's, about the difficulty in finding skilled employees and about being able to keep pace with the demand for the company's services. Currently, Net2Phone has 300,000 so-called active users, or customers who've paid for the service at least once in the past three months.
It cost the company $7 million to sign up those users, and that was without the benefit of distribution agreements like those now in place with Netscape and Compaq, Balter said. Spending seven times as much over the next year and a half should enable the company to double its customer base ''or maybe even hit a million (customers) within that time period,'' he said.
Internet Distribution
''We've been there in terms of rapid growth'' at IDT, which owns about 58 percent of Net2Phone and expanded to $1 billion in annual revenue this year from $100,000 in 1993, Balter said. ''In some of the cases, we've suffered from our own success, so we're really very, very sensitive to that.''
This time, the company hopes success will beget itself.
''Our intent is to continue to aggressively pursue these (distribution) deals,'' Balter said. ''...We don't want to stop in terms of distribution. Our idea is to be the exclusive Internet telephony provider in as many distribution areas as possible.''
The distribution agreements will help Net2Phone reach analysts' estimates of $40 million in revenue for 1999 and $80 million for 2000, Balter said, as well as continued 100 percent year-over-year growth. In addition, the company has operated at nearly break-even in some of its recent quarters, he said, and executives think the company will be cash-flow positive at the beginning of 2002, in line with analysts' expectations.
Net2Phone intends to take full advantage of convergence, the coming unification of phone, cable and computer networks.
''What we may be in the future is a combination of a phone company, a content company, a value-added services company -- so we could be a combination of a Microsoft, AT&T, and a cable company all wrapped into one,'' Balter said.
Net2Phone must move quickly to keep its so-called first- mover advantage in the market for phone calls over the Internet.
''The market opportunity's tremendous, but a market opportunity like this is usually not left to a small player,'' Balter said. ''We're of course always concerned about looking behind our back. We're always paranoid.'' |
