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Technology Stocks : IDT *(idtc) following this new issue?* -- Ignore unavailable to you. Want to Upgrade?

To: Hawaii60 who wrote (13582)	8/26/1999 7:23:00 AM
From: orkrious	Read Replies (2) \| Respond to of 30916

Herb's back. The guy just doesn't give up. Anybody Taking a Look at the Fundamentals of Net2Phone and IDT? By Herb Greenberg Senior Columnist 8/26/99 6:30 AM ET thestreet.com Pumpers and dumpers are having a field day, no doubt, with the stocks of Net2Phone (NTOP:Nasdaq) and IDT (IDTC:Nasdaq). Like the old days of the Internet, at the expense, no doubt, of the little guy who will almost certainly get walloped. Anything, and I mean anything that goes up that quickly -- on a relatively small float -- almost always falls just as quickly, if not faster, after this kind of buying frenzy. Yesterday the stock zoomed 32% to 70 1/8, giving it a market value of more than $3 billion. This will surely go down as yet another case of investors not fully understanding what they're buying. The evidence is clear by the recent action in Net2Phone. As I pointed out yesterday in a midday "Herb on TheStreet Extra," anybody who really likes Net2Phone would be better off owning IDT, because of its 57% stake in Net2Phone and its steep discount to Net2Phone. That, of course, prompted some readers to wonder whether I was "eating crow" or "throwing in the towel" on past items here that were critical of IDT. You kidding? The Net2Phone spinoff itself is just the latest questionable transaction involving IDT. Among the biggest winners in the deal are IDT insiders. According to Net2Phone's prospectus, Net2Phone has agreed to pay IDT $6 million for a 20-year right to use part of a new high-capacity network still under construction. (An example of why this is good for IDT.) What's more, as the company says in its prospectus, they have lots of competition for their services and products, including some from large, well-known, deep-pocketed companies. And if prices of long-distance service continue to fall, Net2Phone warns that it may lose its competitive pricing advantage for long-distance calls. Already some Internet telephone companies are undercutting Net2Phone in the U.S. Bigzoo.com, for example, charges 3.9 cents per minute vs. 4.9 cents for Net2Phone on domestic calls except for Alaska and Hawaii. Then there's the quality issue: As I noted yesterday, the quality of the actual phone calls over the Internet, from a PC, is nothing to write (or call) home about. Calls made several times to me from a friend over the course of the past month using Net2Phone's Internet telephone service were unintelligible. Admittedly, mine is a small sampling. And then there is reader Hazem El-Abbadi. He uses the service frequently for overseas calls, and writes: "The main problem I've found is not the voice quality but a delay between the time one person says something and the other person hears it. This varies from a couple of seconds to about a half a minute. That is where the real annoyance comes in." Finally, in its prospectus, Net2Phone, which had sales of $22 million for the nine months ending April 30, and no profits, warns that U S West (USW:NYSE) and BellSouth (BLS:NYSE) have asked the FCC to institute federal access charges for Internet phone calls. The company says many of its competitors are lobbying for the change. If that happens, Net2Phone warns that its business could be "materially" affected. Boilerplate, sure, but some analysts believe this is a serious issue. P.S.: CNBC's Joe Kernen yesterday told his viewers that on Tuesday officials from IDT called him, pointing out that they believed their stock deserved to be substantially higher with Net2Phone on such a tear. (Assuming someone from IDT really made the call: They had to say something because Net2Phone's investors certainly don't have a clue.)

To: Hawaii60 who wrote (13582)	8/26/1999 7:23:00 AM
From: Smear_campaign	Respond to of 30916

We have another TSCM article today and judging from the title it is not a positive.

To: Hawaii60 who wrote (13582)	8/26/1999 8:02:00 AM
From: Mark Peterson CPA	Read Replies (2) \| Respond to of 30916

Hawaii60, enjoy your thoughtful analysis and the market dynamics between IDTC and NTOP. However, there is one valuation issue that appears to have been inadverdently excluded. Shares of stock in the marketplace are traded as as a fully liquid but minority ownership interest to which no control premium is attached. While it is not necessary to own 50.1% of a stock to warrant a control premium (because it is possible in certain circumstances for a few large shareholders with less than a 50% combined ownership interest to exert control over a widely dispersed minority ownership shareholder base, certainly IDTC's 57% ownership interest of NTOP is a majority ownership interest that, in the event of a sale of NTOP warrants a control premium. What is that premium in this market? Studies of control premiums available through MergerStat suggest that 30% - 57% may be warranted. By my view, IDTC's proportional ownership interest in NTOP is more properly reflected in the following manner: $70 * 28M * 1.3 = $2.548B controlling ownership interest $2.548B (controlling ownership interest) divided by 35M IDTC shares = $72.80 per controlling share. Naturally, that amount excludes the intrinsic value of IDTC. However, a $22 intrinsic value of IDTC and its $72.80 controlling ownership interest in NTOP is approximately $94.80 in break-up value. As you have so adeptly pointed out, there is certainly a disparity in the market's current valuation of IDTC and that disparity will continue to exist until NTOP's stock settles down and the results of its partnerships with AOL, Sprint, et al are more apparent. But the control premium is a factor that I believe should not be excluded. Best regards, Mark A. Peterson