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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (5956)	2/7/1999 12:38:00 AM
From: Bill Zeman	Respond to of 78448

Paul Have been doing much more DD on IDTC, b4 posting on this esteemed thread. Funny, how I have bought not just shares in the stock but call options without doing as much DD! Anyway here goes: The best current value play I know, IDTC. It is not only a low priced tech stock, but has the extra bonus of being a sexy PROFITABLE internet play at only roughly 1.5 book value. Core Business: IDT is an international telecom. They are currently building their own network complete with fiberoptic bandwidth and POPs. CEO is Howard Jonas, former AT&T top dude from b4 dereg. He has built the company from 11 million to 600 million dollars. Revenues have sequentially increased for as many quarters as I can get info on. They offer low cost long distance to compete with the big guys, and often serve as a wholesaler. They are and have made a lot of money in the lucrative phone card business. All projections are for earnings to continue on an upward spiral after they get their network completely built out. Core Business Innovations: The research departments of one of their recent acquisitions has invented a switch that will cost 1/6 of the switches made by Nortel and Alcatel. It works and they are actually installing it in their network. Internet Business: IDTC has an ISP, (of which I am using right now for $10.99/month), which is in the top ten for customers. However, they are deemphasizing this aspect of the business. IDTC's biggest future asset is internet telephony. They have a product called Net2Phone which allows any domestic call anytime for 4.9 cents a minute through internet telephony. No one can touch this, and their intl. rates are also the lowest. The internet telephony (IT), is only slightly less quality than regular phone lines. There are currently over a million users, and with Net2Phone direct neither the calling party or the called have to be anywhere near a computer. With this same technology they also have many other products. Last monday they launched an internet portal, (http://www.ezsurf.com) that allows shoppers to speak directly to an etailers live customer rep while surfing the web through a product called Click2Talk. A recent survey said 89% of people are still uncomfortable with transmitting their credit card number over the internet. This innovation could be huge. IDT has already signed up dozens of big name companies and etailers to use this technology. Internet IPO/Spin-off: Recent excitement in the investing community centers around the emminent IPO/spin off of the internet business. It is doubtful the market has priced this into the stock as of yet, because no one really knows how it will benefit shareholders. All is currently secret according to SEC quiet rules. Company could retain IPO shares as well as gain huge cash pay off for initial sale, and may even issue 1 IPO for every 5 or 3 shares of IDTC in some kind of combination IPO/spin off. Next Post: Why the price is depressed. Bill Z

To: Paul Senior who wrote (5956)	2/7/1999 1:10:00 AM
From: Bill Zeman	Read Replies (3) \| Respond to of 78448

Why IDTC is near it's 52 week low: IDTC became profitable back in 1997, and this combined with extreme excitement about their number one position in IT drove the stock to $40. Then in April of 1998, the FTC and congress began investigating the possibility of regulating and taxing IT. This news sent the whole IT sector, (NSPK, VOCLF, FTEL and others) into a down spin all the way till October. Even though IDTC is mainly a telcom, it was most widely known as an IT play, so even though their earnings kept increasing with skyrocketing revenues the stock fell into the mid teens in sympathy with IT. The most amazing thing about this, is that as far as I understand, IDT will not be vulnerable to a regulatory tax like other ITs because IDT's technology originates the call with a regular phone line unlike others like Vocaltec (VOCLF) whose IT is all over the internet. So, basically IDTC dropped from $40 to $15 for no good reason!! I have heard it suggested in my extensive reading that investors may have been reacting to the possibility that calling cards may eventually become obsolete, (not likely to happen for some time, IMHO), and IDT's number one revenue source is currently prepaid calling cards. I have also heard it suggested that AT&T's announcement last year, that they were going to enter IT may have scared investors, (not a real concern, IMHO as they are so far behind IDT and so big and slow that they may never catch up). Whatever the reasons, they don't seem serious enough as to cause a fall from $40 to $15. Reason For Recent Lows: A few weeks ago IDTC pre-announced a .10 cent hit to current quarter's earnings. Several analysts cut it and lowered earnings estimates to .06 from .16. The stock hit 9 1/2 in one day and popped back up to $14-16 in about a week. The reason given for the earnings shortfall was that vendor and operations delays in the deployment of their network caused them to have to use much more leased capacity and spot services than expected. The problem will be corrected in 2 or 3 quarters. Also, the money they have been dumping into the internet side of the business has been causing a drain on margins. This will be solved by the eminent IPO/spin off. IDT has also hired some very experienced new mgmt to help speed up network deployment. The jump back up to current levels from the 9's is probably due to all the excitement about the internet news forthcoming. IDTC has been on Steve Harmon's ISDEX for more than a year. They have huge internet potential and you can still get in on the ground floor, unlike as you all know, most internet stocks. IDTC has a book value of 10 1/2, $6.50/sh in cash, a asset/liability ratio of almost 4 and a debt/equity ratio of .046. At 16 1/8 with such huge internet potential I see VERY little downside risk, and I look for the low 20's in 1-3 months and $30 b4 Y2K. All IMHO Do your DD's Bill Z