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Net2Phone hammered

From CNET.  Ailing calling-card business hurts Net2Phone. The Internet telephone company’s first-quarter revenue drops partly because of its quicker-than-expected exit from an unprofitable calling-card business.

Not unexpected.  The tables below are created from their financials.  This one shows their mix from 2002 to 2003.  The calling card business cratered, true.  But so did the wholesale long distance and international long distance businesses.  Nothing about Net2Phone, despite their recent $65MM capital round, is healthy.

  2003 2002
Calling Card 8.9 30.7
Product 0.6 3.4
Wholesale LD 36.1 41.7
International LD 45.6 62.1
Total 91.1 137.9

The most interesting thing is that these guys have never made a penny in their entire existance, yet they still get funded.  The tables below show that in 2001 / 2002 they lost a staggering $612 million.  In 2003, they made $17 million, after a $58 million settlement with Cisco pushed them into the black.  Why do people keep throwing money at them? 

  2001 2002 2003
Total revenue         150,199         137,855        91,750
Costs and expenses:      
Direct cost of revenue (exclusive of items shown below)          108,411           78,502        52,820
Selling, general and administrative          168,003         116,570        53,728
Depreciation and amortization            23,349           23,980        11,037
Restructuring, severance, impairment and other items            70,101         141,619         7,363
Settlement of Cisco litigation                    –             1,572 –      58,034
Acquired in-process research and development                     –           13,850                –
Non-cash compensation            20,545           19,556        15,304
Total costs and expenses         390,409         395,649        82,218
Income (loss) from operations –       240,210 –       257,794         9,532
Interest income, net            18,531             4,162         2,021
Income (loss) on equity investments and other expense, net  –       146,973 –           7,887            696
Income (loss) before minority interests  –       368,652 –       261,519        12,249
Minority interests              2,676           15,591         4,546
Net income (loss)  –       365,976 –       245,928        16,795
Redeemable common stock accretion  –             532 –             133                –
Net income (loss) available to common stockholders  –       366,508 –       246,061        16,795

  

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