Net2Phone Gains on Rosy Outlook

Net2Phone (Nasdaq: NTOP) rose 19 U.S.cents to $8.88 in morning trading Tuesday after the company, which providestelephone services over the Internet, beat analyst expectations for thesecond quarter ended January 31st.

The company said that it expects a profit by the end of July 2002, two quarters earlier than previously thought.

Net2Phone, based in Newark, New Jersey, said that revenue for the latest quarterrose 124 percent from a year earlier to $34.7 million, while the loss beforecharges and other items totaled $15.9 million, or 27 cents per share,against reported analyst estimates of 29 cents per share.

After all gains, charges and free minutes, however, the company lost $176.2million, or $2.99 per share. Net2Phone attributed the bulk of the loss to awritedown in the value of its Yahoo! shares.

Chief executive officer Howie Balter said Net2Phone began to see”substantial diversification and expansion” of its revenue sources.

“Thistrend, we believe, will continue and be strengthened by the upcomingintroduction of our voice-enabled high-margin services,” Balter said.

Net2Phone also said that it has restructured agreements with key partners to reducethe cost of subsidizing traffic to those partners.

“We will continue toevaluate all partner relationships, maintaining only those with positivefinancial returns,” Balter said.

One agreement being restructured is the company’s deal with Yahoo!, a move that resulted in a $31 million charge.

Net2Phone said it expects revenue for the year ending in July to top $150million, with sales and marketing expenses dropping by 10 to 15 percent overeach of the next two quarters.

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