IDT's Bad Connection is Getting Worse - Barron's

Telecom giant IDT Corp.'s core businesses of pre-paid calling cards and telecom services have been faltering against inexpensive wireless and VOIP services. Shares are down 28% this year, following average 14% annual declines since 2004. Barron's sees more to come: IDT expects to lose $1.33/share for F2007, after losing $1.55 in 2006. With only $600 million in cash left, some bears see IDT's cash gone by 2009. A dividend instituted this year strains reserves even further. CEO Howard Jonas and insiders have been selling shares. IDT's $59 million overhead in F2006 and an estimated $61.2M in F2007 is squeezing margins. IDT is suing Blackstone Group for allegedly misrepresenting Winstar Communications' financial and customer status when IDT bought it in 2001 for $43m. The renamed IDT Solutions has incurred $200m in losses to date. IDT's also under an IRS investigation; Institutional investors are still enamored of Jonas' value-creating abilities, and cite cost-cutting efforts, but are increasingly frustrated by a lack of transparency and direction. Though the "Jonas touch" enabled IDT's sale of Russian telecom Corbina and IDT Entertainment last year for $146m and $198m respectively, and Winstar came with valuable wireless technology, IDT seems unsure how to capitalize upon it. Barron's says the wireless technology is worth $1.23/share and cash equals $6.64/share giving a $7.87 value. At $9, shares could fall further.

Sources: Barron's
Commentary: IDT Preliminary Proxy: A Few Footnotes Shy of a Six-Pack
Stocks/ETFs to watch: IDT. Competitors: T, S, VZ

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