Voice Over IP Grandaddy IDT Is Going Nowhere (IDT)

IDT Corp. (IDT) was one of the grandfathers of VOIP with its Net2Phone operations, which it just brought in-house with a merger. But the company let a bunch of bullies like Vonage and Skype beat it up and take its lunch money. It is hard to understand why the company would let such a spectacular opportunity go, but they did.

The company has retail and wholesale telecommunications services, its VOIP operations and a home entertainment division. Try as they might, the cannot get the pieces to make money together. In the six months ending January 31, 2006, the retail business made $3.5 million on revenue of $732 million. The entertainment line made $882,000 on revenue of $96.5 million. Everything else showed red ink.

The company is now a hodgepodge of telco, entertainment, VOIP and an IDT Capital arm. The company operates at about a $2.5 billion annual revenue run rate and operating losses each quarter run in the $25 to $60 million range.

So, what are we to make of IDT? It has a market cap of a little over $1 billion and trades at the bottom end of its $11 to $15 range. The two year chart is pretty much straight down.

If ever a company needed a rationale for being in business, IDT is it. Maybe their best bet is to sell everything but Net2Phone and make a run at Vonage. It would be better than trying to operate five or six business that don't seem to be going anywhere.

IDT 1-yr Chart

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was also president of Switchboard.com when it was the 10th most visited site on the internet, according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc., and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in the companies he writes about.