VoIP AN INVESTORS POINT OF VIEW A Cautionary Look

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VoIPAN INVESTORS POINT OF VIEW A Cautionary
Look

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• VoIP represents one of the most significant
  investment opportunities today..
• Large global markets
• Hugely disruptive technologies
• Significant cost advantages
• Incredible feature offerings
• High-margin business opportunities
• More

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• But also presents significant investment
  challenges
• Large, entrenched customers own all the customers
• Consumer point of view
• Multiple cell phones (turning off land lines
  every day doesnt bode too well for home
  replacement offerings).
• Tethered pc-calling is of limited appeal
• No sex appeal to VoIP what is that?
• Highly limited CPE today How am I supposed to
  use that?

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• Enterprise point of view
• Security
• Current Investment
• Do features really work?
• Long sales lead time

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• In the public markets a growing bubble
• An unscientific analysis shows a basket of VoIP
  companys statistics
• Average stock price appreciation of 1446 over
  the last year (and most companies are well off
  their highs)
• Average market capitalization of 12.7 x sales!
• Most companies have limited cash ? none are
  profitable
• Elusive business models fuel maybe theyve got
  the answer speculation
• Reverse mergers starting to show up with
  otherwise unrelated companies now proclaiming
  theyre launching VoIP businesses (recall all the
  companies in the Internet bubble era adding
  dotcom to their names)

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• Adoption is real, but measured
• (the BAD news)
• Forrester Survey
• 13 of consumers are interested or very
  interested in VoIP
• Only 43 have ever heard of the technology
• 3 of consumers are using VoIP
• Consumers would be most willing to consider VoIP
  from their local phone companies

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• Adoption is real, but measured
• (the GOOD news)
• 90 of existing VoIP users are satisfied with
  pricing
• 80 are satisfied with features
• 70 are satisfies with voice quality and billing
• Delivering calls VoIP is better
• Negative industry commentary exists with every
  disruptive force
• Great companies and business models will emerge

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• What VoIP Investors should do
• Dont believe the hype . its a sequel!
• We have all been here before
• Private Public Company stories will get hot
• Remember
• Excite _at_ home - bankrupt
• Webvan - bankrupt
• Etoys - bankrupt
• Pets.com - bankrupt
• Many others

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• What VoIP Investors should do (cont)
• Beware new, ever-evolving metrics
• Remember Today we have We dont yet have
• Eyeballs attempted calls
  profits
• Unique users completed calls cash flow
• Members downloads sustainable
  growth
• Pageviews quality index
• Downloads registrations
• Clicks others

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• What VoIP Investors should (cont)
• The business of VoIP is still evolving
• Profits and cash flow will come its a huge
  opportunity
• Remember
• Ebay - mkt cap 52 Billion
• Yahoo - mkt cap 48 Billion
• Amazon - mkt cap 14 Billion
• The business will have arrived when we stop
  hearing about VoIP and start learning about
  applications and companies

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• What VoIP Investors should (cont)
• Know the management
• Who are they?
• What have they done before?
• How much of their own money is invested?
• Who has invested with them?
• Dig deep
• Dont believe everything you read on the internet
• Start-ups (private or public) face tremendous
  hurdles and roadblocks. Experienced management
  can navigate difficult terrain

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• What VoIP Investors should (cont)
• Know the competition
• The competition is not other start-ups
• The competition has names like BellSouth, SBC,
  Verizon, BT and others they have everything to
  lose and own all the customers
• The competition also has all the marketing money!
• Nimble companies create buzz and word of mouth
  to grow
• Invest for the longer term

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• Summary
• VoIP is and will continue to be a huge
  opportunity
• Growing great businesses around the technology
  will not be easy
• Competition is large and entrenched
• Experienced management means everything
• Thank you!