iBasis tops Street earnings expectations

The Burlington, Mass.-based company reported a net loss of $20.8 million, which compares with a net loss of $7.6 million during last year's fourth quarter. Excluding charges, the company posted a loss of 59 cents a share vs. last year's loss of 26 cents a share. Revenue increased to $20.7 million from $7.6 million.

Wall Street expected revenue of $20.8 million and a loss of 63 cents a share for the quarter, the consensus estimate of analysts surveyed by First Call.

The company provides wholesale voice and fax telephone service over the Internet to traditional phone companies, Internet service providers and application service providers.

iBasis uses its own global network and lines from other phone companies to help carriers start and terminate calls using Internet protocols, which cost less than traditional phone calls.

Internet calls are "probably 40 percent cheaper," said Chuck Martin, a research analyst at SunTrust Equitable Securities. "Because of compression technologies, you can send multiple calls over one phone line, while legacy systems can handle only one call per line."

The company handled 600 million minutes of calls for the full year and 228 million minutes in the fourth quarter. That compares with 157 million minutes of calls last year and about 64 million minutes during the year-ago quarter. More than 80 percent of the company's calls start in the United States and end in foreign countries.

Martin says the company fell short of revenue estimates for the fourth quarter because many calls ended in China and Mexico, which generate less revenue. Revenue per minute fell to 8.2 cents in the fourth quarter from 9.9 cents during the previous quarter.

The analyst believes the decline in revenue per minute will challenge the company during the upcoming year, but also says this is a trend that has hit the whole industry as phone calls become cheaper.

The company could get a boost from recent partnerships and acquisitions.

iBasis announced last December that it will acquire Internet speech software maker PriceInteractive for 10.1 million shares of iBasis and $50 million in cash. iBasis expects the combined company to have positive net income in the first quarter of 2002.

The company also announced a partnership with Openwave Systems, which makes software that allows wireless devices to handle functions like e-mail, Internet access and instant messaging.

Under the deal, iBasis will offer Openwave's wireless software over its network to wireless carriers and other communications companies.

"iBasis is going to be the service provider for Openwave," said Martin, who added that the deal will help iBasis break into the booming wireless market, which should add to the company's revenue depending on acceptance rates by consumers.