VoIP AN INVESTOR’S POINT OF VIEW * A Cautionary Look *

 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…

 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 – doesn’t 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?

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

 In the public markets … a growing bubble  An unscientific analysis shows a basket of “VoIP” company’s 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 they’ve got the answer” speculation  “Reverse mergers” starting to show up with otherwise unrelated companies now proclaiming they’re launching VoIP businesses (recall all the companies in the Internet bubble era adding “dotcom” to their names)

 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

 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

 What VoIP Investors should do  Don’t believe the hype …. it’s a sequel!  We have all been here before  Private & Public Company “stories” will get hot Remember: home - bankrupt Webvan - bankrupt Etoys -bankrupt Pets.com-bankrupt Many others

 What VoIP Investors should do (cont)  Beware new, ever-evolving metrics Remember: Today we have: We don’t yet have: Eyeballs attempted calls profits Unique users completed callscash flow Members downloadssustainable growth Pageviews quality index Downloads registrations Clicks others

 What VoIP Investors should (cont)  The business of VoIP is still evolving  Profits and cash flow will come – it’s 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

 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  Don’t believe everything you read on the internet  Start-ups (private or public) face tremendous hurdles and roadblocks. Experienced management can navigate difficult terrain

 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

 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!