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

3.  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…

4.  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?

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

6.  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)

7.  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

8.  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

9.  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: Excite @ home - bankrupt Webvan - bankrupt Etoys -bankrupt Pets.com-bankrupt Many others

10.  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

11.  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

12.  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

13.  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

14.  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!