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April 15, 2009

deltathree Posts Tough 2008 Financial Results, Closes 2008 on Positive Note

By Tim Gray, TMCnet Web Editor

After posting admittedly disappointing numbers in 2008, deltathree’s (News - Alert) interim CEO said the company made a late surge and solid progress toward addressing several key issues to close out the year’s fourth quarter.
While announcing financial results today for Q4 2008, as well as the full year 2008 ended December 31, CEO Effi Baruch (News - Alert), interim chief executive officer and president, and senior vice president of Operations and Technology at deltathree, said objectives of a previously announced restructuring plan had been met and are expected to go a long way in significantly reducing fixed operating expenses in order to better align the organization with its current operations.
“While our full year 2008 performance was disappointing in light of a highly competitive telecommunications market, I believe we have made solid progress on the key issues of reducing core operating expenses, improving our quarterly bottom line performance, and bolstering the company's balance sheet through our latest round of funding after the end of the year,” said Baruch.
The Manhattan-based developer of  VoIP software reported total revenues of $4.6 million, a drop of $2.3 million compared to the fourth quarter 2007. For the full year 2008, deltathree reported total revenues of $20.2 million compared to $29.5 million for the full year 2007.
On the cost-reduction front, fourth quarter 2008 core operating expenses, consisting of general and administrative, sales and marketing, as well as research and development, declined a combined 51 percent year-over-year, according to Baruch.
“This progress is the direct result of the broad cost-reduction and efficiency measures implemented during the year, including a material reduction in global headcount, reductions in professional service agreements, and the successful renegotiation of certain long-term agreements and real estate obligations,” said Baruch.
As TMCnet reported last month, the company is providing competitive rates for worldwide calling and offering dial-up and Broadband VoIP Phone products with an expanding variety of calling features.
The plan to build a complete line of solutions that allow companies to increase their revenue streams, diversify VoIP product offerings, and differentiate themselves from competitors, has been successful in attracting new business.
deltathree advanced VoIP solutions offer service providers and resellers a range of private label VoIP products and services (including PC to Phone and Broadband VoIP Phone) as well as a back-office suite of services.
On the capital funding side, deltathree says its efforts to reign in costs and streamline the business led to an equity transaction with D4 Holdings, LLC.
In February, D4 Holdings purchased a controlling interest in deltathree and immediately began aligning the strategic interests of both businesses.
The closing of the transaction provided a cash infusion of approximately $1.2 million and positioned deltathree with a strategic investor whose ownership includes owners of ACN, Inc., the world's largest direct selling telecommunications company.
“With progress on these critical initiatives in place, we continue to deploy additional offerings to strengthen our core portfolio of communications solutions aimed at allowing deltathree to expand its current reseller customer relationships, as well as recruit new resellers worldwide,” said Baruch.
As of December 31, 2008, deltathree held approximately $2.1 million in cash, cash equivalents, and short-term investments as well as restricted cash. In February of 2009, deltathree received $1.2 million in cash upon the closing of the equity transaction with D4 Holdings.

Tim Gray is a Web Editor for TMCnet, covering news in the IP communications, call center and customer relationship management industries. To read more of Tim’s articles, please visit his columnist page.

Edited by Tim Gray

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