NET PHONE COMPANY CUTS JOBS

MARTHA McKAY, Staff Writer
The Record (Bergen County, NJ)
11-08-2001
NET PHONE COMPANY CUTS JOBS -- 43% OF WORKFORCE GETTING PINK SLIPS
By MARTHA McKAY, Staff Writer
Date: 11-08-2001, Thursday
Section: BUSINESS
Edition: All Editions -- Two Star B, Two Star P, One Star B

Net2Phone, the once high-flying Internet telephone company, is the
latest victim of the economic downturn.

The Newark-based corporation said Wednesday that it is slashing its
675-member workforce by 43 percent, or about 290 employees. The company
also will streamline its operations and close some facilities.

Net2Phone hopes the moves will save about $23 million.

"We need to be profitable, we owe it to the Street, and we owe it
to ourselves," said Net2Phone spokeswoman Sarah Hofstetter.

The company expects to take an $8 million restructuring charge
covering severance payments and office closures.

Net2Phone, spun off from IDT Corp. in 1999, grew during the past
several years as telecommunications boomed.

IDT started in Hackensack before moving to Newark in 1999;
Net2Phone moved shortly thereafter but kept a presence in Hackensack.
The company currently has about 100 employees in Hackensack, Hofstetter
said.

Details on the number of Hackensack employees who would be laid off
were not immediately available. The company also could not immediately
say which, if any, New Jersey offices might be shuttered. In addition to
Hackensack and Newark, Net2Phone has a facility in Lakewood.

Pink slips were issued Wednesday and will continue through the end
of the week, Hofstetter said.

Net2Phone provides telephone services over the Internet, which
initially consisted of PC users donning headsets and using microphones
attached to their computers to place phone calls. Although the quality
was often poor, the calls were cheap and the method caught on.

Net2Phone currently serves more than 1 million customers and has
signed deals with carriers such as AT&T and Sprint, as well as Internet
giants such as AOL Time Warner, Microsoft, and Yahoo!

Net2Phone's cutbacks did not surprise those who follow the
industry.

"One of the big selling points of Internet telephony is that it
costs less than traditional telephony," said Jeff Kagan, an independent
telecommunications analyst.

But with traditional telephone companies such as AT&T and WorldCom
struggling to maintain revenues in the face of falling long-distance
prices, "how do the smaller upstarts expect to survive?" said Kagan.

"Internet telephony is not going away, it's going to be part of the
landscape," he added, but the companies need to figure out ways to make
money.

Last month, Net2Phone reported continued steep losses. For the
year, the company posted a net loss of $65.8 million vs. a loss of $81.1
million last year.

Last month, Net2Phone's former parent stepped in to effectively
retake control of the company. A consortium led by IDT that included
AT&T Corp. and Liberty Media Corp. gained 49 percent ownership of
Net2Phone and 60 percent of the voting power.

As part of its restructuring, Net2Phone will consolidate some
business lines to provide efficiencies, Hofstetter said.

She added that Net2Phone will focus on providing Internet telephony
over cable systems in concert with Liberty Media.

Net2Phone shares, whose 52-week high was $21.56, on Wednesday
closed down 25 cents to $5.75.

Staff Writer Martha McKay's e-mail address is mckay(a
t)northjersey.com

Keywords: INTERNET. TELECOMMUNICATION. LAYOFF

Copyright 2001 Bergen Record Corp. All rights reserved.