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Yehud-based AudioCodes (Nasdaq:AUDC), a developer IP and ATM networks voice transfer technologies, is ending a rough and tumble year. In Q2 2001 the company posted its first-ever operating loss, which in Q3 became a net loss, even after bad debt was acknowledged and inventory was written off.

In the fourth quarter the company somehow managed to improve its bottom line, but still could not avoid this landmark: negative cash flow.

All the same, Q4 results indicate a certain recovery, though losses and one-time expenses are by far not negligible.

The company's Q4 revenues totaled $5.5 million, up 10% from the third quarter, but a particularly painful 75% drop from its revenues in the same quarter last year, which came to no less than $22.5 million. CIBC Oppenheimer's forecast was $5.1 million revenues, a forecast the company managed to beat. Annual reported 2001 revenues for AudioCodes were $35.7 million, half their total in 2000.

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AudioCodes specializes in solutions for overall data and voice broadband access on DSL and Wireless Access networks. The company's product lines include signal processors, communication cards and end units in the sub-system level for the transfer of voice and fax on VoIP and VoATM networks.

AudioCodes is traded according to $205 million market cap, and the share leaped 300% since the September 11 attacks, which could indicate investor understanding the worst is behind the company.

The company's falling top line could be explained by the fact the entire VoP (voice over packet) market is in a crisis, and fewer orders are placed. Another element is the fact most of AudioCodes sales come from a particularly small group of clients, and the risk is not evenly scattered. None of the company's major clients, Lucent Technologies (NYSE:LU), Cisco Systems (Nasdaq:CSCO), Alcatel (NYSE:ALA), VocalTec Communications (Nasdaq:VOCL) or Clarent (Nasdaq:CLRN) are having it easy these days. However, Mike Lilo, AudioCodes CFO and VP of finance explains the only customer in charge of more than 10% of the company's earnings was VocalTec, and that Clarent's troubles on the home front meant its orders were tiny.