Piper Jaffray lifts income expectations for VocalTec but predicts expanding loss

Analyst Robert Goldman lowers Vocaltec's share price target from $30 to $11
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The positive financial results announced by

VocalTec Communications

(Nasdaq:VOCL) on Thursday, and its optimistic 2001 analyst briefing, had a swift impact on investment houses. Piper Jaffray were fast to update income estimates for 2001 and 2002.

In a conference call the company held after releasing its report, CEO Elon Ganor said he expects income to grow by at least 60% over 2001, implying revenue of $65 million to $75 million for 2001. The company sees earnings rising by 60% to 70% in the years to come.

Despite Ganor's optimistic predictions, analysts at Piper Jaffray prefer to adopt a more conservative approach. Analyst Robert Goldman has increased his revenue expectations, but also his loss expectations.

Goldman writes that VocalTec will report income of $65.5 million and a loss of $1.16 a share in 2001.

An earlier estimate was for revenue of $62.5 million and 88 cents loss a share.

For 2002, he estimates are revenue of $90 million and for 60 cents earnings per share. Earlier estimates spoke of $90 million revenue and net gain of 58 cents.

Holdings in the Truly Global division are expected to decrease

VocalTec provides solutionsfor voice-over-Internet protocol. It trades on Nasdaq at a market cap of $85 million. The company has three separate business divisions. The IP Telephony division provides equipment to communication carriers. The Surf&Call division provides Internet services to call centers, and the Truly Global division provides VoIP directly to end-users.

Goldman's latest revenue model incorporates assessments that the company will reduce its stake in the Truly Global division during 2001 and 2002, although its performance is good.

Goldman adds that Vocaltec will benefit in the years to come from the new products and services that it has began to offer, including upgraded versions of existing products.

He adds that Asia-Pacific contributed about 16% of Vocaltec's total revenue in the last quarter. Sales to that region posted the fastest growth in the last quarter. Deutsche Telekom alone contributed 32% of Vocaltec's total income thanks to a Surf&Call contract. At the time of the report, the company also announced that CFO Jeffrey Dykan is leaving the company by March 2001 to lead an Israeli startup.

Goldman Sachs lowers Vocaltec's price target from $30 to $11, still 55% higher than its current price. The analyst says that this price target implies a price-income ratio of 2 on 2001 expected sales, adding that the company's valuation is approaching its peers, which have taken a beating on the market.