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VocalTec Communications Ltd. (NASDAQ:VOCL) reported results for the fourth quarter and full year ended December 31, 2001.

Revenues for the fourth quarter of 2001 were $5.7 million, representing a sequential decline of 5% and a decline of 53% from the fourth quarter of 2000. The net loss from continuing operations was $4.2 million in the fourth quarter compared with $6.2 million in the third quarter of 2001 and $2.6 million in the fourth quarter of 2000. Excluding restructuring costs of $225,000 and a $941,000 gain on the sale of ITXC shares, the net loss from continuing operations for the fourth quarter was $4.9 million.

Net loss in the fourth quarter of 2001 was $4.2 million, or $0.35 per share, compared with net loss of $4.4 million, or $0.36 per share in the same period of 2000.

Commenting on the quarter, Dr. Elon Ganor, Chairman and CEO of VocalTec stated, "Despite the extremely cautious spending environment, our revenues remain stable. We are continuing to manage the company for the long term and have sharpened our focus both strategically and operationally. This includes continued emphasis on cost reduction and allocation of resources, and to this end we have decided to cap our investment in Surf&Call."

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With respect to Surf&Call, the voice-enhanced Web-enabled call center solution, the Company intends to pursue a sale or a carve-out as an independent company with VocalTec as a minority holder.

"In the fourth quarter we continued to expand our relationship with key customers, supporting ITXC in their further penetration into Mexico and their expansion into Latin America in response to deregulation," remarked Ira Palti, Chief Operating Officer. "We also signed important new distribution agreements in Europe and the Far East, and continued to focus on key customers in those regions."

"With respect to our new VocalTec Softswitch Architecture Series 3000," continued Palti, "we have one major trial under way and expect to participate in others beginning this quarter. However, we do not expect to see deployments until the end of the year. We are still pushing toward profitability; but, with continued poor visibility and the resources required to participate in carrier trials, it is unlikely that we will report an operating profit this year, unless overall demand is better than we currently expect.

Net decrease in cash in the fourth quarter was $3.8 million after the proceeds of the sale of 180,000 shares of ITXC Corp. As of December 31, 2001, the company had $18.4 million in cash (including cash equivalents and short term deposits), and held 4.6 million shares of ITXC Corp. Dr. Ganor commented, "We consider this a long term investment; however, we intend to gradually reduce our holdings in ITXC by selling a small percentage of our shares each quarter."

VocalTec also indicated that it may be characterized under the U.S. Internal Revenue Code as a passive foreign investment company for 2001. If, after completion of the relevant analyses, VocalTec is so characterized, this designation could have significant tax implications for U.S. persons who held VocalTec shares during 2001. VocalTec noted that there are certain elections that can be made to mitigate the effects of this designation and the Company urges those to whom this applies to consult with their tax advisors and be prepared to take appropriate action once the Company determines its final status for 2001.