Problems_for_Voip

(1) By June 2006, VoIP2.biz Inc. had yet to break even financially from either a profit or cash flow standpoint. Revenue for October through December of 2005 totaled only $88,000 but resulted in a net loss of $86,000. For 2006, financial results are expected to be somewhat better with the revenue expected to be $150,000, but earnings before taxes is expected to be negative $66,000. (2) Internet has not yet had a major impact on business voice communication that was expected; several studies had foreseen that business was at the beginning of the next phase of utilizing the internet to further to reduce cost. (3) In order to take advantage of IP networking cost savings and functional enhancements, customers have to replace their existing PBX. Competitors (4) Organization such as Digium, the author of Asterisk and Pingtel, developed application software that functions just like PBX, yet runs on commodity PC hardware under Linux. These system, available are available for free and distributed as “open source” applications, provide virtually all of the features of the proprietary PBX, plus directly support IP trunking and at a cost of as little as 10 percent of the traditional vendor’s PBX. (5) Incumbent local exchange carriers (ILEC’s), principally AT &T and Verizon in Indiana, have long dominated the traditional market for voice communication. They sell network service through a variety of channels, based on business size. (6) AOL, MSN, and other national ISPs should soon be rolling out residential VoIP services. Internet Service providers have long searched for an additional value-added service they could offer in addition to internet access. Management expects wireless ISPs would also be interested in adding VoIP services. (7) VARs and interconnects have traditionally provided a competitive alternative to the ILECs for smaller firms usually at lower cost point. (8) Data networking solution providers have historically sold, installed, and serviced data networking infrastructure. They are in a strong position to add on VoIP equipment and services to their customer base. Organizations such as Fusion Alliance and Advance Micro have expressed an aversion to management to working on voice communication solutions and an interest in partnering with VoIP2.biz. (9) The successful implementation of phase 2 would require significant expenditures in marketing and working capital investment. The $3 million investment would be used primarily to fund this market expansion, and to fund general corporate and operating needs. While HSC and some angel investors had provided the funding for VoIP2.biz to date, HSC management had determined that they would be investing only internally for the next two years. While some of the investor could provide some of the investment capital, no current investor was willing to invest the entire $3 million. (10) In order to get acceptance from the board of directors to accept the opinion of implementing phase 2 plane, Milkowaski would have to explain how he and his team going to increase the acceptance of the technology at a much faster pace without spending huge amount of money. The board at their last meeting had indicated that they would invest only another $500,000 through the end of 2006 if an acceptable plan were to be developed. (11) The board of directors does not believe that VoIP2.biz could be sold for very much given the lack of positive cash flow. The board members think that firm should be shut down.