These days, his company provides local and long-distance calling in the United States and Canada for a flat annual fee of about $30 for U.S. customers, or about $40 in Canada, not including the cost of its similarly priced DUO device. Like most of its rivals, netTalk.com charges customers extra for connect time in excess of 3,000 minutes per month. Extra charges apply to an international call outside United States and Canada unless both parties use a DUO device to connect.
NetTalk.com started operating in late 2008 with Kyridakides and two other employees in a one-room office, located in Miami Gardens near the busy Golden Glades interchange of Interstate 95, Florida’s Turnpike and the Palmetto Expressway. NetTalk.com now owns a 25,000-square-foot building near its original location and has about 80 employees, many of them engineers, system analysts and software writers.
The bulk of netTalk.com’s capital has come from a New York-based investment firm called Vicis, the telephone service provider’s principal shareholder. "They have put close to $25 million into this company," Kyriakides said. Vicis engineered two key transactions in September of 2008, the merger of netTalk.com with a shell company and the combined company’s immediate acquisition of a small VoIP business. The investment firm later arranged a public offering of stock by certain shareholders of the company.
NetTalk.com filed its initial stock registration statement with the Securities and Exchange Commission in February of 2009, and its stock price has been quoted on the OTC Bulletin Board, under ticker symbol NTLK, since September 2009.
The young company is still a money-loser, and its tiny stock price reflects the lack of profitability. Shares of netTalk.com recently sold for 9 cents a share. The stock’s peak price in the previous 12 months was 36 cents.
Heavy borrowing to cover cash needs has increased interest expense, impeding the company’s effort to operate above the break-even point, and reduced advertising expenditures have done little to increase public awareness of netTalk.com. Interest expense in the January-September period last year jumped to $3.2 million from about $944,000 during the same nine months in 2011. Advertising and marketing expenses in the nine month period dropped to about $845,00 last year from $1.78 million in 2011.
Revenues and net losses have headed in the right direction, though. NetTalk.com reported $4.09 million of revenue in the nine months ended last September, up sharply from $2.24 million in the same period in 2011. The company cut its net loss during the nine months almost in half to $12.5 million from $24.9 million in the same period in 2011.
MagicJack’s and Vonage’s revenues dwarf the top line at netTalk.com. New Jersey-based Vonage Holdings Corp., listed under ticker symbol VG on the New York Stock Exchange, earned $84 million of net income last year on $849 million of revenue. Vonage is scheduled to report its first-quarter financial results May 1.
Publicly held magicJack, listed on the NASDAQ stock exchange under ticker symbol CALL, earned $55 million of net income on $158 million of revenue last year, thanks largely to increased sales. MagicJack has corporate offices in Netanya, Israel, and West Palm Beach.
Both big rivals decisively outspent netTalk.com last year on building brand awareness. MagicJack cut its advertising expenditures from $32 million in 2011 to $23 million last year, but that was still 27 times more than netTalk.com spent. Vonage spent $212 million on marketing last year, which was nine times more than magicJack spent.