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Chris Lahiji
Chris Lahiji
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Recently, I am sure all of you have been seeing and hearing things about the VoIP craze on television, magazines, and radio. VoIP essentially stands for Voice Over Internet Protocol, and is just a fancy way of saying a phone that is powered by your Internet connection.

The office number of is powered by Vonage which is VoIP, but I am pretty sure no one can tell the difference. Instead of a normal landline powered by the Baby Bells, our phone uses the broadband connection.

To get a better understanding of this technology if you happen to be a luddite, click here:

Believe me when I say that the cost savings of using VoIP over traditional landline is certainly a factor in purchasing it. Even though consumers have been slow to embrace the technology, corporate America certainly has not.

That is why I am recommending Vodavi (VTEK) today. In my opinion, the company is the only VALUE oriented play in this fast growing segment.

The first thing I like about the stock is the fact that it has been around for over 21 years. Many might not think this type of longevity is a positive trait to have, but in the telecommunication business, it is substantial.

Vodavi makes enterprise telephone systems, marketed under the STARPLUS and Vodavi brands, provide in-house switching for handling incoming, outgoing, and internal phone, fax, and modem traffic for business customers. Some of the other products they sell include voice mail systems, computer-telephony integration products, call distribution software, and commercial telephones.

VTEK also has hardware and software link computers and phones of small and midsized businesses for videoconferencing, call accounting, and Internet messaging which is a growing part of their business. The company sells mainly to distributors and dealers including Graybar and most notably LG Electronics (Korean conglomerate), which is the largest supplier to Vodavi, and owns nearly one quarter of the company.

I spoke to the CFO for an hour a month ago, and he was upfront and kind. Judging by looking at the books, management is extremely disciplined and knows how to make money both in good times and in BAD.

The company has four million cash, no debt, about $17 million in current assets, and is profitable. In my opinion, the catalyst for upside lies in their new product VoIP product line, Telenium. Already, you can see evidence that demand for the product is brisk. The CEO of the company, Greg Roeper mention in the last quarter that revenue associated with specific IP product SKUs increased 100% over the first quarter of 2004 and that he sees a shift from traditional to IP equipment moving forward.

Many of Wall Street will not touch the Company because it gives no quarterly guidance or indication of how business is going until their earnings announcement. That is personally fine with me, because I know that management runs a tight ship and knows how to grow a business.

Finally, I spoke with a couple of Vodavi resellers to ask how their relationship has been with the company. I was not surprised to hear praise for their customer service and outstanding products.

Warm Regards,

Chris Lahiji

Chris Lahiji will be available to take your questions until Thursday, June 16. Please use the form below to submit your questions.

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