November 16, 1998 5:05 PM PST
Tel-Save charts course with new CEO
Tel-Save Holdings, which officially changed its name to Tel-Save.com today, owes its financial existence to a single e-commerce deal struck with America Online in 1997. Although the company is close to ten years old, nearly all of its revenue comes through providing AOL members with discount long-distance telephone service.
Although limited, the AOL business is moving the company steadily forward.
The company reported third-quarter revenue of $123 million today, an increase of more than 53 percent over the same period in 1997. The company posted a loss of $1.58 loss per share, besting the consensus estimate of a loss of $1.63, according to First Call.
Investment bankers Salomon Smith Barney initiated coverage of the company's stock at a "buy" rating.
But today's good news follows a year of falling share value, and rumors of failed business deals.
Today's jump comes after a long slide in the stock's value, down from a high of 30 in February of this year. Company founder and CEO Daniel Borislow said he was close to selling out to an unnamed Internet company last July. That deal never materialized.
Under the terms of its America Online contract, Tel-Save provides AOL members with 9 cent-per-minute long distance service. Subscribers also get access to online billing and call information.
According Borislow, the company has signed up about 1.5 million lines under the deal, which Tel-Save paid AOL $100 million to close.
"Most of our revenue comes from that agreement now," Borislow said.
The CEO said Battista would likely take the company in new directions, but that the details were up to the newcomer.
"He's going to have the opportunity to do other things that he wants to do, because he'll be running the company," Borislow said. "I'm sure he will expand the services and products we offer. Most likely he'll develop a commercial sales force for our telecommunications products."
Today, Tel-Save sells and markets entirely online, without a staff of sales representatives, he added.
Borislow, who has headed Tel-Save continuously for the last 10 years, said the company would be better off in Battista's hands.
"I've usually in businesses for two to three years at a time. I've been in this one for ten," he said. "I'm going to take it easy for a while."