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Technology news and Jobs arrow Cornered! arrow Engin: We've blown $26m; we got it wrong, now give us $8.4m to keep afloat
Engin: We've blown $26m; we got it wrong, now give us $8.4m to keep afloat E-mail
by Stuart Corner   
Monday, 25 February 2008
Having blown the $26 million that Seven Network pumped in when it took a 33 percent stake in 2006,   VoIP provider Engin has terminated its ambitious triple play intentions and is asking shareholders for another $8.4m just to keep it in business.
‡D∞The company has announced a rights issue to raise $8.4 million by offering 281 million shares at three cents each, a 37.5 percent discount on their closing price on 22 February. And it has providedi its long suffering shareholders with remarkably little information on what it intends to do with their money.

Just about the only information in the 34 page prospectus is contained in chairman Ian Smith's letter in which he says the money is needed to "address the immediate cash burn issue; to provide the funding needed to complete the strategic restructure of the business [and] provide capital to grow the subscriber base in the broadband telephony environment and allow the business to consider deploying additional complementary products such as broadband and TiVo and provide ongoing working capital."

Engin had cash and cash equivalents of $3.5 million at 31 December but burnt through half of this ($1.7m) in January. The prospectus offers no guidance as to the future prospects of the business. The offer is fully underwritten by Seven subsidiary Network Investment Holdings.

In his letter, Smith explained that: "your company will be going through a period of further restructure in order to maintain its underlying operation, align overheads and staffing more closely with the current revenue base and position it to grow...As a leading player in the broadband telephony market we believe there are substantial opportunities to be gained by focusing on our core telephony business, achieving a cost base appropriate to that business and positioning it to grow...The board and management are confident that shareholders will be best served by a focus on the core telephony business."

Most of the $26 million Seven pumped in went to build customer numbers for Engin's VoIP service but, as iTWire has previously pointed out, the cost per customer aquired was an order of magnitude greater than that of rival provider, Mynetfone.

 
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