Internet Telephony Service Dialpad in Chapter 11

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Dialpad Communications Inc., a leading player in the Internet telephony business that once threatened the economics of traditional telephone communications, has filed for Chapter 11 bankruptcy protection.


The petition was filed Dec. 21 with the U.S. Bankruptcy Court for the Northern District of California. Santa Clara-based Dialpad now can continue serving its 14 million registered users while reorganizing the company.


"We focused on growth and market share in exchange for profitability as we built the largest customer base of loyal users in the industry," said Craig Walker, acting CEO of Dialpad.


"We overexpanded in some areas in advance of demand and did not anticipate the dramatic decline in advertising revenues as the economy weakened," Walker said.


Dialpad is ranked by consultancy Frost & Sullivan as the No. 1 provider of global voice-over Internet protocol services. The same consultancy predicts that demand for such services -- voice exchanges conducted over the Internet -- will skyrocket $84 billion by 2006, up from $3.8 billion this year.


Meanwhile, Dialpad received a temporary reprieve with the promise of $1.25 million in interim financing from San Gu Oh, chairman of Serome Technology Inc. This funding will help Dialpad as the bankruptcy court reviews its reorganization plans.


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