Our new carrier division also seemed okay. It was already the company’s fastest-growing business. It was well position in the world’s fastest-growing industry. It took very few people (read salaries) to run. And, most importantly, it played to our unique corporate strength. In the carrier business, the three most important talents you need are negotiation skills to drive down prices, analytical abilities to figure out the best place to put in the network and how to price the phone usage, and diplomatic ability to arrange favorable telephone tariffs with foreign governments.

Howie’s unrivaled analytic abilities always put us two steps ahead of anyone else in the industry. Jim, along with Jack Lerer, was virtually running his own state department, securing more favorable international arrangements than any of our competitors. And when it came to negotiating, well, AT&T or MCI might be able to field a team that could beat us at tennis or squash, but at negotiating, they weren’t even in our league. The carrier business wouldn’t be touched.

Net2Phone—our unrivaled technology for placing telephone calls over the Internet—was the future. The division was small, cost little to run, and was leading the industry in developing real Internet telephony products. It would be nuts to get rid of this. Sure, it was losing money, but in a year or so it might be worth more than the whole company. For sure, a way had to be found to move the developments quickly to the marketplace. Maybe there was even some fat to trim. But this wasn’t where the massacre was going to happen.

The big problem was with our consumer Internet business. This was the division that was pulling the company under. This was the part of the business that was losing more than all the others made. This is where the big cuts were going to come.

Ironically, it was the consumer Internet business that attracted Wall Street’s attention and had given us such a high valuation. Cutting it would undoubtedly hammer our stock. On the other hand, going bankrupt would bury it. Better to be hammered than buried, I figured. Plenty of fighters with beat-in faces go on to be champions. Relatively few dead people, however, have gone on to receive much renown.

There was, in the beginning, nothing wrong with the Internet business. In fact, in the beginning, we even ran it profitably. Clients who knew what they were doing would be attracted to us by our low prices and good service. We’d charge them $15 or $20 per month for a service that only cost $8 to provide. We were making almost 100 percent profit and had a few thousand clients. Our advertising costs, mostly in trade journals with smaller classified ads, was minimal.

Then Wall Street said if you could just step up the growth, we could back you.

“Step it up how much?” we asked.

“Oh, not that much,” they replied. “Maybe ten- or twentyfold.”

Ten- or twentyfold? How were we going to do that? Where would we get the money?