China VoIP & Digital Telecom Inc. Reports Up-trending First Quarter Revenue After Challenging Transition to Focus on Virtualization Business

JINAN, Shandong, China, May 24 /PRNewswire-Asia-FirstCall/ -- China VoIP & Digital Telecom Inc. (OTC Bulletin Board: CVDT), a leading virtualization solutions and services provider in China, today announced financial results for the first quarter ended March 31, 2010.

    First Quarter Results:
    -- Revenue reached $1,160,339, an increase of 453.43% compared to $209,665
       in the same quarter of last year. The comparison was based on the
       Company's continued operation -- virtualization business because the
       Company discontinued its VoIP operation last October. By one-year's
       development, the new virtualization business contributes consolidated
       revenue to the Company compared to that in 2009.
    -- Gross profit grew by 53.48 % to $210,774 from $137,005 in the first
       quarter of fiscal 2009.
    -- Operating loss was $484,004, a decrease compared with operating income
       of $25,758 in the same period of 2009.
    -- Net income recorded $1,966,113 compared to net loss of $5,980,209 in
       the first quarter of 2009.

During the first quarter of this year, the company obtained a number of virtualization solutions and services contracts. Several of the projects required two or three months to implement, resulting in revenue deferral from the first quarter to the next when most of the projects will reach completion.

"We are pleased to report a solid start to 2010 after a very difficult year in 2009," said Mr. Kunwu Li, President and CEO of the company. "In July of last year when the Chinese government blocked VoIP communications, our company faced considerable jeopardy. We had to discontinue our VoIP operations, which had previously delivered more than 90% of our revenues. However, facing tremendous difficulties, we took on the challenge to move up a new business that had been in the planning stages. We were able to quickly transition and realign the entire company to focus on virtualization. Starting in 2010, our focus was to obtain customers and sign virtualization solutions and services contracts in strategic industries, which we believe are the critical components of economic growth in China. Penetrating these markets with our virtualization solutions is a vital component for our business growth. We are pleased to report that we were successful in gaining several important customers in these large-scale industries, including healthcare, power supply and the government and taxation sector during the first quarter," Mr. Li said.

"Although some of our initial contracts were modest in terms of dollar amounts, they were important in establishing our company with our target industries to provide us with key reference accounts. As evidence of this, we have recently obtained a second contract from the Shandong Taxation Bureau. We also signed a $640,000 contract with the Wendeng Municipal Government. We are receiving strong support from the local governments to promote our virtualization solutions, which should help expand our marketing campaign to sign more government contracts."

Mr. Li continued, "Since we are only in the early stages of our virtualization solutions business, we still have a lot of work ahead of us in executing of our business plan. A part of this plan is to leverage System Integrators (SIs) as our external sales force. During the first quarter, our SI program contributed 13% of our revenue. The SI marketing effort will complement the company's internal sales in our market penetration strategy."

Mr. Li is upbeat about future growth, despite recent challenges. "While our first quarter revenue and gross profit growth did not meet our expectations, we do see an encouraging and upward trend in our operations. Now that our business transition is complete, we will continue to work hard and develop out strategy to obtain more enterprise users and further our market penetrations with our SI partners in our virtualization business. The virtualization industry has enormous growth prospects in China. We are optimistic that we will be able to deliver strong top line revenue and bottom line earnings growth in the second half of 2010."

    2010 Guideline:

    Fiscal year 2010 Total Revenue: $15 million
    Fiscal year 2010 EBITDA: $3.5 million

About China VoIP & Digital Telecom Inc.

China VoIP & Digital Telecom Inc. offers virtualization technology application in the People's Republic of China through its wholly owned subsidiary Jinan Yinquan Technology Co., Ltd and Beijing PowerUnique Technologies, Co., Ltd. Through the two subsidiaries, China VoIP & Digital Telecom is well positioned to take full advantage of the tremendous economic growth currently being experienced in China. The Company is currently marketing its integral virtualization solutions and services in China and at this time is in the testing stages of other Information Technology products. More information can be found at http://www.chinavoip-telecom.com .

About Virtualization Technology

Virtualization is a proven software technology that is rapidly transforming the IT landscape and fundamentally changing the way people compute.

Today's powerful x86 computer hardware was originally designed to run only a single operating system and a single application, but virtualization breaks that boundary, making it possible to run multiple operating systems and multiple applications on the same computer at the same time, increasing the utilization and flexibility of hardware.

Virtualization is a technology that can benefit anyone who uses a computer, from IT professionals and Mac enthusiasts to commercial businesses and government organizations. Join the millions of people around the world who use virtualization to save time, money and energy while achieving more with the computer hardware they already own.

Safe Harbor Statement

Certain of the statements made in the press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend" or "anticipate" or the negative thereof or comparable terminology. Such statements typically involve risks and uncertainties and may include financial projections or information regarding our future plans, objectives or performance. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of a variety of factors, including the risks associated with the effect of changing economic conditions in The People's Republic of China, variations in cash flow, reliance on collaborative retail partners and on new product development, variations in new product development, risks associated with rapid technological change, and the potential of introduced or undetected flaws and defects in products, and other risk factors detailed in reports filed with the Securities and Exchange Commission from time to time.

    For more information please contact

    CVDT Investor Contacts:
     Michelle Wong
     Tel:   +86-531-5558-5742
     Email: [email protected]

    Great Wall Research LLC
     Sheena Shen
     Tel:   +1-203-252-7266
     Email: [email protected]

SOURCE China VoIP & Digital Telecom Inc.