j2 Global in Buying Spree - Analyst Blog

j2 Global Communications Inc. (JCOM), a leading unified collaborative messaging solutions provider, recently acquired Canada-based Protus IP Solutions Inc. Protus is a Software-as-a-service (SaaS) solutions provider for business enterprises.  j2 Global paid approximately $213 million in cash for this acquisition. This deal was funded from j2 Global's cash on hand. The company has an exceptionally strong balance sheet. At the end of the third quarter of 2010, it had around $5.93 per share of net cash.

Protus has three flagship products. These are: MyFax (Internet fax), Campaigner (email marketing), and My1Voice (virtual phone service). We believe the primary reason for j2 Global's decision is the huge synergy between the two company's flagship products. Target market for MyFax, Campaigner, and My1Voice are very much similar to that of j2 Global's own eFax, Electric Mail, and eVoice products.

During the last one year, Protus generated around $72 million in revenue of which MyFax contributed 81%. After this acquisition, j2 Global has 1.9 million paid DIDs (Dial In Demand) installed globally. In the previous quarter, j2 Global organically added 76,000 DIDs (Dial In Demand), the largest quarterly growth since the fourth quarter of 2000. Importantly, the company maintained its reduced cancellation rate at the pre-recession 2006 level of 2.6%.

The company will incur approximately $15 million of integration costs during the next three quarters of which 50% will be assumed in the ensuing fourth quarter of 2010. j2 Global expects the acquisition of Protus to be accretive immediately. The company now expects revenue for the fourth quarter of 2010 within the range of $69.5 million  to $71.5 million. Non-GAAP EPS (excluding share-based expenses and acquisition-related expenses) will be within the range of 48–50 cents. 

j2 Global mainly competes with Open text Corp. (OTEX), EasyLink Services Int. Corp. (ESIC), and Premiere Global Services Inc. (PGI). We maintain our long-term Neutral recommendation for j2 Global. Currently it is a short-term Zacks #3 (Hold) Rank stock.

 
J2 GLOBAL COMM (JCOM): Free Stock Analysis Report
 
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