j2 Global Communications Inc. (JCOM) has acquired Venali Inc., for approximately $17 million. Venali is a provider of Web-based business fax services. Venali takes pride in its impressive list of clientele and its messaging business alone generated nearly $10 million revenues in the last one year. All pending patent litigation between j2 Global and Venali has also been dismissed.
j2 Global provides a diverse array of services from Internet fax to emails and now has 70 top-tier customers. Large customers are defined by the company as accounts with a contract size of 1,000+ DID (Direct Inward Dial) numbers. To date, the company has deployed 1,400,000 million paid DID accounts globally. Additional offerings provided by the company remain firm as j2 Global has 66 active solutions awaiting market launch. The company holds 57 U.S. and foreign patents with another 49 pending approval.
In August, j2 Global announced the availability of its flagship eFax line of products in 3,300 cities across 46 countries, indicating a growth of around 62% in the last three years. eFax offers free, professional, enterprise and back-office Internet fax services. Recently, South Korea also made its way to the list of countries in j2 Global's global network
We believe management is effectively executing the company's businesses, especially in a sluggish economic environment. j2 Global's business is extremely sensitive to overall macroeconomic factors, particularly weakness in credit markets. The company has a vast majority of credit-sensitive customers from lending and mortgage industries and other financial institutions. Despite all these odds, revenues during the second quarter 2010 inched up 3% year over year, while customer churn rate declined 0.2% sequentially and ARPU (Average Revenue per User) increased marginally for the first time in previous six quarters.
j2 Global faces stiff competition from EasyLink Services International Corporation (ESIC), Open Text Corp. (OTEX) and Premiere Global Services Inc. (PGI).
According to our view, the company's strong financial position ($4.33 per share of net cash) and diversified products/services pipeline, in synergy with the long-term growth prospects for outsourced value-added messaging services, may drive valuation levels higher in the near future.
We maintain our long-term Neutral recommendation for j2 Global. Currently, it is a short-term Zacks #3 Rank (Hold).
J2 GLOBAL COMM (JCOM): Free Stock Analysis Report
OPEN TEXT CORP (OTEX): Free Stock Analysis Report
PREMIERE GLOBAL (PGI): Free Stock Analysis Report
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