I am a long time user of magicJack VocalTec’s (NASDAQ: CALL) voice over Internet protocol (VoIP) device (the magicJack) but just how magical is the stock for investors? To start with and for those of you not familiar with magicJack VocalTec, its an Israeli based company that is a provider of carrier-class voice over Internet protocol (VoIP) and convergence solutions for fixed and wireless communication service providers. In fact, its been around since the mid-1990s but has largely been overshadowed by Vonage (NYSE: VG) and Skype. Nevertheless, magicJack VocalTec has sold over 8 million magicJack devices worldwide.
In fact, I have owned a magicJack for at least a couple of years now. Specifically, the device simply plugs into my computer’s USB port and then I just plug an ordinary phone into the device’s phone jack and use that, or the desktop software that comes with the device, to call any number in the USA for free. The device also comes with its own specific phone number and a choice of area codes. However and when I bought my device (I think I paid around $40 for it plus another $20 per year), the area code that my parents live in and would be using the device to call was still not available so I got a number for a neighboring area code.
Hence and if they want to reach me, they just need to call the phone number I got with the device and its just like calling the area code next door but I can actually be anywhere in the world (except perhaps in the Middle East’s Gulf States where VOIP is largely banned). Likewise, I can be anywhere in the world with high-speed internet and simply call their home or mobile numbers for free.
So why don’t I just use Skype for free? The trouble with Skype (besides the fact that sometimes its not very reliable) is that both my parents and I need to sit in front of the computer for at least an hour or more to talk. That might be fine for some people but when I usually call my parents, my mother is running around doing laundry or the dishes or is putting away the groceries while my dad is outside or balancing his checkbooks at his desk or sitting in the recliner about to go to bed if its really late in the evening. In other words, its easier to pay the $20 bucks a year plus I can call any landline or non-toll free number and be put on hold for awhile without ringing up a massive phone bill.
So what about magicJack VocalTec as a stock investment? Earlier this month, magicJack VocalTec had a 2:1 stock split at the $24 level – near its 52 week high. The split resulted in magicJack VocalTec becoming more liquid for investors and traders alike.
Moreover, magicJack VocalTec had surged 18% in December after it announced the cancelling of a share offering because strong sales were expected to give the stock a cash cushion of at least $50 million. Specifically, magicJack VocalTec’s magicJack Plus has been flying off the shelves with 365,000 being sold in just the first 30 days. And while I don’t yet own the magicJack Plus device, I have been bombarded by emails about it. Basically, magicJack Plus plugs directly into an Internet line – meaning you don’t need to have the computer on in order to make or receive calls (its also priced higher at $69.95 versus $39.95 for the device I own).
Otherwise, investors should be aware that magicJack VocalTec has reported revenues of $119,678k (2010), $116,812k (2009) and $6,114k (2008) along with net losses of $1,555k (2010), and $22,531k (2009) plus net income of $3,708k (2008). That may not be the most exciting income statement but things have definitely improved for the last quarter.
So what’s the bottom line reason to own magicJack VocalTec stock? My guess would be that the major telco players would love to crush a device that clearly threatens their turf while both magicJack and magicJack Plus devices would make a great addition to any bundled service offered by a cable company. In other words, magicJack VocalTec could be an acquisition target by either a telco or cable player or any tech player for that matter (Remember, Microsoft acquired Skype).
Likewise and given the fact that the magicJack devices are also a great way for cash strapped consumers as well as foreign relatives of immigrants to the US to call their loved ones, I suspect magicJack VocalTec will continue to post strong results in the future.
