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JFAX.COM: Sending Positive Messages to Investors

"We are not on the endangered species list," says Steve Hamerslag, the CEO of JFAX.COM . Yes, it has been tough for shareholders of JFAX.COM. However, Hamerslag believes things will change fast - and for the better. In fact, he has been one of the company's biggest buyers. A look at JFAX.COM's insider sales shows lots of activity from him. In late May, for example, he purchased 141,006 shares at $5.89.

Despite its name, JFAX.COM is more than just faxing. Rather, it is a full suite of unified messaging services. Let's face it. With faxes, e-mail and voice messages, it is becoming increasingly difficult to manage everything. JFAX.COM puts everything in one place.

But the marketplace is still emerging. Thus, valuations have been meager. Despite this, JFAX.COM has been building its user base. The company recently purchased a main competitor, eFax.com. Combined, the new JFAX.COM has more than 3.3 million subscribers.

With its large user base, JFAX.COM is in good position to strike deals. One recent deal was with Winfire, which is a provider of free DSL services. Users of Winfire will have access to the unified messaging services of JFAX.COM - which will be part of the Winfire toolbar.

Revenues for JFAX.COM are still small. The first quarter numbers were $2.9 million, which was up 103% from the same period last year. Gross profits were $1.5 million and net losses were $4.6 million. The company has $38 million in the bank and the burn rate has been about $4 million per quarter. "But the burn rate is on the steady decline," said Hamerslag. "We have plenty of runway."

Perhaps a big problem with JFAX.COM has been the perception that it is mostly consumer. Well, according to Hamerslag, the company's services are positioned nicely for e-business. "We take the view that our services provide great incremental value to existing groups of users," says Hamerslag. "Further, by focusing on the corporate market, we've found that the churn rate tends to be lower and the cost of customer acquisition is lower. There is also a major trend for corporations to outsource technologies like ours."

Another great value to the company is its infrastructure. "We built it for reliability," says Hamerslag. "This is critical for the corporate market." It was the acquisition of TimeShift in February 2000 that accelerated the development of the JFAX.COM infrastructure.

Actually, the unified messaging sector can be subject to huge valuations. The most prominent was Phone.com's purchase of OneBox.com, which had 2.5 million registered users. The price tag? $850 million. Currently, JFAX.COM has a market capitalization of $103 million. I think this valuation will soon be on the endangered species list as well.