JFAX.COM: Buyout Bait?

Yesterday, Phone.com paid dearly to get into the unified
messaging game. This looks like the first step in consolidation for the
industry and JFAX.COM could be on the hit list.

To tally things up: I have two cell phones (one that has Web access); a
Palm VII; an office phone line; a home phone line; oh, and I also a fax
line. As for mail addresses, I have four.

I often wonder: Wouldn’t it be great to have a central place for all
messaging? Well, there are a variety of solutions, but they have gotten off
to a slow start. But perhaps — in the new millennium — this may change.

There was evidence of this yesterday, when Phone.com spent a whopping $787
million to purchase Onebox. As the name implies, Onebox is where you
centralize messaging: faxes, voicemail and e-mail.

In all, Onebox has raised $70 million in venture financing. With the money,
Onebox has created cutting-edge technologies, attracting over 2.5 million
users.

I suspect this is only the beginning. There is likely to be more
consolidation in the messaging space. One company that looks attractive is
JFAX.COM (JFAX)
.

When you sign-up for JFAX.COM, you can do such things as send your faxes
and voicemail to e-mail; send faxes and voice messages from your PC; and
listen to voicemail and e-mail messages over any phone. It takes only ten
minutes to connect to the service. In fact, the service has attracted top
players. For example, Yahoo! signed an agreement to use the JFAX.COM
technology (this is part of the Yahoo! Mail services).

Unlike Onebox, JFAX.COM has a tiered customer base. That is, 56,000 of the
users were paid subscribers and 400,000 were registered members.

So far, JFAX.COM has been able to monetize its traffic. In the past
quarter, revenues were $2.6 million, which was double the revenues of the
same period a year ago. The sequential growth rate was 35 percent. The
gross margins were 52.9 percent. But there were losses, of course. In the
last quarter, the losses were $4.4 million, which compares to losses of
$5.2 million in the same period a year ago.

However, JFAX.COM has been making serious changes. Perhaps the most
important was getting a new Chief Executive Officer, Steve Hamerslag. He was the founder and
CEO of MTI Technology, which was a leading data storage management company.
He took the company public in 1994.

The company also added top people to the positions of VP of product
marketing and business development and VP of sales.

But there are challenges for JFAX.COM. Major telecom businesses present
fierce competition, as well as many upstarts (such as Onebox).
However, in light of the Onebox.com acquisition, JFAX.COM definitely looks
attractive — especially at its current valuation (the stock trades at
$4-15/16, with a $162 million market capitalization).

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