j2 Global Inc.
), a leading provider of cloud-based digital faxing and voice
messaging systems, recently completed the 40
acquisition in the company's history. The latest one is the
privately held digital media company Ziff Davis Inc. for which j2
Global paid a total consideration of about $167 million. Ziff
Davis controls a series of leading websites, particularly in the
technology sector. These include PCMag.com, ComputerShopper,
ExtremeTech, Toolbox.com and Geek.com.
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. Although revenue from these sources improved, we
believe estimates for future results may become volatile as the
global economy continues to be challenged. In an effort to cope
with this situation, j2 Global has decided to diversify into
digital media field. Management has estimated that the
acquisition of Ziff Davis will contribute around $60 million in
j2 Global has a strong cash position with no debt outstanding.
After giving effect to this transaction, j2 Global was left with
$300 million in cash and investments. Management has upwardly
revised its revenue guidance after this acquisition. The company
now estimates that its top line for 2012 will exceed the high end
of its previous guidance range of $345 million and $365 million.
Moreover, j2 Global reaffirms that its 2012 non-GAAP earnings per
share will exceed that of 2011.
Despite stiff competition from
Commtouch Software Ltd.
Open Text Corp.
), we believethe company's strong financial position and
diversified product pipeline, as well as its long-term growth
prospects of outsourced value-added messaging services and
continuous subscriber growth will drive earnings higher in the
near future. We, thus, maintain our long-term Neutral
recommendation on j2 Global. Currently, the company holds a
short-term Zacks #3 Rank (Hold) on the stock.
COMMTOUCH SOFTW (CTCH): Free Stock Analysis
J2 GLOBAL INC (JCOM): Free Stock Analysis
OPEN TEXT CORP (OTEX): Free Stock Analysis
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