j2 Global Enters Digital Media - Analyst Blog
November 14 2012 - 6:30AM
Zacks
j2 Global Inc.
(JCOM), a leading provider of cloud-based digital faxing and voice
messaging systems, recently completed the 40th
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
2013.
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. (CTCH) and Open
Text Corp. (OTEX), 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 Report
J2 GLOBAL INC (JCOM): Free Stock Analysis Report
OPEN TEXT CORP (OTEX): Free Stock Analysis Report
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