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j2 Global Completes Another Acquisition

JCOM OTEX

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j2 Global Inc. (JCOM - Analyst Report) recently closed the acquisition of Zintel Communications’ New Zealand business.    

This is the company’s second acquisition within a span of 6 months in the Asia-Pacific region, after acquring the Australian subsidiary of Zintel Communications in March 2012. However, the terms and conditions of the deal were not disclosed by any of the companies.

j2 Global offers outsourced, value-added messaging and communications services to both businesses and individuals supported by a vast array of global telephony/Internet Protocol (IP) networks apart from providing digital faxing, voicemail, email, and call handling services. The company’s networks span over 4,200 cities in about 49 countries.

Recently, j2 Global declared its second-quarter 2012 financial results with both revenue and EPS beating Zacks Consensus Estimates. Additionally, the Board of Directors hiked its quarterly dividend by 2.3% to 22 cents per share from 21.5 cents in the reported quarter, maintaining its streak of dividend increases for four consecutive quarters.

The company offers its cloud-based business to more than 2 million customers and is confident about its growth. We believe this is a strategic acquisition by the company which, when completed, will strengthen its cloud voice business in the Asia-Pacific region and will enhance the experience of its New Zealand subscribers by integrating with Zintel’s cloud based offering.       

j2 Global primarily depends on inorganic growth for expansion and has acquired the cloud service business of several companies since the beginning of the year, including Offsite Backup Solution LLC, Landslide Technologies Inc. and Zimo Communications Ltd. Despite stiff competition from Open Text Corp. (OTEX - Snapshot Report), we believe the company’s strong financial position and diversified product pipeline coupled with the recent acquisitions will foster incremental growth going forward.

The current Zacks Consensus Estimate for j2 Global is pegged at 57 cents for the third quarter of 2012 with a growth rate estimate of (2.54%). For 2012 and 2013, the Zacks Consensus Estimates stand at $2.43 and $2.45, respectively, with growth rates of (1.42%) and 0.82%.

Recommendation:

We thus maintain our long-term Neutral recommendation on j2 Global. Currently, JCOM holds a short-term Zacks #3 Rank (Hold) on the stock.

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