adminNew York. – Facebook’s $19 billion acquisition of WhatsApp got the attention of executives in MagicJack VocalTec Ltd (CALL)’s West Palm Beach offices. Three weeks after the February 19 deal, they dedicated part of their quarterly earnings call to point out the similarities between MagicJack’s business and WhatsApp’s, a growing number of subscribers for a mobile phone application that allows users to communicate for free.
Asked a week later whether he was looking for a buyer, MagicJack chief executive officer Gerald Vento called it a “very appropriate question” before going on to say that he’s “never worried about exit strategy”.
MagicJack’s stock price, in the meantime, is surging.
The shares have rallied 99 percent this year to a 1 1/2 year-high as the company reported better-than-expected fourth-quarter earnings and hedge fund manager Whitney Tilson named it one of his stock picks.
Facebook’s takeover of WhatsApp, the biggest Internet acquisition in more than a decade, followed Japanese online retailer Rakuten (4755) ’s $900 million purchase of the Viber Internet messaging and calling service.
“I’m not surprised that a company like MagicJack would want to ride on the hype of the Facebook acquisition,” Brian Blau, research director in consumer technologies at Gartner, said last week.
The WhatsApp deal “raises the value of messaging, and it raises it to the height that maybe wasn’t thought of before, or wasn’t thought of as realistic.”
MagicJack, whose main product is a device that connects to a computer or router to enable voice calls over the Internet, is revamping its mobile application as it seeks to benefit from the same business model of free communication services offered by Viber and WhatsApp.
It markets itself as a cheap alternative to landline and mobile phone plans, charging an annual fee of $29,95 to make calls with the device to the US and Canada .
“There’s billions and billions of dollars in market capitalisation at play here, and we believe we’re in the right place at the right time,” Vento said in an interview on Monday.
“We clearly view ourselves not just in the device space, but in the app space.”
WhatsApp has more than 450 million members, with one million users being added daily.
Viber has 300 million users of its instant messaging and free Internet phone services.
MagicJack said in a March 12 earnings call that registered users of its free app jumped 23 percent to 6,9 million in the fourth quarter from the previous three months. Of those, 3,3 million used the app in the past 30 days, it said.
MagicJack has a “significant” number of active app users, but not enough to attract a bidder, Blau said. It needs to break into the mobile application business because the value of voice services is declining across the industry, threatening its niche as a low-cost provider over the next five to 10 years, he said. – Bloomberg.
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