Author Topic: CALL - MagicJack VocalTec Ltd  (Read 14628 times)

dolce far niente

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Re: CALL - magicJack VocalTec Ltd
« Reply #10 on: September 14, 2014, 10:28:42 PM »
the company is cash generative and with that, wont they be able to invest in R&D and customer acquisitions? Wont investing in R&D improves customer growth and churn rate? A double whammy?

Not necessarily. Nokia, Kodak come to mind.


PatientCheetah

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Re: CALL - magicJack VocalTec Ltd
« Reply #11 on: September 15, 2014, 05:09:51 PM »
While it is true that the industry is shrinking, and the product is mediocre, I disagree with you that the company will not be able to compound its gain. the company is cash generative and with that, wont they be able to invest in R&D and customer acquisitions? Wont investing in R&D improves customer growth and churn rate? A double whammy?

Can you think of any incremental R&D that will improve customer growth and churn rate? IMO VOIP is a mature industry. For me personally, I make vast majority of my calls from cellphones and PCs for free (e.g. Skype, WeChat, Whatsapp, etc.)
« Last Edit: September 15, 2014, 05:12:44 PM by PatientCheetah »
risk as little as possible until all the stars have aligned

Longer Term: FB MSFT BABA JD YRD

WeiChiLoh

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Re: CALL - magicJack VocalTec Ltd
« Reply #12 on: September 16, 2014, 04:52:03 AM »
Hi. Thanks for the reply. From reading product reviews and whatnot, it seems Magicjack's problems are fixable. An example is the fact that the app on the smartphone cant be close and therefore eats battery. Another is the fact that product quality is quite binary. Customer service can be better. These problems look fixable.

I am not saying this company could be a ten bagger as what tilson suggests. But, so long as the company is able to reduce churn rate by a couple dozen basis point and monthly has customer acquisition rate of maybe 1% to offset some of the churn, this company seems to have the potential to be a multi-bagger on a DCF basis. The company has massive tax assets, negative working capital and is very capital light after all.

sleepydragon

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Re: CALL - magicJack VocalTec Ltd
« Reply #13 on: September 16, 2014, 06:03:33 PM »
I am down about 30% on this name but I am still holding it. 

I use magicJack as my home phone and I love it. There were some negative reviews on amazon about customer services, but I have not experienced any of those problems. For example, there were complaints about there's no way you can disable "auto-renew" from their website. But I found you could do it now. Also, I have not experienced any dropped calls.  So I think they fixed quite a lot of problems.

The only problem I had is I or someone call my magicJack number, the phone sometimes does not ring. But caller can leave a message and the message get send as an email to me immediately. For only $59/year I am very happy customer.

I think there's very little downside, given the cash balance and large deferred revenues. Their only cost is marketing and running the servers. Is it a dying business? I don't think so. I used to use Skype. My Skype was hacked and someone used it to make calls to  Russia.  Skype is also more expensive if you want to receive calls. There's really no other cheaper alternatives. And if this is a dying business, why microsoft spending so much money to buy Skype?  I think magicjack will be bought eventually by someone like ATT. It's a threat to their phone service business.

yadayada

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Re: CALL - magicJack VocalTec Ltd
« Reply #14 on: September 17, 2014, 04:31:00 AM »
but soon there will be wireless internet everywhere. And then you just install skype on your smart phone and call for free? Or if you want to call long distance you probably both have a pc with internet?

I assume you use it for long distance calls?

sleepydragon

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Re: CALL - magicJack VocalTec Ltd
« Reply #15 on: September 17, 2014, 05:41:38 AM »
you can also install magicjack's app on iPhone and make calls.it's also free.
for Skype, you need to pay to get a number for people to call too. and it cost more than MagicJack.
if wireless Internet is everywhere, correct you can make app to app calls for free. but both side has to be running the apps (unless you use MagicJack which package the software into the hardware, and MagicJack to MagicJack calls are already free), and it will be a very long time before that happens.

WeiChiLoh

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Re: CALL - magicJack VocalTec Ltd
« Reply #16 on: September 17, 2014, 06:57:51 AM »
I think the right question to ask is, what is a reasonable bear case and will the company be able to milk enough of its FCF to justify current valuation?

smd123

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Re: CALL - magicJack VocalTec Ltd
« Reply #17 on: December 14, 2014, 03:35:20 PM »
It is trading at ~$7-8 now. $4 per share is cash.

Market cap: 137.31M
Cash: 78.22M
EV: 61.38M
Ebitda: 26.20M

From their q3 earnings call (http://seekingalpha.com/article/2667435-magicjack-vocaltecs-call-ceo-gerald-vento-on-q3-2014-results-earnings-call-transcript), it seems their revenue was depressed due to brand refresh with new devices being rolled out, whose sales will show up in next quarter earnings. Also, they are expanding in Mexico, in partnership with Telefonica.

How do you weigh the risk/reward trade-off here?

Picasso

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Re: CALL - magicJack VocalTec Ltd
« Reply #18 on: December 14, 2014, 04:08:36 PM »
I would attribute a lot of the weakness to the fact that Tilson owns it.  That said it looks pretty cheap here and worth a closer look.

WeiChiLoh

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Re: CALL - magicJack VocalTec Ltd
« Reply #19 on: December 14, 2014, 06:15:39 PM »
I wont buy this company largely because

1) It is is NWC negative. While many people like it, in the case for a declining business, negative NWC actually means that when the business starts declining, NWC actually goes up, puting further pressure on cash flow. That $4 in cash can disappear soon.

2) In order for the company to be worth its current market capitalization, churn rate has to equal add rate. Chrun rate now is 3.1% while add rate is 2%. So i guess that is the data point I am looking at. If add rate exceeds churn rate significantly, then I will start getting interested. 

I would attribute a lot of the weakness to the fact that Tilson owns it.  That said it looks pretty cheap here and worth a closer look.