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JCOM Takes Over EPA Cloud

Zacks Equity Research

j2 Global Inc. (JCOM), a leading provider of unified messaging capabilities, recently acquired a U.K.-based Email Security and Management company called EPA Cloud. The details of the acquisition remain undisclosed.

The company exited the second quarter of 2013 with a strong cash position of $352.9 million and record high revenues of $141.4 million, up 58% year over year, easily beating both the top and the bottom line of the Zacks Consensus Estimate.

Hence, we believe that a solid cash position coupled with a low debt-to-capitalization ratio of 0.28, has induced the company to pursue this acquisition. At present, j2 Global commands approximately 30% of the world’s cloud-based digital faxing system.

Moreover, the company expects to benefit from increasing demand for cloud based, value-added communication, messaging and data backup services. As a result, the company has also raised its outlook for fiscal 2013.

j2 Global primarily depends on inorganic growth for expansion. Last year, the company made six acquisitions related to cloud-based services. The acquisitions were mainly across Europe and Australia with a total capital spending of nearly $198 million. The company executed four more buyouts early this year. The aggressive buy-out strategy of the company will consolidate its global leading position in the virtual PBX market.

Other Stocks to Consider

j2 Global currently has a Zacks Rank #3 (Hold). The other stocks in the Internet/Application software industry that are currently performing well include Textura Corp. (TXTR), Constant Contact, Inc. (CTCT) and Responsys, Inc. (MKTG). All three currently have a Zacks Rank #2 (Buy).

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