VOCL

VocalTec Acquires Outsmart: Major Event that Could Significantly Increase the Share Price

December 10th, 2009 by Yehuda Fruchter   |   No Comments

Today, VocalTec announced that it acquired Outsmart, an Israeli provider of mobile VOIP solutions. Strangely, the company has not announced the financial terms of the deal, but my suspicion is that VOCL got a tremendous bargain, since Outsmart was a busted venture capital (VC) investment, and it’s likely the VC’s just wanted out while maintaining some upside opportunity via shares in VOCL. Hopefully, management will release additional financial details on the deal in the coming weeks or at least next quarter. Outsmart has raised well in excess of $17 million in VC capital, so if VOCL bought it for anything less than that the deal is stellar.

More importantly, as readers know based on my Vonage (VG) posts, I am extremely bullish on the prospects for mobile VOIP. With the acquisition of Outsmart, VOCL has positioned itself with an incredible portfolio of products for mobile VOIP. The market potential of these products is enormous, and the timing couldn’t be better, since mobile VOIP is going to explode in the next few years. As a leading and well recognized leader in the field of VOIP, VOCL can now participate in the coming growth of mobile VOIP.

With a market cap of only about $10 million and sales already at nearly $8 million annualized, the upside for VOCL’s shares seems significant, if my analysis of the Outsmart deal proves somewhat accurate.

Disclosure: Affiliates of Envoy Global Research, and its principals, own shares in VOCL. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.

VocalTec Communications (VOCL): Another Interesting VOIP Investment

August 28th, 2009 by Yehuda Fruchter   |   5 Comments

After my successful investment in VG, I’ve been looking for other ways to play the renewed interest in VOIP, especially considering the push for VOIP applications on mobile networks.

One stock that peaked my interest was VOCL. The company is a provider of carrier-class voice-over-IP solutions for communication service providers, and counts VG as a customer. VOCL was in fact a pioneer in the VOIP space. Recently, VOCL announced the availability of a new mobile VOIP product, which you can read about here. Supporting my bullish stance on VOIP for mobile was this interesting quote from the CEO in the press release for the new product: “Market estimates mention mobile broadband penetration rates of over 50% by 2013 with cellular VoIP representing the majority of voice traffic by the same year.”

As for the stock, though it has increased over 1,000% from its low (wish I had found it earlier, of course), incredibly it still seems to offer a good risk/reward. Basically, in February of this year, VOCL bought back 1.7 million shares of its own stock from Cisco International at $0.40. That represented about 23% of the shares outstanding, leaving VOCL with about 5.7 million shares outstanding.

At the current price of about $1.75, this equates to a market cap of about $10 million. However, at the end of the last quarter, VOCL reported about $11 million in cash, implying that the company, despite the significant rise in the stock price, still sports a negative enterprise value. Notably, however, during the last quarter revenue grew by 50% on a sequential basis to $1.5 million and the company reduced losses to around $700K. In 2008, VOCL had approximately $6 million in revenue and the company expects growth this year. With over 60% gross margins, this revenue stream, and other IP at the company, are clearly not worthless.

Overall, despite the fact that the company has had significant trouble generating profits in the past, I think that at current prices, these financial difficulties are already priced into the stock valuation, given the negative EV. At the same time, as the company’s financial situation improves due significant industry-wide changes, and as more investors look for ways to invest in the mobile VOIP sector, VOCL’s stock value could still increase significantly.

Disclosure: Affiliates of Envoy Global Research, and its principals, own shares in VOCL and VG. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.