This has been quite a year for MagicJack on the financial front. Today the VoIP protagonist did what is becoming a familiar thing, pre-announcing a stronger than expected quarter and raising its guidance for both revenue and earnings per share.
I say familiar because they have done something similar four times since Christmas. In this case, they now expect third quarter revenue and GAAP earnings per share to fall in the ranges of $40-41M and $0.55-0.80, respectively. That will once again easily beat analyst expectations, which according to Yahoo Finance were $39.4M and $0.39. Full year estimates were also raised to 35-45% revenue growth and earnings per share of $1.70-2.00.
However, they also said they would take a one-time write-down for chip inventory they bought during the supply chain disruption that followed the disastrous Japanese tsunami that may be as much as $0.15 per share. Seeing as that hit is one-time and less than the amount they raised guidance by, the street can’t really complain. And they aren’t, as the stock is up 4% today.
MagicJack also offered some metrics for its improving cost structure. After netting termination revenue, they say it costs them only $1/year or less per user in opex, and it would be $0/year if they were able to count access charges that are held up in court.
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Categories: Financials · VoIP
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nobody likes a braggart less than carriers that are struggling (and there’s no shortage of them out there). Till recently Magic Jack has been to other carriers merely a tiny little nuisance, an obnoxious noise we don’t like listening to, a peripheral player that’s barely in the telecom space. But these guys are putting up real numbers with real earnings.
As far as I can tell they have no proprietary intellectual property yet they seem to be making abnormally high returns. (That piece of equipment can probably be replicated by most of the engineers that read this blog and understand VOIP technology.)
Therefore, I suspect either someone is going to enter this space to compete away some portion of these abnormal returns or regulators are going to look more closely at this business. For example, are there any access charges they’re avoiding or USF contributions they don’t have (or think they don’t have) to make. What about emergency services? Will regulators all of the sudden say they need to support 911 services.
Sadly, success has a funny way of drawing attention that you don’t necessarily want. I say, stay tuned…
I wonder how long Magic Jack can keep this scam of a service running.
Telecom companies won’t replicate the service unless they absolutely have to because they’d have to trade dollars for pennies. Good for Magic Jack. Survival of the fittest doesn’t always mean survival of the biggest.