Sidecut Reports

I’ll leave it to those who have more time to spend with SEC documents than I do right now to sort out all the details, but the initial public offering hinted at by MagicJack founder Dan Borislow last summer has sort-of come to pass, with the announcement of a merger between MagicJack’s parent company and VoIP gear supplier VocalTec, which trades on the public markets.

As befits a Borislow operation, there’s a whole lot of murkiness and mess involved — gotta love the line from the SEC filing that flashes a big red light over any and all proceedings, mainly to do with the fact that VocalTec isn’t a U.S.-based company so doesn’t necessarily have to play by NASDAQ rules. From the merger SEC filing, we quote:

We are a “foreign private issuer” and you will receive less information than you would about us from a domestic U.S. corporation. In addition, we have opted out of certain Nasdaq Marketplace listing requirements.

With the caveats out of the way, what else is interesting about MagicJack? According to the fiscal numbers, MagicJack did indeed have a $100 million revenue year in 2009 as Borislow predicted when we talked to him last — it was actually $117.8 million in revenue according to the document — but the company also incurred a loss of $22 million for the year, mainly due to huge costs like those of the MagicJack devices sold ($23.4 million), advertising ($32.1 million), network and carrier charges ($25.6 million) and $41.8 million in “General and administrative” charges, which seem quite high for a smallish startup of MagicJack’s nature.

Read the rest of this entry »

If you follow this blog you know we are big fans of the way our pal Andy Abramson thinks, especially when he thinks big. Some required reading for this long weekend is Andy’s thoughtful take on “sponsored” Wi-Fi, who pays for Internet access and communications going forward — a blend of thinking as thorough as a Thanksgiving table. Take a read and digest the thinking… worth your time.

As a bit of a corollary to the post I wrote this week for my pals at GigaOM, there is the question about why aren’t MagicJack and Clearwire working together, as disruptors of the telecom status quo? MagicJack, as inventor Dan Borislaw will tell you, is making hay selling a $40 device that lets you make cheap calls over your broadband connection. And Clearwire is using WiMax to make that broadband connection cheaper.

Doesn’t the combo sound right for some of that peanut-butter/chocolate kind of hookup? It sure seems so to MagicJack’s Borislow. But so far, he says that the Clearwire folks haven’t rung his bell, despite the potential leads he might be able to provide from his customer list.

“It blows me away, the fact that they don’t call me up,” said Borislaw about Clearwire.

In their defense, the Clearwire folks are busy trialing their own version of Voice over IP, which they probably plan to charge more for than MagicJack’s $20-per-year service. Right now, Clearwire is only offering voice as a $25-per-month option in its Portland market; while Clearwire has said that its customers can use any VoIP application they choose, in previous interviews company execs like co-chairman Ben Wolff have said that they plan to offer voice services robust enough to justify the planned charges.

Sounds good — but in these economic times, MagicJack’s $20 per year might sound even better. But instead of competing, it’s gotta be at least worth a call to Borislaw to see if there’s a potential partnership, no?

Since we’re knee-deep in new report creation mode here at Sidecut central, this post isn’t going to be too long. But some news nuggets from different parts of the communications world got me to thinking… is it time for Skype and WiMax to do the peanut butter-n-chocolate thing?

One on hand, you’ve got Clearwire experimenting with VoIP handsets in Portland, Ore., the town that may yet go down as the Capital of WiMax before this is all over. On the other you’ve got Skype (and Asterisk) talking about making it easier to interact with SIP and by extension, small business phone systems.

Now throw in some Skype mobile handsets and what do we have?

Probably not anything the Clearwire folks want too badly, since they are counting on VoIP subscriptions to increase ARPU. But… imagine how interesting a WiMax service pitch would be if you got a free Skype phone as part of the signup deal. If anyone wants to continue this conversation over drinks in Vegas, I’m buying…

News of note around the ol’ Internets:

Senate Ready for DTV Delay: Sen. Rockefeller says it’s a disgrace that the DTV transition needs to be delayed. Vote is next week?

WiMax Forum Wants to Make Roaming Easier: The industry group launches a plan to help providers, device manufacturers and others synchronize WiMax services for easier roaming.

Sprint Dials Up a $2B Public Safety Plan: The good folks at Sprint have an idea about how to spend some of that stimulus cash, to build a network for public safety personnel.

Wireless Providers Want Cash, Not Conditions: Meanwhile, the big cellular telco lobbying organization, CTIA, says stimulus cash is great, but please hold the “open network” conditions, thanks.

VoIP a Winner over 4G: A study says that Voice over IP will be a big winner on 4G networks. (We agree, and plan to cover the topic in our WiMax Focus research service later this year.)