MagicJack Under Fire

January 10th, 2013 by · 5 Comments

Even before it went public many in the industry have watched magicJack and its over the top marketing campaigns with suspicion, and since the reverse merger with Vocaltec the public markets have remained doubtful.  Yesterday one bear, Copperfield Research, finally declared open war and took its case against the company public.  They aren't pulling any punches and the stock took a tumble yesterday in response. 

Calling for regulators to investigate, they accused magicJack and its now former CEO of a wide range of misdeeds, both recent and historical, and both corporate and personal. Accounting shenanigans are alleged, and the company's R&D facility is described as a "warehouse next to a shack housing a rug an upholstery cleaning business". Copperfield then pegs a more realistic run rate earnings per share of $0.55, a far cry from what they've been pre-announcing quarter after quarter.

It's quite a read, actually, though I am not yet in a position to judge how accurate it is.  The various red flags cited certainly could explain why the financial guys haven't been willing to give the company much credit.  It's been quite interesting to watch them this year, from using options to power their stock buyback for a while back in the spring to the quarterly pre-announcements and huge reported earnings numbers.

Nevertheless, it's one side of the story. Will magicJack fire back?  Did CEO Daniel Borislow resign after getting wind of this, or did his resignation prompt Copperfield Research to take off the gloves?  And whether magicJack counterattacks or not, will the rest of the VoIP industry get smeared in the process?

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Categories: Financials · VoIP

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5 Comments So Far


  • mhammett says:

    I’ve always viewed them as scum, but I couldn’t care less about their financials.

  • Huh says:

    Why did you “view them as scum?” Seems like a typical incumbent’s attitude about disruptive companies. Tough crap, I say. Care to explain?

  • mhammett says:

    Not an incumbent here.

    MRC $ to LNP in, $ to LNP out.

    Many OCN-LATA combinations are not included in their advertised price.

    Sleezy marketing.

  • Pomerantz Law Firm Has Filed a Class Action Against magicJack VocalTec Ltd., and Certain Officers — CALL. As for the latest award, it’s more smoke and mirrors from the execs. Frost & Sullivan sell “awards” to businesses, as alleged recognition for something special about the target company, something that F&S has
    supposedly done extensive research about. In reality, many of those awards are handed out (not for free, they are sold as commercial products!) with little or no real justification. The only justification is that award sales generate substantial revenue for F&S. In fact, companies are actively targeted for award sales, based on a) whether they seem to have a liking for awards, and b) whether they look like a potential future client to F&S.
    Similarly, identical awards are often sold to direct competitors in an industry, which ought to be an impossibility. To get around that, F&S invents convoluted award names that differ from each other only in some
    insignificant detail. This is just one example of a culture of dodgy business practices at this firm. More can be found online.

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