SAN FRANCISCO (04/07/2000) - The cramped voice-messaging-service sector shrunk slightly today, as JFax.com of Hollywood, Calif., announced that it plans to acquire competitor EFax.com of Menlo Park, Calif. Under the deal's terms, JFax would give EFax stock holders about 18.5 million shares of its common stock at Wednesday's closing price of $4.
JFax also would lend EFax $5 million and, in exchange, would receive a warrant to purchase 250,000 shares of EFax stock. Both companies provide a range of messaging services, some free and others fee-based. JFax, for example, allows a customer's e-mail box to receive faxes and voicemail in addition to e-mail.
Combined, the two companies have 3 million users of their free services and 125,000 users who pay for additional services.
Following news of the deal, both stocks rose: JFax closed the day at $4.44, up nearly 11 percent from yesterday's close, and EFax ended the day at $4.59, up about 3.5 percent. JFax President and CEO Steve Hamerslag says his company, which sustained a net loss of $17.4 million in 1999 (with revenues of $7.6 million), expects the acquisition to accelerate profitability. "We intend to become profitable in the not-too-distant future," says Hamerslag, though he declined to predict when that might occur. As the merger is completed this spring, JFax and EFax would shut down their sites and launch a new presence.
The new site's name has not been released, but Hamerslag admitted that it will "get fax out of the name - we're really about communications."
Hamerslag also confirmed that, as part of the consolidation, some employees would be laid off. With an array of portals, ISPs and unified messaging Netcos all offering a comparable range of services, the strategy of companies like JFax continues to hinge on partnerships forged with large providers, similar to JFax's own relationship with Yahoo. And although the online messaging market is a crowded one, its players have their eyes open for additional services they might offer on their sites. Regarding niche messaging services' decisions to partner with portals and others, EarthLink spokesman Kurt Rahn says: "I don't think it's necessary to survive. But I think it makes good business sense."