Fax Featured Article

If socialite Arianna Huffington can become a successful publishing mogul, why can’t j2 Global (News - Alert) do the same? The Internet-based fax and cloud services company just purchased former tech magazine giant Ziff-Davis for $167 million in cash, jumping into the publishing world with both feet.

The acquisition means that media properties such as PCMag.com, ComputerShopper, ExtremeTech and Geek.com are now owned by j2 Global. Don’t screw it up, j2! PC Magazine and ComputerShopper are institutions, as is the Ziff-Davis brand.

But Ziff-Davis is not the publishing powerhouse it was during the 1990s. The publisher assumed too much debt, got passed around from owner to owner, had its enterprise division sold off to Insight Venture Partners in 2007, and lost its video game sites to Heart in 2009, according to the San Francisco Chronicle. It is not exactly the dominant tech publisher of day’s yore.

Still, the purchase should be good for business.j2 Global expects that the deal should add an additional $60 million in 2013 revenues and boost its share price since the diversification shields the company from some of the macroeconomic factors that threaten its core business.

“j2 Global's business is extremely sensitive to overall macroeconomic factors, particularly weakness in credit markets,” wrote Zacks Equity Research. “The company has a vast majority of credit-sensitive customers from lending and mortgage industries and other financial institutions.”

Future results for j2 Global maybe become volatile as the global economy continues to be challenged, according to Zacks Equity, making the move into digital media a nice play.

FBR Capital’s Daniel Ives, who tracks J2 Global’s stock, recently told clients that the purchase price of 2.8 times the projected 2013 revenue was “fair,” and he was fairly optimistic about the ability of j2 to use Ziff to market its fax services, according to Barron’s.

“In our opinion this acquisition represents a nice tangential growth opportunity for j2, as the company looks to expand its marketing and cloud services segment over the coming years,” Ives wrote. “We also believe Ziff offers the company additional cross-sell opportunities for j2′s core fax product, given its strong marketing presence. As evidenced with this acquisition (and the company’s recent debt offering), we believe j2 is going to be incrementally more aggressive on the M&A path in 2013 as the company looks to increase its growth profile and expand its product footprint through strategic acquisitions such as Ziff Davis.”

This is all tangential from the real reason we think j2 purchased Ziff-Davis, which is to impress its tech-loving buddies in the fax and cloud services industries. But unlike, say, the purchase of the AmigaOS, which would have gained it street cred but undoubtedly hurt earnings, the acquisition of Ziff-Davis is both a swift move and a sexy one.

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