Internet fax and communications service provider j2 Global Communications (Nasdaq: JCOM) is targeting fax offenders again, this time a company called Hot Lead. j2 Global has filed a lawsuit against Texas-based Hot Lead, accusing the company of sending its customers thousands of "junk faxes," essentially the equivalent of spam email advertisements.
Now, I'm not an expert in public relations, but it seems to me naming your company Hot Lead is just asking for the wrong kind of attention -- sort of like showing off your kitten juggling skills at a PETA convention. Consumers today have little patience for unsolicited advertisements, and Hot Lead will have to defend itself by demonstrating that it does not violate the Telephone Consumer Protection Act of 1991, which bans unsolicited fax advertising.
Earlier this year, j2 Global settled similar lawsuits against two companies sending unsolicited faxes. The company has been a champion for the cause of stamping out junk fax over the last few years, since the annoying advertisements degrade the quality of service j2 provides its customers.
The extra legal expense of going on the offensive against fax spammers is important -- j2 Global reported more than 900,000 paying customers and more than 10 million "free customers" at the end of 2006. Services to these customers combined to bring in revenue of $175 million in 2006 and largely contributed to a stunning $65.8 million in free cash flow.
In fact, j2's 28.6% ratio of leveraged free cash flow to revenue rivals even highly successful, cash-producing companies such as Google's (Nasdaq: GOOG) 8.8%, Microsoft's (Nasdaq: MSFT) 17.9%, and even eBay's (Nasdaq: EBAY) 24.8%. With a growing cash hoard of $191.6 million, j2 can afford to aggressively pursue junk faxers.
j2 Global's stock price has shot up roughly 1,380% over the last five years, thanks to the company's continued ability to grow its business and produce high margins for its services. The company also employs patented technology on its own network across 37 countries, giving it a solid moat against competition. With success like this, j2 will stay on the offensive to remove any obstacles from its path.
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Microsoft is a Motley Fool Inside Value pick, and eBay is a Motley Fool Stock Advisor selection.
Fool contributor Dave Mock imagines that kitten juggling requires a high level of expertise and should not be tried at home. He owns no shares of companies mentioned here. Dave is the author of The Qualcomm Equation. The Fool disclosure policy spits hairballs from time to time.