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MagicJack CEO Sees 2013 Profit Rising on Apps: Israel Overnight

Sept. 7 (Bloomberg) -- MagicJack VocalTec Ltd., the Israeli company whose founders invented the technology used for making phone calls over the Internet, is forecasting higher profits for 2013 as customers use its new mobile phone applications.

“Our apps have been very popular and we are going to monetize them,” Chief Executive Officer Daniel Borislow said yesterday by phone from West Palm Beach, Florida. “It also helps us cut our media costs,” as the tool will become popular through word-of-mouth publicity, he said.

The technology company surged 4.3 percent to $26.54 in New York yesterday, the highest level since March 21, after raising its 2012 earnings forecast for the second time in two months. MagicJack led gains on the Bloomberg Israel-U.S. equity index of the biggest Israeli companies traded in New York, which climbed to the highest level since May yesterday.

MagicJack forecast 2012 earnings of as much as $2 per share, compared with an earlier estimate of $1.50 to $1.80, according to a statement yesterday. Profitability will further improve in 2013 with revenue from the apps and a new product that will be used via WiFi technology, Borislow said yesterday. The company also plans to buy another 5 percent of outstanding shares, he added.

MagicJack’s jump sent valuations to 17.4 times estimated earnings. The ratio surpassed for the first time since May the average multiple of 17 for companies on the Nasdaq Composite Index, according to data compiled by Bloomberg.

The Israel-US Equity Index rose 1.5 percent to 85.42 yesterday while the benchmark TA-25 Index declined 0.1 percent to 1,112.57 in Tel Aviv.

‘Dedicated Phone Number’

The company had previously increased its earnings forecast for the year to $1.50 to $1.80 in July from as little as $1.25, citing higher device sales and customers renewing their use of the services.

The company’s main product is a device that connects to a computer or to a router to enable voice calls over the Internet. Last week it rolled out an app for Google Inc.’s Android platform, after developing a free app for users of Apple Inc.’s iPhone. The company is seeing app downloads in excess of 20,000 a day, according to Borislow.

“At some point when people want a dedicated phone number, then they will be happy to pay for the app,” he said. The apps also help the company gain market share in countries outside the U.S., as no hardware investment is required, he said.

The Israeli company competes with Skype Technologies SA, which was acquired by Microsoft Corp. for $8.5 billion last year, and Vonage Holdings Corp., the biggest U.S. provider of telephone service over the Internet.

Share Buyback

MagicJack spent $30 million to $40 million on buybacks during the second-quarter, Borislow told investors on a conference call on July 30.

“We have an aggressive buyback policy and we are trying to keep people as informed as possible,” he said.

Israel, whose population of 7.8 million is similar in size to Switzerland’s, has about 60 companies traded on the Nasdaq Stock Market, the most of any country outside the U.S. after China. The nation is also home to more startup companies per capita than the U.S.

Tower Semiconductor Ltd., the maker of customized chips, rose 4.2 percent to $8.93. Its shares in Tel Aviv climbed 2.8 percent to 35.05 shekels, or the equivalent of $8.73.

The Migdal Haemek, Israel-based company has increased 13 percent this week, the most since the week ended March 23.

Tower’s shares were relisted on the Nasdaq Global Select Market, according to a statement yesterday. The company reported on Sept. 3 that it will manufacture products for Vishay Siliconix, a unit of Pennsylvania, U.S.-based Vishay Intertechnology, at factories in Japan and Israel.

To contact the reporter on this story: Sridhar Natarajan in New York at

To contact the editor responsible for this story: Tal Barak Harif at

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