Will VocalTec and Skype Merge?

One of the major factors that led TMC to decide to launch Internet Telephony magazine back in 1997 was that we saw VocalTec launching products in the space which allowed telephony to travel over IP networks – and just like that the IP communications market was born.

Prior to this point, voice over frame relay was the preferred way to transmit voice over a packeted network.

When we launched Internet Telephony, we invited VocalTec co-founder and CTO Lior Haramaty to write a column in the publication – after all, no one knew more about the technology he helped invent than well, him!

Getting back to present-day Vocal-Tec, the company has merged with magicJack parent Ymax Corp. and recently raised its revenue guidance slightly and is looking to officially launch magicTalk – a PC-based service offering free US calling.

Back in August, TMC ran a piece on magicTalk and now the company says it has 100,000 beta users and 10,000 downloads per day. The magicTalk one-month Alexa rank is 386,430 up from 893,141 (lower numbers correspond to higher rank) and their Alexa chart is certainly improving as the chart below shows.


My two cents are it is tough to compete with Skype and Google in the VoIP space with a new offering but magicTalk has used television advertising to sell VoIP service in a way which turned an unknown company into a household name overnight. They used marketing well and although they have had some controversy surrounding them, I have always considered Ymax to be great promoters.

One of the past issues the company had was when they launched, they made some claims about their technology which were a bit over the top and many industry bloggers went ballistic in response. Moreover, the company has been called out about its inability to provide live voice service calls – but in reality if live support calls cost about $15 per interaction, how can you expect to get these bundled into service which costs about $40/year?

I reached out to the company for more information about what they’re up to but they weren’t immediately available for comment. To give you some additional perspective I asked Haramaty for his thoughts – he isn’t involved with the company anymore but his opinions are very well-respected in the market and this is what he had to say:

When looking at the “new” VocalTec (with Magic Jack) and Skype as competitors, one can’t ignore the differences in positioning and corporate culture. While Skype caters to the more technically inclined users, VocalTec’s infomercials and POS as Wal-mart, Target and Walgreens is targeting a much broader, less techie audience. Complementing this is the clear product message, ease of installation and low price of Magic Jack.

I would assume that if compared, the customer demographic of Skype will prove to only partially overlap VocalTec/Magic Jack customers. Collaboration might be beneficial.

Moreover, VocalTec is holding patents that cover the foundations of VoIP,  a potential threat to Skype, especially pre-IPO. I would not be the least surprised if an attempted merger between the companies is imminent. A reverse merger instead of an IPO?

A combined company can be a winner, with a huge diverse customer base, a rich range of products, mashed technologies, sophisticated network management and intellectual property to protect it all. It can emerge as  a new-era global AT&T, revolutionizing, again, the voice communication business.

Certainly very interesting thoughts and I wouldn’t be surprised if such a merger were to happen for the exact reasons outlined above. Having the largest user base of IP communications users and a massive patent pool is a great combination. Remember – you read it here first.

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