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It’s the turn of VocalTec Communications Ltd. (Nasdaq:VOCL) to emerge from the cellar where it has been hiding for quite some. The share skyrocketed 38% yesterday, and thanks to what? On Main Street, to the best of my recollection, the company has been collaborating for a long time with IBM Corp. (NYSE:IBM) on all kinds of VoIP projects. But Wall Street read a company press release yesterday (also released by IBM’s public relations department), which stated, “VocalTec, a leading global provider of carrier-class multimedia and voice-over-IP solutions for communication service providers, announced today its cooperation with IBM…”

Truthfully, had I seen the original German “Konvergenz & Wireless Forum News Flash”, I might have rushed out to buy some shares, but when the report hit the Internet, VocalTec’s share had already soared beyond what I was willing to pay.

If you ask me, then just as in the case of million shares in the past, the words “cooperation with IBM” explains the rise, because 80% of investors, maybe even 90%, who bought VocalTec yesterday heard about the company for the first time in their lives, but they’ve heard about IBM since the day they could read. Obviously, when people see that a company worth $15 million has some kind of agreement with IBM they want to try and buy 1,000 or 2,000 shares, and why not?

But why this wildness? It happens again every time, doesn’t it? Nevertheless, and for the same insane rise, which has become a norm on Wall Street in the past five years happen, it turns out that jumps like this from time to time, especially in shares like VocalTec, are important if they occur once every few years. They are important because they remind us that there are companies that have vanished from our consciousness. After all, VocalTec has an honored place in the technology museum. It was the first company in the world to commercialize VoIP; that it its claim to fame.

This company, for reasons that are difficult to assess, fell behind in the tough VoIP race, and almost came to the end of the road. Fortunately, a knight on a white horse rode up in the form of the founders of TDsoft, who it over. Joseph Albagli, Arie Shaham, Ilan Rosen and others acquired VocalTec in a share-swap deal plus a little cash. The take-over was quite friendly, because VocalTec’s previous management had little choice: the company went from a loss of $8 million on $19 million revenue in 2003 to a loss of $24.4 million on $4.6 million revenue in 2005, and its future promised only worse things to come.

The question asked at the time was, why did this very serious group of gentlemen want to take over what was basically a competitor? I think that the answer was that, despite VocalTec’s heavy losses, under good management it could do great things.

Does the deal with IBM indicate that something is happening here? I hope so, but I have no idea, and as far as I am aware, only very few people who bought the share recently, if anyone at all, have any idea, because VocalTec discloses very little information.

After restructuring, VocalTec could definitely spring a favorable surprise. Firstly, it has a group of managers whose CVs indicate that they know how to run a business. One thing is clear to me: the company’s technology from both VocalTec and TDsoft is the latest word in the field. They have money because they held a private placement in May. What’s left? Management, of course, and I’m quite optimistic on this score, so let’s wait for the share to stabilize, and then check things out again to see what will be the best thing to do. For now, I think that riding the wave would be silly.

VOCL 1-yr Chart

Published originally by Globes [online], Israel business news - www.globes.co.il © Copyright of Globes Publisher Itonut (1983) Ltd. 2006. Republished on Seeking Alpha with full permission.

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Source: VocalTec's IBM Deal: Sign of Things to Come?