Fax Americana: Charting the Progress of a Pair of E-Faxers

Two companies compete to dominate the business of sending faxes through email.
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eFax.com, Inc.

(EFAX) - Get Report

has labored in the trenches of technology since 1988, making fax-related hardware and licensing embedded-systems technology to companies like

Hewlett-Packard

(HWP)

. Its stock sat out 1998's tech-stock surge, sliding steadily from its then-all-time high of 7 3/16 to 1 17/32 in late November.

But things changed Feb. 8, when management wrapped the company into an e-package, changed its name to eFax.com from JetFax, and started offering a new, free Internet service: giving people a free telephone number to receive faxes, then forwarding those faxes to users' email boxes. The only problem is that it's a money-losing strategy with no clear profit model.

You may remember my colleague

Herb Greenberg's

mention of how much he liked eFax.com's free phone number and ability to receive his faxes via email, especially once it worked out the

glitches in the system.

According to eFax.com's

Securities and Exchange Commission

filings, the company organized a subsidiary --

eFax.com

-- to offer the fax-to-email service

and

to change the company's name by merging JetFax into the new e-company. And it seemed to have worked -- for a while. Hence the stock soared, closing above 30 April 9.

eFax.com plummeted to less than 20 Monday, falling alongside its brethren in the near meltdown that day in the tech arena. But eFax.com may have contributed to that free-fall with a filing with regulators Friday explaining that while its stock ticker was now EFAX, a second name change from eFax.com, Inc. to eFax.com had been delayed by

Delaware General Corporation Law

. The official name must remain eFax.com, Inc. until next month's stockholder meeting.

Another reason for the stock's decline could have arisen April 16, when a similar company drew attention away from eFax.com.

JFax.com

, the first email/fax/unified-messaging company, founded in 1995 by East German rap/rocker Jaye Mueller, filed its IPO registration that day to raise up to $90 million. Mueller designed his original fax-via-email system so he could stay in touch with associates while his band was on tour.

JFax.com recently changed its name from

Jfax International

. Like eFax.com, it offers a free phone number with fax service, then ups the ante with voice-mail delivery to customers' email. For the service, both companies select the area code for customers' fax numbers. eFax.com, to its credit, landed one in my same area code while JFax stuck me with an area code some 150 miles away.

Whereas eFax.com's Web site only hints at premium services to come, JFax, for $12.50 a month, gives customers a phone number in their choice of 60 area codes around the world complete with unified messaging. Users can check voice messages and faxes through their email or call a toll-free number to get their email by phone, voice mail and notification of faxes received. This is the cyberequivalent of an executive suite office in cyberspace and is something a virtual business or frequent traveler can rely on.

JFax has also been doing the fax part of this since late 1995 -- two or three generations when you're living on Internet time -- which means it has had more time to get the bugs out and build a base of 27,000 premium subscribers.

Of course, eFax.com has paying customers too, but they're all traditional purchasers and licensees. So it's no surprise that JetFax -- being an old-fashioned tech company of sorts -- has been losing less money than its competition: $1.5 million in 1998 compared with JFax, which saw its losses balloon to $11.9 million last year.

Of course, eFax.com has a fundamental problem: No matter how many times its news releases describe it as "an Internet fax-to-email service provider," its main business is not a .com. And while eFax.com stock soared 70% March 15 when it announced a deal to supply

Xoom.Com

(XMCM)

with its service, JFax has long had deals with

Yahoo!

(YHOO)

,

America Online

(AOL)

,

Ameritech

(AIT) - Get Report

and a laundry list of others.

This battle of the e-fax companies has obviously just begun, and it will heat up even more once JFax goes public.

Lewis Perdue helped launch three technology companies in roles ranging from marketing executive to chairman/CEO. He has written widely on technology for InfoWorld, PCWorld, Interactive Week, Forbes ASAP and many others. Perdue is also editor and publisher of

Wine Investment News. At time of publication, he held no positions in the stocks discussed in this column, although holdings can change at any time.

As originally published, this story contained errors. Please see Corrections and Clarifications.