Giants vying to buy jajah

More than a decade ago, he was one of the four top earners in the Israeli high-tech scene: he and his partners sold online messaging company Mirabilis to AOL for $407 million. Now Yair Goldfinger is planning to do it again: the Israeli startup jajah, in which he is invested, is expected to be sold for somewhere between $200 million to $300 million.

Possibly buyers include Cisco Systems, Microsoft, and 02, which is the European arm of the international cellular company Telefonica.

Jajah's technology enables people to talk over Internet. Subscribers type in their own phone number and the destination phone number on the company's Website. The phone call is then connected at especially low rates.

Other jajah services allow the same type of connection via cellular phone.

The exit, even at the lower end, would be impressive: From its establishment jajah has raised $35 million from venture capital funds Sequoia, Globespan, Capital Partners, and T Ventures, as well as from Deutsche Telekom, Intel - and Yair Goldfinger. If it indeed sells for $300 million, investors stand to make 8.5 times their original investment.

TheMarker has learned that of the three main contenders in negotiations - Cisco, Microsoft and 02, only one has submitted an actual bid for the Internet company.

Although jajah is profitable, with annual sales revenues of about $30 million, it operates in a fiercely competitive market characterized by very low margins.

A source in the know told TheMarker that the transaction is not a done deal yet. "Jajah operates in a very competitive market, so that no offer can be ignored, especially one like this. Jajah is a good, profitable company," the source said.

Founded in 2005, jajah has 25 million subscribers. The firm is able to connect to 125 countries and aims for 200 in the future. Its research and development center in Ra'anana has 70 employees, and it maintains staff at offices in the U.S. as well. Businessweek magazine listed jajah last June (alongside four other Israeli companies) as one of the 50 companies most likely to be the next Google.

Up to now jajah has managed to score some impressive alliances and deals. Voice calls conducted by Yahoo's messenger service are in fact a jajah variation, and the company has recently signed a deal with Twitter to connect calls between users with its service (currently available only in the U.S.).

The Israeli company's biggest contract to date, signed last August with Microsoft, will integrate jajah's product into the software giant's communications server. The deal is estimated to be worth millions of dollars annually.

There are many big players in the market for voice calls over Internet. The largest and most well-known of these is Skype, which eBay acquired in September 2005 for $2.6 billion. Unlike Skype, jajah's service can also be used without earphones, a microphone or telephone connected to a computer. Once the telephone numbers are entered on its Web site, the call is connected through normal telephones.

Another jajah competitor is the U.S. company Gizmo5, which was recently reported to be in advanced stages of negotiations for a takover by Google for $30 million.