magicJack faces allegations of accounting irregularities
Frost & Sullivan's naming of magicJack VocalTec (Nasdaq: CALL) as the best VoIP service provider based on a survey of North American VoIP users has apparently not been able to stem the decline in the company's stock.
The stock dropped from a high of $18.50 per share earlier in the month to below $14.65 in late afternoon trading on Wednesday.
The stock took a steep drop on Jan. 9 following allegations by a blogger that the company used accounting gimmicks to boost profits and that the former CEO, Daniel Borislow, used company stock for collateral as debt, charges Borislow called "clear and utter lies," according a report by Bloomberg.
In addition, the Shareholders Foundation, a portfolio monitoring service, announced Wednesday an investigation by an undisclosed law firm on behalf of magicJack investors over potential securities laws violations. The probe is examining investor claims that the firm made "materially false and misleading" statements about its business, prospects and operations.
magicJack has declined to comment on the allegations.
On the good news front, a Frost & Sullivan survey of North American VoIP users found that magicJack received the highest ratings on overall quality, ease of use, billing practices, value and pricing for VoIP services. The firm received the top score in each category as well as the highest overall score.
"Consumers rate magicJack higher than its major competitors. For overall quality, magicJack is rated 5.8 on a seven-point scale, while its major competitors much lower," commented Joerg Dittmer, senior analyst at Frost & Sullivan.
If magicJack can weather this legal storm over alleged dodgy accounting practices, its performance in the market bodes well for continued growth for the VoIP provider.