As of the last business day of the registrant’s most recently completed second fiscal quarter, the approximate aggregate market value of the common stock held by non-affiliates, based upon the closing price of the common stock as quoted by the NASDAQ Global Select Market was ~~$672,955,896.~~$695,301,411. Shares of common stock held by executive officers, directors and holders of more than 5% of the outstanding common stock have been excluded. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of February 16, ~~2009,~~2010, the registrant had ~~43,945,979~~45,176,381 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the definitive Proxy Statement to be delivered to shareholders in connection with the Annual Meeting of Shareholders to be held May ~~7, 2009~~6, 2010 are incorporated by reference into Part III of this Form 10-K.

This Annual Report on Form 10-K includes 7473 pages with the Index to Exhibits located on page 65.

TABLE OF CONTENTS

	Page
PART I.

Item 1. Business	3

Item 1A. Risk Factors	8

Item 1B. Unresolved Staff Comments	1716

Item 2. Properties	1716

Item 3. Legal Proceedings	17

Item 4. Submission of Matters to a Vote of Security Holders	1918


PART II.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	2019

Item 6. Selected Financial Data	2322

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2423

Item 7A. Quantitative and Qualitative Disclosures About Market Risk	32

Item 8. Financial Statements and Supplementary Data	34

Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	62

Item 9A. Controls and Procedures	62

Item 9B. Other Information	63


PART III.

Item 10. Directors, Executive Officers and Corporate Governance	64

Item 11. Executive Compensation	64

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	64

Item 13. Certain Relationships and Related Transactions, and Director Independence	64

Item 14. Principal Accounting Fees and Services	64


PART IV.

Item 15. Exhibits and Financial Statement Schedules	65

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PART I

Item 1. Business

Company Overview

j2 Global Communications, Inc. (“j2 Global”, “our”, “us” or “we”) is a Delaware corporation founded in 1995. By leveraging the power of the Internet, we provide outsourced, value-added messaging and communications services to individuals and businesses throughout the world. We offer fax, voicemail, email and call handling services and bundled suites of certain of these services. We market our services principally under the brand names eFax®, eFax Corporate®, Onebox®, eVoice® and Electric Mail®.

We deliver many of our services through our global telephony/Internet Protocol (“IP”) network, which spans more than ~~3,000~~3,500 cities in 46 countries across six continents. We have created this network, and continuously seek to expand it, through negotiation with U.S. and foreign telecommunications and co-location providers for telephone numbers (also referred to as Direct Inward Dial numbers or “DIDs”), Internet bandwidth and co-location space for our equipment. We maintain and seek to grow an inventory of telephone numbers to be assigned to new customers. Most of these numbers are “local” (as opposed to toll-free), which enables us to provide our paying subscribers telephone numbers with a geographic identity. In addition to growing our business internally, we have used acquisitions to grow our customer base, enhance our technology and acquire skilled personnel.

Our core services include fax, voicemail, email and call handling, as well as bundled suites of certain of these services. These are business services that make our customers more efficient, more mobile, more cost-effective and more secure than traditional alternatives. We generate substantially all of our revenue from subscribers that pay, ~~activation,~~ subscription and usage fees. ~~Activation and subscription~~Subscription fees are referred to as “fixed” revenues, while usage fees are referred to as “variable” revenues. We also generate revenues from patent licensing ~~fees,~~and sales, advertising and revenue share from our customers’ use of premium rate telephone numbers. Of the ~~11.6~~11.2 million telephone numbers deployed as of December 31, ~~2008,~~2009, approximately ~~1.2~~1.3 million were serving paying subscribers, with the balance deployed to free subscribers, including those with premium rate telephone numbers. We operate in one reportable segment: value-added messaging and communications services, which provides for the delivery of fax, voice and email messages and communications via the telephone and/or Internet networks.

During the past three years, we have derived a substantial portion of our revenues from our DID-based services, including eFax, Onebox, and eVoice. As a result, we believe that paying DIDs and the revenues associated therewith are an important metric for understanding our business. It has been and continues to be our objective to increase the number of paying DIDs through a variety of distribution channels and marketing arrangements and by enhancing our brand awareness. In addition, we seek to increase revenues through a combination of stimulating use by our customers of usage-based services and introducing new ~~services and instituting appropriate price increases to our fixed monthly subscription and other fees.~~services.

We market our services to a broad spectrum of prospective customers including individuals, small to medium-sized businesses and large enterprises and government organizations. Our marketing efforts include enhancing brand awareness; utilizing online advertising through Internet portals, Internet service providers (“ISPs”), search engines and affiliate programs; and selling through both a telesales and direct sales force. Currently, we have seven primary methods by which we acquire paying subscribers: (i) selling direct through our Websites, targeting primarily individuals; (ii) attracting direct paying individual subscribers through various Internet portals, ISPs, search engines and affiliate programs; (iii) promoting our solutions to small to mid-sized businesses through our Websites targeting corporate, enterprise and governmental customers; (iv) converting a portion of our free base of customers to a paid solution; (v) selling our solutions to large enterprises and governmental organizations through our direct sales force and tradeshows; (vi) attracting international individual and business customers through our international Websites and direct sales force; and (vii) offering additional services to our existing customers. We continuously seek to extend the number of distribution channels through which we acquire paying customers and improve the cost and volume of customers obtained through our current channels.

In addition to growing our business organically, we have used acquisitions to grow our customer base, enhance our technology and acquire skilled personnel. During 2009, we completed the acquisition of the digital faxing business and certain intellectual property of CallWave, Inc., a provider of Internet unified communications solutions, and the email business of Quexion, LLC. During 2008, we completed four acquisitions: (a) fax assets of Mediaburst Limited, a UK-based provider of messaging services, (b) all of the outstanding shares of Phone People Holdings Corporation, a U.S.-based provider of voice messaging services, (c) assets of Mailwise, LLP, a U.S.-based provider of email services, and (d) assets of Mijanda, Inc., a U.S.-based provider of fax and voice services. During 2007, we completed two acquisitions: (a) assets of YAC Limited, a provider of messaging services primarily in the United Kingdom, and (b) the RapidFAX digital fax business of Easylink Services International Corporation. ~~During 2006, we purchased assets of Send2Fax, LLC, a South Carolina provider of Internet fax services.~~

Through a combination of internal technology development and acquisitions, we have built a patent portfolio consisting of ~~57 issued~~multiple U.S. and foreign patents and numerous pending U.S. and foreign patent applications. We generate licensing revenues from some of these patents. We intend to continue to invest in patents, to aggressively protect our patent assets from unauthorized use and to continue to generate patent licensing revenues from authorized users. For more information on our patents and other intellectual property, please refer to the section entitled Patents and Proprietary Rights contained in Item 1 of this Annual Report on Form 10-K.

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~~property, please refer to the section entitled “Patents and Proprietary Rights” contained in Item 1 of this Annual Report on Form 10-K.~~

Our Solutions

We believe businesses and individuals are increasingly outsourcing their communication and messaging needs. Their goal is to reduce or eliminate costs while also enhancing the security of transmissions and user efficiency. Our core eFax solution enables users to receive faxes into their email inboxes. Our core eVoice and Onebox solutions provide customers a virtual receptionist with various available enhancements. These services represent more efficient and less expensive solutions than many existing alternatives, and provide for increased security, privacy and message handling flexibility (e.g., the ability to store messages electronically and forward them by simply forwarding an email).

We currently offer integrated solutions designed to replace or augment individual and corporate messaging and communication services. We tailor our solutions to satisfy the differing needs of our customers. Our paid services allow a subscriber to select a local telephone number from among more than ~~3,000~~3,500 cities around the world. Toll-free U.S. and Canadian telephone numbers are also available, as are premium rate numbers in various countries in Western Europe. In addition, our services enhance the ability of businesses to provide messaging services to their remote workforces, increase their level of information security and control and allocate costs more effectively.

We offer the following services and solutions:

Fax

eFax offers desktop faxing services. Various tiers of service provide increasing levels of features and functionality. Our eFax ~~Free~~® service is our limited use, advertising-supported “introductory offering,” which assigns the subscriber a unique randomly selected telephone number that enables the user to receive a limited number of faxes into his or her personal email inbox and to access these messages via a Web-based email interface. In exchange, the subscriber agrees to receive and open email advertising, which we distribute on a consistent basis. In various countries in Western Europe, we also offer premium rate telephone numbers at no charge to our subscribers. Our ~~eFax~~ Plus® and eFax ProTM services allow a subscriber to choose either a toll-free telephone number that covers both the U.S. and Canada or a local telephone number from among more than ~~3,000~~3,500 cities worldwide. This service level enables subscribers to receive inbound fax messages in their email inboxes, access these messages via a full-featured Web-based email interface and send digital documents to any fax number in the world directly from their desktops. This service offering is also localized in many international currencies and the following languages, including Chinese (Cantonese), Dutch, French, German, Italian, Polish, Portuguese and Spanish, among others.

eFax Corporate offers capabilities similar to those offered by eFax Plus and eFax Pro, but with added features and tools geared towards enterprises and their users. For example, we provide our corporate customers a Web browser-based account administration interface, which enables them to provision telephone numbers to employees, as needed, without contacting our account representatives. eFax Corporate also offers the option of enhanced security features, which are particularly attractive to law firms and companies in regulated industries such as banking, brokerage and healthcare.

eFax Developer™TM offers high-volume, production fax solutions. Designed for quick and simple integration with application environments, eFax Developer provides inbound and outbound fax services through a secure XML interface. Enhanced features such as bar-code recognition, dynamic retries and high speed transmission are included and accessible 24/7/365. Robust fax capabilities can easily be implemented through simple software development kits or through a universal web post solution. ~~eFAX~~eFax Developer provides the scaling power of an outside fax service with the flexibility of an internal server without requiring additional equipment, supplies or expertise.

eFax Broadcast™TM and jBlast® offer cost-effective solutions for high-volume outbound faxing. These services enable users to send important documents simultaneously to hundreds or thousands of recipients anywhere in the world. Customers do not need special computer equipment, expensive fax boards or multiple phone lines. These services also enable customers to accurately monitor the status of their faxes and update their database of “Do Not Fax” names and undeliverable fax numbers.

We have alternative desktop faxing solutions that are offered under a variety of brands and pricing plans geared primarily toward the individual or small business user. We also offer limited versions of certain services on a free basis.

Voice

eVoice ReceptionistTM and Onebox ReceptionistTM are virtual PBX solutions that provide small and medium-sized businesses on-demand voice communications services, featuring a toll-free or local company telephone number, a professionally-produced auto-attendant and menu tree. With these services, a subscriber can assign departmental and individual extensions that can connect to

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multiple U.S. or Canadian telephone numbers, including traditional land-line telephones as well as mobile and IP networks, and can enhance reachability through “find me/follow me” capabilities. These services also include advanced integrated voicemail for each extension, effectively unifying mobile, office and other separate voicemail services ~~as well as efficiency-enhancing delivery of~~and improving efficiency by delivering voicemails in both native audio format and as transcribed text.

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Onebox® is a full-featured suite of unified communications services, including email, voicemail, fax and “find me/follow me” capabilities. Onebox Unified Messaging provides the subscriber a unique toll-free or local number and enables him or her to receive voicemail messages or faxes via email or access them by telephone; to send, receive or reply to faxes or voicemail messages online or by telephone; and to store faxes and email messages online.

Electric Mail® is an outsourced hosted email service that we offer to businesses. Electric Mail develops and delivers email and related solutions that are hosted offsite and seamlessly integrate into a customer’s existing email system. The services include Electric WebMailTM, E-mmunityTM virus scanning, SpamSMARTTM SPAM filtering, and VaultSMARTTM /PolicySMARTTM archiving which delivers a secure, scalable email ~~archive~~archiving and customizable compliance tools to correspond towith a company’s retention policy.

Global Network and Operations

We have multiple physical Points of Presence (“POPs”) worldwide, a central data center in Los Angeles and a remote disaster recovery facility. We connect our POPs to our central data centers via redundant, and often times diverse, Virtual Private Networks (“VPNs”) using the Internet. Our network is designed to deliver value-added user applications, customer support, billing and a local presence for our customers from among more than ~~3,000~~3,500 cities in 46 countries on six continents. Our network covers all major metropolitan areas in the U.S., U.K., and Canada, and such other major cities as Berlin, Hong Kong, Madrid, Manila, Mexico City, Milan, Paris, Rome, Singapore, Sydney, Taipei, Tokyo and Zurich. For financial information about geographic areas, see Note 14 of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

We obtain telephone numbers from various local carriers throughout the U.S. and internationally. Our ability to continue to acquire additional ~~quantities of~~ telephone numbers in desired locations in the future will depend on our relationships with our local carriers, our ability to pay market prices for such telephone numbers, ~~a continuing growth in~~our ability to secure telephone numbers from among growing number of alternate providers and the regulatory environment. Please refer to the sections entitled ~~“Government Regulation”~~Government Regulation and ~~“Risk Factors”~~Risk Factors contained in Item 1 and 1A, respectively, of this Annual Report on Form 10-K.

Customer Support Services

Our Customer Service organization provides support to our customers through a combination of online self-help, email messages, interactive chat sessions and telephone calls. Our Internet-based online self-help tools enable customers to resolve simple issues on their own, eliminating the need to speak or write to our customer service representatives. We use internal personnel and contracted third parties (on a dedicated personnel basis) to answer our customer emails and telephone calls and to participate in interactive chat sessions.

We provide email support seven days per week, 24 hours per day to all subscribers. Paying subscribers have access to live-operator telephone support seven days per week, 24 hours per day. Dedicated telephone support is provided for Corporate customers 24 hours per day, seven days per week.

Competition

Competition in the outsourced, value-added messaging and communications space is fierce and continues to intensify. We face competition from, among others, fax-to-email providers, broadcast fax companies, traditional fax machine or multi-function printer companies, unified messaging/communications providers, telephone companies, voicemail providers, companies offering PBX systems and outsourced PBX solutions and email providers. We believe that the primary competitive factors determining success in the market for value-added messaging and communications services include financial strengths and stability, pricing, reputation for reliability and security of service, intellectual property ownership, effectiveness of customer support, service and software ease-of-use, service scalability, customer messaging and branding, geographic coverage, scope of services and local language sales, messaging and support.

Our most popular solutions relate to faxing, including the ability to deliver faxes to our customers via email and our outbound desktop faxing capabilities. These solutions compete primarily against traditional fax machine manufacturers, which are generally large and well established companies, providers of fax servers and related software, such as Open Text Corporation ~~and its recently acquired subsidiary Captaris, Inc.,~~ as well as publicly traded and privately-held application service providers, such as Premiere Global

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Services, Inc. ~~(formerly PTEK Holdings Inc.)~~ and Easylink Services International ~~Corporation (formerly Easylink Services Corporation).~~Corporation. Some of these companies may have greater financial and other resources than we do. For more information regarding the competition that we face, please refer to the section entitled ~~“Risk Factors”~~Risk Factors contained in Item 1A of this Annual Report on Form 10-K.

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Patents and Proprietary Rights

We regard the protection of our intellectual property rights as important to our success. We aggressively protect these rights by relying on a combination of patents, trademarks, copyrights, trade dress and trade secret laws and by using the domain name dispute resolution system. We also enter into confidentiality and invention assignment agreements with employees and contractors, and nondisclosure agreements with parties with whom we conduct business in order to limit access to and disclosure of our proprietary information.

We have a portfolio of ~~57 issued~~multiple U.S. and foreign patents and have numerous pending U.S. and foreign patent applications, all covering components of our technology and in some cases technologies beyond those that we currently offer. Three of our core U.S. patents have been reaffirmed through reexamination proceedings with the United States Patent and Trademark Office. We seek patents for inventions that contribute to our business and technology strategy. We have obtained patent licenses for certain technologies where such licenses are necessary or advantageous. Unless and until patents are issued on the pending applications, no patent rights on those applications can be enforced.

Over the past ~~three~~five years we have generated royalties from licensing certain of our patents and have enforced these patents against companies using our patented technology without our permission. We have pending patent infringement lawsuits against several companies. In each case, we are seeking at least a reasonable royalty for the infringement of the patent(s) in suit, a permanent injunction against continued infringement and attorneys’ fees, interest and costs. ~~Some of these cases have been stayed due to pending re-examination proceedings on certain of our U.S. patents with the U.S. Patent and Trademark Office, and others continue to proceed forward.~~

We own and use a number of trademarks in connection with our products and services, including eFax and the eFax logo, eFax Corporate and the eFax Corporate logo, eVoice and the eVoice logo, Onebox and the Onebox logo and Electric Mail and the Electric Mail logo, among others. Many of these trademarks are registered in the U.S. and other countries, and numerous trademark applications are pending in the U.S. and several non-U.S. jurisdictions. We hold numerous Internet domain names, including “efax.com”, “jconnect.com”, “fax.com”, “j2.com”, “j2global.com”, “onebox.com”, “electricmail.com”, “efaxcorporate.com” and “evoice.com”, among others. We have in place an active program to continue securing “eFax” and other domain names in non-U.S. jurisdictions. We have filed to protect our rights to the “eFax” and other names in certain alternative top-level domains such as “.org”, ~~“.net”~~“.net“, “.biz”, “.info” and “.us”, among others.

Like other technology-based businesses, we face the risk that we will be unable to protect our intellectual property and other proprietary rights, and the risk that we will be found to have infringed the proprietary rights of others. For more information regarding these risks, please refer to the section entitled ~~“Risk Factors”~~Risk Factors contained in Item 1A of this Annual Report on Form 10-K.

Government Regulation

We are subject to a number of foreign and domestic laws and regulations that affect companies conducting business related to the Internet and telecommunications, including, among others, those addressing ~~issues such as~~ privacy, data protection, ~~freedom of expression,~~ indecency, obscenity, defamation, libel, pricing, ~~online products and services,~~ taxation, ~~content,~~telephone numbers, advertising, ~~copyrights and other~~ intellectual property ~~information security~~ and technological convergence. We face risks from proposed legislation or new interpretations of existing legislation that could occur in the ~~future.~~future, and as Internet services and telecommunications services converge or the services we offer expand, we may face increased domestic or foreign regulation in areas such as delivery of broadband services, inter-carrier compensation and continued regulation of competition.

~~We provide~~Some of our ~~services through data transmissions over public telephone lines and other facilities provided by telecommunications companies (“carriers”). These transmissions and carriers~~service providers are subject to regulation by the U.S. Federal Communications Commission (“FCC”), state public utility commissions and foreign governmental authorities. However, as an Internet messaging services provider, we generally are not subject to direct regulation by any governmental agency in the U.S., other than regulations applicable to businesses generally. This is not the case in some international locations. Nevertheless, as Internet services and telecommunications services converge or the services we offer expand, we may face increased domestic or foreign regulation of our business in areas such as delivery of broadband services, inter-carrier compensation and continued regulation of competition.

Continued regulation arising from telephone number administration may also make it more difficult for us to obtain necessary numbering resources. For example, ~~in the U.S.,~~several years ago the FCC allows states to petition for authority to adopt technology-specific area codes. We have sought reconsideration from the FCC of this decision, and the outcome of this proceeding could affect our ability to offer services in competition with incumbents. So far,conditionally granted requests by California and Connecticut ~~have requested authority~~ to adopt special area codes for

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unified messaging. ~~The FCC conditionally granted Connecticut’s petition in 2003, but the state~~Although neither State has not yet adopted a specialized code. The FCC granted California’s petition with fewer conditions. We opposed California’s request for this authority and are now participating in the reconsideration stage of the FCC proceeding. Although there has been diminished activity of this sort since 2003,implemented such area codes, if they or other states ~~apply for and implement specialized area codes,~~do so our ability to compete in those states could be adversely affected. Similar regulation has occurred internationally (e.g., Germany prohibits issuing a local telephone number to anyone without a physical presence in the area) and may continue to be enacted in additional locations in the future. As a user of toll-free numbers and an organization that requests such numbers from the national numbers database, we are subject to the FCC's rules regarding warehousing, hoarding, and porting of toll-free numbers. Failure to comply with such rules could result in substantial fines and penalties.

In addition, Congress and the FCC are reviewing legislation and regulations related to the Universal Service Fund (“USF”), which subsidizes the U.S. telecommunications system. Congress and the FCC are considering altering the formula by which entities contribute to the USF. If adopted, one proposal to implement a flat-fee per phone number methodology could alter or eliminate the provision of our non-paid (free advertising-supported) services and could cause us to raise the price of our paid services. Other changes to the USF may also increase our costs and impact our operations. For example, in 2008 the FCC determined that conference calling services are directly assessable for USF purposes. As a result, we now pay directly into the USF for those services. The FCC could reclassify other communications services and determine that they are directly assessable, which may further increase our cost of doing business.

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The FCC is authorized to take enforcement action against companies that send so-called “junk faxes” and has held numerous fax broadcasters liable for violating the Telephone Consumer Protection Act of 1991 (“TCPA”), the Junk Fax Prevention Act of 2005 (“Junk Fax Act”) and related FCC rules. ~~Individuals may also, under certain circumstances, have a private cause of action for violations and recover monetary damages.~~ Entities that merely transmit facsimile messages on behalf of others may ~~be found liable~~face FCC inquiry and enforcement, civil litigation or private causes of action if they have a high degree of involvement in transmitting junk faxes or have actual notice of illegal junk fax transmissions and failed to take steps to prevent such transmissions. We take significant steps to ensure that our services are not used to transmit unsolicited faxes on a large scale and we do not believe that we have a high degree of involvement or notice of the use of our service to broadcast junk faxes. However, because fax transmitters do not enjoy an absolute exemption from liability under the rules, we could face FCC inquiry and enforcement, civil litigation or private causes of action, which could result in financial penalties that could cause material adverse effects to our operations. We are currently involved in litigation involving alleged violations of the TCPA with Protus IP Solutions, Inc. For more information about this lawsuit, see Item 3 of this Annual Report on Form 10-K entitled ~~“Legal~~Legal Proceedings.”

~~In the area of data protection, many U.S. states and foreign jurisdictions have passed laws requiring notification to users when there is a security breach for personal data.~~ We are ~~also~~ subject to a range of federal, state and foreign laws regarding privacy, ~~and~~ protection of user ~~data. The costs~~data, data breaches, and retention of ~~compliance with these laws may increase in the future as a result of changes in interpretation. Furthermore, any~~certain data elements. Any failure on our part to comply with these laws may subject us to significant liabilities. ~~There is a risk that these laws may be interpreted and applied in conflicting ways from country to country and in a manner that is not consistent with our current data protection practices.~~ Complying with these varying ~~international~~ requirements could cause us to incur additional costs and change our business practices. ~~Further, any failure by us~~We also face risks due to ~~protect our users’ privacy~~potential Internet neutrality laws and ~~data could adversely affect our business.~~regulations as to the services and sites that users can access through their broadband service providers.

Future developments in laws that govern online activities might inhibit the growth of the Internet, impose taxes, mandate costly technical requirements, create uncertainty in the market or otherwise have an adverse effect on the Internet. There is also substantial uncertainty as to the applicability to the Internet of laws governing issues such as property ownership, fraud, tort, copyrights and other intellectual property issues, taxation, defamation, obscenity and privacy, none of which contemplated the existence of the Internet. These developments could, in turn, have a material adverse effect on our business, prospects, financial condition and results of operations. ~~Also uncertain is the impact of foreign legal developments regarding jurisdiction and choice of law for cases involving Internet-based activities.~~

Seasonality and Backlog

Our subscriber revenues are impacted by the number of effective business days in a given period. We experience no material backlog in sales orders or the provisioning of customer orders. We traditionally experience lower than average usage and customer sign-ups in the fourth quarter.

Research and Development

The markets for our services are evolving rapidly, requiring ongoing expenditures for research and development and timely introduction of new services and service enhancements. Our future success will depend, in part, on our ability to enhance our current services, to respond effectively to technological changes, to sell additional services to our existing customer base and to introduce new services and technologies that address the increasingly sophisticated needs of our customers.

We devote significant resources to develop new services and service enhancements. Our research, development and engineering expenditures were $11.7 million, $12.0 million ~~$11.8 million~~ and ~~$8.8~~$11.8 million for the fiscal years ended December 31, 2009, 2008 ~~2007~~

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and ~~2006,~~2007, respectively. For more information regarding the technological risks that we face, please refer to the section entitled ~~“Risk Factors”~~Risk Factors contained in Item 1A of this Annual Report on Form 10-K.

Employees

As of December 31, ~~2008,~~2009, we had approximately 400 employees, the majority of whom are in the U.S.

Our future success will depend, in part, on our ability to continue to attract, retain and motivate highly qualified technical, marketing and management personnel. Our employees are not represented by any collective bargaining unit or agreement. We have never experienced a work stoppage. We believe our relationship with our employees is good.

Web Availability of Reports

Our corporate information Website is www.j2global.com. The information on our Website is not part of this Annual Report on Form 10-K. However, on the Investor Relations portion of this Website the public can access free of charge our annual, quarterly and current reports, changes in the stock ownership of our directors and executive officers and other documents filed with the Securities and Exchange Commission (“SEC”) as soon as reasonably practicable after the filing dates. Further, the SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding our filings at www.sec.gov.

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Item 1A. Risk Factors

Before deciding to invest in j2 Global or to maintain or increase your investment, you should carefully consider the risks described below in addition to the other cautionary statements and risks described elsewhere in this Annual Report on Form 10-K and our other filings with the SEC, including our subsequent reports on Forms 10-Q and 8-K. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may affect our business. If any of these known or unknown risks or uncertainties actually occurs, our business, prospects, financial condition, operating results and cash flows could be materially adversely affected. In that event, the market price of our common stock will likely decline and you may lose part or all of your investment.

Risks Related To Our Business

~~In order to sustain our growth, we must continue to attract new paid subscribers at a greater rate and with at least an equal amount of revenues per subscriber than we lose existing paid subscribers.~~

We may not be able to continue to grow or even sustain our current base of paid customers on a quarterly or annual basis. Our future success depends heavily on the continued growth of our paid user base. In order to sustain our growth we must continuously obtain an increasing number of paid users to replace the users who cancel their service. In addition, these new users must provide revenue levels per subscriber that are greater than or equal to the levels of our current customers or the customers they are replacing. We must also retain our existing customers while continuing to attract new ones at desirable costs. We cannot be certain that our continuous efforts to offer high quality services at attractive prices will be sufficient to retain our customer base or attract new customers at rates sufficient to offset customers who cancel their service. In addition, we believe that competition from companies providing similar or alternative services has caused, and may continue to cause, some of our customers or prospective customers to sign up with or to switch to our competitors’ services. Moreover, we have experienced, and may continue to experience, an overall reduction in our average revenue per subscriber as the percentage of our subscriber revenues from lower priced alternative fax brands and voice services has increased. These factors may adversely affect our customer retention rates, the number of our new customer acquisitions, our average revenue per subscriber and/or subscriber usage levels. Any combination of a decline in our rate of new customer sign-ups, decline in usage rates of our customers, decline in average revenue per subscriber, decline in customer retention rates or decline in the size of our overall customer base may result in a decrease in our revenues, which could have a material adverse effect on our business, prospects, financial condition, operating results and cash flows.

Weakness in the financial markets and in the economy as a whole has adversely affected and may continue to adversely affect segments of our customers, which has resulted and may continue to result in decreased usage levels, customer acquisitions and customer retention rates and, in turn, could lead to a decrease in our revenues or rate of revenue growth.

Certain segments of our customers - those whose business activity is tied to the health of the credit markets and the broader economy, such as banks, brokerage firms and those in the real estate industry - have been and may continue to be adversely affected by the current ~~turmoil~~weakness in the credit markets and ~~weakness~~ in the broader mortgage market and the general economy. To the extent our customers’ businesses have been adversely affected by these economic factors and their usage levels of our services decline, we ~~have~~experienced and may continue to experience a decrease in our average usage per subscriber and, therefore, a decrease in our average variable revenue per subscriber. In addition, continued weakness in the economy has adversely affected and may continue to adversely affect

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our customer retention rates and the number of our new customer acquisitions. These factors have adversely impacted, and may continue to adversely impact, our revenues and profitability.

Increased numbers of credit and debit card declines as a result of decreased availability of credit and/or a ~~weakening~~weak economy which continues to experience heightened levels of unemployment could lead to a decrease in our revenues or rate of revenue growth.

A significant number of our paid subscribers pay for their services through credit and debit cards. Weakness in certain segments of the credit markets and in the U.S. and global ~~economy~~economies, which continue to experience heightened levels of unemployment, has resulted in and may continue to result in increased numbers of rejected credit and debit card payments. We believe this has resulted in and may continue to result in increased customer cancellations and decreased customer signups. This also has required and may continue to require us to increase our reserves for doubtful accounts and write-offs of accounts receivables. The foregoing may adversely impact our revenues and profitability.

Our financial results may be adversely impacted by higher-than-expected tax rates or exposure to additional tax liabilities.

We are a U.S.-based multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. Our provision for income taxes is based on a jurisdictional mix of earnings, statutory rates and enacted tax rules, including transfer pricing. Significant judgment is required in determining our provision for income taxes and in evaluating our tax positions on a worldwide basis. It is possible that these positions may be challenged or we may find tax-beneficial intercompany transactions to be uneconomical, either of which may have a significant impact on our effective tax rate.

A number of factors affect our income tax rate and the combined effect of these factors could result in an increase in our effective income tax rate. An increase in future effective income tax rates would adversely affect net income in future periods. We operate in different countries that have different income tax rates. Effective tax rates could be adversely affected by earnings being lower than anticipated in countries having lower statutory rates and higher than anticipated in countries having higher statutory rates, by changes in the valuation of deferred tax assets or liabilities or by changes in tax laws or interpretations thereof.

~~Effective January 1, 2007, we adopted the provisions of FASB Interpretation No. 48,~~ ~~Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109~~ (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes by creating a framework for how companies should recognize, measure, present and disclose in their financial statements uncertain tax positions that they have taken or expect to take in a tax return. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes (see Note 8 of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K).

A substantial portion of our cash and investments are invested outside of the U.S. We may be subject to incremental taxes upon repatriation of such funds to the U.S.

We may be subject to examination of our tax returns by the U.S. Internal Revenue Service and other domestic and foreign tax authorities. We are currently under audit by the Internal Revenue Service for tax years 2004 through ~~2006.~~2008. In addition, we ~~have been notified~~are under audit by the California Franchise Tax Board ~~that we are being audited~~ for tax years 2005 through ~~2007.~~2007 and by the Illinois Department of Revenue for 2005 and 2006. We are also under audit by various other states for non-income related taxes. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our income and other tax-related reserves and expense. If our reserves are not sufficient to cover these contingencies, such inadequacy could materially adversely affect our business, prospects, financial condition, operating results and cash flows.

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Our growth will depend on our ability to develop our brands and market new brands, and these efforts may be costly.

We believe that continuing to strengthen our current brands and effectively launch new brands will be critical to achieving widespread acceptance of our services, and will require continued focus on active marketing efforts. The demand for and cost of online and traditional advertising have been increasing and may continue to increase. Accordingly, we may need to spend increasing amounts of money on, and devote greater resources to, advertising, marketing and other efforts to create and maintain brand loyalty among users. In addition, we are supporting an increasing number of brands, each of which requires its own resources. Brand promotion activities may not yield increased revenues, and even if they do, any increased revenues may not offset the expenses incurred in building our brands. If we fail to promote and maintain our brands, or if we incur substantial expense in an unsuccessful attempt to promote and maintain our brands, our business could be harmed.

If our trademarks are not adequately protected or we are unable to protect our domain names, our reputation and brand could be adversely affected.

Our success depends, in part, on our ability to protect our trademarks. We rely on some brands that use the letter “e” before a word, such as “eFax” and “eVoice”. Some regulators and competitors have taken the view that the “e” is descriptive. Others have claimed that these brands are generic when applied to the products and services we offer. If we are unable to secure and protect trademark rights to these or other brands, the value of these brands may be diminished, competitors may be able to more effectively mimic our service and methods of operations, the perception of our business and service to subscribers and potential subscribers may become confused in the marketplace and our ability to attract subscribers may be adversely affected.

We currently hold various domain names relating to our brands, both in the U.S. and internationally, including efax.com and various other international extensions, evoice.com, fax.com, onebox.com and others. The acquisition and maintenance of domain names generally are regulated by governmental agencies and their designees. The regulation of domain names in the U.S. may change. Governing bodies may establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names. As a result, we may be unable to acquire or maintain relevant domain names in the U.S. Furthermore, the relationship between regulations governing domain names and laws protecting trademarks and similar proprietary rights in the U.S. is unclear. Similarly, international rules governing the acquisition and maintenance of domain names in foreign jurisdictions are sometimes different from U.S. rules, and we may not be able to obtain all of our domains internationally. As a result of these factors, we may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of our trademarks and other proprietary rights. In addition, failure to protect our domain names domestically or internationally could adversely affect our reputation and brands, and make it more difficult for users to find our Websites and our services.

We may be subject to risks from international operations.

As we continue to expand our business operations in countries outside the U.S., our future results could be materially adversely affected by a variety of uncontrollable and changing factors including, among others, foreign currency exchange rates; political or social unrest or economic instability in a specific country or region; trade protection measures and other regulatory requirements which may affect our ability to provide our services; difficulties in staffing and managing international operations; and adverse tax consequences, including imposition of withholding or other taxes on payments by subsidiaries and affiliates. Any or all of these factors could have a material adverse impact on our future business, prospects, financial condition, operating results and cash flows.

We have only limited experience in marketing and operating our services in certain international markets. Moreover, we have in some cases experienced and expect to continue to experience in some cases higher costs as a percentage of revenues in connection with establishing and providing services in international markets versus the U.S. In addition, certain international markets may be slower than the U.S. in adopting the Internet and/or outsourced messaging and communications solutions and so our operations in international markets may not develop at a rate that supports our level of investments.

We rely heavily on the revenue generated by our fax services.

Currently, a substantial portion of the overall traffic on our network is fax related. Our success is therefore dependent upon the continued use of fax as a messaging medium and/or our ability to diversify our service offerings and derive more revenue from other services, such as voice, email and unified messaging solutions. If the demand for fax as a messaging medium decreases, and we are unable to replace lost revenues from decreased usage of our fax services with a proportional increase in our customer base or with revenues from our other services, our business, financial condition, operating results and cash flows could be materially and adversely affected.

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We believe that one of the attractions to fax versus alternatives, such as email, is that fax signatures are a generally accepted method of executing contracts. There are on-going efforts by governmental and non-governmental entities, many of which possess greater resources than we do, to create a universally accepted method for electronically signing documents. Widespread adoption of so-called “digital signatures” could reduce demand for our fax services and, as a result, could have a material adverse effect on our business, prospects, financial condition, operating results and cash flows.

If we experience excessive fraudulent activity or cannot meet evolving credit card company merchant standards, we could incur substantial costs and lose the right to accept credit cards for payment and our subscriber base could decrease significantly.

A significant number of our paid subscribers authorize us to bill their credit card accounts directly for all service fees charged by us. If people use our services using stolen credit cards, we could incur substantial third party vendor costs for which we may not be reimbursed. We also incur losses from claims that the customer did not authorize the credit card transaction to purchase our service. If the numbers of unauthorized credit card transactions become excessive, we could be assessed substantial fines for excess chargebacks and we could lose the right to accept credit cards for payment. In addition, credit card companies may change the merchant standards required to utilize their services from time to time. If we are unable to meet these new standards, we could be unable to accept credit cards. Substantial losses due to fraud or our inability to accept credit card payments, which could cause our paid subscriber base to significantly decrease, could have a material adverse effect on our business, prospects, financial condition, operating results and cash flows.

Our business and users may be subject to sales tax and other taxes.

The application of indirect taxes (such as sales and use tax, value added tax (“VAT”), goods and services tax, business tax and gross receipt tax) to e-commerce businesses such as j2 Global and our users is a complex and evolving issue. Many of the fundamental statutes and regulations that impose these taxes were established before the growth of the Internet and e-commerce. In many cases, it is not clear how existing statutes apply to the Internet or e-commerce. In addition, some jurisdictions have implemented laws specifically addressing the Internet or some aspect of e-commerce and several other proposals have been made at the U.S. federal, state and local level that would impose additional taxes on the sale of goods and services through the Internet. These proposals, if adopted, could substantially impair the growth of e-commerce, hamper our ability to retain and attract new customers and diminish our ability to derive financial benefit from our activities. In November 2007, the U.S. federal government enacted legislation extending the moratorium on states and other local authorities imposing access or discriminatory taxes on the Internet through November 2014. This moratorium does not prohibit federal, state or local authorities from collecting taxes on our income or from collecting taxes that are due under existing tax rules. The application of existing, new or future laws could have adverse effects on our business, prospects and operating results. There have been, and will continue to be, substantial ongoing costs associated with complying with the various indirect tax requirements in the numerous markets in which we conduct or will conduct business.

A system failure or security breach could delay or interrupt service to our customers, harm our reputation or subject us to significant liability.

Our operations are dependent on our ability to protect our network from interruption by damage from fire, earthquake, power loss, telecommunications failure, unauthorized entry, computer viruses or other events beyond our control. There can be no assurance that our existing and planned precautions of backup systems, regular data backups, security protocols and other procedures will be adequate to prevent significant damage, system failure or data loss. Also, despite the implementation of security measures, our infrastructure may be vulnerable to computer viruses, hackers or similar disruptive problems caused by our subscribers, employees or other Internet users who attempt to invade public and private data networks. Currently, a significant number of our users authorize us to bill their credit or debit card accounts directly for all transaction fees charged by us. We rely on encryption and authentication technology to effect secure transmission of confidential information, including customer credit and debit card numbers. Advances in computer capabilities, new discoveries in the field of cryptography or other developments may result in a compromise or breach of the technology used by us to protect transaction data. Any ~~damage~~ system failure or security breach that causes interruptions or data loss in our operations or in the computer systems of our customers or leads to the misappropriation of our or our customers’ confidential information could result in significant liability to us, cause considerable harm to us and our reputation and deter current and potential customers from using our services. Any of these events ~~could have a material adverse effect on our business, prospects, financial condition, operating results and cash flows.~~

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If we experience excessive fraudulent credit card charges or cannot meet evolving credit card company merchant standards, we could lose the right to accept credit cards for payment and our subscriber base could decrease significantly.

A significant number of our paid subscribers authorize us to bill their credit card accounts directly for all service fees charged by us. We incur losses from claims that the customer did not authorize the credit card transaction to purchase our service. If the numbers of unauthorized credit card transactions become excessive, we could be assessed substantial fines for excess chargebacks and we could lose the right to accept credit cards for payment. In addition, credit card companies may change the merchant standards required to utilize their services from time to time. If we are unable to meet these new standards, we could be unable to accept credit cards. Our inability to accept credit card payments could cause our paid subscriber base to significantly decrease, which could have a material adverse effect on our business, prospects, financial condition, operating results and cash flows.

Our business is dependent on a small number of telecommunications carriers in each region and our inability to maintain agreements at attractive rates with such carriers may negatively impact our business.

Our business substantially depends on the capacity, affordability, reliability and security of our telecommunications networks. Only a small number of carriers in each region, and in some cases only one carrier, offer the telephone number and network services

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we require. Certain of our telecommunications services are provided pursuant to short-term agreements that the providers can terminate or elect not to renew. As a result, any or all of our current carriers could discontinue providing us with service at rates acceptable to us, or at all, and we may not be able to obtain adequate replacements, which could materially and adversely affect our business, prospects, financial condition, operating results and cash flows.

~~Our business could suffer if we cannot obtain or retain telephone numbers, are prohibited from obtaining local numbers or are limited to distributing local numbers to only certain customers.~~

Our future success depends on our ability to procure large quantities of local telephone numbers in the U.S. and foreign countries in desirable locations at a reasonable cost and offer our services to our prospective customers without restrictions. Our ability to procure and distribute telephone numbers depends on factors such as applicable regulations, the practices of telecommunications carriers that provide telephone numbers, the cost of these telephone numbers and the level of demand for new telephone numbers. In addition, although we are the customer of record for all of our U.S. telephone numbers, from time to time, certain U.S. telephone carriers illegally inhibit our ability to port numbers or illegally port our telephone numbers away from us to other carriers. Also, in some foreign jurisdictions, under certain circumstances, our customers are permitted to port their telephone numbers to another carrier. These factors could lead to increased cancellations by our customers and loss of our telephone number inventory. These factors may have a material adverse effect on our business, prospects, financial condition, operating results, cash flows and growth in or entry into foreign or domestic markets.

For example, in the U.S., the FCC has adopted an order that permits states to apply to the FCC for delegated authority to implement specialized area codes that would segregate services, which may include “unified messaging” and other services that the FCC perceives as being “geographically insensitive,” into unique area codes. We have petitioned the FCC for reconsideration of this decision, which remains pending. The outcome of this petition may reduce demand by our customers or prospective customers for new telephone numbers in the affected areas, if it restricts us from obtaining telephone numbers in area codes that are generally perceived as local by consumers. Two states, Connecticut and California, have petitioned the FCC for such authority. The FCC conditionally granted Connecticut’s petition in 2003, but the state has not adopted a specialized code. If the state goes forward at some future date and adopts a specialized area code, the outcome of this proceeding could affect our ability to compete in the state. The FCC granted California’s petition with fewer conditions and reconsideration proceedings are ongoing. Similar regulation has occurred in some foreign jurisdictions and may continue to be enacted in the future. If this continues, it may materially affect our ability to acquire the telephone numbers for our operations or may make our services less attractive due to unavailability of telephone numbers with a local geographic identity.

In addition, future growth in our subscriber base, together with growth in the subscriber bases of providers of other fax and/or voicemail to email and unified messaging services, may increase the demand for large quantities of telephone numbers, which could lead to insufficient capacity and our inability to acquire sufficient telephone numbers to accommodate our future growth. For more information regarding telecommunications regulation that may affect our ability to obtain telephone numbers, please see Item 1 of this Annual Report on Form 10-K entitled “Business – Government Regulation.”

The successful operation of our business depends upon the supply of critical elements and marketing relationships from other companies.

We depend upon third parties for several critical elements of our business, including various technology, infrastructure, customer service and marketing components. We rely on private third-party providers for our Internet and telephony connections and

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for co-location of a significant portion of our communications servers. Any disruption in the services provided by any of these suppliers, or any failure by them to handle current or higher volumes of activity, could have a material adverse effect on our business, prospects, financial condition, operating results and cash flows. To obtain new customers, we have marketing agreements with operators of leading search engines and Websites. These arrangements typically are not exclusive and do not extend over a significant period of time. Failure to continue these relationships on terms that are acceptable to us or to continue to create additional relationships could have a material adverse effect on our business, prospects, financial condition, operating results and cash flows.

Inadequate intellectual property protections could prevent us from enforcing or defending our proprietary technology.

Our success depends in part upon our proprietary technology. We rely on a combination of patents, trademarks, trade secrets, copyrights and contractual restrictions to protect our proprietary technology. However, these measures provide only limited protection, and we may not be able to detect unauthorized use or take appropriate steps to enforce our intellectual property rights, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the U.S. While we have been issued a number of patents and other patent applications are currently pending, there can be no assurance that any of these patents will not be challenged, invalidated or circumvented, or that any rights granted under these patents will in fact provide competitive advantages to us.

Currently, two of our patents are subject to re-examination proceedings with the U.S. Patent and Trademark Office. The result of these proceedings could limit or invalidate some or all of the claims under these patents, which could require us to record an impairment of patent asset in our consolidated financial statements. In that case, we would be required to record a charge to earnings in our consolidated financial statements during the period in which the impairment of our patent is determined. This may adversely impact our results of operations.

In addition, effective protection of patents, copyrights, trademarks, trade secrets and other intellectual property may be unavailable or limited in some foreign countries. As a result, we may not be able to effectively prevent competitors in these regions from infringing our intellectual property rights, which could reduce our competitive advantage and ability to compete in those regions and negatively impact our business.

Companies in the messaging industry have experienced substantial litigation regarding intellectual property. Currently, we have pending patent infringement lawsuits, both offensive and defensive, against several companies in this industry. This or any other litigation to enforce our intellectual property rights may be expensive and time-consuming, could divert management resources and may not be adequate to protect our business.

We may be found to have infringed the intellectual property rights of others, which could expose us to substantial damages or restrict our operations.

We have been and expect to continue to be subject to claims and legal proceedings that we have infringed the intellectual property rights of others. The ready availability of damages, royalties and the potential for injunctive relief has increased the costs associated with the litigation and settlement of patent infringement claims. In addition, we may be required to indemnify our resellers and users for similar claims made against them. Any claims against us, whether or not meritorious, could require us to spend significant time and money in litigation, pay damages, develop new intellectual property or acquire licenses to intellectual property that is the subject of the infringement claims. These licenses, if required, may not be available at all or have acceptable terms. As a result, intellectual property claims against us could have a material adverse effect on our business, prospects, financial condition, operating results and cash flows.

~~If our trademarks are not adequately protected or we are unable to protect our domain names, our reputation and brand could be adversely affected.~~

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unclear. Similarly, international rules governing the acquisition and maintenance of domain names in foreign jurisdictions are sometimes different from U.S. rules, and we may not be able to obtain all of our domains internationally. As a result of these factors, we may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of our trademarks and other proprietary rights. In addition, failure to protect our domain names domestically or internationally could adversely affect our reputation and brands, and make it more difficult for users to find our Websites and our services.

We may be engaged in legal proceedings that could cause us to incur unforeseen expenses and could occupy a significant amount of our management’s time and attention.

From time to time we are subject to litigation or claims, including in the areas of patent infringement and anti-trust, that could negatively affect our business operations and financial condition. Such disputes could cause us to incur unforeseen expenses, occupy a significant amount of our management’s time and attention and negatively affect our business operations and financial condition. We are unable to predict the outcome of our currently pending cases. Some or all of the amount we may be required to pay to defend or to satisfy a judgment or settlement of any or all of these proceedings may not be covered by insurance. Under indemnification agreements we have entered into with our current and former officers and directors, we are required to indemnify them, and advance expenses to them, in connection with their participation in proceedings arising out of their service to us. These payments may be material. For a more detailed description of the lawsuits in which we are involved, see Item 3. ~~“Legal~~Legal Proceedings.”

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The markets in which we operate are highly competitive and our competitors may have greater resources to commit to growth, superior technologies, cheaper pricing or more effective marketing strategies.

For information regarding our competition, and the risks arising out of the competitive environment in which we operate, see the section entitled ~~“Competition”~~Competition contained in Item 1 of this Annual Report on Form 10-K. In addition, some of our competitors include major companies with much greater resources and significantly larger subscriber bases than we have. Some of these competitors offer their services at lower prices than we do. These companies may be able to develop and expand their communications and network infrastructures more quickly, adapt more swiftly to new or emerging technologies and changes in customer requirements, take advantage of acquisition and other opportunities more readily and devote greater resources to the marketing and sale of their products and services than we can. There can be no assurance that additional competitors will not enter markets that we are currently serving and plan to serve or that we will be able to compete effectively. Competitive pressures may reduce our revenue, operating profits or both.

~~Our growth will depend on our ability to develop our brands and market new brands, and these efforts may be costly.~~

Our business is highly dependent on our billing systems.

A significant part of our revenues depends on prompt and accurate billing processes. Customer billing is a highly complex process, and our billing systems must efficiently interface with third-party systems, such as those of credit card processing companies. Our ability to accurately and efficiently bill our subscribers is dependent on the successful operation of our billing systems and the third-party systems upon which we rely, such as our credit card processor, and our ability to provide these third parties the information required to process transactions. In addition, our ability to offer new paid services or alternative-billing plans is dependent on our ability to customize our billing systems. We are in the process of upgrading our current billing systems to meet the needs of our growing subscriber base. Any failures or errors in our billing systems or procedures or resulting from any upgrades to our billing systems or procedures could impair our ability to properly bill our current customers or attract and service new customers, and thereby could materially and adversely affect our business and financial results.

Future acquisitions could result in dilution, operating difficulties and other harmful consequences.

We may acquire or invest in additional businesses, products, services and technologies that complement or augment our service offerings and customer base. We cannot assure you that we will successfully identify suitable acquisition candidates, integrate disparate technologies and corporate cultures and manage a geographically dispersed company. Acquisitions could divert attention from other business concerns and could expose us to unforeseen liabilities. In addition, we may lose key employees while integrating

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any new companies. We may pay for some acquisitions by issuing additional common stock, which would dilute current stockholders. We may also use cash to make acquisitions. We will be required to review goodwill and other intangible assets for impairment in connection with past and future acquisitions, which may materially increase operating expenses if an impairment issue is identified.

Our success depends on our retention of our executive officers, senior management and our ability to hire and retain key personnel.

Our success depends on the skills, experience and performance of executive officers, senior management and other key personnel. The loss of the services of one or more of our executive officers, senior managers or other key employees could have a material adverse effect on our business, prospects, financial condition, operating results and cash flows. Our future success also depends on our continuing ability to attract, integrate and retain highly qualified technical, sales and managerial personnel. Competition for these people is intense, and there can be no assurance that we can retain our key employees or that we can attract, assimilate or retain other highly qualified technical, sales and managerial personnel in the future.

~~We may be subject to risks from international operations.~~

As we continue to grow our international operations, adverse currency fluctuations and foreign exchange controls could have a material adverse effect on our balance sheet and results of operations.

As we expand our international operations, we could be exposed to significant risks of currency fluctuations. In some countries outside the U.S., we already offer our services in the applicable local currency, including but not limited to the Canadian Dollar, the Euro and the British Pound Sterling. As a result, fluctuations in foreign currency exchange rates affect the results of our operations, which in turn may materially adversely affect reported earnings and the comparability of period-to-period results of operations. Changes in currency exchange rates may also affect the relative prices at which we and foreign competitors sell our services in the same market. In addition, changes in the value of the relevant currencies may affect the cost of certain items required in our operations. Furthermore, we may become subject to exchange control regulations, which might restrict or prohibit our conversion of other currencies into U.S. Dollars. We cannot assure you that future exchange rate movements will not have a material adverse effect on our future business, prospects, financial condition, operating results and cash flows. To date, we have not entered into foreign currency hedging transactions to control or minimize these risks.

~~Our business and users may be subject to sales tax and other taxes.~~

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We are exposed to risk if we cannot maintain or adhere to our internal controls and procedures.

We have established and continue to maintain, assess and update our internal controls and procedures regarding our business operations and financial reporting. Our internal controls and procedures are designed to provide reasonable assurances regarding our business operations and financial reporting. However, because of the inherent limitations in this process, internal controls and procedures may not prevent or detect all errors or misstatements. To the extent our internal controls are inadequate or not adhered to by our employees, our business, financial condition and operating results could be materially adversely affected.

If we are not able to maintain internal controls and procedures in a timely manner, or without adequate compliance, we may be unable to accurately report our financial results or prevent fraud and may be subject to sanctions or investigations by regulatory authorities such as the SEC or NASDAQ. Any such action or restatement of prior-period financial results could harm our business or investors’ confidence in j2 Global, and could cause our stock price to fall.

Risks Related To Our Industry

Our services may become subject to burdensome telecommunications regulation, which could increase our costs or restrict our service offerings.

We believe that our services are “information services” under the Telecommunications Act of 1996 and related precedent and therefore would not currently be subject to U.S. telecommunications services regulation. We provide our services through data transmissions over public telephone lines and other facilities provided by carriers. These transmissions are subject to foreign and domestic laws and regulation by the FCC, state public utility commissions and foreign governmental authorities. These regulations affect the availability of telephone numbers, the prices we pay for transmission services, the competition we face from telecommunications service providers and other aspects of our market. However, we believe that our services are “information services” under the Telecommunications Act of 1996 and related precedent and therefore would not currently be subject to U.S. telecommunications services regulation. The FCC also views Internet-based services as being interstate and subject to the protection of federal laws preempting state efforts to impose traditional common carrier regulation on such services. However, as messaging and communications services converge and as the services we offer expand, we may become subject to FCC or other regulatory agency regulation. Changes in the regulatory environment could decrease our revenues, increase our costs and restrict our service offerings. In many of our international locations, we are subject to regulation by the governmental authority.

In the U.S., Congress and the FCC regulations subsidize portions of the telecommunications system out of the USF. Congress and the FCC are reviewing the way it collects USF payments from telecommunications carriers. Among the proposed changes being considered is imposing a flat fee per telephone number, which could have a material adverse effect on the provision of our non-paid services and could cause us to raise the price of our paid service. ~~Other changes to the USF subsidy being considered by the Congress and the FCC may also impact our operations.~~

In August 2005, the FCC reclassified wireline broadband Internet access services (i.e., DSL) as information services, thereby allowing telephone companies to offer their lines to competing providers for what they decide is a “fair value” rather than at “low rates.” The decision enables incumbent local exchange carriers to charge higher rates for underlying broadband transmission service to competitive local exchange carriers that service some of our lines in various states. This could have an indirect impact on our profitability and operations.

The TCPA and FCC rules implementing the TCPA, as amended by the Junk Fax Act, prohibit sending unsolicited facsimile advertisements to telephone fax machines. The FCC may take enforcement action against companies that send “junk faxes” and individuals also may have a private cause of action. Although entities that merely transmit facsimile messages on behalf of others are not liable for compliance with the prohibition on faxing unsolicited advertisements, the exemption from liability does not apply to fax transmitters that have a high degree of involvement or actual notice of an illegal use and have failed to take steps to prevent such transmissions. We take significant steps to ensure that our services are not used to transmit unsolicited faxes on a large scale, and we do not believe that we have a high degree of involvement or notice of the use of our service to broadcast junk faxes. However, because fax transmitters do not enjoy an absolute exemption from liability under the TCPA and related FCC rules, we could face FCC inquiry and enforcement or civil litigation, or private causes of action, if someone uses our service for such impermissible purposes. If this were to occur and we were to be held liable for someone’s use of our service for transmitting unsolicited faxes, the financial penalties could cause a material adverse effect on our operations. We are currently involved in litigation involving alleged violations of the TCPA with Protus IP Solutions, Inc. For more information about this lawsuit, see Item 3 of this Annual Report on Form 10-K entitled ~~“Legal~~Legal Proceedings.”

Also in the U.S., the Communications Assistance to Law Enforcement Act (“CALEA”) requires telecommunications carriers to be capable of performing wiretaps and recording other call identifying information. In September 2005, the FCC released an order defining telecommunications carriers that are subject to CALEA obligations as facilities-based broadband Internet access providers and Voice-over-Internet-Protocol (“VoIP”) providers that interconnect with the public switched telephone network. As a result of this definition, we do not believe that j2 Global is subject to CALEA. However, if the category of service providers to which CALEA applies broadens to also include information services, that change may impact our operations.

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In addition, for calls placed to certain of our European telephone numbers we receive revenue share payments from the local telecommunications carrier. The per minute rates applicable to these “~~calling~~"calling party ~~pays~~”pays" telephone numbers is subject to foreign laws and regulations. A reduction in the permitted per minute rates would reduce our revenues and could cause us to restrict our service offerings.

For more information regarding telecommunications regulation that may affect our business, please see Item 1 of this Annual Report on Form 10-K entitled ~~“Business –~~ Government Regulation.”

Our business could suffer if we cannot obtain or retain telephone numbers, are prohibited from obtaining local numbers or are limited to distributing local numbers to only certain customers.

For example, several years ago the FCC conditionally granted petitions by Connecticut and California to adopt specialized “unified messaging” area codes, but neither state has adopted such a code. Adoption of a specialized area code within a state or nation could harm our ability to complete in that state or nation if materially affecting our ability to acquire telephone numbers for our operations or making our services less attractive due to unavailability of telephone numbers with a local geographic identity.

In addition, future growth in our subscriber base, together with growth in the subscriber bases of providers of other fax and/or voicemail to email and unified messaging services, has increased and may continue to increase the demand for large quantities of telephone numbers, which could lead to insufficient capacity and our inability to acquire sufficient telephone numbers to accommodate our future growth. For more information regarding telecommunications regulation that may affect our ability to obtain telephone numbers, please see Item 1 of this Annual Report on Form 10-K entitled Government Regulation.

The value-added messaging and communications services industry is undergoing rapid technological changes and we may not be able to keep up.

The value-added messaging and communications services industry is subject to rapid and significant technological change. We cannot predict the effect of technological changes on our business. We expect that new services and technologies will emerge in the markets in which we compete. These new services and technologies may be superior to the services and technologies that we use or these new services may render our services and technologies obsolete. Our future success will depend, in part, on our ability to anticipate and adapt to technological changes and evolving industry standards. We may be unable to obtain access to new technologies on acceptable terms or at all, and may therefore be unable to offer services in a competitive manner. Any of the foregoing risks could have a material adverse effect on our business, prospects, financial condition, operating results and cash flows.

We ~~rely heavily on the revenue generated by our fax services.~~

We are subject to regulations relating to data ~~privacy.~~privacy, security and retention.

~~In the area of data protection, many~~Many U.S. states and foreign jurisdictions have passed laws ~~requiring notification to users when there is a~~in the area of data privacy, security ~~breach for personal data. We are also subject to federal, state~~ and ~~foreign laws regarding privacy and protection of user data (including in many E.U. Member States and Canada).~~retention. The costs of compliance with these laws may increase in the future as a result of ~~changes in interpretation. There is a risk~~laws that ~~these laws may be interpreted and applied in conflicting ways~~conflict from country to country, ~~and~~changes in ~~a manner~~those laws, changes in the interpretations or interpretations that isare not consistent with our current data protection practices. Complying with these varying international requirements could cause us to incur additional costs and change our business practices. Changes to existing laws or the passage of new laws intended to address these privacy and data protection and retention issues could directly affect the way we do business or could create uncertainty on the Internet. This could reduce demand for our services, increase the cost of doing business as a result of litigation costs, increase service or delivery costs or otherwise harm our business. Failure to comply with these and other international data privacy, security and retention laws could subject us to lawsuits, fines, criminal penalties, statutory damages, adverse publicity and other losses that could harm our business. Further, any failure by us to protect our users’ privacy and data could result in a loss of user confidence in our services and ultimately in a loss of users, which could adversely affect our business.

New and existing regulations could harm our business.

We are subject to the same foreign and domestic laws as other companies conducting business on and off the Internet. There are relatively few laws specifically directed towards online services. However, due to the increasing use of the Internet and online services, laws relating to the Internet (such as user privacy, freedom of expression, pricing, fraud, content and quality of products and

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services, taxation, advertising, intellectual property rights and information security) are being debated around the world. It is not clear how existing laws governing issues such as property ownership, copyrights and other intellectual property issues, taxation, libel and defamation, obscenity and personal privacy apply to online businesses because many of these laws were adopted prior to the advent of the Internet and related technologies and, as a result, do not contemplate or address the related issues. Enactment of new laws and regulations, or the interpretation of existing laws and regulations in a way that is adverse to us, could have a material adverse effect on

~~- 15 - -~~

our business, prospects, financial condition, operating results and cash flows.

The Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (the “CAN-SPAM Act”), which allows for penalties that run into the millions of dollars, requires commercial emails to include identifying information from the sender and a mechanism for the receiver to opt out of receiving future emails. We believe that our email practices comply with the requirements of the CAN-SPAM Act. If we were ever found to be in violation of the CAN-SPAM Act, that could have a material adverse effect on our business, financial condition, operating results and cash flows.

In the E.U., the European Parliament and Council amended the Communications Directive with the Directive on the Retention of Data Processed in Connection with the Provision of Public Electronic Communications Services (“Data Retention Directive”). In the interests of public security, the Data Retention Directive requires telecommunications carriers and information service providers to store traffic (e.g., time of communication, numbers, identity of users) and location data from electronic communications for six months to two years, at the discretion of the Member States. Member States are in the process of adopting this Directive into national laws. Implementation of the Data Retention Directive, which include inconsistent requirements about how long to store and when to destroy data, may impact some of our operations.

In addition, because our services are accessible worldwide and we continue to expand our international activities, foreign jurisdictions may claim that we are required to comply with their laws. Non-U.S. laws regulating Internet companies may give different rights to consumers, content owners and users than comparable U.S. laws. Compliance may be more costly or may require us to change our business practices or restrict our service offerings relative to those in the U.S. Our failure to comply with foreign laws could subject us to penalties ranging from criminal prosecution to bans on our services.

Increased cost of email transmissions could have a material adverse effect on our business.

We rely on email for the delivery of our fax and voicemail messages. In addition, we derive some advertising revenues through the delivery of email messages to our free subscribers and we regularly communicate with our subscribers via email. We also offer email services through Electric Mail. If regulations or other changes in the industry lead to a charge associated with the sending or receiving of email messages, the cost of providing our services would increase and, if significant, could materially adversely affect our business, prospects, financial condition, operating results and cash flows.

Risks Related To Our Stock

In order to sustain our growth, we must continue to attract new paid subscribers at a greater rate and with at least an equal amount of revenues per subscriber than we lose existing paid subscribers.

We may not be able to continue to grow or even sustain our current base of paid customers on a quarterly or annual basis. Our future success depends heavily on the continued growth of our paid user base. In order to sustain our growth we must continuously obtain an increasing number of paid users to replace the users who cancel their service. In addition, these new users must provide revenue levels per subscriber that are greater than or equal to the levels of our current customers or the customers they are replacing. We must also retain our existing customers while continuing to attract new ones at desirable costs. We cannot be certain that our continuous efforts to offer high quality services at attractive prices will be sufficient to retain our customer base or attract new customers at rates sufficient to offset customers who cancel their service. In addition, we believe that competition from companies providing similar or alternative services has caused, and may continue to cause, some of our customers or prospective customers to sign up with or to switch to our competitors’ services. Moreover, we have experienced, and may continue to experience, an overall reduction in our average revenue per subscriber due to a combination of a shift in the mix of products sold and reduced usage from customers. These factors may adversely affect our customer retention rates, the number of our new customer acquisitions, our average revenue per subscriber and/or subscriber usage levels. Any combination of a decline in our rate of new customer sign-ups, decline in usage rates of our customers, decline in average revenue per subscriber, decline in customer retention rates or decline in the size of our overall customer base may result in a decrease in our revenues, which could have a material adverse effect on our business, prospects, financial condition, operating results and cash flows.

Future sales of our common stock may negatively affect our stock price.

As of February 16, ~~2009,~~2010, substantially all of our outstanding shares of common stock were available for resale, subject to volume and manner of sale limitations applicable to affiliates under SEC Rule 144. Sales of a substantial number of shares of common stock in the public market or the perception of such sales could cause the market price of our common stock to decline. These sales also might make it more difficult for us to sell equity securities in the future at a price that we think is appropriate, or at all.

Anti-takeover provisions could negatively impact our stockholders.

Provisions of Delaware law and of our certificate of incorporation and bylaws could make it more difficult for a third party to

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acquire control of us. For example, we are subject to Section 203 of the Delaware General Corporation Law, which would make it more difficult for another party to acquire us without the approval of our board of directors. Additionally, our certificate of incorporation authorizes our board of directors to issue preferred stock without requiring any stockholder approval, and preferred stock could be issued as a defensive measure in response to a takeover proposal. These provisions could make it more difficult for a third party to acquire us even if an acquisition might be in the best interest of our stockholders.

Our stock price may be volatile or may decline.

Our stock price and trading volumes have been volatile and we expect that this volatility will continue in the future due to factors, such as:

Assessments of the size of our subscriber base and our average revenue per subscriber, and comparisons of our results in these and other areas versus prior performance and that of our competitors;

Variations between our actual results and investor expectations;

Regulatory or competitive developments affecting our markets;

~~- 16 - -~~

Investor perceptions of us and comparable public companies;

Conditions and trends in the communications, messaging and Internet-related industries;

Announcements of technological innovations and acquisitions;

Introduction of new services by us or our competitors;

Developments with respect to intellectual property rights;

Conditions and trends in the Internet and other technology industries;

Rumors, gossip or speculation published on public chat or bulletin boards;

General market conditions; and

Geopolitical events such as war, threat of war or terrorist actions.

In addition, the stock market has from time to time experienced significant price and volume fluctuations that have affected the market prices for the common stocks of technology and other companies, particularly communications and Internet companies. These broad market fluctuations have previously resulted in a material decline in the market price of our common stock. In the past, following periods of volatility in the market price of a particular company’s securities, securities class action litigation has often been brought against that company. We may become involved in this type of litigation in the future. Litigation is often expensive and diverts management’s attention and resources, which could have a material adverse effect on our business, prospects, financial condition, operating results and cash flows.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

As of December 31, ~~2008,~~2009, we ~~are~~were leasing approximately 40,000 square feet of office space for our headquarters in Los Angeles, California under a lease that expires in January ~~2010.~~2010 which was extended through January 31, 2020. We lease this space from an entity indirectly controlled by our Chairman of the Board. Additionally, we have smaller leased office facilities in British Columbia; California; Hong Kong; Illinois; and Ireland.

All of our network equipment is housed either at our leased properties or at one of our multiple co-location facilities around the world.

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Item 3. Legal Proceedings

Overview of ~~Patent Litigation~~Legal Proceedings Against Us

From time to time, we are involved in litigation and other disputes or regulatory inquiries that arise in the ordinary course of our business. Many of these actions involve or are filed in response to patent actions filed by us against others. The number and significance of these disputes and inquiries has increased as our business has expanded and j2 Global has grown. Any claims or regulatory actions against us, whether meritorious or not, could be time-consuming, result in costly litigation, require significant management time and result in diversion of significant operational resources.

As part of our continuing effort to prevent the unauthorized use of our intellectual property, we have initiated litigation against the following companies, among others, for infringing our patents relating to Internet fax and other messaging technologies: ~~Captaris, Inc., a subsidiary of~~ Open Text Corporation and its Captaris business (“~~Captaris”~~Open Text”), Integrated Global Concepts, Inc. (“IGC”), Venali, Inc. (“Venali”) ~~and~~, Protus IP Solutions, Inc. (“Protus”), EasyLink Services International Corp. (“EasyLink”) and Packetel, Inc. (“Packetel”). ~~Captaris, IGC,~~In January 2010 we settled our patent infringement suit against Comodo Group, Ltd. Three of the patents at issue in some of these lawsuits have been reaffirmed through reexamination proceedings with the United States Patent and Trademark Office.

Open Text, Venali, Protus, EasyLink and ~~Protus~~Packetel have each filed counterclaims against us, ~~which are described in more detail below.~~

~~Overview~~including seeking declaratory judgments of ~~Legal Proceedings Against Us~~

~~From time to time, we are involved in litigation~~non-infringement, invalidity and ~~other disputes or regulatory inquiries that arise in the ordinary course~~unenforceability of our ~~business. Many~~patents. Open Text and Protus have also asserted counterclaims purporting to allege antitrust violations of Section 2 of the Sherman Act and California’s Business and Professions Code §§ 16720 and 17200. Open Text and Protus are seeking dismissal of our patent infringement claims, damages, including treble and punitive damages, injunctions against further violations, and attorneys’ fees and costs. All of these ~~actions~~cases are filed in response to patent actions filed by us against the plaintiffs. The number and significance of these disputes and inquiries has increased as our business expands and j2 Global grows. Any claims or regulatory actions against us, whether meritorious or not, could be time-consuming, result in costly litigation, require significant management time and result in diversion of significant operational resources.

~~In February 2004 (the “2004 case”) and July 2005 (the “2005 case”), we filed two lawsuits against Venali,~~being litigated in the United States

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District Court for the Central District of California before the same judge, who has indicated that the cases will be handled in a coordinated fashion. Discovery in all of these cases is underway. Trial is currently scheduled to begin March 1, 2011. We are also pursuing claims against Protus in Canada based on Canadian patents and Protus has asserted similar anti-competition claims against us in response.

In July 2005, one of our affiliates filed a separate case against Venali in the United States District Court for the Central District of California, asserting infringement of several ~~of our~~other U.S. patents. ~~The 2004 case has been stayed pending reexamination of the patents in suit. In the 2005 case,~~ Venali filed various counterclaims against us and our affiliate on December 27, 2006, which ~~relate~~included antitrust counterclaims related in substantial part to the patent infringement claims by usour affiliate against Venali. On May 11, 2007, the court entered a claim construction order regarding the disputed terms of the patents-in-suit. On August 12, 2008, the court granted Venali’s motion for summary judgment of non-infringement. On November 3, 2008, the court granted our summary judgment motion on Venali’s remaining counterclaims, which alleged antitrust violations based on our enforcement of our patents. We ~~have~~ appealed the non-infringement ~~rulings~~ruling in the ~~2005~~ case to the United States Court of Appeals for the Federal Circuit. On January 22, 2010, the Federal Circuit issued a decision affirming the District Court’s grant of summary judgment of non-infringement. Venali did not appeal the dismissal of its antitrust counterclaims.

On ~~December~~May 12, ~~2006, Venali~~2003, we filed ~~suit against us in~~an application to register the eFax mark on the United States ~~District Court~~Patent and Trademark Office (“USPTO”) Principal Register, which the USPTO approved and published for the Southern District of Florida, alleging infringement of U.S. Patent Number 7,114,004 (the “ ’004 Patent”). Venali is seeking damages in the amount of lost profits or a reasonable royalty, a permanent injunction against continued infringement, treble damages, attorneys’ fees, interest and costs. On March 6, 2007, weopposition. In July 2005, Protus filed an ~~answer~~opposition proceeding before the USPTO Trademark Trial and Appeal Board seeking to prevent such registration. In the ~~complaint denying liability.~~opposition proceeding, Protus claims that the mark is generic or merely descriptive and not entitled to registration. On ~~May 17, 2007,~~September 1, 2005, we ~~filed a request with~~responded to Protus’ Notice of Opposition. The parties are engaged in discovery. Trial before the ~~U.S. Patent &~~ Trademark ~~Office for reexamination of the ’004 Patent, which request was granted~~Trial and Appeal Board is set to conclude on ~~July 27, 2007. On August 20, 2007, the court granted our motion to stay the action pending the reexamination.~~September 15, 2010.

In January 2006, we filed a complaint in the United States District Court for the Central District of California against Protus asserting causes of action for violation of the Federal Telephone Consumer Protection Act, trespass to chattels, and unfair business practices as a result of Protus sending “junk faxes” to us and our customers. We are seeking statutory and treble damages, attorneys’ fees, interest and costs, as well as a permanent injunction against Protus continuing its junk fax sending practices. In September 2007, Protus filed a counterclaim against us asserting the same causes of action as those asserted against it, as well as claims for false advertising, trade libel, tortious interference with prospective economic advantage and defamation. Protus is seeking, among other things, general and special damages, treble damages, punitive damages, attorneys’ fees, interest and costs, as well as a permanent injunction against us sending any more junk faxes. The parties are engaged in discovery. Trial is currently set for January 18, 2011.

On September 15, 2006, one of our affiliates filed a patent infringement suit against IGC in the United States District Court for the Northern District of Georgia. On May 13, 2008, IGC filed counterclaims alleging violations of Section 2 of the Sherman Act and breach of contract. IGC is seeking damages, including treble and punitive damages, an injunction against further violations, divestiture of certain assets, attorneys’ fees and costs. On June 13, 2008, we moved to dismiss the amended counterclaims, and on August 28, 2008, we moved to stay the action pending the appeal in the 2005 case against Venali, described above, which involves the same patents and claims at issue in the IGC action. On February 18, 2009, the Court granted our motion to stay the case pending the conclusion of the Venali appeal. On January 29, 2010, we gave the Court notice of the Federal Circuit’s decision in the Venali appeal, thereby lifting the stay. No further proceedings have occurred thus far.

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On December 12, 2006, Venali filed suit against us in the United States District Court for the Southern District of Florida, alleging infringement of U.S. Patent Number 7,114,004 (the “ ’004 Patent”). Venali is seeking damages in the amount of lost profits or a reasonable royalty, a permanent injunction against continued infringement, treble damages, attorneys’ fees, interest and costs. On March ~~2, 2010.~~6, 2007, we filed an answer to the complaint denying liability. On May 17, 2007, we filed a request with the USPTO for reexamination of the ’004 Patent, which request was granted on July 27, 2007. On August 20, 2007, the court granted our motion to stay the action pending the reexamination. On October 1, 2009, the USPTO issued a Notice of Intent to Issue a Reexamination Certificate confirming the claims of the ’004 Patent. On December 1, 2009, the Court lifted the stay. Discovery is ongoing in this case. Trial is currently scheduled to begin March 14, 2011.

On May 9, 2007, Bear Creek Technologies, Inc. (“Bear Creek”) filed suit against us in the United States District Court for the Eastern District of Texas, alleging infringement of U.S. Patent Number 6,985,494 (the “ ‘494 patent”). Bear Creek is seeking damages in at least the amount of a reasonable royalty, a permanent injunction against continued infringement, treble damages, attorneys’ fees, interest and costs. On June 29, 2007, we filed an answer to the complaint denying liability, asserting affirmative defenses and asserting counterclaims of non-infringement and invalidity. On September 21, 2007, Bear Creek filed its reply to our counterclaims, denying each one. On February 11, 2008 we filed a request for reexamination of the ‘494 ~~patent.~~patent with the USPTO. On February 28, 2008, the Court stayed the case during the pendency of the reexamination proceedings. On April 18, 2008, the ~~United States Patent and Trademark Office~~USPTO granted the reexamination request. On February 12, 2009, the USPTO finally rejected the reexamined claims, and Bear Creek failed to file a response within the prescribed timeframe. On June 16, 2009, the USPTO issued a right to appeal the examiner’s rejection. Bear Creek filed its appeal on September 16, 2009. We filed our response to Bear Creek’s appeal on October 14, 2009 and are awaiting an answer from the USPTO examiner. On September 10, 2009, the Court “Administratively Closed” the case pending resolution of the reexamination proceeding.

~~On September 15, 2006,~~In November 2008, we and one of our affiliates filed a ~~patent infringement suit~~lawsuit against ~~IGC in the United States District Court for the Northern District of Georgia. On October 11, 2007, IGC filed counterclaims against us, certain of our current~~Zilker Ventures, LLC and ~~former officers and/or directors, one of our affiliates, and several other parties purporting to allege violations of antitrust law, the Racketeer Influenced and Corrupt Organizations Act (“RICO”~~Choosewhat.com, LLC (collectively, “Zilker”) and various related statutory and common law claims arising out of our procurement and enforcement of our patents and our acquisition of certain companies. IGC is seeking damages, including treble and punitive damages, an injunction against further violations, divestiture of certain assets, attorneys’ fees and costs. On April 23, 2008, the court ordered IGC to replead its counterclaims. IGC filed amended counterclaims on May 13, 2008, alleging violations of Section 2 of the Sherman Act and breach of contract, and seeking the same relief as the original counterclaims. The amended counterclaims drop several parties and no longer assert violations of RICO, Section 7 of the Clayton Act, Section 1 of the Sherman Act or the Georgia Uniform Deceptive Trade Practices Act. On June 13, 2008, we moved to dismiss the amended counterclaims and on August 28, 2008, we moved to stay the action pending the appeal in the Venali action, described above, that involves the same patents and claims at issue in the IGC action. On February 18, 2009, the Court granted our motion to stay the case pending the conclusion of the Venali appeal.

~~On June 29, 2007, a purported class action was filed by Justin Lynch as the named plaintiff~~ in the United States District Court for the Central District of California alleging ~~that we have attempted to monopolize and/or monopolized the market~~infringement of our eFax trademark and for ~~Internet facsimile services to home and small offices~~false advertising in violation of ~~Section 2~~§ 43(a) of the Sherman Act. The claims related in substantial part to the patent infringement actions by us against various companies. The suit sought treble damages, injunctive relief, attorneys’ fees and costs. On August 24, 2007, we filed an answer to the complaint denying liability. Shortly following the Court’s entry of summary judgment in our favor dismissing the antitrust counterclaims in the 2005 Venali case, the plaintiff agreed to dismiss this action. On January 23, 2009, the Court entered a dismissal with prejudice. We made no payments to the plaintiff in connection with the dismissal.

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On June 26, 2008, we filed a patent infringement suit against Captaris in the United States District Court for the Eastern District of Texas. On February 6, 2009, Captaris filed counterclaims against us seeking declaratory judgments of non-infringement and invalidity of our patents and unenforceability of our patents based on inequitable conduct as well as purporting to allege antitrust violations of Section 1 & 2 of the Sherman Act and Section 7 of the ClaytonLanham Act and California’s Business and Professions Code ~~§§ 16720~~§17200 et seq. The lawsuit sought an accounting for Zilker’s profits, our lost profits, attorney fees, interest and ~~17200. Captaris is seeking dismissal of our patent infringement claims, damages, including treble and punitive damages, an~~costs, as well as a permanent injunction against ~~further violations,~~Zilker’s trademark infringement and ~~attorneys’~~false advertising activities. On December 23, 2008, Zilker filed a counterclaim seeking a declaration that our eFax trademark is generic or merely descriptive and not entitled to trademark protection or registration and that Zilker’s use of the eFax mark was a fair use. Zilker sought to recover attorney fees and ~~costs. We have~~costs in addition to declaratory relief. On September 14, 2009, Zilker filed a motion for summary judgment that it did not ~~yet responded~~infringe our eFax mark, did not engage in false advertising, and on its claim for a declaration that our eFax mark is generic or merely descriptive. On November 4, 2009, the Court denied the motion. On November 13, 2009, the case was dismissed pursuant to ~~the counterclaims.~~a settlement agreement.

We do not believe, based on current knowledge, that any of the foregoing legal proceedings or claims is likely to have a material adverse effect on our consolidated financial position, results of operations or cash flows. However, depending on the amount and the timing, an unfavorable resolution of some or all of these matters could materially affect our consolidated financial position, results of operations or cash flows in a particular period. ~~In accordance with SFAS 5,~~ ~~Accounting for Contingencies, we~~We have not accrued for a loss contingency relating to these legal proceedings because unfavorable outcomes are not considered by management to be probable or reasonably estimable.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth quarter of ~~2008.~~

2009.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock is traded on the NASDAQ Global Select Market under the symbol “JCOM”. The following table sets forth the high and low closing sale prices for our common stock for the periods indicated, as reported by the NASDAQ Global Select Market.

	High		Low		High		Low
Year ended December 31, 2009
First Quarter					$	21.89	$	16.26
Second Quarter						24.80		20.18
Third Quarter						24.53		20.35
Fourth Quarter						22.29		19.28
Year ended December 31, 2008
First Quarter	$	24.00	$	18.59		24.00		18.59
Second Quarter		26.80		20.91		26.80		20.91
Third Quarter		26.97		21.30		26.97		21.30
Fourth Quarter		22.96		13.74		22.96		13.74
Year ended December 31, 2007
First Quarter		28.75		23.01
Second Quarter		35.37		27.92
Third Quarter		37.23		32.45
Fourth Quarter		35.07		21.17

December 31,
2008 2007 2006
Free service telephone numbers 10,363 10,874 10,323
Paying telephone numbers 1,236 1,064 907
Total active telephone numbers 11,599 11,938 11,230

	December 31,
	2009		2008		2007
Free service telephone numbers		9,910		10,363		10,874
Paying telephone numbers		1,275		1,236		1,064
Total active telephone numbers		11,185		11,599		11,938

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	Year Ended December 31,
	2009		2008		2007
Subscriber revenues:
Fixed	$	197,918	$	186,459	$	162,099
Variable		44,004		50,382		50,230
Total subscriber revenues	$	241,922	$	236,841	$	212,329

Percentage of total subscriber revenues:
Fixed		81.8%		78.7%		76.3%
Variable		18.2%		21.3%		23.7%

Revenues:
DID-based	$	233,443	$	228,984	$	205,290
Non-DID-based		12,128		12,529		15,407
Total revenues	$	245,571	$	241,513	$	220,697

Average monthly revenue per paying telephone number (1)	$	15.09	$	15.96	$	16.75

(1) See calculation of average revenue per paying telephone number at the end of this section, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Year Ended December 31,
2008 2007 2006
Subscriber revenues:
Fixed
$ 186,459 $ 162,099 $ 126,586
Variable
50,382 50,230 48,585
Total subscriber revenues $ 236,841 $ 212,329 $ 175,171

Percentage of total subscriber revenues:
Fixed
78.7 % 76.3 % 72.3 %
Variable
21.3 % 23.7 % 27.7 %

Revenues:
DID-based
$ 228,984 $ 205,290 $ 167,882
Non-DID-based
12,529 15,407 13,197
Total revenues $ 241,513 $ 220,697 $ 181,079

Average monthly revenue per paying telephone number (1) $ 15.96 $ 16.75 $ 16.45

~~(1)~~

~~See calculation of average revenue per paying telephone number at the end of this section, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”~~

Critical Accounting Policies and Estimates

In the ordinary course of business, we have made a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”). Actual results could differ significantly from those estimates under different assumptions and conditions. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results and require management’s most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Revenue. Our revenue consists substantially of monthly recurring and usage-based subscription fees. In accordance with GAAP, ~~and SEC Staff Accounting Bulletin No. 104,~~ ~~Revenue Recognition, which clarifies certain existing accounting principles for the timing of revenue recognition and classification of revenues in the financial statements,~~ we defer the portions of monthly recurring and usage-based subscription fees collected in advance and recognize them in the period earned. Additionally, we defer and recognize subscriber activation fees and related direct incremental costs over a subscriber’s estimated useful life.

Investments. We account for our ~~short and long-term~~ investments in debt securities in accordance with ~~the provisions of Statement of Financial Accounting Standards (“SFAS”) No 115,~~ ~~Accounting for Certain~~FASB ASC Topic No. 320, Investments in– Debt and Equity Securities (“~~SFAS 115”) and Emerging Issues Task Force Issue No. 03-1,~~ ~~The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments~~ ~~(“EITF 03-1”~~ASC 320”). ~~SFAS 115~~ASC 320 requires that certain debt and equity securities be classified into one of three categories; trading, available-for-sale or held-to-maturity securities. These j2 Global investments are typically comprised primarily of readily marketable corporate debt securities, ~~debt instruments of the U.S. government and its agencies and~~ auction rate debt, preferred securities and ~~preferred securities.~~certificates of deposits. We determine the appropriate classification of our investments at the time of acquisition and reevaluate such determination at each balance sheet date. Held-to-maturity securities are those investments that we have the ability and intent to hold until maturity. Held-to-maturity securities are recorded at amortized cost. Available-for-sale securities are recorded at fair value, with unrealized gains or losses recorded as a separate component of accumulated other comprehensive income (loss) in stockholders’ equity until realized. Trading securities are carried at fair value, with unrealized gains and losses included in interest and other income ~~net~~ on our ~~condensed~~ consolidated statement of operations. All securities are accounted for on a specific identification basis. ~~In accordance with FASB Staff Position No 115-1, we~~We assess whether an other-than-temporary impairment loss on an investment has occurred due to declines in fair value or other market ~~conditions.~~conditions (see Note 4 of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K).

~~In September 2006,~~j2 Global complies with the provisions of FASB ~~issued SFAS~~ASC Topic No. ~~157,~~ 820, Fair Value Measurements and Disclosures (“~~SFAS 157”~~ASC 820”), which defines fair value, provides a framework for measuring fair value and expands the disclosures required for fair value measurements. SFAS 157 applies to all accounting pronouncements that require fair value measurements; it does not require any new fair value measurements. Effective for fiscal years beginning after November 15, 2007, companies were required to implement SFAS 157 for certain assets and liabilities that are carried at fair value on a recurring basis in financial statements. The FASB did, however, provide a one-year deferral for the implementation of Statement 157 for other nonfinancial assets and liabilities. We do not expect the implementation of this deferral to

~~- 25 - -~~

~~have a material impact on our consolidated financial position and results of operations. Accordingly, we adopted SFAS 157 for financial assets and liabilities on January 1, 2008.~~

~~SFAS 157~~ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, ~~SFAS 157~~ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

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Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 – Include other inputs that are directly or indirectly observable in the marketplace.

Level 3 – Unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

~~In accordance with SFAS 157, we~~We measure our cash equivalents and ~~marketable securities~~investments at fair value. Our cash equivalents and ~~marketable~~short-term investments and other debt securities are primarily classified within Level ~~1 with the exception of our investments~~1. Investments in auction rate securities ~~which~~ are classified within Level 3. The valuation technique used under Level 3 consists of a discounted cash flow analysis which included numerous assumptions, some of which include prevailing implied credit risk premiums, incremental credit spreads, illiquidity risk premium, among ~~others.~~others and a market comparables model where the security is valued based upon indicators from the secondary market of what discounts buyers demand when purchasing similar auction rate securities. There was no change in the technique during ~~the period. Because these auction rate securities are classified as held-to-maturity, there were no gains or losses recorded for~~ the period. Cash equivalents and marketable securities are valued primarily using quoted market prices utilizing market observable inputs. Our investments in auction rate securities are classified within Level 3 because there are no active markets for the auction rate securities and therefore we are unable to obtain independent valuations from market sources. ~~Therefore, the auction rate securities were valued using a discounted cash flow model.~~ Some of the inputs to the cash flow model are unobservable in the market. The total amount of assets measured using Level 3 valuation methodologies represented 3%less than 1% of total assets as of December 31, ~~2008.~~2009.

Share-Based Compensation Expense. ~~Effective January 1, 2006, we adopted SFAS~~j2 Global complies with the provisions of FASB ASC Topic No. ~~123 (revised 2004),~~ ~~Share-Based Payment~~718, Compensation – Stock Compensation (“~~SFAS 123(R)”~~ASC 718”). Accordingly, we measure share-based compensation expense at the grant date, based on the fair value of the award, and recognize the expense over the employee’s requisite service period using the straight-line method. The measurement of share-based compensation expense is based on several criteria including, but not limited to, the valuation model used and associated input factors, such as expected term of the award, stock price volatility, risk free interest rate and award cancellation rate. These inputs are subjective and are determined using management’s judgment. If differences arise between the assumptions used in determining share-based compensation expense and the actual factors, which become known over time, we may change the input factors used in determining future share-based compensation expense. Any such changes could materially impact our results of operations in the period in which the changes are made and in periods thereafter. ~~In November 2005, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position No. 123(R)-3,~~ ~~Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards~~ ~~(“FSP 123R-3”).~~ We elected to adopt the alternative transition method for calculating the tax effects of share-based compensation ~~pursuant to FSP 123R-3. In March 2005, the SEC issued Staff Accounting Bulletin No. 107,~~ ~~Topic 14: Share-Based Payment~~ ~~(“SAB 107”) which provided supplemental implementation guidance for SFAS 123(R). We have applied the provisions of SAB 107 in our adoption of SFAS 123(R).~~

~~In December 2007, the SEC issued Staff Accounting Bulletin No. 110,~~ ~~Certain Assumptions Used in Valuation Methods – Expected Term~~ (“SAB 110”). According to SAB 110, under certain circumstances the SEC staff will continue to accept beyond December 31, 2007 the use of the simplified method in developing an estimate of expected term of share options that possess certain characteristics in accordance with SFAS 123(R) beyond December 31, 2007. We adopted SAB 110 effective January 1, 2008 and continue to use the simplified method in developing the expected term used for our valuation of share-based ~~compensation.~~compensation in accordance with ASC 718.

Long-lived and Intangible Assets. We account for long-lived assets in accordance with the provisions of ~~SFAS~~FASB ASC Topic No. ~~144,~~ ~~Accounting for the Impairment or Disposal of Long-Lived Assets~~360, Property, Plant, and Equipment (“~~SFAS 144”~~ASC 360”)~~. SFAS 144~~, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets.

~~In accordance with SFAS 144, we~~We assess the impairment of identifiable intangibles and long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important which could individually or in combination trigger an impairment review include the following:

significant underperformance relative to expected historical or projected future operating results;

~~- 26 - -~~

significant changes in the manner of our use of the acquired assets or the strategy for our overall business;

significant negative industry or economic trends;

significant decline in our stock price for a sustained period; and

our market capitalization relative to net book value.

If we determined that the carrying value of intangibles and long-lived assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, we would record an impairment equal to the excess of the carrying amount of the asset over its estimated fair value.

~~Consistent with SFAS 144, we~~We have assessed whether events or changes in circumstances have occurred that potentially indicate the carrying value of long-lived assets may not be recoverable. ~~We concluded~~During the fourth quarter of 2009, we determined based upon our current and future business needs that ~~there were no such events or changes~~the rights to certain external administrative software will not provide any future benefit. Accordingly, we recorded a disposal in ~~circumstances which would trigger an impairment review during~~the amount of $2.4 million to the consolidated statement of operations representing the capitalized cost as of December 31, 2009. Total disposals of long-lived assets for the year ended December 31, 2009, 2008 and 2007 ~~or 2006.~~was approximately $2.5 million, zero and $0.2 million, respectively.

- 25 - -

Goodwill and Purchased Intangible Assets. We evaluate our goodwill and intangible assets for impairment pursuant to ~~SFAS~~FASB ASC Topic No. ~~142,~~ 350, Intangibles – Goodwill and Other ~~Intangible Assets~~(“ASC 350”), which provides that goodwill and other intangible assets with indefinite lives are not amortized but tested for impairment annually or more frequently if circumstances indicate potential impairment. The impairment test is comprised of two steps: (1) a reporting unit’s fair value is compared to its carrying value; if the fair value is less than its carrying value, impairment is indicated; and (2) if impairment is indicated in the first step, it is measured by comparing the implied fair value of goodwill and intangible assets to their carrying value at the reporting unit level. We completed the required impairment review at the end of 2009, 2008 ~~2007~~ and ~~2006~~2007 and noted no impairment. Consequently, no impairment charges were recorded.

Income Taxes. We account for income taxes in accordance with ~~SFAS~~FASB ASC Topic No. ~~109,~~ ~~Accounting for~~740, Income Taxes (“~~SFAS 109”~~ASC 740”), which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities. ~~SFAS 109~~ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the net deferred tax assets will not be realized. Our valuation allowance is reviewed quarterly based upon the facts and circumstances known at the time. In assessing this valuation allowance, we review historical and future expected operating results and other factors to determine whether it is more likely than not that deferred tax assets are realizable. We had $10.7 million and $7.8 million in net deferred tax assets at December 31, 2008 and 2007, respectively. Based on our review, we concluded that these net deferred tax assets do not require valuation allowances as of December 31, 2008 and 2007. The net deferred tax assets should be realized through future operating results and the reversal of temporary differences.

Income Tax Contingencies. We calculate current and deferred tax provisions based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed during the following year. Adjustments based on filed returns are recorded when identified in the subsequent year.

Effective January 1, 2007, ~~we adopted~~the FASB ~~Interpretation No. 48,~~ ~~Accounting for Uncertainty in~~issued new accounting guidance regarding uncertain income tax positions. This guidance found under FASB ASC Topic 740, Income ~~Taxes— an Interpretation of FASB Statement No. 109~~ ~~(“FIN 48”). FIN 48~~Taxes, provides guidance on the minimum threshold that an uncertain income tax position is required to meet before it can be recognized in the financial statements and applies to all tax positions taken by a company. ~~FIN 48~~ASC 740 contains a two-step approach to recognizing and measuring uncertain income tax ~~positions accounted for in accordance with SFAS 109.~~positions. The first step is to evaluate the income tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. If it is not more likely than not that the benefit will be sustained on its technical merits, no benefit will be recorded. Uncertain income tax positions that relate only to timing of when an item is included on a tax return are considered to have met the recognition threshold. We recognize accrued interest and penalties related to uncertain income tax positions in income tax expense on our consolidated statement of operations. At ~~the adoption date of~~ January 1, 2007, we had $25.0 million in liabilities for uncertain income tax positions, including $6.1 million recognized under ~~FAS 5~~FASB ASC Topic No. 450, Contingencies (“ASC 450”) and carried forward from prior years and an additional charge of $18.9 million to retained earnings. On a quarterly basis, we evaluate uncertain income tax positions ~~in accordance with the FIN 48 criteria~~ and establish or release reserves as appropriate under FIN 48. During 2008, we recognized a net increase of $6.6 million in liabilities and at December 31, 2008 had $38.6 million in liabilities for uncertain income tax positions (see Note 8 of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K).GAAP.

As a multinational corporation, we are subject to taxation in many jurisdictions, and the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various taxing jurisdictions. Our estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts and circumstances existing at that time.

~~- 27 - -~~

Therefore, the actual liability for U.S. or foreign taxes may be materially different from our estimates, which could result in the need to record additional tax liabilities or potentially to reverse previously recorded tax liabilities. In addition, we may be subject to examination of our tax returns by the U.S. Internal Revenue Service and other domestic and foreign tax authorities. We are currently under audit by the Internal Revenue Service for tax years 2004 through ~~2006.~~2008. In addition, we ~~have been notified~~are under audit by the California Franchise Tax Board ~~that we are being audited~~ for tax years 2005 through ~~2007.~~2007 and by the Illinois Department of Revenue for 2005 and 2006. We are also under audit by various other states for non-income related taxes. It is possible that these audits may conclude in the next 12 months and that the unrecognized tax benefits we have recorded in relation to these tax years may change compared to the liabilities recorded for the periods. However, it is not possible to estimate the amount, if any, of such change. We adequately establish reserves for these tax contingencies when we believe that certain tax positions might be challenged despite our belief that our tax positions are fully supportable. We adjust these reserves when changing events and circumstances arise.

Non-Income Tax Contingencies. In accordance with the provisions of ~~SFAS No. 5,~~ ~~Accounting for Contingencies~~,ASC 450, we make judgments regarding the future outcome of contingent events and record loss contingency amounts that are probable and reasonably ~~estimated~~estimable based upon available information. The amounts recorded may differ from the actual income or expense that occurs when the uncertainty is resolved. The estimates that we make in accounting for contingencies and the gains and losses that we record upon the ultimate resolution of these uncertainties could have a significant effect on the liabilities and expenses in our financial statements. As of December 31, ~~2008,~~2009, we had ~~$2.6~~$0.8 million of non-income tax related contingent liabilities.

- 26 - -

Recent Accounting Pronouncements

See Note 2.2 – Basis of Presentation and Summary of Significant Accounting Policies, Recent Accounting Policies of our accompanying consolidated financial statements for a full description of recent accounting pronouncements and our expectations of their impact on our consolidated financial position and results of operations.

Results of Operations

Years Ended December 31, 2009, 2008 ~~2007~~ and ~~2006~~2007

The following table sets forth, for the years ended December 31, 2009, 2008 ~~2007~~ and ~~2006,~~2007, information derived from our statements of operations as a percentage of revenues. This information should be read in conjunction with the accompanying financial statements and the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

	Year Ended December 31,						Year Ended December 31,
	2008		2007		2006		2009	2008	2007


Revenues		100%		100%		100%	100%	100%	100%
Cost of revenues		19		20		20	18	19	20
Gross profit		81		80		80	82	81	80
Operating expenses:
Sales and marketing		17		18		17	15	17	18
Research, development and engineering		5		5		5	5	5	5
General and administrative		18		18		21	18	18	18
Loss on disposal of long-lived asset							1	—	—
Total operating expenses		40		41		43	39	40	41
Operating earnings		41		39		37	43	41	39
Gain on sale of investment		—		—		—
Other-than-temporary impairment losses							4	—	—
Interest and other income		2		4		4	1	2	4
Interest and other expense		1		—		—	—	1	—
Earnings before income taxes		42		43		41	40	42	43
Income tax expense		12		12		11	13	12	12
Net earnings		30%		31%		30%	27%	30%	31%

Delaware	51-0371142
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Period	Total Number of Shares Purchased	Average Price Per Share (1)	Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Number of Shares That May Yet Be Purchased Under the Program
January 1, 2008 – January 31, 2008				5,000,000
February 1, 2008 – February 29, 2008	1,324,422	$ 20.56	1,324,422	3,675,578
March 1, 2008 – March 31, 2008	2,209,767	21.93	3,534,189	1,465,811
April 1, 2008 – April 30. 2008	746,589	21.28	4,280,778	719,222
May 1, 2008 – May 31, 2008	180,772	21.06	4,461,550	538,450
June 1, 2008 –June 30, 2008	73,866	23.18	4,535,416	464,584
July 1, 2008 – July 31, 2008	464,584	23.00	5,000,000	—
Total	5,000,000	$ 21.59

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a)		Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b)		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c)		Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a)		Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b)		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c)
Equity compensation plans approved by security holders		4,322,930	$	11.73		6,690,332		4,480,591	$	13.17		4,203,637
Equity compensation plans not approved by security holders		—		—		—		—		—		—
Total		4,322,930	$	11.73		6,690,332		4,480,591	$	13.17		4,203,637

			Peer Group		NASDAQ
Measurement Date	j2 Global		Composite Index		Telecom Index
Dec-04	$	100.00	$	100.00	$	100.00
Mar-05	$	99.48	$	104.66	$	91.77
Jun-05	$	99.83	$	105.06	$	93.40
Sep-05	$	117.16	$	83.82	$	96.90
Dec-05	$	123.88	$	79.16	$	92.79
Mar-06	$	136.23	$	83.20	$	113.90
Jun-06	$	180.99	$	86.16	$	97.47
Sep-06	$	157.51	$	89.12	$	104.34
Dec-06	$	157.97	$	91.47	$	118.55
Mar-07	$	160.70	$	112.07	$	119.78
Jun-07	$	202.32	$	120.87	$	131.54
Sep-07	$	189.74	$	119.56	$	145.89
Dec-07	$	122.72	$	116.04	$	129.42
Mar-08	$	129.39	$	107.06	$	115.28
Jun-08	$	133.33	$	103.44	$	117.22
Sep-08	$	135.36	$	102.13	$	101.30
Dec-08	$	116.17	$	56.09	$	73.79
Mar-09	$	126.90	$	53.96	$	76.11
Jun-09	$	130.78	$	68.34	$	94.87
Sep-09	$	133.39	$	62.04	$	107.18
Dec-09	$	117.97	$	66.42	$	109.39

			Peer Group			NASDAQ
Measurement Date	j2 Global		Composite Index			Telecom Index
Dec-03	$	100.00	$	100.00		$	100.00
Mar-04	$	91.09	$	103.92		$	100.18
Jun-04	$	112.14	$	119.60		$	101.35
Sep-04	$	127.43	$	97.58		$	94.25
Dec-04	$	139.17	$	122.35		$	108.00
Mar-05	$	138.40	$	128.05		$	99.11
Jun-05	$	138.93	$	128.54		$	100.87
Sep-05	$	163.05	$	102.55		$	104.65
Dec-05	$	172.41	$	96.84		$	100.21
Mar-06	$	189.59	$	101.80		$	123.00
Jun-06	$	251.88	$	105.41		$	105.27
Sep-06	$	219.20	$	109.04		$	112.68
Dec-06	$	219.85	$	111.92		$	128.03
Mar-07	$	223.64	$	137.11		$	129.36
Jun-07	$	281.57	$	147.88		$	142.05
Sep-07	$	264.06	$	146.27		$	157.55
Dec-07	$	170.79	$	141.97		$	139.77
Mar-08	$	180.07	$	130.98		$	124.50
Jun-08	$	185.56	$	126.55	��	$	126.59
Sep-08	$	188.38	$	124.95		$	109.40
Dec-08	$	161.68	$	68.62		$	79.69

	Payments Due by Period
	(In thousands)
Contractual Obligations	1 Year		2-3 Years		4-5 Years		More than 5 Years		Total
Operating leases (a)	$	1,596	$	3,305	$	3,416	$	8,722	$	17,039
Telecom services and co-location facilities (b)		8,134		2,142		271		—		10,547
Computer software and related services (c)		195		407		8		—		610
Holdback payment (d)		1,169		—		—		—		1,169
Other (e)		421		1		—		—		422
	$	11,515	$	5,855	$	3,695	$	8,722	$	29,787

	2009			2008
ASSETS

Cash and cash equivalents	$	197,411		$	150,780
Short-term investments		31,381			14
Accounts receivable, net of allowances of $3,077 and $2,896, respectively		11,928			14,083
Prepaid expenses and other current assets		13,076			6,683
Deferred income taxes		2,657			2,958
Total current assets		256,453			174,518

Long-term investments		14,887			11,081
Property and equipment, net		13,366			18,938
Goodwill		81,258			72,783
Other purchased intangibles, net		39,091			36,791
Deferred income taxes		8,717			7,787
Other assets		229			142
Total assets	$	414,001		$	322,040

LIABILITIES AND STOCKHOLDERS’ EQUITY

Accounts payable and accrued expenses	$	15,941		$	16,915
Income taxes payable		1,563			1,800
Deferred revenue		11,411			13,680
Total current liabilities		28,915			32,395

Accrued income tax liability		46,820			38,643
Other long-term liabilities		2,094			1,022
Total liabilities		77,829			72,060

Commitments and contingencies		—			—
Stockholders’ Equity:
Preferred stock, $0.01 par value. Authorized 1,000,000 and none issued		—			—
Common stock, $0.01 par value. Authorized 95,000,000 at December 31, 2009 and 2008; total issued 52,907,691 and 52,305,293 shares at December 31, 2009 and 2008, respectively, and total outstanding 44,227,123 and 43,624,725 shares at December 31, 2009 and 2008, respectively		529			523
Additional paid-in capital		147,619			131,185
Treasury stock, at cost (8,680,568 shares at December 31, 2009 and 2008, respectively)		(112,671	)		(112,671	)
Retained earnings		301,670			234,843
Accumulated other comprehensive loss		(975	)		(3,900	)
Total stockholders’ equity		336,172			249,980
Total liabilities and stockholders’ equity	$	414,001		$	322,040

																			Accumulated
																			other
	Common stock						Additional			Treasury stock						Retained			comprehensive			Stockholders’
	Shares			Amount			paid-in capital			Shares			Amount			earnings			income/(loss)			equity

Balance, December 31, 2006		53,449,368		$	535		$	144,935			(4,131,224	)	$	(4,647	)	$	112,735		$	1,183		$	254,741
Comprehensive income:
Adoption of FIN 48		—			—			—			—			—			(18,915	)		—			(18,915	)
Net earnings		—			—			—			—			—			68,461			—			68,461
Foreign currency translation		—			—			—			—			—			—			2,111			2,111
Unrealized loss on available-for-sale investments		—			—			—			—			—			—			(345	)		(345	)
Comprehensive income		—			—			—			—			—			49,546			1,766			51,312
Exercise of stock options		776,273			7			7,693			—			—			—			—			7,700
Issuance of common stock under employee stock purchase plan		9,282			—			266			—			—			—			—			266
Tax benefit of stock option exercises and restricted stock		—			—			3,608			—			—			—			—			3,608
Repurchase of common stock		—			—			(42,349	)		(1,529,100	)		(15	)		—			—			(42,364	)
Repurchase of restricted stock		(9,784	)		—			(63	)		—			—			—			—			(63	)
Issuance of restricted stock, net		100,794			1			(1	)		—			—			—			—			—
Share-based compensation		—			—			7,414			—			—			—			—			7,414
Balance, December 31, 2007		54,325,933			543			121,503			(5,660,324	)		(4,662	)		162,281			2,949			282,614
Comprehensive income:
Net earnings		—			—			—			—			—			72,562			—			72,562
Foreign currency translation		—			—			—			—			—			—			(6,751	)		(6,751	)
Unrealized loss on available-for-sale investments		—			—			—			—			—			—			(98	)		(98	)
Comprehensive income		—			—			—			—			—			72,562			(6,849	)		65,713
Exercise of stock options		226,760			2			1,827			—			—			—			—			1,829
Issuance of common stock under employee stock purchase plan		9,632			—			182			—			—			—			—			182
Tax benefit of stock option exercises and restricted stock		(313,288	)		(3	)		150			—			—			—			—			147
Repurchase of common stock		—			—			—			(5,000,000	)		(108,009	)		—			—			(108,009	)
Repurchase of restricted stock		(19,024	)		—			(462	)		—			—			—			—			(462	)
Retirement of treasury stock		(2,000,000	)		(20	)		—			1,979,756			—			—			—			(20	)
Issuance of restricted stock, net		75,280			1			(1	)		—			—			—			—			—
Share-based compensation		—			—			7,986			—			—			—			—			7,986
Balance, December 31, 2008		52,305,293			523			131,185			(8,680,568	)		(112,671	)		234,843			(3,900	)		249,980
Comprehensive income:
Net earnings		—			—			—			—			—			66,827			—			66,827
Foreign currency translation		—			—			—			—			—			—			1,746			1,746
Unrealized gain on available-for-sale investments		—			—			—			—			—			—			1,179			1,179
Comprehensive income		—			—			—			—			—			301,670			2,925			69,752
Exercise of stock options		523,290			5			2,703			—			—						—			2,708
Issuance of shares under Employee stock purchase plan		5,808			—			120			—			—			—			—			120
Vested restricted stock		95,266			1			(1	)		—			—			—			—			—
Repurchase of restricted stock		(21,966	)		—			(469	)		—			—			—			—			(469	)
Share based compensation		—			—			11,018			—			—			—			—			11,018
Excess tax benefit on share based compensation		—			—			3,063			—			—			—			—			3,063
Balance, December 31, 2009		52,907,691			529			147,619			(8,680,568	)		(112,671	)		301,670			(975	)		336,172

	As of December 31, 2008		As of December 31, 2007
Due within 1 year	$	14	$	54,297
Due within more than 1 year but less than 5 years		—		9,949
Due within more than 5 years but less than 10 years		4,669		6,200
Due 10 years or after		6,412		5,092
Total	$	11,095	$	75,538

	As of December 31, 2008		As of December 31, 2007
Trading	$	14	$	432
Available-for-sale		—		36,170
Held-to-maturity		11,081		38,936
Total	$	11,095	$	75,538

Asset	Valuation
Trade Names	$	2,040
Non-Competition Agreements		1,780
Software Developed		1,870
Customer Relationships		4,876
Goodwill		35,524
Fixed Assets		30
Cash		224
Accounts Receivable		170
Other Current Assets		51
Other Current Liabilities, net		(960	)
Total	$	45,605

	Pro Forma December 31, 2008		Year Ended December 31, 2008
	(unaudited)
Revenues	$	249,677	$	241,513
Net Income	$	73,618	$	72,562
EPS – Basic	$	1.65	$	1.63
EPS – Diluted	$	1.60	$	1.58

	Pro Forma December 31, 2007		Year Ended December 31, 2007
	(unaudited)
Revenues	$	231,871	$	220,697
Net Income	$	70,676	$	68,461
EPS – Basic	$	1.44	$	1.40
EPS – Diluted	$	1.39	$	1.35

	Pro Forma December 31, 2006		Year Ended December 31, 2006
	(unaudited)
Revenues	$	188,688	$	181,079
Net Income	$	54,402	$	53,131
EPS – Basic	$	1.11	$	1.08
EPS – Diluted	$	1.07	$	1.04

	December 31, 2009		December 31, 2008
Due within 1 year	$	—	$	—
Due within more than 1 year but less than 5 years		12,833		—
Due within more than 5 years but less than 10 years		—		—
Due 10 years or after		2,054		—

Total	$	14,887	$	—

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value

December 31, 2009
Auction Rate and other Debt Securities	$	13,996	$	891	$	—	$	14,887


December 31, 2008
Auction Rate and other Debt Securities	$	11,081	$	—	$	9,224	$	1,857

	Less than 12 months				12 months or longer				Total
			Gross				Gross				Gross
	Fair		unrealized		Fair		unrealized		Fair		unrealized
	Value		losses		Value		losses		Value		losses

December 31, 2008
Debt securities held-to-maturity
Auction rate and other Debt securities	$	—	$	—	$	1,857	$	9,224	$	1,857	$	9,224

Total debt securities held-to-maturity	$	—	$	—	$	1,857	$	9,224	$	1,857	$	9,224

December 31, 2009	Level 1		Level 2		Level 3		Fair Value

Cash equivalents, short-term investments and other debt securities	$	241,898	$	—	$	—	$	241,898
Auction rate securities		—		—		1,781		1,781

Total	$	241,898	$	—	$	1,781	$	243,679

	Level 3 Financial Assets
	Year Ended December 31, 2009

Beginning Balance	$	—
Total gains (losses) - realized/unrealized
Included in earnings (other than temporary impairment)		(9,343)
Not included in earnings		1,053
Purchases, issuances and settlements		—
Sales		(1,117)
Transfers in and/or out of Level 3		11,188
Balance, December 31, 2009	$	1,781


Total losses for the period included in earnings relating to assets still held at December 31, 2009	$	(5,419)

	2009			2008
Computers and related equipment	$	38,980		$	51,465
Furniture and equipment		714			1,221
Capital leases		—			569
Leasehold improvements		2,964			2,962
		42,658			56,217
Less: Accumulated depreciation and amortization		(29,292	)		(37,279	)
Total property and equipment, net	$	13,366		$	18,938

	Balance as of January 1, 2008		Additions		Amortization			Deductions		Foreign Exchange Translation			Balance as of December 31, 2008		Balance as of January 1, 2009		Additions		Amortization			Deductions			Foreign Exchange Translation		Balance as of December 31, 2009
Goodwill	$	39,452	$	34,958	$	—		$	—	$	(1,627	)	$	72,783	$	72,783	$	7,952	$	—		$	—		$	523	$	81,258
Intangible assets with indefinite lives		2,384		297		—			—		—			2,681		4,081		2,994		—			(6	)		—		7,069
Intangible assets subject to amortization		26,836		13,847		(6,094	)		—		(479	)		34,110		32,710		8,586		(8,034	)		(1,349	)		109		32,022
Total	$	68,672	$	49,102	$	(6,094	)	$	-	$	(2,106	)	$	109,574	$	109,574	$	19,532	$	(8,034	)	$	(1,355	)	$	632	$	120,349

	Balance as of January 1, 2008		Additions		Amortization			Deductions		Foreign Exchange Translation			Balance as of December 31, 2008
Goodwill	$	39,452	$	34,958	$	—		$	—	$	(1,627	)	$	72,783
Intangible assets with indefinite lives		2,384		1,697		—			—		—			4,081
Intangible assets subject to amortization		26,836		12,447		(6,094	)		—		(479	)		32,710
Total	$	68,672	$	49,102	$	(6,094	)	$	-	$	(2,106	)	$	109,574

	Balance as of January 1, 2007		Additions		Amortization			Deductions		Foreign Exchange Translation		Balance as of December 31, 2007
Goodwill	$	30,954	$	8,019	$	—		$	—	$	479	$	39,452
Intangible assets with indefinite lives		2,063		321		—			—		—		2,384
Intangible assets subject to amortization		19,337		11,187		(3,896	)		—		208		26,836
Total	$	52,354	$	19,527	$	(3,896	)	$	-	$	687	$	68,672

	Weighted-Average Amortization Period	Historical Cost		Accumulated Amortization		Net
Patents	8.9 years	$	27,675	$	12,720	$	14,955
Technology	4.8 years		3,007		1,550		1,457
Customer relationships	7.9 years		15,024		6,064		8,960
Trade name	14.2 years		9,079		2,429		6,650
Total		$	54,785	$	22,763	$	32,022

	Weighted-Average Amortization Period	Historical Cost		Accumulated Amortization		Net		Weighted-Average Amortization Period	Historical Cost		Accumulated Amortization		Net
Patents	8.5 years	$	24,282	$	8,942	$	15,340	8.5 years		24,282	$	8,942	$	15,340
Technology	5.0 years		2,986		974		2,012	5.0 years		2,986		974		2,012
Customer relationships	8.5 years		12,468		3,840		8,628	8.5 years		12,468		3,840		8,628
Trade name	13.7 years		9,676		1,546		8,130	16.0 years		8,276		1,546		6,730
Total		$	49,412	$	15,302	$	34,110		$	48,012	$	15,302	$	32,710

Fiscal Year:
2010	$	6,451
2011		4,355
2012		3,820
2013		3,353
2014		3,076
Thereafter		10,967
Total expected amortization expense	$	32,022

Fiscal Year:
2009	$	6,537
2010		5,679
2011		3,620
2012		3,184
2013		2,671
Thereafter		12,419
Total expected amortization expense	$	34,110

	Operating Leases		Operating Leases
Fiscal Year:
2009	$	1,489
2010		414	$	1,596
2011		215		1,579
2012		200		1,726
2013		83		1,697
2014				1,719
Thereafter		580		8,722
Total minimum lease payments	$	2,981	$	17,039

	Years Ended December 31,
	2009			2008			2007
Current:
Federal	$	29,614		$	27,716		$	21,764
State		1,618			3,389			3,557
Foreign		348			1,394			1,467
Total current		31,580			32,499			26,788

Deferred:
Federal		(766	)		(2,255	)		136
State		84			(751	)		141
Foreign		53			98			(65	)
Total deferred		(629	)		(2,908	)		212

Total provision	$	30,951		$	29,591		$	27,000

Balance at January 1, 2008	$	30,863
Increases related to positions taken on items from prior years		906
Increases related to positions taken in 2008		5,660
Related interest and penalty, tax effected		1,214
Balance at December 31, 2008	$	38,643

Balance at January 1, 2009	$	36,225
Increases related to positions taken in 2009		7,122
Balance at December 31, 2009	$	43,347

	Number of Shares		Weighted-Average Exercise Price	Weighted-Average Remaining Contractual Life (In Years)	Aggregate Intrinsic Value
Options outstanding at December 31, 2006	4,639,614		$8.58
Granted	682,100		$30.44
Exercised	(776,273	)	$9.92
Canceled	(162,267	)	$24.26
Options outstanding at December 31, 2007	4,383,174		$11.19
Granted	344,453		$22.42
Exercised	(226,760	)	$8.05
Canceled	(177,937	)	$23.74
Options outstanding at December 31, 2008	4,322,930		$11.73
Granted	808,760		$18.05
Exercised	(523,290	)	$5.18
Canceled	(127,809	)	$28.00
Options outstanding at December 31, 2009	4,480,591		$13.17	5.1	$38,210,492
Exercisable at December 31, 2009	2,939,410		$8.96	3.4	$35,747,850
Vested and expected to vest at December 31, 2009	4,174,144		$12.65	4.8	$37,628,033

		Options Outstanding						Exercisable Options
Range of Exercise Prices		Number Outstanding December 31, 2008		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable December 31, 2008		Weighted Average Exercise Price
	$0.55		6,500		2.01	$	0.55		6,500	$	0.55
	0.94		930,798		2.99		0.94		930,798		0.94
	0.99 – 2.07		767,604		2.06		1.59		767,604		1.59
	2.56 – 9.55		778,396		4.50		7.80		778,396		7.80
	11.43 – 16.90		71,451		6.57		14.26		48,099		14.29
	18.77		839,900		6.57		18.77		427,100		18.77
	20.27 – 28.50		592,121		8.37		24.65		79,988		25.54
	29.67 – 33.51		256,160		8.45		32.81		53,360		32.72
	33.54		20,000		8.71		33.54		4,000		33.54
	34.73		60,000		4.43		34.73		12,000		34.73
	$0.55 – $34.73		4,322,930		4.98	$	11.73		3,107,845	$	6.83

Nonvested Options	Shares			Weighted Average Grant-Date Fair Value		Shares			Weighted Average Grant-Date Fair Value
Nonvested at January 1, 2008		1,555,735		$	14.56
Nonvested at January 1, 2009							1,215,085		$	11.09
Granted		344,453			13.89		808,760			9.89
Vested		(570,870	)		18.89		(379,102	)		19.51
Canceled		(114,233	)		23.60		(103,562	)		19.45
Nonvested at December 31, 2008		1,215,085		$	11.09
Nonvested at December 31, 2009							1,541,181		$	14.08

				Weighted-Average					Weighted-Average
				Grant-Date					Grant-Date
	Shares			Fair Value		Shares			Fair Value
Nonvested at January 1, 2008		359,550		$	22.94
Nonvested at January 1, 2009							319,494		$	23.75
Granted		58,474			23.25		730,603			17.70
Vested		(75,280	)		20.98		(95,266	)		21.46
Canceled		(23,250	)		21.14		(7,000	)		17.19
Nonvested at December 31, 2008		319,494			23.75
Nonvested at December 31, 2009							947,831			19.36