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Shares of Marchex Inc. (NASDAQ: MCHX) dropped Friday to an almost three-year low after the company had posted its second-quarter results. Marchex shares fell about 20% to less than $9. Just hours before the company had announced the acquisition of pay-per-call company VoiceStar for $28 million.

This is an extremely undervalued stock, in my opinion. Marchex owns a great portfolio of more than 200,000 generic domains, including gems like Cuisine.com, VideoCamera.com, Beijing.com, and Debts.com. This portfolio alone is worth hundreds of millions of dollars and so far Marchex has not exhausted the potential of any of these domain names yet. Although the company certainly has excellent pay-per-click pages that are better than what you can get at any domain parking company, Marchex has not developed any of its domains. Marchex’s domains have a great commercial value and each of its domains has the potential to be built into a multi-million-dollar business within months. Imagine Marchex developing just one of its domains per year. The company could quickly become one of the biggest players on the Internet. Marchex would have online businesses each worth as much as Business.com (sold for $350 million in 2007) and CreditCards.com (sold for $130 million in 2006, now filing for IPO). The sky is the limit for generic .com domains of such high quality!

Marchex has been working on improving their domain parking pages in order to maximize the revenue of their overall portfolio, but I am sure that the company will decide to develop single domains into full online businesses in the near future. That will be the time when Marchex shares will soar.