Vonage IPO Raises $531M... Bankruptcy in 2008?
Vonage's much maligned IPO was finally sold today at $17 per share. Vonage sold 31.25 million shares generating $531M in capital, which is the 2nd largest Internet related public offering over the last 5 years behind Google's $2B IPO in 2004.
I just don't understand why anyone would want a piece of Vonage. They have a technology that is rapidly being commoditized and they aren't profitable. Sure there is a landslide of demand coming for VOIP, but in todays world technology doesn't stay new very long and Vonage isn't offering a premium/high tech/value-added service any longer. 8X8, Verizon, Yahoo, Skype and many others are jumping into this market so if Vonage can't generate profit now how are they going to make any money as more competitors sprout up and undercut their prices?
At Vonage's current burn rate of $75M in Q106, this $531M should last them for 7.5 more quarters. I wonder if we'll see a Vonage bankruptcy in 2008, or maybe sooner if they have to cut prices further. I know that growth in consumer VOIP demand is high, but I don't see VOIP becoming mainstream by 2008 and I think mainstream adoption is the only way that Vonage will be able to reach the kind of scale it would require to be a successful company.
At the end of the day Vonage's customers may wind up being the biggest loser of all paying too much for VOIP and losing money on the stock. Ouch!