Tuesday, May 23, 2006

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!

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2 Comments:

At July 07, 2008 12:07 PM, Blogger William said...

I started with Vonage, just like anyone, with the excitement of a new age phone company that treats their customers very well, and doesn't rip them off.

skip forward in time to present day...

I just got told by Vonage customer service that I couldn't get 13 months of back billing from them that they charged me for a phone I hadn't been using since may of 2007.

I lived in Seattle at the time with my wife who was in the military, she was moved to Louisiana due to a change of station, so I cancelled my account prior to leaving... being that we knew we were going to move around a lot we didn't start online service so seeing any charges to our checking account was difficult, being that we moved we didn't receive our account info until November of 2007 (in Bulk I might add) and still really didn't notice due to so much happening in our lives at the time, then in February/March of 08 I see charges from Vonage on our account, I call them and they told me that it's no problem sir you can get all of that money back being that we can see you didn't use your phone, BUT you will have to talk to our cancellation dept to cancel your account... needless to say, I had a horrible time working around their hours, being mine are so long, that it took me till June to call to cancel, but I wasn't worried "I could get all of my money back, being that they could see that I didn't use their phone for over a year"...

Nope... instead I got an offer to receive 10 dollars off service for a year, ooooooo I get 120 dollars of my hard earned money back. Vonage blows and is a major rip off, and I will see to it that everyone knows about it.

William A Carpenter

 
At July 09, 2008 1:06 PM, Blogger Chase said...

I find your blog very interesting. I have heard that Vonage is a commercial voice over IP network. Vonage Corporation provides telephone service via a broadband connection. The clients if Vonage claim they are far from being satisfied with the company and the services it provides. They say it is a corrupt company because they demand payment for the services the customers did not offer. That is what I have learned from www.pissedconsumer.com.

 

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