So Vonage is filing an Initial Public Offering. What does this mean for the VoIP business? Are they a good IPO
prospect? Would purchasing Vonage stock be a good idea? Is the IPO irrational exuberance?
Well, let's
look at some facts.
- The VoIP business is the real deal. Broadband phone service is here
to stay, and digital media delivery over IP is the new standard. Vonage's IPO doesn't directly prove this, but it
certainly helps quiet the naysayers who still don't believe in the concept of everything running on IP.
- Vonage is NOT a conventionally appealing IPO. Sure they have amazing revenue growth, but it
has come at a huge, huge loss. The company has never posted a profit, and its marketing budget alone was higher
than its operating revenue in 2005. If I'm a Wall Street prospecter, I'm not exactly jumping for joy. $250
million bucks? Vonage may rip through this cash before you can blink. Let's hope the revenues follow.
- Despite the negative financials, including Vonage (and 8x8??) stock in one's portfolio is a good
idea, and here's why. Vonage has pushed IP telephony into the mainstream and consumers recognize it as a
brand leader in the sector. Vonage is considered by many mainstream consumers to be "the new phone company",
and, unlike the previous generation of CLECs who couldn't offer any unique value, folks actually recognize the
distinction between Vonage and Ma Bell. Also, compared to blue chip telecom stocks, which are going to get
beaten down by fleeing revenue streams (fleeing to companies like Vonage), big telecom union contract
costs, bloated legacy equipment costs, and ancient telecom regulations that are largely tripe, Vonage's stock
appears to have much upside potential. Vonage didn't have to drop 2 billion dollars in order to capture a user
base either (ie. Ebay buying Skype); Instead, Vonage's users base is 100% paid (unlike Skype's) and paid at a
premium (remember, Vonage is charging 5 bucks a month more than many of its competitors).
-
This IPO isn't exuberant. In order to be irrational, we'd have to be talking about a money-losing
outfit (which Vonage IS) which has a non-traditional business plan (which Vonage ISN'T) and which cannot be described
in terms of upside potential (which Vonage ISN'T). Two out of three ain't bad.
Remember Google?
Should you buy Vonage stock?
Reader Comments
(Page 1)2. I wouldn't trust Jeffrey Citron with my money.
Apparently no-one knows about Datek Securities? His former company was fined for fraudulent stock activity.
"Mr.Citron and other individuals participated in an extensive fraudulent scheme involving improper use of the Nasdaq Stock Market's Small Order Execution System, or SOES." -thestreet.com
It may be a big-boy in the VoIP industry now, but it was started up by an opportunistic fraud artist.
3. Yes excellent points, but is there really a lot of competition out there? Answer is no. quick bucks, ? yes . long term , mmm,, dangerous, short term revenue, oh hell yes, they are going to eat this stock up.
Posted at 2:24PM on Feb 27th 2006 by Demitri
4. My name is Bob. All i want to know is vonage a good stock and if it is what is the cost. It would be nice if someone would give me the real scoop on vonage and the future of the stock.
Posted at 3:02AM on Mar 18th 2006 by robert kuglin
5. I want to know how to get an opportunity to participate in the Vonage IPO.
Does anyone know anything?
Posted at 8:00PM on Mar 26th 2006 by Crystal Wright
6. very simple direct question: any idea when will this vonage stock or IPO be open for public trading?
Posted at 1:44AM on Apr 30th 2006 by mike
7. My wife sent me an email not to long ago asking me if we wanted to purchase Vonage stock before it was released to the general public. My answer was NO??
We were loyal Vonage customers from 2003 until recently when their service went down hill in a major way. We could not get anything done that we needed. We left Verizon to become Vonage customer with the expectation that we were getting a batter service for a lot less money. We did end up saving money but we certainly suffered in the service area. We have since left Vonage and are now customers of Sunrocket and so far have been very pleased. As far as I am concerned Vonage needs a major turnaround in the service department before they will ever get any of our money again.
Posted at 9:42AM on May 9th 2006 by Adam Felton
1. Vonage should concentrate on their service before they worry about all the advertising and their IPO. I was a loyal Vonage user since 2003. But last year the service really took a dip and they email support was non-existant and their phone support took ages. I tried cancelling but they wouldn't let me. I ended up cancelling the card it was using and moving to ViaTalk. Vonage continuted to bill me. Finally they gave up and tried to collect $60 from me. No way. They were the ones that wouldn't let me quit. Then last month I got a flyer asking me to come back to Vonage. I also advised my friend to sign up for Vonage while I still used it and everytime he calls me all I hear is static - the same reason I left Vonage. I am trying to convince him to move to ViaTalk.
Posted at 4:33PM on Feb 24th 2006 by Tony