Vonage IPO Reactions

56 Comments

+ Mark Evans: Given VCs love liqudity events such as IPOs, you have wonder whether Vonage and CEO Jeff Citron made a strategic mistake by waiting too long to do an IPO. My take is Vonage wanted to be acquired rather than go through the IPO process.
+ Jeff Pulver: Five years ago, during the summer of 2000 after Jeffrey Citron joined the Min-X team and came in as the lead investor, he told me that he was looking at any investment with a five year time horizon.
+ Techdirt: The fact that they need so much to stay competitive, however, may point to larger problems with the business model.
+ Paul Kapustka: From here, an IPO looks dubious since it’s going to take a lot more than the $600 million Vonage is reportedly seeking to successfully battle the SBCs and Verizons of the world

56 Comments

Anonymous

I own an ISP catering to business customers. We evaluated Vonage working on our DSL and Leased Line services and found it a good solution. We have been recommending it to customers seeking information on VoIP. I have used it for almost three years. No real Problems to report.

I have found in discussions with others and my own experiences, that ISP and concurrent utilization make the biggest difference. I can communicate via Vonage to a cable user using Vonage with out issue unless he downloads data. The service gets choppy. However when communicating with others on our network via Vonage, quality does not seem to be impacted by activity. Certain video streams do impact my service. For example if I am watching a CNN Stream, I can hear a difference on the line. But is usualy still usable. However if others on my home network are streaming, then quality will be impacted. Occasional, raley I will drop to cell for important calls. Cell is my backup for when issues come up such a down commection.

The stock? I did submit the offer. The IPO is being handled by major brokerage firms and the WEB process really hammered home the issues and risks involved. My experience is that any IPO is a risk and there are protections against immediate sales (dumping) of stock by insiders. SOX (Sarbanes-Oxley, Act) has added much more control. There are other investors involved so I recommend making a decision on factors such as the industry, market share, viability and longevity and your personal position. As these posts indicate, there are many examples of positives and negatives for Vonage and other providers. If you believe VoIP will be an important service that can be offered independently of Telcos going forward, then I say take a shot on a market leader.

Erick K Loss

I am a systems integrator. I work with data, phone, TV and security systems everyday. I set up systems for colleges and hotels. I tried Vonage for our new office phone system. I could not get it to ring through consistently. Calls were not completed, some were dropped. For one week I had no phones at all. Customers would write e-mail or call my cell phone to ask if we were still in business. They would get messages saying that my number was disconnected or that it was not valid.

I spent over 11 hours on-line or on hold trying to get help, most of it on hold. When I called to cancel service I told them that I needed to keep the number and it would take a few days for the phone company to connect me again. They cut me off right then. I had no phone service. Qwest could not reconnect me with that number unless it was active. I had to spend 3 hours trying to get Vonage to activate the number again. Then they gave me a temporary number for 3 days, which no one knew to call, before I got my old number and same crappy service back. When I was finally connected to a land line again they gave me a $12.50 credit for my troubles.

Vonage should be put out of business. They ruined mine for almost a month. They have a cruddy product, lousy service and tech support and terrible business practices.

If you have to choose between two cans and a string and Vonage, take the cans and string. You’ll be happier with the service.

alpha

I have enjoyed being a vonage customer for two years with zero problems, including with customer service. I am not sure of the longterm prospects for the stock, but I do feel confident that the early days after the ipo will see some elevated prices. I’ve submitted my conditional offer for 500 shares (all I can afford to risk right now). I am curious about how the allocation will go but looking forward to the whole process.

iChris

I have a quick update to my Short Survey. Please visit and answer a few questions if you have not already done so.

Min Day 1 price: 9.00
Min Year 1 price: 3.00

Median Day 1 price: 23.00
Median Year 1 price: 22.00

Average Day 1 price: 26.42
Average Year 1 price: 30.21

Max Day 1 price: 100.00
Max Year 1 price: 250.00

Katie

I have used Vonage for myself for about 3 years, and my business since I started it. I have been very happy with the service and Vonage in general. Unfortunately, that is not the determining factor in how well a stock will do.
I have no doubts that Vonage as a company will continue to do well. The question is at what point will their excessive marketing campaign stop. They need to spend money to make money, but they need to do it intelligently. I believe, for the most part, they are doing so. Almost everyone has heard of Vonage now. More and more people are signing up. Everyone I know who has it, loves it. More people want to get it, but are waiting on having access to broadband.
I know Vonage will do well in the short-term, the question is will it do well in the mid-long term.
A minimum investment of $1600-1800 is significant for someone like me. I think I’m going to, but I’m not sure yet. And there’s the rub. I have until Friday to make my final decision. I guess we’ll all see then.

chris cox

RE: In case one of the earlier contributors wants to know,
English IS the native language of India, so as that contributor wrote, “using non-English speakers to handle customer service” (for Vonage) is simply not true. I’m a friggin American from the backwoods of Tennessee and I know that. Check your facts man before you utter your next inane statement.

Nikola

Wait…what’s wrong with cashing out or in? Isn’t that what capitalism, and especially the stock market are for?
1st of all, how come people aren’t considering the possibility that VG stock will hit 32$ or $48 before anyone tries to “cash out.” Won’t that be a better deal for all those involved, especially those you may consider greedy investment people from Citron. Vonage is great, and people should be grateful for its exsistance. It has rescued all of us from the oligopoly of the telecom giants. I have saved thousands of dollars with Vonage over the years because I do a lot of long distance calling. Sprint, AT &T, Bell-South, and those real ‘corporate’ monsters used to charge me per call what I pay Vonage in 4-5 months. I have once recieved a 415$ sprint bill for communicating with Europe. It is true that trans-continental calling with Vonage has had choppy reception issues in the past but it has only gotten better not worse over time. Vonage means freedom, and a different way of doing business, and communicating with the world. What if Vonage starts partnering up with serious ISP’s around the world? Those same ones that are at competition with Vonage’s competitors? Try to tell me that all the .inc (s) of small ISPs would not jump on the opportunity to join Vonage vs. AT & T, Verizon, or those ‘Enron’ types. That’s right I said it…
:D

iChris

I am a Vonage customer and haven’t decided whether to invest or not. I think if we pool our thoughts on this it will help us all come to the right conclusion. Please take this Short Survey about what you think Vonage stock will be worth in the future. I will post the results here on this comment space Thursday evening. Thanks.

Anonymous

I am a happy Vonage customer. So when I received the invitation to participate in its IPO, it made me curious. But after reading about the background of Jeffrey A. Citron (Vonage’s “principal stockholder, founder, Chairman and Chief Strategist” and former CEO) and his run ins with the law, it made me nervous. More importantly, I decided not to participate in the IPO. You can read all the juicy details here:

http://www.sec.gov/cgi-bin/browse-edgar?company=vonage&CIK=&filenum=&State=&SIC=&owner=include&action=getcompany

In my opinion, this clearly is an individual who puts his own interests first – above those of his shareholders or customers. Given the increased competition in VOIP from the big players (AT&T, Verizon, etc.), I think the IPO is a desperate attempt by Vonage execs to cash out before the competition beats them down, especially since it was reported that Vonage is now allocating 15% of IPO shares to its customers. In the really hot IPOs, do the customers ever get to participate to such an extent?

After the IPO, Citron will own approximate 31% of Vonage. If its shares are priced at $14 – $16 dollars (as the company hopes it will be), then Citron will hold Vonage shares worth approximately $775 – $872 MILLION! And you don’t think he’s trying to cash out?!?

mhaggag

So, what about that Vonage directed share program for certain Vonage customers? Vonage is offering loyal customers the opportunity to puchase between 100 and 5000 common stock shares at IPO price (between $16 and $18). I received the email and the “system” voicemail, probably hundreds of thousands of Vonage subscribers have received them too. An opportunity or a trap?

BCM

As a Vonage subscriber since January 2004, I can honestly say that it is a fantastic service! It has saved me $10-30 per month and the quality is excellent.

Prior to Vonage, I had a standard SBC land line with substandard service, basically paying for nothing as the line was nonfunctional more often than not, and with the phone company’s monopoly, there were no other options in my area. With SBC complaints were as frequent as time would permit–it was nearly impossible to reach customer service. When I did, they always tried to tell me it was inside the residence and not their problem… no it wasn’t… a service man told me the trouble was on the pole and under the road… but we went through this month after month, year after year… until Vonage came along and gave me functional phone service. I dropped SBC like a rock.

So, I want to support Vonage. They may not be perfect, but the quality is there. They provide an excellent, reliable service at a low price.

Johnny

Yeah “racially motivated” was/is a wienie. You want to market to English-speakers, and you use non-english speakers to handle customer service. “weinie” ignores this incredibly poor business practice and plays a race card. Wienie, wienie, wienie.

Wats wurse than Vonajes pour kustomer survis communikashuns is their deceptive and dishonest business practices. (You don’t have to be a Pakistani to communicate poorly, do you ?)

In short, they lie about cost and the ability to cancel in order to get you to “try” the service, and then set-up an impossible process for cancelling the service. Read some customer complaints via Google. The Better Business Bureau and the State Attorney General are a more effective means of cancelling your Vonage line than is Vonage itself.

A business can only do this only so often before the stink and the stigma will have a permanent effect.

Mahlon

I’m a Vonage customer, and can buy into their IPO. But opening the IPO to customers is a potential train wreck — Vonage is the evil twin of the last big tech firm to open the IPO to the individual investor, Google.

Profitability: Google was wildly profitable, and has become more wildly profitable; Vonage is stupendously UNprofitable, and has promised bigger losses as they grow.

Prospects: Google made a ship load of money with free products, and had a sustainable competitive advantage in hard-core engineering; Vonage is spending $210 in marketing per new customer to convince them to spend $30 a month on a service that every IM client is offering for much less.

Reputation: Google was squeaky clean; Vonage founder and “chief strategist” has a whole section in the prospects on SEC accusations, “extensive fraudulent scheme,” “extensive fines,” and getting banned from the securities industry. Would you buy stock from this guy?

I bought Google – its profitability, prospects and reputation proved to be good indicators of its potential. But I’m staying far, far away from Vonage for all the same reasons.

Bob Jones

I’ve had Vonage at home for at least a couple years and I love it. Much better than Qwest, ATT, etc and all for $25/mo. Now they have offered me an opportunity to participate in their IPO which will be happening later this month. They are estimating an initial price at $16-$18. I am wondering whether to participate.

Dan

I’ve had Vonage since Nov 05 and the service has been fine. A call to customer service in India about the minutes billed catagories was a waste of time but the rep was as helpful as they could be and diligent in their efforts. I liked dropping BellSouth because their TV marketing is just downright annoying and Vonage was a fresh alternative. Vonage marketing is fresher than BellSouth and kinda funny, too. I’ll go IPO, not because of business models, CEO or the like, but because I like their product, people and service. In the long run, they should be a good alternative choice for consumer migration.

brian

To follow up on the telecom industry my Mother has worked at GTE (now SBC) for almost 30 years. The past 5 have been in customer service-billing where their cutting edge technology has developed a new program to allow for email response to customer complaints! [How long has email been around?] Irregardless her feedback is that they are woefully understaffed in all areas of customer support – technical, billing, maintenance, hardware support,…

I picked up Vonage just in Nov 2005 and have been relatively trouble free. Two emails sent in for power supply issues to the router were answered promptly. Billing is automatic each month (with no hidden charges) and notice sent via email and statement available on the web. Also email notice of voicemails including the calling # which is awesome when I am traveling and don’t want to waste roaming cell phone calls just to check and see if I even have messages.

Vonage is a good service and they [or their competitor(s)] is quite likely the future of the land based telephone. As with DSL, however, securing and keeping a large national and international market is a tough business. The business model can be improved through reduction of the Marketing costs translating into net cash flow. This makes good sense especially if their marketing campaign isn’t having the right impact on their target consumers.

Overall, quite happy with Vonage. If they can translate customer satisfaction into customer base growth with a reduction in Marketing costs this IPO will be a very good investment.

Jeff

Ditto. I’ve had vonage for almost a year and never had a problem. It’s a great value for my small business. I’ve had way worse experience with the entrenched telco’s.

SMR

Ditto John M. I have been a customer for 3 years and never had a problem or need to call tech support. In addition, I call internationally quite often and have no problems with that as well. Overall, vonage is better than any Telco I have ever used.

mark

I’ve use Vonage since Feb 2003, and have saved $40 smackers per month after dropping the telco… I’ve never had to call support in 3 years and had no quality issues worth complaining about… other players have not given me a significant reason to even consider their service yet…

John M

No, sorry those comments are not “racially motivated”.. He was simply stating the obvious. A different native language, a different culture, and workers generally unfamiliar with the industry mean a lot of miscommunication. Geez what a weenie.

MB

I will say Alex’s reply is a little exaggeration and racially motivated in reference to customer service in India. Vonage has issues with Customer Service right here in NJ. They are growing at a rapid pace from Subscribers prospective but quality of service is going down not from Call QoS standpoint but in their administrative processes like Billing,Shipping equipment and keeping track of customer issues. They need a big time Management revamp. People in India even do not have authorization to transfer the call back to NJ in case of escalation.I hope you can understand further. Vonage is going to be a good stock for short term investment purposes as this company knows how to market its products. Comcast cannot reach the same level as Vonage easily without a acquisation or a better price model.

jruetten

I have been a Vonage customer for over 2 years. Their main problems are the voice quality is better than cell it isn’t as good as Ma Bell. The second concern is that their service is dependant on a broadband provider that may or may not like Vonage running over its lines. I use Comcast which also has a phone service to offer. With all that being said, I am very satisfied with Vonage and tell people about it every chance I get. I have not had that much need to call Customer Service, which frankly sucks at every telecom company I have ever had to deal with (bellsouth, comcast, savvis, AT&T, Charter, just to name a few) so in short, getting rid of Bellsouth was one of the happiest days of my consumer life. Vonage is a great product/service for the money.

Charles Turner

I think they will do well with an IPO and get some new employees to answer the phone and reply to E-Mails. I cannot understand the calls I received from India. They need money to hire people to make the company run. They have 100,000 call a week because its a good idea. Any company would love to have this response to their product.It’s to bad that no one is taking advantages of this opportunity.

Rick baeta

Two years ago I met with Jeff Citron about running Vonage’s retail sales. I was told that the plan was to paint a good picture so Citron could sell the company. What has happened is greed. No one wants to pay $500 million for a company that never had a long term goal. The only reason Vonage was started is to make Citron a Billionair before the age of 40. Don’t get fooled again. Vonage will hirt you in the long run.

Ken

Jeff Citron is a smart businessman and everything he touches turns to gold. Who ever heard of Skype before E-Bay?

Ven Reddy

True the costs are around $9-$15. There is constant pressure on DSL pricing and most DSL subscriptions are tied to “mandatory” telephone service for a given duration. I’m not sure how long they can keep up the margins.

Jesse Kopelman

Who’s losing money on DSL? Most numbers I see have the cost to serve at less than $10/month/sub, which is a lot less than the charge for the service.

Ven Reddy

The business model for VoIP parallels the business model for DSL; which is a money loser and no-one has really figured out how to make serious money.

Vonage’s IPO filing is to flush out a lurking buyer or take advantage of the VoIP buzz at investment banks. Speaking of buzz, take a look at Bidu, the stock is at $79 down from it’s high of $130 (apprx.) This is probably what will happen to Vonage’s IPO.

Alex

Vonage controls so little that you keep wondering how it can be called a business model. I am a customer for half a year, but have you ever tried to discuss quality issues with Vonage? Their international lines are hiccupy, the call center is in India, where you spend just half an hour spelling your name, and the standard response is that it must be your ISP problem. The day Comcast rolls out anything nationwide and attractive as far as price, Vonage will have to spend much more money to acquire new and keep the existing customers.

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