Vonage, the company that introduced a haunting jingle and low cost voice calls over the Internet to the masses is all set to go public. The company is likely to start trading tomorrow, according to news reports, despite some last minute doubts about its long term […]

Vonage, the company that introduced a haunting jingle and low cost voice calls over the Internet to the masses is all set to go public. The company is likely to start trading tomorrow, according to news reports, despite some last minute doubts about its long term viability. The plan is to sell 31.25 million shares in the $16 to $18 range, which could put the value of the company at around $2.6 billion. The company, based in Holmdel, New Jersey- could raise as much as $493 million, some news reports suggest. That’s nearly double the number originally expected. But will the cash last?

“Right now it’s a perennial money loser. And the growing competition also makes life harder for Vonage,” Jon Arnold, of J Arnold Associates tells Reuters. It is an argument we have made time and again.

Seldom have more doubts been raised about any company going public. Almost free phone calling from Skype could KO Vonage’s plans, said Andy Kessler, who knows a lot about the technology stocks. Wall Street Journal reported on the growing number of customer complaints. Our analysis showed them no money anytime soon, especially as the competition from the cable companies intensifies.

In anticipation of this IPO, the company has been spending aggressively in order to add new subscribers. Telegeography, a research firm, says that there were 5.5 million subscribers at the end of first quarter 2006, versus 1.9 million at the end of the first quarter last year. Stephan Beckert points out that, that “Vonage still rules the roost in terms of subscriber numbers–in fact, in a reversal of recent trends, they put a bit of distance between themselves and Time Warner in the first quarter.” Unfortunately, in terms of revenues, Vonage has had to take a back seat to its much bigger rivals.

How this IPO turns out we shall see tomorrow. How the stock performs in the weeks and months to come..!

From the archives:
Cablevision is Machiavellian Move
Will SkypeFree KO Vonage IPO?
Cable VoIP, Hotter Than Ever
Vonage Churn, Investor Heart Burn
Vonage Files for $250 Million IPO

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  1. Get ready to short this puppy!

  2. richard lander Tuesday, May 23, 2006

    and goodness knows how much they are losing overseas. i have a vonage uk account because i need a london number to work from spain. and it works great but how much are they losing at £7.99 a month for all uk landline calls?
    they have to charge this pitiful amount because rival Freetalk which has just lowered the bar to £6.99.

    Vonage UK is run by a very smart guy Kerry Ritz but its PR and marketing is pitiful. Freetalk has point of sale links with the major DSG retail electronics group. Vonage is reduced to uninspiring newspaper ads.

  3. IPOs usually happen when holding companies want to cash in. They’re almost never a good buy. They end up leveraging companies to the point that they fail in 3 years, which is what will happen with Vonage.

  4. javier morales Tuesday, May 23, 2006

    Vonage is just inflating the ballon to cash out! But the average personal investor thinks “VOIP”so they will buy, and once they see that they are not making money and with a $ 200-300 aquisition cost I doubt they will.
    By the way, who’s crazy enough to tamper with the name logo just before the IPO?

  5. I feel bad for the post-IPO retail investors who buy this dud

  6. I sure wish I could read the subscriber/revenue chart without having to press my face against my screen. Your readers are clearly too farsighted for their own good. :)

  7. You still quote the sell-out Kessler? If he was so smart why doesn’t he tell us to jump in on Google instead of saying it was “too confusing” http://www.hoovers.com/business-information/–pageid__13760–/global-ipoc-index.xhtml# His book that trashed Mary Meeker (whom I don’t care for but nonetheless see him as no differrent) proved pretty baseless, just like his comments on the Vonage IPO will. The fact is Andy was wrong about the Google IPO (see above) and here: http://www.marketwatch.com/News/Story/Story.aspx?guid={2A38966D-C8C8-43A9-8514-C693F994F752}&siteid=mktw
    So if you think he gave good advice about the Google IPO and playing Monday morning QB with his former co-workers then I say take his and this blog’s advice on the IPO. However if you see this as a mere pathetic attempt to of self promotion to get his name in the news about a hot item in which he knows jack about, then remember his self promotions will cause you to miss out if heeded.

  8. Kessler or not the GOOG IPO cannot be mentioned on the same page. Google was the “big unknown”, groundbreaking new business – Vonage has a mature, known business already being commoditized. Game Over.

  9. Carmen Hughes Tuesday, May 23, 2006

    I decided to open up a Vonage account to test it. I didn’t get farther than the process of trying to become a new customer when things went awry. 3 hours and several email later, I couldn’t fix the problem their reps had created with trying to open the account so I canceled the account then had to deal with a reimbursement hassel. The experience alone of trying to become a new customer was nothing less than a nightmare. When a company can’t get it right from the get go, there are bigger problems looming. Run for hills on this one.

  10. David Neawedde Tuesday, May 23, 2006

    I like Vonage, I have had them for 1 year now and never had a problem, glad there IPO is soon!

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