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Summary:

Vonage reported results for the second quarter of 2006, and they were not pretty. In its first earnings report since going public (May 2006), Vonage reported a loss of $74.1 million ($1.16 a share) versus $63.6 million a year ago. Sales came in at $143 million, […]

Vonage reported results for the second quarter of 2006, and they were not pretty. In its first earnings report since going public (May 2006), Vonage reported a loss of $74.1 million ($1.16 a share) versus $63.6 million a year ago.

Sales came in at $143 million, versus $59.4 million in the second quarter of 2005. That all seems good right? Except those numbers missed analyst expectations of around $148 million. Worse news: the company indicated that its 2006 sales will be in $600-to-$615 million, versus analyst expectations of around $636.5 million. More troubling - churn is up to 2.3% versus 2.1% in the first quarter of 2006.

In 2005, Vonage spent nearly $414 million in advertising to gain market traction, according to AdAge. Makes you wonder how much it will have to spend more in 2006 to keep the momentum going. It will have to – it needs to find new subscribers to handle that churn situation properly and show growth across the board.

There was some good news – the number of net new subscribers came in ahead of analyst expectations – 255,936. The company now has 1.85 million subscribers. In other words, the company needs to add about 450,000 or new subscribers to meet its lowered 2006 target of 2.3 million.

Vonage which is down nearly 60% from its IPO price of $17 a share, is heading south again. Why? Company says it will fall short of previously predicted number of subscribers as well – about 2.3 million versus previous expectations of 2.45 million. Who wants to bet that meeting lowered expectations would be tough, now that the cable Goliath Comcast has joined the cable VoIP party? It already has over 700,000 subscribers. Things are going to get ugly… but then you already knew that!

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  1. And don’t forget the biggest “worse yet”: The service still sucks to high hell and customer service is somehow even less competent than they were even 6 months ago. We’re back to using Qwest for 90% of our calls.

  2. I have always said the ”’CABLES are king””’…stick Vonage in the sinking ship called “”WE HAVE NO CUSTOMERS TITANTIC ” and add Packet8 and Primus and Sunrocket along for the Ride!!!
    Skibare
    Cable WINS, everyone else loses…end of story

  3. It is interesting that Vonage has decided to spend money on marketing instead on improving customer service.

    It would be interesting to know what is causing the churn – poor customer service or cheaper/better alternatives for customers.

  4. I am not entirely sure if the commentators above are using the same service as I am but I have found Vonage fantastic! Call quality is great and you do not need a PC just your regular telephone…

    It’s great all I can say… I had been using a very popular software based VOIP service for the past 3 years and Vonage is just simply much better and less hassle to me in terms of using it as a telephone service.

    The service is great I use it all day for unlimited US calls and also for all my calls to Europe, namely, UK, France and Spain all unlimited to fixed lines there everyday and no problems at all…

    As for Vonage’s numbers, they really need to get someone else to take over their marketing; over $400million! An unbelievable amount for customer aqcuisition costs… Why…?

  5. Christoper Bermingham Wednesday, August 2, 2006

    I use Vonage exclusively for home phone service and it has been outstanding, both in quality and price. Comcast has been bombarding me with mailings for their local phone service- for $15 dollars more a month. No thank you.

    Vonage’s biggest problem is poor ROI on its marketing. Instead of paying for pop-ups and intrusive advertising, they should target and interact with techies, who in turn can provide great word of mouth advertising.

  6. otis wildflower Wednesday, August 2, 2006

    Yeah, I have had Vonage for years now (Cisco ATA186 adapter) and for $15-16/mo for 500 minutes it’s a flipping bargain. I only use like 150-200mins and my area’s a cell dead spot, and when I moved to a different state all I had to do is plug the ATA into my new broadband, hit the website and update my 911 junk, and viola I started getting my fone calls (which I had forwarded to cell during the move).

    All the incumbent network providers seem to do is charge at least $30/mo (usually $40) for unlimited which I don’t need, none have a cheapo plan that meets my needs, and if I move to an area that doesn’t have Comcast, TW, etc. or I want to change my provider I have to go thru the tedious rigamarole of having my number migrated.

    As a stock, Vonage might be suck, but for service, it’s better than any ILEC IMO.

  7. Mabelle – SEO Expert Wednesday, August 2, 2006

    I had vonage with my 1.5Mbit dsl connection almost 1.5 years ago. The voice quality was terrible. I could not use it ..
    Gizmo and Skype have much better voice quality..

    Btw, Vonage sends unauthorized (spam) emails all the time..

    Thanks

  8. Vonage is a joke. I had an existing Vonage line for over a year, then they started charging me for an additional fax line I did not order. I don’t even have a fax machine!

    Vonage would not acknowledge the mistake, and continued to charge me for the fax line. I had to cancel the account, and they still won’t give me a refund.

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