Still Holding On? Lets discuss

Posts: 81 · Vonage Forum Senior Joined: Feb 27, 2006 Posts: 81

I just didn't think it's worth $17 a share, yet. I have a buy order for $8. I've stuck with Vonage as a customer for 3 years despite the horrible customer service. The company has a future if they play it right, but it may only be as an aquisition target by someone like Comcast, Time-Warner Cable, Adelphia etc.

I don't think the CEO's former SEC violations is relevant here. He knows he's under the microscope and he has to play clean. The real key is that they have to get their costs under control so that they move to a positive cash flow.

Stop the saturation advertising: More is not better. Fewer, but better targeted ads will be effective. They spent $250m for ads and promotion, and had $270m in revenue.

Improve the customer service: This stops customer churn. It will also encourage people who are 'less tech savvy' to try the service. They just want to pick up a phone and hear dial tone. They don't want to get into bits & bites and QOS stuff. And all they hear right now is that customer service is an issue. That is a huge road block to growth. These are the people who won't go to Skype or GoogleTalk, but will sign up with their cable company because they know there's service available.

Posts: 80 · Vonage Forum Senior Joined: May 24, 2006 Posts: 80

dconnor wrote:

audiotron wrote:

When does the quiet period end?

Tomorrow (25 calendar days after the stock was priced)

The quiet period is for 40 days from the time a company goes public (in the past this period was 25 days).

In the case of Vonage, the quiet period will end July 2nd.

Posts: 111 · Vonage Forum Senior Joined: Jun 15, 2006 Posts: 111

Here is my reply to the list of positives you posted

Management and Directors have an even bigger stake in the company than we do.

Yet they all bought their shares for under $3. They are still sitting on a huge paper profit. Even if they belive in the company, it is unwise to have such a large and concentrated financial position. Their interests are to sell as fast as they can. Even if they sell half their shares, they still would have a ton of money invested in the company.

Barriers to entry are fairly low, but due to the extreme pricing by Vonage, it would be very costly to steal customers from them.

But if a customer is worth so much, as you say, then it still makes sense to undercut Vonage. Furthermore, companies like Comcast can undercut Vonage because they have a lower cost structure, and access to a large customer base.

The product is excellent (according to my experiences).

In most cases yes, but still not as reliable as traditional phone service.

Broadband customers will become even more valuable as telecom companies, and cable companies spend billions to expand and widen the pipeline into the home.

I don't see how that follows. The price of broadband service has been steadily declining. That makes customers less and less valuable. Furthermore, offering dirt-cheap or free VoIP service seems to be an excellent way for the Cable-Cos to increase revenue.

Negatives:
Company is cash flow negative.

That has got to be the understatement of the year. The company is hemmoraging money.

Competition. Low barriers to enter the business.

Significant cadre of short sellers

I wish I owned it here and not $17, but I think the company will survive and be a major player in the broadband marketplace.

On what basis to you think the company will survive?

Maybe the stock is not the best value, but we all must agree that the product is the real deal.

Is there some way that Vonage is the "real deal" but the VoIP products offered by the Cable Co's is not?

Posts: 20 · Vonage Forum Associate Joined: May 31, 2006 Posts: 20

Ok, I surrender. I have no idea of the merits of the Verizon suit, but
I do know who has the deeper pockets.

Posts: 2135 · Posted: Mon Jun 19, 2006 9:35 am Post subject:

LDTalk wrote:

dconnor wrote:

audiotron wrote:

When does the quiet period end?

Tomorrow (25 calendar days after the stock was priced)

The quiet period is for 40 days from the time a company goes public (in the past this period was 25 days).

In the case of Vonage, the quiet period will end July 2nd.

Thank you for this correction, I was looking at some bad info.

Posts: 94 · Vonage Forum Senior Joined: Jun 17, 2006 Posts: 94

I'll address some of the issues that you brought up regarding my analysis.

Cable companies can compete with Vonage based on price.

This is incorrect and you see it today. The cable companies can attract new customers based on customer service and prior relationships, but they can't compete on price. That's why you see the cable pricing for VOIP by the cable companies at $30 or $40 per month. This will make it very difficult for the cable companies to attract millions of customers. They will find it difficult to get their own cable customers to switch to VOIP.

Broadband costs are going down and this will hurt Vonage.

Again this is incorrect. As the cost of broadband goes down, more people will get access to the high speed internet. This will increase the amount of people that will use VOIP. Once a customer has high speed broadband, it is unclear if there is any loyalty to use the VOIP from their cable company. Customers will choose the service based on price and customer service. There is very little advantage that a high speed internet provider has in attracting VOIP customers. It's like AOL trying to control what its customers do when they are on line. Once customers have access to high speed internet, they will make their decisions regarding VOIP based on price and customer service.

Vonage is burning cash

This is correct. I think the distinction between burning cash to survive and burning cash to gain customers must be made however. Vonage's strategy is to gain enough customers to have a critical mass in the VOIP space. They can stop burning cash and attracting new customers and start running a profitable company. That would however be the worse strategy for the stock. The stock would be almost worthless in that situation. Vonage needs to continue to grow to have any value. The telecoms are extremely nervous about Vonage (or any other VOIP company), because they know that very soon most phone service will be through VOIP. That is why they would like to change the rules and charge customers based on usage and data transmissions over their networks. They realize that soon most of their customers will be leaving them and they really don't have any natural advantage in retaining their customers. Contrary to your statement, they have no cost advantage. Their costs in providing VOIP services are the same as Vonage. The only problem for them is that they have started much too late. It's like an new internet search provider saying that they're going to compete against Google because there are no barriers to entry in the search sector. Wrong!

Posts: 1123 · Vonage Forum **MVM** Joined: May 26, 2005 Posts: 1123

"Once a customer has high speed broadband, it is unclear if there is any loyalty to use the VOIP from their cable company."

Perhaps it's just the geek in me, but I'd sure as hell want a VoIP solution that was native to the network it traverses, rather than one that is provisoned from afar. It seems to me my cable provider's VoIP architecture had more structuring to it's backbone, than packets that have to cross multiple boundaries to authenticate, then communicate.

One other thought: Established customer service wil always win over better pricing. Why? Becuase if you can piss someone off enough with a support call, even just one time, it's enough to make them cancel.

Posts: 20 · Vonage Forum Associate Joined: May 31, 2006 Posts: 20

Edge wrote:

I'll address some of the issues that you brought up regarding my analysis.

Cable companies can compete with Vonage based on price.

This is incorrect and you see it today. The cable companies can attract new customers based on customer service and prior relationships, but they can't compete on price.

Please support this claim. Clearly, as you note, they do not try to compete on price, but it does not follow necessarily that they can't. I think they just don't want to right now and that could change. If they really cannot, it's an important point, so I'd like to understand why you think this.

Posts: 94 · Vonage Forum Senior Joined: Jun 17, 2006 Posts: 94

xmeyer wrote:

Ok, I surrender. I have no idea of the merits of the Verizon suit, but
I do know who has the deeper pockets.

Vonage has been in existence for many years now. I wonder why Verizon would wait until the quiet period before filing these lawsuits.

The lawsuits filed by Verizon are laughable. They claim to own certain patents on VOIP technology. Right!! That's like Blockbuster saying they own certain patents on DVR technology.

This is the short sellers and their attempt to bring the stock down further. It will probably work too, because the company has to keep its mouth shut and the lawsuits don't have to be very specific. There is nobody to champion the stock. The short sellers would like to cover their shorts at $5.

Posts: 81 · Vonage Forum Senior Joined: Feb 27, 2006 Posts: 81

When I've 'invited' some of my more non-techie friends and family to join Vonage, most have ended up selecting their cable provider's VoIP service at a higher price. Here are the comments.

I'd rather use the cable company. They own their stuff and fix or bring me a new one it when it breaks. Wouldn't Vonage have to ship me a new box if mine breaks?

Comcast has service people who can come out. Vonage does not. I don't know how to fix this stuff.

I know Comcast, I don't know Vonage other than the bad commercials. I need to know who I'm trusting my phone service to.

Comcast may be more money than Vonage, but the are still cheaper than SBC/AT&T and I already deal with them.

Out of the eight people I've invited to join. 2 have joined and 6 declined. One of the 2 who accepted went back to SBC/AT&T because he had DSL and "had to keep a line for the DSL anyway", and one remains a Vonage customer.