Vonage Bankrupt by 2009 -- Citigroup Analyst

Posts: 163 · Posted: Tue Apr 10, 2007 10:29 pm Post subject:

galion wrote:

Interesting deal with Voip Inc. It does look like a possibility.

Did not help this week. The future does not look too good right now for Vonage. I did not see any news regarding employee cutbacks or restructuring... which is a bit unusual considering the situation. Though it is probably happening in the background. Fresh coat of paint before they sell the building.

The war room has to be buzzing right now.

============ Update 04-12-07 (24 hrs later) ===============
"Vonage, the struggling US-based broadband telephony pioneer, said Mike Snyder had stepped down as chief executive "by mutual agreement" and announced a series of cost cutting measures designed to shore up its business after setbacks in a patent lawsuit by Verizon Communications."
=====================================================

I see an inevitable merger, or buyout.

Posts: 2 · New Forum Member Joined: Jul 04, 2007 Posts: 2

I hope that Vonage survives. The thought of having to switch back to RCN or pick up service from Verizon, Sprint, etc. just makes me ill. These big guys are for the birds. Twisted Evil

Posts: 163 · Posted: Mon Jul 23, 2007 8:13 pm Post subject:

DigitalVoice wrote:

I see an inevitable merger, or buyout.

Q: Still no buyout - at rock bottom $2.60 per share?
A: The buyer knows the stock will go down further.

Q: Still no merger?
A: Their organization (technology?) is flawed. Who wants to team up with a loser?

Q: So... what now?
A: ...Bankruptcy.

Posts: 163

http://money.cnn.com/news/newsfeeds/articles/djf500/200708022045DOWJONESDJONLINE001156_FORTUNE5.htm

"Vonage is forecast to lose 34 cents a share, omitting onetime items, on sales of $208.1 million. The company lost a costly patent suit to Verizon earlier this year that Vonage (VG) has appealed in federal court. Its shares now trade at $ 1.88. "

Posts: 90 · Vonage Forum Senior Joined: May 05, 2005 Posts: 90

As in other internet markets, some consolidation is inevitable.

The barriers to entry in this business are low, and there are a lot of well-funded competitors (Telcos, Cable Cos) who have vested interests.

The company has yet to turn a profit, as they are more concerned with marketing (expanding the client base) at the present time. I think this is short-sighted.

For example, I use MAXEMAIL for my internet virtual fax service. They charge $16 a year for this service and send faxes to me as pdf files by e-mail and provide me with a unique fax number.

Never heard of them? I'm not suprised. eFax has paid a lot of money to be top dog on the search engines and also in banner advertisements. Do a search on "efax ****" and you will realize that paying more per MONTH than maxemail charges in a YEAR is no bargain.

Not suprisingly, like AOL, if you try to cancel eFax, they continue charging your credit card. Some business model. Yet folks continue to use AOL and eFax. But for how long?

There are two schools of thought on business models - on the internet and elsewhere. The first is to get customers, no matter what the cost, and then empty their pockets and toss them aside, and look for the next customer. Most car companies work this way. If you buy a new car, $500 to $1000 of the cost was for those stupid advertisments on the radio and TV.

The other school is to build a business slowly by word of mouth, sell the service at a low, low price, and keep a steady and loyal client base. This second model is much easier to administrate, but maybe not as sexy.

According to today's Washington Post, Vonage has nearly $250 million in debt coming due in 2010. This sounds like a lot of money, until you consider that Vonage recently cut its annual marketing budget by $110 MILLION for this year alone. And according to one quarterly report, Vonage made $250 million in sales. So how big IS the ad budget?

See:

http://www.washingtonpost.com/wp-dyn/content/article/2007/09/26/AR2007092602142.html?hpid=sec-tech

In other words, "Woo Hoo" costs a lot of money - maybe more than the cost of running servers and completing phone calls.

$24 a month for internet phone service sounds like a bargain, until you figure out how much of that is advertising (maybe as much as half?). $15 a month without the "Woo Hoo" sounds a lot better (and lets face it, we can all find such companies using an internet search).

I wonder if that is why some Vonage execs have left. It seems Vonage is more interested in building a huge client base by relying heavily on advertising. I guess the thought is, the big dog wins in competitions like this, and they want to be the big dog. Good Luck.

I suspect we'll see some market consolidation in this industry within the next few years. It remains to be seen whether Vonage comes out on top.