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Vonage IPO
mesowarny writes "The street writes: Vonage Holdings, moved to become the first major Internet telephony player to go public by filing Wednesday to raise up to $250 million via an initial offering of stock and named a Tyco International executive as CEO. Our revenues were $18.7million in 2003, $79.7million in 2004, and $174.0 million for the nine months ended Sept. 30, 2005," the company's prospectus says."While our revenues have grown rapidly, we have experienced increasing net losses, primarily driven by our increase in marketing expenses. From the period of inception through Sept.30, 2005, our cumulative net loss was $310 million. Our net loss for the nine months ended Sept.30, 2005, was $189.6million. During the same nine-month period, our marketing expenses were $176.3million."
isn't tyco in a heap of financial trouble for reporting false earnings like enron?
No link to Vonage?
Seriously, I'm really impressed by their success so far. Many of my non-geek friends and family are starting to use Vonage - it beats the heck out of SBC.
Something that frustrates me, though, is the apparent lack of VOIP for small businesses. I have a small company where my partner and I work from our home offices and on the road, about an hour away from each other. Every call is long distance. We're paying through the nose for our cell phones, which barely work in our houses anyway. Looking around, I've only found a handful of VOIP companies that are affordable, and most of them don't seem to be very helpful for my situation. We were talking about how cool it would be to set up an Asterisk box so we could have the voicemail, forwarding, etc. It's just not something I have time for.
The Vonage business service doesn't seem like much more than a residential+fax line. Another place I saw sent you a box you had to set up but it was pricy. It's like there's no in-between.
Anyone have a suggestion?
They seem to have lost more money than they spent marketing though. Also with ISPs coming out with their own VOIP are they heading down?
Considering the current backbone provider backlash against VOIP, Vonage (and others like them) could have a very short business life.
Talking to Geeks is like eating jello with a chainsaw, interesting, but painful.
I really can't wait to invest in a company that has "increasing net losses". It's like 1999 all over again. I know they're after some capital, but profits talk right now and I really can't see this going well for them.
Jerry
http://www.networkstrike.com/
While our revenues have grown rapidly, we have experienced increasing net losses, primarily driven by our increase in marketing expenses. From the period of inception through Sept.30, 2005, our cumulative net loss was $310
Maybe that is a clue. I swear there is a vonage commercial on every commercial break of any show I ever watch on cable.
That song from Kill Bill makes me cringe now when I hear it.
"While our revenues have grown rapidly, we have experienced increasing net losses..."
I think I've seen this movie...I remember how it ends.
Wow. Their marketing expenses totaled 93% of their net loss. I wonder how what their revenue and net loss would have been without all that marketing expense?.
Sounds like they aren't going to be able to maintain the all-you-can-use service for only $25 much longer.
Edward Burr
Having a smoking section in a restaurant is like having a peeing section in a swimming pool.
Shouldn't this be Vonage VOIPO? You need the right tone in the title. I mean come on!
Customers may be eligible for shares too! http://ipoinfo.vonage.com/
Considering the current backbone provider backlash against VOIP, Vonage (and others like them) could have a very short business life.
Then again, considering the current customer backlash (including potential legal action) against ISPs that interfere with the traffic from particular applications - including ESPECIALLY relatively low-volume streams like those involved in VoIP, this could as easily go the other way.
Interesting times.
Bantam Dominique roosters crow a four-note song. Once you've heard it as "Happy BIRTHday" you can't NOT hear it that way
Does anyone know where you can download the company's prospectus for the IPO?
is anyone using Broadvoice?
What Vonage needs is to cut back a little on its freakin' marketing efforts.
There IS such a thing as Too Much of a Good Thing[tm].
On a side note, I'm glad I ditched Vonage. I'm now using Gizmo and saving money in the process (even with a dial-in number).
When I signed up, I was paying $34.95/mo for unlimited US/Canada. Twice they dropped the price on me, each time by $5.
They're considerably cheaper than the local cable company, Time Warner. I guess TW has two advantages -- bundling for price, and for making it a check-off. Personally, though, I move every year or two, and I prefer keeping it simple with a carrier-independent service.
I'd certainly not have had a problem with them keeping it at $29.95... I wonder how much that 16% drop in revenue per customer has affected their losses vs. the subscriber gain by being at a lower price point.
I still think that one of the biggest obstacles to VoIP is that they don't make it super-obvious how to use your normal in-house wiring with their service to make it indistinguishable from a handset/wiring perspective. That's what keeps people like my mother from considering it.
500GB of disk, 5TB of transfer, $5.95/mo
A few items to keep in mind with regard to Vonage's marketing expenses:
Vonage can cut way back on them without losing existing customers. They are not unavoidable operating expenses.
If a company intends to be as large as the incumbents, they'll need equivalent marketing - regardless of their current number of customers.
Vonage could "grow" its revenue so that its relatively fixed high-profile national marketing expense becomes a much smaller fraction of its expenses without reducing its actual marketing expenses a dime. Remember that the amortized cost for the first customer of a startup company that spent $100 million developing its products is $100 million per customer. If the customer growth is exponential while the marketing expenses are linear, the amortized cost declines rapidly with time.
The more important numbers to worry about are the operating costs per customer, not necessarily the acquisition cost for the earliest customers, which can be misleading.
that says you need a certain number of profitable quarters before you can file for IPO.
"I'd rather be a lightning rod than a seismometer." -Ken Kesey
The blurb mentioned that Vonage is the first Internet Telephony player to go public, but I happen to know that Packet8 is publicly traded...
vonage-à-trois
Just don't like the idea of dropping money into VoIP companies.
Short term they are bleeding rectally trying to grow marketshare above all other considerations while the telcos are trying to stamp them out of existance and national governments worldwide want to outlaw VoIP as undesirable competition to the local monopolies and the huge tariff structures they currently reap buttloads of juicy tax money from foreigners off of.
Longterm, assuming VoIP in general and any one particular VoIP company survives the shortterm, they face the problem of becoming unneeded. Everyone seems to be missing the big picture here, a VoIP provider gives you two things.
1. Point of presence, i.e. a phone number. Google Chat (i.e. Jabber) can do that part equally well and for zero dollars. Plus as IP6 begins to roll out and dynamic IP & NAT goes away we return to the original Internet where every host has an address, read that as a telephone number/hostname.
2. An interface to the legacy telco network. If VoIP becomes universal that service becomes far less valuable.
So longterm the value add a company like Vonage provides drops drastically and thus their net per customer will be on a similar decline to the current fade to zero valuation currently on the accounting books for the existing long distance businesses.
Democrat delenda est
Google is public and has free VOIP service google talk.
They have an increasing losses due to marketing. Some people have been frowning upon that, but I think so early in business it is important to capture the market. As much as possible. So I would think they are on right track. Also their service is pretty good. I have them for over an year now and quite happy.
I'm not trying to troll, but what happens to your VoIP service when the power goes out? Are you SOL? This is one (among other) things that has me passing on Vonage and others.
Then there are the up-and-comers, like Skype. That's the future of VoIP. Skype is already a better deal than Vonage, and without one-year lock-in contracts. Skype's costs are likely lower too.
That's why I figured Vonage's strategy is to go IPO, or sell the company. Vonage has been sitting still. They have not been adding any new features to their service--such as a simple, "do-not-disturb" feature that AT&T has. Come on, it's an electronic network! The cost of adding new features must be minimal.
Plus, the quality of Vonage's service is absolutely abysmal. If Vonage works, great. If it doesn't work, good luck--they will screw you. I have personal experience here. No wonder they've registered vonagesucks.com.
I now pay over $40 a month for a Verizon landline, rather than a Vonage phone, and I'd much rather give my money to Verizon. However there are probably investors dumb enough to buy Vonage IPO stock.
Penny - plain text accounting
Mine works fine when the power goes out, as does my WiFi router, cordless phone and TiVos. All are are on UPS's
I'd be willing to bet there are many, many people on POTS lines with only cordless phones of the type that require power ( some have battery backup ). All those people are screwed if the power goes out.
Given how many people have cell phones, I'd be most times power goes out people will reach for the cell without giving it a second thought. And with customers using VOIP and broadband I'd guess that the percentage with cell phones is pretty darn high.
While our revenues have grown rapidly, we have experienced increasing net losses, primarily driven by our increase in marketing expenses.
Don't you love how they phrased that like it's an expendeture they have no control over? I mean, hello? You look at you checkbook balance and realize you're getting towards 0 you STOP SPENDING MONEY.
Do something about it lobby your congress man/woman to keep local phone lines open to secondary carriers. I utalize xo, at work, and vonage at home. Trust me a few times a year and my boss make it a point to lobby our congress person regarding the benifits of equal oppertunity access to baby bells networks.
I found a company out of miami, called DSLi ... http://www.dsli.com/ they offer a VOIP Business solution with a Virtual PBX system. They offer a Virtual Attendant, voicemail, call fowording, extentions, the whole 9 yards. I just signed up and I have already saved over $300 on my monthly business phone bill and I have way more options now than I did before!
VoIP is cool stuff and can save you a bundle on your phone bills (if you make many long-distance calls). BUT make sure your internet connection is good enough for it. It's not just about throughput, you need low latency and low jitter as well. Anyway, try your connection out at http://testyourvoip.com/ a few different times of the day and make sure it is worth your time.
My Dad and a couple of co-workers have Vonage and they all love it. Unfortunately my DSL is pretty much at the limit of the distance from the local telephone CO so my line is not up as much as I want my phone to be... ah well.
-ben
To all the people who think that Skype and Google Talk are going to put Vonage out of business, you have to realize that Vonage isn't selling VOIP... they're selling Primary Line Replacement. Their customers expect their Vonage phone service to work exactly like their regular phone service, so they absolutely need to be able to terminate to PSTN, as many Vonage customers will be replacing their primary phone service with Vonage. This is why 911 was such a big deal for VOIP not that long ago... because for many VOIP customers, their VOIP phone line was going to be their ONLY phone line.
I work for a VOIP company, and I would say that the biggest threat is the big Telecoms that can squash VOIP either by messing with the packets that travel over their wires to destroy QoS, or by pushing the goverment to regulate VOIP out of business. Actually, this is one reason why the company I work for is glad that a big company like Vonage is around to look out for the interests of VOIP companies.
Vonage is bleeding money in marketing and practically giving away their service (including the VOIP devices that they give to their customers -- which I guarantee is not cheap), and it's questionable whether they'll ever be profitable, even if they tailor back their marketing efforts.
I would stay away from Vonage as an investment opportunity, for no other reason than VOIP is fighting an uphill battle against the telecoms. Even if VOIP can survive the war with the major telecoms, there are a lot of companies trying to break into this market, and Vonage may find themselves paving the way for another company to claim dominance over the VOIP world, especially if they can't find a way to make themselves profitable soon.
I just upgraded to FIOS and was told for an additional $5 a month I could get unlimited long distance. When I asked how that came about the reply was that it was meant to compete against VoIP firms. So now I am using Verizon, pay $22 less per month than Vonage was, and am actually able to use my fax at full speed, something that was elusive with Vonage.
I am not sure I would invest in them just yet.
I thought Vonage was kind of cool until they started airing tv commercials with the name pronounced with the stress on the first syllable. It's obvious they are trying to not sound French, which reeks of the right-wing party line. They want you to say
"Vone-idge" instead of "vahn-aaahj". And that's enough to keep me on my landline.
-fb Everything not expressly forbidden is now mandatory.
Vonage already can't afford the marketing expenses required to recruit and retain customers, and that problem is only going to get worse.
Vonage should quit spending on marketing and concentrate on customer service. They are widely regarded as having the worst customer service of any company ever! I wish I had found out about this prior to signing up. I didn't think anyone could top Verizon Online. Vonage has them beat.
Do not read this
The most popular maybe. The most well funded maybe, but NOT THE FUCKING FIRST.
My ISP was in the VOIP game months if not a YEAR before Vonage and we aren't alone.
I just happen to have a retard for a boss so we go exactly -----> nowhere.
That doesn't make Vonage the first. Just the most recongnized.
Packet8 (Nasdaq EGHT) has been a publicly trading company for years, though, the name has changed a few times. They were selling the cheesy video-phones (over analog dialup modems) back in the day. I'm not totally sure what else they did, but I'm sure that it wasn't VOIP back then.
> I guess TW has two advantages -- bundling for price, and for making it a check-off.
Although I don't know what "check-off" means, TW will also hook their system into your current phone lines so you don't have to sit by your cable/DSL modem to use the phone.
When marketing expenses are 50% of all your expenditure and you have been in business for some 5 odd years only, there is a big problem. You may bring in more subscribers now but if you do not invest in enriching their experience, they will flitter away very quickly.
(no tv here)
...but not when his girlfirend is around.
VONE-idge? Sounds like BONE-idge, a term I've heard my 17 year old kid use
Need Mercedes parts ?
Sounds like they aren't going to be able to maintain the all-you-can-use service for only $25 much longer.
Yeah, that's a lot of money for marketing. But, I think they're probably explaining it to investors that it's an initial hump that's already been jumped. Now that they've established themselves as the most known VOIP company, they can coast and retain the marketshare they have and harvest those $25-a-month subscriptions for several years. This is all a guess on my part, though.
Seth
$5 / month hosted VPS on linux = awesome!
...to raise up to $250 million via an initial offering of stock...
...to cover their next year's marketing expense. What do they do next?
~Once you have your choices narrowed down, the rest will fall into place.
Telio isn't making a loss either.
(Revenues around $6.4M, operating profit before extraordinary expenses around $700k)
Caveat emptor: I work for Telio. My views are biased.
Lose over $300M then go IPO.. welcome to Bubble 2 point Oohhhhhh not again!! ;)
I signed up for Vonage 10 days ago, and once the switchover of my phone number from my POTS line becomes effective, I'll be looking to tie the other phones in my house into the VOIP router.
From what I understand, the technique is to open the Telco box on the side of my house, and remove the wires that bridge the Telco's incoming POTS line to my home's phone wiring.
Can anyone shed any further light on this? Additional precautions? I can meter out some of the jacks to be sure there isn't any active voltage on the home wiring before tieing it into the VOIP router, but I'm not sure if there are other considerations.
Opinions expressed are my own and not necessarily those of my employer.
The problem is that Vonage sucks as a company. I had Vonage, the call quality was poor, the modem had problems which required technical support (for which I had to endure the reading of scripted questions by non-english-speakers), my ISP has enough of an upload cap that you can't really do anything significant on the internet AND get a call at the same time, the call quality is poor, calls are frequently dropped or don't connect, and they aren't groqing fast enough to provide local access numbers to a lot of people outside big cities. When I finally got completely fed up I called to cancel the service... that's when I was abosultely attacked by customer service rep who essentially called me a moron for not wanting his service... this was pure Lily Tomlin "without us, you got no damn phone" behavior. I was then transfered to another individual who gave me same treatment and then another, which suggests that this is not poor individual behavior, but rather a company policy of trying to intimidate people into keeping the service. The short of it... I still have a phone... I don't and won't use Vonage. Any company who has this type of poor customer service attitude cannot have huge growth prospects.
I still think that one of the biggest obstacles to VoIP is that they don't make it super-obvious how to use your normal in-house wiring with their service to make it indistinguishable from a handset/wiring perspective. That's what keeps people like my mother from considering it.
Which is odd, because its incredibly easy to do. Find the grey telco box, and disconnect the bunch of wires from the terminals, and make sure the other wires are all attached, by color.
Where do you get this? I have been a customer with Vonage for a long time (July 2004) and have never had to sign a one-year contract.
Nope, you have it down pat. Its really as simply as turning two screws, removing the wires from them. Just remember to have some wire caps to keep all the other lines in your house connected to each other.
It takes about 5 minutes.
You've got it pretty much right. The wiring for any given phone line in a house is set up in a ring, such that any jack can become the input. Once you've got the Telco disconnected from your box and plug in your TA to any wall jack, your TA becomes the input for the ring. Metering shouldn't be necessary - just use a handset to make sure there's no dialtone or white noise on the line. It should be completely dead.
A major suggestion I would have for you, however, is to wrap the Telco plug with electrical tape, and hang a tag on it with a note to the effect of "Do NOT reconnect this system to POTS! It may damage inside VoIP equipment."
Also remember, your TA will likely only give you enough ringing voltage to power 4-6 handsets. Any more than that, you run the risk of drawing too much power from the system and not having enough juice left to ring the phones when a call comes in.
The Russian Mafia will mod you down just to see if the Moderate button works.
You seem to be implaying that the article said, "moved to become the first major Internet telephony player", as opposed to what it really says, "moved to become the first major Internet telephony player to go public". The main idea being conveyed is that they are the first to try to go public (with Internet telephony being a modifier of that), not the first VOIP company. Now, it may be that your company is a public company, but by your own admission they are not a major player in the Internet telephony market.
It's a good thing you posted as anonymous coward, because now everyone thinks you're an idiot with such bad Attention Defecit Disorder that you can't even finish reading a simple, easy to understand, sentence.
I love my Vonage service but I don't use it in a normal way. My girlfriend lives in Australia now and I will be moving to join her in the not too distant future. I got Vonage and brought the box out there on a visit about a year ago. Once I got one of those 240V universal DC power adapters to work for the power the thing it came right up on her DSL connection with a 716 Buffalo phone number in Australia. I ended up leaving it there. The quality of the calls is better than Verizon's long distance was and I only pay $15 a month for 500 minutes that I used to get charged ~$.20/min for.
I know that my situation is a bit rare but I have been dazzled and amazed by Vonage and hope they don't go away - the amount of money that they have saved me in calling her is tremendous and the ability to have a local US phone number overseas for friends and family to call me on is going to be great. I highly reccomend this sort of solution for anyone who makes frequent international calls.
I think that one has the view Vonage from their relatively easy ability, to-date, to raise private capital. Their IPO seems driven from a desire to obatin a firm valuation on the company as a whole. In this contect one should examine Vonage in relation(IMHO) to the Billions EBay paid for Skype. And Skype has neligible Revenue and an unknown ability to convert non-paying customers into paying customers. You mention Business VoIP product offerings. The number 2 (IMHO) competitor to Vonage (though much smaller in customer numbers) is "Packet8" www.packet8.net (EGHT ticker symbol). They have a range of Business product offerings which even allow for a Cyber Switchboard functionality between different locations etc. Plus they also offer a good Video Telephone system and FULL E911.
I have seen so many trolls in this thread, and they almost sound like they have valid arguments. However, if you know facts, then they are easily busted.
1. Vonage does not require contracts. I have had Vonage for well over a year now, and I have referred people to Vonage with in the past month. No one I know who has Vonage has even heard of a service contract.
2. Myth: Vonage has lost of dropped calls or calls that do not connect. This is false. If you do experience these problems, then it is likly cause by a problem with A: Your network set up. B: Your cable line. I had Vonage with no problems, and then all the sudden I experienced degraded call quality and dropped calls, however my Xbox Live was dropping connection too. Turned out, the cable company did an "up grade" at a terminal close to my house and it had a bad connection in place. Cable company fixed it, no more problems with Vonage, and no more problems with Xbox Live. If anything, I would say VOIP has helped me resolve problems with my connection more than it has hurt me.
3. Myth: The call quality is horrible. Again, I have had Vonage for over a year. People cannot tell I use VOIP. Now, I can't use a ton of upstream while I'm on the phone because it CAN cause degraded call quality, but I have not had much problem with that. I am regularly playing a game on Xbox Live while talking on my vonage line with no problems, and Xbox live does use a pretty hefty amount of upstream.
I love my Vonage. If you want to try it for yourself, just email me, and I can send you a referral link. Granted, you can get 1 month free just by signing up through thier site, but going through my link would help a fellow slashdotter out. wagaman@gmail.com
Never argue with an idiot. They will just bring you down to their level and beat you with experience.
When the power went out in our Vonage equipped house, my call home in the afternoon rang my wife's cell. Vonage will automaticlly call forward to another number if it can't see your router on the net. Pretty cool, and definitely better than the old telco handled service outages.
Vonage is evil... try the google of Voip www.sunrocket.com. Best service and majority of the features and the best part is that this is no gotchas company. :)
See their Terms of Service. See Section 2.1 for their termination fee. There's an implicit 12-month contract.
No, not false. Many subscribers have no problems at all, but many do -- so commonly that one has to question the maturity of the technology. Vonage service is marketed as a replacement for a POTS line, and it's nowhere near as reliable. More on that in a moment...
I worked for Vonage for longer than that. I could tell I used VoIP. I got a Vonage box at home (but didn't transfer my POTS line: wanted to be sure of emergency calling capability if the power grid went down). I returned it after months of face-to-face discussions with the top tier of tech support, service reconfigurations, equipment replacements -- and multiple service visits from my cable company -- failed to clear up my line quality issues.
Vonage couldn't even keep their internal IP phone system up all the time, and it randomly (or not-so-randomly) featured echo, noise, failure to connect calls, dead connections...that's got to tell you something.
Then again, a friend of mine has had a Vonage line in his house for at least a year now and is delighted with it. Absolutely, 100% satisfied. Sounds just like POTS when I talk with him.
My point being that Joe Consumer (or even Joe Slashdot) can't rely on plugging it in and having it work right. It really seems to be hit-or-miss. But it's marketed as a replacement phone line. In my opinion, the technology is still too immature to merit that claim. It can't adequately (much less automatically) handle sub-optimal conditions.
When the technology is smart enough, if Vonage stays as big as they are, they might have the upper hand (with exclusive deals with the phone adapter manufacturers) and really-and-for-true "lead the Internet phone revolution" in getting better technology -- and better service -- to market first. That might be worth investing in.
Among them
I know what you are thinking - maybe your bandwidth is as issue. No - I play online games and need millisecond response time. My bandwidth is solid - and large!
All of the issues I mention do NOT go away with the reboot of the Vonage modem.
The worst part of this is that if you use the computer at all or if there is any traffic to any of your computers in the house, the service becomes terrible. Even a small amount! You can put the Vonage modem in front of your network, but then it interferes with online games - even when there is no call coming through.
We have friends that use it and have little or no problems. We use the phone for 3-4 hours a day and really see the issues day in and day out. We got Vonage to avoid SBC and to save $40 bucks a month. We are now waiting for SBC to call us with a deal so we can switch back. Never thought I would say something like that in my life.
Vonage's service seems like it is one month old, not one of the most mature out there.
My advice: stay away if you use the phone a lot. Let it mature until they have another generation of the Vonage routers(and service).
- Just because you can't, doesn't mean you shouldn't
TW bundles for price? Hardly.
I just established new service a couple weeks ago. There is NO price break for getting their "all in one" package as opposed to getting RoadRunner, digital cable and VoIP separately (I asked about this exact point). RoadRunner is still $29.95/month for the first year (promotion). Digital cable is still $55.82/month. VoIP is still $39.95. You just get one bill instead of three.
But TW's marketing sure makes you think you get a break. "I saved $30/month on my phone bill!" - sure, because you got free long distance for your $40/month that TW phone service gives you. But you could have gotten the same from Vonage for $30/month. Or built right into your cell phone service.
Does anyone know what their pre- or post-money evaluation would be ? It's kinda important, but the article does not say.
For the nine months ended Sept. 30, 2005:
Revenues = $174.0 million
Net loss = $189.6 million
Marketing expenses = $176.3 million
Even if they were able to eliminate all marketing expenses without losing any revenue, they would still be losing money. If you eliminate $176.3 million of the $189.6 million loss, they still would lose $13.3 million.
Also, it's kind of fishy that they are reporting 9 months. I mean most companies are able to do a full year report by around Januray 20th. What are they hiding in the last 3 months?
I use TimeWarner Cable, but have been on Vonage for three years now. Any user who reboots his router and loses a convo, is an idiot, sounds like you are too. Why? Because a child will tell you that the best setup puts the analog/digital box for Vonage [or any VoIP service] IN BETWEEN the source cable line and the fucking router. DUH!!!
Tell me your stupidity arises from your sales gig, and that you have no intention of 'taking up' engineering, or support, please.
My Vonage setup has a dedicated 90KBs for full duplex, which allows fat pipes in the background for downloads, etc. Crystal clear lines. Used for business all the time. Two phone numbers and an 800-toll free for less than TW's basic single-line service, AND 24/7 zero long distance charges to all 50 States and Canada. In a word: Unbeatable. Haven't needed a landline since early 2003. Voicemail over the phone, online web site, and as attachments in e-mail [nice .wav files]. Righteous.
Anyone interested in the 2 for 1 deal, hit the email in my post. Over and out. Oh, and when I want to send a fax, no probs, jack in, send, no per page charge, no toll. Bite that, TW.