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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."
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?
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!
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
Technically, the Tyco fiasco was only Kozlowski (former CEO), Swartz (former CFO), and Belnick (former chief legal officer). Essentially, they took out personal, no interest, loans from the company totalling $170m without informing shareholders. This was later written off as benefits which the benefits committee did not approve beforehand. (Although, I have my doubts about the possibility that $170m in personal loans would go unnoticed by other people within the company.)
In my opinion this is a questionable business decision at best. Vonage has all the earmarks of a mid 90's "bubble" company with a shaky at best business plan. Now, they go public on unstable ground and hire a person from Tyco as CEO. While he may not have contributed to the scandal at Tyco, anything associated with Tyco has, deserved or not, a bad reputation associated with it. This wouldn't be my first choice as hire if I was trying to convince potential stockholders to invest.
$sys$droids
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.
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
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.
Vonage IPO Propectus:0 104746906001567/a2167036zs-1.htm
http://www.sec.gov/Archives/edgar/data/1272830/00
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.
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.
The other day I decided to rummage through my rather extensive coinage collection. Noting one that much more shiny than the rest of the otherwise average lot, I reached for it to get a closer look. No sooner did my left hand touch its surface than a horrific voltage streaked up my hand and through my entire left appendage. Everything went black.
After an untold amount of time, I awakened, the world slowly returning to me after the mysterious blast of amperage. Directly above me, the visage of an anxious woman looking down upon me as I laid on a bed of (what I later discovered to be) straw. I then noticed an aching pain in my left shoulder and head - the latter of which had a linen bandage wrapped haphazardly around it. Touching the place it hurt the most stained my fingers red - the seepage was leaking through - and I yelped in pain.
"Donna be touchin' that, Master Klein. Ya need yar rest, aye. The guards done brought ya 'ere in 'eir carriage not less than two days 'go - what were ya doin' so far from the village & so close to the carnage from the battle?" she asked. "You're not one o' those graverobba's 'oo pillage and steal from 'ose brave men who done fell in honah, are ya?"
Guards? What guards? Battle? Carriage? Klein? Apparently the blast from the shiny coin did more damage to my head than I thought?
THE END
Yeah, totally lame, I know. But I'd like to see you write a story with all the -age words that are pronounced your 'correct' way.
God, I feel like a writer for Final Fantasy or something... uck.
One man's constant is another man's variable.
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.