IPO

Vonage working for image makeover

Thu, 10 Jan 2008 06:59:55 -0500

This year will be the make or break year for pure play VoIP giant Vonage with its viability in the hands of its bankers who have to agree to refinance its significant debt. Vonage handed out most of its IPO cash on patent settlements to the horde of telcos that decided the best way to compete with VoIP was through the courts.

In December, some $250 million of Vonage's debt will come due for repayment. While the owners of those convertible notes can exchange them for stock, the stock is now trading in a $2 range compared with a high of $13.33 when it floated back in 2006, making it highly unlikely the lenders will accept anything but cash.

A betting person would punt on a telco bail out--Sprint does not have a residential wireline business. But in the meantime Vonage is getting on with better looking after its customers and this week announced at CES its "My Vonage" product strategy. This is Vonage's attempt to move away from the discount price trap it has fallen into and instead promote the rich feature set that comes from IP comms.

First announcement is a device called V-Portal. According to the release V-Portal is "a digital voice adapter and single port router with a built-in liquid crystal display, and contact book, an innovative one-stop communication hub with useful features such as group calling and voice activated dialing." It is being heavily rebated to new Vonage users and is on sale at $9.99 (plus a $30 activation fee for the privilege of having Vonage turn on the device!)

For more:
- Vonage to launch V Portal Release
- Vonage kicks off My Vonage strategy Article

Related articles:
Can Vonage do it? Article
Vonage still top VoIP carrier Article

Vonage verdict perspective

Thu, 04 Oct 2007 06:59:59 -0400

There's a saying in the fourth estate that if it bleeds, it leads. A thousand pardons for starting with such a cliché, but hey, it's true. Disaster is interesting, especially when it's happening to someone else.

Disaster has been happening to Vonage for quite a while now. I was a subscriber when it launched its initial public offering in early 2006, and I kept getting letters about buying shares. I was also covering telecom hearings on Capital Hill, where the network neutrality debate was heating up. Verizon and Comcast were leading the pack to create tiered pricing for web applications that used heavy data rates. Voice does not use heavy data rates, but it generates revenue, and the implication was clear. Network owners were going to have a say about what was transmitted through their wires.

There could not have been a worse time to do a third-party VoIP IPO. Rich Greenfield of Pali Capital was firing off warning shots like Paul Revere. Vonage went out anyway at $17 and lost $4 a share by the following day. It was definitely bloody.

Meanwhile, Comcast and Verizon have quietly (and sometimes otherwise) developed alternative strategies to avoid the network neutrality regulations that would prohibit tiered pricing. Comcast has pulled the plug on a few of its more piggish broadband subscribers, while Verizon sued the pants off of Vonage. Clever move. Easier than buying them outright, because even though the IPO tanked, the company was still valued for a time in excess of $1 billion.

Then Sprint joined the fun, and of all things, SunRocket.

So here you have a bootstrap company that came out of nowhere to pioneer the VoIP market in the United States, having pulled off one of the worst IPOs in history being sued by two corporate giants and one dead firm. So it was when the Verizon appeal verdict was released last week I interpreted it to be less than horrific. Indeed, the appellate court upheld the verdict on two of three disputed patents, but the $58 million and royalties damages award was vacated completely. While it's true that the lower court will just have to come up with another number, it'll likely be a third less than the original. Vonage put up a $66 million bond for damages last April so it could keep signing up subscribers, so it wasn't completely unprepared for the outcome.

What more Vonage can endure is hard to say, but it's a testament to the company that it's still standing at all. The stock seems to have stabilized at $1, down from the $3 range where it settled after the original Verizon verdict in March. Before that, it was hanging in at around $7. The real question is who's buying the shares and what do they expect? Vonage went into business mostly with noise, a name and a good idea. (VoIP itself, not the business plan.) AT&T just announced that it would start bundling VoIP with it's U-verse TV offering. Verizon's FiOS, now with Vonage? Hmm. Let me know your thoughts, at dmcadams@fiercemarkets.com.

Time Warner Cable to IPO

Thu, 19 Oct 2006 20:01:34 -0400

So while some cablecos are talking about going private (Cablevision, anyone?), Time Warner Cable just filed to go public. It's not about raising cash--it's a way for partner Comcast to cash out of the Adelphia purchase. Yes, it's complicated, but don't worry about it because that's not the point here. The pricing of the IPO implies that TWC values each basic cable subscriber at $3629. At $50/month (remember: basic cable), that means TWC expects to keep a customer for about 6 years. But add in upgrades like phone service, and that 6-year customer becomes far more valuable--and by watching the stock and reading those quarterly reports, we'll get to see just how valuable those basic customers turn out to be.

For more information about the TWC IPO:
- read this article from Broadcasting and Cable

Vonage may take stock buyback hit

Mon, 05 Jun 2006 20:01:37 -0400

You'll remember that Vonage went public recently at $17/share, and that the stock has been sinking since. (It closed yesterday at $12.32, off a June 1 low of $11.52.) As part of the IPO, Vonage reserved a bunch of stock for some of its customers. When the stock's price dropped pretty much out of the box, some of those customers said they wouldn't pay up; Vonage promised underwriters that they'd make good for the deadbeats. Now it looks like Vonage made some technical mistakes in the way it promoted the stock to those customers in the first place, which means Vonage may have to buy those shares back at the original $17 price. No one's saying yet how much the goof may cost.

For more information about the Vonage IPO:
- read this article from Computer Business Review Online

Vonage IPO sinks

Thu, 25 May 2006 20:01:35 -0400

We guess it's good news that Vonage's IPO came off as expected this week. Underwriters set the price of 31.25 million shares at $17--the middle of the expected range--so the company raised more than $530 on Wednesday. The bad news is that it was the least successful IPO of the last two years, closing down the first day 13 percent at $14.85.

For more information about the Vonage IPO:
- read this Computer Partner article