Friday, August 26, 2005

Vonnage IPO ...Then A Merger??

There's been some talk recently in the media....The Wall Street Journal and The Deal business newspaper for example....that Vonage is planning an Initial Public Offering of up to $600 million in stocks within the next six weeks.

You can read more about it in a thread featuring the story at the Vonnage Forum.

There are two reasons for this IPO.

The obvious reason for such an IPO is a way to raise money for the needed expansions, infrastructure improvements and marketing push Vonage will need to invest in to keep ahead of a fast-moving pack of challengers. Vonnage will need this cash since they have spent more than a mountain of nickels to market the Vonnage name to date. In fact...their cost per customer to acquire business is way more than each customer brings in revenue. Scary investm,ent but seems to be working for the time being. Although Vonnage has succeeded in branding the Vonnage name in the public eye that marketing effort has had a huge price tag. Another fact...that's where the majority of Vonnage expendetures has gone....marketing. They now need to back that up with spending on what really makes "stuff" work long term....if they are to hang on to any market advantage they have.

Another reason for this IPO is a possible merger with an as yet un-named entity. There may be some discussions going on with various potential interested parties .....but right now nothing tangible has leaked out. It may just be a "plan" that has yet to really take shape. Expect quite a frenzy of suitors should this happen. Richard Shaw of ZDNet thinks that Sprint makes the most logical choice for the acquiring company. That makes sense to me. But I'd like to see Qwest in there if they can come up with the capital to make a competitive bid.

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