Monday, July 10, 2006

Vonage Stock Continues To Take A Nose Dive

This may not be strict broadband tech news....but it's still timely and important.

Vonage stock continued it's downward spiral closing at $7.40 a share today....it's lowest level yet. That's quite the drop from their opening IPO price of $17. Hmmmmm.....seems like I said something like this would happen in a warning post here just before Vonage went public.

Given how Vonage is put together, their existing high business costs at the time, their lack of any substantial presence in the enterprise QoS arena or even real small-medium business enhancement markets....their stock performance shouldn't be any real surprise to anyone who had their eyes open (and hopefully their wallets closed). If eyes weren't open before you can bet that investors are wide awake now. It appears that there's no real return-on-investment strategy for this debacle....unless a buy back is in the offing and a return to private equity.

This whole situation is further compounded by yet another patent infringement suit against Vonage. Being in the legal hot seat once AGAIN for allegedly infringing on patents couldn't come at a worst time. The potential costs of damages and royalties worth about $180 million will just further add to th huge losses from the failed IPO. The whole law suit issue will probably contribute to further declines in stock price too.

In contrast....Packet8 is a picture of health compared to Vonage. As well as perfectly positioned in the right markets with their business VoIP solutions driven by their virtual office IP PBX and enterprise packages. Some folks hype the jingle (Vonage)...and some just build a business (Packet8). With the results really pretty predictable.

What does this mean to consumers? Vonage isn't someplace I'd want to have my faith in right now. Their prices are very likely to go up....and they are perfectly ripe for a takeover from any number of directions (can you say Baby Bell?). If that happens expect service and support to erode, features to be streamlined, and consumer costs to take yet another hike. With that in mind I suggest businesses of any size play it smart and head to Packet8 if not already there. Much safer and more stable for the long haul.

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