Vonage: 'One-Trick Pony' Going for IPO

May 23, 2006

Rich Tehrani says that this morning CNBC had a report on the expected Vonage IPO -- see more details in today's AP story. The price is expected to be set tonight at $16 to $18 per share selling 31.25 million shares.

Our colleague, long-time VoIP blogger Tom Keating, had scathing criticism for Vonage in his blog entry, "Time to dump Vonage," a few days ago. Tom has been using Vonage almost since it began, but has been extremely disappointed by the company's service lately. Tom says, "Two years ago, I talked about the 'death knell' for Vonage and other 'one trick pony' VoIP providers that rode the open Internet and didn't provide the last-mile data connection, so I did see this coming .... I wrote about the fall of Vonage to the triple play providers as something that's coming soon, so hold on while I go ring the death knell bell for Vonage."

Wow, those are striking words to read on the eve of Vonage's IPO; the phrase "one trick pony" strikes me as apt. I do think the IPO is an important development for the VoIP industry, but it's hard for me to feel excited about the long-term prospects for a company whose service is marketed as just a cheaper alternative to POTS.

Given the potential of IP communications, simply using the technology to cobble together a poor imitation of regular phone service reminds me of early television broadcasts that were just talking-head radio shows performed in front of a camera.

This quote from today's Reuters story reflects the sentiments of quite a few other comments I've seen today about the expected IPO:

"Vonage has acknowledged that it may never be profitable and is viewed with skepticism by many analysts, who cite the growing competition it faces in providing voice-over-Internet protocol (VoIP) services.

"'We haven't liked the offering since we first saw the registration,' said David Menlow, president of IPOfinancial.com. 'There are so many other companies out there that can deploy this strategy or this product in a heartbeat.'"

Yikes!

AB -- 5/23/06