Andy on Vonage

Here are Andy’s thoughts on Vonage and the IPO. He is not a believer in Vonage in the long term. I am.

He thinks Jeff Pulver could have steered the company in a better direction but since he was pushed out of Vonage he wasn’t able to offer guidance. My question on this is what was wrong with Jeff Citron’s guidance? He has done better in Wall Street than most people in VoIP. Right? Perhaps Andy thinks Citron doesn’t know enough about telecom?

Still, I would rather see Jeff Pulver running a VoIP company than in the event business (one less competitor 😉 ) so I support Andy’s vision of Jeff spending time consulting with Vonage and perhaps others.

Andy also infers Jeff Pulver would have made the company focus on other things besides VoIP — perhaps new services.

It may be worth mentioning that the industry has been talking about services since Harry Newton’s time — that was back before the term or concept of IP telephony existed. Virtually all issues of Computer Telephony (Harry’s magazine) talked about this from 1991-1995.

Prior to that there were the occasional mentions in Harry’s Teleconnect

The net/net is that Vonage could have implemented new services if they chose to at any time. These could have differentiated them.

It is not clear that new services would have made Vonage a better company though.

In my opinion they just had an IPO too early. The IPO should have taken place in 2008.

Vonage could be an amazing investment in the long term. Remember most of their customers are fiercely loyal. When they have 5 million dollars and their marketing costs decrease how could you bet against them?

They are also a perfect acquisition target.

For the investor with a strong stomach and staying power this is a good one.

It will likely be volatile so I would buy it on the dips and potentially sell it on the spikes for a while until they start to come out with consistently good news.

I expected many to bash Vonage after the IPO and I am not surprised because they aren’t a company that is poised for an IPO. They have said repeatedly that market share is more important than profit. That is a recipe for a bad IPO.

This company in the short term should not set the tone for an entire industry.

They have the brand and reputation that comes with outmarketing virtually all other companies.

That has to be worth something in the long run.

The question is what is it worth and when will the profits start?

In conclusion, Andy may be right but for the wrong reason. I think the company’s market position is excellent. But perhaps the Vonage killer will be Skype or Google and not the phone companies or MSOs.

One thing is for certain — this won’t be a smooth ride. I will be checking Andy’s blogs for further commentary.

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