This hasn’t been a good week for independent VoIP providers. It started off with Andy Abramson’s scoop that Skype is coping with a lawsuit that could (but probably won’t) strike at the heart of eBay’s high-profile purchase. Now, it looks like Vonage, the feisty company that pioneered the VoIP market in the U.S., is having trouble with its IPO, giving rise to the idea that Vonage’s only option is to sell out to a traditional telco.
But, as Om points out, who will buy Vonage? Although the company is experiencing tremendous growth, it’s also spilling a lot of cash to gain that growth. And in the end, why would any rival need Vonage? Phone companies and cable companies already have the capability to launch their own in-house VoIP options, so at most all they would want from Vonage is the customer relationships, which they can probably easily swipe anyway with attractive triple-play bundles.
Alex Saunders looks at this another way in a post which has this great title: Vonage: Worst IPO Candidate This Year? Alex thinks that the fundamental problem with Vonage is that the company has to keep shelling out more money to get increasingly smaller revenues. In other words, Vonage is caught in a situation where its costs are rising and the price of its product is dropping.
If the price goes to zero, usage should skyrocket. If usage skyrockets, then the costs associated with running the network also rise. Cost basis increasing, revenue decreasing… does this sound like an IPO to you? Not on your life!
With these kind of woes, is it any surprise that Vonage, as Mark Evans points out, has bailed on VON Canada, a particularly telling sign given that VON’s chief Jeff Pulver is a co-founder of Vonage? It’s interesting, too, that Niklas Zennstrom, slated to be a keynote speaker at VON Canada, has also pulled out, sending one of his VPs instead.
Cynthia Brumfield at 10:24 AM|Comments(0)
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