May 24, 2006 9:09 AM PDT

Vonage shares slide on first day

Vonage's Internet phone service wasn't the only thing selling at a discount on Wednesday. So was its stock.

Shares of the new public company slid almost 13 percent from its initial offering price after the company's stock completed its first day of trading on the New York Stock Exchange. The dip could indicate that investors are wary of the company's future prospects.

Vonage shares had dropped 12.6 percent, to $14.85, at the closing bell. The company's initial public offering was priced on Tuesday at $17 a share, which resulted in $531 million for the company.

Many on Wall Street have kept a close eye on the Vonage IPO to see how investors would receive it. And so far it looks as if investors could be skeptical about Vonage's future.

The company, which sells a service that turns broadband connections into phone lines, has never been profitable. And it has admitted that it may never be profitable, as it continues to rack up debt by increasing its marketing efforts.

The company has reported losses in every quarter since it first started in 2001. As of March 31 this year, the company had a deficit that reached $455 million, according to a filing with the Securities and Exchange Commission.

In addition to competing against big phone companies such as Verizon Communications and AT&T, Vonage is increasingly facing competition from other Internet telephony players. America Online, eBay's Skype, Google and Yahoo all offer free Internet telephony services that could compete with Vonage. But these services differ slightly from Vonage's because they are not marketed as regular phone replacements.

The biggest threat to Vonage appears to be the cable companies, which are vigorously marketing their telephony services as replacements to traditional telephone lines. Cable providers such as Comcast and Time Warner have seen tremendous growth in their customer base as they bundle their voice service with high-speed Internet access and TV service.

Time Warner added 270,000 digital phone subscribers in the first quarter of 2006, its biggest gain ever. And Comcast, the largest cable provider in the U.S., added 211,000 new phone customers during the quarter, more than it had signed up during all of 2005.

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Vonage Holdings Corp., telephony, investor, IPO, cable company

8 comments

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What a joke
I tried Vonage and it was costing me MORE PER MONTH to have it than to get a regular phone line! I then went to cancel and they tried to stick me with a $80 cancellation fee.

I'll stand to my landline, $18 a month and works even when the Internet or power is down.
Posted by rstinnett (41 comments )
Reply Link Flag
The opposite here
Vonage was way cheaper than SBC's offering. And as an added bonus, I don't have to deal with the inept SBC customer "service".
Posted by JoeF2 (1306 comments )
Link Flag
But what does your $18 include?
You stated that you only pay $18 a month, but does that include caller id, voicemail, unlimited long distance to us and canada? I had verizon and with just caller id, no long distance I was paying over $30 month. I have had Vonage for almost a year now and practically no problems. If I do lose internet or Vonage goes down, I have my calls set to automatically route to my cell phone.
So I would say I disagree with your statement that Vonage is a joke. I think you need to be more clear with your reasons on why Vonage is a joke. I am also curious to know who your phone company is that you pay $18 month, unless its a stripped down service, which just includes the dial tone with no extras such as ld or caller id or voicemail
Posted by pnodine (6 comments )
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$ 18 for a landline
I am also curious with what service offers this, I currently have vonage and love the service, the internet site allows you to change and view almost evey detail about your account including incoming calls for as long as you've had the service, plus listen to voicemail online. Not to mention a little known fact about vonage is that you can take your vonage box and plug it in anywhere with broadband access.Which means you could travel with it and have your house/office number in your hotel with you, and still call for free. Even if your in another country, you can call the US and Canada for free they also have a travel sized wifi box, that you could set up anywhere, even a coffee shop. let's see your $18 phone company offer anything close.
Posted by wdabrams (1 comment )
Link Flag
I Love Vonage
I signed up for Vonage in November and have been extremely happy. I had to change my phone number to a particular number in order to take care of a family member. The customer service truly is customer oriented, unlike my former provider, Verizon. The folks at Vonage went out of their way to accomodate our family's needs. AND the fax line is only $10.00. Including that and unlimited calling plus voice mail, call forwarding, caller ID, it's still way cheaper than what I used to pay Verizon.
Posted by boodleswithatwist (1 comment )
Link Flag
I don't think it's a joke if it saves you money.
I subscribe Broadvoice for my parents and they love it. They mainly use it for long distance though, with broadvoice they can call Canada, France and Australia for free. Ever since they have it the service was only down once )They'll be so many way to get the internet now in the near future (through Fiber optic line, power line on top of cable and DSL that we currently have) and I think the technology is only gonna get better. Remember it's only been a year or two since people are starting to get into this.
Poeple will try anything if it means saving them money.
Posted by xwingsct (56 comments )
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Know about Lingo
VOIP is great, but Vonage is too expensive. I've been using Lingo for more than a year now. No Problem. Same features, free calls in Europe, lower intl' rates, for $19.95. I don't understand why people pay more for this service.
Check it out yourself: www.lingo.com
Posted by allbis55 (1 comment )
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Definitely Wave of the Future
I just purchased Vonage and it is the best - free unlimited nationwide calling and CHEAP international calling. VOIP is DEFINITELY the new wave. Vonage will reap the market if the company can tailor their marketing expenses and overall budget strategy. It would be nice to see the "big guys" get a kick in the butt from this company. It's worth watching to see where they go...
Posted by kel508 (1 comment )
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