TMCnet News

Yet Another Rough Week for Vonage
[March 30, 2007]

Yet Another Rough Week for Vonage


Group Editorial Director
 
Embattled VoIP provider Vonage began the week expressing confidence in its ability to win an appeal against Verizon and chastising the market for "over-reacting" to its legal set-backs.
 
And Vonage (News - Alert) ended the week with the “bold” news that they have created a news hotline for those subscribers who are pressed for time. Apparently Vonage subscribers can simply dial 700-GET-NEWS at no extra charge to get the latest headlines from around the world spoken right over the phone from Reuters news service.
 
I don’t believe Verizon (News - Alert) has laid any patent claims to this service yet, but I’m not willing to lay any money on the line.
 
The pitch for coverage came to me as follows:
 
“At cocktail parties, around the water cooler or over grande lattes at the local coffee shop, everyone loves a well-informed conversationalist. But who these days has time to catch the evening news or read the paper — or even boot up a computer — wait — log on and surf to an Internet news site? Your latte will be cold by the time you find the news you're looking for.”
 
Apparently the service will allow users to:
 
“…Call 700-GET-NEWS whenever it's convenient and brush up on global politics, finance, sports, entertainment and much more; now even PTA meetings and soccer practice will never be dull again.”
 
Tonight’s top news item on 700-GET NEWS? “Vonage Rearranges Deck Chairs”
 
 
For you see, somewhere in between Monday’s expression of confidence, and the announcement Friday of the revolutionary new service, Citigroup analyst Michael Rollins had this to say about the Holmdel, NJ-based provider:
 
“Failing to successfully address the patent-infringement suits could force this company into a financial restructuring or bankruptcy in the 2008 or 2009 timeframe.”
 
Ouch.
 
Rollins, who initiated coverage on Vonage with an $11 price target and ``neutral'' rating in July, reduced his rating from ``hold'' and slashed his price target for the stock to $2.50.
 
Bloomberg Bashing
Also on Friday, Bloomberg’s Amy Thomson wrote the following lead to her story:
 
“Vonage Holdings Corp.'s advertisements tell customers, 'people do stupid things.' Ten months after the company's initial public offering, many early investors may look the same way for buying the stock.”
 
Of course, there remain some people who are still treating Vonage with respect and are posting articles in defense of the VoIP company.
 
Blogging on Techworld, in a piece entitled “In Defence of Vonage,” John E. Dunn writes that it’s ok if the company allegedly lifted some patented technology from Verizon (because the customers like the service). It’s ok that Vonage quality is not quite as good as PSTN service (it’s not Vonage’s fault, but rather the fault of “the technology”). He also claims that the only reason Skype (News - Alert) flourished is that they were able to hide behind the skirts of “Big Mama” eBay in order to avoid being sued (hmmm…maybe Zennstrom and Friis are just really innovative, and good marketers to boot?).
 
Still John deserves credit for standing up for Vonage in its time of need. Maybe they should offer him a free news service for his troubles.
 
I don’t know. I’ve been around long enough to know you don’t count your chickens before they hatch, and I’ve seen a few “hanging-on-for-dear-life” companies make remarkable comebacks (wish I bought Nortel (News - Alert) in December 2002 for $3–$4), but unless Vonage comes out stronger in defense of itself, I can’t see it happening.  Could it be I’m overreacting?
 
Let me know by commenting below.


[ Back To TMCnet.com's Homepage ]