Vonage: Verizon Merely A Flesh Wound
Couple of items to report on the Vonage front. First, the company has quietly announced its first annual calling plan.
It’s been offered only to existing residential customers, according to a company spokesman. It will cost $239.99 for a year’s worth of unlimited calling in the U.S., Canada, Puerto Rico and certain European countries. It would save subscribers about $60 a year vs. paying $24.99 a month.
The spokesman described the plan as in “beta” with Vonage testing the response from its customers before deciding whether to roll it out to new subscribers.
Vonage also fired back at unnamed “media” outlets for speculating that the company’s patent imbroglio with Verizon will spell the end of the startup. According to a company release:
"It is wrong and irresponsible to presuppose either the outcome or the impact this litigation would have on our business," said Mike Snyder, Vonage's chief executive officer. "First and foremost, we are confident we have not infringed on any of Verizon's patents and, in any case, we believe the Verizon patents are invalid."
Snyder continued, "Nevertheless, our financial reserves would allow us to continue normal operations regardless of the outcome. In addition, we are confident that regardless of how this litigation is ultimately decided, Vonage's customers will see no change whatsoever to any aspect of their phone service."
Vonage intends to vigorously fight this frivolous lawsuit and expects to win. The company is confident it will be vindicated and, in the process, Verizon's lawsuit will be exposed as a transparent attempt to stifle one of its most successful competitors.
As the leading provider of broadband telephone services in the U.S. and based on Vonage's current financial position it is well positioned for future growth and success. Vonage's accomplishments in the past year continue to validate our business strategy and the strength of the company. These include:
-- 19 consecutive quarters of double digit revenue growth;
-- Doubled revenues to $607 million in 2006 alone; and
-- Adding nearly 1 million net subscribers and growing.
The conventional wisdom has it that startups like Vonage and 8×8 and SunRocket, et. al. are doomed by the rise of cable-delivered telephony and possibly even Skype and other IM-type offerings. This Verizon suit plays into that narrative. But prior to CES I spoke with Stephan Beckert, an analyst at TeleGeography who said that in fact, Vonage and other independent providers could secure about 40 percent of the market by 2010, and that a 60-40 split between cable/teleco VoIP and independents will be the natural equilibrium of the market.
That’s probably about 4 million-7 million subscribers for the independents by 2010 based on the figures floating around.
In this analysis, there’s room for Vonage and other players, if they can remain financially viable. Stay tuned.
dolly commented:
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PC & can make calls from skype-skype users for a lower
rate,send instant messages,video calls r for free,&the package
includes 12 months of unlimited calls to US and Canada for
$29.95.So grab this opportunity and try out skype.If u want to know
about skype visit www.skype.com.
dolly commented:
mrl commented:
Greg - The operable phrase in your post is "if they can remain
financially viable." Mr. Beckert's point about how much of the
market Vonage might garner by 2010 is moot if the company cannot
find a way to reach financial viability - something Vonage is yet
to show. In fact, even without the impact of losing (or even
fighting) a significant legal battle, Vonage is on thin ice with
regards to its ability to generate cash. By some of their own
underwriter's estimates Vonage will come within $20MM of running
out of cash before reaching cash flow (assuming that they have to
pay their $250MM convert in cash) - it should be noted that those
projections also didn't have any reserve for losing a patent fight
- or even for the legal fees associated with fighting the patent
fight... failing additional Wall St. funding that is awfully thin
margin of error for a company that has missed important projections
in the past (be they line growth projections, churn or cost of
customer acquisition)... Curiously, Mr. Snyder's points you quote
have nothing to do with viability - they are standard dot.com hype.
That VG has been able to grow revenues at a double digit pace or
add subscribers while burning through hundreds of millions of
investor's cash should be no surprise - it is also provides no
evidence of how VG will actually reach stand alone viability to get
to that 2010 date that Mr. Beckert references. Finally, Vonage,
while vociferously claiming that they will be unaffected by the
lawsuit, has yet to explain how they plan to do that. They spent
over $40MM in cash last quarter alone - the company will point to
their $500 million plus in cash as their "cushion" - but the
company also has $250MM in debt due at the end of 2008 for which it
will be required to pay cash - and for which (according to their
S-1 filing) the investors can demand immediate repayment should
Vonage suffer a lawsuit loss (in order to insure that there are no
judgements placed ahead of the debt)... Paying the debt along with
a $197MM judgement would basically wipe out the cash position of
the company...
mrl commented:
