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Vonage: Bullish or Bearish?

Vonage
First, the good news from Vonage’s fourth-quarter results: the VoIP service provider now has 2.22 million subscribers after it add another 166,000 customers in the quarter. Meanwhile, it only lost $65-million as revenue nearly doubled from a year earlier.

Now, the bad news: the stock tumbled to a record low, $5.25, amid concerns subscriber growth slowing. Vonage said it expects to have between 2.9-million to 3.1 million customers by the end of this year, compared with analyst expectations about about 3.5 million. The company also expects to lose $150-million to $170-million this year before becoming profitable in early-2008.

So what do you focus on: the good news or bad news? The narrower loss in the quarter or the concerns about subscriber growth? There’s no doubt the competitive landscape is getting more intense as the cablecos and, increasingly, the carriers become more aggressive. Then, you’ve got players such as SunRocket and 8×8. That said, Vonage has 2.2 million customers so it can’t be dismissed. The question is whether Vonage can continue to see strong enough growth to become profitable, establish a solid competitive foothold, and get investors excited again about a stock that has tumbled from its IPO price of $17.

For more, check out AOL Money & Finance; Russell Shaw, who is troubled by the subscriber slowdown, including soft sales during the holidays, and Larry Dignan, who wonders if Vonage has a future, and looks at a possible takeover (current price: $836-million) given the company’s depressed stock price.

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  • Lats

    Definitely Bearish….I’d love to see their churn numbers. I am sure they are adding new customers since they are marketing like the new Coke… but everyone I know that has Vonage is going crazy with the service.
    My experience (I have it at home and at the office) with their service has been not so good….service being the call stability and quality as well as the client service which seems to be restricted to “phone and wait on hold until one of our reps has time to not help you”. Things have been okay the past three weeks so I am staying on board for now but I won’t be interested in buying their stock until I can go a few of months with solid service.

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