Vonage pulls the trigger – out of desperation?

by Mathew on February 8, 2006 · 6 comments

So VOIP pioneer Vonage has finally pulled the trigger on its much-rumoured IPO, hoping to raise up to $250-million. Over the past year there has been repeated whispering that the company was planning a stock offering – but then the rumours changed their tone, and Vonage was reported to be in talks about being acquired. Then everything went quiet. As Andy Abramson noted almost exactly a year ago, the company has been burning through money at a tremendous rate.

As my Canadian tech-blogging colleague Mark Evans notes in his take on the news the SEC filing from Vonage states the company had revenues of about $174-million (U.S.) in the nine months ended in September, and racked up losses of $189-million or so in that same period . The vast majority of those costs were for marketing, which isn’t surprising given that Vonage has been blanketing the Web and the airwaves over the last year.

Needless to say, that’s not a terribly attractive business model – which implies that founder Jeffrey Citron (who also founded online stock-trading firm Datek Online, which he later sold) – has gotten a little desperate about his ability to cash out his significant investment in the company. And he might be right to feel a little desperate, considering the fact that VOIP from cable companies, Skype and other forces – including a possible Google VOIP offering – is turning up the heat.

According to a recent survey by Sandvine, the share of VOIP minutes that broadband providers control has gone from 18 per cent last year to 53 per cent, while Vonage has 22 per cent. Good luck with that IPO, Vonage. At least Jeff Pulver might get a little something out of it.

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