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VoIP Systems

Vonage Growth Slows, Losses Narrow

Vonage Holdings Corp. (NYSE: VG) lost a lot less during the second quarter after making significant cost cuts, particularly in marketing and advertising. (See Vonage Reports Q2.)

Vonage lost $34 million, or 22 cents a share, on revenues of $206 million. In the same quarter last year, the company lost $74 million on revenues of $144 million. There is no EPS data for 2006 because Vonage was still a private company.

The losses were much lower than projections from analysts polled by Thomson Financial , who were expecting a loss of 34 cents per share. Revenues however, fell short of expectations.

But with the cutback in marketing has come a slowdown in subscriber growth. Vonage added only 57,000 new subscribers in the second quarter, which is down sequentially from 166,000 in the previous quarter. Even still, the company is spending more on marketing per customer addition, $287, compared to last year's second quarter when the number was $273.

Vonage attributes some of the decline in subscribers to the bad press surrounding its pending litigation with Verizon Communications Inc. (NYSE: VZ). [Ed. note: Sure, blame the media.] That patent dispute case, which Vonage lost to Verizon back in March, has been heard by a U.S. Appeals Court and is awaiting a decision that could come any day.

Vonage shares are hovering around $2.25 now. A year ago, the company's stock was around $6.81, a 67 percent drop in value in just 12 months. [Ed. note: Probably the media's fault, too.]

— Raymond McConville, Reporter, Light Reading

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