Vonage Takes Step Toward Recovery
This development is an important step in the VOIP service provider’s financial recovery. Vonage’s debt is set to mature on Dec. 18, 2008, and it will not be able to make good on it without any refinancing. Investors and analysts have been cautious about the company for this reason and have been skeptical of whether or not it will obtain the necessary refinancing.
But the dark debt cloud above Vonage has not yet cleared. “We still don’t know the terms of the agreement yet,” says Stanford Financial Group analyst Clayton Moran. “Any positive stock reaction will be determined by the terms, which could be quite onerous. We’re still maintaining caution.”
For the past few quarters, Vonage has been sniffing at profitability as it has managed to lower costs and narrow its losses. (See Vonage Posts Q3 Loss, Settles With AT&T.) But the debt it accumulated mostly due to its legal troubles with Verizon Communications Inc. (NYSE: VZ), AT&T Inc. (NYSE: T), and Sprint Corp. (NYSE: S) could still permanently cripple the company. (See Vonage Settles More Patent Disputes, Vonage Sued Again, and Vonage Settles With Verizon.)
Vonage will still have to address other concerns such as its high churn rate and poor customer service. Investors are encouraged in the meantime, as Vonage’s stock has opened up $0.17 (9.39 percent) to $1.98 on the New York Stock Exchange (NYSE) .
— Raymond McConville, Reporter, Light Reading