Vonage: More Fuel Please!

3:00 PM -- Wall Street has been saying that in the new IPO market, you need profitability to sell shares to the public.

Vonage Holdings Corp. (NYSE: VG), which filed for IPO this week, plans to test that concept in the extreme. (See Vonage Files for $250M IPO and High Flyin' Vonage.)

I started reading the Vonage S-1 filing but got stuck on the first "Risk Factor":

    We have incurred losses since our inception, and we expect to continue to incur losses in the future. For the period from our inception through September 30, 2005, our cumulative net loss was $310.0 million. Our quarterly net losses generally have increased each quarter from our inception through the quarter ended September 30, 2005, for which our net loss was $66.0 million. Initially, our net losses were driven principally by start-up costs and the costs of developing our technology. More recently, our net losses have been driven principally by marketing expense, which was $176.3 million for the first nine months of 2005.
Not only is Vonage losing money, but its losses have been increasing. Hmm. Makes you wonder how this company is going to go public in the new "conservative" IPO market.

— R. Scott Raynovich, Editor in Chief, Light Reading

paolo.franzoi 12/5/2012 | 4:06:41 AM
re: Vonage: More Fuel Please!

Actually, the whole thing makes one wonder about $2.5B for Skype. Don't it?

And having negative margins don't get made better in volume.

Scott Raynovich 12/5/2012 | 4:06:39 AM
re: Vonage: More Fuel Please! I have not found anybody that can explain to me the pricing on the Skype deal.

And I really don't understand the Vonage business model.
Scott Raynovich 12/5/2012 | 4:06:38 AM
re: Vonage: More Fuel Please! Good point. We need to look into this. It is a strange time when you have tech companies with $10+B on the balance sheet going to raise debt.
paolo.franzoi 12/5/2012 | 4:06:38 AM
re: Vonage: More Fuel Please!
Just another completely unrelated question....

Did you see Cisco take on $5.5B worth of debt for what it says is S-A and other stuff?
From the Reuters article:

Cisco could have paid cash for Scientific-Atlanta but would have had to repatriate cash from overseas, incurring a hefty tax bill, said Standard & Poor's analyst Bruce Hyman.

"Paying a fairly low interest rate on the bonds issued in the U.S. while earning interest at a decent level on cash overseas means the net cost to Cisco is not onerous," he said.

At the end of the day, they are just deferring the tax liability unless they are planning to spend it overseas. Does this not raise some issues with the value of the cash on Cisco's and Microsoft's balance sheets?

Spondon 12/5/2012 | 4:06:24 AM
re: Vonage: More Fuel Please! I'd rather invest in meatballs and sausage from My favorate Jersey Shore Italian Eatery than sink money in this IPO........I like the garlic taste to verify my money doesn't waste. Will they ever reveal their cost per subscribe acquisition to investors? Doubt it!!

I heard one theory that the Skype purchase was attractive because of the millions Skype of users in Asia and eBay wanted to market to that Skype user base to enter into that market......Still the Billion Dollar price tag makes no sense.........I think this was Bob Metcalf's theory and he wasn't really sure either.........
Scott Raynovich 12/5/2012 | 4:06:16 AM
re: Vonage: More Fuel Please! >I'd rather invest in meatballs and sausage from >My favorate Jersey Shore Italian Eatery than >sink money in this IPO

Do you have any solid recommendations on Jersey Shore eateries?
Spondon 12/5/2012 | 4:06:14 AM
re: Vonage: More Fuel Please! Hey Scott!!
Nice to hear from you.......My favorate Jersey Shore Italian Eatery is Piancone's on Main Street in Bradley Beach.
I usually don't eat suace made by other places but their sauce is my exception......I pick up like a gallon of it :-)_~~~~
If you are down at the shore send me an email and I'll show you around......bring friends.....
My contact information is in Light Reeading's
contact list. I'm the only Spondon.......
Scott Raynovich 12/5/2012 | 4:06:13 AM
re: Vonage: More Fuel Please! thanks!
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