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The fat lady stopped singing before she even got on stage.

Shares of internet phone service provider Vonage (NYSE:VG) sank like a stone in their trading debut Wednesday after pricing late Tuesday at $17 a share. This is no surprise, considering that the last few weeks have been nothing but a bad press fest for Vonage. In fact, there were several sell ratings on the stock before shares began trading; you don't see this often, although in an ideal world we would.

The meat and potatoes: Vonage lost $261 million in 2005 on revenue of $269 million. Vonage's sales have been falling, but costs per subscriber have been on the rise. It is a business rife with competition: Cable companies are signing up their customers to VoIP as part of their triple-play platform (data, cable, voice). VoiP rival Skype has already introduced steeply lower prices. Even Google entered the business. If Microsoft couldn't beat Google, do you think Vonage will?

But let's not pin everything on Vonage: The investment bankers really screwed up here -- they should've priced the IPO lower, maybe at $10 or $12 -- this would've lowered the amount they netted in fees, but the stock would've looked better. For all the talk we hear about bankers manipulating stocks, they let this one get away.

VG Wednesday May 24 2006