No Future for Vonage

Aug. 6.09 | About: Vonage Holdings (VG)

What is Vonage (NYSE:VG) doing with a NYSE listing? It’s been trading at under a buck a share since last December — and it received a delisting notice as long ago as October 2008. Somehow, it managed to persuade the NYSE not to delist it in April, but it’s very unclear how. The stock has been languishing at about 40 cents since February, it’s lucky to get one analyst asking questions on its conference calls, and — this is my favorite datapoint — according to its latest results, its book value is negative to the tune of more than $108 million: the company has $334 million in assets, and $442 million in liabilities. Net income of $1 million in the most recent quarter (or $0.01 per share) isn’t going to make much of a dent in that.

I signed up for Vonage service in April 2003, so I’m a customer of long standing. There have been rocky periods along the way, especially as regards voice quality, but the thing which strikes me most is the fact that back then, when I signed up, the standard residential calling plan was $25.99 a month. Over the intervening six years, Vonage has faced huge competition, not only from triple-play packages and from Skype and Google Voice and the like, but also from people simply giving up land lines altogether for their cellphones. That has helped to push prices down, even as significant technological advances have helped to pull prices down. Today, the price of the standard calling plan has plunged all the way to… $24.99 a month.

I have too many phone numbers: my home phone (Vonage), my work phone, my iPhone, and my BlackBerry. And that’s not including my Skype and iChat accounts. I have more access to more telecommunications capability than I really know what to do with, especially since increasingly I communicate not by voice but rather by Twitter (when it’s up) and IM. Vonage isn’t really saving me money any more: it’s just an extra cost every month which I have increasing difficulty justifying.

I like having a home phone, I don’t particularly want to give up my home phone number, and through sheer inertia I’m likely to keep my Vonage account for the time being. But it’s hard to see much of a future for Vonage itself. The stock market has long since worked this out. Why hasn’t the NYSE?

(see Vonage earnings call transcript)