Vonage New All-Time Lows, Again (VG)

Vonage Holdings Inc. (NYSE:VG) is trading as though it should be named Vonage Slippings.  The company has put in 52-week and all-time lows for what looks like may end up being the third day in a row if these levels hold.  Shares closed under $3.00 again last week and haven’t been able to see $3.00 since, with shares down more than another 5% at $2.61 mid-day.

The sad part is that the earnings for the June 30 quarter are not out until August 9, 2007.  That means there may be a news vacuum if the company doesn’t have any new material information.  It seems that shares have been weak since the new Ooma free phone was brought out recently, and the closure of competitor SunRocket hasn’t seemed to yield any significant ‘investor hopes’ for new subscribers that would have hoped some of those 200,000 (said to be) users would instantly migrate.

If the company doesn’t issue any news between now and then, that leaves more than two weeks before we know what the quarter looked like and what the subscriber guidance will be.  Last quarter the company saw a 0.1% sequential churn rise to 2.4% and marketing expenses were 46% of revenue at $91 million, with average marketing costs per gross subscriber line running $273 (down from $306 the prior quarter).  Its marketing budget for 2007 was noted as $310 million.  Vonage also ended last quarter with $410 million in cash and equivalents (before the $66 million surety bond ruling and 5.5% royalty revenue ruling)….. The company also noted that the ruling will keep it from commenting on any prior financial guidance.

Of the analysts that cover the VoIP provider, there are no positive ratings on the stock.  The literary Dr. Pangloss might still be positive, but even he would admit that his call would be quite contrarian if he really existed.

Jon C. Ogg
July 23, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.