Vonage, which started out in the public markets as a company with a $17 a share IPO valuation, has been in the "sevens" for several weeks now.
Right now, it doesn't appear that the company's stock will go much lower or higher in the short term. For at least the near-term and perhaps beyond, $6.50 is probably the floor and $8.50 is most likely the ceiling.
I do sense a trajectory toward more targeted marketing spending, but I don't pick up any buzz that a major strategic move is on the immediate horizon.
But at the same time I have to ask myself how long these doldrums can - or will be permitted to- continue.
Thinking through this issue, I see several possible resolutions. Vonage could:
Continue on its course- Cut burn rate, somehow continue subscriber acquisition gains, keep the patient alive for years.
File Chapter 11 or worse- Backers freak as red ink continues and shareholder lawsuits go bad. Vonage seeks bankruptcy protection.
Go private, with significant equity investment- Private equity is flush with cash these days. Entirely possible for Vonage to get an offer they can't refuse. Private equity pays disappointed shareholders a premium, boots out much of current management, cuts down on marketing, pursues other cost-cutting measures with eye toward potential flipping (i.e. selling) of company.
Be acquired by a major telco- I still think that SprintNextel- the largest telco without an in-house VoIP presence- would be the most logical acquirer. Yet two things need to happen first. SprintNextel needs to consummate their own merger. Then, SprintNextel needs to get out of the penny-wise, pound-foolish mindset that they can get into the VoIP world via a series of jackleg partnerships that do not offer the scope of options an acquisition of a fully formed VoIP company with two million subscribers could promise.
Be acquired by a major cable company- Probably the least likely. Comcast has their Digital Voice, and Time Warner Cable (as well as AOL) also has their offerings.
Be acquired by Yahoo!- Yahoo! Messenger is diligently chasing the Internet phone market. Yahoo!, which is searching for acquisitions, could use Vonage as the beef behind their Internet phone services. Vonage could be the ATA component and what is now Yahoo! Messenger could be tweaked to be the softphone and IM component of such a service.
Build their own triple play- Vonage could cast about for softphone and IM platform alliance or acquisition opportunities, as well as buy or ally with alternate-path Internet access companies. Make no mistake about it. This is a time-consuming, brick-by-brick approach, but given the abilities of Vonage's many competitors to present prospective subscribers with triple or quadruple play service options, Vonage should at least think about this route.
Then again, there could be an eighth alternative in Vonage's future.
What do you think?
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