In his piece entitled Vonage and its Weather Vane Moment, TheStreet.com editorial contributor Kevin Kelleher writes:
Vonage had little choice but to try for an IPO after eBay (EBAY:Nasdaq) bought Skype for a mouthwatering $2.6 billion. Yet its IPO could quietly die on the vine, as did Buy.com's public-market dreams late last year. Or it could sneak past the IPO censors and get a chance to sink or swim on its own merits as the VoIP saga plays out.
Look closely, though, and the preponderance of evidence that Vonage has offered so far says it will sink.
Kelleher's main argument is that Vonage's technology is "being copied by the Bells and being surpassed by Skype."
That ties in with my argument that Vonage is bound to feel pressure from the triple and quadruple-play bundled offerings of their cable and telecom rivals who are also getting into VoIP, and from the IM providers who are building out their own, free or very inexpensive, VoIP services of their own.
Oh, but Kelleher is just getting started. He seems to have an issue with new Vonage CEO Mike Snyder's previous place of employment, as president of Tyco subsidiary ADT Security.
Kelleher notes that according to The Wall Street Journal, ADT "was the major contributor to accounting errors at Tyco that totaled $2 billion." "Of course, Snyder wasn't implicated in any wrongdoing at Tyco," Kelleher writes, "but somehow that's scarier: The unit he managed toppled a corporate giant -- and he had nothing to do with it. Can that be called management?"
In other words, Kelleher seems to be saying that if Snyder was not hands-on enough to know about the accounting errors, his executive and financial management ability is questionable.
Kelleher then makes the case that if nothing else, Vonage's financial situation will call for a seasoned hand at the rudder. He cites the following language in Vonage's IPO prospectus:
"We may need to seek additional funding by accessing the equity or debt capital markets. Reasonable enough, but wait: "Our significant losses to date may prevent us from obtaining additional funds on favorable terms or at all ... We do not fit traditional credit lending criteria ... the terms of our senior unsecured convertible notes contain significant restrictions on our ability to raise additional capital."
But despite what Kelleher sees as a bunch of red flags, he does hold out hope for the Vonage IPO. He articulates the hope with colorful and sarcastic language:
"We all know that, on Wall Street if nowhere else, sobriety isn't permanent. If the institutional investors decide it's been a long time since it rock-'n'-rolled at a Bacchanalian orgy (as sordid and bloody as that last one turned out) this IPO will get the OK," Kelleher writes."And then it will be up to Vonage to keep the wine flowing."