Some investors just can't pull the trigger when it comes to picking a stock. Others ride stocks all the way into the ground because they're emotionally attached to the company's story, products, or management. Vonage (NYSE: VG) shareholders have seen their investment drop 89% since its IPO two years ago. Ouch.
The reason for the precipitous decline in valuation is simple: The company has failed to perform up to investor expectations. The most obvious symptom is that revenue growth has been slower than expected while losses have continued to increase. But I could also note that its current cash position is significantly less than its trailing 12 month (ttm) loss, it has a negative book value, and it is currently trading below its 50-day AND its 200-day moving average. With a share price flirting with one measly dollar (it's actually traded as low as .89 cents), what kind of reception do you think VG will get from Wall Street when it goes out, hat in hand, to raise yet more money - which will likely happen in the very near future when they run out of dough.
And then let's talk about the service. I have been a Vonage customer (yes, I am a current customer) for over 3 years. I began using Vonage for 2 reasons: 1) it was the only way to maintain my direct office phone # when I moved my office to my home in '05. The number I have - which I'd had for nearly 20 years - could not be moved to my location by traditional or cable-based phone service providers. But since Vonage provides "soft" numbers that allow callers to dial a number that is in essence forwarded to another number seemlessly, I could keep my number at no extra cost (all other alternatives I could find involved a stiff monthly fee to accomplish this). 2) Vonage is cheap! Yes - that was a huge selling point. And it makes it really tough to leave especially since there are VERY few alternatives that come even close to the $30 to $40 per month - all-you-can-eat Vonage plan.
Vonage provides consistently poor to mediocre service. That's the best I can say about it. For a heavy user running a business and doing dozens of 2-way conference calls daily, phrases like "we've been Vonaged" or "Vonaged again!" tend to work their way into your everyday vocabulary. Without exception, every other Vonage user that I have spoken with reports the same crappy service. But they, like me, lack an alternative at a similar price point. So, how long will Vonage survive? Until a true competitor comes along with a better service at a similar price. It appears that it won't be Skype (the quality seems good but it's way too expensive). And it won't be the new MagicJack (it's application is limited to use with a computer and you can't use the computer for other stuff while you're on the "phone." AND Vonage already has the same USB-port solution called V phone.)
