IP Pulse on Vonage IPO

IP Pulse: Vonage filed a $250 million IPO with the SEC last month, after unsuccessfully trying to find a buyer willing to pay $2 billion for its consumer VoIP operations. The company considered a $600 million IPO but adjusted the IPO down before filing. As part of the move, Jeff Citron switched job titles to chairman and chief strategist, and Mike Snyder stepped in as CEO. Although Citron is the company founder and holds a 41% stake in the company, he brings in baggage, especially for a 35-year old. In 2003, he paid $22.5 million to settle charges from the SEC that he engaged in improper trading while a chief executive at Datek Online Holdings. Snyder's nose isn't altogether clean. He was president of ADT, while the company was involved in a $2 billion accounting scandal involving Tyco. Snyder came out of the company unscathed but ADT's CEO and CFO both were convicted of criminal conduct. In the filing, Vonage claims that it generated $174 million in revenues and a loss of $189.6 million. The service provider stated that it spent $232.4 million in marketing during 2004 and the first three quarters of 2005 and has plans to increase spending. Based on '05 marketing expenses, the company spent $213.77 for each new customer. The filing included the ominous declaration that "you should expect us to continue to generate net losses for the unforseeable future." At the end of February, Vonage reported that its customer base grew to exceed 1.5 million subscribers, making it one of the largest VoIP service providers in North America.