Vonage IPO: Investor Advice

Business Week advises: "Potential investors in the Net calling outfit's IPO would do well to remember that it has yet to make money and it faces tough competition." What an understatement! Unlike ELN and AOL who have partnered with Covad to provide the underlying service if necessary, Vonage, like many of the 1200 VoIP companies, rides on the existing Broadband line. That makes them subject to the BB Providers whims. "Despite that breakneck growth [of 857k in 2003 to 1.6M in March], the company has yet to make money. Losses have swelled steadily with revenue, to the point where Vonage lost $261.3 million last year on sales of $269.2 million." Skype is now offering free calling; VZ has lowered its Voicewing offering to the Vonage rate. AOL, ELN and NetZero have VoIP offerings. More importantly, the cablecos have taken 7M VoIP lines in very little time --- while making $$! Something that Vonage cannot admit to - neither 7M nor making money, since they are spending $221 in advertising per user that signs up. Vonage's IPO paperwork readily admits that it will continue to bleed for the sake of market share. But what is the end game??? Someone buys them for their money losing customer base??? More likely, Vonage eventually dries up and dies, screwing its customers (and making a mess for the DIDs it leaves behind). But then, that's just how I see it happening.