Monday, May 22, 2006

Tomorrow is V-Day - Vonage's IPO

It's Victoria Day here in Canada, and I'm quasi-working. However, there are two things very much on my mind today that I need to post about, if not just in passing.

1. Tomorrow is Vonage's IPO. Predictions, anyone?

2. Tonight, the Yankees are at Fenway again, as the battle for first place continues.

I'm just going to muse about Vonage here. The blogosphere has been quiet about this today, and maybe it's just a non-event, esp for those in-the-know. I did a story with Reuters earlier today about the IPO, and it's just run now. Kudos to them for looking at the story before the IPO launches tomorrow. I would have thought there would be a lot guessing/wagering as to where the pricing will fall.

The other day, I commented about Vonage's IPO roadshow, and building on this, I think their IPO IS an important event. Tomorrow, of course, I suspect the media will be all over this, and I hope to hear from some of them, regardless of how my prediction turns out!

I'm not much of a stock picker, but my guess is that the IPO will be well received, and the opening price will spike in the area of 25% to 50%. Keep in mind, existing Vonage subscribers are already entitled to shares, so that's 1.7 million people who don't have to rush to be first in line.

There are a lot of pros and cons to Vonage, and it really could go either way. However, with such a dearth of IPOs in the VoIP market, the huge premium Skype garnered from the eBay deal, and the recent consolidation moves by big name carriers, I think there are enough positives here to warrant a good offering. There simply aren't many places for investors to put their money into VoIP, especially for pureplay exposure to this exploding market.

If Vonage has done one thing very well, it's build a brand. They are the Kleenex of VoIP, and nobody comes close. The company is far from perfect, and short-term, is a basket case financially - HOWEVER - if they execute well, stick to their plan, and find a way to add value to what is rapidly becoming a commodity item, they can make this work.

I think a lot of this lies on where you believe the market is going. If you believe that there's still a strong market for using landline telephony (which there is), then there's plenty of room for Vonage to grow. Maybe not forever, but at least 5 years.

On the other hand, if you believe landline is so Voice 1.0, and the future totally belongs to PC-based telephony, then Vonage is toast, and Skype will - or may - inherit the earth. Of course, the latter is where Google/AIM/Yahoo/MSN all think the world is going, and if you're under 25, that's probably true.

Of course, both hold true, and that's why I think Vonage will do ok tomorrow. Longer term is harder to tell, and all the recent moves by AIM, Verizon, Yahoo/AT&T, Comcast, etc. will do nothing but make life harder for Vonage. But that's not our concern for tomorrow - one day a time.

Bottom line, whether you care for Vonage - or not - it is in the interests of the entire IP communications sector for their IPO to succeed. There is an awful lot of money looking for homes in this market, but until there is some track record of IPO success, that money will stay away. Several companies who entered this space around 2000 are primed for IPO - they've survived a downturn, and have matured to the point where they're ready for IPO. One could argue that if Vonage can't make it work , then nobody can. So for all of those IPOs-in-waiting out there, I'd say let's all hope things go well tomorrow!

Technorati tags: , , ,

No comments: