Vonage Holdings Corp. (NYSE: VG) announced this morning that its CEO, Michael Snyder, had resigned. To replace him, Vonage is bringing back Jeffrey Citron who was barred from the securities business [subscription] due to actions he took at Datek.
But Vonage's sleaze goes beyond its executives. It stole its core technology. After all, in March, a court found that Vonage violated Verizon Communications Inc.'s (NYSE: VZ) patents on VG's core technology. Its service is notoriously unreliable. I called a friend who has Vonage and our call kept getting interrupted. But it still forks over its dwindling cash reserves for TV ads talking about how wonderful it is.
Bain Capital -- which owned 8% of VG after a $200 million investment -- foisted VG on the public in May 2006 at $17.25. Since then, VG has collapsed by 83% and it has used its patent litigation problems as an excuse not to file its 10K. But in the nine months ending last September, VG lost $221 million and had $154 million in cash -- thanks to a $495 million stock sale. These practices do not add to Vonage's already ailing reputation.
If the public decides not to buy more of its stock, VG will run through its remaining cash in under a year. It announced $140 million in cost cuts today -- $110 million lower marketing expense and $30 million less in general and administrative costs.
If I owned VG or subscribed to its service, I'd dump them both.
Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Verizon or Vonage.
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Reader Comments (Page 1 of 1)
4-12-2007 @ 11:43AM
Ed G said...
A friend works for Vonage. This morning he and 299 others were given the pink slip.
4-12-2007 @ 4:15PM
R. Pickard said...
I have had vonage since early 2005 and have never had one problem with its reception or ability to
receive and make calls. I have had more problems with Bell South (Now A T & T) during that time.
4-12-2007 @ 7:58PM
wilfred rowlette said...
Someone made a statement about how bad vontage reception is whne talking. I have Vontage and have had very good service and very pleased with the service and the people that run the business. I had Verizon and I can say that this is the worst company that I have ever had dealings with in 50 years that i have been dealing with public utilities. I retired from a public utility company after 35 yrs, and if I had treated my customers like Verizon treats their customers,I would ahve been fired the first week I worked there. I have been on the phone for over 2 hrs,,That is over 120 minutes, trying to get the billing strait and my accounts strait with them. You can never call back and talk to the same reppersenative that you spoke to the first time,,,you have to start all over from the beginning again..It is a shame that the state of Virginia lets this company get by with treating the customers the way they do. It took me about 6 months to have my phone number transferred to the Vontage Company, They get very disturbed when you quit them and go with another company. I still have DSL with Verizon and the only reason that I had that is there is no other company in this area that I can get high speed internet at a reasonanble price.VERIZON has got to be the worst telephone company that is allowed to do businesss in the USA. Verizon sucks?????
4-12-2007 @ 7:47PM
wilfred rowlette said...
IF YOU THINK VONTAGE IS SLEAZY...YOU SHOULD TRY ""VERIZON""" THERE IS NO COMPARISON TO THE TWO COMPANIES. I HAVE USED BOTH SERVICES AND THERE IS NO COMPARRISON TO THESE TWO COMPANIES. ""VERIZON "" SHOULD BE RUN OUT OF THE USA FOR THE WAY THEY TREAT CUSTOMERS. I WOULD GIVE ANYTHING TO HAVE ALL OF MY RECORDS PULLED OUT AND GONE OVER WITH BY THE STATE CORPERATION COMMISSION SINCE I HAVE HAD SERVICE WITH VERIZON THAT STARTED IN JULY 2006.. I HAVE BEEN ON THE PHONE WITH VERIZON FOR HOURS AT A TIME TRYING TO GET BILLING AND ACCOUNTS STRAIT. """VERIZON""" SHOULD BE TARED AND FEATHERED AND RUN OUT OF BUSINESS. i would sure like to hear some other openions of other suctomers of "VERIZON " AND HAVE THEIR PERSONAL VIEWS OF VERIZON.
4-13-2007 @ 12:33PM
Patrick Smith said...
Vonage sleazy? Well, I used vonage for quite some time, and as a phone service, they were excellent. The customer service was awesome, and the features I got for the price blew any other competitor, including Verizon, right out of the water...and NO extra charges...ever!
4-14-2007 @ 10:33PM
Scott Wilson said...
I had Vonage for 6 months and dumped it.Constant problems with the service and tech support who were useless. Switched back to Verizon and have had nothing but great service and reliability.