More bad news for VoIP industry

Kevin Kelly — Thu, 19 Jul 2007 10:51:00 EST

Filed under: Bad News, Consumer Experience, Competitive Strategy, Ciena Corp (CIEN), Level 3 Communications (LVLT), Vonage Holdings (VG)

When companies discontinue operations it's one thing, but when a company ceases operations without warning its customers something is fishy. When SunRocket did just this, red flags appeared in my head. Companies don't just close their doors one days for no reason, but it appears that SunRocket did just this:

"At the company's Tysons Corner headquarters, the phones went unanswered, the doors were locked and a cardboard sign with "Out of Business" scribbled on it hung inside the glass front door."

Obviously consumers who used the company's services were out of luck for the day, but it didn't stop there. In fact, many of these consumers paid for their services well in advance.

Although this seems like an isolated event, it casts further doubt on the entire VoIP industry. As a result, the primary VoIP provider in America, Vonage (NYSE: VG) is likely to lose some (more?) credibility. That being said, for many consumers the benefits VoIP offers over traditional phonelines are powerful enough to let them "roll the dice" once again. Some followers of this space who I spoke to are going as far as to say this could help Vonage because they will gain some of SunRocket's business, but I'm not sure about that and the impact wouldn't be significant because SunRocket's total customer base was about 10% of Vonage's current customer base.

However, if 8x8 (NASDAQ: EGHT) could pick up SunRocket's accounts, the stock would most certainly fly because of its small size - $82 million - and 8.7 short ratio.

Continue reading More bad news for VoIP industry

More bad news for VoIP industry originally appeared on BloggingStocks on Thu, 19 Jul 2007 10:51:00 EST. Please see our terms for use of feeds.

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Sun sets on SunRocket

Tom Taulli — Tue, 17 Jul 2007 11:05:00 EST

Filed under: Bad News, Vonage Holdings (VG)

Over the past couple years, VOIP phone companies have been big spenders for online advertising. It was the right target market - but not cheap. Competitors essentially bid up the prices.

Well, things may moderate. According to a report in the Wall Street Journal [a paid service] and The New York Times, VOIP provider, SunRocket, has shut down its operations.

Funny enough, if you surf the Net, you will still see lots of SunRocket ads. So, I guess the company still needs to take some cleanup actions.

The firm got its start about three years ago and quickly attracted venture capital from firms like Doll Capital Management, BlueRun Ventures and the Mayfield Fund (which, of course, will now have a write off).

Even at that time, things looked dicey for VOIP providers. Vonage Holdings Corp. (NYSE: VG) had a strong presence in the market and there was lots of competition from traditional players, like Verizon Communications Inc. (NYSE: VZ) and AT&T Inc. (NYSE: T). Of course, there was competition from cable players.

What's more, it appears there are outages at SunRocket, which is certainly a big hassle for customers.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Sun sets on SunRocket originally appeared on BloggingStocks on Tue, 17 Jul 2007 11:05:00 EST. Please see our terms for use of feeds.

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