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Vonage gets closer to getting knocked-out
A judge today prohibited Vonage from signing up any new customers until it has ceased violating 5 patents owned by Verizon. Given that 2.5 per cent of Vonage customers run away from the service each month, the latest order is essentially a death sentence.
Vonage got a stay of execution within hours of the first ruling, as the company convinced an appeals court to temporarily lift the earlier ban. But put the emphasis on temporarily.
The VoIP provider already has to pay $58m in damages because of the case, has to spend increasingly more on marketing to lure in new customers and has yet another patent suit that will hit the courts this September, it would be safe to say that the desperation level must be rising.
Vonage last May underwent a disastrous IPO. It stock price currently trades at about $3.37 (down from $17 at the time of the IPO) and the company has a market capitalization of $522m. Based on its earnings of $372.71 for all of 2006, Vonage currently would have a price/earnings ratio of 1.40. (a p/e ratio however requires 4 quarters of data. Vonage has only been listed for the past 3 quarters).
P/E ratios are a strong indicator of investor confidence and normally run in the double digits: Microsoft's is 23.79; Google's 47.44 and Cisco's 29.28. Even a troubled company like Telecom Italia is still trading at a P/E ratio of 16.09.
Signs from the investment community don't come any clearer. This company need a miracle to survive.
April 6, 2007 at 09:04 PM | Permalink
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