Tuesday, April 06, 2010

Calling 411 on Vonage

Speculators: The Stock Price of Vonage Might Double

In the coming year there is the potential of a Vonage (VG) takeover. But over the last quarter many exciting developments have occurred at VG. It's the recent developments that might lead to the rising stock price.

For example:

Release of Apple iPad - On March 19, 2010, VG announced the grant of a virtual phone number patent. The patent - titled Method and Apparatus for Placing a Long Distance Call Based on a Virtual Phone Number - allows consumers to communicate with distant locations without incurring long distance or international calling charges. This is a second patent to a critical development that broadened VG’s customer base at the time of the release of the iPad.

Apple (APPL) and AT&T (T) agreed to ban apps that would let iPhone users make phone calls using the 3G data connection to prevent cutting into T’s profits. That agreement was revealed in summer of 2009 when the FCC asked AAPL and T to explain why Google’s (GOOG) Voice app was rejected from the iPhone store.

After the FCC announced it was planning to extend internet openness rules to mobile networks, T in October 2009 announced it would extend VOIP to 3G networks for the iPhone. It appears that T’s policy change is coming into effect. VG’s App Store was approved by Apple in September, 2009 and VG’s service is currently available on the iPhone. And, because the iPad has a microphone and runs iPhone Apps, VG will certainly be available on the iPad.

Success of Introductory $14.99 Promotion for 6 months

– Yesterday, a representative of Vonage indicated the promotion has “greatly exceeded expectations.” This is exciting news for VG, especially at a time when the landscape of cellular is changing to enable VOIP apps, signaling a new era for companies such as VG. As cellular networks are becoming faster, the quality and lure of VOIP is increasing as an alternative or supplement to cellular. Additionally, Intel (INTC) and other partners (Samsung, Nokia (NOK) etc.) have been developing WiMax, which would broaden the VOIP market even further. Some research reports estimate that VG will go to $4.00 in 2010.

Evidence that Vonage has a sustainable business model – As we have witnessed in VG’s earnings release, they beat analyst’s estimates for the second consecutive quarter. Not only has VG been luring customers from the traditional land line-based services, but now they are rapidly entering into the cellular market. This increases the likelihood of a takeover of VG. I would expect that cellular providers and traditional phone companies would be interested in VG.

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2 Comments:

Blogger Investor said...

I have heard this hype and optimism about buyout of vonage and all the things about stock will double...I don't buy that. I believe that Vonage has still a long way for that and morever the most of the investor in Vonage are day traders...when they make 15-20% they get take profits and get out...only when Vonage does the reverse split say 10:1 or 20:1..then they can hope of doing better. Untill its a penny share...no substancial gain can be expected

11:27 PM  
Blogger no_slappz said...

Investor,

Usually fallen companies like Vonage are of little interest to me. But, in the case of Vonage, its customer list has value and the Voip side of telephony is growing. Thus, there is some reason for optimism here.

For a long time cable TV companies produced nothing but huge losses. However, it was clear that eventually the winners in the game would be the firms with the customers.

Same story for Cell Phone companies. It's all about getting subscribers, and it is easier to buy another company than pirate the other company's subscribers.

The only real question is price.

Meanwhile, if you want a stock in a more stable company with interesting prospects and a huge dividend, go for Pitney Bowes -- PBI.

9:48 AM  

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