Friday, November 24, 2006


Vonage (VG) sells telephonic services, land line phone plans, using the latest in voice over internet protocal technology (VOIP).

If high speed internet is the way you roll, they'll fix you up with more calling minutes than Abraham has children, and for much less than conventional land lines. Paying less money up front, talking your head off, and never paying a penny more than that less money... that's what Vonage is all about.

Cell phones cause brain cancer.* They're like little microwaves pushed snugly up to our cerebral cortexes.

Normal phone plans cost too much.

When the dust settles in a couple years I'm betting Vonage will come out of the telephonic melee with a good chunk of change in their pockets. I'm literally betting on it. As of three days ago I'm officially invested in their company.

They went public last May or so at $17. Shares are now selling for under $7. Now, sure the company hasn't made a dime in the last three years, but there are reasons for that.

Marketing. I guess that's really the only reason. They spend a lot on marketing. You'd probably recognize the catchy commercial tune they use. It goes something like: woo hoo, woo hoo hoo. Woo hoo, woo hoo hoo. I'm sorry. I'm a little bit tone deaf.

If it weren't for marketing expenses they'd be in the green. For those of you in Los Angeles I mean making a profit not growing marijuana, though growing marijuana would equally turn Vonage into a money maker. However, I don't think the New York Stock Exchange would let me continue buying stock in their company.

At this point the CEO predicts a positive net income beginning early in 2008. I really doubt that Vonage faces any kind of real bankruptcy threat since 1) they could just stop spending their money on marketing, and 2) several of the big wigs in the company have recently been buying millions of dollars of Vonage stock themselves. I'm betting that the stock price will hang around the low seven dollar mark for about six months until the company develops a little more name recognition. At that time it will double and then triple in price back to just above it's IPO price. At that point they'll start turning a good net profit and the stock will double in price again over another year to eighteen months time.

Of course, what if the whole VOIP thing becomes outdated by some new type of telecommunicative technology? I will be out a thousand dollars and the Vonage big wigs will be out a few mil, or 100% and 1% of our net worths respectively.

It wouldn't be the first time I've found gravel in my drinking water from the bottom of the net worth well.

*Maybe not a proven fact.


Blogger Justin said...

I avoided the cell phone for so long, and yet it finally crept up from behind and bit me. I look at it sometimes, at arm's length, wondering.

10:38 PM  
Blogger james t nath said...

Yeah. I used to rage against the dying of the light. The light being everything inefficient and lonely that convenience would snuff out. But now I've resorted to investing in light's death's competitor. Probably a long shot though, at best.

7:08 PM  

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