Vonage (VG)

[Cellme]

I saw this on the SiliconInvestor. Just thought it would be good to put it here too.


This question was asked on the Yahoo board

"""What price should I bid for this stock on open on Monday ? """

A very interesting question!

If you are a buy and hold, I will have to say market price!

Why? - Not because it would be necessarily be the lowest price short term - although it could very well be.

No, you have to look back and see what has happened here, and then look ahead and see what is going to happen!

**
THE PAST:

Vonage, with no earnings, losing money, came out as an IPO for a ridiculous PPS of $17 and was immediately blasted down by shorts.

Sprint, Verizon, and ATT sued Vonage for patent infringement, trying in the case of Sprint, to shut the company down.

It was a Short/trader heyday! PPS was pushed down to under $1. Shorts, traders, and MM's were all represented on the Yahoo board, name calling, attacking other posters, fear mongering, speading FUD - just waiting for the day that VG went under!

Analysts downgraded.

The Press/ Media made sure the words "troubled" "faltering" in any article they printed, and quoted dubious sources to further the image - many still do! Poor lazy jounalism.

BUT, during these troubled times, Vonage continued double digit growth in customers and revenue

**
THE TURNAROUND:

In October, VG announced the first Lawsuit settlement and during the next 4 months, they settled all the major suits that threatened their existence.

BEAR STEARNS UPGRADED

This came at a price, much cash was used, and it became apparent that their debt would have to be refinanced.

Of course our negative posters said it couldn't be done, although the debt was only 1/3 the annual revenues - Less than the yearly marketing expenses alone, - a much lower ratio than most other competitors.

With the news Friday, it has become very clear that the debt refinance is doable and will be completed soon!

The negative posters will tell you the opposite, but I have to point out that..

CITI UPGRADED..

on the news. It is my belief, they probably were involved in helping set up the refinance.

THE MAJOR PROBLEMS / THAT HAVE PUSHED VONAGE TO A WAY UNDERVALUED SITUATION ARE GONE!!!

ANYBODY that tells you different, are living in
the past or haven't re-ascessed the situation.

**
THE PRESENT

The company is CASH FLOW POSITIVE - they just reported in the 8k, they still have the same amount of Cash on March 31st as they had December 31st. $190 million

Since the IPO they have doubled customers and revenue. 2.6 million customers - $828 million 2007 revenue. $900+ predicted 2008 revenue, $1 billion 2009 revenue predicted.

There are NO HUGE ONE TIME CHARGES that plagued the company, settling the lawsuits, last year, evident on the horizon.

Positive adjusted operating income, in the 4th quarter 2007!!

http://www.acronet.net/~dgroves0/posadjincome.JPG

http://www.acronet.net/~dgroves0/posiadjincome.JPG

Selling at Price/Sales (ttm): 0.34, when the competitors, are selling between 1x and 2x!

**
THE FUTURE:

The major problems have been solved!

Cash Flow Positive.

PPS has been pushed down to a level of a company not expected to survive.

Double Digit Growth.

New services and Products.

On the edge of GAAP profitability

Takeover canidate

1X sales = $5.50

You can listen to the negative posters, and go elsewhere, but why are they here??

Or you can wonder why PPS is so low after all the problems the bashers complained about are solved. Wonder why it has received 2 upgrades?

If you are reading this, you know the NEGATIVES THAT PUSHED THIS SO LOW ARE GONE, and the positives will now assert themselves!

MARKET PRICE MONDAY WILL BE A LOT LOWER THAN PPS 3 MONTHS FROM NOW!

Dave