Vonage Banks On IPad After Surviving 33-Cent Stock
Vonage has an application planned for the iPad and can add video and messaging to its service. Photographer: Gary Gardiner/Bloomberg
Vonage Holdings Corp. Chief Executive Officer Marc Lefar, a year after his company’s stock hit a low of 33 cents, said he is looking to devices like Apple Inc.’s iPad to speed the digital phone company’s recovery.
Lefar, 46, took over in 2008 as Vonage was telling investors that patent lawsuits and hundreds of millions in debt threatened to drive it to bankruptcy. Since the March 2009 low, the company’s stock has rebounded to more than $2 and will probably be included in the Russell 3000 index.
Lefar, an AT&T Inc. veteran who helped that company score its exclusive deal for the iPhone, is betting on similar devices to help Vonage grow and has an application planned for the iPad tablet computer. The company also has the ability to add video and messaging to its service, he said in an interview June 18.
“Our legacy is one of replacing the home-phone service and giving it enhanced features,” he said. “We’ve got plenty of additional work to do to get the business growing.”
Lefar also said a software or phone company may seek to combine with Vonage to gain access to its technology. He declined to comment on whether the company is in talks about a partnership or acquisition.
Last month, Vonage hired Amichay Oren as vice president of research and development, tapping into his experience running startups to step up creation of new services. Oren founded the software company Expression Inc., which was acquired by SAP AG.
Russell 3000
Vonage offers phone service over the Web, using voice-over- Internet-Protocol technology. It charges as little as $9.99 a month, competing against larger phone carriers such as AT&T.
Vonage has also branched out to international calls and data-based voice features for mobile phones. Lefar said the company is planning a service that lets family members share a phone number over different devices and locations.
“He has really put them on the smart growth program, because before, they were growing to the point of bankruptcy,” said Roger Entner, an analyst at Nielsen Co. “Hats off. Not a lot of people would have thought that would have happened.”
Vonage said last week it will probably be added to the Russell 3000 stock market index this month. That listing would increase demand for the stock as investors add it to their index funds, said Entner, who is based in Boston.
To become eligible for the Russell index, Vonage had to pull its stock price up to over $1, as the index requires. The company also had been in danger of being delisted from the New York Stock Exchange after its stock fell below $1.
Vonage fell 23 cents to $2.46 at 4:04 p.m. on the New York Stock Exchange.
Reducing Costs
The company, based in Holmdel, New Jersey, reported its first-ever profit in the first quarter of 2009. Net income more than doubled to $14 million in the first quarter of this year.
Lefar invested in customer service to reduce defections and added new products to win customers. He cut marketing spending by 15 percent last year and also slowed hiring.
Lefar took the reins from founder Jeff Citron, who was serving as interim CEO. Citron, who owns about a fifth of Vonage’s shares, had initially chosen Mike Snyder to lead the company. Snyder left shortly after Vonage lost a patent suit to Verizon Communications Inc. that threatened to bar the company from using technology for making calls to standard phones. Patent fights with AT&T and Sprint Nextel Corp. followed.
The Securities and Exchange Commission alleged that Citron, 39, and others participated in a fraudulent use of the Nasdaq Stock Market’s small-order execution system as part of a company called Datek Securities, according to Vonage’s regulatory documents. Citron and his associates settled with the SEC in 2002 and 2003.
‘Out of Steam’
In 2008, Vonage said in a regulatory filing it believed some financial institutions and accounting firms had refused to do business with the company because of Citron’s past.
Vonage still gets the majority of its earnings from home- phone customers, according to Lefar, and competes with larger cable and phone operators that offer subscribers discounted packages of Web and TV service. Vonage’s stock price, after almost doubling this year, is still a fraction of the $17 for which it was first sold to the public in 2006.
“The inherent risk, though, is how long does our industry need standalone voice-over-IP providers. More and more people are cutting their landline,” said Zeus Kerravala, an analyst at Yankee Group in Boston. “There is a risk that they’re going to run out of steam.”
To contact the reporter on this story: Amy Thomson in New York at athomson6@bloomberg.net
Rate this Page