Vonage, back from the brink

In case you were wondering, Vonage--the VoIP juggernaut of a few years back whose attempt to become the dominant new player in the telecom voice world was beaten back by lawsuits, a weak IPO and massive churn and customer acquisition expenses--is still around.

Not only that, the company whose thunder in the VoIP market may have been usurped more recently by options like MagicJack, just turned its first year-end profit in its 10-year history. Vonage reported net income of about $3 million for the year and about $4 million for the fourth quarter. Operational income, revenue and average revenue per user indicators also are all pointing upward. Meanwhile, the one metric that should always be pointed downward is way down: Customer churn was at its lowest level in more than two years.

Who does Vonage have to thank for all this? Well, the thanks should start with CEO Marc Lefar, a guy who spent time in the executive ranks at the two biggest wireless companies in the nation. Lefar joined Vonage in mid-2008, when the company faced hundreds of millions of dollars in lawsuit costs that added to already mounting debt.

But, perhaps thanks should also go to a few companies who are no longer actively trying to beat Vonage in the voice game. Vonage's comeback actually coincides with a broadening realization among telcos that voice is no longer their business. So, ironically, the companies who sought to put Vonage out of business just a couple of years ago through patent lawsuits may now be inadvertently feeding Vonage a growing potential customer base.

Is the comeback for real? Even during the recent stellar fourth quarter, the comment boards at FierceVoIP continued to see a large number of customer complaints about Vonage--basically people demanding the company's head on a platter. Keeping customer churn improvements from being a passing fad may be Vonage's top ongoing challenge.

Still, if new Net neutrality rules and legislation become a reality as part of broadband reform, the company may find relief from an ongoing dispute with telcos and cable TV companies, which Vonage has accused in the past of blocking its calls or affecting its service quality. If that happens and Vonage can hold steady with its numbers, the VoIP company's best days may still lie ahead. -Dan

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