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NewsGlobe: Currents
Vonage charts a new course
Having weathered problems, company shifts product strategy focus
by Jim Barthold
Vonage Holdings has withstood a flurry of patent infringement
and other legal action which pretty much brought the company
to its knees. Now it’s trying to re-energize itself as it
transforms from a VoIP provider focused on cheaper voice
services to a VoIP provider with a package of broadband
capabilities.
When Vonage started, people needed a cheap voice
alternative that voice-over-IP provided. That vision was
changing before the company was distracted by a series of
devastating lawsuits. Now it’s coming around again to
recognize that today’s consumers can get cheap phone
almost anywhere; they want features and services that make
that voice more attractive, said Jeffrey Citron, Vonage
chairman.
Vonage cut a wholesale DSL partnership deal with Covad and
is preparing to launch a “prosumer” offering, Vonage-Pro,
that takes the VoIP provider’s base products into the
commercial space for business users.
“We have quire a few customers who call up … looking to buy
the Vonage voice solution but they don’t have broadband.
This led us to talk to Covad about wholesaling their platform
and then putting together a Vonage bundled with allowed
these customers to buy both digital voice and the broadband
they’re asking for (and need for VoIP),” Citron said.
The partnership with Covad gives Vonage a nationwide
broadband footprint so it’s no longer dependent on marketing
to customers who already have DSL service, generally
attached as part of a phone bundle, or cable modem service,
which increasingly is bundled with digital voice. It also opens
up a market of satellite subscribers who have no high-speed
Internet or voice bundle.
“We’ve been talking to them about it for quite some time and
we’re thrilled they’re finally ready to go to market with
broadband,” said Lisa Graham, senior vice president and
general manager of Covad’s wholesale division.
To be fair, Vonage has been a bit preoccupied. The company
was hammered by multiple copyright infringement lawsuits
from the likes of Verizon, AT&T and Sprint and took a beating
in court. For a time, it appeared it was over for Vonage, but
about this time last year the company developed a new
strategy on which to focus and start anew. Since then Vonage
has recorded three straight quarter of operating cash flow and
positive EBITDA for two quarters said Citron and is working on
a proposal to refinance its debt.
The company announced what Citron believed are good first
quarter results.
“There was a point when I first took over after the loss of the
Verizon (patent) case and there was a lot of uncertainty in our
future and there were a ton of things we had to fix,” he said.
Those were not minor fixes: “Fix the fundamentals of the
business, fix marketing, fix cost management, fix customer
care then strengthen the core relationship with the customers
and grow from that core. Today’s announcements with Covad
and Vonage-Pro (demonstrate) we’re starting to get good
traction in the marketplace and that’s going to lead to
accelerated growth in the second half of the year. At this point
we have a lot of the historic problems behind us.”
Vonage-Pro is ahead, providing a package that bundles most
residentially oriented Vonage services and features into
packages for business consumers.
The company is also going to spend money, he promised.
“This past quarter we spend about 27 percent of our revenue
on marketing (and) we expect at the end of the year we’ll be
spending between 30 and 32 percent. The company has $150
million in the bank and we’re going to use that money,” he
said.
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