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Saturday, September 02, 2006

Weekend Edition: Vonage: On A Wing And A Prayer

Stocks: (VG)

After bottoming at $6.30 about a month ago, Vonage is up to $8.67 in the last few days. That's 38%, most of it coming in the last few days.

Now, Vonage, which started trading as an IPO at $17.25, has not announced anything in the last month that would cause a rise in it shares. Bear Streans started the stock at "peer perform" which is not exactly high praise.

Some technical investors might argue that the stock is "oversold", but that seems thin.

On August 1, the company announced that its revenue hit $143.3 million, below expectations. The company's loss grew to $74.1 million for the period ending in June.

No good news there.

VoIP is still growing rapidly in the US and abroad, but the fear among Vonage followers is that the company is competing with cable companies that already have large customer bases, and tons of money.

Perhaps the key to the Vonage rise is the eBay is figuring out how to make money from Skype. Its recent deal with Google will involve the ability to use Skype for customers and vendors to speak. The chances that Vonage could strike a deal with another large internet company like AOL or Yahoo! are fairly decent. Skype and Vonage may have been separated at birth, but they are much more alike than different.

It would only take one large distribution deal, probably with a large internet company that wants Vonage's tech and customers, to get Wall St to believe that the company is back on track. Who knows? That could happen any day.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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