After much speculation, Vonage has finally filed to raise as much as $250-million through an initial public offering. The strange part of the announcement was that I initally saw the news about Tyco International executive Mike Snyder replacing Jeff Citron as CEO, which immediately caused to think it was a precursor for an IPO. The interesting part of the Vonage filing is it wants to use some of the proceeds to make acquisitions and make strategic investments. Does this mean Vonage will try to consolidate the market by going after 8x8, Sun Rocket, etc.? What's far more interesting is Vonage's finances and ownership information. For the nine months ended Sept. 30, 2005, the company posted a loss of $189.4-million on sales of $174-million. This includes $176.2-million of spending on marketing (that accounts for all those online banner ads) and $98-million SG&A. You have to wonder how much of an appetite there will be among investors for a company posting huge losses in a competitive marketplace? If Vonage manages to sell the IPO, Citron looks to make out like a bandit. He currently owns 41% of the common shares, which seems high given Vonage has raised $408-million of venture capital. One theory is he's been investing in each financing round. Other equity holders are Bain Capital (8%), Meritech (22%) and New Enterprise Associates (10%). Citron also owns 46.5% of the outstanding options - 1 million at $2.65 a share and 10 million at $3.15 a share.
Update: Russell Shaw warns that Vonage "better execute or else", which is putting it mildly, and provides a lengthy post on their strategy going forward. Meanwhile, Joseph Lazlo does a little number-crunching and talks about his bullishness about the VoIP market. I don't think he spends enough time looking at Vonage's huge losses and marketing expenses, which are far more important than churn and subscriber numbers.
Update: BusinessWeek's Olga Kharif has a story about Vonage's battle to stay competitive amid competition from cablecos, Google, Yahoo and Microsoft. It's just more evidence about how investors should be extremely cautious about investing in the IPO.

If you're interested in the red-hot real estate market (or just curious about the value of your home and your neighbours!), Zillow.com has potential to become a valuable tool to quickly find the value of more than 40 million homes in the U.S. It's easy to use and provides information that used to be available to real estate agents. Using the clean and easy interface (there's no requirement to register), a search of a U.S. address produces a home's value, details (# of bedrooms, bathrooms, square footage, lot size etc.) and the value of comparable homes. A beta version of Zillow.com launched today, although you may have some trouble accessing it due to high traffic volume. The company, started by a group of ex-Expedia.com executives including CEO Rich Barton, said the beta is "just the first step in our long-term mission to empower everyone with information and tools to help them take control of the scary, frustrating and exciting process of buying and selling a home". As for the all-important question of how Zillow plans to make money, it will be from advertising. The company has raised $32-million in venture capital
P.S. How about expanding Zillow into Canada? We need some competition for the Multiple Listing Service!

Update: The domain Zillow.ca is owned by Stuart MacDonald, who started Expedia.ca before becoming senior vice-president of marketing for Expedia.com.

Nortel CEO Mike Zafirovski's work to clean the decks has moved to the legal world on news the company has reached a settlement in principle to settle two major lawsuits filed in the Southern District Court of New York. The deal will be part of a global settlement involving all the class-action lawsuits launched against Nortel in the wake of an accounting scandal in which a dozen senior executives, including ex-CEO Frank Dunn, allegedly cooked the books to trigger a lucrative bonus plan. So what's it going to cost to make these lawsuits go away? A cool $2.4 billion. This will consist of $575 million in cash and the issuance of 628.6 million common shares, which represents 14.5% of current equity. Nortel will also contribute one-half of any recovery in the existing litigation by Nortel against Dunn, ex-CFO Douglas Beatty and ex-controller Michael Gollogly, who were terminated for cause in April, 2004.

A new report by In-Stat suggests global cable telephony revenue will nearly doubled by 2009 to $10-billion from $5.6-billion in 2005 - a forecast that comes as no surprise given the growing inroads made by Time-Warner and Cablevision in the U.S. and Videotron and Shaw in Canada. In-Stat analyst Michael Paxton said the advantage cablecos have over carriers is their lower costs. "Based on our analysis, it costs between 17% to 25% less to provision a VoIP cable telephony subscriber than a traditional circuit-switched cable telephony subscriber", he said.
You can bet the carriers such as Verizon, SBC and BellSouth will quickly amend their arguments on net neutrality to include this In-Stat forecasts. This is more evidence, they'll argue, that their core local phone businesses are under siege so they need new ways to generate revenue to remain competitive.