For anyone looking for a good Sunday afternoon read, Vonage's S-1 fits the bill. It offers some intriguing insight into the company's plan to raise as much as $646-million through an IPO. The positive news is Vonage now has more than 1.5 million customers who generate average revenue of $27.65 a month. The bad news is Vonage is still spending like crazy to attract new business. In the first-quarter, the company spent $88.3-million on marketing, which explains all those banner ads and television commercials. This led to a net loss of $72.5-million on sales of $118.8 million. For anyone who believes Vonage will suddenly turn off its marketing machine to reduce the red ink think again. In the S-1, Vonage said "in order to grow our revenue and customer base, we have chosen to increase our marketing expenditures significantly. We are pursuing growth, rather than profitability, in the near term to capitalize on the current expansion of the broadband and VoIP markets and enhance the future value of our company". Translation: A huge chunk of the IPO proceeds will be spent on marketing campaigns. \The S-1 also includes a lengthy list of risks, including the fact "attracting customers away from their existing providers will be more difficult as the early adopter market becomes saturated and mainstream customers make up more of our target market." Translation: There's lot of competition with more marketing muscle than Vonage. After Vonage completes IPO, co-founder Jeff Citron's 33% stake will be worth about $850-million, while Vonage's venture capital investors (Bain Capital, Meritech, New Enterprise and 3i) will see their $400-million investment suddenly be worth $1.12-billion. Bottom line: the IPO is a slam dunk for existing investors but far from compelling for new shareholders.

Sometimes you wonder if Nortel can't win for trying. The company finally manages to convince itself its 2005 financial results are ready for public consumption (a positive development), then it goes and releases them late in the day on Friday after everyone's headed home for the weekend. (a negative development). From an optics perspective, it gives the impression that Nortel is trying to hide something because the only reason to issue a major press release late in the day on a Friday is if you want to avoid attention from investors and the media. Of course, Nortel will likely claim it received SEC clearance and/or that its paper work was completed Friday afternoon so it had no choice but to follow disclosure rules and release the financial results. Maybe this is true but this isn't the first time Nortel has utilized the Friday afternoon "trick" to release financial news. If Nortel - and CEO Mike Zafirovski - are at all interested in regaining the confidence of investors and analysts, they need to try to appear as if they are being as straightforward and transparent as possible. Issuing a press release to disclose financial results that should have come out a few months ago is not the way to do it.