So, let's do some simple number-crunching with Vonage's second-quarter results. The company posted a loss of $74.6-million, largely due to $90.1-million of marketing costs (50% more than a year earlier) amid fierce competition from the cablecos, which makes attracting customers even more of a challenge. Assuming competition remains as intense and Vonage has to spend as much or more on marketing each quarter, the company's $597.7-million of cash will evaporate over the next eight quarters. Then what? Well, Vonage CEO Mike Snyder believes the company will generate "adjusted operating profits as early as the first quarter of 2008" (I wonder what adjusted operating profits are?) Of course, Vonage's efforts to become profitable aren't helped by the fact it spent more to acquire a customer ($239 vs. $236) in the second-quarter, while churn climbed to 2.3% from 2.1%. To put churn into perspective, Vonage attracted 377,005 new customers in the quarter but lost 121,069. Now, I'm not a financial wizard but these numbers don't pass the smell test. Granted, Vonage may 1.85 million customers but the rest of its financial metrics are going in the wrong direction. It explains why the stock is trading at $6.70 - compared with IPO price of $17.
Update: Jon Ogg has some good perspective on Vonage's numbers, while Om Malik also weighs into the Vonage fray. Meanwhile, the New York Times looks at how large carriers such as Verizon are losing local customers to cable rivals and VoIP service providers such as Vonage.