Vonage Holdings Corp. (VG)

epetroel (99.15) Submitted: 4/21/08 5:04 PM : Start Price: $1.93 VG Score: 7.39

As a former Vonage customer, I have to admit that their product is awesome. The features you get for the price make landline phones look ridiculously expensive.

Their financial condition though is anything but awesome.

With a negative book value, negative return on assets, and a negative profit margin, they are burning up cash as fast as they can borrow it. If that wasn't bad enough, the expense of getting new customers coupled with a high churn rate essentially means that the more customers they get, the more money they lose... they could literally grow themselves right into bankruptcy. Add in the patent issues, competition from cable companies, and the tendancy for more and more people to give up landlines all together for cell phones and I think we have a pretty safe underperform here.

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