Oldphone
If losing a crucial legal decision to Verizon recently isn’t bad enough, Vonage now has find itself a new CEO after Michael Snyder resigned. As important, the company said it plans to slash operating costs by $140-million to “enhance shareholder value and improve its competitiveness in the marketplace”. This is particularly bad news for Web sites that have reaped the benefits of Vonage’s aggressive marketing efforts given the company has been spending nearly $200-million online a year.

Since Snyder joined Vonage in March 2006, Vonage’s shares have tumbled from about $14 to $3.09. The company has been battered by an ocean of red ink, increasing competition from cablecos getting into the VOIP business, inconsistent service, and a high churn rate that has forced Vonage to spend like a drunken sailor on marketing to attract new customers. From the very start, Vonage’s prospects as a business have been unclear given its growth strategy was tied to attracting as many customers as fast as it could by offering a low-cost product in a market with little barriers to entry.

To me, Vonage was always more of an investment play by co-founder (and now interim CEO) Jeffrey Citron, who figured someone would snap it up to establish a foothold in the VOIP market. As it turned out, no one was willing to step up to the plate. This forced Vonage to make a $17-a-share IPO, which amazingly was over-subscribed. You could make a solid argument that Vonage single-handedly killed the tech IPO market, which isn’t such a bad thing given it has forced many companies to focus on growing their businesses, while keeping overly-enthusiastic investors from throwing themselves into risky investment vehicles.

Note: Check out this ClickZ story on how Vonage’s trouble could impact the online ad industry. As well, Jon Arnold has an extensive post on Vonage’s conference call this morning.

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