Vonage Profits on a Fluke Gain

VoIP provider Vonage Holdings Corp. (VG) on Thursday reported a profit, but before investors get too excited (although it’s too late for that – Vonage’s stock skyrocketed for the first time in a long time on the income news), it’s important to note it was a fluke.

The profit stemmed from a one-time gain. On the books, that meant Vonage made $5 million in the first quarter of 2009. Without that piece of luck, though, the company actually lost $7.7 million.

Further, Vonage lost subscribers – 6,000 net, in all. That’s a big deal in the midst of a recession when people are looking to cut costs. And that’s been Vonage’s value proposition all along – to save users money. But the provider increasingly has faced competition from cable operators and telcos that bundle VoIP into their packages. Which raises the question … how much longer can Vonage sustain its single-source business model?


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