Vonage is encountering the most turbulence. Added to a share price at last week’s close of US2.99 – down from its May 2006 IPO kick-off figure of US$17.00 – the loss-making company has recently reported the resignation of its ceo Michael Snyder. Worse still, although it was granted a temporary stay on a ban from using VoIP IPR that a federal court last month ruled was the property of Verizon (click), Vonage, in a filing with the US Securities and Exchange Commission,  has admitted that it has no ready-to-hand ’workaround’ to sidestep the claimed Verizon patented technology. In the filing Vonage stated: “We are continuing to work on designing around the Verizon patents as construed by the trial court and may in the future be required to develop and design around other third-party intellectual property. Implementation of these design arounds, including those we may in the future implement in connection with our patent litigation with Verizon, may not be feasible or, if feasible, may take several months to implement, and may cause service interruptions or be temporarily or permanently incompatible with some of the features we currently offer.”

The filing continued: “If service interruptions affect the perceived reliability of our service or if we are required to limit our offering of service features, we may have difficulty attracting and retaining customers and our brand reputation, results of operations and financial condition could be materially and adversely affected.”

If the worse comes to the worse, possible bankruptcy or liquidation is spoken of.

Skype’s woes are not of this magnitude, and indeed in the Q1 2007 results posted by parent eBay the division’s income totalled US$79mn, up 123% on Q1 2006, while registered users were reported as 196mn, a 107% increase on Q1 2006.

But in a new advisory posted by the Ovum consultancy, authors Mark Main and Steven Hartley noted that that although Skype grew, the company was now facing much tougher competition.

“Although revenue growth has been steady at Skype, the operational data doesn't look as strong. Total user growth was impressive year-on-year at 107% but has been falling steadily for five quarters. Skype to Skype minutes increased just 11% year-on-year to 7.7bn minutes and sequential growth showed just 1% growth on Q4 2006,” commented Main and Hartley. “Therefore, more users are spending less time using the system. Given that we estimate that approximately one sixth of users are regular users (at least once a week), there is now additional pressure to grow an active user base.”

The Ovum duo concluded: “Skype is now coming up against both traditional telcos and specialist VoIP providers and its rapid growth is diminishing. It reacted in January by announcing the SkypePro flat-rate package and a SkypeOut connection charge. We felt at the time that they were a necessary and shrewd move (see ‘EuroView Daily’, 19 January 2007). We expect Skype to make further moves to sustain revenue growth because with a long-term trend in growth of subscriber acquisition more effort must be made to monetise the existing user base.”
John Williamson