Vonage

Scenario: Gene One Generic Benchmarking

Vonage is a leading provider of broadband telephone services with over 2.5 million subscriber lines as of February 1, 2007. Based in Edison, New Jersey, Vonage offers services to subscribers throughout the United States. It expanded into Canada in April 2004, and into the United Kingdom in early 2005. Vonage CEO Jeffery Citron has lead his R&D teams in conducting breakthrough telecommunications research in order to make the product a major success. They currently have award-winning technology which enables anyone to make and receive phone calls with a touch tone telephone almost anywhere a broadband Internet connection is available. Vonage is a company which offers phone service that implements VoIP (Voice-Over-Internet-Protocol) technology. There are two major reasons to use VoIP: lower cost and increased functionality. Vonage CEO Jeffery Citron states that, "the real question is whether the company can acquire its customers in an efficient manner and thereby narrow its losses". Offering an IPO can create much needed cash flow for a company to move itself forward into the marketplace. However, going public is not always the sure way to go. Vonage went public on May 24, 2006 at a price of $17 a share. Prior to the IPO, Vonage solicited its customers via automated phone call announcements and emails with an offer to buy shares of the IPO. The price fell $2.15, closing at $14.85 on the New York Stock Exchange. Vonage's IPO was the worst trading day for any IPO in 2006 up to that point. Vonage proved skillful at selling consumers its money-losing stock. That created a problem for Vonage because it used its IPO to turn happy customers into disgruntled shareholders (Vonage, 2006). It is unusual and risky for a company to solicit customers to buy its IPO. In doing so, Vonage damaged its image. Gene One's leadership must learn from Vonage's experience and carefully plan its IPO by considering all stakeholders and their reactions before signing its current employees and customers into stockholders or they could slowly go out of business. According to McShane and Von Gilnow (2005) the greater the consistency between the leader's words and actions, the more the employees will believe and follow the leader.

VoIP is less expensive because it routes telecom traffic over the internet instead of through the public switched telephone network as a result telecom costs on a per-call basis can be significantly lower. Even though there is a cost for internet service, using VOIP over this service may not involve any extra charges, so the users view the calls as free.

Also, they offer feature-rich and cost effective communication services that offer users an experience similar to traditional telephone services. Vonage's service is sold on the web and through national retailers including Best Buy, Circuit City, WalMart and Target and is available to customers in the U.S., Canada and the United Kingdom. The biggest advantage that consumers who use Vonage may see, is the enormous cost saving it has over traditional lines. Vonage comes with all the calling features found on a regular traditional line, but at a fraction of the cost. These features include 3 way calling, call forwarding, caller id, and a voicemail service. The calling plans are very affordable. For example, for $24.99, consumers will enjoy unlimited calls to anywhere in the U.S. and Canada. Also, unlike traditional POTS lines, where there are always hidden taxes totaling in excess of $15.00,