Vonage Should Take the Money and Run

Vonage has reportedly turned down a buyout offer of $1.5 billion. Here's my advice to the VoIP company: Take the money and run. The VoIP bubble won't last. Light Reading reports that one of the bidders is BellSouth, and that analysts value the company at between $1 billion and $1.5 billion if it were to be sold today.

Note that caveat: If it were to be sold today. The eBay acquisition of Skype for $2.6 billion has given VoIP incredible buzz among investors and would-be buyers.

But that buzz won't last long. We're in the middle of a VoIP bubble right now, every bit as frothy as the Internet bubble that gave companies like Pets.com outrageous valuations. Where is the Pets.com sock puppet now? More to the point, what happened to all those poor souls holding worthless Internet stock? The smart ones aren't lining up for a Vonage IPO.

Is VoIP valuable? Certainly. It's the future of telephony. But when someone buys Vonage, in essence all they're buying is the company's customer base. Considering that the customer base is more interested, than anything else, in saving a few bucks, they're likely a fickle crowd. The moment a cheaper service comes along, they'll desert Vonage. It'll be tough for whoever buys Vonage to hang on to them, much less upsell them higher-margin services.

So my suggestion is that Vonage sell quickly, before an IPO. The VoIP bubble is bound to pop.