Wednesday, September 16, 2009

Vonage Profits... but still...

Vonage generated its first-ever net profit during the second quarter of 2009, but still lost 89,000 net subscriber lines.

The voice-over-IP provider on Aug. 5 posted 2Q 09 pro forma net income of $1 million, or $0.01 per share. The company had posted a loss of $7 million or $0.04 per share in the year-ago quarter.

Vonage’s improvement in net income was driven primarily by ongoing reductions in operating expenses as well as cost of goods sold.

Despite the improvement in net income, Vonage finished with approximately 2.49 million lines in service, down from 2.58 million active lines in the prior quarter. Meanwhile subscriber churn increased to 3.2% from 3.0% in the year-ago-quarter and 3.1% sequentially. The company attributed the drop in subscribers to national economic factors coupled with marketing initiatives that will take several quarters to ramp up.

The company has launched a new commercial that announced Vonage’s elimination of all up-front costs, activation fees, device charges and shipping fees. Furthermore, the company will no longer lock customers in short-term promotional pricing that jumps dramatically at the end of the promotional period.

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