Financial activity moved at a frenzied pace this week – in the economy at large and, on a macro level, within the communications industry. From a mainstream perspective, Congress drew closer to passing a final economic stimulus bill; news broke that retail sales grew somewhat in January; and companies from wide-ranging sectors announced more layoffs. Meanwhile, from a niche view, evidence abounded that the recession also continues taking its toll among telecom service providers and equipment vendors. It’s the same old song and dance – quarterly losses, job cuts and other money problems as businesses struggle to survive. There was, however, some much-needed good news: two carriers reported profits for the fourth quarter of 2008. All in all, the week of Feb. 9 marked yet another mercurial one as Americans slog their way through the worst economy since the Great Depression.
Stayin’ Scrappy
Whatever one might think about Vonage Holdings Corp. (VG), Nortel Networks Corp. (NT) and Nokia Corp. (NOK), there’s no denying these besieged companies won’t go down without a fight. And that’s the kind of conviction that could ensure their survival. They’ll have to address immediate and pressing troubles, first, though, to even get that far. For Vonage this week, the snag was a diminished market cap. For Nortel, it was ending shareholder meetings and prepping for more layoffs. And for Nokia, the problem was too many devices, too little demand and, therefore, too many employees.
Let’s start with Vonage. The over-the-top IP telephony provider already faces the threat of having its stock delisted from the New York Stock Exchange (NYSE) because the prices have stayed under the $1 minimum for too long. Now the NYSE says Vonage could be suspended or delisted from the Exchange because the provider’s market cap is floundering. NYSE rules require a company’s average global market cap to total at least $100 million for 30 trading days in a row. On Feb. 11, Vonage’s market cap held at around $76.8 billion. On Feb. 12, virtually overnight, the valuation had dropped to $64.8 billion.
Oh, how the mighty have fallen. Vonage, the one-trick-pony VoIP company, boasted a $2.3 billion market cap on May 25, 2006, the day after it went public at $17 per share. You might recall that price stunned analysts because Vonage was just – and still is – an Internet telephony provider. No nifty devices, no earth-shattering apps, no diversification. That narrow focus seems to have caught up with the Jeffrey Citron-founded firm. Its stock prices are hovering in the low-40 cents range and its market cap has plummeted by $2.2 billion over the past three years.
