Mr. Jon Arnold

GLG News by Mr. Jon Arnold, Principal

Is Google Wave Good News or Bad News for Carriers?

July 15, 2009

Analysis of:Is Google Wave Good News or Bad News for Carriers? | www.ipcom-insights.com

Google Wave represents a real threat to both service providers and the established order of vendors providing various forms of communications and collaboration solutions to enterprises. Wave provides a 2.0 solution to 2.0 communications challenges and for many, will be a better way of doing things. This is not good news for the likes of Microsoft, Cisco, Avaya, IBM, etc., and signals an important shift in validating open source and the cloud as viable alternatives to the status quo.

What to do with Skype? Maybe Apple?

April 15, 2009

Analysis of:EBay plans Skype public listing | news.bbc.co.uk

The potential impact for spinning out Skype into an IPO is much greater than most people realize. I was cited in another BBC article on this story today - see link in my commentary below. Aside from the IPO option, there is an important story around the Skype founders wanting to buy their compay back. I have an unusually long and close history with Skype, so my perspective is broader than most. Another option is selling Skype to someone else, and I have long felt Apple would be a great home. Most people talk about more obvious choices, but I think Apple has more interesting possibilities.

Nortel: the Good News - Web.Alive

January 15, 2009

Analysis of:Nortel files for bankruptcy | www.businessstandard.com

Yesterday's news about Nortel was bad for Nortel, bad for telecom and bad for Canada's tech sector. Other companies - large and small - will fail in 2009, so this is a sign of the times in general. However, Nortel has many strengths and assets that will not disappear overnight, and will remain a factor in the market one way or another. Nortel is not the innovation leader it once was, and this has played a role in their demise. One of the brightest lights, however, is Web.Alive, which is only now becoming public. Within the analyst community, I have had unique exposure to this technology, and my blog post from yesterday shares that perspective and explains why I think Web.Alive is a valuable asset for Nortel or a potential acquirer.

Arbinet - VoIP Peering Gains Momentum But Maybe Confusion

May 23, 2006

Analysis of:Arbinet Joins Peering Party | www.lightreading.com

Arbinet is already handling a lot of interexchange traffic, so they are no stranger to this world. VoIP peering is a nascent market, and their Spider Registry is yet another peering solution for carriers to consider. Existing solutions are all a bit different, and each has a distinct business model - and none of which are proven. Beacuse of Arbinet's existing role in the market, it is not clear whether their move is complementary or competitive with the likes of Neustar, XConnect, Stealth, iPeerx and others. As such, it remains to be seen if this causes confusion among carriers, or if it will be viewed as a welcome addition that could kick start VoIP peering.

Vonage IPO - Will the Market Buy It?

May 23, 2006

Analysis of:Vonage Holdings (VG) Still Sees IPO Price of $16-$18 on 31.25M Shares | www.streetinsider.com

Vonage's scheduled IPO date is May 23, and all eyes in the IP communications sector will be watching closely. The company has the strongest brand in the market, and is the clear market leader for pureplay VoIP. In the wake of Skype's acquisition by eBay, the market has seen its first billion dollar VoIP valuation. Expectations and hopes are similarly high for Vonage, but they face a very different set of challenges than Skype.

There have been very few VoIP-related IPOs lately, but several companies are ready, and they are all wishing for good news from Vonage. If the IPO goes well, we should expect to see these other companies ramp up their plans to be next. Vonage may not have a sustainable business model, but the confidence of the financial community in the VoIP space for IPOs will ride on how they fare.

Vonage IPO - What is VoIP Really Worth?

May 4, 2006

Analysis of:Vonage Targets $500M From IPO | www.lightreading.com

In the wake of last year's Skype/eBay deal, Vonage is upping the ante to the point where they believe their company has just as much value as Skype. They're basing this on last week's S1 filing which shows improved performance and a strong growth trend.

They may be adding subscribers at a healthy pace, but Vonage continues to lose money, and must continue to spend in the area of $30 million per month to attract new subscribers and replace lost subscribers. This is not a sustainable model, and they clearly are focusing on short term growth at the expense of profitability.

Skype and Vonage are different businesses, and have very different economics. While it's debatable whether eBay had a rational basis for valuing Skype, one cannot transfer their logic to Vonage. A pureplay VoIP provider like Vonage is really uncharted waters in terms of determining a valuation, and comparisons to Skype are misleading at best.

Skype has zero marketing costs, and attracts over 150,000 new users every day. Churn is a critical success factor for any subscriber-based business, and this is simply not an issue Skype. Users just keep coming no matter what they do. It's much easier to base a valuation on a company with Skype's mechanics than Vonage's, and I'm certain the market will recognize this when the launch date arrives.

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