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Internet phone pioneer Vonage went public today, but received an icy reception. The stock price floated down from its initial price of $17 a share to close at $14.85. That's the worst first-day performance for two years, and customers who took up the company's offer have been burned.

Vonage operates VoIP in the US, Canada and the UK.

While Skype has already cashed in on the VoIP hype, persuading eBay to part with $2bn, Vonage has failed to find a buyer, and looking at the books, it's not hard to see why.

Even the most bullish analysts don't expect Vonage to be profitable until 2008 or 2009. Acquisition costs are over $200 per customer, while the general trend is towards cheap or free calls.

Vonage is already under intense price competition from incumbents like Verizon. The cable giants too are gearing up to add VoIP services to their data plans. And in addition to fixed operators, the mobile companies also want Vonage's minutes, with handset manufacturers adding seamless roaming and VoIP calls to their handsets.

Vonage has raised almost $650m in capital in the past five years, and carries an accumulated debt of $467m. In its prospectus, Vonage said it gained $118.9m revenue in the first three months of 2006, but lost $85.2m. Last year the company posted a loss of over $260m.

Despite an optimistic outlook - Vonage says it wants to raise its 1.6m subscriber base to 15m by the end of next year - it's hard to see who else can afford to promote VoIP, except a deep-pocketed incumbent.

Like so many of the "Web 2.0" start-ups, who are basing a business on a menu option, maybe VoIP was only ever a feature of something else. ®

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