Smokin : In addition, in November 2013 Vonage cl
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In addition, in November 2013 Vonage closed on a deal to acquire Vocalocity, one of the fastest growing providers in the SMB hosted VoIP market. The company had revenue of $28 million during the first half of 2013, which was 39% higher than the same period in the prior year. The SMB market represents a large growth opportunity for Vonage. According to a July 2013 report by Frost & Sullivan, the SMB market alone for VoIP is $15 billion annually. Additionally, The SMB hosted VoIP market is forecast to grow at a compound annual rate of 27.5% over the next five years. The SMB VoIP service will be marketed under the Vonage Business Solutions brand and will be headed by Wain Kellum, formerly Vocalocity's CEO. Kellum recently stated that "85% of small businesses are still using traditional phones," and that VoIP can reduce monthly phone costs by at least 30%.
The Vocalocity acquisition, which cost Vonage $130 million, places the company as one of the largest providers of VoIP services to the SMB market. In its Q3 2013 earnings release, the company stated : "This transformative acquisition will place Vonage at the forefront of the large and rapidly growing small and medium business market. Vocalocity is already growing customers and revenue rapidly, and we believe we can fuel their growth with our brand and scale while achieving meaningful cost synergies." The Vocalocity deal is something Vonage investors should be excited about, as Vonage will now provide real competition in the fast growing SMB space to stock darling 8x8, which sports a hefty 56 forward P/E.
Lefar predicted that the growth initiative would add $100 million in revenues by the fourth quarter of 2014. Datora going to market in Q2 2014 will help some and any additional partnerships in India or Mexico would be a nice bonus. But Vocalocity will be the real key, as it provides Vonage a large presence in the fast-growing SMB hosted VoIP market.
Better late than never.
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