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Vonage Holdings Tumbles 12% on Lack of Buyback Plan

Wednesday, 15 Feb 2012 05:00 PM

 

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Shares of Vonage Holdings Corp., the biggest U.S. provider of telephone service over the Internet, fell the most in more than three months after saying it will accelerate investments in infrastructure with no immediate plans to buy back shares.

Vonage dropped 12 percent to $2.40 at the close in New York, for the biggest decline since Nov. 2. The shares have fallen 47 percent in the past 12 months.

The Holmdel, New Jersey-based company, which cited a higher churn rate in the fourth quarter, is looking to expand long distance, mobile service, and increase its overseas reach. Vonage will invest $5 million to $10 million per quarter above 2011 levels to expand, Marc Lefar, chief executive officer, said on a conference call Wednesday.

“With the company now on a solid foundation operationally and financially, the time is right to accelerate our investment in key strategic growth initiatives,” Lefar said.

“The negative is very clear: Shareholders want them to buy back stock,” said Robert Routh, an analyst with Phoenix Partners Group in New York. Routh, who recommends buying the shares, spoke in a telephone interview.

Vonage reported cash and equivalents of $58.9 million on Dec. 31, down from $78.9 million a year earlier. The company had $55.6 million in cash at the end of the third quarter.

Buyback Plans

Buybacks are “something we will actively - and do -discuss with our board, and would consider doing at the right time,” Barry Rowan, chief financial officer, said on the call.

“In the near term, we are very focused on strategic, organic growth and this is where we are investing a portion of our dollars,” Leslie Arena, vice president for investor relations, said in an e-mail.

The company reported profit, excluding certain items, of $24.5 million or 10 cents a share, for the fourth quarter compared with $14.6 million, or 6 cents, a year earlier.

Churn during the period was 2.7 percent, up from 2.4 percent a year earlier, Vonage said in a statement. The company cited higher turnover among Hispanic subscribers relative to other international customers. Vonage lost 14,000 net lines during the quarter and 30,000 for the year, on par with a year earlier.

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