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Buffett Buying Spree Continues MoneyNews
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The rumors have circulated for months – and they're finally coming to fruition: Vonage, the world's largest Internet phone service provider, is going public. The company announced Wednesday that it plans to raise $250 million through an initial public offering. According to The Los Angeles Times: "A Vonage IPO has been rumored for more than a year, but analysts said this could be the right time for the Homdel, N.J., company to go public because the market for first-time stock offerings is enjoying its biggest boom in six years."
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Vonage has made its mark through the development of voice-over-Internet protocol (VOIP), which allows Web surfers to place phone calls via the Internet. VOIP breaks voice signals into packets (much the way e-mail does) and sends them over high-speed lines. Phone calls made using VOIP are typically cheaper than conventional calls. The company is awash in red ink, though. Since it launched in 2001, Vonage has racked up $310 million in losses. But the company has 1.4 million customers and it expects that number to double by 2008. Investors also like the fact that federal regulators treat Vonage with kid gloves, since they don't consider VOIP to be a phone technology and consequently don't hold the company to the same restrictions phone companies must endure. "From a historical perspective, this is a very important company," analyst Blair Levin at Stifel, Nicolaus & Co. told The Times. "But over the long-term, it's not clear what niche they are going to be in." Other analysts say that Vonage's private investors have grown frustrated over the lack of return from their investments. That explains the need for an IPO. "This IPO comes at a time when they need to repay their investors," says Maribel Lopez, telecommunications analyst for consulting firm Forrester Research Inc. "And they need to get out while the getting's good." Meanwhile, one thing is certain: The Internet phone market is growing rapidly. The Times reports that the number of Internet phone service subscribers grew by more than 200%, increasing from 1.3 million to an estimated 4.4 million, according to research firm TeleGeography Inc. The selling point for Vonage and its IPO is that the company controls 28% of the market.
2. Will Snow Blast China Currency Manipulation? Currency speculators are bracing themselves over reports that U.S. Treasury Secretary John Snow will label China as a currency manipulator in his next semi-annual report to Congress. Bloomberg cites Senator Richard Shelby, chairman of the Senate Banking Committee, who says Snow may do just that. "Treasury should call it like it is," Shelby told Bloomberg. "If the Chinese are manipulating the currency, as I believe they are, and he's got evidence of that, then he should say so." But that's not to say that Snow is a sure bet. Shelby told Bloomberg that he's skeptical Snow will call China out. "I don't expect him to," he said. "People don't usually do that politically. There's political ramifications to it." Congress has been after China for months to come clean on its currency management. Pending legislation from Senators Charles Schumer and Lindsey Graham would penalize China with high tariffs should the country fail to make its currency more flexible. Any word from Snow that China is engaging in fraudulent behavior regarding its currency will make it easier for lawmakers to pass such legislation. According to Bloomberg, China's trade surplus with the U.S. rose 25% to $185.3 billion through November 2005. That represents over one-third of the overall U.S. trade deficit, which in 2005 was a record $661.8 billion. "Snow has been calling on China to allow its currency to move in line with market forces, stressing the point during an eight-day trip there in October," says Bloomberg.
"In two reports to Congress last year, Snow stopped short of calling the Asian nation a manipulator."
Editor's Note:
3. Buffett Buying Spree Continues The holiday shopping season may be long gone, but that hasn't stopped Warren Buffett from engaging in a serious buying spree. His company Berkshire Hathaway announced yesterday that it will buy San Francisco-based insurance firm Applied Underwriters and all of its subsidiaries, including its North American Casualty insurance companies. Applied Underwriters is a privately held company that, according to a Berkshire Hathaway statement, is the industry leader in integrated workers' compensation solutions. Terms of the transaction were not disclosed. Applied Underwriters will continue to be managed by its founders, Chairman and CEO Sidney R. Ferenc and President and COO Steven Menzies, as well as the rest of its current management team. The Company maintains its national operations center in Omaha, Nebraska. It will remain headquartered in San Francisco, and all of its business operations will continue as usual.
Says Buffett, Berkshire Hathaway's Chairman and CEO: "We invest in proven companies that are industry leaders and that offer significant growth potential. Applied's management team has the disciplined mindset necessary to lead a profitable underwriting operation." Last month, Berkshire Hathaway purchased Business Wire, a privately held global distributor of corporate news, multimedia and regulatory filings.
"We quickly realized that Business Wire was a gem of a company," Buffett added. "I expect Business Wire to continue to do what it has always done, and I'll be there if I can help in any way."
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