Calls of Note Part 6

- Piper Jaffray believes Vonage (NYSE:VG) recently exceeded the two million VoIP subscriber milestone and will likely be promoting this fact in conjunction with next week's VoIP industry trade show (VON or Voice-On-the- Net) next week. Vonage exited Q2 with 1.85 million VoIP subscribers and was adding just under 20K net subscribers per week on average. Assuming this 20K level of net subscriber adds has carried into Q3 and given we are nine weeks past the 1.85 million level reported for June, the firm believes Vonage recently exceeded the two million subscriber level and will likely be announcing this news relatively soon.

Vonage has roughly 124 million shares of common stock that comes available for sale following the IPO lock-up expiration on November 20. They believe the lock-up expiration could create an overhang for the stock and could impact investor sentiment.

Despite the potential for near-term catalysts (2M subs, VON conference, better-than-expected EBITDA), the firm remains cautious on VG shares due to numerous concerns which include, increased competition, declining ARPU, decelerating sub adds, customer care issues, and
increasing customer churn.

Maintains Mkt Perfrm and $7 tgt.

Notablecalls: Note there VG shares have rallied over the past couple of weeks from around $6.5 levelt just below $9. Suspect the 2 mln sub announcement will prove to be the top of that move.