Jeff Kagan: Why Ooma IPO Belly Flopped

Jeff Kagan |


Ooma had its IPO last week and as we all know, things didn’t go so well. Ooma ($OOMA) is a leader in the IP or VoIP space, so let’s discuss the space in general, the problem, and Ooma in particular to see what went wrong and what the future may bring.

Internet Telephony or Voice Over Internet Protocol uses the Internet to send voice calls digitally. That is compared to the traditional telephone networks we have used for decades. IT or VoIP started in the 1990’s, but since quality was horrible, it took years to get good enough to be taken seriously. Today, VoIP technology boasts great quality if you choose the right provider, and there are plenty of good and bad quality services in the market.

There are also many IP providers, both large and small. Larger companies like telephone companies AT&T Inc. ($T), Verizon Communications Inc. ($VZ) and CenturyLink Inc. ($CTL). Also, cable television companies like Comcast Corporation ($CMCSA), Time Warner Cable ($TWC), Charter Communications, Inc. ($CHTR) and Cox.

There are also plenty of smaller, dedicated providers like Ooma, Vonage Holdings Corp ($VG), Skype, RingCentral Inc. ($RNG), 8x8, Inc. ($EGHT), Mitel Networks Inc. ($MITL), MagicJack and more. There can be a wide difference between companies like this. Quality is all over the map depending on a variety of factors including the speed and quality of your Internet connection.

In this larger VoIP or IT space, Ooma has great quality. This is compared to the other smaller providers and if you have a decent Internet connection in your home or office with regards to speed and quality.

VoIP Growth Changing Toward Business

VoIP growth has been robust over the last decade, but things seem to be slowing down on the consumer side. It looks like more growth going forward may come from the business side of the equation. That’s why Vonage is expanding to and really trying to grow their business side of the house.

This has many wondering about the growth potential of this IP or VoIP space for smaller providers. I believe this space will continue to grow, however, the real growth may come from the larger providers who blend these services with other services in a larger bundle.

For example, you can by VoIP or IP services from the same telephone company or cable television company where you may also buy other services like television, high speed Internet, wireless services and so on.

Increasingly VoIP Growth Coming from Large Competitors

I see this VoIP space continuing to grow, but the rapid growth may come from larger providers compared to smaller providers. This may be similar to what we saw in the Internet Service Provider or ISP space.

In the 1990s, the leaders of this space were companies like AOL, Prodigy, Earthlink and Mindspring. Today leaders in this same space are larger companies like AT&T, Verizon, CenturyLink, Comcast, Time Warner Cable, Charter and Cox.

Investors may have shied away from the Ooma IPO because of the changing marketplace. The solution will be for the real leaders of this space, a group which I consider Ooma to belong in, to get loud and innovative.

How Ooma Can Continue to Lead

Ooma must break the rules and innovate like crazy. Then they must talk about it with a very loud and clear voice to let the marketplace know of their success, the growth of IP and the fact they are a leader in this space.

If they don’t, the marketplace will pass them by as it has many others over time.

So the future of the IP and VoIP space is bright and full of growth on both the wire line and wireless world. However, rapid growth may shift more toward the business side of the equation. Plus growth may shift toward larger providers of other communications services.

With all that said, I do believe there is plenty of room for a very innovative and well run smaller company with a direct focus on VoIP and IP services to succeed. A company like Ooma may be just that kind of company.

What the future holds is the big question. No one knows. However much depends on what Ooma does going forward to break through the glass ceiling. Ooma can continue to grow and to lead in a slice of the IP pie. The question is...will they? Let’s see if they can pull all the pieces together to make that dream a reality. columnist Jeff Kagan is a Wireless Analyst, Telecom Analyst, Industry Analyst and consultant. He shares thoughts on the changing industry, which he's been following for 25 years. He follows what's hot, what's not, why and what's coming next. Email him at

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


Symbol Name Price Change % Volume
CHTR Charter Communications Inc. 256.14 -1.98 -0.77 924,986
CMCSA Comcast Corporation Class A Common Stock 64.15 -0.21 -0.32 5,521,605
CTL CenturyLink Inc. 28.25 0.28 1.01 2,426,468
EGHT 8x8 Inc 14.90 0.20 1.36 153,991
MITL Mitel Networks Corporation 6.77 -0.15 -2.17 51,196
OOMA Ooma Inc. 8.64 0.13 1.53 7,876
RNG Ringcentral Inc. Class A 22.08 -0.08 -0.34 133,994
T AT&T Inc. 37.66 -0.99 -2.56 49,221,300
TWC Time Warner Cable Inc n/a n/a n/a 0
VG Vonage Holdings Corp. 6.25 0.00 0.00 1,053,808
VZ Verizon Communications Inc. 48.38 -0.76 -1.55 13,044,878


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