There is skepticism in the VoIP world regarding Vonage coming out with an IPO and it seems that an established telecom giant may takeover this reputed VoIP brand before that happens. Despite enjoying a good name as a VoIP provider, it is facing stiff competition from a number of companies.

Companies such as Google, Yahoo and MSN are all planning to get a share of the pie and are offering free advertising supported services to the consumers. It would certainly become difficult to compete with the free services being offered and would eliminate pay for use services in the long run.

The company is also suffering from cash burn. It has been running a massive marketing campaign in the states in order to build on its 1.4 million subscriber base. Although its revenues tripled in 2005 but its increasing expenses resulted in wider losses in the first three Quarters of 2005.

Even if it is not sold out and it comes out with an IPO, investors might think twice before investing in it as its founder and chairman, Jeffrey Citron already had a run in with the US SEC before.

With the heat turning on Vonage would it be able to survive this testing time? Let's keep our fingers crossed.