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Vonage Small Business Phones Challenge Verizon's Dominance

Stocks in this article: BRK.A BRK.B VG VZ

NEW YORK (TheStreet) -- The latest TV ads to annoy everyone come from voice over Internet protocol (VOIP) provider Vonage (VG). These commercials feature a straggly-haired bearded guy who looks like he stepped right out of one of those Geico caveman ads from a few years ago. (Geico is owned by Berkshire Hathaway (BRK.A) (BRK.B).) The difference is that the Geico ads were funny.

The Vonage spots attempt to lure residential land line customers to VOIP via the promise of greatly reduced phoned bills.

The ads are downright annoying. But they finally goaded me into seeing what Vonage had to offer to small business customers. Verizon (VZ) land line charges have simply gotten out of hand. It was time to try something different.

Vonage, which has been in the residential VOIP business for several years now, is now pushing into the small business market. This effort presumably got a boost this past November, when the company purchased Vocalocity, which had 23,000 small business customers at the time, for $130 million.

Before making the leap to VOIP, I wanted to give Verizon one last shot to keep my business. Once I could finally reach a live person, my conversations with their customer service reps were unfortunately uninspiring.

Yesterday, my small business officially left the safety and security of the land line for the brave new world of VOIP. So far so good.

By my calculation, this will cut my monthly phone bill by more than 56%. The service also includes a plethora of features that were either not available at Verizon or were not worth adding due to the additional cost. That includes features such as a "virtual receptionist," voicemail sent to email, and the ability to ring several phones (including cell phones) at once. I also took my old phone number with me, which was quickly and easily done.

All of this can help a small business to function as a larger entity.

Perhaps I'll dump our monthly savings into Vonage shares. The $900 million market-cap company is profitable, and currently trades for about 22 times 2015 consensus earnings estimates. The balance sheet is decent as well, ending 2013 with $85 million in cash and $135 million in debt, $75 million of which was used to finance the Vocalocity acquisition.

This is one to keep an eye on.

In the end, those annoying Vonage ads should pay off handsomely.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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