Yak Communications - Another VoIP Casualty?

Been meaning to post about this one for a few days, and the fact that nobody seems to be paying any attention to this says a lot on its own. I only came across this because I spoke to a journalist about it last week - will let you know when the story runs.

Yak Communications has been in the long distance and calling card business for some time, and WorldCity is their more recent suite of offerings targeted at the residential VoIP market. I've never quite been able to figure out what business Yak is really in, and now I guess I'm not alone.

On June 20, Yak announced they were "exploring strategic alternatives to maximize shareholder value", which is a polite way of saying it's tough to make a go of things in this game. I second the motion there, and despite some nice marketing and brand building, Yak has obviously not caught on enough to justify the investment needed to continue. They even tried to spice things up with free video calling - which I blogged about last November - but that's not the ticket either.

To make things official, last Thursday, Yak announced the selection of their investment bank - Orion Securities - to get on with the business of finding a market exit.

You know things can't be going too well when this announcement is made just ahead of the long weekend, when people have other things on their minds. Furthermore, there's no evidence of this news on their website, which says they want to ease out of the market as quietly as possible.

In my view, none of this is surprising, especially given how badly things have gone with Vonage and their IPO. I've long felt pureplay retail VoIP offerings have a low probability of success, and unless you've built a brand the way Vonage has, I just don't see how you can create much residual value. Sure, the cost of entry is low in this business, but the exit price isn't usually very high either.

At this point, it doesn't look like Yak has much more than a modest base of VoIP subscribers and a fairly strong calling card business. The brand is pretty reputable, but is far from being a household name. There is some asset base there, but not much, and it's hard to see how Orion will get much in return beyond the $10 million they have in the bank. Am sorry to say, but for a change, this isn't a good news story about the Canadian market.

Anybody want to buy a VoIP company?

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