How Technology Can Help - Or Destroy - Your Portfolio

An Example of How Vonage and Skype Could Take Down the Major Carriers

This week, as I reviewed the expansion plans for our soon-to-be opened fine jewelry and fountain pen store in the Midwest, I began looking through the organization's costs to see if there was anything that we had simply taken for granted. I began to think about something known as VoIP that I had read about in various trade publications, and thought that perhaps it was something we should consider. <p> Beginning with two of our smallest operations, I signed up for both Skype and Vonage Business. Each had its own benefits and drawbacks, but the results were amazing - what resulted were nine phone lines and annual cost savings of between $6,000 and $8,000 by simply switching from our existing AT&T account. In addition, many of these lines had unlimited calling features that gave us more for our money on top of the lower price. <p> Let's assume that my company can earn 15% on book value. In ten years, the money we saved by this one move will result in an additional $121,800 to $162,430 in net worth for the firm by simply making one tiny change to our cost structure. This is the nature of compounding. <p> As an investor, I immediately began to wonder how the phone companies are going to generate sufficient profit to justify their existence compared to the past. I don't see how they are going to survive in their current form. That said, they may make a great trade, but I would not want to own shares of the major carriers for a ten or twenty year period. Unless something changes, they are going to become obsolete. After all, who would have imagined Vonage or Skype only a few short years ago?