Despite the difficulties faced by Vonage, the future for VoIP — Voice over Internet Protocol — remains attractive to growth-oriented advisors. Jim Oberweis Jr. notes, “VoIP is finally gaining traction — and people are now getting rid of their phone lines in droves, as the quality of VoIP has dramatically improved.”

Indeed, the money manager and editor of The Oberweis Report notes, “At my home, we’ve replaced our regular phone service with a VoIP connection and I find it virtually indistinguishable from traditional land-line connections.”

For those unfamiliar with the technology, he explains, “With VoIP, your voice is converted into a digital signal that travels over the internet. The price is right — around $35 bucks a month — for unlimited calls around the world.”

Importantly, he does not see the upside opportunity among telephony service providers. Rather, he sees the potential among companies that make the equipment that enables VoIP networks to operate.

He notes, “VoIP is causing an exponential increase in demand for bandwidth.” And that, he notes, takes lots of investment and equipment. It represents, he suggests, “the renaissance of the telecommunications equipment industry after six long years in the doldrums.” So what companies will benefit from this renaissance?

He notes, “Among our favorite beneficiaries is Acme Packet, a firm that develops session border controllers, which help to control traffic flow for IP networks.”

Acme is the market leader, he says, noting that the company went public last October and revenues for the first nine months of 2006 grew 158% year over year.

Another good choice, he suggests, is Oplink Communications, a provider of optical network components and OPNET Technologies, which he describes as an analytic-driven network management software provider.

In addition, Israel-based Allot Communication designs IP network optimization appliances that also help to manage network traffic.

Among big names, he also suggests Cisco. He states, “As the market leader for routers, exponential growth in traffic will likely stimulate sales in the years to come, yet the stock’s P/E of 21 is still at the low end of its historical range.”

Overall, he says, “no matter how you think the IP telephony game will play out, there is no question bandwidth requirements are on the rise. Providers of solutions to the bandwidth bottleneck have the wind at their back. Now is the time to put up your sail.”

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