Vonage (VG) gets knifed by Sprint

Posted Sep 25th 2007 6:43PM by Douglas McIntyre
Filed under: Bad News, Industry, Law, Sprint Nextel Corp (S), Verizon Communications (VZ), Vonage Holdings (VG)

Vonage (NYSE:VG) needs to get a new patent attorney. It has already lost a very large case IP to Verizon (NYSE:VZ). And, earlier today, Sprint (NYSE:S) won a claim against the VoIP company covering six patents.

Vonage's stock fell 33% in just a couple of hours. It was already near a low. After bottoming at $1.20, it closed at $1.30. The stock traded around $17 after the company's IPO in May 2006.

According to The Wall Street Journal, the jury in the case ruled that Vonage would have to pay Sprint $69.5 million in damages. That amounts to a royalty of about 5% of the revenue over the time that the six patents were infringed upon.

When Vonage lost the Verizon case, the damages were $66.5 million and 5.5% of revenue paid as a royalty going forward. At the end of the last quarter, Vonage had over $340 million in cash.

At the current pace, Vonage can lose three more suits like this, if it runs the company as a break-even.

Douglas A. McIntyre is a partner at 24/7 Wall St.

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Reader Comments (Page 1 of 1)

9-26-2007 @ 1:21AM

TJ. Atni said...

Hang in there Vonage, I believe in you. I am a super satisfied customer and your service and product have been flawless. I am a customer of Sprint AND Nextel, also, and they should sit at your feet and study intently the lesson of the truly loyal customer. I believe I will go out tomorrow and buy some of the Vonage stock at the bargain prices to be had, it will give me something to smile about in a couple of years. Sprint and Verizon should have been so smart.

10-03-2007 @ 9:05PM

James said...

Pity that this debacle is giving the entire VoIP segment a black eye because there are great companies out there that focused on the technology and not the “sizzle”. Hey, I liked the Vonage commercials as much as the next guy, I only wish they had spent more time and money making sure they had the rights to use the technology they did. I still like the idea of VoIP and finding alternatives is hard because I don’t want to be stranded like many Sunrocket customers were recently. It seems there are good alternatives like Net2Phone and Lingo, but it is really too bad that such a high profile provider will probably set this whole category back in people’s minds