The Vonage (NYSE: VG) saga continues. Douglas McIntyre reported recently of a "sucker rally" in Vonage stock as Vonage tried to fight off a patent lawsuit brought against the company by Verizon (NYSE: VZ). Friday brought with it a refusal of an appeal made by Vonage and slapped the voice-over-IP telephony firm with a $120 million lawsuit.
Legal costs have hurt Vonage and may increase its risk of bankruptcy. The company said that it may not have enough money to pay $253.5 million in debt due as early as December 2008.
The firm had a first-move advantage and created an innovative service. Unfortunately, the legal issues and commoditization of voice-over-IP technology has severely hampered the prospects for the young company. I would expect the company and its customer-base would not be a standalone business a year or two from now.
Zack Miller is the lead equity analyst for America Israel Investment Associates, LLC., the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund. Author holds no positions in the stocks mentioned above.
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