Monday, March 12, 2007

What Does Vonage Do Now???

Is that the sound of the other foot dropping on Vonage?

The recent unfavorable judgement in their patent infringement fight with Verizon heeps even MORE embarassement on their so called "management team".

The jury found that Vonage had infringed on three of the five patents Verizon accused its rival of doing. The infringed patents cover the technology used to connect Vonage's voice-over-Internet-Protocol (VoIP) calls to the regular phone network, as well as some features for implementing call-waiting and voice-mail services.

The payment, which of course will be appealed, is exactly one-thirds that of the $197 million Verizon had requested. The reason for this is that the jury did not find that the infringement was willful. That degree of infringement is often assessed as triple damages.

Verizon had requested that the use of the allegedly infringed patents by Vonage should result in elements of Vonage being shut down pending settlement. That matter will be addressed in another court hearing on March 23.

You can read more on the judgement at Vonage Patent Infringement

I found this quote particularly alarming....for investor and customer alike:

"Vonage is already losing money," said Clayton Moran, an equities analyst with Stanford Group. "If you add the expenses of the damages, royalties and the ongoing legal battles, it just throws their future profitability further into question."


I mean.....come on.

I've already chronicled the ineptness that is Vonage....including their miserable attempt at an IPO....in earlier articles here at Broadband Nation:

Has The Vonage Death Watch Begun....Or Just Continuing?

Vonage Stock Coninues To Take A Nose Dive

Vonage Shares Fall 14%....I Warned Ya

Vonage Costs To Customers Just Went Up.....Uh Oh

Vonage Churn....Investor Heartburn

Vonage Sucks! Yea...I Said It!

The recent Vonage legal troubles are indicative of an overall leadership attitude which at best borders on the self-destructive.

Of course Vonage will appeal the judgement requiring them to pay Verizon $58 Million for "stealing" patents owned by Verizon. But the fallout is already being felt. Vonage stock tumbled another 14% last Friday ending at an all time low of $4.17 per share (By the way....well below their targeted IPO price of not too long ago by almost 75%.)

Can you say....OUCH!

Don't expect the pain to go away anytime soon either. There's lots of potential scenarios left to play out.

The possibilities include:

* They are forced to disable elements of their service

* They declare Chapter 11

* They give up and sell their subscriber list to a competitor

* A buyback of Vonage shares, followed by a major private equity investment that will take Vonage private.

Add all of the above to the Vonage reputation for abusing customers with non-existent customer service and over billing situations. Not a pretty picture.

The handwriting on the wall is that long overdue changes need to made in Vonage. These are fixes that current Vonage management seems incapable of executing. Or even realizing. If that is to happen it's likely somebody else will have to do it.

As always.... who will ended up paying the most in the end?

Current Vonage customers that's who. As if that should be a surprise.

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