Vonage (VG) just can't catch a break. Today a federal jury ruled that Vonage infringed on 6 of Sprint's (S) patents. The ruling, which Vonage just announced they will appeal, awards Sprint $69.5 million in damages and will also require Vonage to pay a 5% royalty on future revenues. Vonage shares were recently hitting a fresh all time low on the news.
The recent headway Vonage has managed to make cutting marketing expenses and reducing operating costs have been over shadowed by the continuing patent and legal problems.
Vonage previously lost a patent infringement case against Verizon and is currently in the midst of a lawsuit by defunct former rival Sunrocket.
The Vonage story used to be about growth. Now it looks like the only story they have left to sell is survival. At the close of the second quarter, they had about $280 million in cash left. At their current burn rate of $50 million per quarter and after paying today's damage, they have a little over a year left.
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The business plan for Vonage just wasn't there. Unless the plan was grab as many customers as possible and then sell out to a big carrier or cable company, what business model was there for Vonage?
Their only product was a commodity, their quality of service relied on competitors and the only advantage they had was their marketing spend.
Doesn't seem to be much possibility that Vonage would ever do well.
One might think that VoIP for consumers is down for the count – with the Sunrocket meltdown and now this legal mess with Vonage leaves one pining for a provider who has been around and won’t get knocked out the box. I asked my IT geek friend what they liked and they told me about Net2Phone. Unlike almost all the other guys – this company has been at this for about 10 years and they are well funded (big IDT owns them). He also said that now because of all the uncertainty – they are running a special try/ buy offer. Try them for 3 months free and then it is just $19.95/ month – plus you get to keep your phone number. It’s better than paying the big telco’s lots of $$$ every month.
Also—I have a lot of family overseas and have been blown away by the options for international calling – not only really cheap international rates – but you can get a local phone number in a huge number of countries. Most of my family is based in Brazil – they dial a local call to my Brazil number from Net2Phone and it gets to me here.
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