Tuesday, November 20, 2007

Vonage Owes Over $200M

I have either been living under a rock for the past few months, or just simply can't keep up with all of the industry news. Just yesterday, it was brought to my attention that VoIP provider Vonage is tied up in a legal battle with Verizon over three alleged patent infringements. After appeals, the latest news is that Verizon Wireless won the case, and Vonage has to pay a grand total of US$120 million to the wireless phone provider. Ouch.

What makes the situation even worse for Vonage is that the company recently settled two other litigation cases with AT&T and Sprint. On October 8, Vonage settled a suit with Sprint in relation to six patents in its "voice over packet patent portfolio." Vonage was to pay Spring a total of US$80 million to cover licensing for past and future use of the technology. A few weeks later, Vonage settled a dispute with AT&T over "packet telephone system" patent infringements, leading to a payment of US$35 million over the next five years.

Basic math would indicate to me that the company might just be in a tad bit of trouble. Vonage's just-released Q3 2007 results report just US$211 million in total revenue.

It's a shame, because I really think we need more competition in the telephones arena, whether it be landline, Internet, or wireless, not less. I tried out the Vonage service in its early days, and thoroughly enjoyed using it. It was simple, convenient, and compared to a "regular" home phone plan, much, much cheaper. Customers who often make long distance, and even international, phone calls, will especially save tons of cash by jumping on the VoIP bandwagon. Of course, like any other service, it does have drawbacks: the most obvious is that, if your broadband Internet connection goes down, so will your phone. But with 70%+ wireless phone penetration in Canada, and broadband services becoming more reliable by the minute, this probably isn't such a huge deal. Hopefully Vonage will pull through, and come out with some great, new offerings in 2008! VoIP could very well be the way of the future in voice communication, and the more options the consumer has, the better.


MrInvestor said...

Get your facts straight if you are going to post a information about a company. Vonage indeed has had patent infringement suits with 3 of the major telephony companies being Sprint, Verizon and At&T. These lawsuits have been in the news over the last year. The real news is that they settled with the two of the three (Verizon and Sprint) in October. The AT&T news was that a settlement was being reached for $39 million dollars, payable to AT&T over the next five years.
The real news is that after settling all of these suits, Vonage still has $150 million in cash in inventory and will achieve profitablity this coming year.

Marketnews - Christine Persaud said...

Hi MrInvestor,

Thanks for your comments. I did, in fact, note everything you mentioned above. As for the $150 million in cash and inventory, I certainly hope they have this and that it will indeed lead them to profitability in future. As mentioned, I've tried the Vonage service and love it; and I also think we need them as a VoIP provider in Canada.