Vonage CEO Comes Out Swinging

Vonage (VG-NYSE) is coming out in defense of itself after last week’s patent case.  Here is how they start the release:  In the last week, several media reports have inaccurately speculated on the outcome and impact that Verizon’s patent litigation now being heard in U.S. District Court in Alexandria, Va. would have on Vonage’s business….These same media reports overlooked Vonage’s strong balance sheet and contingency plans for maintaining uninterrupted operations….

Mike Synder, CEO of Vonage: "It is wrong and irresponsible to presuppose either the outcome or the impact this litigation would have on our business.  First and foremost, we are confident we have not infringed on any of Verizon’s patents and, in any case, we believe the Verizon patents are invalid.  Nevertheless, our financial reserves would allow us to continue normal operations regardless of the outcome. In addition, we are confident that regardless of how this litigation is ultimately decided, Vonage’s customers will see no change whatsoever to any aspect of their phone service."

Vonage is saying they can survive regardless of the decision and is still maintaining that it can continue its growth plans.  It may be too soon to tell if consumers will back away from signing up out of fears that the phone service they use could be put under.  Most should know that no one is expecting a service shutdown, so we’ll see.

Vonage (VG) still owns the distinct reputation as being the worst IPO in recent times, and its investors have formed what may be a cult stock status.  It still has a market cap of $835 million even though it trades near the bottom of its historical trading range.  It is up $0.01 ahead of the open at $5.40; and the 52-week range is $5.08 to $17.25.  Just two weeks ago the shares were at $5.90 and last week shares hit that new low of $5.08 on an intraday basis.

Jon C. Ogg
February 26, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.