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Content Tagged with Verizon + patent
And Now Its AT&T’s Turn To Sue Vonage
Its like the Groundhog Day for Vonage (VG), the beleaguered VoIP services company. After being separately sued by Verizon (VZ) and Sprint (S), and losing its cases over patent infringements, the Holmdel, NJ-based company is now facing similar charges from AT&T (T).
Vonage was ordered to pay $66 million to Verizon, and it recently settled its case with Sprint for around $80 million. AT&T, apparently has been trying to reach a settlement for past two years, but couldn’t strike a deal. “We were forced to file a lawsuit,” AT&T spokesman told the Wall Street Journal.
Sprint Patents Get Vonage Cash
The beleaguered VoIP provider Vonage (VG) has been taking it on the chin for so long that even a marginal bit of good news is worth noting. The company said today it has “settled its pending patent dispute with Sprint (S)” and has “entered into a licensing arrangement under Sprint’s Voice over Packet (“VOP”) patent portfolio.” The settlement has sent Vonage shares soaring this morning, up 73 percent to roughly $2 a share.
The agreement is valued at $80 million: $35 million for past license use, $40 million for a fully paid future license, and a $5 million prepayment for services. On Sept. 25, a Kansas jury handed down a verdict finding that Holmdel, N.J.-based Vonage had infringed six of Sprint’s patents. Vonage was asked to pay $69.5 million in damages.
Why is this good news? It’s one less thing for Vonage to worry about; now the company can focus all its energies on resolving the patent imbroglio with Verizon (VZ). The courts asked Vonage to pay $66 million to Verizon back in June. If they can resolve that issue, then they can get back to battling cable companies for customers.
First a lawsuit, now Vonage loses CEO
Michael Synder, chief executive officer of Vonage, came, saw and scurried away. Vonage chief executive resigned this morning, in what seems to be an un-ending string of bad news for the Holmdel, NJ-based VOIP service provider. Snyder was the CEO of Vonage for less than a year. He has also resigned from the board of directors.
Vonage Founder and Chairman Jeffrey Citron is going to take over as the interim CEO. Citron, cannot be CEO of a publicly traded CEO as part of a settlement with the Securities & Exchange Commission. The company is looking for a new CEO - not an easy task given the uncertainty around the company.
Vonage has been in crisis mode since it lost its patent case to Verizon, and a US Court asked them to stop marketing their service to new customers. They stay open for business after getting a temporary stay and are appealing the court’s decision that essentially will put them out of business.
The company is also undertaking a restructuring that is going to save $140 million in costs, of which $110 million will come from the marketing budget. No worries people – you will still see those annoying ads, for the company expects to have a marketing budget of $310 million. The company is cutting its work force by 10 percent.
The expense cuts are a move to appease the Wall Street, and also indicate the fight with Verizon and increased competition with cable companies is beginning to impact the company – and not in a good way. Vonage expects revenues of $195 million in the first quarter 2007, with net subscriber additions of 166,000 (21% year-over-year decline) and marketing cost per gross subscriber addition of $275. The company had 332,000 gross subscriber additions. That’s just WEAK!
Some believe that Snyder is the fall guy here, but I think it might be an exit of convenience. Vonage needs the street fighting skills of Citron in the battle for survival. Snyder may have wanted to get out of dodge. Stay tuned as story develops.
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Vonage, say hello to Grave Dancers
Charter Communications, the St. Louis, Mo.-based cable service provider, is not-so-subtly getting ready for a dance… on Vonage’s grave. It has launched a promotion hoping to lure worried Vonage customers to switch to its VoIP service. Charter, that currently boasts about 500,000 phone customers, is supposedly a friend of Charter Vonage, and has been trialing Vonage as part of a special $45 voice-and-data bundle.
If other cable providers started following Charter’s example, and offered sops to Vonage customers to switch, Vonage would find itself in deep trouble. The Holmdel, NJ-based Vonage is locked in a vicious patent fight with Verizon that has left it black-and-blue.
With Vonage market capitalization having fallen below $500 million, cable operators should pool their resources, and make an offer for Vonage’s 2.2 million customers. Clearly $700-to-$800 per subscriber - about $1.54 billion-to-$1.6 billion at $700-to-$800 times 2.2 million subscribers - is too high a price. At $250-to-$300 per subscriber, however, cable operators should seriously consider a bid.
At those levels, the company will be valued at $550 million-to-$660 million, which is a premium over the current stock price, but still be cheaper than spending millions on advertising and customer sign-ups. The cable operators can then divvy up the spoils amongst themselves depending upon the region of service, and perhaps pick up a few broadband subscribers in the process. Dividing the spoils is a common practice in the cable business.
Of course, they can wait and watch Vonage get pummeled, and fall further as it gets further embroiled in the legal mess with Verizon. Then we would need to change the headline to one that is inspired by a James Hadley Chase paperback!
Vonage saved by VoIP Inc., for now
One of the most memorable lines in recent cinematic history is when Dr. Evil in Austin Powers utters, “Throw me a fricking bone.” That was the first thought that came to mind when reading about Vonage having found a work around their patent mess, thanks to VoIP Inc., a little VoIP company from Florida.
Verizon recently won its patent infringement battle against Vonage, and unless the Holmdel, NJ-based VOIP company got a stay from the federal court on April 6, it was facing a lights-out type situation. However, this deal with VoIP Inc. - will help Vonage stay open for business at the very least.
According to a 8-K filing by VoIP Inc., it was going to provide Vonage with certain network services, though the filing didn’t really reveal the financial terms. VoIP Inc., has patents and has a subsidiary that provides direct VoIP interconnection facilities with multiple carriers.
The deal could at least help Vonage address 2-out-of-3 Verizon patents that have landed it in hot water. Two of the patents deal with how VoIP calls connect to the PSTN network and the third one is about making VoIP calls via Wi-Fi phones.
Vonage is delaying filing its annual report pending the federal court’s decision (expected on April 6.) Funny how they were mocking the market for overreacting - Vonage actions since then show that over reaction was justified.
- 3/26/2007: VoIP patent mess to get messier.
- 3/26/2007: Vonage ready to rumble
- 3/23/2007: Vonage has 2 weeks to stop using Verizon patents, says Judge
- 3/16/2007: Vonage - rocky road, not road kill
- 3/8/2007: Vonage owes $58 million in patent case
VoIP patent mess to get messier
The telecom death match between Vonage (VG) and Verizon (VZ) is being played on in a small arena enclosed by a mesh wire of patents. And things could get quite bloody in months to come. Ed Pennington, head of patent practice for Bingham McCutchen, a Washington DC law firm told Telephony that a whole bunch of patent trolls could be waiting to pounce as a result of the Verizon-Vonage decision.
Verizon recently won the $58 million lawsuit, giving hopes to all patent holders, each looking to some get their piece of the action. Verizon, which has won its patent infringement case against Vonage could be emboldened by its win, and go after other players including cable companies and other small VoIP providers. Business Week estimates that there are about 2,000 VoIP-related patents have been issued to a diverse group of companies.
Some of the companies with big patent portfolios include Sprint, Net2Phone and a little known company called Web Technology. Incidentally, Web Technology last week filed a law suit against Verizon, Vonage, AT&T, Earthlink and SunRocket. Tech giants Cisco, Motorola, and Broadcom also have their own patents related to VoIP.
“You will see more companies exiting the business,” David McClure, president and CEO of the US Internet Industry Association recently told Business Week. Now that’s a novel way of precipitating a shakeout!
- 3/26/2007: Vonage ready to rumble
- 3/23/2007: Vonage has 2 weeks to stop using Verizon patents, says Judge
- 3/16/2007: Vonage - rocky road, not road kill
- 3/8/2007: Vonage owes $58 million in patent case
- 2/15/2007: Vonage growth slows in Q4
- 1/22/2007: Vonage’s tough road ahead.
