Vonage shares soar on suit settlement
new york -- The beaten-down shares of Vonage Holdings Corp. more than doubled in value Monday after the Internet phone company said it had settled a patent suit filed by Sprint Nextel Corp.
The shares gained $1.42 to $2.57.
On Sept. 25, a jury in U.S. District Court in Kansas City, Kan., found that Vonage infringed six Sprint patents and ordered the company to pay $69.5 million in damages. The settlement Monday resolves all claims in that suit for $80 million, the companies said.
Sprint also agreed to license to Vonage its portfolio of more than 100 patents on connecting calls between a regular telephone network and a packet-switched network such as the Internet.
“We are pleased to resolve our dispute with Sprint and enter into a productive future relationship,” said Sharon O’Leary, chief legal officer of Holmdel, N.J.-based Vonage.
The settlement does not put all of Vonage’s legal troubles behind it. In March, another jury awarded Verizon Communications Inc. $58 million in damages plus 5.5% royalties on future revenue after finding that Vonage violated three Verizon patents. Litigation continues in that suit. Vonage denies infringement and says it has deployed work-arounds for two of the patented technologies.
Vonage’s legal troubles and the sudden shutdown of rival Sunrocket Inc. in July have raised questions about the future of stand-alone Internet telephone companies. Their subscribers use adapters to link their phones to their broadband Internet connections and pay about $25 a month for unlimited domestic calling.
Vonage was a pioneer in that market and was the biggest player until last year. But its subscriber growth has stalled this year, leaving it with 2.3 million subscribers at the end of the second quarter.
Potential customers have been scared off by the litigation, raising Vonage’s already high cost of recruitment to $287 for every new subscriber in the second quarter. Meanwhile, cable companies have rolled out voice-over-Internet services and have quickly gained customers among their video subscribers. Comcast Corp. ended the second quarter with 3.1 million phone subscribers.
Vonage’s stock went public last year at $17 a share. The stock has disappointed investors, but the high initial offering price gave Vonage a substantial cash pile, which has enabled it to weather the litigation setbacks.
