Vonage settles Verizon lawsuit

Vonage Holdings Corp., the beleaguered provider of Internet-based telephone service, said Thursday that it had settled a patent lawsuit brought by Verizon Communications Inc. for a maximum of $120 million.

The lawsuit, along with two filed by other phone companies, had cast a heavy shadow over Vonage’s future. The company’s service enables subscribers to connect their phones to their broadband connections for about $25 a month using a Vonage adapter.

After setbacks in the litigation with Verizon, which began in June 2006, Vonage put $88 million in escrow. The settlement caps any payouts Vonage will make on top of that amount at $32 million.

The settlement was announced just after the stock market closed. Vonage shares fell 7 cents to $1.53, then surged 70% in after-hours trading to $2.60.

“We believe that the settlement terms may allow Vonage to avoid bankruptcy -- at least for now,” telecom analysts at brokerage Stifel Nicolaus wrote in a research note Thursday.