Vonage: How Low Can You Go?

von_6395_59661jpeg.jpgVonage (VG), the Holmdel, NJ-based VoIP service provider has been on the ropes for so long that you think it can’t get any worse. But it does! Earlier this year the company lost a patent infringement case to Verizon, and was asked by the courts to pay Verizon, $66 million in back payments and 5.5% in royalties.
Vonage got some more bad news yesterday: the jury ruled in favor of Sprint (S) and found that Vonage infringed upon six Sprint patents. This time around Vonage has been asked to pay $69.5 million in damages. The stock promptly tanked 33% and closed at about $1.30 a share. Vonage plans to contest the jury’s decision, the company said via a press release.
What can one say about this situation: it speaks for itself. It is only a matter of time before Vonage goes the way of SunRocket. By better fiscal management and with enough cash in the bank, it can prolong the agony, but ultimately something dramatic needs to happen for the company to dig itself out of this hole. As I said earlier this week, playing the cheap voice game is fraught with risk.