It has been a rough month or so for Vonage. The company finally pulled off its long-anticipated public offering, even getting some of its customers to buy shares. It didn’t take long for the stock price to plummet, leading some of its VoIP customers to conclude that they need not bother to fulfill their commitments to buy the company’s stock at the IPO price.
The latest blow comes in the form of a lawsuit filed by Verizon. In it, the telecommunications giant alleges that Vonage is infringing on seven different patents related to VoIP technology and is asking for unspecified damages. In particular, Verizon points to Vonage’s voice mail, WiFi phones, and call forwarding services as allegedly infringing on patents held by Verizon.
In response, Vonage said those services had been developed inside the company using proprietary technology or technology licensed from other firms. According to the VoIP provider, the lawsuit is Verizon’s first communication about the patents, and it promises to vigorously defend itself against the allegations of the lawsuit.
Vonage’s long-terms prospects are looking a bit murky. Aside from the slide in its stock price (which dropped further once the news of this latest lawsuit hit the markets), the company is faced with a number of other legal actions, including some related to its IPO. Of particular note are nine class-action lawsuits filed earlier this month on behalf of disgruntled shareholders, alleging violations of securities laws by the company and its underwriters leading up to the offering.
Whether Vonage will be able to weather the current legal storm remains to be seen. Its stock price has dropped by almost half since the IPO, and as our go-to finance guy Anders Bylund said in his analysis of the stock offering, the company’s future prospects look uncertain. It suffers from a extremely large 2.1 percent monthly churn ratio, is spending more on advertising than it makes on sales, and is facing increased competition in the VoIP space from much bigger companies like Comcast and AT&T. Add in the costs of fighting myriad legal battles and Vonage is in for a rough ride ahead.