John Paczkowski

Recent Posts by John Paczkowski

Vonage Leading the 'Voice Over R.I.P.' Revolution

These patents are invalid. We don’t owe them a dime.”
Vonage lawyer Louis Jameson, Sept. 21

Vonage lawyer Louis Jameson was right. Vonage doesn’t owe Sprint Nextel a dime. It owes the company 800 million of them. Vonage settled its patent dispute with Sprint Nextel this morning for $80 million–$35 million for past use of Sprint’s patented technology and $40 million for future licensing, along with a $5 million prepayment.

Sprint, in turn, has agreed to license Vonage its VOIP portfolio, which includes more than 100 patents covering methods and components to connect voice calls between a traditional telephone network and an IP network. The settlement comes two weeks after a federal jury ruled that Vonage illegally used Sprint patents and awarded Sprint $69.5 million in damages.

In a statement today, Vonage General Counsel Sharon O’Leary said, “We believe this deal is good news for Vonage, our customers and our shareholders. It allows us to put this litigation behind us and continue to focus on our core business by removing the uncertainty of legal reviews and long-term court action.”

Presumably with the “uncertainty of legal reviews” removed, Vonage will have that much more time to focus on other uncertainties, like its financial viability. As of June 30, Vonage only had $344 million in cash. Of that, $66 million is restricted cash used as collateral for the Verizon bond. (Verizon also won its patent-infringement case against Vonage.) And it’s carrying $248.2 million in debt, with a put option that may mean it is due as soon as December 2008.

But why dwell on matters so bleak. There is, after all, good cause for celebration: Vonage stock soared as much as 80% this morning–if soaring is what you call reaching for $2 per share from a baseline of $1.56–on the news, giving the company its biggest single-day advance since going public last year.

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