Vonage advances on clearing patent hurdles

Vonage Holdings is making progress in developing a technical ‘work-around’ that would enable the leading US broadband telephony provider to circumvent patents owned by rival Verizon Communications.

Vonage is appealing against jury ruling that it infringed three patents held by Verizon – a ruling that, if it stands, would force Vonage to pay Verizon more than $58m in damages and 5.5 per cent of future subscriptions from lines that use the disputed technology.

”We believe we have workable designs for the two name translation patents and intend to begin deploying the solution to our customers shortly,” said Jeffrey Citron, Vonage’s chairman. “In addition, we are continuing our development of the workaround for the wireless patent,” he said.

Mr Citron’s comments appeared designed to ease investor concerns about the company’s future. Coupled with the announcement of a smaller quarterly net loss, they helped lift Vonage’s depressed share price by 10 per cent in early trading.

Vonage’s first-quarter net loss totalled $72m, or 47 cents per share, compared with a loss of $85m in the same period last year. Revenue at the company increased by 64 per cent to $196m.

”We have battled through an extremely difficult quarter and will continue the fight in the courtroom,” Mr Citron said. Vonage’s legal problems coupled with concerns about the company’s business model and high marketing costs have worried investors who have seen the stock plunge from an initial public offering price of $17 a year ago, to around $3.36 currently.

But despite the company’s problems, Vonage, which helped pioneer VoIP (Voice over Internet Protocol) services in the US challenging the traditional phone companies, said it added 166,000 net subscriber lines in the quarter, bringing its total to nearly 2.4m lines.

Average monthly revenue per subscriber line rose to $28.31 from $27.85 in the year-ago quarter but the company said its subscriber churn rate, a key measure of customer loyalty, rose to 2.4 per cent from 2.3 per cent in the previous quarter.