Vonage shares surge on hope of survival

News of a settlement on Verizon's patent claim against Vonage, spurred the VoIP leader's stock price 39 percent, with shares rising 60 cents to finish $2.13 on the New York Stock Exchange. That was the biggest gain since Oct. 8 when the Sprint patent settlement was announced, and comes after Vonage shares had fallen 69 percent since new year, but a long way down from its bullish IPO price of $17 in May 2006.

Vonage has agreed to pay Verizon $80 to $120 million depending if the appeals court reconsiders Vonage's plea. But the sharp change in investment sentiment seemed to be driven by a view that Verizon had intended to put the VoIP out of business and the settlement meant Vonage now has a chance to recover. "Verizon had always given the impression that its intent was in putting Vonage out of business,'' Jeff Weiss, a patent lawyer at Weiss & Moy PC in Washington told Bloomberg. The settlement "was fairly shocking," he said.

All eyes are now on Vonage's 3rd quarter results, due Nov. 8. Some analysts are predicting Vonage --despite its 2.5 million customers -- will run out of cash early next year. Vonage is still dealing with a third patent claim, this time from AT&T and at the same time is facing stiff competition from the cable companies which are aggressively leveraging their existing customer base to grow their "digital voice" business. Comcast has been the most successful and now has more VoIP subscribers than Vonage. 

For More:
- Vonage statement on the patent settlement.
- Bloomberg report of investor reaction. Report

Related Articles:
Vonage settles with Sprint. Report
VoIP becomes key in the battle for eyeballs. Report
Comcast surges past Vonage. Report