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Vonage gets pummeled in court again

Posted Sep 26 2007, 03:44 PM by Kim Peterson
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Tough week for Vonage, the one-time Internet calling darling that has more courtroom drama than a season of "Law & Order." But I think the company could be an attractive acquisition target.

Today an appeals court upheld a verdict against Vonage in a patent case involving Verizon. Now the courts will recalculate how much money Vonage should pay (the previous total was $58 million plus 5.5 percent royalties on future sales). Trading was halted briefly on the stock, and its share price fell 26 percent to 96 cents.

This follows yesterday's news that a jury found Vonage guilty of infringing patents owned by Sprint Nextel. Vonage was ordered to pay nearly $70 million, which caused the stock price to plummet 34 percent. Woe to the investors that got in at the company's $17 IPO price.

But Vonage's problems run much deeper than patent infringement. The company only added 57,000 subscribers in the second quarter, down from 166,000 the preceding quarter. The drop was due to a big pullback in company marketing. And those subscribers came at a price: nearly $290 spent to acquire each one in advertising and other costs. 

And worst of all: Comcast, on a roll with its "triple play" cable-Internet-phone package, outpaced Vonage in the quarter to become the country's top Internet calling service provider.
 
Silicon Alley Insider is questioning whether Vonage will shut down. Giga Om says it's only a matter of time:
"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."
At least Vonage has a solid base -- 2.45 million subscriber lines. And getting those customers cost a lot of money. The company could be acquired just for its user rolls alone.
Comments

 

I had a business line and 2 personal lines with Vonage.  We had so many problems with our service that I decided to cancel.  Customer service was so horrible to the point of being non-existant.  Just trying to get a service representative on the phone usually took an hour or more.  And since our Vonage line was so bad I had to use my cell phone.  Then to cancel we had to be transferred to another customer service rep in another department.  This also took a long time on hold.  We spent several days and countless hours on hold just trying to get through to someone and to cancel our services.  Even then they put us through hell in order to disconnect.  They seem to be doing eveything possible to keep customers from leaving and their numbers up.  If the service works for you then that's great.  But, good luck if you ever need to contact someone there for a problem.  THE WORST SERVICE I'VE EVER EXPERIENCED.

We switched to Vonage after Sunrocket went out of business.  It was an easy transition since most of the other companies were too busy to get my business.  I would spend hours on hold just to get customer service agents on the line to connect service.  Then I would have to wait several days to receive the box that allows phone connection through the internet.  Because Vonage was available at most retailers, I could cut out that waiting period and just connect easily through the internet.  The service is much better than Sunrocket.  No complaints here.  Hopefully they won't go out of business too.

I went to Best Buy to buy the phone connection package. Well the Best Buy kid had no idea what he was doing and sold me not phone modem but internet phone unit's which I didn't need or want. Well after 3 day's of trying to deal with Vonage Customer Service. I was upset I went to Hoovers Stock summary and got the phone number to their corporate offices and after a half hour got it taken care of.

They should go out of business

Just another case of the Big Players trying to squeeze out the 'Little Guy'-snuff out any and all competition.The ugly side of American business.

I agree with James. I know they are not perfect and you are going to have some problems but it seems the big companies always find a way to squash the little guys. I don't know about your area but in TN we have Comcast that offers the same thing as Vonage only at 50% more per month. That is the price even if you already have their cable & internet services. You would think they could offer the service cheaper but when you can run off the competition I guess it doesn't matter.

Vonage needs to work on the customer service.  People are not in love with Verizon & the others, but they do have a foundation. I have had nightmare service issues with Verizon. Keep adding new, and take care of the one's you have Vonage.

I have Vonage and have been very happy with the service.I just hope they don't go under because then I have to go to the big boys and I can't stand them.

I like Vonage.  I have had it for 2 years and have had almost no issues.  Not looking forward to trying to cancel though.  I have heard it's hard and arduous.

I have Vonage service in the Charleston, SC area, and Time Warner cable offers broadband phone service with minimal amenities, and more than twice the cost of the basic service. After 3 years thus far, I've had almost no problems that weren't associated with my cable modem service (I have RoadRunner as a service provider). If Vonage becomes no longer viable, I will switch to Verizon, who has virtually the same service amenities.

Vonage has been GREAT!!  I can't imagine having to live without their simultaneous ring (rings up to 4 numbers at once) feature.

Nearly all companies' customer service is unbearable these days.  I hope they don't go out of business.  They are the closest thing to a leader in this technology, putting them under will just make it easier for the more traditional phone providers to control (increase) prices.

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