Market Comments Submitted by Nick at Ambitions as a Stock Trader
Submitted By Knobias ClipReport
Vonage Ends 2007 on a Positive Note as Legal Battles Conclude
Vonage Holdings (NYSE: VG) (the “Company”) and Nortel Networks (NYSE: NT) announced Monday that an agreement in principle has been reached regarding the pending litigation between the two companies.
The settlement described in Monday’s press release involves a limited cross-license to three Nortel and three Vonage patents and will not call for any monetary payments by any party. In addition, claims relating to past damages and the remaining patents will be dismissed without prejudice. The cross-licensing will involve technology that is used to make 944 and 411 calls.
On a day that saw an overall decline in most indices, Vonage conversely advanced. By avoiding any further monetary damages, shares of the Company gained as much as 13% on the news, reaching a session high of $2.27. Vonage had recently plummeted to $0.89 in late September, setting a 52 week low, after a federal jury hit the Company with $69.5 million in damages to Sprint Nextel (NYSE: S).
Following Vonage’s loss to Sprint, other large Telecoms began to pile on as well, including Nortel and AT&T Corp (NYSE: T).
Two weeks ago, it was reported by the Associated Press (among other news outlets) that Nortel was countering an initial lawsuit filed in 2004 against Nortel by Digital Packet Licensing regarding three patents. Vonage acquired those patents from Digital Packet last year and continued with the lawsuit. Nortel countered that Vonage had actually violated a total of nine of its patents related to Internet phone services, including aforementioned 411 and 911 calling.
In an additional settlement early this month, the Company agreed to pay AT&T $39 million arising from yet another patent dispute. Vonage released details of the settlement in an 8K filed on 12/28/07. After an upfront payment of $1.95 million to AT&T in January 2008, the Company will pay $650 thousand per month for five years, with the $1.95 million constituting pre-payment for the last three months of the deal. In return, Vonage will be granted non-exclusive rights to AT&T’s patents related to Voice over Internet Protocol and dual-mode wireless services in order to offer its existing products, including services and products that may be offered within the next 18 months. However, the Company disclosed that the agreement does not grant Vonage any rights or license to operate a wireless network to provide any wireless service.
With Friday’s and Monday’s announcements, Vonage appears to finally be wrapping up its legal battles. In fact, the Company spent most of 2007 trying to fend off lawsuits from a number of major U.S. telecom companies. Although, as noted in a Monday article written by Donna Kardos of Dow Jones Newswires (donna.kardos@dowjones.com), Vonage could still face many challenges as cable companies roll out their own digital phone services and consumers increasingly opt for cell phones in lieu of landlines.
The Company is a provider of digital phone services with over 2.5 million subscriber lines. Vonage has posted TTM revenues of $796.8 million and net losses of $384.9 million, with a significant portion of said losses being a direct result of the Company’s legal battles.
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