Vonage: There ain’t no Workaround


Vonage apparently confirms what some patent-watchers had guessed — that there is no technical workaround to the patent claims from Verizon that Vonage is alleged to be infringing. More on this one later!



Light Reading is reporting that Sprint may buy Vonage. According to their source, the companies may decide to merge depending on what the appeals court decides on April 24th. That’s when a judge will decide whether or not the injunction should be enforced during the appeals process.

After reading that article, I have a slightly different theory. Perhaps Sprint and Vonage have already agreed to a buyout. In that case, Sprint would want the appeals court to stay the injunction for the remainder of the appeals process. I would think Vonage has a better chance of getting a favorable ruling by itself, rather than as a part of Sprint (that would explain why a deal has not been finalized yet). After all, they could argue that an injunction would be devastating for Vonage. However, if Sprint buys Vonage before the ruling, Sprint would have a harder time arguing that an injunction would be devastating for it, since the ruling would only effect Sprint’s new VOIP business. Also, a merger would explain why Vonage is cutting its marketing expenses and staff. If Vonage wanted to stay independent, I think it would have waited until the April 24th ruling to decide on those cost cutting measures. Despite all its turmoil, Vonage still managed to add customers in the first quarter. Does it make sense to cut your staff by 10% while your still growing? However, if Sprint were to buy Vonage, I’m sure Sprint would be looking to use its own resources to run Vonage. A merger would also explain the departure of Vonage’s CEO.

So why would Sprint want to buy Vonage? As the Light Reading article suggests, based on its current market capitalization, Vonage is cheap. Also, as reported by a blog on Zdnet, Sprint does not currently have a VOIP business. Finally, my personal belief is that Sprint wants Vonage for its WiMax build out. Having a VOIP service would allow them to offer a double play (voice and data) over WiMax. I think adding a VOIP service adds a lot of value to a data only WiMax service.

Full disclosure: I do currently own shares of Vonage, and I am hoping the two companies will merge.

Paul Kapustka

Arlo, check out the new story on the front of the main blog.

Arlo Gilbert

It is unfortunate that several popular blogs have picked up on your tidbit with an almost “gleeful” or “na-na-na-na hey hey hey goodbye” type of attitude towards vonage.

Even Verizon doesn’t benefit from this judge’s incredibly reckless ruling. Verizon want’s their cut (and probably wants Vonage to use the Verizon overpriced/underserviced carrier service). Verizon benefits from a ruling of infringement only if the judge insists that they pay royalties.

Verizon’s patents now as a result of this overly broad interpretation are a potential VoIP killer.

Perhaps this judge should grab his prunes and retire to an occupation that requires less diligence and.. um… good judgment.


What are the implications for others in the VOIP business – say Gizmo who sells call-out minutes and call in numbers? Or Skype?

Do all of these companies use the same technology as Vonage does?

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