Vonage Dissed at Injunction Junction

U.S. Dist. Court Judge Claude Hilton signed an injunction against Vonage Holdings Corp. (NYSE: VG) this morning, preventing the VOIP provider from using Verizon Communications Inc. (NYSE: VZ)'s patented technology. Vonage was not granted the 120 day stay that it was seeking while its patent-infringement case goes to appeal. (See Vonage, Verizon Fight to Go Into Late Rounds.)

The judge allowed a proposal by Verizon that would allow Vonage to continue using its patented technology but would prevent Vonage from signing up new customers. The compromise is a small victory for Vonage which will be able to continue serving its 2.2 million existing customers.

Vonage's stock fell $0.25 (6.91%) to $3.37 in trading yesterday in anticipation of the injunction. Investors fear that any unfavorable outcome would keep the VOIP service provider from adding new customers -- and slow its revenues to a crawl. The rapid rate at which Vonage signs up new customers has been one of the few bright spots for the company, only outstripped by its massive financial losses and free-wheeling spending on consumer marketing.

Vonage's financial story is still one for the ages. The company's shares have lost 80 percent of their value since Vonage's IPO of $17 per share. In the past week, research analysts at Citigroup , the bank that underwrote the IPO, downgraded Vonage to sell -- a rare occurrence for an underwriting company. (See Citigroup Analyst Sticks 'Sell' on Vonage.)

The New York Stock Exchange is closed today for Good Friday.

— Raymond McConville, Reporter, Light Reading

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