In a statement released as Wall Street trading opened for its first trading day after Vonage’s share price took a 26% dive, Snyder sought to control the damage wrought by last week’s court injunction against the Vonage voice over IP service.
For the market to react the way it did to the recent rulings shows an unfortunate lack of understanding of the judicial/appellate system, a lack of appreciation of Vonage’s resourcefulness, or, perhaps, both. Anyone who’s counting Vonage out is making a huge mistake, Snyder said.
A federal court in Virginia handed down the injunction Friday, after a jury had earlier found that Vonage’s service infringes upon three patents owned by rival voice carrier Verizon.
The injunction did not go into effect immediately. Vonage has requested a stay, a request that will be heard on April 6. It also intends to appeal the jury’s decision, and expects a stay to stay in effect throughout the appeals process, which could take some time.
No matter what happens on April 6, the reality is this litigation is going to take years to make its way through the legal system, Sharon O’Leary, Vonage’s chief legal officer, said in a statement.
The company’s share price regained $0.38 yesterday, an almost 13% improvement on its Friday closing price of $3. Even so, it’s still a far cry from the $17 opening price when the company executed its IPO less than a year ago.
It’s said the stock market hates nothing more than uncertainty. And, even in the face of Vonage’s confidence, there are still a lot of ifs.
We are optimistic the trial court judge will stay the injunction. If he doesn’t, however, we’re very confident the Circuit Court of Appeals will stay the injunction through the entire appeal process, O’Leary said. And once the case is up on appeal, we are confident that the appellate court will overturn the verdict based on the faulty claim construction of the patents involved.
It seems unlikely that Vonage will allow its customers’ telephone service to be switched off due to this injunction, regardless of what rulings are handed down. The company has had nine months to consider workarounds and other contingency plans.
A settlement with Verizon, perhaps, is not out of the question.
Perhaps the market over-reacted not due to the belief that Vonage is about to close down, but because the company’s current business plan is to acquire as many VoIP customers as possible and build up a substantial subscriber base that will lead it to profitability.
Analysts have been watching its customer acquisition costs and churn rates very carefully, and any event that could cause those numbers to tick up – customer uncertainty caused by a well-publicised injunction on its very service, for example – is probably not helpful to Vonage’s growth.
The company says it has seen 19 consecutive quarters of double-digit revenue growth, and that it doubled revenue to $607m last year.