GO
Loading...

Vonage Shares Close at All-Time Low On Legal Setback

Vonage Holdings shares were hammered on Friday after a federal judge agreed to bar the company from using Internet phone technology owned by much bigger rival Verizon Communications.

The stock , which was halted for about two hours on the New York Stock Exchange, closed at a new historical low as investors sent shares down wider than 25%.

Vonage expressed confidence Friday afternoon that its customers would not experience service interruptions as it attempts to overturn the ruling in appeals court.

"Our fight is far from over," Vonage CEO Mike Snyder said in a prepared statement. "We remain confident that Vonage has not infringed on any of Verizon's patents - a position we will continue vigorously contending in federal appeals court - and that Vonage will ultimately prevail in this case."

U.S. District Judge Claude Hilton said in court he would delay signing the order for two weeks to give Vonage time to try to convince him to stay the injunction while it appeals the entire patent infringement case. "I will sign the injunction at the time I rule on the stay," he said.

Hilton agreed with Verizon that it would suffer irreparable harm if he allowed continued infringement of the voice-over-Internet Protocol (VoIP) technologies that allow consumers to make calls over the Internet.

He rejected arguments by Vonage that the harm to Verizon , the No. 2 U.S. telephone company, was outweighed by other factors, including the public interest.

"I don't think it's going to kill Vonage," said Albert Lin, an analyst at American Technology Research. But he said the legal costs and management distractions were disruptive.

Stanford Group analyst Clayton Moran, said Vonage's subscriber growth could slow due to the continued legal wrangling and it might have to spend more to work around the Verizon patents.

"It should likely continue as an independent company, but their operating challenges will have increased," said Moran.

A jury on March 8 found Vonage had infringed three patents owned by Verizon. The jury said Vonage must pay $58 million plus 5.5% royalties on future sales.

"They could not have been commercially successful if they had not taken these patents we have and put them into their technologies," Dan Webb, an attorney for Verizon, said at Friday's hearing on the injunction request.

Webb also cited documents Vonage filed with the court under seal, saying an injunction would cause "enormous business difficulties" for Vonage. Webb said the Vonage filings suggested that Vonage "can't live with an injunction because of the way their technology is designed."

Vonage's chief lawyer, Sharon O'Leary, told Reuters outside court that Vonage customers would not be affected by the case. She declined to comment on the sealed documents the company filed with the court.

She was pleased the judge gave the company two weeks to try to stop the injunction. "We will get the stay, either through the district court or the Federal Circuit Court of Appeals," O'Leary said.

Vonage has been public for less than a year, and its stock has lost value consistently since its initial public offering at $17 a share on May 23.

Contact U.S. News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More

Don't Miss

U.S. Video