Vonage CEO Blasts Media ‘Speculation’

Taking a page from Mark Twain, Vonage’s CEO blasted as “wrong
and irresponsible” recent media reports and comments from analysts that suggest the Internet phone company’s survival rests with the outcome of a Verizon patent lawsuit.

Vonage CEO Mike Synder dismissed as “frivolous” Verizon’s patent infringement lawsuit now underway in Virginia. “We are confident we have not infringed on any of Verizon’s patents and, in any case, we believe the Verizon patents are invalid,” Snyder said in a statement.

“Regardless of how this litigation is ultimately decided, Vonage’s customers
will see no change whatsoever to any aspect of their phone service,” the
Holmdel, N.J., company’s statement continued. Vonage said it had financial
reserves and contingency plans for maintaining uninterrupted service.

Snyder trounced reports following last week’s opening statements implying a
Vonage loss in the case could mean extensive retooling of its product or customer loss. “It is wrong and irresponsible to presuppose either the outcome or the impact” of the lawsuit
on Vonage, Snyder said.

Last week, Verizon attorney Daniel Webb told a Virginia jury Vonage owed
$197 million for infringing five patents surrounding Internet calling
technology. Webb also claimed Vonage used the patented technology to “lure”
away Verizon landline subscribers – a charge angrily denied by Vonage.

Verizon Communications sued
Vonage last year, and is asking a federal court to stop Vonage from using patents that the phone company claims were stolen. “Vonage has gained 1.1 million new customers — many of whom are Verizon’s former customers,” the New York telecom asserted in amended court papers filed
last month.

In court, Vonage shot back. “Verizon has lost millions of customers, and they’ve lost them for a variety of reasons, not because of Vonage,” Vonage attorney Roger Warin
told the Virginia jury.

Vonage is also developing a workaround for five VoIP patents Verizon claimed were
infringed, a source familiar with the situation told internetnews.com. The workaround would enable subscribers to continue using the service. Whatever the trial’s outcome, subscribers won’t be hurt, insisted Vonage.

Yankee Group analyst Pat Monaghan disagrees. The trial “could eventually mean the end of Vonage,” he said. If the legal battle detracts from Vonage’s goal for profitability in 2008, investors could dump the stock, Monaghan told internetnews.com. “Vonage is in a race to become profitable.”

Vonage controls about one-fifth of the 8.5 million VoIP subscribers in
2006, according to Yankee Group. Compared to the growing number of cable
companies entering the Internet phone market, “Vonage is the smallest
fish in the pond,” said Monaghan.

Vonage took issue with the comments.

“We don’t believe our side of the case has been told accurately,” Brook
Schulz, Vonage vice president of communications, told
internetnews.com. “Despite reports to the contrary, we’re soldering
on.” Vonage’s statement was designed to forestall the impact of what Schulz
termed “any inaccurate reporting.”

Verizon was not immediately available for
comment.

“This is pretty clear he’s talking to Wall Street,” Jupiter Research
analyst Joe Laszlo told internetnews.com. Vonage had no choice to
fight back, agreed IDC’s Voip analyst, Will Stofega.

And it is a fight. As VoIP is predicted to nearly double to 14.5 million U.S. subscribers, Verizon finds its landline business stagnating, Stofega said.

Vonage shares were up more than two percent to $5.50 in late morning
trading.