Hey Vonage, it's a STAY, not a WIN

In the somewhat self-delusional world that some Vonage execs, analysts and users seem to inhabit, yesterday's stay of an order allowing Vonage to keep signing up new customers until the patent infringement issues with Verizon are settled amounts to a win.I have a hard time viewing this attitude as reality.

In the somewhat self-delusional world that some Vonage execs, analysts and users seem to inhabit, yesterday's stay of an order allowing Vonage to keep signing up new customers until the patent infringement issues with Verizon are settled amounts to a win.

I have a hard time viewing this attitude as reality.

Business Week's Olga Kharif has done a superb reporting job talking to analysts who would seem to agree with my belief that yesterday's results connote a stay, and not a win.

 

Noting that the same judges who ruled yesterday will be hearing the appeal on June 25, my fellow Portlander Olga quoted New York-based attorney Nolan Goldberg of  Proskauer Rose  as saying, "I don't think the court wanted to sign a death warrant on Vonage."

Olga adds:

The judges spent much of the two-hour proceeding—unusually long, according to lawyers—trying to understand the potential impact of an order to stop recruiting new customers. They also seemed to struggle to understand the claims and the arguments made in the case, delving into the nitty-gritty of voice-compression technology, servers' role in providing service, and figuring out which types of phones a decision may cover.

"It's very hard to tell from the briefs what's going on here," Olga writes that Chief Judge Paul Michel told a Vonage lawyer during the hearing. "Your motion papers don't explain the context and significance of the injunction and claims."

And as to the takeaway from the judgement itself?

Olga quotes Proskauer Rose attorney James Shalek as saying that the unusual length of the hearing "is an indication that the judges didn't have their hands around this case as much as they would like. "They were trying to understand the merits and didn't lean one way or another."

My fellow blogger and friend Jon Arnold, who is one of the sharpest telecommunications analysts I know, has an even more sobering take.

They need to reassure existing customers," Jon tells  Olga. "Ultimately, this Verizon thing is just a huge wake-up call. There are a lot of things wrong with their business model." 

In one of her conclusions, Olga echoes in theory what I have been saying for many months now. Vonage needs to find a wireless partner with which it can offer bundled services.

"Now may be the time for Vonage to invest in new features, such as a wireless offering, which would differentiate its service from that of cable companies like Comcast," she writes. "Comcast is poised to overtake Vonage as the nation's No. 1 Web-calling provider."

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