Vonage close to patent fix

IP telephony service provider says it will have a work-around in the next few months to the patents it was found to infringe.
Written by Marguerite Reardon, Contributor
Vonage is close to coming up with a technical fix that could solve its patent infringement problems, Chief Executive Jeffrey Citron said during the company's quarterly earnings conference call Thursday.

In March, a jury in Virginia found Vonage had infringed on three patents held by Verizon Communications. Vonage is currently appealing the decision.

Citron said the new technology, which will provide a work-around to the first two patents that describe how IP addresses are mapped to telephone numbers, can be installed through software downloads. The fixes are not expected to cost Vonage much to implement, Citron said. And the installation will require minimal effort from customers. He also said the company is working on a solution for the third patent, which deals with the transmission of voice over Internet Protocol calls over Wi-Fi networks.

Vonage's net loss for the first quarter was $72 million compared with a loss of $85 million in the same quarter a year earlier. The company was not publicly traded in the year-earlier quarter. Revenue was up 64 percent to $196 million from $119.7 million a year ago.

But the company's legal troubles may have affected its ability to sign up new customers. In the first quarter, the company signed up 166,000 new subscribers. During the same quarter a year ago, it signed up 328,000 new subscribers.

Vonage, which spent an average of $275 to acquire each new customer in the quarter, said that its churn rate, or the rate at which customers drop its service, rose to 2.4 percent compared with 2.3 percent for the previous quarter.

In April, Vonage said it would cut its advertising budget by $110 million to $310 million for 2007. It also plans to reduce its workforce by 10 percent to help curb spending. The company's CEO Michael Snyder also stepped down last month. Citron, who is acting as interim CEO, said during the conference call that the company will update investors on its next conference call regarding its CEO search.

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