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Vonage stock tumbles 14% percent; here's what I think will happen next

Geez, man. If that grab up there were colored white rather than blue, it could pass for a mountain, and then a treacherous snow field below.
Written by Russell Shaw, Contributor on
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Geez, man. If that grab up there were colored white rather than blue, it could pass for a mountain, and then a treacherous snow field below.

But no. That's the minute-by-minute depiction of Vonage's misadventures on the Nasdaq today. A day in which Vonage ended at $4.17 a share. The all-time low was 69 cents (-14.20%) below yesterday's ending mark of $4.86.

I know this isn't a stocks blog, but you should realize that when Vonage investors freak like this, and use an unfavorable patent infringement decision to drive the stock to another all-time low, that things are not peachy. One thing that I've learned covering BlackBerry is that investors hate patent-lawsuit uncertainty.

But the two situations aren't really that similar. Sure, BlackBerry-maker Rsearch In Motion's stock plunged into the 50s in the darkest days of the patent dispute with NTP- only to rebound into the $140+ range just several months later. But that jump was largely fueled by compelling new products. And even though Vonage may well try that route with some more cool third-party gear, that gear is not central to the main Vonage experience and even value proposition as say, a BlackBerry with a camera has been.

So what happens now? 

The ultimate effect could be felt in the executive office, where very very anxious major investors and IPO-backers could feel the irrestible demand for major action. And if decision-makers take comfort from the fact that today's closing price was 40 cents greater than today's $3.87 a share low, the end-of-session spike could best be explained by last-hour bargain-hunters who propped up the manic trading pace of 10,557,900 shares for the full day.

So what happens now?

Probably there will be an upward creep until later this month when we hear if Vonage will be required to disable elements of their service in order to comply with the patent ruling. If no, Vonage appeals go forward and the stock inches back up $5 a share and quite likely higher.

The danger for that is that the "we can win this case on appeal" hubris may attach itself to Vonage's already existing, egotistical attitude that they can go it alone and don't need major triple-play partners. 

If Vonage is ordered to shut down though?

We'd have to see how extensive that order is, and if there is a time-adjustment factor. It could mean anything from Chapter 11 reorg to fire sale of subscriber lists to what I think is the most likely result- a buyback of the firm's shares, followed by a major private equity investment that will take Vonage private.

Then, and only then, will come the fixes that current Vonage management seems incapable of executing. Or even realizing.

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