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End Could Be Near for Vonage As CEO Quits
[April 12, 2007]

End Could Be Near for Vonage As CEO Quits

TMCnet Web Editor
In another sign that the curtain may be closing for Vonage (News - Alert), company chief executive Michael Snyder has resigned, with the VoIP provider also announcing it would lay off part of its workforce in a cost reduction move.

Jeffrey A. Citron, Vonage’s chairman, will serve as interim chief executive until a replacement is found, according to a statement released late Wednesday.
The statement said Vonage plans to reduce its marketing expense by approximately $110 million, with the company expecting marketing expenditures of $310 million for 2007. While Vonage did not say how many many workers it would cut, the company plans to reduce its G&A by $30 million through the reductions and consolidation of operations.

The turn of events for Vonage is not surprising, even though the company has tried to reassure customers it is financially solvent and was expecting to expand its operations.
The past month has been all downhill for Vonage. In early March, a federal jury ruled the company infringed three of Verizon’s patents and would have to pay $58 million in damages, plus future royalties.
On March 23, the court issued an injunction barring Vonage from using Verizon’s patents, but gave the VoIP provider a reprieve by stating it would not enforce the ban for several weeks after hearing Vonage’s appeal. But last week, a federal judge ruled Vonage could no longer sign up new customers, in effect making long-term survival of the company difficult.
How long Vonage remains solvent is anyone’s guess. In the Wednesday statement, the company reported preliminary March quarter revenue of $195 million, with gross subscriber line additions of 332,000 and net subscriber line additions of 166,000. Average monthly customer churn was 2.4%.

Citron said the cuts were needed to ensure the company’s survival.
“In order to strengthen Vonage's financial position, we are taking a number of measures to reduce our costs and operating expenses. We remain focused on improving our competitive position in the marketplace,” Citron said.
Spencer Chin is a contributing editor for TMCnet. To see more of his articles, please visit his columnist page.
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