Vonage Narrows Loss in Q1, Says Patent Workaround is in Progress

By Spencer D. Chin

TMCnet Web Editor

 

Vonage (News - Alert) finished a turbulent first quarter by reporting a narrower year-to-year loss on higher year-over-year sales, as the company saw an increase in subscribers.

 

For the quarter ended March 31, Vonage saw sales of $196 million, a 64% increase from $120 million in the first quarter 2006, driven by strong customer line growth over the course of the year and higher average revenue per line.

 

Vonage’s first-quarter net loss was $72 million, or $0.47 per share, down from a net loss of $85 million reported in the first quarter 2006.

 

The company reported it added 166,000 net subscriber lines during the quarter and finished with nearly 2.4 million lines in service.

 

But how Vonage fares in the second quarter remains to be seen. Over the past month, the company taken the brunt of the fallout from the March ruling that found Vonage had several of Verizon’s (News - Alert) patents and would have to pay $58 million in damages, plus royalties.

 

In addition, it remains to be seen how many subscribers Vonage will retain because of concern over the company’s future.

 

Recently, Vonage slashed 200 jobs and was denied its request to have the patent case retried.

 

Jeffrey Citron, chairman and interim chief executive of Vonage, said in a statement, "We have battled through an extremely difficult quarter and will continue the fight in the courtroom. While the patent litigation has challenged our business, it has not distracted our focus on providing consumers with the opportunity to choose a better phone service.

 

A major hurdle facing Vonage continues to be trying to find a workaround for Verizon’s patents the company has been found to violate. Though Vonage earlier reported the patents could be difficult to work around, Citron said Vonage was making progress.

 

"We believe we have workable designs for the two name translation patents and intend to begin deploying the solution to our customers shortly. In addition, we are continuing our development of the workaround for the wireless patent,” Citron stated.

 

He declined to give further details of the patent workaround during a conference call with analysts Thursday morning.