Vonage Opens for Business, Again

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It's been a brutal last twelve months — give or take a few bad weeks — for Vonage. The company announced it was going public, and that it hoped to raise around $250 million. Shortly after, Vonage doubled the estimate. The optimism has shrunk into a corner since then.

Vonage promised 13.5 percent of its stock to existing customers, a loyalty thank you. (For a look at the IPO, check out Darren Dahl's article on the "Grim IPO.") When the stock immediately tanked, those loyal folks filed a class action suit on June 2, 2006, arguing that Vonage had misled them into early stock purchases. A few weeks later, Verizon joined the party with a suit alleging that Vonage had violated five of the telecom giant's patents. The following April, a jury found that Vonage had violated 3 of Verizon's patents (Verizon had claimed 5 violations). Judge Claude Hilton ordered Vonage to post a $66 million bond to pay damages, which was bad enough. In a move that inspired one of the company's lawyers to say Vonage was suffering a "slow strangling," Hilton barred Vonage from taking on any new customers. Soon after, CEO Michael Snyder resigned. He'd been brought on board to shepherd the company through its IPO. The stock, meanwhile, slid below $3 (not for the last time).

Better news — for Vonage, at least — arrived yesterday with the U.S. Court of Appeals decision, which drew back Hilton's ban on new customers. After the deluge of terrible news, Vonage is left to celebrate a most basic function of most companies: its ability to sign up customers. But is this just a pyrrhic victory? With the appeal still hanging over their head, would you sign up with Vonage? Or would you go to one of the scores of VoIP providers not living under appeals? Vonage needs to prove to current and potential customers that it remains a viable option, which is no easy task.