Vonage’s Request For Verizon Rehearing Was Likely Expected (VG, VZ, S)

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Vonage Holdings (NYSE:VG) announced today that the company has filed a motion for a review by the original three-judge panel or the full panel of the U.S. Court of Appeals for the Federal Circuit sitting en banc of the September 26 decision in its patent litigation with Verizon (NYSE:VZ). En banc signifies a decision by the full court of all the appeals judges in jurisdictions where there is more than one three- or four-judge panel.  After the settlement with Sprint Nextel (NYSE:S), this was probably an event that could have been predicted.

These lawsuits are going to be severe for the company if it can’t get the issues resolved in an amicable way.  If it has too boost prices to stay afloat either too much or too many times it will drive customers away as the benefits will be less compared to today.  We saw the near doubling of the stock when the Sprint settlement (post-judgment) was announced.  If the company can prove they have the durability to survive and get the major cases behind it, then we could see another "off to the races" trade. 

Verizon obviously does not really want to settle at least in the same manor as Sprint.  This won’t be the first such attempt to get a do-over or to extend some form of an olive branch out.  Expect more news in the weeks ahead.  We probably won’t see the independent VoIP leader post results and subscriber/churn numbers for another month or so.  Vonage shares are down almost 12% today at $1.93.

Jon C. Ogg
October 10, 2007