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Sprint, Vonage Strike $80 Million Patent Deal
by Karl Bode 11:19AM Monday Oct 08 2007 Tipped by Rick See Profile
A federal jury recently ruled that Vonage infringed on six of Sprint's patents, and ordered the VoIP operator to pay $69.5 million in damages and 5% of all future revenue. Vonage says they've settled their patent dispute with Sprint for a cool $80 million. According to the company, that total includes $35 million for past use of Sprint's patents, $40 million for a "fully paid future license" and $5 million in "repayment for services."
quote:
"We are pleased to resolve our dispute with Sprint and enter into a productive future relationship," said Sharon O'Leary, General Counsel for Vonage. "We believe this deal is good news for Vonage, our customers and our shareholders. It allows us to put this litigation behind us and continue to focus on our core business by removing the uncertainty of legal reviews and long term court action."
Of course, there's still some outstanding litigation with Verizon to attend to. Vonage shares jumped 40% on the news of the Sprint settlement this morning.

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KrK
Heavy Artillery For The Little Guy
Premium
join:2000-01-17
Tulsa, OK

Shares jump 40%?

Hmm. I need to buy a bunch of Vonage shares! ... Yesterday.



I don't really think having to pay this kinda money is good news, however, but I guess a lot of people thought Vonage was going to fold up.

FFH
Premium
join:2002-03-03
Tavistock NJ
kudos:5

Re: Shares jump 40%?

said by KrK:

Hmm. I need to buy a bunch of Vonage shares! ... Yesterday.



I don't really think having to pay this kinda money is good news, however, but I guess a lot of people thought Vonage was going to fold up.
Instead of $24.95/mo, the price may go up to something like $29.95/mo. But that starts to get Vonage in to what their competitors charge for service.
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tivoboy

join:2004-05-10
Menlo Park, CA

Re: Shares jump 40%?

I think they will simply hold pricing steady, and just pay the fine. I don't read a going forward fee, but even if the one time royalty payment was a going forward fee, they might want to pay it over time.

If I were S, I would want the money from VG now though.

At 175m, now 300m or so market cap, for 2.4m subs, that is about 120$ a sub for someone to buy. About what people have typically paid. I think the company should be valued at about 500mm, which would make this a 3.00 stock?

I'm not jumping back in on this for a while though. I like it better in the .9 range

Dezbend
Premium,MVM
join:2001-04-20
said by KrK:

...but I guess a lot of people thought Vonage was going to fold up.
Which is probably why Sprint made the one time settlement deal instead of 5% of future profits. Especially with the Verizon suite still outstanding, Sprint probably didn't want to take the chance of having a 5% take in a bankrupt business.
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MrMaster
jetsetter
Premium
join:2000-12-16
St Thomas, VI
yeah i sold my vonage shares at 99 cents. It is currently up 98 cents on the market.

I love it when I get screwed. Such a warm feeling.

dodgetech2

join:2002-01-01
Gouldsboro, PA

Re: Shares jump 40%?

said by MrMaster:

yeah i sold my vonage shares at 99 cents. It is currently up 98 cents on the market.

I love it when I get screwed. Such a warm feeling.
Yup, I bought it 2 weeks ago at .96.....everyone here was calling me stupid.....Just sold it an hour ago..:)

I was gonna hold it a bit longer, but didn't want to risk it anymore.....
I'll grab some more next week, when it belly flops again..and its gonna, mark my words.

FFH
Premium
join:2002-03-03
Tavistock NJ
kudos:5

Re: Shares jump 40%?

Chart of last 5 days Vonage stock:


dvd536
as Mr. Pink as they come
Premium
join:2001-04-27
Phoenix, AZ
kudos:4

Re: Shares jump 40%?

said by FFH:

Chart of last 5 days Vonage stock:
Still a far cry from what the IPO opened at.
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tivoboy

join:2004-05-10
Menlo Park, CA

Re: Shares jump 40%?

Okay, now I feel stupid for selling the .91 at 2.05. 2.55$? What?

woody7
Premium
join:2000-10-13
Torrance, CA

hmmm.....

"Instead of $24.95/mo, the price may go up to something like $29.95/mo. But that starts to get Vonage in to what their competitors charge for service."

Isn't this what it is really about. Instead of competing on price, sue them into oblivion. Just what is the patent dispute difference between Verizon and Sprint?
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BlooMe

holocron
Premium
join:2004-06-28
Minneapolis, MN

welcome to...

Sprinage

Rick
Premium,MVM
join:2001-02-06
Waterbury, CT

Actually..

the stocks up 78% right now.
If I bought recently, I'd sure be taking those one day profits.

As for the deal, I guess it's good they get it out of the way but it still is very pricey for Vonage.

The jury awarded sprint 58 Million + 5.5% of future revenues.

This deal calls for a one time payment of 80 Million instead.

While I guess over time that could benefit vonage..it is yet another big chunk of their cash they're blowing on their way to profitability. Not to mention the Verizon payment still pending.

I think Sprint made a wise decision and this will just let them bow out of the whole deal. Who wants to be bothered monitoring vonages future revenues..waiting on future payments..and hoping they survive to ever really realize the 5% returns?
This way Sprint can just take the cash and invest it..and easily get their own 5%..and more..returns on it.

For shareholders today..i'd take the 70% + returns on the stock..and run!

~Rick..
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The Coyote captured the RR! Roadrunner Rick is now Comcastic!
DMS1

join:2005-04-06
Plano, TX

Re: Actually..

said by Rick:

As for the deal, I guess it's good they get it out of the way but it still is very pricey for Vonage.

The jury awarded sprint 58 Million + 5.5% of future revenues.

This deal calls for a one time payment of 80 Million instead.
I think the deal is about more than just playing with numbers. According to the MSNBC article here: »www.msnbc.msn.com/id/21192277/, Vonage gets a license for a hundred VOIP-related patents from Sprint.

Rick
Premium,MVM
join:2001-02-06
Waterbury, CT

Re: Actually..

I'm not saying the deal won't benefit vonage.
Providing they make it, over the long term, this deal should prove to be better for them than a constant 5.5% of revenues royalty payment hanging over their heads.

It also puts the whole distraction of this suit to rest..and lets them get on with business.

Vonages big challenge now is to get profitable before their money runs out. And, at this rate they're burning through it very fast.

Their next challenge is surviving the threat from the cable co's and othe voip providers. Even AT&T is supposedly going to get into the game with uverse voip.

And finally, as for sprint..they know it can be an ugly business being involved in someone elses. And this lets them cut loose of this whole thing with Vonage..and move on themselves.
They get to bank or invest 80 million..which will certainly offset whatever a future royalty would have given them.
Plus..they don't have to proceed any longer with the legal process.

It's a good deal all the way around, but still the winner I think is sprint. After all, vonage IS paying them 80 Million.
--
The Coyote captured the RR! Roadrunner Rick is now Comcastic!

vonageeeee

@sprintlink.net
Vonage won't have to worry about Verizon on an ongoing basis now since they are using Sprint's technology. All they have to do is pay a fine and make sure they're not using any Verizon patent technology from here on out.
tmc8080

join:2004-04-24
Brooklyn, NY
Reviews:
·ooma
·Optimum Online
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2 million and counting... DOWN

This spells price increase down the road, 2008...
also spells something else.. the countdown as in subscriber loss..

keep in mind vonage will now hump customers for a $40 disconnect fee... personally, I wouldn't pay it, what is really involved that cost $40 to cancel an account?
Punching some buttons in a computer.. not as if it's a telco pots disconnect, neither is terribly expensive to do at the company's cost... probably mere pennies.

AnonProxy
Premium
join:2001-05-12

Vonage paid $15MM a month for adverts

Paying $80 million for the forever future use of the patents is a GREAT deal for them.

Showstopper

@verizon.net

Maybe

Get ready for a merger u will see if u cant beat em buy em