Vonage
(NYSE:VG) shares rose $0.12, or 3.88%, to $3.21 after a federal appeals
judge suggested a reprieve that might allow the VOIP provider to avoid
its patent problems with Verizon. This is a critical legal battle for
Vonage that could drive it into bankruptcy if the lower court decision
is upheld. The company's shares have reflected this risk, dropping over
50% this year alone. Meanwhile, if the company's patent issues go away
there could be significant share appreciation from these depressed
levels.
So, what was this reprieve? Well, the federal appeals
judge suggested that instead of blocking Vonage from using Verizon's
patented technology, perhaps the startup company could be given a time
period to develop an alternative method of developing its online
telephone service that doesn't violate Verizon's patents. If other
judges agree, the courts would then pass the case back down to lower
courts with instructions to consider that possibility. However, the
lower courts could decide to not even reconsider. So, there is a lot of
possibilities with only one leading to a positive outcome for Vonage.
Meanwhile,
Vonage indicated it was working on such a technology in May, but said
it could take months to get operational. The problem the company is
facing is the downtime between the development and implementation of
this new technology where it would be forbidden from making any income.
If a judge were to give the company time, it could save the company
from bankruptcy and give it a second chance at life. This makes VG a
stock
worth watching!
Related CompaniesAT&T Inc. (T)Sprint-Nextel (S)Alltel Corporation (AT)