[infoshare] Vonage in Crisis
- From: "Luis Guerra" <blindsingle@xxxxxxxxxxx>
- To: "InfoShare" <InfoShare@xxxxxxxxxxxxx>
- Date: Sat, 14 Apr 2007 00:54:35 -0400
Vonage in Crisis
VoIP leader says goodbye to CEO and slashes marketing budget.
April 12, 2007
By
Cassimir Medford
Internet telephony leader Vonage on Thursday said CEO Michael Snyder stepped
down and that the company will slash costs in a bid to turn around its
struggling
business.
The Holmdel, New Jersey-based company, which recently lost a critical patent
dispute with Verizon Communications, said company founder and chairman
Jeffery
Citron would take over as interim CEO.
Vonage said it was cutting its crucial marketing expenses by about 25
percent and administrative expenses by $30 million. The moves come less than
a week
after a federal judge banned Vonage from signing up new customers, a major
blow to a company that operates on very thin margins, an analyst said.
"This is a really bad time for Vonage because it now has to survive on less
money," said Yankee Group analyst Zeus Kerravala. "Can they survive running
lean and mean? The jury is out on that."
An appeals court later granted Vonage a stay of the injunction on signing up
new customers while Vonage appeals the original lower court ruling.
About a month ago a jury in Alexandria, Virginia, sent shockwaves through
the VoIP industry when it ruled that Vonage had infringed on three of
Verizon's
patents.
The patents, which apply to various ways Internet calls traverse public
networks, are fairly broad and could well affect many of Vonage's voice over
Internet
Protocol (VoIP) competitors, Mr. Kerravala said.
The jury ordered Vonage to pay $58 million in damages to Verizon, along with
royalties of 5.5 percent on future sales.
Vonage currently spends $275 to acquire each new customer. The company,
which has more than 2 million subscribers, is one of the more prolific
advertisers
both on TV and the Internet.
"I don't know if they can survive as they are currently constituted," Mr.
Kerravala said. "There may be need for wholesale leadership change and that
perhaps
could only come from the company being acquired."
And the most likely suitor could be Verizon, Mr. Kerravala said.
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