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More trouble for Vonage

Janet Babin Jun 20, 2006

TEXT OF STORY

MARK AUSTIN THOMAS: When it rains, it pours for Internet phone provider Vonage. First, the company had a disastrous debut on the New York Stock Exchange. Then shareholders served up a class action lawsuit over that IPO. And yesterday, Vonage was sued by Verizon. Verizon claims Vonage is using their patented technology to offer phone service over the Internet. Janet Babin gives us a damage report.

JANET BABIN: Vonage stock dropped 12 percent yesterday as word on the Verizon lawsuit spread.

The stock price has fallen almost 50 percent since its initial public offering of $17 per share. But a few analysts remain bullish on the Internet phone company.

Daniel Berninger is an analyst with Tier One Research. He says the lawsuit is the price the start up has to pay to break a monopoly.

DANIEL BERNINGER:“The lawsuits take four or five years to play out, and then there’ll be another one. Verizon will be playing about five or six different activities against Vonage for the foreseeable future.”

Berninger says Vonage can survive so long as it keeps adding customers. It has about 1.6 million subscribers, and added some 300,000 in the first quarter of this year.

I’m Janet Babin for Marketplace.

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