Executives at Vonage Holdings Corp. are so upbeat in public talks these days it's hard to believe the Internet phone company faces a court order that may cut off its lifeblood: new customers.
Vonage executives have said they expect to announce next month new technology aimed at getting around Verizon Communications Inc.'s patents, which a judge ruled that Vonage was infringing on.
But in court and regulatory filings this week, Vonage said it was months away from a work-around. And if an appeals court does not lift the injunction that would prevent the money-losing company from servicing new customers, Vonage said it might suffer "irreparable damage" leading to layoffs, a customer exodus and even "bankruptcy or liquidation of the company."
The company already has announced a $140-million cost-cutting measure that was expected to lead to layoffs of up to 10% of its 1,800 workers.
Vonage shares slid 6% on Wednesday to a $3.11, near a record low and a fraction of the $17 investors paid in the company's initial public offering almost a year ago.
Even if Vonage wins a stay of the injunctions and goes on to defeat Verizon on appeal, it may gain little more than extra time. Analysts said Vonage was likely to be a historical footnote: a pioneering company that changed an industry but couldn't stick around long enough to enjoy it.
"It seems like everything is working against them," said Robert V. Green, a telecommunications industry strategist with Briefing.com.
The patent dispute is the most urgent of Vonage's troubles, but not necessarily the biggest. The Holmdel, N.J., company faces major competitive and operational obstacles.
Cable TV companies controlled 65% of the market for Internet-based phone calling at the end of December -- compared with 23% for Vonage -- and were growing faster than Vonage. Analysts said Vonage's $420 million in cash may not last long enough for the company to turn profitable.
"It doesn't get any easier for Vonage," said analyst Clayton F. Moran at Stanford Group.
Jeffrey A. Citron, Vonage's co-founder, chairman and interim chief executive, won't hear any of it.
"This is not a dire picture," he insisted in a recent interview. "Vonage established a great plan and has a phenomenal business."
The Internet phone company has advertised heavily to build a national brand and educate consumers about alternative phone service that was based on a technology called voice over Internet protocol.
