February 14th, 2008
Vonage's immediate future: debt re-fi, more patent trolls
Our own Larry Dignan has been looking at Vonage’s year-end financial report, and points out Vonage’s debt issues.
Noting Vonage’s patent infringement settlement payments for more than $200 million for the year, Larry notes that:
To wit: Vonage had $190 million in cash, marketable securities and restricted cash as of Dec. 31. A year ago, Vonage had $508 million on that same basis. Forking over more than $200 million in settlements hurts–especially when you lose 3 percent of your subscriber lines each quarter. Vonage ended 2007 with 2.6 million lines total.
However, Vonage isn’t out of the woods by any stretch. The company disclosed it has $253 million in convertible debt, which can be cashed in at the end of 2008. That math doesn’t quite work since Vonage only has $190 million at its disposal–actually $151 million excluding restricted cash.
Vonage is pursuing a re-fi, but although they are a company and not a homeower, these are not exactly the best times for that. And when you owe more money than you hold in assets, lenders of any stripe are likely to drive a hard bargain.
And, what about the patent trolls? They may be looking at Vonage as a company that will settle to make these disputes go away.
Russell Shaw is an enterprise computing journalist, analyst and author based in Portland, Oregon. See his full profile and disclosure of his industry affiliations.
