Vonage has been riding in rough waters for the past month.
The company lost a patent infringement case brought forth by Verizon stating
that the company had infringed on VoIP patents. Verizon was in turn awarded $58 million and 5.5%
in royalty payments for any future infringements.
The company has also been faced with fewer and fewer new subscribers.
Vonage has a seen its new subscribers fall from 256,000 in Q2 2006 to 204,591
in Q3 2006 and to 166,000 in Q4 2006. The company also lost $72 million during
Q4 2006 compared to a loss of $65 million for Q4 2005.
Despite the abundance of bad news, Vonage executives were
optimistic. "We are confident in Vonage's future health, growth prospects
and longevity," said Vonage chairman and chief strategist Jeffrey R.
Citron in March.
Today, another bit of bad news has turned up on deck for
Vonage. Michael Snyder yesterday stepped down as Vonage's Chief Executive Officer
and resigned from the company's Board of Directors. In the interim, Citron has
been named as interim CEO.
"Mike has made valuable contributions to the growth of
our business and we will miss him. We thank him and wish him well in his future
endeavors," said Citron in a statement.
In addition to the leadership change, Vonage has also
announced that it will begin new cost-cutting measures to stem the company's
losses. "In order to strengthen Vonage's financial position, we are taking
a number of measures to reduce our costs and operating expenses. We remain
focused on improving our competitive position in the marketplace," Citron
continued.
The cost-cutting measures will including reducing its
marketing expenses by $100 million and its general and administrative budget by
$30 million through employee layoffs.
The future outlook isn't
too bright for Vonage. "While cutting marketing expenses is a wise move, it doesn't meaningfully
change the outlook," said Stanford Group analyst Clay Moran. "Vonage
is a company on life support mainly because they are running out of
money," said Leo Hindery of InterMedia Partners.