NEW YORK – Vonage Holdings Corp. reported a smaller quarterly net loss on Thursday, boosting its shares as the improvement eased some worries about the Internet phone company’s future after a patent infringement ruling.
Vonage’s first-quarter net loss totaled $72 million, or 47 cents per share, compared with a loss of $85 million in the same quarter a year earlier. The company, founded in 2001, was not publicly traded until May 2006.
Revenue rose 64 percent to $196 million, basically in line with the average forecast of analysts, according to Reuters Estimates.
Vonage shares were up 14 cents, or 4.6 percent, at $3.19, although they are still down about 80 percent from their initial public offering price of $17 a year ago.
Analysts said investors were also encouraged by the company’s announcement of progress in developing a way to work around Verizon Communications Inc. patents that a court ruled Vonage had infringed.
Vonage is currently appealing that ruling.
“Investors are somewhat happy to hear that the workaround is going to be deployed in the near future, which potentially reduces the uncertainty about the company’s viability,” Stanford Group analyst Clayton Moran said.
He added, however, that the outlook for Vonage was still challenging and that investors should remain wary.
The Verizon lawsuit has raised concerns about higher costs and management distraction, adding to worries about high marketing expenses as well as growing competition from cable operators and other Internet phone companies.
Analysts have said consumers, afraid of service disruptions stemming from Vonage’s legal woes, may cancel subscriptions or reconsider signing up for the company’s voice-over-Internet protocol (VOIP) services.
Churn, or the cancellation rate, rose to 2.4 percent from 2.3 percent in the previous quarter.
Vonage Chairman Jeffrey Citron told Reuters that the workarounds would not have an impact on customers.
“The design workarounds will have no impact on customers. The software upgrades will happen automatically,” he said in a phone interview.
The Holmdel, New Jersey-based company said it added 166,000 net subscriber lines in the quarter, about the same as in the previous quarter, bringing its total to nearly 2.4 million lines.
“There’s no doubt that it’s moderating,” Citron said, adding that it was an expected result of less marketing spending.
Vonage recently cut about 200 jobs as part of a cost-cutting plan. The company has said it would cut general administrative expenses by $30 million and marketing costs by $110 million in 2007.
Marketing costs for the first quarter rose, although they accounted for a smaller proportion of sales. Such spending totaled $91 million, or 46 percent of revenue, compared to $88 million, or 74 percent of revenue, a year ago.
The leading U.S. consumer VOIP provider said it would not comment on previously issued forecasts, due to uncertainty surrounding the Verizon litigation.
“Our overall thesis is that investors should remain cautious and skeptical about Vonage,” Stanford Group’s Moran said. He has a $3 target and a “hold” rating on the shares.