This is what I had always feared!! Vonage in a regulatory filing has warned that its battle with Verizon could drag it towards bankruptcy. The company had been ordered to pay $58 million in damages plus 5.5 percent of all future earnings. Besides this battle it has another pending patent case with Sprint-Nextel.

Given below are some of the lines from the annual report of Vonage:

In the event of a successful claim of infringement or in the case of the Verizon litigation, we may need to obtain one or more licences from third parties, which may not be available at a reasonable cost, if at all. Vonage stated in its annual report. The defence of any lawsuit could result in time-consuming and expensive litigation, regardless of the merits of such claims

The battle has exhausted Vonage and it might default on convertible bond terms forcing payment worth $253.6 million. Up till now Vonage had been making positive statements on the patent issue but this annual report has come as a shocker as now the company has finally come face to face with reality. Vonage has been trying to resolve the patent issue with Sprint Nextel but there are also rumors making rounds that Sprint might takeover Vonage. The enterprise value is being pegged at $354 million and this makes the cost of 2.4 million customer base at $150 per customer which is any way quite less than the industry standards and this could be a good bargain for Sprint but before jumping to any conclusion you need to realize that the situation is quite complex as the subscriber base of Vonage is expected to fall at a rate of 27% per year and therefore anybody picking up this company should think twice before accepting the offer. It seems the company would inch closure to bankruptcy sooner or later and the clock has already started ticking.