Vonage ( VG) is digging deeper into its dwindling cash supply, agreeing to pay Sprint ( S) $80 million to settle a patent infringement ruling.
The Holmdel, N.J., voice-over-the-Net telco says it has entered a licensing agreement with Sprint. The deal calls for Vonage to pay Sprint $35 million for use of the calling technology to date and $40 million for future use. Another $5 million was tacked on as a prepayment charge. Vonage shares surged 40% Monday on news of the deal. Late last month, the stock tumbled below a dollar after a jury ruled the Vonage was infringing on Sprint's patents -- the second patent defeat for the company. Vonage lost a similar case to Verizon ( VZ) earlier this year. That ruling recently was sent back for a review. The unfavorable rulings have piled onto an already ugly investment story, with Vonage shares now having dropped 95% since their May 2006 IPO price of $17. Vonage has set aside $146 million to settle the two patent defeats. The company now has about $197 million in cash and, according to the company's most recent quarterly filing, about $253 million in total debt. Vonage has managed to burn through nearly $300 million of the $491 million in cash it raised with its IPO. "We believe this Sprint deal is good news for Vonage, our customers and our shareholders," the company said in a press release. "It allows us to put this litigation behind us and continue to focus on our core business by removing the uncertainty of legal reviews and long term court action." Vonage shares recently were up 47 cents to $1.62.