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Vonage's Vanishing Act

The stock drops below $1 just 16 months after its $17-a-share IPO.



shares broke below a dollar Wednesday as the struggling Net phone company absorbed its latest legal setback.

Vonage shares traded as low as 90 cents apiece after an appeals court upheld a patent infringement judgment against Vonage in a case against




That defeat came a day after Vonage was handed a defeat in a similar patent lawsuit brought by

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The unfavorable rulings have piled onto an already ugly investment story, with Vonage shares now having dropped 95% since their May 2006 IPO, in which Vonage sold shares to the public at $17 apiece.

Making matters worse, cash is getting tight at the Holmdel, N.J., voice-over-Net tech shop. Vonage has set aside $66 million to pay Verizon, and if this week's Sprint ruling stands, the company will soon have to tack on another $69.5 million to its penalty fund. A court ordered a review of the Verizon penalty Wednesday.

Regardless, investors haven't been optimistic about Vonage's viability. Thanks to a big-spending marketing effort and massive ongoing losses, Vonage has managed to burn through more than half the $491 million in cash it raised with its IPO.

As of June, Vonage had $277 million in cash and investments, and it carries about $253 million in total debt, according to the company's most recent quarterly filing. In the Aug. 13 filing, Vonage said it had enough revenue and cash to fund operations "for at least the next 12 months."

A Vonage representative said Wednesday that "we don't anticipate any modifications to our statement," referring to the 12 months or more of funding. The representative added that the company has sufficient cash reserves to pay the Sprint judgment.

Vonage shares fell 32 cents, or 24%, to 98 cents in midday trading Wednesday.