Vonage Up On Inexplicable Rumors Sprint May Buy It

Includes: S, VG
by: Eric Savitz

Even before I give you the rumor, here’s my advice: be skeptical. That said, here goes: There are apparently rumors that Vonage (NYSE:VG) has held talks about selling itself to Sprint Nextel (NYSE:S).

The rumors stem from a story published yesterday by Light Reading which said that Vonage has been holding talks with Sprint to settle a still-pending patent infringement lawsuit Sprint has filed against Vonage.

“Our sources confirm Sprint and Vonage have been in talks about the patent issue, and one source says Vonage is considering selling itself to Sprint,” Light Reading reports.

There are some holes in this story. For starters, remember that Vonage is still grappling with the possibility of a service shutdown after a federal jury found the company to be in violation of three Verizon (NYSE:VZ) voice over IP patents. At a hearing scheduled for April 24, a federal appeals court will decide whether to remove a stay of a lower court order which would have barred the company from signing up new customers.

Unless Sprint has a license to use those patents, or has an obvious way to avoid them - and the patents are very broad in nature - it is hard to see why it would want to buy Vonage, and certainly not before the litigation has reached a conclusion.

Nonetheless, Vonage shares were higher on the news; the stock was up 13 cents yesterday at $3.42, and has traded as high as $3.68.