1272830--4/17/2007--VONAGE_HOLDINGS

related topics

{product, market, service}

{system, service, information}

{stock, price, operating}

{acquisition, growth, future}

{property, intellectual, protect}

{control, financial, internal}

{regulation, government, change}

{product, liability, claim}

{stock, price, share}

{financial, litigation, operation}

{provision, law, control}

{customer, product, revenue}

Risks Related to Our Business We are, and may in the future be, subject to damaging and disruptive intellectual property litigation that could materially and adversely affect our business, results of operations and financial condition, as well as the continued viability of our company. Our efforts to design around third-party intellectual property and implement such design arounds, including in connection with our Verizon patent litigation, may cause disruptions to our service. We have incurred quarterly losses since our inception, and we may continue to incur losses in the future. If we are unable to compete successfully, we could lose market share and revenue. Decreasing telecommunications prices may cause us to lower our prices to remain competitive, which could delay or prevent our future profitability. If VoIP technology fails to gain acceptance among mainstream consumers, our ability to grow our business will be limited. Certain aspects of our service are not the same as traditional telephone service, which may limit the acceptance of our services by mainstream consumers and our potential for growth. Our emergency and E-911 calling services are different from those offered by traditional wireline telephone companies and may expose us to significant liability. Flaws in our technology and systems could cause delays or interruptions of service, damage our reputation, cause us to lose customers and limit our growth. Our ability to provide our service is dependent upon third-party facilities and equipment, the failure of which could cause delays or interruptions of our service, damage our reputation, cause us to lose customers and limit our growth. We may not be able to maintain adequate customer care during periods of growth or in connection with our addition of new and complex Vonage-enabled devices, which could adversely affect our ability to grow and cause our financial results to be negatively affected. If we are unable to improve our process for local number portability provisioning, our growth may be negatively affected. A higher rate of customer terminations would negatively affect our business by reducing our revenue or requiring us to spend more money to grow our customer base. We may require significant additional capital to pursue our growth strategy, but we may not be able to obtain additional financing on favorable terms or at all. As a result of being a public company, we incur increased costs that may place a strain on our resources or divert our management s attention from other business concerns. Because much of our potential success and value lies in our use of internally developed systems and software, if we fail to protect them, it could negatively affect us. We are currently subject to securities class action litigations, the unfavorable outcome of which might have a material adverse effect on our financial condition, results of operations and cash flows. Future disruptive new technologies could have a negative effect on our businesses. The past background of our founder, Chairman, Chief Strategist and interim Chief Executive Officer, Jeffrey A. Citron, may adversely affect our ability to enter into business relationships and may have other adverse effects on our business. Regulation of VoIP services is developing and therefore uncertain, and current or future legislative, regulatory or judicial actions could adversely affect our business and expose us to liability. The success of our business relies on customers continued and unimpeded access to broadband service. Providers of broadband services may be able to block our services or charge their customers more for also using our services, which could adversely affect our revenue and growth. If we fail to comply with FCC regulations requiring us to provide E-911 emergency calling services, we may be subject to fines or penalties, which could include disconnection of our service for certain customers or prohibitions on marketing of our services and accepting new customers in certain areas. Taxes and 911-related fees will increase our customers cost of using our services and could result in penalties being imposed on us. Our service requires an operative broadband connection, and if the adoption of broadband does not progress as expected, the market for our services will not grow and we may not be able to grow our business and increase our revenue. We will need to comply with Section 404 of the Sarbanes-Oxley Act of 2002. If we fail to achieve and maintain adequate internal control over financial reporting, our business, results of operations and financial condition could be materially adversely affected. Jeffrey A. Citron, our founder, Chairman, Chief Strategist, interim Chief Executive Officer and principal stockholder, exerts significant influence over us. The market price of our common stock has been and may continue to be volatile, and purchasers of our common stock could incur substantial losses. Our stock price may decline due to sales of shares by our other stockholders. Our certificate of incorporation, bylaws and convertible notes contain provisions that could delay or discourage a takeover attempt, which could prevent the completion of a transaction in which our stockholders could receive a substantial premium over the then-current market price for their shares.

Full 10-K form ▸

1272830--4/17/2007--VONAGE_HOLDINGS_CORP