Is there such a thing as a “workaround” that actually, well, works? It strikes me that whenever a company gets in trouble for infringing on someone else’s IP, the company doing the infringing says “No worries, we’ve got a workaround somewhere around here that we had put aside for a rainy day”. Vonage, for example, claimed it had a workaround after a U.S. judge ruled it had infringed on technology owned by Verizon, while Research in Motion talked about a workaround during the latter stage of its legal woes with NPT Inc.

We never found out whether or not RIM did have a workaround because it ended up forking over more than six hundred extra-large ones (aka millions) to make NTP go away. Now, Vonage has admitted it doesn’t have a workaround after suggesting last week it had a workaround in development . Even worse, Vonage isn’t sure that a workaround is “feasible” given the extent of Verizon’s patents. This is bad news because it means Vonage will likely be unable to sign up new customers unless it reaches a patent deal with Verizon. Maybe Vonage’s new CEO, Jeff Citron (who used to be the old CEO), will be able to strike a deal with Verizon CEO Ivan Seidenberg.

For more, check out Thomas Howe, who is incredulous Vonage can’t create a workaround, as well as Engadget.

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If losing a crucial legal decision to Verizon recently isn’t bad enough, Vonage now has find itself a new CEO after Michael Snyder resigned. As important, the company said it plans to slash operating costs by $140-million to “enhance shareholder value and improve its competitiveness in the marketplace”. This is particularly bad news for Web sites that have reaped the benefits of Vonage’s aggressive marketing efforts given the company has been spending nearly $200-million online a year.

Since Snyder joined Vonage in March 2006, Vonage’s shares have tumbled from about $14 to $3.09. The company has been battered by an ocean of red ink, increasing competition from cablecos getting into the VOIP business, inconsistent service, and a high churn rate that has forced Vonage to spend like a drunken sailor on marketing to attract new customers. From the very start, Vonage’s prospects as a business have been unclear given its growth strategy was tied to attracting as many customers as fast as it could by offering a low-cost product in a market with little barriers to entry.

To me, Vonage was always more of an investment play by co-founder (and now interim CEO) Jeffrey Citron, who figured someone would snap it up to establish a foothold in the VOIP market. As it turned out, no one was willing to step up to the plate. This forced Vonage to make a $17-a-share IPO, which amazingly was over-subscribed. You could make a solid argument that Vonage single-handedly killed the tech IPO market, which isn’t such a bad thing given it has forced many companies to focus on growing their businesses, while keeping overly-enthusiastic investors from throwing themselves into risky investment vehicles.

Note: Check out this ClickZ story on how Vonage’s trouble could impact the online ad industry. As well, Jon Arnold has an extensive post on Vonage’s conference call this morning.

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After being hit with an injunction last week that prevents it from using VoIP technology owned by Verizon, Vonage shares plunged a record low of $2.98 on Friday before bouncing back to $3.37 today. Since its 17-a-share IPO, Vonage has dropped a staggering 80%. The obvious question is when does Vonage start to represent good value to investors and/or good acquisition material for someone looking to instantly add 2.2-million subscribers.

For investors, the question of value comes down to assessing whether Vonage can maintain its subscriber momentum amid increasingly fierce competition; whether it can keep more of its existing customers, which would allow it to dial back the dollars spent on marketing; and whether it can shrink its losses.

In many ways, Vonage is running in a marathon, and it can’t afford to stop spending if it wants to build a big enough subscriber base to establish a solid foothold. If Vonage decides to spent less on marketing, the cablecos will start to eat its lunch – which explains why Vonage is all over the NCAA basketball tournament, for example. At the very least, Vonage needs to keep pushing forward even if it runs into pesky hurdles such as injunctions, a stock heading south, large losses and a troubling churn rate.

In terms of the injunction, Vonage said the market is over-reacting (really, does anyone expect them to say otherwise?). In breaking the rule never to paraphrase Mark Twain in a press release, Vonage CEO Mike Snyder paraphrased Mark Twain by saying “the rumors of Vonage’s death have been greatly exaggerated. Friday’s events represented one small step in what is sure to be a long legal battle.”

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First, the good news from Vonage’s fourth-quarter results: the VoIP service provider now has 2.22 million subscribers after it add another 166,000 customers in the quarter. Meanwhile, it only lost $65-million as revenue nearly doubled from a year earlier.

Now, the bad news: the stock tumbled to a record low, $5.25, amid concerns subscriber growth slowing. Vonage said it expects to have between 2.9-million to 3.1 million customers by the end of this year, compared with analyst expectations about about 3.5 million. The company also expects to lose $150-million to $170-million this year before becoming profitable in early-2008.

So what do you focus on: the good news or bad news? The narrower loss in the quarter or the concerns about subscriber growth? There’s no doubt the competitive landscape is getting more intense as the cablecos and, increasingly, the carriers become more aggressive. Then, you’ve got players such as SunRocket and 8×8. That said, Vonage has 2.2 million customers so it can’t be dismissed. The question is whether Vonage can continue to see strong enough growth to become profitable, establish a solid competitive foothold, and get investors excited again about a stock that has tumbled from its IPO price of $17.

For more, check out AOL Money & Finance; Russell Shaw, who is troubled by the subscriber slowdown, including soft sales during the holidays, and Larry Dignan, who wonders if Vonage has a future, and looks at a possible takeover (current price: $836-million) given the company’s depressed stock price.

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