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Internet phone company Vonage will name a new chief executive as early as next week, according to a story published in The Wall Street Journal Friday.

The newspaper cited people familiar with the situation. The news comes as Vonage secures funding to buy back some of its debt. On Thursday the company said it has a letter of commitment from the hedge fund Silver Point Finance to provide up to $215 million in private debt financing.

Vonage will use the cash, plus some of its own, to repurchase the remainder of its $253 million in convertible notes, the Journal story said. Vonage needed to raise money for the repurchase by December 16 or risk bankruptcy, according to the article.

Jeffrey Citron, who founded Vonage and stepped down as head of the company in early 2006, returned as interim CEO in April 2007. Over the past year, Citron has helped guide the company through a series of patent disputes and worries of bankruptcy.

Now that Vonage has settled its legal disputes and it's regained its financial footing, Citron is looking for someone else to take over the day-to-day management of the company, the story said.

But even with a new chief executive in charge, Vonage still faces many challenges. The company, which pioneered the Internet telephony market, faces stiff competition from cable operators now offering phone service as well as the phone companies themselves who sell cellular services that can also be used as wired phone replacements.

Talk about an odd couple. Cable giant Comcast said Wednesday that it will work with Vonage to help ensure Vonage's Internet phone service works well over its broadband network.

The Comcast/Vonage alliance follows other similar announcements made with other Internet companies, as the cable operator tries to convince customers that it's not looking to kill competitive services that run over its network.

Last year, Comcast was discovered slowing down peer-to-peer traffic on its network. At first the company denied it was filtering traffic. Then it admitted it had slowed down some types of traffic to manage congestion on its network. Net Neutrality proponents and consumer advocates were outraged and feared Comcast's actions were attempts to control content flowing over its network.

The outcry against Comcast has been so strong, that the company said it would work with peer-to-peer companies BitTorrent and Pando Networks to find new ways to manage its traffic. And in March, it said that it would move to a protocol agnostic network management solution by the end of the year. And in June it began testing a network management system that will slow down during times of congestion for heavy bandwidth users regardless of the application they are using.

"This collaboration with Vonage, and our outreach to many key participants in the Internet community, demonstrate that we are committed to provide network management solutions that benefit consumers and competition" Tony Werner, Comcast Chief Technology Officer, said in a statement.

But what makes the alliance with Vonage interesting is that Vonage is a direct competitor to Comcast. Vonage sells a voice over IP phone service that competes directly with Comcast's own VoIP phone service.

"Although we're competitors with Comcast, this understanding helps our two companies work together to balance the needs of network management with consumers' ability to freely access the services, applications and content of their choice," Louis Mamakos, Vonage Chief Technology Officer, said in a statement.

Internet telephony company Vonage is getting back on track with improved quarterly earnings and a deal, announced Thursday, to resell broadband service from Covad, a DSL service provider.

The new service, called Vonage Broadband, will offer speeds of 3 megabits per second to 6 Mbps to residential and small-business customers. It will allow Vonage to bundle its Internet telephony services with broadband services. Until now, customers using Vonage would get their own broadband service from a cable company or phone company and then add the Vonage service on top.

The news of the deal comes as Vonage announces first-quarter 2008 earnings. The company, which has been struggling to reduce its losses, said it lost $9 million. This was a huge improvement from the year before, when the company lost $72 million during the same quarter.

Revenue for the quarter was $225 million, up about 15 percent from the previous year.

A year ago, Vonage looked to be dying a slow death. It was still battling Verizon Communications in a lengthy and expensive patent infringement lawsuit. And its losses were mounting as customers dumped its service. But now it looks like the company has begun turning things around.

Of course, it isn't out of the woods yet. With a greatly reduced marketing budget, it is still having trouble attracting new customers. And it continues to lose a lot of customers every month.

For the first quarter, it added a total of 30,000 new subscribers, down from 56,000 new subscribers in the previous quarter and 166,000 during the first quarter of 2007. And it's still losing customers. The monthly churn rate, or cancellation of its service, rose to 3.3 percent from 3 percent during the previous quarter.

That said, Vonage seems more focused on surviving. And with its legal troubles out of the way, the company looks like it's refocusing its strategy. CEO Jeffrey Citron said the company will likely increase marketing spending in the latter part of the year, which should spur more customer growth.

Sprint Nextel and Verizon Communications both see an opportunity to make a buck on their IP telephony patents after successfully suing Vonage Holdings last year.

On Thursday, Sprint Nextel said in a U.S. District Court in Wichita, Kan., that it was suing four small phone companies. Sprint alleges that Nuvox Communication, BroadVOX Holdings, Big River Telephone, and Paetec Communications are infringing on six of its patents.

Those patents, part of a larger portfolio of patents that cover voice over IP technology owned by Sprint, are the same ones used to successfully sue Vonage. The two companies eventually settled the dispute last year. And Vonage agreed to pay Sprint a total of $80 million, which includes $35 million for past use of the license, $40 million for a fully paid future license, and $5 million in prepayment for services.

Verizon Communications, which won a $120 million settlement from Vonage last year, is also asserting its patent claims. Earlier this month the company filed a suit in the Eastern District Court of Virginia against cable operator Cox Communications for infringing on eight patents that had to do with voice over IP technology. Two of the patents in the Cox case are the same ones Verizon successfully sued Vonage for infringing.

Since Sprint and Verizon have already successfully asserted these patents, it certainly strengthens their new cases. And it's very likely the companies will either win in court or be able to pressure these companies and any other VoIP providers into licensing deals.

This is very good news for Sprint, which would benefit greatly from turning its existing patent portfolio into a cash cow. The beleaguered cell phone carrier has been bleeding customers and is in desperate need of new revenue growth to boost earnings.

Just when you thought its legal troubles were over, Vonage gets involved in another legal squabble with telecommunications equipment maker Nortel Networks.

On Friday, Nortel filed a lawsuit against Vonage claiming that the voice provider has violated nine patents related to its Internet phone service, including features such as 911 and 411 calling and click to call.

The lawsuit, which was filed in U.S. District Court in Delaware, comes in response to a suit Vonage is pursuing against Nortel. In 2004, a company called Digital Packet Licensing sued Nortel for infringing on three of its patents. Vonage acquired Digital Packet Licensing last year and is continuing the lawsuit.

For more than a year, Vonage has been caught up in one patent lawsuit after another. AT&T, Sprint Nextel, and Verizon Communications have all sued the company for allegedly violating their patents. In October, Vonage settled its suit with Sprint Nextel for $80 million. Later that month, it settled with Verizon in a deal that could cost the company a maximum of $120 million. And early in November, Vonage was in settlement talks with AT&T in deal that could cost it $39 million over five years.

As for its performance, Vonage is hanging in there, but there are still troubles. It actually reported slightly better-than-expected revenue numbers for the third quarter of 2007, pulling in about $211 million. This was a little better than some analysts on Wall Street had expected; they predicted the company would report $210 million in revenue. But Vonage is still struggling to keep customers it has already won. The company said it had added 78,000 net subscribers in the quarter, increasing the total to more than 2.5 million. But it is still churning or losing a lot of customers. The company reported an average monthly churn rate of 3 percent up from 2.5 percent during the second quarter.

At the end of the day, Vonage has a very tough road ahead. Not only has its reputation been damaged, but the company will be spending a lot of money over the next several years paying off its legal bills. The best thing it can do now is settle this and any other lawsuits quickly, so it can move forward.

Updated at 7:25 a.m. PDT Friday.*

Vonage said Thursday it had resolved an ongoing patent dispute with Verizon Communications at a price tag of up to $120 million, ending what has been a mostly gloomy saga for the struggling Internet phone company.

The announcement comes about a month after New Jersey-based Vonage, which has yet to turn a profit, lost the bulk of an appeal regarding three voice over Internet protocol patents held by the nation's second largest telephone company.

The appeals court upheld a jury finding that Vonage had infringed on two patents that are arguably central to its service. It ordered a new trial on a patent infringement finding, dealing with a feature considered less significant to Vonage's service, but the settlement covers that patent, too, so that court action appears unlikely to proceed. Because the jury deciding the case did not distinguish which damages applied to which patents, the court also threw out a $58 million judgment against Vonage.

The precise amount of Vonage's final payout to Verizon depends on whether the federal appeals court grants a rehearing Vonage has requested on the two central patents, Vonage said in a statement.

If Vonage wins a rehearing or manages to secure relief from an injunction affecting one or both of the two core patents, it has agreed to pay Verizon $80 million. If Vonage is not granted a rehearing or if the injunction, which is currently on hold, is reinstated, Vonage said it will pay $120 million, of which $2.5 million will be "payable to certain charities." Vonage said it has already deposited $88 million into an escrow acount.

"We're pleased to put this dispute behind us and believe this settlement is in the best interests of Vonage and its customers," Sharon O'Leary, the company's chief legal officer, said in a statement. "This settlement removes the uncertainty of legal reviews and long-term court action and allows us to continue focusing on our core business and customers."

Verizon representatives declined to comment on the settlement.

Vonage has claimed all along that it has a technical work-around that will allow its service to continue working without disruption to its customers, even if a court ultimately decides to enforce an injunction prohibiting it from using Verizon's patents.

The settlement decision struck Stifel Nicolaus analyst Rebecca Arbogast as a bit surprising--at least from the perspective of Verizon, which she described as "in the catbird seat."

"Unless Vonage had an airtight work-around, which was unlikely, Verizon was in a position to enforce an injunction against a core aspect of Vonage's service, which could have put them over the brink," she told CNET News.com after the settlement announcement, which arrived just after the 4 p.m. EST close of the stock market. "I would expect that Verizon ultimately decided they'd rather have Vonage alive than dead. And some settlement money to boot."

In addition to the Verizon deal, Vonage has now settled patent disputes in recent weeks with Sprint Nextel for $80 million and Klausner Technologies, a privately held company that specializes in voice-messaging technology, for an undisclosed amount.

But Vonage's legal woes aren't over yet. The company revealed in an federal regulatory filing last week that it's facing a new patent infringement suit from AT&T in Wisconsin federal court.

*This blog was updated to note Verizon's decision Thursday not to comment further on the settlement.

Vonage has asked a federal appeals court to revisit its recent decision to uphold most of a patent infringement ruling in a case it lost to Verizon Communications.

The Internet phone company characterized the request for a rehearing as the "next logical step" in the litigation process and in "moving our business forward."

The struggling firm also continues to "explore all legal options available to put the Verizon litigation to rest," Chief Legal Officer Sharon O'Leary said in a statement Wednesday.

Could that mean another out-of-court settlement is on the horizon? Earlier this week, Vonage settled a patent dispute with Sprint Nextel to the tune of $80 million. That development arrived just weeks after a federal jury ordered Vonage to pay $69.5 million for infringing six voice-over Internet protocol patents.

In late September, the U.S. Court of Appeals for the Federal Circuit upheld a jury's finding earlier this year that Vonage had infringed on two Verizon patents, which are seemingly critical to the way the Net phone company's service works. (Vonage has maintained it has a workaround that doesn't infringe, but some analysts say Verizon may challenge those supposed fixes as well.)

The appeals court opted to send the infringement decision on the remaining patent at issue, which is considered less significant to Vonage's offerings, back to a lower court for a new trial. The court also threw out a $58 million judgment against Vonage because the jury didn't specify how the damages would be divvied up among the three patents at issue.

Update at 2:33 p.m. PDT: Rebecca Arbogast, an analyst with Stifel Nicolaus and constitutional law professor at Johns Hopkins University, said requests for appeals court rehearings are "routinely sought" but "seldom granted."

Internet telephony provider Vonage said Monday that is has settled its patent dispute with Sprint Nextel.

The two companies have entered into a licensing arrangement that allows Vonage to use patents for voice over Internet Protocol, or VoIP, technology that are held by Sprint.

Vonage has agreed to pay Sprint a total of $80 million, according to the company. This includes $35 million for past use of the license, $40 million for a fully paid future license and $5 million in prepayment for services.

In September, a Kansas jury found that Vonage had infringed six Sprint patents. And it ordered Vonage to pay $69.5 million in damages, plus 5 percent for future damages.

Literally the next day, Vonage lost its appeal in its patent legal battle with Verizon Communications. In March, a jury in Virginia found that Vonage had infringed on three patents. And the court ordered Vonage to pay $58 million in damages.

With this latest settlement, Vonage has at least alleviated some of the legal pressure on the company.

"We believe this deal is good news for Vonage, our customers and our shareholders," Sharon O'Leary, Vonage's general counsel, said in a statement. "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."

After months of battle, Vonage has lost the bulk of its appeal in the Verizon Communications patent infringement case.

In March, a jury in Virginia found that Vonage had infringed on three patents held by Verizon. And it awarded Verizon $58 million in damages along with future damages of 5.5 percent on the revenue that Vonage was making during the appeal process.

The judge in the case imposed an injunction on Vonage that would force the company to stop delivering a service using technology that infringes on Verizon's patents. But because Vonage has been appealing the case, the injunction has not yet gone into effect.

On Wednesday, Vonage's appeal essentially came to an end. And as the legal dust settles, the small voice over IP company now faces the possibility of paying hefty monetary damages and a total shutdown of its IP telephony service.

But as is often the case in complicated legal disputes, the actual outcome of the case is still far from certain. In its final judgment, the U.S. Court of Appeals threw out one of the three patent verdicts and upheld the other two. And because the total damage award was assessed based on Vonage violating all three patents, the appeals court asked the lower court to reconsider the entire $58 million damage package awarded in March.

On the one hand, this sounds like a partial victory for Vonage. And the company has said as much.

"We thank the appellate court for its thoughtful consideration of the merits of our case," Vonage's chief legal officer, Sharon O'Leary, said in a statement. "We are pleased with the decision to vacate the 880 patent and the damages. However, Vonage remains confident that it has not infringed on the 880 patent--a position we will continue to vigorously assert and look forward to presenting at trial."

But the reality of the situation is altogether different. For one, the two patents the court upheld happen to be the most fundamental to Vonage's service. Essentially, U.S. Patent No. 6,282,574 and U.S. Patent No. 6,104,711 define how phone calls are routed over the Internet, which essentially is the basis of Vonage's IP telephony service today.

By contrast, U.S. Patent 6,359,880, which is the patent the appeals court said would have to be retried by the lower court, has to do with how public wireless and cordless Internet gateways communicate with the Internet. Because this technology is not a big part of Vonage's commercial service today, sending the case back to the lower court will likely have little impact on Vonage's actual business.

And because the '880 is considered less significant, when the lower court reassesses damages, as it's been asked to do by the appeals court, it could just re-enter the same amount without holding an entirely new trial.

The reason is simple. Both Vonage's and Verizon's experts who testified during the original trial, stated that the '880 patent should have little impact on determining damages. This means that the damages that were assessed were based mostly on the cumulative contribution from the two other patents, '711 and '574. And the judge could look at this testimony and re-enter the $58 million for damages.

But in addition to the hefty damages the company will still likely have to pay, Vonage is now facing the possibility of having its service shut down.

During the appeal, the injunction issued by the judge in the case was not in effect. But once the appeals court's decision is final, which should happen within two weeks to a month, the injunction barring Vonage from using any technology that infringes on Verizon's patents goes into effect.

Vonage is adamant that its service will continue.

"It's business as usual," O'Leary said in a statement. "We have had our workarounds for the '711 and '574 patents in place for some time and will remain focused on providing a great customer experience."

But these claims will have to be verified. Right now it's unclear how this will work. Either the court will step in to determine if the new fixes violate the patents as they were examined during the trial, or Verizon will have to challenge the new workarounds.

One thing is certain, Vonage's troubles are far from over.

"I think there is definitely a threat that its service could be impacted," said Rebecca Arbogast, an analyst with Stifel Nicolaus. "Vonage says it has a workaround, but who's to really know? My hunch is that Verizon will likely aggressively challenge these fixes as well."

This latest legal blow comes just one day after a jury in Kansas found that Vonage infringes on six patents held by Sprint Nextel. The jury awarded damages of $69.5 million in that case. All in all, the news looks bleak for Vonage, said Arbogast.

"These are different patents in a different court," she said. "But the damages in the Sprint case are significant, and it's just piling on one more shovel full of penalties on the company at a time when it already has a significant amount of money tied up in escrow over the Verizon case. Plus, there's the threat of an injunction, and it makes investors wary."

Indeed, Vonage's stock dipped another 26 percent to close at 96 cents per share.