Vonage CEO steps down

By Ritsuko Ando

NEW YORK (Reuters) - Internet phone company Vonage Holdings Corp. (VG.N: Quote, Profile, Research, Stock Buzz) said on Thursday its chief executive had stepped down and it plans to cut jobs and marketing costs, seeking to revive a business that investors worry may collapse.

Vonage shares, which have fallen more than 80 percent from their initial public offering price a year ago, rose 11 percent or 33 cents to $3.33 in early afternoon trading.

But analysts said the moves did little to improve business growth prospects or to address concerns over a patent lawsuit filed by Verizon Communications (VZ.N: Quote, Profile, Research, Stock Buzz) that threatens to cripple Vonage's ability to sign on new customers.

"Reducing marketing will probably not help to accelerate growth. From a financial perspective, though, it's probably the right move," said Stanford Group analyst Clayton Moran.

He said he was telling clients to avoid Vonage shares, citing growing competition from cable and telecommunication rivals. "There's too much uncertainty in its operations," he said. "The risk is too high."

Vonage said CEO Michael Snyder resigned from the board effective Thursday. Chairman Jeffrey Citron, who had been CEO of Vonage from January 2001 to February 2006, will be interim CEO until the company finds a replacement.

Vonage did not say how many jobs it plans to eliminate, but the goal was to reduce its general administrative expenses by $30 million through the rest of 2007 by cutting its workforce and consolidating operations. It estimated a $5 million charge for employee termination benefits in the second quarter.

The company also said it plans to cut marketing costs by $110 million this year, resulting in marketing spending of about $310 million in 2007.