I must have been so, so wrong. While I've had very little good to say about Internet telephony provider Vonage (NYSE:VG), Wall Street had a very different opinion at the release of first-quarter earnings last week. On a day when just about every other telecom got smoked, investors bid up shares of Vonage by 10%, as the company reported revenue of $196 million and a loss of $72 million.

Normally, a service provider would have its stock jump because of a huge increase in new subscribers, or improved metrics such as churn or ARPU. But Vonage actually showed very weak fundamentals, and there was little surprise in the financials that the company guided to only a few months back. So what's all the fuss about?

Apparently, investors were encouraged by the company's indication that a workaround for Verizon's (NYSE:VZ) patents looks promising. Royalty for the use of the patents cost Vonage $10.4 million this quarter, or 5.5% of its service revenue. If the company can successfully redesign its service around the patents, this money would then, in theory, stay with Vonage and help ease the pain on the bottom line.

The company also indicated that it was going to get better at retaining customers by improving customer service and offering new features on its plans. Good thing, because churn is still increasing; it went up to 2.4% this quarter as the company struggled to add 166,000 net new subscribers.

But while investors have given a little life to beleaguered shares, Vonage's problems are far from over. Even if the company can successfully work around the three Verizon patents, Sprint Nextel (NYSE:S) claims seven of its patents are being violated as well. And more legal distractions hang over Vonage -- from state and federal investigations into marketing practices to class action suits related to the IPO and quality of service.

Fundamentally, Vonage still has to wrestle with the competition dragon as well, mostly from cable companies like Comcast (NASDAQ:CMCSA) and Time Warner Cable (NYSE:TWC) but also from eBay's (NASDAQ:EBAY) Skype. With so many issues still hanging over Vonage, this relief may be very temporary.

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Fool contributor Dave Mock found that crab cakes look nothing at all like he imagined. He owns no shares of companies mentioned here. Dave is the author of The Qualcomm Equation. The Fool has a disclosure policy.