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Sonus Redeploys CFO

Sonus Networks Inc. (Nasdaq: SONSE) has brought in some fresh boardroom blood and sidelined its CFO as it struggles to clear up its financial history (see Sonus Extends Financial Review).

The softswitch vendor announced today that it has extended its ongoing financial review to periods prior to 2002, and that the review and audit could be "lengthy." The possibility of an extension had been flagged by Sonus, so it was not a total surprise (see Sonus Financial Review Continues).

The review, which is focused on when revenue should be recognized on the balance sheet rather than if it should exist at all, was first announced in February (see Sonus Drops a Bomb).

In a separate statement the vendor announced that, with immediate effect, CFO Stephen Nill "transitions" to a new role: VP of business operations. The company could not provide any further detail about this role other than that it involves "administrative functions," so it's unclear whether Nill will be twiddling his thumbs in the office or spending more time with his pets and power tools until things blow over.

The new man in charge of the balance sheet is Bert Notini, who has been appointed president and COO. Notini will "assume responsibilities for the financial operations of the company" until a new CFO is appointed, according to the statement.

Lehman Brothers analyst Steve Levy regards the appointment of a COO as encouraging. In a research note issued today, Levy says he believes the creation of Notini's role "underscores management's intent to return its energies to growing the company."

Sonus could do with a turn in its financial fortunes. Having risen steadily as VOIP became the industry buzzword de jour last year, the company's share price hit a 12-month peak of $10 in January; began its decline when the firm delayed its fourth-quarter results (see Sonus Delays Q4 Results); and then plummeted when the revenue review was announced:



The share price has fallen slightly on today's news, dropping 5 cents to $4.03 from yesterday's closing price of $4.08.

The company is also set to meet with officials from Nasdaq regarding its continued listing on the exchange. As a result of being unable to file its financial report for 2003 because of the ongoing review, Sonus is no longer in compliance with Nasdaq's listing rules. It has had to change its ticker symbol from SONS to SONSE, and is due a hearing with a Nasdaq panel to determine its fate. The vendor notes there "can be no assurance that the Panel will grant a request for continued listing."

— Ray Le Maistre, International Editor, Boardwatch

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steve 12/5/2012 | 2:06:43 AM
re: Sonus Redeploys CFO ...these kinds of things always get worse before they get better...and no "redployed" CFO has ever resurfaced anywhere other than the gulag..
technonerd 12/5/2012 | 2:06:42 AM
re: Sonus Redeploys CFO What other reason would they have to keep him, unless maybe the guy has some pictures of orgies in the boardroom ...
change_is_good 12/5/2012 | 2:06:41 AM
re: Sonus Redeploys CFO you tell me one small company where the board, ceo, cfo, cto, cio, vp sales and other verticals don't know what is going on real-time. they track this stuff on conf calls everyday.

steve 12/5/2012 | 2:06:28 AM
re: Sonus Redeploys CFO Not to defend anyone involved in this mess, but with the new revenue recognition procedures it is incredibly difficult to predict how and when revenue can be recognized for GAAP accounting purposes. Everyone tracks receipt of orders, bookings, etc. But unfortunately not enough focus is put on when you can actually take it in as revenue.
Stevery 12/5/2012 | 2:06:26 AM
re: Sonus Redeploys CFO ... but with the new revenue recognition procedures it is incredibly difficult to predict how and when revenue can be recognized for GAAP accounting purposes. Everyone tracks receipt of orders, bookings, etc. But unfortunately not enough focus is put on when you can actually take it in as revenue.

Then is it still easy to inflate the revenue numbers? Are'nt there rule changes after things like Enron?
technonerd 12/5/2012 | 2:06:17 AM
re: Sonus Redeploys CFO the new revenue recognition procedures it is incredibly difficult to predict how and when revenue can be recognized for GAAP accounting purposes. Everyone tracks receipt of orders, bookings, etc. But unfortunately not enough focus is put on when you can actually take it in as revenue.

If the CFO thought his job was too difficult, then he should have quit and gotten a position where his main duties would be to wear a hairnet and ask people if they want fries with that Coke.
whyiswhy 12/5/2012 | 2:06:15 AM
re: Sonus Redeploys CFO "Everyone tracks receipt of orders, bookings, etc. But unfortunately not enough focus is put on when you can actually take it in as revenue."

Sorry, that is just so much BS. With goods, the earliest unit revenue can be recognized is when each unit ships. When the cash actually arrives is another matter, and what is when it really should be recognized. Most of GAAP is for crooks. The only things that count are cash flow and cash balance. Never forget that.

-Why
zillionaire 12/5/2012 | 2:06:14 AM
re: Sonus Redeploys CFO Is that he was acting on orders and was spared since he can prove as much. The fact that he wasn't whacked for impropriety shows that he has something up his sleeve that cutting him loose would expose. Clearly a good old boys club...put out bad numbers, get a slap on the wrist and new business cards...see you at the 19th hole friday afternoon.
LightGaugeGuitarString 12/5/2012 | 2:05:50 AM
re: Sonus Redeploys CFO "With goods, the earliest unit revenue can be recognized is when each unit ships."

In this business, a vendor often can't even recognize revenue when the unit ships, since purchase agreements often stipulate acceptance criteria, future features. A vendor shouldn't declare revenue until EVERYTHING on that purchase agreement has been delivered.

LGGS
jgris136 12/5/2012 | 2:03:40 AM
re: Sonus Redeploys CFO Since all you guys are such experts on the subject maybe you should apply for the new CFO position. Put your money where your mouth is...let's see how well you do! Not that I am defending these actions...but get real! You are only speculating on what happened, your really have no idea. I have worked with the most ethical of financial officers and it is never that easy and the rules have are increasingly more complex. Stick to what you know and save the armchair quarterbacking for Sunday afternoon
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