& cplSiteName &

Stock Watch: Sonus Networks Inc.

Light Reading
News Analysis
Light Reading
1/18/2001

Despite a 75 percent drop in its share price from highs reached in August of last year, Sonus Networks Inc. (Nasdaq: SONS) still sports a market cap of roughly $6 billion. That’s not bad for a company with estimated revenue of just $43 million last year. Does Sonus deserve this still-lofty valuation?

Some analysts say the stock, recently trading at about $32 a share, could actually be a good deal if the company can manage to stay in the technological lead in the fast-growing packet-based switch market.

Sonus, primarily a voice gateway company that markets its products to carriers, is at the forefront of the migration of the $60-billion legacy circuit-based voice network to an IP network that packages voice and data together. IDC estimates that the worldwide softswitch market will grow from roughly $1.3 billion this year to $5.7 billion in 2004. Most analysts say it’s a little too early to predict who will be the clear winner in the packet-based switching market. But Tim Kraskey, managing director of YankeeTek Ventures, says Sonus has about a one-year technology lead when it comes to switch capabilities and scaleability.

Nortel Networks Corp. (NYSE/Toronto: NT) and Lucent Technologies Inc. (NYSE: LU) both have products on the market, while Cisco Systems Inc. (Nasdaq: CSCO) has recently made a strong push into the space, acquiring voice switching specialists IP Cell and Vovida (see Cisco Turns Up Voice Signal). Among smaller companies, the name most mentioned by analysts is Unisphere Networks Inc. (Nasdaq: UNSP), which acquired Broadsoft last October. Unisphere has also had some success selling switches, mainly to European carriers.

In combination with its PSX6000 SoftSwitch, which provides the intelligence, Sonus’s GSX9000 voice-over-IP central office switch offers many of the same functions as a Class 5 telephone circuit switch at a cost savings of up to 50 percent per port. In addition, the Sonus switch takes up much less space at the central office: A traditional circuit switch requires 40 racks to handle 50,000 simultaneous calls, while the GSX9000 does the trick with just two 19-inch racks. Sonus also produces a signaling gateway switch that enables functions like 800 toll-free service over IP, and an Internet offload switch that directs modem-originated traffic away from the circuit-switch network.

Sonus strengthened its position in the softswitch market last year with its early November purchase of Telecom Technologies (TTI), which U.S. Bancorp Piper Jaffray telecom-equipment analyst Ted Jackson says was the preeminent independent softswitch company. TTI is expected to contribute $18 million to $23 million in revenue in 2001 ($11 million to $13 million in hardware, the rest in services), putting Sonus’s total estimated revenue for the year at around $140 million.

Sonus counts Global Crossing Ltd. (Nasdaq: GBLX) as its trophy customer. Williams Communications Group (NYSE: WCG), also a big-name customer, has not been a major revenue contributor for Sonus so far, but analysts say that could change this year. Time Warner Telecom Inc. (Nasdaq: TWTC) signed on as a Sonus customer last July, inking a three-year $75 million contract. TWT has 350,000 access lines in 22 markets. Sonus won XO Communications Inc. (Nasdaq:XOXO), which boasts 737,000 access lines in 53 markets, last November when that carrier ordered a full suite of products.

Sonus is currently in trials with 20 customers. Word has it that the company may soon announce that it has added Qwest Communications International Corp. (NYSE:Q) as a customer, in part because TTI already had an established relationship with the carrier.

-- Rob DeFrancesco, special to Light Reading http://www.lightreading.com

(1)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Scott Raynovich
Scott Raynovich
12/4/2012 | 9:00:28 PM
re: Stock Watch: Sonus Networks Inc.
Is Sonus perceived as the leader the IP voice switch market?
Featured Video
Upcoming Live Events
November 5, 2019, London, England
November 7, 2019, London, UK
November 14, 2019, Maritim Hotel, Berlin
December 3-5, 2019, Vienna, Austria
December 3, 2019, New York, New York
March 16-18, 2020, Embassy Suites, Denver, Colorado
May 18-20, 2020, Irving Convention Center, Dallas, TX
All Upcoming Live Events