Sonus: So Tough to Call
The VOIP vendor announced its fourth-quarter and full-year results today, and it seems no one saw what was coming. In November the company announced a "challenging" set of third-quarter financials, and predicted that fourth-quarter sales would be "meaningfully less" than the $97.1 million reported a year earlier. (See Sonus Reports Q4 and Slowdown Crunches Sonus.)
As a result, analysts reworked their spreadsheets, stuck a wet finger out the window, and predicted, on average, fourth-quarter revenues of $64.1 million. Even the most optimistic of the seven analysts polled by Thomson First Call only went as high as $69.7 million. On average, the analysts expected Sonus to report full-year revenues of $288 million.
Yet the vendor today announced fourth-quarter and full-year 2008 revenues of $89.5 million and $313.1 million, respectively. The analysts will have to scratch their heads about the whys and wherefores until the earnings conference call at 10 a.m. Eastern, when they will no doubt seek some "color" as to why they, and the company itself, were so wide of the mark. And then they'll try to provide estimates for the year ahead: Good luck with that!
While that unexpected uptick in fourth-quarter revenues is likely good news (though you never know -- it could be the high before the fall), the bad news is that Sonus reported a non-cash charge of $87.3 million "related to an increase in the Company’s valuation allowance against its deferred tax asset."
As a result, Sonus reported a net loss for the fourth quarter and full year of $99 million and $113.6 million, respectively. Even without the charge, Sonus was still in the red. Analysts had expected a loss per share for the fourth quarter, after charges and one-time items, of 2 cents: Without the non-cash charge, the fourth-quarter loss was about 4 cents per share, according to Light Reading's calculations.
In an effort to pull the company into profitability, the management team has been cutting costs, including two recent rounds of layoffs, ahead of what's likely to be a tough year for the VOIP equipment sector in general. Sonus relies quite heavily on its North American customers, particularly AT&T Inc. (NYSE: T), for sales, and capex belts are being tightened currently, especially for the first half of 2009. (See AT&T Cuts Capex by up to $3B, Sonus Cuts 40 More, and Sonus Culls Staff.)
The company is trying to diversify, though, and has been making a stronger pitch for business from mobile operators in recent months, including a trio of new product announcements at the recent Mobile World Congress show in Barcelona. (See Sonus Struts Mobile Stuff.)
The vendor's share price closed Wednesday at $1.14.
— Ray Le Maistre, International News Editor, Light Reading