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Sonus Cuts a New Shape as Ribbon Communications

Ray Le Maistre
11/3/2017

The names Sonus and Genband have been on the communications networking and services scene for years (remember the buzz around softswitches and session border controllers?) but now they're no more... because they have completed their merger and have decided on a new name -- Ribbon Communications. (See Sonus Networks, Genband Complete Merger .)

A cut above the rest, perhaps?

So what is Ribbon Communications all about? Well, based on 2016 numbers, it's a company that generates revenues of $680 million a year, mostly in North America and from a mix of professional services and technology products (VoLTE and unified communications platforms, signaling systems, session border controllers, policy systems and more, all with a heavy dose of virtualization of course). It has network operator customers, such as America Movil, AT&T, BT, Optus, Verizon and Vodafone, in all the major territories and a broad range of enterprise customers and channel partners.

But looking at combined financials for 2016, the company suffered an operating loss of more than $31 million, despite gross margins of 56.2%, so one of the initial targets of the Ribbon management will be to trim costs. The company is expecting cuts its operating costs by up to $50 million in 2018 and "drive solid cash flow from operations in the first year after closing," so it knows where it wants, and needs, to be financially.

It's early days for Ribbon -- no doubt we'll get a deeper dive into its plans and expectations in the coming months.

— Ray Le Maistre, International Group Editor, Light Reading

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JT69247
JT69247
11/18/2017 | 7:10:32 PM
Revenues down. Stock price down. Yeah, this makes sense.
So can someone please explain to me why this "merger" makes sense? 

The expected 2017 revenues that Dolan announced in May/June for the GB side were $40M more than what they are now forecasting. That sounds like a big miss to me. But yet Sonus shareholders are only getting 50% of the shares, even though GB is a $40M smaller company than originally promised. I suspect they are going to have to increase the number of heads they will have to cut. Merry Christmas folks. 

Can someone explain to me how/why the Sonus and GB executive team stays intact? Keeping the two CEOs. The two CFOs. The two heads of sales. Heads of product. Where is the savings at the top the pyramid? For a "merger" that is supposed to bring synergies, it seems curious that all of the big boys keep their jobs. 

Lastly, how does Dolan keep his job? Based on stock performance, he should be out. Not only look at the stock price of Sonus when he came in vs the price today...just look at the price of the stock on the date of the announcement vs today. He adds GB to Sonus, and already he is $50M down on market cap. Great move. 

Objectively, the clock is ticking on Dolan. I'll wager that he is out once the Q2'18 earnings annoucement is released. 
kq4ym
kq4ym
11/16/2017 | 11:00:59 AM
Re: Sounds like a familiar plan
Getting past the "loss of more than $31 million, despite gross margins of 56.2%," isn't probably going to be just a matter of cutting costs, but getting that net income way better. Not an easy task I'd guess for Ribbon.
mendyk
mendyk
11/10/2017 | 10:03:12 AM
Re: Goodie goodie gum drops
I see what you did there.
GypsumFantastic
GypsumFantastic
11/9/2017 | 12:05:26 PM
Goodie goodie gum drops
Ooh! Ooh! Ooh! the funky Ribbon?
Kevin Mitchell
Kevin Mitchell
11/3/2017 | 4:33:57 PM
Nortel would have been better...
With All that 90s nostalgia they had an opportunity to bring the Nortel name back. 
mendyk
mendyk
11/3/2017 | 2:34:52 PM
Sounds like a familiar plan
Let's lose less money next year. And if we lose a lot of losses, we can come out ahead. The sad part is, this is usually much easier said than done.
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