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Sonus Raises $115 Million in IPO

Light Reading
News Analysis
Light Reading
5/25/2000

While ONI Systems Inc. http://www.oni.com waits in the wings, Sonus Networks Inc. http://www.sonusnet.com. (Nasdaq: SONS) went to market on a day in which Nasdaq rebounded for the second straight day from its recent slump.

Sonus raised $115 million when underwriters sold 5 million shares at a price of $23. In mid-day trading, the stock had risen 60 percent to $37, giving the company a market capitalization of roughly $2 billion, with 60 million shares outstanding.

Goldman Sachs Group Inc. http://www.gs.com (NYSE: GS) led the underwriting, boosting the price up from the filing range of $19-$21. Sonus sells networking switches that integrate voice and data services. It was backed by venture capitalists Matrix Partners http://www.matrixpartners.com, North Bridge Venture Capital Partners http://www.nbvp.com, Charles River Ventures http://www.crv.com, and Bedrock Capital Partners http://www.bedrockcapital.com.

So far, Sonus has made only a handful of customer announcements including a deal with Williams Communications Group Inc. http://www.wilcom.com (NYSE: WCG) promising Sonus $20 million worth of business in the first year. However, little of that revenue has yet to be booked. For the period ending March 31, Sonus had announced $1 million in revenue while reporting a $16 million loss.

In fact, this point was best summed up in the risk statements written by the company in its SEC filing: "To date, we have shipped our products to a limited number of customers, and only during the first quarter of fiscal 2000 did we begin to recognize revenues. We expect that in the foreseeable future, substantially all of our revenues will depend on sales of our products to a limited number of customers. Our customers are not contractually committed to purchase any minimum quantities of products from us."

The deal comes as the IPO for optical networking company ONI Systems was postponed for the third straight day. While Goldman Sachs, the underwriter for ONI, maintains that the deal will still be priced, two separate sources at well-known investment banks not involved in the underwriting have attributed the delay to SEC scrutiny.

--R. Scott Raynovich, Executive Editor, Light Reading

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