Sonus Shares Latest Thrill

You've got to hand it to Sonus Networks Inc. (Nasdaq: SONS) -- the company certainly knows how to make things interesting.

shares vaulted 11 percent this morning, trading up $0.51 to $5.20 on news that it beat analysts' revenue and profit estimates with its second-quarter 2005 results. That comes after Sonus lost money in the first quarter and did not provide guidance for the second (see Sonus Dips Into the Red).

The company reported that for the quarter ended June 30, 2005, net income nearly doubled to $9.7 million, or 4 cents per share, up from $4.9 million, or 2 cents per share, a year earlier. Analysts had expected the company to post a loss of 1 cent per share, according to Reuters Research.

Revenues grew 37 percent to $58.1 million from $42.4 million in 2004, blowing away the analyst estimates of $38.5 million by $20 million.

Legg Mason Inc. upgraded Sonus shares from a Sell rating to a Hold, but complained of a "lack of rhythm" in Sonus's quarterly results.

But looking forward, Sonus officials told analysts Monday only that revenues for the rest of the year were expected to exceed the $91.5 million taken in the first half. There was no real quarterly or numeric guidence.

While the glowing second-quarter numbers warmed investors overnight, the reality of Sonus's vague guidance for the rest of the year seemed to set in Tuesday.

Shares that had traded as much as 30 percent higher in the after-hours market on Monday sunk back to more modest gains of 10 percent after the stock opened for trading Tuesday morning.

That lack of clarity and foreward vision from Sonus brought back frustrating memories for some analysts, who have longed for some predictability in Sonus's earnings.

One theory on the spectacular second quarter was that Sonus was simply booking revenues that had slipped from the first quarter. In truth, $6 million in revenues had indeed been deferred from the first quarter.

"Q2 book-to-bill came in below 1x -- we believe that much of the revenue upside in the quarter came from revenue that was previously hung up from a revenue recognition perspective (consistent with Sonus’ well-publicized challenges on revenue recognition)," wrote Jefferies & Co. Inc. analyst George Notter in a research note.

The "revenue recognition challenges" that Notter refers to led to its earlier accounting restatements -- and the inquiry by the SEC. Such a history means that investors might need to see a string of impressive quarters before their doubts are quelled. They're still waiting.

Sonus's reporting problems have stemmed at least partly from its low customer count. Only 39 companies contributed to revenues in the second quarter, and one of those was Cingular Wireless LLC , which contributed 41 percent of revenues. So one blip in the Cingular account can throw off (or up) the whole quarter.

Sonus CEO Hassan Ahmed could offer no assurance that the third quarter would not be another disappointment (like the first) and that most of the year's remaining revenue would be reported in the last quarter of the year. Ahmed believes observers can get a much better idea of his company's progress by looking at it in half-year increments, instead of tracking it quarter-by-quarter. Whether or not Sonus can repeat its second quarter results in the third may depend on Cingular. "Cingular is deploying our product more broadly after the AT&T Wireless acquisition being completed," Ahmed told Light Reading Tuesday. "The Cingular business specifically is something we see as contributing to our business throughout the rest of 2005.”

Sources believe that the large chunk of Cingular revenue in the second quarter resulted from Sonus's technology gaining acceptance in the AT&T Wireless portion of Cingular's Network. Cingular acquired the AT&T Wireless network in February 2004.

Jefferies analyst Notter maintained a Hold rating on Sonus, but he also raised his 2005 full-year estimates, raising revenue projections from $167.1 million to $186.2 million. "Consistent with the upside in Q2 results, we are taking our 2005 EPS estimate from $(0.01) to $0.03," wrote Notter. "Our 2006 EPS estimate, however, declines from $0.05 to $0.00 on higher operating expense assumptions."

The news adds to a long lineup of activity at Sonus in 2005. In June, the SEC ended its inquiry into Sonus and gave the company the "all-clear" after Sonus had restated its books from 2001-2003. Also in June, Light Reading reported that Sonus might be the the big beneficiary of business at Then, just a week ago, a finance VP resigned. (See Sonus Cleared by SEC, Stock Jumps, Source: Sonus Has BellSouth Deal, and Sonus Finance VP Quits.) — R. Scott Raynovich, US Editor, and Mark Sullivan, Reporter, Light Reading

allidia 12/5/2012 | 3:06:09 AM
re: Sonus Shares Latest Thrill are very confident that 2H05 sales will be greater than 1H05 ($91.3m). They also said Q3 is starting Strong. And to quell the 1 time wonder scenario SONS deferred Revenue grew to $115m or so and not all revenue has been able to make it in to the bookings or deferred columns. They land Cingular which is a major customer... state Motorola partnership contributed to bookings and earnings this Q.. Managed 63.8% margins and have earned 0.03 for the first half in a year of substantial investment. Sonus added more employees again this Q and is expanding in India. If Lightreading is correct with BellSouth then what more can you ask for. Oops forgot Jupiter Telecom in Japan will be deploying IMS from SONS this year. SONS needs a PR team. The stock is grossly undervalued compared to the opportunity that is now starting to show in the results. Heck NT went up 12% on decent numbers and they still have an SEC investigation.
baba_curley_nanda 12/5/2012 | 3:06:00 AM
re: Sonus Shares Latest Thrill BTW,
Light Reading has done a poor job in covering SONS, back when the BT contract was due to be announced they stated clearly that SONS would get a major piece via Marconi contract, now they are out of the loop in checking if indeed SONS may get the Class5 nod since SONS is the only vendor- not Ericsson, not Huawei, not Siemens etc. that has what BT 21GN needs for network border gateway protocol and tariffing across multiple VOIP nets much less across VOIP to legacy nets. SONS was only in with Marconi allegedly for this feature alone as the SOLE reason. BS, SONS was there because SONS passed BT certification platinum level testing TWICE, not once TWICE. Ericsson is still working on the clas 5 features BT needs, so Eurpean nepotism or not BT needs SONS in Dec. They are idiots for the choices they made- especially giving the criminal enterprise Huawei even a piece of the pie. Huawei stole all of Cisco IOS code and Cisco proved it- settled out of court but Huawei cannot sell its wares into US market- CSCO only dealt since CSCO wants China and not willing to close China- too political- can U imagine the criminals at Huawei to do this???

Unimaginable BT would give this co. business.

Anyway, SONS will get major piece of BT...my prediction,and they will get some of major cable deals once they need IMS...

Finally, SONS lands Tata- bet you with site in India Tata is done deal!!

baba_curley_nanda 12/5/2012 | 3:06:00 AM
re: Sonus Shares Latest Thrill SONS is clearly firing on all Cylinders and for ONCE- LR has it right- BLS is in the bag- in fact they are projecting better 2nd half- HA did NOT say next quarter could be bad like last-he said to look at last years second half- which was good- and then he said they have never had this positive a view of number of orders coming in!!
Sure HA is a hem haw guy and he will not commit- he is a Pakistani and modesty is valued in that culture- that said he should shut UP and let Bert and Ellen answer financial estimates!!!

SONS will blow out the next 2 CCs, not just Cingular- but NTT and BLS is due to order for 3q or 4q and finally if Cingular is going SONS then SBC/BLS joint venture CINGULAR going with SONS means that BLS gets SONS value and reliablilty.

I say SONS has EVERY RBOC and the money will be pouring in, sure they are opening HQs in Bangalore etc. but those costs are a positive and you should just look at revenue in the pipeline and deferred revenue- HA said book to bill will be CLOSE to onw- he cannot stand to make a commmitment as he is so afraid of civil suits fomr investors that he is caustious to a fault..
Plus if Cingular goes SONS than the IMS must be SONS and so that means BLS land and SBC land will be SONS or no SONS IMS- and they are ONLY ONES COMPLIANT- forget Cedarpoint and niche cable cos. when Google and AOL and Yahoo want to tie in apps to SONS its the only one with SIP APIS ready to go to tie in web appss and that is game set and match for SONS in the web space- so RBOCS will have a quintuple play- yep

2)Cellular hybrid phone that goes VOIP whenever you get home or to a hot spot and that means ONE phone number and one bill from SBC or BLS or VZ
3)IP TV is coming when SBC gets FTTH or HDSL out and they may go fixed wirelss and run fiber to the curb.
4) RBOCs will offer Broadband of coure to allow for VOIP always on except when you are cellular and even then cell will have some web capability that will be way better than VCAST crap they have now.
5) Web based tied in applications that will come via GOOGLE- MSN-AOL-Yahoo- and on and on- a killer app will arrive from a web portal co. and it will be run from SONS app servers under IMS umbrella SONS wrote the RFC and so IETF loves it and they bought into SONS RFC and made it the IETFs IMS model since SONS clearly gets what is needed to hook in Web apps via SIP to add facilites to calls that set up nifty apps riding along with calls sessions whatever.
6) Finally- one of the apps riding on IMS will be videophone and that is likely provided by SONS or by RBOC- it will be a syncronized session that will give you full video phone on your cell that has very big TV screen. Or at home you put your VOIP/Cell phone into a base that hooks to your PC and TV- one and the same display. Thats all for now folks. SONS is next MSFT crossed with JNPR crossed with Yahoo crossed with Cingulare- and they will make bucks on every app that their servers tie together- now that is the killer business model that keeps on giving.

I can see SONS at GOOGLE prices in 10 years. As for now I will be happy if SONS hits 40 in 3 years- it deserves it- street has no vision of what this little co. is up to!!!

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