Sonus Misses in Q3
The softswitch and IMS gear maker reported a net loss of $2.7 million, or a penny a share, on revenues of $45.7 million for its third fiscal quarter of 2005. That compares to the reported profit of $10.3 million, 4 cents a share, on revenues of $46.8 million for the company's year-ago quarter.
When compared to analysts' expectations, Sonus missed its earnings number and its revenue number. Analysts surveyed by First Call were expecting Sonus to report a profit of $0.01 a share on revenues of $49 million.
Sonus shares were up $0.14 (2.85%) to $5.06 in normal trading on Tuesday. But shortly after the company reported its quarterly loss -- and the conference call that explained the numbers -- its shares fell $0.66 (13.04%) to $4.40 in after-hours trading.
The missed numbers, Sonus claims, weren't a matter of botched sales. The company says it lowered its revenues by $4.7 million and its earnings by 2 cents a share because it renegotiated "certain customers' bundled maintenance and support arrangements" during the quarter.
So thanks to some mysterious customer contract doings, nearly $5 million in revenues that could have been reported in the third quarter as product revenues will now appear during some future quarter as service revenues.
"We have historically called out any unusual items in our results and we wanted to be sure and call this one out as well," says the vendor's jet-setting CEO, Hassan Ahmed. (See Sonus Chief: Come Fly With Me! )
Sonus's financial scandal days may be over, but now the company is taking on the likes of Lucent Technologies Inc. (NYSE: LU) and others in the softswitch market and in new carrier IMS deployments. When asked how he felt about Lucent's many wins in the North American IMS race, Ahmed took a step back for a broad comment about the technology's generalities. (See Cingular Picks Lucent for IMS, SBC Jumps on Lucent IMS Bandwagon, Lucent Lands BellSouth IMS Deal, and Lucent in the Lead for Verizon IMS?.)
"IMS is really an open architecture and that allows an operator to leverage multivendor solutions," he says. "There's been a lot of talk about IMS and it's really good because it validates the direction we've been taking."
Though Ahmed didn't say so, Sonus may not have as much to worry about by missing RBOC business as some think, according to one analyst watching the company.
In his earnings preview note, Eric Buck at Janco Partners Inc. writes that "no RBOC, other than Qwest, has accounted for more than 10% of Sonus’ revenues in any of the last five quarters.
"Should the remaining RBOCs go elsewhere... it is not likely to be detrimental to Sonus' current revenue stream." Buck adds that Sonus is winning deals with the carriers "that are really driving the market" such as new voice entrants like EarthLink Inc. and AOL Inc.. (See EarthLink Picks Sonus and Sonus, AOL Team On IMS .)
Even with new VOIP wins, not all are convinced that Sonus is quite the trailblazer it used to be. "We further believe Sonus remains overly dependent on legacy customers, applications such as trunking, and a GSX9000 platform which is now seven years old," writes Merriman Curhan Ford & Co. analyst Tim Savageaux, in an October 7 note to clients.
— Phil Harvey, News Editor, Light Reading