Why Williams Sold Its Sonus Shares

At first glance, the recent sale by Williams Communications Group (NYSE: WCG) of an enormous block of shares in Sonus Networks Inc. (Nasdaq: SONS) doesn't look good for Sonus.

On closer scrutiny, though, the sale appears to have more to do with Williams's need for fast cash than with any possible disadvantage to holding Sonus stock.

"This doesn't mean anything for Sonus," says Steve Levy, analyst at Lehman Brothers. "It means that Williams needs the money."

Sonus is generally acknowledged to lead the market in voice-over-IP gateways. These gateways use so-called softswitch technology to mimic circuit switches and port legacy voice traffic to packet-based networks. The company has been public since May 2000 (see Sonus Networks Inc. (SONS)).

According to Thomson Financial Network, Williams filed with the Securities and Exchange Commission on February 9 to sell 635,061 shares of Sonus stock valued at about $25 million. The filing apparently wasn't made online, and thus came to light later than it would have otherwise. Williams, which has been a stakeholder since the Sonus IPO last May (see Sonus Raises $115 Million in IPO), hasn't disclosed the full amount of its position in the company.

Both Williams and Sonus say the sale won't affect their separate customer/supplier relationship. The two have a deal that dates to February 2000, when Williams agreed to a $20 million, three-year purchase of Sonus gear. Sonus still says that deal could produce up to $100 million in revenues, based on estimates of the size of Williams's requirements to port voice circuits to its broadband IP network.

Porting the circuits is part of a larger-scale $1.9 billion access-network buildout that Williams is eager to complete this year -- and for which it's been revamping its finances and drumming up cash.

In February, for instance, Williams Communications reduced its debt and increased its assets by reworking its equity agreement with parent company Williams (Nasdaq: WMB). The carrier also arranged for more credit (see Williams Increases Credit Facility). Williams also has told its suppliers that it won't pay for equipment until it's actually using it.

Williams isn't alone in its struggle to fund capital expenditures this year. The call for capex cash reportedly motivated Broadwing Communications (NYSE: BRW) to sell 2.4 million shares of Corvis Corp. (Nasdaq: CORV) last week (see Broadwing Sells Corvis Shares).

Separately, Qwest Communications International Corp. (NYSE: Q) engineered a debt sale last month (see Qwest Tidies Up Finances) to fund capex. Others, including XO Communications Inc. (Nasdaq: XOXO), plan sales of debt and equity combinations to fund their ongoing network needs.

It's not clear just how reliance on stock transactions may have played into Sonus's recent nosedive. Today, for example, shares were selling at 20.62, down 3.12 (over 13 percent).

-- Mary Jander, senior editor, Light Reading http://www.lightreading.com

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photonic 12/4/2012 | 8:46:03 PM
re: Why Williams Sold Its Sonus Shares

Broadwind dumps Corvis' stock and its Corvis' fault.

Williams dumps Sonus' stock and its Williams'

I don't get it.
photonic 12/4/2012 | 8:45:57 PM
re: Why Williams Sold Its Sonus Shares
Here are the two headings for identical actions taken by two carriers and now you tell me if LightReading is not biased against Corvis.

News Analysis: Broadwing Sells Corvis Shares - 3/5/2001 4:00:00 PM
Carrier nets $43 million in cash by dumping one-third of its stake in the optical networking startup

News Analysis: Why Williams Sold Its Sonus Shares - 3/12/2001 5:00:00 PM
Williams Communications' sale of $25 million in Sonus shares seems to say more about the carrier than its supplier

fk 12/4/2012 | 8:45:52 PM
re: Why Williams Sold Its Sonus Shares I don't get "it's Corvis' fault" that Broadwing sold their shares from that headline. You're being hypersensitive. It's precisely this sort of whingeing that creates the impression that telecom engineers are whining bellyachers with serious self-esteem issues. I showed this site to someone who had never seen it, and after perusing the "discussion" portion of the site, she said, "My God. What a bunch of babies!" Quite frankly, it's hard to disagree with that assessment. Accusations of bias, bribery, etc. It's absolutely pathetic. You guys should listen to yourselves.
optinuts 12/4/2012 | 8:45:50 PM
re: Why Williams Sold Its Sonus Shares fk
don't paint all of us with the same brush. why have this site at all if we're all a bunch of babies. i suggest LR stay off these boards, keep a high editorial perspective, respond only to those comments that deserve a reply. the emotion flows both ways.

i think media bias is a fair issue. why is corvis always played down on these pages. they have a leading edge technology.
Rugger 12/4/2012 | 8:45:49 PM
re: Why Williams Sold Its Sonus Shares I'm with Photonic on this one. BW simply needed cash, just as Williams does. I said it way back when the article came out. And I'm saying it again. No whining or bellyaching here. I'm just tired of bias and shoddy journalism.
fanfare 12/4/2012 | 8:45:48 PM
re: Why Williams Sold Its Sonus Shares optinuts:

I have to agree. Although I do appreciate the work/research that is done by the authors at this site , I must admit.. I do see a tendancy to 'downplay' perspectives on CORV from LR.

The problem is that I see so much uninformed biased garbage written on technology from so many supposedly credible sources that I can't help seeing the majority of articles from LR as a breath of fresh air. Media bias is a real issue anywhere you look. Although LR may be no exception on this issue ... at least they get the data on the actual technologies correct (i.e. I don't see them getting confused over things like the functionality of products in this space... which is more than I can say about most journalistic endeavors in the world of high tech).

I am heavily weighted in CORV. I believe the technology there is strong. If CORV performs as I believe it will I'm sure (I hope) that LR will be there to report on this accurately.

runningwater53 12/4/2012 | 8:45:44 PM
re: Why Williams Sold Its Sonus Shares Yeah - the attacks are unrelenting. My advice to the ignorant and untrained - keep the LR kitty full, and keep its leaders wined and dined.
photonic 12/4/2012 | 8:45:41 PM
re: Why Williams Sold Its Sonus Shares

Can you explain the difference between William's sale and Broadwing's sale? Please, we are dying to find out the difference. Obviously, the articles are radically different.
fk 12/4/2012 | 8:45:36 PM
re: Why Williams Sold Its Sonus Shares I just reread the article on the Broadwing sale of Corvis stock, and it only reinforces my belief that you are being hypersentive here. The article pointedly says that Broadwing is fully committed to its relationship with Corvis, that they believe in the technology, and that they were raising money with the sale to fund bulding out their network. How you find this to be critical of Corvis is a bit of a puzzle.

On the other hand, I don't have a financial stake in Corvis or any of its competitors (unless you want to talk about the 100 shares of Nortel, and I sure don't considering the acquisition cost.) Funny how everyone here complaining about alleged bias has a stake in the company. In the article in question, the accusation that Broadwing's sale of Corvis stock was made to be an indictment of Corvis as a company or as a technology is wholly without merit. If this is supposed to be indicative of bias, then fellas, you're failing to convince this unbiased observer.

But my complaint isn't about Corvis in particular, but the general level of whining. Every single article talk has one or more of the following:

1) Accusation of bias against the company being talked about
2) Accusation of bias against another company not being talked about
3) Accusation that the editors are being bought
4) Demand to see the investors of record in LR

It is a fact that there is someone reading this site that has a financial stake (usually the biggest of one's life) in whatever startup is being discussed here. Nonetheless, that doesn't justify the level of bellyaching. It's so tiresome. Maybe you guys enjoy reading the endless litany of complaints, but I find it to simply be volume without meaning. Which is not to say that there aren't valid complaints. Those are a different story. But to merely smear the editors with blanket, rote accusations of bias, malevolence and ineptitude is a waste of everyone's time. If you believe you have a point to make, make it. But be prepared to back it up. It's easy to make accusations. To have meaning, you have to be able to support your contention, and the vast majority of the time, the accusers aren't even coming close.
allidia 12/4/2012 | 8:45:26 PM
re: Why Williams Sold Its Sonus Shares I agree with you generally but if she used the word "dumped" it could and probably should be construed as a negative. In this case CORV shares were "dumped". Bad choice of words which lends crediblity to those arguing bias. Secondly, this article is like Wall Street analysts cutting a stock from Strong Buy to Buy.We know what they mean by announcing the opinion change (relate to word "dumping") and then they go on to say how things still look promising for the company (CORV gear is working..). Mayan, Zaffire, Ironbridge etc.. reported negative actions ..layoffs..but what if LR wrote one of these and blamed the layoffs on another company???
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