November 2, 2010

Sonus Networks Reports 2010 Third Quarter Results

WESTFORD, Mass., Nov. 2, 2010 /PRNewswire via COMTEX News Network/ -- Sonus Networks, Inc. (Nasdaq: SONS), a market leader in next generation IP-based network solutions, today announced results for the quarter ended September 30, 2010.

Revenue for the third quarter of fiscal 2010 was $42.7 million, compared to $61.2 million in the second quarter of fiscal 2010 and $56.2 million for the third quarter of fiscal 2009. The Company's net loss on a GAAP basis for the third quarter of fiscal 2010 was $22.3 million, or $0.08 per share, compared to net income of $0.3 million, or $0.00 per diluted share, for the second quarter of fiscal 2010, and a net loss of $3.4 million, or $0.01 per share, for the third quarter of fiscal 2009.

"We are pleased with the customer growth we achieved during the third quarter across our entire product line. The timing of revenue from several large orders negatively impacted our third quarter operating results but is not expected to negatively impact our results for the year," said Raymond P. Dolan, President and Chief Executive Officer of Sonus. "We continue to have a positive outlook ahead and remain focused on leveraging all of our product platforms to accelerate growth and profitability."

2010 Guidance

The Company expects to achieve total revenue between $225 and $245 million for 2010. For 2010, Non-GAAP gross margin is expected to be within the range of 58% to 62%, and total Non-GAAP operating expenses are expected to be in the range of $145 to $148 million.

Conference Call Details:

Sonus Networks will host a conference call for analysts and investors to discuss its third quarter 2010 results as well as certain forward-looking information today at 4:45 p.m. ET.


    To listen live via telephone:
    Dial-in number: 800-743-4304
    International Callers: +1 212-231-2900


To listen via internet:

Sonus Networks will host a live webcast of the conference call. To access the webcast, visit www.sonusnet.com, About Us, Investor Relations.

About Sonus Networks

Sonus Networks, Inc. is a leader in IP networking with proven expertise in delivering secure, reliable and scalable next generation infrastructure and subscriber solutions. With customers in over 50 countries across the globe and over a decade of experience in transforming networks to IP, Sonus has enabled service providers and enterprises to capture and retain users and generate significant ROI. Sonus products include media and signaling gateways, policy/routing servers, session border controllers and subscriber feature servers. Sonus products are supported by a global services team with experience in design, deployment and maintenance of some of the world's largest and most complex IP networks. For more information visit www.sonusnet.com.

This release may contain forward-looking statements regarding future events that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results. Readers are referred to Item 1A "Risk Factors" of Sonus' Annual Report on Form 10-K for the year ended December 31, 2009 and Form 10-Q for the quarters ended March 31, 2010, June 30, 2010 and September 30, 2010, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements. Any forward-looking statements represent Sonus' views only as of today and should not be relied upon as representing Sonus' views as of any subsequent date. While Sonus may elect to update forward-looking statements at some point, Sonus specifically disclaims any obligation to do so, except as required by law.

Sonus is a registered trademark of Sonus Networks, Inc. All other company and product names may be trademarks of the respective companies with which they are associated.

For more information, please contact:



    Wayne Pastore          Fran Murphy
    978-614-8291           978-614-8148
    wpastore@sonusnet.com  fmurphy@sonusnet.com



                                  SONUS NETWORKS, INC.
                     Condensed Consolidated Statements of Operations
                          (in thousands, except per share data)
                                       (unaudited)




                                        Three months ended
                                        ------------------
                        September 30,       June 30,       September 30,
                                  2010             2010              2009
                                  ----             ----              ----
    Revenue:
      Product                  $19,391          $36,796           $33,544
      Service                   23,348           24,385            22,621
                                ------           ------            ------
        Total revenue           42,739           61,181            56,165
                                ------           ------            ------

    Cost of revenue:
      Product                    7,231           10,826            10,160
      Service                   11,730           11,842            10,755
                                ------           ------            ------
        Total cost of
         revenue                18,961           22,668            20,915
                                ------           ------            ------

    Gross profit                23,778           38,513            35,250
                                ------           ------            ------

    Gross profit %
      Product                     62.7%            70.6%             69.7%
      Service                     49.8%            51.4%             52.5%
    Total gross
     profit %                    55.6%            62.9%             62.8%

    Operating
     expenses:
      Research and
       development              16,226           15,106            14,141
      Sales and
       marketing                11,836           12,392            11,527
      General and
       administrative           17,157           10,971            11,578
      Restructuring              1,114                -             1,533
                                 -----              ---             -----
        Total operating
         expenses               46,333           38,469            38,779
                                ------           ------            ------

    Income (loss)
     from operations           (22,555)              44            (3,529)
    Interest expense               (10)             (30)              (23)
    Interest income                439              466               787
    Other income, net                1                1                12
                                   ---              ---               ---

    Income (loss)
     before income
     taxes                     (22,125)             481            (2,753)
    Income tax
     provision                    (153)            (170)             (644)
                                  ----             ----              ----

    Net income (loss)         $(22,278)            $311           $(3,397)
                              ========             ====           =======

    Earnings (loss)
     per share:
      Basic                     $(0.08)              $-            $(0.01)
      Diluted                   $(0.08)              $-            $(0.01)

    Shares used to
     compute earnings
     (loss) per
     share:
      Basic                    275,412          275,051           273,907
      Diluted                  275,412          276,314           273,907


                       SONUS NETWORKS, INC.
          Condensed Consolidated Statements of Operations
               (in thousands, except per share data)
                            (unaudited)




                                          Nine months ended
                                          -----------------
                                 September 30,        September 30,
                                           2010                 2009
                                           ----                 ----
    Revenue:
      Product                           $92,465              $89,267
      Service                            73,863               69,517
                                         ------               ------
        Total revenue                   166,328              158,784
                                        -------              -------

    Cost of revenue:
      Product                            30,358               27,041
      Service                            35,501               32,986
                                         ------               ------
        Total cost of revenue            65,859               60,027
                                         ------               ------

    Gross profit                        100,469               98,757
                                        -------               ------

    Gross profit %
      Product                              67.2%                69.7%
      Service                              51.9%                52.6%
    Total gross profit %                  60.4%                62.2%

    Operating expenses:
      Research and
       development                       46,272               45,995
      Sales and marketing                37,822               36,018
      General and
       administrative                    38,272               32,259
      Restructuring                       1,114                3,510
                                          -----                -----
        Total operating
         expenses                       123,480              117,782
                                        -------              -------

    Loss from operations                (23,011)             (19,025)
    Interest expense                        (53)                 (94)
    Interest income                       1,420                3,513
    Other income, net                        12                   24
                                            ---                  ---

    Loss before income
     taxes                              (21,632)             (15,582)
    Income tax benefit
     (provision)                           (469)                 341
                                           ----                  ---

    Net loss                           $(22,101)            $(15,241)
                                       ========             ========

    Loss per share:
      Basic                              $(0.08)              $(0.06)
      Diluted                            $(0.08)              $(0.06)

    Shares used to compute
     loss per share:
      Basic                             275,107              273,518
      Diluted                           275,107              273,518


                            SONUS NETWORKS, INC.
                   Condensed Consolidated Balance Sheets
                               (in thousands)
                                (unaudited)



                                          September 30,        December 31,
                                                    2010                2009
                                                    ----                ----
                  Assets
    Current assets:
      Cash and cash equivalents                  $81,245            $125,323
      Marketable securities                      247,908             239,223
      Accounts receivable, net                    34,710              47,998
      Inventory, net                              26,982              21,925
      Deferred income taxes                          650                 562
      Other current assets                        19,657              17,508
                                                  ------              ------
        Total current assets                     411,152             452,539

    Property and equipment, net                   16,588              14,646
    Intangible assets, net                         1,928                 341
    Goodwill                                       5,056               5,053
    Investments                                   84,314              49,598
    Deferred income taxes                            960                 711
    Other assets                                  22,427              17,849
                                                  ------              ------
                                                $542,425            $540,737
                                                ========            ========

       Liabilities and stockholders'
                   equity
    Current liabilities:
      Accounts payable                           $19,040              $5,337
      Accrued expenses                            24,126              19,292
      Current portion of deferred
       revenue                                    56,014              74,748
      Current portion of long-term
       liabilities                                   492                 753
                                                     ---                 ---
        Total current liabilities                 99,672             100,130

    Deferred revenue                              35,818              25,242
    Long-term liabilities                            911               1,127
                                                     ---               -----
          Total liabilities                      136,401             126,499
                                                 -------             -------

    Commitments and contingencies

    Stockholders equity:
      Common stock                                   279                 277
      Additional paid-in capital               1,299,983           1,286,326
      Accumulated deficit                       (900,911)           (878,810)
      Accumulated other comprehensive
       income                                      6,940               6,712
      Treasury stock                                (267)               (267)
                                                    ----                ----
          Total stockholders' equity             406,024             414,238
                                                 -------             -------
                                                $542,425            $540,737
                                                ========            ========


                                   SONUS NETWORKS, INC.
                     Condensed Consolidated Statements of Cash Flows
                                      (in thousands)
                                       (unaudited)




                                                 Nine months ended
                                                 -----------------
                                       September 30,          September 30,
                                                 2010                   2009
                                                 ----                   ----
    Cash flows from operating
     activities:
      Net loss                              $(22,101)              $(15,241)
      Adjustments to reconcile
       net loss to cash flows
       provided by operating
       activities:
        Depreciation and
         amortization of property
         and equipment                         8,134                  7,497
        Amortization of intangible
         assets                                  413                    184
        Stock-based compensation              12,410                  9,889
        Loss on disposal of
         property and equipment                   81                    173
        Deferred income taxes                     60                   (137)
        Changes in operating
         assets and liabilities:
          Accounts receivable                 13,471                 41,600
          Inventory                          (10,360)                (4,217)
          Other operating assets               1,484                 (7,516)
          Accounts payable                    12,704                 (3,212)
          Accrued expenses                     4,477                (12,999)
          Accrued litigation
           settlements                             -                 (9,600)
          Deferred revenue                    (8,347)                 4,240
                                              ------                  -----
            Net cash provided by
             operating activities             12,426                 10,661
                                              ------                 ------

    Cash flows from investing
     activities:
      Purchases of property and
       equipment                              (9,193)                (4,813)
      Purchase of intangible
       assets                                 (2,000)                     -
      Purchases of marketable
       securities                           (283,461)              (179,416)
      Sale/maturities of
       marketable securities                 236,698                228,979
                                             -------                -------
            Net cash provided by (used
             in) investing activities        (57,956)                44,750
                                             -------                 ------

    Cash flows from financing
     activities:
      Sale of common stock in
       connection with employee
       stock purchase plan                     1,353                  1,119
      Proceeds from exercise of
       stock options                             327                     32
      Payment of tax withholding
       obligations related to
       net share settlements of
       restricted stock awards                  (572)                  (531)
      Principal payments of
       capital lease obligations                (194)                  (189)
                                                ----                   ----
            Net cash provided by
             financing activities                914                    431
                                                 ---                    ---

    Effect of exchange rate
     changes on cash and cash
     equivalents                                 538                    856
                                                 ---                    ---

    Net increase (decrease) in
     cash and cash equivalents               (44,078)                56,698
    Cash and cash equivalents,
     beginning of year                       125,323                122,207
                                             -------                -------
    Cash and cash equivalents,
     end of period                           $81,245               $178,905
                                             =======               ========


                                              SONUS NETWORKS, INC.
                                            Supplemental Information
                                                 (In thousands)
                                                  (unaudited)


    The following tables provide the details of stock-based compensation
    and amortization of intangible assets included in the Company's
    Condensed Consolidated Statements of Operations and the line items
    in which these amounts are reported.  Additional information
    regarding these items is available in the Investor Relations section
    of our website at http://www.sonusnet.com.  The information
    contained on our website or that can be accessed through our website
    should not be considered to be part of, or incorporated into, this
    press release.



                                                Three months ended
                                               ------------------
                                    September                     September
                                       30,         June 30,          30,
                                         2010          2010            2009
                                         ----          ----            ----
    Stock-based compensation
      Cost of revenue - product          $105           $89             $67
      Cost of revenue - service           396           404             483
                                          ---           ---             ---
        Cost of revenue                   501           493             550
                                          ---           ---             ---

      Research and development
       expense                            617           665             774
      Sales and marketing expense         647           688             885
      General and administrative
       expense                          4,947         1,366             930
                                        -----         -----             ---
        Operating expense               6,211         2,719           2,589
                                        -----         -----           -----

          Total stock-based
           compensation                $6,712        $3,212          $3,139
                                       ======        ======          ======


    Amortization of intangible
     assets
      Cost of revenue - product           $37           $38             $40
      Research and development            100           100               -
                                          ---           ---             ---
          Total amortization of
           intangible assets             $137          $138             $40
                                         ====          ====             ===





                                         Nine months ended
                                         -----------------
                                    September       September
                                       30,             30,
                                         2010            2009
                                         ----            ----
    Stock-based compensation
      Cost of revenue - product          $265            $298
      Cost of revenue - service         1,219           1,335
                                        -----           -----
        Cost of revenue                 1,484           1,633
                                        -----           -----

      Research and development
       expense                          1,888           2,643
      Sales and marketing expense       2,064           3,419
      General and administrative
       expense                          6,974           2,194
                                        -----           -----
        Operating expense              10,926           8,256
                                       ------           -----

          Total stock-based
           compensation               $12,410          $9,889
                                      =======          ======


    Amortization of intangible
     assets
      Cost of revenue - product          $113            $184
      Research and development            300               -
                                          ---             ---
          Total amortization of
           intangible assets             $413            $184
                                         ====            ====


SOURCE Sonus Networks, Inc.

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