Sonus Networks Reports 2005 First Quarter Financial Results.CHELMSFORD Chelmsford, city, England Chelmsford, city (1991 pop. 91,109), county seat of Essex, SE England. It is a market center (especially for cattle) for the surrounding agricultural district. , Mass. -- Sonus History and Origin Sonus is a Latin word which means "noise, sound" or "tone, character, style". It is also the root word for sonic and sound. Therefore, it was an inspirational word for many well known companies and other words such as Sony (from the combination of sonus Networks, Inc. (Nasdaq: SONS), a leading supplier of service provider voice over IP (VoIP) infrastructure solutions, today reported its financial results for the first quarter ended March 31, 2005. Revenues for the first quarter of fiscal 2005 were $33.6 million compared with $45.1 million in the fourth quarter of fiscal 2004. Net loss for the first quarter of fiscal 2005 was $3.7 million or a loss of $0.01 per share compared with net income for the fourth quarter of fiscal 2004 of $6.3 million or $0.02 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share. Revenues for the first quarter of fiscal 2004 were $36.5 million, and net income was $3.0 million or $0.01 per diluted share. "We achieved a number of key objectives in the quarter, including strong order activity, the expansion of our customer base, establishment of new global partnerships and the introduction of new software for the ISP (1) See in-system programmable. (2) (Internet Service Provider) An organization that provides access to the Internet. Connection to the user is provided via dial-up, ISDN, cable, DSL and T1/T3 lines. market. We are, of course, disappointed that our progress is not reflected in our revenue result this quarter," said Hassan Hassan (häsän`), d. 1894, sultan of Morocco (1873–94). He brought the weak and disorganized country firmly under his control and held in check attempts by European powers at domination. Ahmed, chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , Sonus Networks. "Looking ahead, the world's service providers will continue their migrations to VoIP, and we are pleased that Sonus has a leading position in this important market." During the first quarter, Sonus announced four new customer deployments in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. and in Europe. In the U.S., America Online See AOL. is deploying Sonus' technology to deliver its new Internet See Web 2.0 and Internet2. Phone Service, which is changing the very nature of voice service, making it a pathway pathway /path·way/ (path´wa) 1. a course usually followed. 2. the nerve structures through which an impulse passes between groups of nerve cells or between the central nervous system and an organ or muscle. not just for conversations, but also for a wide range of next-generation interactive applications. Also in the U.S., WebEx Communications is augmenting its WebEx MediaTone Network with a VoIP solution from Sonus to deliver new IP-based conferencing See teleconferencing. services to its customers. In Mexico, Marcatel is building out a VoIP network with Sonus to provide access services to businesses and cable operators. In Europe, Slovak Telecom has implemented a Sonus-based network to support the delivery of prepaid pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. and postpaid post·paid adj. With the postage having been paid in advance. postpaid Adverb, adj with the postage prepaid Adj. 1. calling services. Demonstrating the scalability and reliability of the Sonus solution, three existing customers extended their Sonus-based networks during the first quarter. XO Communications XO Communications is a United States telecommunications firm and one of the largest Competitive Local Exchange Carrier (CLEC) in the country. It is owned by XO Holdings, Inc OTCBB: XOHO. announced their new business service, XOptions(R) Flex A development system for Flash-based applications from Adobe. Introduced in 2004 as a J2EE application, Flex compiles ActionScript code and XML-based user interface descriptions (MXML) into binary Flash files (SWF files). , which is the first in a series of the carrier's new enhanced services Enhanced service is service offered over commercial carrier transmission facilities used in interstate communications, that employs computer processing applications that act on the format, content, code, protocol, or similar aspects of the subscriber's transmitted information; delivered over the XO national IP network and Sonus technology. Leveraging the Sonus Open Services Architecture The Open Service Access or OSA is part of the 3rd generation mobile telecommunications network or UMTS. OSA describes how services are architected in an UMTS network. The standards for OSA are being developed as part of the 3rd Generation Partnership Project (3GPP). (TM) (OSA 1. OSA - Open Scripting Architecture. 2. OSA - Open System Architecture. ), XO Communications will deliver a broad range of IP telephony The two-way transmission of voice over a packet-switched IP network, which is part of the TCP/IP protocol suite. The terms "IP telephony" and "voice over IP" (VoIP) are synonymous. applications and features to businesses throughout the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . South Carolina-based NuVox also announced that it is introducing a new business VoIP service that will be delivered over its Sonus-based network. Further, Global Crossing, one of the first providers to decommission de·com·mis·sion tr.v. de·com·mis·sioned, de·com·mis·sion·ing, de·com·mis·sions To withdraw (a ship, for example) from active service. a legacy switch in the core of its network and replace it with a VoIP switch, announced that it is continuing to decommission legacy switches in four additional cities. This project is expected to create increased network efficiencies and enhance the seamless delivery of converged IP services. Underscoring Sonus' success with both existing and new customers, the company was again ranked the number one provider of carrier-class packet voice equipment for the fourth quarter of 2004. Industry research firms reported that Sonus increased its market share in several segments of the carrier packet voice market, growing faster than the market and the competition in 2004. In-Stat/MDR and Synergy The enhanced result of two or more people, groups or organizations working together. In other words, one and one equals three! It comes from the Greek "synergia," which means joint work and cooperative action. Research Group named Sonus the market share leader, recognizing Sonus as the top equipment vendor in several major service provider packet telephony Synonymous with IP telephony and voice over IP (VoIP), in which a digital voice stream is broken up into small chunks (packets) and transmitted over a packet-switched network. See IP telephony and packet switching. market segments. Additionally, Sonus estimated that at the end of Q1, service providers globally were carrying an estimated 12 billion minutes per month of customer traffic on their Sonus-based networks. In January 2005, Sonus entered into a global reseller An organization that sells hardware and software to the general public. Resellers purchase products from software publishers and hardware manufacturers. agreement with Samsung Electronics Samsung Electronics (SEC, Hangul:삼성전자; KSE: 005930, KSE: 005935, LSE: SMSN, LSE: SMSD) is a South Korean multinational corporation and the world's largest and leading electronics and information technology company. Company. Under the terms of this non-exclusive agreement, Samsung is able to sell and support Sonus VoIP solutions to mobile operators around the world. Continuing the expansion of its worldwide presence, Sonus announced the opening of a software development and regional support center in Bangalore, India. Sonus Networks India Pvt. Ltd. will concentrate on the development of VoIP applications, software design and quality assurance services Assurance services have been defined by the American Institute of Certified Public Accountants (AICPA) as 'Independent Professional Services that improve information quality or its context'. in support of Sonus' product portfolio. The establishment of Sonus' center in India represents another phase in the company's commitment to providing VoIP applications and services to customers around the globe. About Sonus Networks Sonus Networks, Inc. is a leading provider of voice over IP (VoIP) infrastructure solutions for wireline and wireless service providers. With its Open Services ArchitectureTM (OSA), Sonus delivers end-to-end solutions (jargon) end-to-end solution - (E2ES) A term that suggests that the supplier of an application program or system will provide all the hardware and/or software components and resouces to meet the customer's requirement and no other supplier need be involved. Compare: turn-key solution. addressing a full range of carrier applications, including trunking See port aggregation. and tandem switching A telephone central office switch that links telco end offices together and does not connect to the customer directly. Also called a "Class 4 switch" or "TDM switch," a tandem switch is a computer that is specialized for TDM-based, circuit-switched telephone calls. , residential and business access, network border switching and enhanced services. Sonus' voice infrastructure solutions, including media gateways, softswitches and network management systems, are deployed in service provider networks worldwide. Founded in 1997, Sonus is headquartered in Chelmsford, Massachusetts Chelmsford is a town in Middlesex County, Massachusetts in the Greater Boston area. It is located 24 miles from Boston and, bordering on the City of Lowell, it is part of the Greater Lowell metropolitan area. of U.S. Additional information on Sonus is available at http://www.sonusnet.com. This release may contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 the "Risk Factors" section of Sonus' Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. , dated March 15, 2005, filed with the SEC, which identifies important risk factors that could cause actual results to differ from those contained in the forward-looking statements. Risk factors include among others: the impact of material weaknesses in our disclosure controls and procedures and our internal control over financial reporting on our ability to report our financial results timely and accurately; the unpredictability of our quarterly financial results; risks associated with our international expansion and growth; consolidation in the telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. industry; risks associated with the investigation of the company by the SEC; and potential costs resulting from pending securities litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. against the company. 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. Sonus is a registered trademark of Sonus Networks. Open Services Architecture is a trademark of Sonus Networks. All other company and product names may be trademarks of the respective companies with which they are associated
SONUS NETWORKS, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended
March 31, December 31, March 31,
2005 2004 2004
-------- --------- --------
Revenues $ 33,610 $ 45,083 $ 36,532
Cost of revenues 12,112 13,757 12,400
-------- --------- --------
Gross profit 21,498 31,326 24,132
-------- --------- --------
Gross profit % 64.0% 69.5% 66.1%
Operating expenses:
Research and development 11,017 9,348 8,928
Sales and marketing 9,027 8,935 6,860
General and administrative 6,800 7,385 4,827
Stock-based compensation - 65 379
Amortization of purchased intangible
assets - 601 600
-------- --------- --------
Total operating expenses 26,844 26,334 21,594
-------- --------- --------
Income (loss) from operations (5,346) 4,992 2,538
-------- --------- --------
Interest expense (128) (119) (122)
Interest income 1,875 1,477 765
-------- --------- --------
Income (loss) before provision for
income taxes (3,599) 6,350 3,181
Provision for income taxes 96 89 167
-------- --------- --------
Net income (loss) $ (3,695) $ 6,261 $ 3,014
======== ========= ========
Net income (loss) per share:
Basic $ (0.01) $ 0.03 $ 0.01
Diluted $ (0.01) $ 0.02 $ 0.01
Shares used in computation:
Basic 247,877 247,134 244,607
Diluted 247,877 256,443 255,592
SONUS NETWORKS, INC.
Condensed Consolidated Balance Sheets
(In thousands)
March 31, December 31,
2005 2004
----------- -------------
Assets
Current assets:
Cash, cash equivalents and marketable
securities $303,824 $292,076
Accounts receivable, net 27,631 32,486
Inventory, net 31,256 28,346
Other current assets 11,653 10,891
----------- -------------
Total current assets 374,364 363,799
Property and equipment, net 11,145 8,217
Long-term marketable securities 7,488 21,029
Other assets 864 783
----------- -------------
$393,861 $393,828
=========== =============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $26,942 $26,894
Accrued restructuring expenses 189 186
Current portion of deferred revenue 69,267 65,105
Current portion of long-term liabilities 25 30
----------- -------------
Total current liabilities 96,423 92,215
----------- -------------
Long-term deferred revenue, less current
portion 22,746 25,960
Long-term liabilities, less current portion 614 613
Convertible subordinated note 10,000 10,000
Stockholders' equity:
Common stock 250 250
Capital in excess of par value 1,051,875 1,049,142
Accumulated deficit (787,780) (784,085)
Treasury stock (267) (267)
----------- -------------
Total stockholders' equity 264,078 265,040
----------- -------------
$393,861 $393,828
=========== =============
SONUS NETWORKS, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
Three Months Ended
March 31, December 31, March 31,
2005 2004 2004
--------- ------------ --------
Cash flows from operating activities:
Net income (loss) $ (3,695) $ 6,261 $ 3,014
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation 1,476 1,617 1,632
Tax benefit from stock options
exercised - 67 -
Stock-based compensation - 65 379
Amortization of purchased intangible
assets - 601 600
Changes in current assets and
liabilities
Accounts receivable 4,855 2,916 (8,308)
Inventory (2,910) (780) (1,553)
Other current assets (762) 1,970 (1,455)
Accounts payable 1,334 (2,445) 2,403
Accrued expenses (1,330) 38 (1,169)
Deferred revenue 948 3,076 7,760
--------- ---------- ---------
Net cash provided by (used in)
operating activities (84) 13,386 3,303
--------- ---------- ---------
Cash flows from investing activities:
Purchase of property and equipment (4,303) (2,696) (2,230)
Maturities (purchases) of marketable
securities, net 2,977 (8,118) 15,910
Other assets (81) (20) 136
--------- ---------- ---------
Net cash provided by (used in)
investing activities (1,407) (10,834) 13,816
--------- ---------- ---------
Cash flows from financing activities:
Sales of common stock in connection
with employee stock purchase plan 2,313 - 796
Proceeds from exercise of stock
options 420 2,565 400
Payments of long-term liabilities (58) (31) (59)
--------- ---------- ---------
Net cash provided by financing
activities 2,675 2,534 1,137
--------- ---------- ---------
Net increase in cash and cash
equivalents 1,184 5,086 18,256
--------- ---------- ---------
Cash and cash equivalents, beginning
of period 121,931 116,845 133,715
--------- ---------- ---------
Cash and cash equivalents, end of
period $ 123,115 $ 121,931 $151,971
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