Q3 Revenues Grow to $15.6 Million, Increase 139% Over Preceding Quarter

WESTFORD, Mass., October 11, 2000 – Sonus Networks, Inc. (Nasdaq: SONS), a leading provider of voice infrastructure solutions for the new public network, today reported financial results for its third quarter ended September 30, 2000.  

Revenues for the third quarter of fiscal 2000 were $15.6 million compared with $6.5 million for the second quarter ended June 30, 2000, an increase of 139 percent.  Net loss, excluding stock-based compensation, for the third quarter of fiscal 2000 was $5.4 million or $0.04 per share, compared with a net loss, excluding stock-based compensation, of $9.0 million or $0.07 per share on a pro forma basis for the second quarter of fiscal 2000. 

Net loss for the third quarter of fiscal 2000, including stock-based compensation, was $12.4 million or $0.09 per share, compared with a net loss of $15.4 million or $0.12 per share on a pro forma basis, for the second quarter of fiscal 2000. 

Revenues for the first nine months of fiscal year 2000 were $23.2 million.  Net loss, excluding stock-based compensation, for the first nine months of fiscal year 2000 was $23.4 million or $0.18 per share, on a pro forma basis.  Net loss for the first nine months of fiscal year 2000 was $43.8 million or $0.34 per share on a pro forma basis.

Certain per share amounts above are on a pro forma basis, which assumes the conversion of all redeemable convertible preferred stock into common stock as if such conversion occurred at the date of original issuance.  The net income per share and number of shares used in the per-share calculation for all periods presented reflect the three-for-one stock split that was effective October 10, 2000.  

“We are extremely pleased with the progress we have made in the third quarter, our first full quarter as a public company,” said Hassan Ahmed, Sonus’ president and CEO.  “We achieved significant growth in our revenues during the quarter and continued to build on our early market leadership through major contracts with new customers, the development of new product capabilities and formation of key industry partnerships.  It is clear that the migration to the new public network represents one of the industry’s most fundamental market transitions and we look forward to capitalizing on the opportunity before us.” 

In the third quarter, Sonus announced that two new customers, Time Warner Telecom and PointOne Telecommunications, have selected Sonus’ solutions to build out their next-generation voice infrastructures.  Time Warner Telecom is deploying Sonus’ complete Packet Telephony suite first for Internet offload and in the future, to deliver both long distance and local voice services.  PointOne is rolling out the Sonus equipment throughout its network to enable the scalability of its existing IP-voice infrastructure and to offer a range of voice and data services. 

During the quarter, Sonus continued to broaden its product portfolio.  In August, Sonus announced it has joined with NTT Communicationware and Nissho Electronics to develop, market and support a Japanese version of the award-winning Sonus Packet Telephony suite.  In September, the company debuted Sonus InsightTM, a comprehensive, web-based element management system (EMS) designed to simplify the deployment and operation of carrier-class packet voice networks and provide seamless OSS (operations support systems) integration.

Also in the third quarter, Sonus expanded its partnerships with telecom industry leaders.  Continuing to execute on its access strategy, Sonus forged a relationship with Copper Mountain Networks, a leading provider of DSL solutions for business and residential users, to provide carriers an end-to-end packet voice solution.  As part of the relationship, the two companies announced the interoperability of Sonus’ GSX9000 Open Services Switch and PSX6000 SoftSwitch with Copper Mountain’s CopperEdge concentrators and CopperRocket Integrated Access Devices (IADs).  Sonus continued to build its Open Services Partner Alliance (OSPA) with the addition of eight new partners during the quarter, and membership in the OSPA now stands at 42 telecom companies. 

About Sonus Networks

Sonus Networks, Inc. is a leading provider of voice infrastructure products for the new public network.  Sonus’ solutions enable service providers to deploy an integrated network capable of carrying both voice and data traffic, and to deliver a range of innovative, new services.  The Sonus Open Services Architecture (OSA) and award-winning Packet Telephony suite cut the time-to-market for competitive new service products, allowing carriers and third-party developers to expand marketshare and build important new revenue streams.  Its highly scalable products fully interoperate with and extend the life and utility of today’s public network.  Sonus embodies in its management and staff decades of experience in developing carrier-class voice, data and multimedia solutions for implementation in the world’s largest networks.  Sonus, founded in 1997, is headquartered in Westford, Massachusetts.  Additional information on Sonus is available at http://www.sonusnet.com. 

This release may contain projections or other forward-looking statements regarding future events or the future financial performance of Sonus 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 Sonus’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, filed with the SEC, which identifies important risk factors that could cause actual results to differ from those contained in the forward-looking statements.  These risk factors include, among others, the Company’s ability to grow its customer base, dependence on new product offerings, market acceptance of its products, rapid technological and market change and manufacturing and sourcing risks.

Sonus Insight, GSX9000, PSX6000, Open Services Partner Alliance and Open Services Architecture are trademarks 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 BALANCE SHEETS
(IN THOUSANDS)
                                            September 30, December 31,
                                                 2000          1999
                                             (unaudited)
ASSETS
Current Assets:
  Cash and cash equivalents                     $152,685       $8,885
  Marketable securities                             --         14,681
  Accounts receivable, net                         7,617         --
  Inventories                                     14,388        2,210
  Other current assets                             1,879          298
      Total current assets                       176,569       26,074

Property and equipment, net                       10,703        4,269
Other assets, net                                    911          439
                                                $188,183      $30,782
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
  Current portion of long-term obligations            $0       $1,336
  Accounts payable                                11,800        1,412
  Accrued expenses                                13,763        2,691
  Deferred revenues                               12,264        1,031
      Total current liabilities                   37,827        6,470
Long-term obligations, less current portion         --          3,402

Redeemable convertible preferred stock              --         46,109

Stockholders' Equity (Deficit):
  Common stock                                        61           22
  Capital in excess of par value                 268,288       25,611
  Accumulated deficit                            (77,688)     (33,882)
  Stock subscriptions receivable                    (346)        (346)
  Deferred compensation                          (39,894)     (16,604)
  Treasury stock, at cost                            (65)        --
      Total stockholders' equity (deficit)       150,356      (25,199)
                                                $188,183      $30,782

SONUS NETWORKS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
                             Three Months Ended     Nine Months Ended
                                 September 30,        September 30,
                               2000        1999     2000        1999
Revenues                     $15,568        $0    $23,171         $0
Manufacturing and
 product costs                 8,830       519     14,846      1,091

Gross Profit (Loss)            6,738      (519)     8,325     (1,091)
Operating Expenses:
  Research and development     7,032     2,434     18,231      7,505
  Sales and marketing          5,833     1,475     13,576      2,747
  General and administrative   1,763       438      3,750      1,114
  Stock-based
   compensation                6,982     1,090     20,347      2,171
     Total operating
      expenses                21,610     5,437     55,904     13,537
Loss from Operations         (14,872)   (5,956)   (47,579)   (14,628)
Interest income, net           2,495        71      3,813        283

Net Loss                    ($12,377)  ($5,885)  ($43,766)  ($14,345)

Net Loss Per Share:
Basic and Diluted             ($0.09)   ($0.38)    ($0.57)    ($1.13)

Shares Used
 in Computation              144,836    15,631     77,448     12,729

Pro Forma Net
 Loss Per Share (1):
Basic and Diluted             ($0.09)   ($0.06)    ($0.34)    ($0.16)

Basic and Diluted,            ($0.04)   ($0.05)    ($0.18)    ($0.13)
 Excluding Stock-based
 Compensation
Shares Used in Computation   144,836    96,330    130,291     91,351

(1) Pro forma basic and diluted net loss per share have been
calculated assuming the conversion of all outstanding preferred stock
into common stock, as if the conversion had occurred at the date of
issuance.
NOTE: Shares used in the net loss per share and the pro forma net
loss per share calculations retroactively reflect the three-for-one
stock split effective on October 10, 2000.