Sonus Networks Reports 2001 Second Quarter Financial Results

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Q2 Revenues Grow to $52.6 Million, Increase 27% Over Preceding Quarter

WESTFORD, Mass., July 11, 2001 – Sonus Networks, Inc. (Nasdaq: SONS), a leading provider of voice infrastructure solutions for the new public network, today reported financial results for its second quarter ended June 30, 2001.  

Revenues for the second quarter of fiscal 2001 were $52.6 million compared with $41.5 million for the first quarter of fiscal 2001, an increase of 27 percent. Adjusted net income for the second quarter of fiscal 2001, which excludes stock-based compensation and amortization of goodwill and purchased intangibles was $1.2 million or $0.01 per share, compared with adjusted net income, which excludes stock-based compensation, amortization of goodwill and purchased intangibles and an in-process research and development charge relating to the acquisition of telecom technologies, inc., completed in January 2001, of $151,000 or $0.00 per share for the first quarter of fiscal 2001. 

Net loss for the second quarter, including stock-based compensation and amortization of goodwill and purchased intangibles, was $51.4 million or $0.30 per share, compared with a net loss, including stock-based compensation, amortization of goodwill and purchased intangibles and an in-process research and development charge, of $82.5 million or $0.51 per share for the first quarter of fiscal 2001.

Revenues for the first six months of fiscal year 2001 were $94.1 million compared with $7.6 million for the same six month period in fiscal year 2000. Adjusted net income for the first six months of fiscal year 2001 was $1.3 million or $0.01 per share, compared with an adjusted net loss of $18.0 million or $0.15 per share for the same six month period in fiscal year 2000. Net loss for the first six months of fiscal year 2001, including the non-cash charges, was $133.9 million or $0.80 per share compared to a net loss, including the non-cash charges of, $31.4 million or $0.72 per share for the same six month period in fiscal year 2000. 

"This was an exceptionally good quarter for Sonus, particularly in light of the currently challenging telecommunications market," commented Hassan Ahmed, president and CEO, Sonus Networks. "We've seized a significant market opportunity as carriers shift their spending to technologies that provide dramatic improvements in economics and the ability to offer new revenue-generating services." Ahmed continued, "Today we announced the addition of a major incumbent carrier, BellSouth, to our customer roster. The selection by BellSouth represents an important milestone for Sonus in our drive to penetrate the incumbents."  

"During the quarter, we also strengthened our presence internationally, particularly in Asia. We went live with our deployment with Fusion Communications in Japan, furthered our progress internationally with Global Crossing, and signed a distribution agreement with Sumitomo Corporation.  Finally, we made good progress in broadening our solutions to extend from the core to the edge of the network, " concluded Ahmed.

Coincident with this release, Sonus announced that BellSouth has chosen Sonus to provide its industry-leading packet voice infrastructure solutions to supplement BellSouth's existing voice network (see related announcement "Sonus Networks Provides Internet Call Diversion Solution for BellSouth.") BellSouth will implement a full Sonus packet voice solution as the foundation for offloading Internet traffic from its circuit-switched voice network. By deploying Sonus' solutions for Internet call diversion (ICD), BellSouth will be able to scale its network resources to efficiently manage Internet and voice traffic.

Earlier in the quarter, Sonus announced that Fusion Communications deployed Sonus' packet voice solutions in the core of their next-generation voice network, which is already carrying live, revenue-generating traffic. Initially, Fusion has rolled out the Sonus systems in 17 cities across Japan, with plans to rapidly build out a network footprint that will encompass all major cities and population centers. Launched in April, the Fusion network currently supports more than 510,000 subscribers.

Further expanding its reach in Japan, Sonus formed a distribution relationship with Sumitomo Corporation. Under this non-exclusive agreement, Sumitomo will provide the full range of Sonus packet voice products to the Japanese carrier market, including Sonus' award-winning GSX9000 Open Services Switch, the PSX6000 SoftSwitch, the INtelligentIP Softswitch, the SGX2000 SS7 Signaling Gateway, and the Sonus Insight Element Management System.

In April 2001, Sonus forged a partnership with Juniper Networks in which the two companies will work together to help service providers build integrated voice and data networks with the highest levels of performance, reliability and quality of service. Through their joint sales and marketing alliance, Juniper Networks and Sonus are working together to deliver carrier-class solutions harnessing the latest innovations in MPLS/Traffic Engineering, service-aware routing and differentiated services.

Sonus also continued to draw leading telecom companies to its Open Services Partner Alliance (OSPA), increasing the range and scope of the Sonus partner initiative. During the quarter, 44 companies joined the OSPA as partners, and 18 companies successfully completed interoperability testing with Sonus to achieve "Powered" status in the OSPA. In a widely-attended demonstration at SUPERCOMM 2001 in Atlanta last month, Sonus and 32 of its "Powered" OSPA partners showcased an extensive range of innovative, next-generation products, services and solutions in a live IP/PSTN network.

In May, Sonus filed an S-3 "shelf" registration statement under which the Company may raise up to $1 billion in debt, equity or other securities, and the Company completed a $10 million private placement of convertible subordinated debt. 

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, dated May 14, 2001, 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, integration risks relative to its acquisition of telecom technologies, rapid technological and market change and manufacturing and sourcing risks.

GSX9000, PSX6000, SGX2000, Sonus Insight, 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.