Sonus Networks Reports 2001 Third Quarter Financial Results

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WESTFORD, Mass., October 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 third quarter ended September 30, 2001.  

Revenues for the third quarter of fiscal 2001 were $40.3 million compared with $15.6 million in the same period last year, an increase of 159 percent. Adjusted net loss for the third quarter of fiscal 2001, which excludes restructuring charges, amortization of goodwill and purchased intangibles, impairment of assets, stock-based compensation and an in-process research and development charge relating to the purchase of certain assets of Linguateq, Inc. in July 2001, was $11.4 million or $0.06 per share, compared with an adjusted net loss, which excludes stock-based compensation, of $5.4 million or $0.04 per share for the third quarter of fiscal 2000. 

Net loss for the third quarter of fiscal 2001, including restructuring charges, amortization of goodwill and purchased intangibles, impairment of assets, stock-based compensation and an in-process research and development charge, was $498.2 million or $2.81 per share, compared with a net loss, including stock-based compensation, of $12.4 million or $0.09 per share for the third quarter of fiscal 2000.

In light of current market conditions, Sonus is aligning its cost structure with its revised business outlook, and as a result, recorded a restructuring charge of $25.8 million in the third quarter of fiscal 2001. Additionally, Sonus recorded a one-time, non-cash charge of $376.7 million for the accelerated write-off of goodwill and purchased intangibles related to the acquisition of telecom technologies, inc. Sonus also recorded non-cash stock-based compensation expense of $25.4 million related to the acceleration of vesting of stock options, restricted stock, and retention stock awards held by certain terminated employees.  

Revenues for the first nine months of fiscal year 2001 were $134.3 million compared with $23.2 million for the same nine-month period in fiscal year 2000. Adjusted net loss for the first nine months of fiscal year 2001, which excludes the restructuring and non-cash charges, was $10.1 million or $0.06 per share, compared with an adjusted net loss of $23.4 million or $0.18 per share for the same nine-month period in fiscal year 2000. Net loss for the first nine months of fiscal year 2001, including the restructuring and non-cash charges, was $632.0 million or $3.71 per share compared to a net loss, including the non-cash charges, of $43.8 million or $0.57 per share for the same nine-month period in fiscal year 2000. 

"The financial results reported today were on track with the revised business outlook we provided in September," said Hassan Ahmed, president and CEO, Sonus Networks. "We are making the necessary adjustments in our business to improve our near-term financial performance. Importantly, we will continue to invest in the areas required to make us an excellent partner to our customers and position us to broaden our leadership in the market for next-generation voice solutions."

To that end, Sonus made significant progress with customers during the third quarter, announcing contracts with three service providers, BellSouth Corporation, Level 3 Communications and Exario Networks. The addition of these industry-leading carriers brings the number of Sonus' announced customers to 13.  

In September, Sonus' market position was confirmed by leading industry research firms, Cahners In-Stat, Infonetics Research and Synergy Research Group. The respected research firms issued reports that ranked Sonus the worldwide market share leader for carrier-class packet voice switching equipment for the second quarter of 2001, the fourth consecutive quarter Sonus has held that position. Additionally, Sonus was named the most dynamic network and telecom company in the United States by Forbes ASAP magazine in their annual "Dynamic 100" listing.

In the third quarter, Sonus brought 11 new partners into the company's Open Services Partner AllianceSM (OSPA), further strengthening one of the premier partner initiatives in the telecommunications industry. The OSPA, which now has membership of more than 150 companies, provides a framework that offers service providers end-to-end, packet-based solutions using best-of-breed technologies and applications.

"Looking forward, we are confident about the opportunity the packet voice revolution represents and Sonus' ability to lead it," continued Ahmed. "The advantages that Sonus solutions bring to carriers, in terms of both cost reduction and increased revenue opportunities, remain as powerful as ever. We continue to lead the market with innovative technologies, a marquee customer base and strong competitive position. Our view of the long-term opportunity has not changed."

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 August 13, 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.

Open Services Partner Alliance is a service mark of Sonus Networks, and 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.