Sonus Networks Reports 2007 Third Quarter Financial Results

BT Group Selects Sonus as 21CN Vendor for AGCF; Company Reaches Agreement to Settle Class Action Lawsuit

WESTFORD, Mass., November 8, 2007 – Sonus Networks, Inc. (Nasdaq: SONS), a leading supplier of service provider IP-voice infrastructure solutions, today reported its financial results for the third quarter ended September 30, 2007.

Revenues for the third quarter of fiscal 2007 were $76.6 million compared with $75.5 million in the second quarter of fiscal 2007 and $76.0 million for the third quarter of fiscal 2006. The Company reported a net loss on a GAAP basis of $26.8 million, or $0.10 per share, for the third quarter of 2007, compared to a GAAP net loss of $7.0 million, or $0.03 per share, for the second quarter of 2007, and GAAP net income of $14.4 million, or $0.06 per diluted share, for the third quarter of 2006.

Revenues for the first nine months of fiscal 2007 were $223.2 million, compared to $200.5 million in the same period last year. The Company's GAAP net loss for the first nine months of fiscal 2007 was $37.7 million, or $0.14 per share, compared to GAAP net income of $29.1 million, or $0.11 per diluted share, for the first nine months of fiscal 2006.

The Company's results include stock-based compensation and related expenses, other costs related to the stock option investigation and subsequent restatement such as withholding tax adjustments and professional fees, and amortization of intangible assets totaling $11.2 million in the third quarter of 2007, $18.8 million in the second quarter of 2007 and $4.7 million in the third quarter of 2006. These charges totaled $43.8 million in the first nine months of 2007 and $10.1 million in the first nine months of 2006. The Company's 2007 GAAP results also include $40 million of expense related to the November 7, 2007 settlement of litigation.

"Sonus delivered a solid quarter, further strengthening the Company's leadership position in this exciting market," said Hassan Ahmed, chairman, president and CEO, Sonus Networks. "We recorded revenue slightly ahead of our outlook, launched important new technology into the market, strengthened our executive team and, perhaps most importantly, won a significant position in the world's largest all-IP network, BT's 21CN."

"We have demonstrated the ability to deliver IP-voice traffic seamlessly, provide end-to-end IP-based voice communications networks and deploy advanced features and applications, all while supporting many of the world's largest operators. This new way of communicating is going to shape our daily lives and make them more fulfilling, exciting and manageable. The decisions major network operators are making today reflect their commitment to this new communications paradigm, and as these investments are expected to drive ongoing growth in our business," continued Ahmed.

In a press release issued today, Sonus announced that BT Group, one of the world's leading providers of communications solutions and services, has selected Sonus as an official 21CN vendor to supply an Access Gateway Control Function (AGCF) capability to support BT's 21st Century Network programme (21CN). The Sonus solution will enable communications providers to interconnect with BT's 21CN and leverage its next-generation capabilities to provide converged multimedia services to end user customers. 

Resolution of 2004 Class Action Lawsuit

On November 7, 2007, the Company reached an agreement to settle litigation against the Company and certain of its former and current officers alleging violations of federal securities laws in connection with the Company's 2004 restatement. 

Pursuant to the settlement, which is subject to court approval, the Company has agreed to pay $40 million to the shareholder classes in the case. The Company has recorded a $40 million charge and related liability in the third quarter of fiscal 2007 for the full amount of the settlement. 

The Company has approximately $15.3 million in insurance coverage that could be used to help offset the costs of this litigation as well as other litigation pending against the Company and certain of its current and former officers and directors. Due to ongoing discussions with its insurer about the extent of the insurance coverage available for, and current uncertainties about the outcome of, the other pending litigation, the Company has not yet determined how much, if any, of this insurance coverage will be allocated to the 2004 restatement settlement. In the event that the Company ultimately determines that some or all of the $15.3 million of available insurance will be utilized towards this settlement, the Company would record a gain in that subsequent reporting period for the amount of the insurance proceeds allocated to the settlement.   

Third Quarter Fiscal 2007 Business Highlights:
New Products

Sonus' focus on innovation remained unwavering in Q3, bringing several new products to market to help network operators drive value in their networks and empower consumers with lifestyle-changing communications solutions. 

• Sonus released its latest generation of the Network Border Switch (NBS), raising the bar once again for network security across the boundaries of today's IP core, access and wireless networks. The strength of Sonus' NBS was validated by CT Labs, a full service testing and analysis lab serving converged communications product manufacturers and next-generation network carriers and service providers. The rigorous tests conducted by CT Labs confirmed that Sonus' NBS provides carrier-class security features that help network operators maintain the integrity of their networks.
• Sonus unveiled a new version of its enterprise and residential voice services software platform. The new platform, called Access 7.0, brings a broad array of innovative and traditional voice features to telephone operators that will enable the delivery of enterprise and residential IP-voice services to customers, regardless of the last-mile connection. Access 7.0 is built on Sonus' award-winning IP Multimedia Subsystem (IMS)-based platform, further strengthening operators' ability to embrace the power of IP with a migration path that fits into their overall business plans.
• Sonus continued to innovate in its core networking solutions as well, delivering a new standards-based Electronic Number Mapping (ENUM) enhancement for number portability services. This new solution is critical for network operators worldwide, particularly in emerging markets in Eastern Europe, Latin America, South America and Asia-Pacific that are working to keep pace with changing regulatory landscapes.

Customer Announcements

Demonstrating the success of Sonus' end-to-end IP access solution, Carphone Warehouse Networks, a subsidiary of the Carphone Warehouse Group, celebrated the one-year anniversary of the Group's free TalkTalk Broadband service built on its Next Generation Network using the Sonus platform. The network currently supports in excess of 600,000 subscribers and is expected to reach nearly one million households as part of Carphone Warehouse Group's initial deployment by the end of its 2007/08 financial year.

Industry Leadership

Sonus' track record for technology innovation and its position as one of the industry's most trusted providers of IP-voice and multimedia services once again earned the Company market share leadership. Independent market researchers reported that Sonus increased its market share in the second quarter of 2007. 

• Infonetics Research, a leading independent research firm, published a report naming Sonus a leader in key segments of the IP-voice market worldwide and in North America. The report also reflected Sonus' recent focus on growing its position in EMEA, noting that the Company's market share position increased 50% over the previous quarter.
• Synergy Research Group, a leading independent industry research firm, reported Sonus grew its leading market share position to 29.2% of the high density gateway market. This achievement was during a time when several operators delayed capital spending decisions. Sonus extended its leadership by capturing a higher percentage of the overall market and growing revenue 17.8% in the first half of 2007 compared to the first half of 2006.
• iLocus Research reaffirmed Sonus leadership in minutes of IP voice traffic, noting that Sonus carries approximately 4 out of 10 long distance IP voice minutes.

"It started simply with connecting a call over an IP network, but sparked a revolution as operators around the globe began investing in creating the world's most advanced IP networks. To be successful, network operators need a superior innovation partner to drive the possibilities in communications to the next level. Innovation is critical, and that is one area where Sonus has always excelled," said Ahmed. "Sonus shares with its customers a vision for the transformative power of IP, and we're dedicated to helping our customers deliver a new communications landscape that blends traditional communications with new levels of richness, mobility, and tools for improving users' lifestyles."

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 comprehensive IP Multimedia Subsystem (IMS) solution, Sonus addresses the full range of carrier applications, including residential and business voice services, wireless voice and multimedia, trunking and tandem switching, carrier interconnection and enhanced services. Sonus' voice infrastructure solutions are deployed in service provider networks worldwide. Founded in 1997, Sonus is headquartered in Westford, Massachusetts. Additional information on Sonus is available at http://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' Quarterly Report on Form 10-Q for the period ended June 30, 2007, 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 and uncertainties associated with the Company's restatement of its historical stock option granting practices and accounting including regulatory actions or litigation; risks associated with our international expansion and growth; consolidation in the telecommunications industry; and potential costs resulting from pending securities 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, Inc.  All other company and product names may be trademarks of the respective companies with which they are associated.