Sonus Networks Reports Financial Results For Q4 FY2003, Fiscal Year 2003 And Q1 FY2004

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CHELMSFORD, Mass., July 28, 2004 – Sonus Networks, Inc. (Nasdaq: SONSE), a leading supplier of service provider voice over IP (VoIP) infrastructure solutions, today reported its financial results for the fourth quarter and fiscal year ended December 31, 2003, and for its first quarter ended March 31, 2004. Sonus has restated its consolidated financial results for fiscal years 2001 and 2002 and the first three quarters of fiscal 2003 in its Form 10-K/A filed with the Securities and Exchange Commission (SEC) on July 28, 2004. Sonus today also filed its Form 10-Q for the first quarter of 2004 with the SEC. Sonus will hold a conference call to review its financial results at 8:15 am Eastern time, Thursday, July 29, 2004.

Today’s filings bring the Company into compliance with the SEC requirements for the filing of its periodic reports. The Company received notice today from the Nasdaq Stock Market that it has determined to delist the Company’s stock from the Nasdaq National Market effective as of the opening of the market on Monday, August 2, 2004. The Company has notified Nasdaq that it has filed its delinquent SEC reports. The Company has requested that its common stock remain listed on the Nasdaq National Market because the Company is now in compliance with Nasdaq’s filing requirement and is awaiting a determination from Nasdaq.

“Today we reported our financial results through the first quarter of 2004, filed all the related securities filings and are once again in compliance with the SEC financial reporting requirements. The completion of our financial review forms a strong foundation for us to continue to build the company and expand our position in the market,” said Hassan Ahmed, chief executive officer and chairman, Sonus Networks. “During this period in which we have invested significant energy in our financial review, our business has continued to thrive. We have announced new customers, extended our industry-leading solutions further into the wireless and access markets, significantly expanded our engineering, sales and services resources, and taken actions to strengthen our internal controls, processes and infrastructure. We are excited about the market opportunity for voice over IP and are confident in our ability to play a leadership role.”

Revenues for the first quarter of fiscal 2004 were $36.5 million compared with $9.2 million in the first quarter of 2003. Net income for the first quarter of fiscal 2004 was $3.0 million, or $0.01 per share, compared with a net loss for the first quarter of fiscal 2003 of $9.7 million, or $0.05 per share.

Revenues for the fourth quarter of fiscal 2003 were $46.4 million compared with $12.5 million in the fourth quarter of fiscal 2002. Net income for the fourth quarter of fiscal 2003 was $6.9 million, or $0.03 per diluted share, compared with a net loss for the fourth quarter of fiscal 2002 of $13.4 million, or $0.07 per share. Revenues for fiscal year 2003 were $93.2 million compared with $93.9 million for fiscal year 2002. Net loss for fiscal year 2003 was $15.1 million, or $0.07 per share, compared with a net loss for fiscal year 2002 of $73.8 million, or $0.39 per share.

Restatement of Consolidated Financial Statements

As a result of the financial review, Sonus has restated its consolidated financial results for fiscal years 2001 and 2002 and the first three quarters of fiscal 2003 as embodied in its Form 10-K/A. As previously reported, the primary impact of the restatements is the adjustment to the timing of revenue recognition and certain other financial statement accounts. Principal adjustments to revenue relate to the timing of revenue where the revenue has been deferred and recognized in subsequent periods. In addition, other material restatements include adjustments to purchase accounting, impairments, accruals and deferred compensation.

An overview of adjustments by period is as follows:

• 2003 – Restated revenues for the first nine months of 2003 were $46.8 million compared with $66.0 million as initially reported. Restated deferred revenues as of September 30, 2003 were $85.2 million compared with $34.0 million as initially reported. Accrued expenses as of September 30, 2003 were $17.5 million compared with $32.9 million as initially reported. Restated net loss was $22.0 million, or $0.10 per share, compared with $6.4 million, or $0.03 per share, as initially reported.
• 2002 – Restated revenues for fiscal 2002 were $93.9 million compared with $62.6 million as initially reported. Restated deferred revenues as of December 31, 2002 were $59.8 million compared with $29.2 million as initially reported. Accrued expenses as of December 31, 2002 were $16.5 million compared with $33.4 million as initially reported. Restated net loss was $73.8 million, or $0.39 per share, compared with $68.5 million, or $0.36 per share, as initially reported.
• 2001 - Restated revenues for fiscal 2001 were $128.8 million compared with $173.2 million as initially reported. Restated deferred revenues as of December 31, 2001 were $60.4 million compared with $13.3 million as initially reported. Accrued expenses as of December 31, 2001 were $18.4 million compared with $27.7 million as initially reported. Restated net loss was $635.6 million, or $3.68 per share compared with $645.4 million, or $3.74 per share, as initially reported.

Sonus’ restated annual financial statements are included in its Amendment No. 1 on Form 10-K/A on file with the SEC. Investors are encouraged to read this filing for a more complete description of the financial restatement. For the purpose of restating its consolidated financial statements for the first three quarters of 2003 and 2002, consistent with the restatements in the Company’s Form 10-K/A, Sonus anticipates amending its previously filed quarterly reports on Form 10-Q for each of the first three quarters of 2003, as soon as practicable.

Sonus also reported that Stephen J. Nill, its vice president of business operations and former chief financial officer, has resigned at the request of the Company.

Company Conference Call, Webcast and Replay Information

Date: Thursday, July 29, 2004
Time: 8:15 am Eastern

To listen via telephone:

Dial-in number: +1-800-633-8410 or +1-212-896-6053

To listen via the Internet:

Sonus will host a live webcast of the conference call. To access the webcast, visit the Sonus Networks Investor Relations site at http://www.sonusnet.com.

Replay:

A telephone playback of the call will be available following the conference and can be accessed by calling +1-402-977-9140 or +1-800-633-8284. The access code for the replay is 21204187. The telephone playback will be available through August 12, 2004.

The webcast will be available on the Sonus Networks Investor Relations site through July 29, 2005. To access the replay of the webcast, visit the Investor Relations site at http://www.sonusnet.com.

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 Architecture (OSA), Sonus delivers end-to-end solutions addressing a full range of carrier applications, including trunking and tandem switching, 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. Sonus, founded in 1997, is headquartered in Chelmsford, 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 the “Risk Factors” section of Sonus’ Annual Report on Form 10-K/A dated July 28, 2004 and filed with the SEC, and the “Cautionary Statements” section of Sonus’ Quarterly Report on Form 10-Q, dated July 28, 2004 and filed with the SEC, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements. Risk factors include, among others, uncertainties regarding the timing of the Company’s completion of the filing of its Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, the possibility that Sonus may be delisted from Nasdaq, risks as to the litigation and SEC investigation with respect to the foregoing and related matters, unforeseen issues encountered in the completion of the audit and uncertainties regarding the extent to which prior period financial statements will be restated. In addition, 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, GSX9000, Insignus and Sonus Insight are trademarks of Sonus Networks. All other trademarks, service marks, registered trademarks, or registered service marks are the property of their respective owners.