Sonus Networks Inc. (SONS)
EARNINGS
3Q09 Earnings Results - First Blush
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Results/Guidance: SONS reported Rev/PF EPS (incl. ESO) of
$56.2mln/$(0.01) v. our $50.0mln/$(0.08) and Street consensus’s
$55.8mln/$(0.03) estimates. Strong gross margin drove the EPS upside.
SONS has scheduled its 3Q09 conference call on Monday November 9th at
4:15 PM EST (Dial in: ).
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CS Outlook: We maintain our estimates, target price, and Neutral rating
ahead of the earnings call. SONS’s opex discipline and focus on cash
balances should continue to provide a downside cushion to shares. We have
been impressed by new CEO Richard Nottenburg’s actions in right-sizing
the organization, exiting unprofitable business, and maintaining strong
financial discipline. We continue to believe, however, that sustained
profitable growth and share appreciation are largely dependent upon
SONS’s ability to successfully transition its business to execute against the
IP-to-IP session management opportunity. On this front, the jury remains out.
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Highlights: SONS’s brief press release noted the completions of its
restructuring initiatives, which started are year ago and its ongoing focus on
introducing new products and service offerings.
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Valuation: Our 12-month target price of $2.50 is derived by applying an
EV/Revenue multiple of 1.3x to our unchanged CY09 $212.6mln revenue
estimate.