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Sonus Networks Wraps Up Sale of Switching Gear to Verizon as Loss Narrows

Posted on: Friday, 11 July 2003, 06:00 CDT

Jul. 11--Sonus Networks of Westford yesterday said it has completed its first sale of telecommunications switching gear to Verizon Communications Inc., the nation's largest phone company, as Sonus posted a narrower-than-forecast quarterly loss and steadily improving sales.

Verizon's multimillion-dollar purchase of Sonus equipment provides further evidence that an industry revolution in moving phone calls over to Internet protocol packet-based switching, which has been predicted since 2000, is finally moving to big mainstream carriers after initially being adopted mainly by start-ups. MCI and Sprint have begun deploying IP switches from Nortel Networks, as has Verizon, while Qwest and Global Crossing continue to add Sonus gear.

Sonus reported second-quarter sales of $21.4 million, a 33 percent increase from the first quarter and up slightly from the same quarter last year. Sonus had a net quarterly loss of $3.2 million, or 1 cent per share, below the 2 cent loss consensus estimate of Wall Street analysts.

Sonus shares, which careened from over $80 in early 2000 to 80 cents last fall, have since rebounded and closed yesterday at $5.72, down 68 cents, in trading before earnings and the Verizon sale were announced.

Verizon, which Sonus vice president Michael O'Hara said accounted for over 10 percent of its sales last quarter, is using Sonus gear for handling some long-distance calls in unspecified markets.

Kevin Mitchell, a Woburn-based analyst with Infonetics Research, which tracks the network equipment market, said the Verizon-Sonus deal "is not anything substantial or huge right now, but it certainly has the potential to be.

"I don't think that anyone has ever questioned that voice services are going to go IP or packet, but the timing has been the question, and the market has been in this prolonged pause" but could now begin to grow rapidly, Mitchell said.

Internet protocol switching cuts costs substantially compared to traditional circuit switches and also enables cheaper deployment of premium services.

"This is part of our overall migration of the network to IP technology," Verizon spokesman Jack Hoey said.

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