Sonus’Announcement Of Vonage As A New Customer Affirms Our Belief Sonus’
Growth Profile Consists Of FarMore Than Just Class-4 Gateway Sales.
With the recent flury of IMS and class 5 contract wins by a couple of Sonus’ key
competitors, some investors started to doubt Sonus’ ability to meaningfully penetrate other
portions of the VoIP market. A perception was growing that Sonus’ growth profile was too
heavily dependent on the class-4 media gateway market, particularly given what can be
characterized as a disappointing 2005 for Sonus in class-5. We believe Sonus’ recent
contract announcements with AT&T, AOL, and Earthlink, punctuated with this win at
Vonage proves Sonus growth profile is strong.We also note that Sonus is the Class -5
product catagory leader with its Japanese Class 5 oriented deployments dwarfing the
placements of other vendors on a global basis.
We believe Sonus has not only won Vonage as a customer, but that it has achieved primary
vendor status to the number one VoBB service provider in the country, by subscriber count.
Sonus class-5 win at Vonage involves the sales of its softswitches, media gateways, and
several other components of its product portfolio. The press release stated that Vonage will
look to deploy Sonus gear in both the U.S. and internationally, and has already deployed
Sonus geared in two of the largest markets in the U.S., New York and Los Angeles.
This Class-5 VoBBWin At Vonage Is No Fluke – Sonus Has Demonstrated Its Ability
To DeployWorking Access VoIP/IMS Deployments In Japan Where It Is The Mkt
Leader. Sonus has had considerable success in Japan at Fusion, Yahoo Broadband, KDI
and NTT deploying access footprint and IMS like application delivery. Sonus has more
successful access deployments than any other vendor. We think its success in the
international markets and the industry’s shift to a technology footprint that is highly
compatible with Sonus’ SIP/Diameter based portfolio of products bodes well for the
company in being a key supplier into the U.S. Service providers, including accounts in
which it has yet to be named a class-5/IMS supplier. We strongly doubt that the U.S. service
providers will choose a single vendor approach. We note that in the closed architecture
world of traditional Class 5 gear there are no single sourced service providers. It’s easier to
be multi vendor in an open systems environment so its highly likely there will be multiple
equipment vendors at every service provider over time. Sonus appears well positioned to be
among the top 3 in this arena and is currently the leader in terms of existing deployments
Sonus Mgnt Believes That Penetrating This Highly Visibily Account Serves AsA
Ringing Endorsement Of Its Product Portfolio – AViewWe AgreeWith. In our view,
we think Sonus displaced Vonage’s incumbent supplier with this contract win. Sonus’
management believes its win here serves as a ringing endorsement of its product line as it
believes Vonage's decision to go with Sonus gear was, at least in part, driven by its desire to
ensure carrier class quality service to its customers. Sonus has often emphasized that the
strength of its product portfolio is not just in industry leading port counts, but also in its
carrier class capability and feature-functionality. We think this contract win cements this
view.
We Believe GSX4000 Sales Into Vonage Are Soon To Follow. While the contract
announcement only mentioned the GSX9000 as the gateway currently being sold into
Vonage, we believe the probablity of GSX4000 gateway sales into Vonage in the not-toodistant
future is high. Sonus released the GSX4000 specifically to target smaller carriers
such as Vonage and to fill in ‘holes’ of larger networks already deploying the GSX9000. In
fact, we are a little suprised Sonus was able to sell its GSX9000 product into vonage, given
the availability of its GSX4000 and the scale of Vonage’s business.
In Addition To This Announcement, Our Recent MtgWith Mgnt Reaffirmed Our
Belief That Sonus’Biz Is Strong, And At These Levels, Investors Should Be Buyers Of
Its Stock. We recently attended a meeting with clients and Sonus’ CEO, CTO and COO, at
2
the company’s headquarters. The meeting was well attended and management’s tone was
noticeably upbeat. Management left us with the impression that business is strong and
results should solidly improve. They also reminded us that the recent financial statements do
not tell the whole story, with good business momentum beneath the surface. While Sonus’
most recently announced quarters have been less than impressive, management, given its
ability to see the company’s business both on and off the financial statements, is seeing a
very different and more positive picture. We view this most recent contract win as evidence
of some of this momentum.
From Citi |
