SONS Message Board - Msg: 23153277

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Technology Stocks : SONS

SONS 7.830

+2.8%

Nov 28 4:00 PM EST

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From: Home-Run	1/4/2007 1:54:26 PM
	of 1575

From CSFB Business Update INVESTMENT THESIS. SONS is one of the leading suppliers to communication service providers of VoIP switching infrastructure. We believe that the migration by service providers from circuit to IP voice infrastructure will drive significant growth in SONS’s operating profitability over the intermediate to LT horizon. BUSINESS UPDATE. In a press release issued on January 3, 2007, SONS provided an update of its business activity and its NASDAQ listing status. Consistent with our oft-stated view, SONS noted “very strong customer activity in 4Q06, resulting in both 4Q and FY06 orders at record levels…[with] business activity exceeding our previous outlook for the year with profitable growth well ahead of estimated market growth.” 4Q06 AND FY07. While SONS didn’t quantify this outlook, we expect SONS to post 4Q06 Rev/PF(ex-FAS123R) EPS of at least $70mln (and believe $75+mln is possible)/$0.05 v. our and Street consensus estimates of $68mln/$0.04 and $65.8mln/$0.03, respectively. SONS’s press release reinforces our confidence in our Street high 2007 Rev/PF(ex-FAS123R) EPS estimate of $329mln/$0.30 ($0.27 incl-FAS123R). We continue to expect our estimates will prove to be overly conservative, with upside to $350mln and $0.35 or greater. STOCK. We believe that SONS offers one of the most compelling small-cap investment ideas in the communications infrastructure industry, with significant upside opportunity and limited downside risk and we would continue to be buyers of SONS’s shares given our expectations regarding SONS’s future operating results relative to current expectations.. VALUATION. Our 12-month $7.80 price target is driven by applying a 26x multiple to our FY07 $0.30 P/F EPS (ex-options) estimate, although we believe there is significant upside to our FY07 est. and accordingly to our price target.

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