Comments from a retired telecom guy on Sonus
from dukesinvestments.com
Prepared by Guy Cox
I worked for BellSouth in the telecommunications industry for 33 years, starting out in Newnan as an installer repairman. During my career within the telecommunication industry I was able to see first hand how the industry and technology evolved over time. When I retired I was the lead tester for BellSouth's fast access DSL, testing Alcatel's latest software and equipment in our research lab.
The Lord has blessed my family and I. I want to pass on what I have learned in the telecommunication industry to my family and friends who are interested in investing in the stock market.
I see a trend that is taking place within the communication industry that the average person is not aware of. The telecommunication industry is the process of converting from Circuit based switches to IP packet routed telephone calls.
That is why I want to tell you about Sonus Networks, Sonus entered the communication field back in the late 90's with a unique concept concerning how local and long distance phone calls are made. The concept of packet switching or Voice Over Internet Protocol, Voice over Broad Band and Internet Protocol Television has revolutionized the telecommunication industry.
I believe this is an investment opportunity that comes along once in a life time and I am willing to share my knowledge of the telecommunication industry and how it will evolve over time from a circuit based network to a packet based network. The consumer market will have the ability to have instant data and communication.
The telecommunication industry in no longer concerned about wire lines to each individual home. They want to be the provider of choice for your internet, data and TV services. Sonus is on the fore front of this technology that will make it all possible.
Telecommunication History:
Telecommunication switches have historically changed from one technology to another about every twenty years.
1.40's and 50's the industry changed from Operator assisted calls to "Step by Step" switches to "Cross Bar" switches.
2.60's saw the introduction of the 1A ESS switches.
3.80's digital switching was installed in the telecommunication networks through out the world.
4.00's . Saw the Time Division Multiplexed network cores being converted to packet based trunking.
Since the 1990's we have seen a swell in the wireless environment and now in the near future we will see the following events in the telecommunication industry.
1.A convergent of the wireless and wire line (Home) phones.
2.Networks replace the core (Class 4) switches with packet switches.
3.Central Office (Class 5 ) switches will be converted to soft switches for the following reasons.
a.Soft switches cost less than legacy switches.
b.Software upgrades are less expensive
c.Smaller foot print in Central Offices.
d.Larger Capacity
e.More Band Width.
Currently we are about 5 to 6 years into the next 20 year cycle of upgrading the telecommunication industry and already we are seeing the Next Generation network evolve to provide instant information to the customer through the emergence of IMS (IP Multimedia Subsystems).
SONUS has partnered with wireless phones vendors and other software vendors to provide data services to the wireless handset. Video + Data
SONUS has been recognized as an industry leader by the following industry research groups.
1.Synergy Research Group. Provides Technology Market Research for the Data and Telecommunications Networking Industry
2.Yankee Group. Research and analysis of information technology companies.
SONUS NETWORKS
SONS
BUSINESS SUMARY:
Sonus Networks, Inc. engages in the development, marketing, and sale of Internet protocol multimedia subsystem-ready voice infrastructure products for the deployment and management of voice and data services over carrier packet networks. The company's products include GSX9000 Open Services Switch to enable voice traffic to be transported over packet networks; GSX4000 Open Services Switch to expand the reach of VoIP networks into applications, geographic regions, or to deploy IP-based multimedia services; PSX Call Routing Server that provides network intelligence, including call control, service selection, and routing; and SGX Signaling Gateway that provides SS7 solution for Sonus' IMS architecture that interconnects packet solutions with SS7 networks. It also offers ASX Feature Server to provide local area calling features for residential and enterprise markets; NBS Network Border Switch solutions that provide IP-to-IP border control and PSTN media gateway integrating security, session control, and media control; IMX Application Platform to develop, integrate, launch, and manage telecommunication applications and services; and Sonus Insight Management System that simplifies the operation of carrier-class packet voice networks. In addition, the company offers services, including turnkey network installation, system integration and testing, technical support, and educational services to customer personnel on the installation, operation, and maintenance of its equipment. Its customers include traditional and emerging communications service providers, including long distance carriers, local exchange carriers, Internet service providers, wireless operators, cable operators, international telephone companies, and carriers that provide services to other carriers. The company operates in the United States, Europe, and the Middle East, Africa, Japan, and Asia-Pacific regions. Sonus Networks was founded in 1997 and is headquartered in Chelmsford, Massachusetts.
Sonus has as its customers some of the world's largest telecommunications companies in the world. Use the link below to view Sonus customers.
sonusnetworks.com
During the last conference call, HASSAN stated that Sonus was working with five more unannounced customers. Sonus recently announced that Level 3 had awarded them the contract to replace all their switches with Sonus soft switches and gateways.
Obstacles to Overcome:
Sonus recently investigated back dating stock options that were awarded to the officers and directors. Sonus is working to be in compliance with the NASDAQ. Sonus discovered that during the 2000 to 2003 time frame there were options issued that were in question and filed an 8K with the NASDAQ on December 29th.
Below is an excerpt from the 8K filing.
In order to address the adverse tax consequences under Section 409A, each of the Company's executive officers and directors (the "Section 16 Persons") has executed a consent (the "Consents"), pursuant to which each Section 16 Person has irrevocably agreed that the exercise price of any of the Section 16 Person's stock options that become subject to Section 409A will be increased so as to be equal to the fair market value of the Company's stock on the re-determined measurement date.
biz.yahoo.com
Conclusion:
Sonus closed at $3.72 on 12/30/05 and at $ 6.59 on 12/29/06resulting in a 75% increase for the year 2006. In 2006, Sonus exceeded the previous quarterly earning by 20%.
Once the options issue is completed and Sonus comes into compliance with the NASDAQ by updating their financials. I look for the Sonus to make a fast run toward $10.00 and be in the $12.00 to $15.00 price range by year end 07.
2007 through 2010 will also be growth years for Sonus, as the telecommunication industry will have to adopt to compete with the cable industry. IPTV will be one of the driving factors the market for the near future as the industry competes to be the vendor of choice for the end users.
March of 2007 is significant because the U.S Government will be awarding a 48 Billion dollar contract to replace the current government telecommunication network. Sonus along with its customers is poised to receive a portion of the contract.
Sonus has a presence in Europe, Russia, China, Japan, Korea and the United States. Sonus has positioned them self to be a major player in the telecommunication of the future. |
