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Technology Stocks : SONS

SONS 7.830

+2.8%

Nov 28 4:00 PM EST

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From: John Hayman	5/12/2008 3:16:08 PM
	of 1575

Sonus Rallies On Strong Q1; Merriman Ups Rating To Buy Posted by Eric Savitz Sonus Networks (SONS) shares are trading higher this morning after the VoIP infrastructure provider reported better than expected first quarter profits. Sonus posted Q1 revenue of $74 million, which was actually a tad below the Street consensus of $74.3 million. But non-GAAP profits of 2 cents a share was better than the penny a share loss the Street had expected. Merriman Curhan Ford analyst Tim Savageaux observes in a research note this morning that gross margin in the quarter of 64.3% was well ahead of his estimate of 58.5%, “driven by both product and service margin upside.” He also notes that operating expenses came in below expectations, resulting in an operating margin of 6%, rather than the -0.3% he had forecast. Savageaux raised his rating on the stock to Buy from Neutral. Among other things, he cited “the potential for a resurgence of next-generation network spending at NTT in Japan,” strong capex trents at AT&T (T), the company’s top customer, and a recent win at BT. He also notes that the company has a strong balance sheet with $400 million in cash and no debt. He upped his 2008 EPS estimate for the company today to 17 cents from 13 cents; for next year he goes to 22 cents from 18 cents. SONS today is up 21 cents, or 5.5%, at $4.10. blogs.barrons.com

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