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Sonus Networks Provides Corporate Update

January 14, 2015 | Telepresence Options

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WESTFORD, Mass.--(BUSINESS WIRE)-- Sonus Networks (Nasdaq: SONS), a global leader in enabling and securing real-time communications, today provided the following corporate updates:

  • Acquisition of SDN (Software Defined Networking) Technology Assets from Treq Labs, Inc.
  • Terms of Reverse Stock Split
  • Preliminary Financial Results and Reporting Date for Fourth Quarter 2014

Acquisition of SDN Assets from Treq Labs

The Company announced the acquisition of the SDN technology assets of Treq Labs, Inc. ("Treq") for cash consideration of approximately $10.1 million. The acquisition closed on January 2, 2015 and is expected to be neutral to Sonus' full year 2015 non-GAAP EPS outlook. As part of the transaction, the Company also entered into an Earn-Out Agreement whereby the Company has agreed to issue up to an aggregate of approximately 6.6 million shares of common stock over a three-year period of 2015 through 2017 if aggregate revenue thresholds of at least $60 million are achieved by the SDN business during that period, and up to an aggregate of an additional approximately 11 million shares (17.6 million shares in total) if aggregate revenue thresholds of at least $150 million are achieved by the SDN business during that period. If the initial revenue thresholds are not met, no shares will be issued. The shares issuable under the Earn-Out Agreement are subject to proportionate adjustment to reflect adjustments to the Company's capital stock, which includes the reverse stock split referenced below.

Treq's SDN technology provides solutions that optimize networks for voice, video and UC (Unified Communications) for both enterprise and service provider customers. Treq's solutions allow enterprises to give priority to latency-sensitive and business critical traffic based on business rules. Similarly, this technology enables service providers to offer reliable, comprehensive and secure on-demand network services to their enterprise customers. Using an easy to use portal, enterprise customers can quickly provision application-aware network services in minutes instead of weeks or even months.

Treq's SDN solution is aimed at delivering the following benefits for network operators:

  • Drive significant improvements in network utilization resulting in reduced network costs and associated capital expenditures
  • Create operational expense savings through more streamlined, automated provisioning, while also improving the speed of services creation and deployment
  • Transform networks from traditional IT operations to a Network-as-a-Service (NaaS) model, providing the ability to turn up bandwidth-on-demand
  • Give operators an end-to-end view of their network enabling complete network QoS (quality of service)
  • Provide SLA (service level agreement) assurance through application-aware policy and real-time network awareness
  • Eliminate vendor lock-in as a result of the hardware-independent software-only solution

"Networks are becoming increasingly congested due to the growing consumption of media-rich applications such as video and UC," said Kevin Riley, chief technology officer of Sonus. Riley continued, "Historically, network operators have overprovisioned their networks to handle this congestion, which has resulted in inefficient network monetization. This model is no longer economically feasible given the rapid increase in network bandwidth driven by video and UC. A solution is required which can deliver predictable behavior in an environment of congestion via intelligent network control and application-aware policies. Treq's SDN solution marries programmatic network control with network state awareness and application policy to deliver real-time SLA (service level agreement) assurance. The combination of Sonus' SBC and policy capabilities with Treq's SDN intelligence delivers unparalleled, real-time application layer network performance and analytics. Together with Treq, Sonus is creating a new architecture for service delivery."

Ray Dolan, chief executive officer and president of Sonus added, "This acquisition accelerates the delivery of our SDN strategy. Our industry's transition to SDN is a strategic element to the selection criteria of both enterprise and service provider customers as they evaluate their future network architectures. Treq's technology is already validated in some of the world's most demanding networks, including State Street, a leading global provider of financial services to institutional investors, and Pacnet, an Asian telecommunications and services provider (pending acquisition by Telstra)."

Additional presentation materials regarding the acquisition can be found here at the Events and Presentations section of Sonus' Investor Relations website.

Terms of Reverse Stock Split

The Company also announced the terms of the reverse stock split that was approved by the Company's stockholders at its Special Meeting of Stockholders held on December 2, 2014. On January 7, 2015, the Reverse Stock Split Special Committee of the Company's Board of Directors set the ratio for the reverse stock split at one (1) for five (5) to be effective as of the commencement of trading on Friday, January 30, 2015. As of that date, each five shares of issued and outstanding common stock will be consolidated into one share of common stock. The reverse stock split will not change the par value of the common stock. The reverse stock split will reduce the number of shares of Sonus' outstanding common stock from approximately 250 million to approximately 50 million.

Stockholders who hold their shares in brokerage accounts or "street name" will not be required to take any action to effect the exchange of their shares. Holders of share certificates will receive instructions from the Company's transfer agent regarding the process for exchanging their shares. For additional information regarding the reverse stock split, reference is made to Sonus Network's Proxy Statement on Schedule 14-A dated and as filed with the Securities and Exchange Commission, on October 15, 2014.

Preliminary Results for Fourth Quarter 2014

The Company also announced preliminary results for the fourth quarter of 2014, ended December 31. Revenue is expected to be approximately $77 million compared to guidance of $76 million to $82 million. Non-GAAP EPS is expected to be in line with guidance at $0.03 ($0.15 on a pro-forma, split-adjusted basis).

"As stated on our third quarter earnings call, our guidance for the fourth quarter reflected the possibility of limited-to-no budget flush from our service provider customers," said Mark Greenquist, chief financial officer of Sonus. Greenquist continued, "While this proved to be the case in the fourth quarter, our EPS growth and operating leverage remain strong. Looking ahead to 2015, and as noted on our prior earnings call, we remain comfortable with consensus analyst revenue and non-GAAP EPS estimates for the first quarter of 2015 of approximately $74 million and $0.01 (approximately $0.03 on a pro-forma, split-adjusted basis which reflects anticipated investments in the SDN business). Further, we expect to deliver at least 10 percent revenue growth and 10 percent operating income margins for full year 2015."

"As stated on our third quarter earnings call, our guidance for the fourth quarter reflected the possibility of limited-to-no budget flush from our service provider customers," said Mark Greenquist, chief financial officer of Sonus. Greenquist continued, "While this proved to be the case in the fourth quarter, our EPS growth and operating leverage remain strong. Looking ahead to 2015, and as noted on our prior earnings call, we remain comfortable with consensus analyst revenue and non-GAAP EPS estimates for the first quarter of 2015 of approximately $74 million and $0.01 (approximately $0.03 on a pro-forma, split-adjusted basis which reflects anticipated investments in the SDN business). Further, we expect to deliver at least 10 percent revenue growth and 10 percent operating income margins for full year 2015."

Reporting Date of Fourth Quarter 2014 Financial Results

Sonus will report financial results for the fourth quarter of 2014 before the open of the market on Wednesday, February 18, 2015. Following the release, Sonus will host a conference call with the financial community at 8:30 a.m. ET to discuss the results.

The Company will offer a live, listen-only Webcast of the conference call via the Sonus Networks Investor Web site at http://investors.sonusnet.com/events.cfm where a replay will also be available shortly following the conference call.

Conference call details:

Date: February 18, 2015

Time: 8:30 a.m. (ET)

Dial-in number: 800 736 4594

International Callers: + 1 212 231 2914

Replay information:
A telephone playback of the call will be available following the conference call until March 4, 2015 and can be accessed by calling 800 633 8284 or +1 402 977 9140 for international callers. The reservation number for the replay is 21759132.

About Sonus Networks

Sonus enables and secures real-time communications so the world's leading service providers and enterprises can embrace the next generation of SIP and 4G/LTE solutions including VoIP, video, instant messaging and online collaboration. With customers in more than 50 countries and nearly two decades of experience, Sonus offers a complete portfolio of hardware-based and virtualized Session Border Controllers (SBCs), Diameter Signaling Controllers (DSCs), policy/routing servers and media and signaling gateways. For more information, visit www.sonus.net or call 1-855-GO-SONUS. Sonus is a registered trademark of Sonus Networks, Inc. All other company and product names may be trademarks of the respective companies with which they are associated.







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