Sonus Networks Reports 2011 Third Quarter Results

Sonus Networks, Inc. (Nasdaq: SONS), a market leader in next-generation IP-based network solutions, today announced results for the quarter ended September 30, 2011 and provided its outlook for the quarter and year ending December 31, 2011.

Third Quarter Highlights

• Total revenue was $66.4 million
• SBC product revenue was $10.4 million, compared to $7.7 million in the second quarter of fiscal 2011 and $3.1 million in the third quarter of fiscal 2010
• Sonus added eight new customers in the quarter, all of whom purchased SBC products and services

Revenue for the third quarter of fiscal 2011 was $66.4 million, compared to $51.8 million in the second quarter of fiscal 2011 and $42.7 million in the third quarter of fiscal 2010. GAAP net income for the third quarter of fiscal 2011 was $1.9 million, or $0.01 per diluted share, compared to a net loss of $5.9 million, or $0.02 per share, in the second quarter of 2011 and a net loss of $22.3 million, or $0.08 per share, in the third quarter of 2010. Non-GAAP net income for the third quarter of fiscal 2011 was $4.1 million, or $0.01 per diluted share, compared to a net loss of $3.6 million, or $0.01 per share, for the second quarter of fiscal 2011 and a net loss of $14.3 million, or $0.05 per share, for the third quarter of fiscal 2010.

"Sonus is leveraging its rich history as a market-leading IP networking company into faster-growth areas, including the session border controller market,” said Ray Dolan, President and Chief Executive Officer. "Solid SBC momentum this quarter with our revenue and new customers are good indicators of the progress we are making. We look forward to reporting on our success in the coming quarters as we continue to reposition our business for higher growth opportunities.”

Fourth Quarter and Fiscal 2011 Outlook

The Company’s outlook is based on current indications for its business, which may change during the current quarter. A reconciliation of the GAAP to non-GAAP outlook and a statement on the use of non-GAAP financial measures are included at the end of this press release. For the fourth quarter and fiscal 2011, management provides the following outlook:

• Total company revenue of $70 million to $74 million for the fourth quarter and $255 million to $259 million for the full year
• SBC product revenue of $17 million to $20 million for the fourth quarter and $37 million to $40 million for the full year
• GAAP gross margins between 62% and 63% for the fourth quarter and between 55% and 56% for the full year
• Non-GAAP gross margins between 63% and 64% for the fourth quarter and between 56% and 57% for the full year
• GAAP operating expenses between $41.5 million and $43 million for the fourth quarter and between $158 million and $159 million for the full year
• Non-GAAP operating expenses between $39.5 million and $41 million for the fourth quarter and between $151 million and $152 million for the full year
• GAAP earnings per share between $0.00 and $0.02 for the fourth quarter and GAAP loss per share between $0.04 and $0.06 for the full year
• Non-GAAP earnings per share between $0.01 and $0.03 for the fourth quarter and non-GAAP loss per share between $0.01 and $0.03 for the full year
• Year-end cash and investments of approximately $385 million

"While the fundamentals and prospects for our business are improving, this revised fourth-quarter financial outlook reflects a more cautious capital spending environment by our customers,” said Moe Castonguay, Chief Financial Officer.

Earnings Conference Call Details:

Sonus Networks will host a conference call for analysts and investors to discuss its third quarter 2011 results, as well as certain forward-looking information today at 4:45 p.m. ET.

To listen live via telephone:

Dial-in number: 800-931-6361
International Callers: +1 212-231-2929

To listen via internet:

Sonus Networks will host a live webcast of the conference call. To access the webcast, visit www.sonusnet.com, About Us, Investor Relations.

Replay information

A telephone playback of the call will be available following the conference and can be accessed by calling 800-633-8284, or for international callers, +1 402-977-9140. The reservation number for the replay is 21542478 and will be available until November 10, 2011.

Non-GAAP Financial Measures

Sonus Networks presents its financial statements in accordance with accounting principles generally accepted in the United States ("GAAP”). Many of our investors have requested that we disclose non-GAAP information because it is useful in understanding our ongoing performance and comparing it to our historical results, as our non-GAAP financial measures exclude certain non-cash and one-time charges or benefits. Likewise, we use non-GAAP measures that exclude certain expenses, such as stock-based compensation expense, amortization of intangible assets and restructuring charges, in analyzing and assessing the overall performance of our business, making operating decisions, planning and forecasting future periods, and determining payments under compensation programs. We exclude stock-based compensation expense and amortization of intangible assets because these charges are non-cash in nature. We exclude restructuring charges because they are one-time events. No adjustment to income taxes for non-GAAP items is required, as we were unable to recognize a tax benefit on domestic losses incurred in any of the periods presented. We believe that non-GAAP financial measures, including gross profit, gross margin, operating expenses, net income (loss) and earnings (loss) per share, are useful when evaluating our ongoing operations and comparing them to our historical results, including our liquidity.

Whenever we use a non-GAAP financial measure, we provide a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure.

Our non-GAAP financial measures are not presented in accordance with, nor are they intended to be a substitute for, GAAP financial measures. In addition, our presentations of these measures may not be comparable to similarly titled measures used by other companies. Our non-GAAP financial measures should not be considered alternatives for, or in isolation from, the financial information prepared and presented in accordance with GAAP. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as analytical tools. In particular, many of the adjustments to our GAAP financial measures reflect the exclusion of items that are recurring and will be reflected in our financial results for the foreseeable future.

About Sonus Networks

Sonus Networks, Inc. is a leader in IP networking with proven expertise in delivering secure, reliable and scalable next generation infrastructure and subscriber solutions. With customers in over 50 countries across the globe and over a decade of experience in transforming networks to IP, Sonus has enabled service providers and enterprises to capture and retain users and generate significant ROI. Sonus products include media and signaling gateways, policy & routing servers, session border controllers and subscriber feature servers. Sonus products are supported by a global services team with experience in design, deployment and maintenance of some of the world's largest and most complex IP networks.

For more information, visit http://www.sonusnet.com and the Sonus in Session blog.

Important Information Regarding Forward-Looking Statements

This release may contain forward-looking statements (within the meaning of the Private Securities Litigation Reform Act) regarding future events that involve risks and uncertainties. Forward-looking statements can be identified by words such as "anticipates,” "intends,” "plans,” "seeks,” "believes,” "estimates,” "outlook,” and "expectations” and similar references to future periods. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results. Such forward-looking statements may relate to, among others, expected financial and operating results, expected growth rates, future stock-based compensation and amortization expenses, future business prospects and market conditions. Such forward-looking statements do not constitute guarantees of future performance and are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those anticipated. These include, but are not limited to: the timing of the Company's recognition of revenues; the ability to recruit and retain key personnel; difficulties supporting our new strategic focus on channel sales; difficulties expanding the Company's customer base; difficulties leveraging market opportunities; difficulties providing solutions that meet the needs of customers; market acceptance of the Company's products and services; rapid technological and market change; the ability to protect intellectual property rights; the ability to maintain partner, reseller, distribution and vendor support and supply relationships; higher risks in international operations and markets; the ability to hire and retain employees; the impact of increased competition; currency fluctuations; litigation; changes in the market price of the Company's common stock; actions taken by significant stockholders; failure or circumvention of the Company's controls and procedures; and other risks and uncertainties described more fully in documents filed with or furnished to the Securities and Exchange Commission by the Company, including in Item 1A - "Risk Factors" of our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q. Any forward-looking statements represent Sonus' views only as of today and should not be relied upon as representing Sonus' views as of any subsequent date. While Sonus may elect to update forward-looking statements at some point, Sonus specifically disclaims any obligation to do so, except as required by law.

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.

SONUS NETWORKS, INC.
Reconciliation Between GAAP and Non-GAAP Financial Measures
(In thousands, except percentages and per share amounts)
(unaudited)

The tables below include non-GAAP financial measures derived from our Condensed Consolidated Statements of Operations (unaudited). These non-GAAP financial measures of Gross profit, Gross margin, Operating expenses, Net income (loss) and Earnings (loss) per share are not presented in accordance with, nor are they intended to be a substitute for, accounting principles generally accepted in the United States of America ("GAAP”). In addition, our presentations of these measures may not be comparable to similarly titled measures used by other companies. The non-GAAP financial measures described below should not be considered alternatives for, or in isolation from, the financial information prepared and presented in accordance with GAAP.

We use a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of our business, in making operating decisions, planning and forecasting future periods and determining payments under compensation programs. We consider the use of these non-GAAP financial measures helpful in assessing the core performance of our continuing operations and liquidity, and when planning and forecasting future periods. These items for the periods presented are Stock-based compensation expense, Amortization of intangible assets and Restructuring.

Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. In particular, many of the adjustments to the Company’s GAAP financial measures reflect the exclusion of items that are recurring and will be reflected in the Company’s financial results for the foreseeable future.

SONUS NETWORKS, INC.
Reconciliation Between GAAP and Non-GAAP Financial Measures
(In millions, except percentages and per share amounts)
(unaudited)

The following tables include non-GAAP measures provided as outlook for the three months and year ended December 31, 2011 derived from our GAAP (accounting principles generally accepted in the United States) 2011outlook. This non-GAAP outlook for gross margin, operating expenses and earnings (loss) per share is not presented in accordance with, nor is it intended to be a substitute for, GAAP. In addition, our presentations of these measures may not be comparable to similarly titled measures used by other companies. The non-GAAP measures provided as outlook should not be considered alternatives for, or in isolation from, the financial information prepared and presented in accordance with GAAP.

We use a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of our business, in making operating decisions, planning and forecasting future periods and determining payments under compensation programs. We consider the use of these non-GAAP financial measures helpful in assessing the core performance of our continuing operations and liquidity, and when planning and forecasting future periods. These items for the periods presented are Stock-based compensation expense and Amortization of intangible assets.

Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. In particular, many of the adjustments to the Company’s GAAP financial measures reflect the exclusion of items that are recurring and will be reflected in the Company’s financial results for the foreseeable future.