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Sonus Networks Reports 2012 Third Quarter Results

Sonus Networks, Inc. (Nasdaq: SONS), a global leader in SIP communications, today announced results for the third quarter ended September 28, 2012.

Results are reported on a consolidated basis and include the partial quarter financial effect of Network Equipment Technologies, Inc. (“NET”), an acquisition which closed on August 24, 2012. A table providing stand-alone Sonus and stand-alone NET results is provided in the supplementary financial data on the IR page of the Company’s website.

Third Quarter Consolidated 2012 Highlights (including NET)

  • Total revenue was $57.0 million.
  • Total SBC revenue, including maintenance and services, was $25.4 million, compared to $19.1 million in the second quarter of 2012 and $13.9 million in the third quarter of 2011.
  • SBC product revenue was $20.4 million, compared to $13.5 million in the second quarter of 2012 and $10.4 million in the third quarter of 2011.
  • SBC product revenue was a record 61% of total product revenue.
  • Won 40 new customers in the quarter, 11 for Sonus and 29 for NET (post-acquisition).
  • Sonus SBC 5100 and Sonus SBC 5200 Certified in Microsoft's Unified Communications Open Interoperability Program for Microsoft Lync Server 2010; together with Sonus SBC 1000 and Sonus SBC 2000 represents the largest portfolio of MS Lync certified SBCs on the market.

Revenue for the third quarter of fiscal 2012 was $57.0 million, compared to $57.6 million in the second quarter of fiscal 2012 and $66.4 million in the third quarter of fiscal 2011. The GAAP net loss for the third quarter of fiscal 2012 was $15.6 million, or $0.06 per share, compared to a GAAP net loss of $11.7 million, or $0.04 per share, in the second quarter of 2012 and GAAP net income of $1.9 million, or $0.01 per diluted share, in the third quarter of fiscal 2011. The non-GAAP net loss for the third quarter of fiscal 2012 was $6.3 million, or $0.02 per share, compared to a non-GAAP net loss of $8.6 million, or $0.03 per share, in the second quarter of fiscal 2012 and non-GAAP net income of $4.1 million, or $0.01 per diluted share, in the third quarter of fiscal 2011.

2012 Fourth Quarter and Full Year Outlook

The Company’s outlook is based on current indications for its business, which may change during the current quarter. All figures are non-GAAP and include the partial quarter effect of NET in the third quarter of 2012 and the anticipated full quarter effect of NET in the fourth quarter of 2012. A reconciliation of the non-GAAP to GAAP outlook and a statement on the use of non-GAAP financial measures are included at the end of this press release.

Fourth Quarter 2012

       

Current Guidance

Total Revenue $77 to $81 million
SBC Total Revenue $25 to $26 million
SBC Product Revenue $21 to $22 million
NET Total Revenue (incl. in Total Revenue)

NET SBC Total Revenue (incl. in SBC Total Revenue)

$10 million

$4 million

Gross Margin 58%
Operating Expenses $44 to $45 million
Diluted EPS $0.00 to $0.01
Cash & Investments $270 million
Diluted shares 282 million
 

Full Year 2012

Current Guidance

Total Revenue $256 to $260 million
SBC Total Revenue $87 to $88 million
SBC Product Revenue $68 to $69 million
NET Total Revenue (incl. in Total Revenue)

NET SBC Total Revenue (incl. in SBC Total Revenue)

$17 million

$6 million

Gross Margin 60%
Operating Expenses $170 to $171 million
Basic EPS $(0.06) to $(0.07)
Cash & Investments $270 million
Diluted shares 280 million

Restructuring

In August 2012, the Company initiated a plan to streamline operations and reduce operating costs, including a corporate-wide restructuring plan. In the third quarter of fiscal 2012 the Company recorded restructuring expenses of $2.0 million for severance and related expenses and the consolidation of its France offices. The Company expects to record additional restructuring expenses of $6.0 million in the fourth quarter of fiscal 2012, comprised of approximately $5 million for facility-related charges and $1 million for severance and other related charges.

Quote

“Sonus proved this quarter that our SBC growth engine is continuing to grow faster than the market. We continue to compete very effectively and grow our market share,” said Ray Dolan, President and Chief Executive Officer. “This continued momentum will enable us to more rapidly transition our business from legacy Media Gateway toward a profitable SBC growth company.”

Conference Call Details

Date: November 7, 2012
Time: 8:30 am (ET)
Dial-in number: 800 908 8402
International Callers: +1 212 231 2936

Replay information:

A telephone playback of the call will be available shortly following the conference call until November 21, 2012 and can be accessed by calling 800 633 8284 or +1 402 977 9140 for international callers. The reservation number for the replay is 21606654. A webcast replay of the conference call will also be available shortly following the conference call on the Company’s Investor Relations Web site in the Events & Presentations – Archived Events section.

Accounting Period:

As of the beginning of fiscal 2012, the Company began reporting its first, second and third quarters on a 4-4-5 basis, with the quarter ending on the Friday closest to the last day of each third month. The Company's fiscal year-end is December 31.

Tags:

Sonus Networks, Sonus, SONS, 2012 third quarter, earnings, results, IP-based network solutions, SBC, SBC 1000, SBC 2000, SBC 5100, SBC 5200, SBC 9000, session border controller, session border control, session management, SIP trunking, Cloud VoIP communications, unified communications, UC, VoIP, IP, TDM.

About Sonus Networks

Sonus helps the world's leading communications service providers and enterprises embrace the next generation of SIP-based solutions including VoIP, video and Unified Communications through secure, reliable and scalable IP networks. With customers around the globe and 15 years of experience transforming networks to IP, Sonus has enabled service providers to capture and retain users and both service providers and enterprises to generate significant ROI. Sonus products include session border controllers, policy/routing servers, subscriber feature servers and media and signaling gateways. 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 www.sonus.net or call 1-855-GO-SONUS.

Important Information Regarding Forward-Looking Statements

The information in this release contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, which are subject to a number of risks and uncertainties. All statements other than statements of historical facts contained in this report are forward-looking statements. Without limiting the foregoing, the words “anticipates”, “believes”, “could”, “estimates”, “expects”, “intends”, “may”, “plans”, “seeks”, “projects” and other similar language, whether in the negative or affirmative, are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

Examples of forward-looking statements include, but are not limited to, statements regarding the following: plans, objectives, outlook, goals, strategies, future events or performance, growth in market share, trends, investments, customer growth, operational performance and costs, liquidity and financial positions, competition, estimated expenditures and investments, impacts of laws, rules and regulations, revenues and earnings, performance and other statements that are other than statements of historical facts. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. They are neither statements of historical fact nor guarantees or assurances of future performance. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, the timing of our recognition of revenues; our ability to recruit and retain key personnel; difficulties supporting our new strategic focus on channel sales; difficulties retaining and expanding our customer base; difficulties leveraging market opportunities; restructuring activities; our ability to realize benefits from acquisitions (including with respect to our acquisition of Network Equipment Technologies, Inc.); litigation; actions taken by significant stockholders; difficulties providing solutions that meet the needs of customers; market acceptance of our products and services; rapid technological and market change; our ability to protect our intellectual property rights; our ability to maintain partner, reseller, distribution and vendor support and supply relationships; higher risks in international operations and markets; the impact of increased competition; currency fluctuations; changes in the market price of our common stock; and/or failure or circumvention of our controls and procedures. Important factors that could cause actual results to differ materially from those in these forward-looking statements are discussed in Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations", Part I, Item 3 "Quantitative and Qualitative Disclosures About Market Risk" and Part II, Item 1A "Risk Factors" in the Company's most recent Quarterly Report on Form 10-Q. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. We therefore caution you against relying on any of these forward-looking statements, which speak only as of the date made.

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.

Discussion of Non-GAAP Financial Measures

Sonus management uses a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of the business, making operating decisions, planning and forecasting future periods, and determining payments under compensation programs. Our annual financial plan is prepared both on a GAAP and non-GAAP basis, and the non-GAAP annual financial plan is approved by our board of directors. Continuous budgeting and forecasting for revenue and expenses are conducted on a consistent non-GAAP basis (in addition to GAAP) and actual results on a non-GAAP basis are assessed against the annual financial plan. We consider the use of non-GAAP financial measures helpful in assessing the core performance of our continuing operations and liquidity, and when planning and forecasting future periods. By continuing operations we mean the ongoing results of the business excluding certain costs, including, but not limited to: stock-based compensation, amortization of intangible assets, depreciation expense related to the fair value write-up of acquired property and equipment, acquisition-related costs and restructuring. We also consider the use of non-GAAP earnings per share helpful in assessing the organic performance of the continuing operations of our business. By organic performance we mean performance as if we had owned an acquired business in the same period a year ago. While our management uses these non-GAAP financial measures as a tool to enhance their understanding of certain aspects of our financial performance, our management does not consider these measures to be a substitute for, or superior to, GAAP measures. In addition, our presentations of these measures may not be comparable to similarly titled measures used by other companies. These 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 an analytical tool. In particular, many of the adjustments to Sonus’ financial measures reflect the exclusion of items that are recurring and will be reflected in our financial results for the foreseeable future.

Stock-based compensation is different from other forms of compensation, as it is a non-cash expense. For example, a cash salary generally has a fixed and unvarying cash cost. In contrast, the expense associated with an equity-based award is generally unrelated to the amount of cash ultimately received by the employee, and the cost to us is based on a stock-based compensation valuation methodology and underlying assumptions that may vary over time. We believe that excluding non-cash stock-based compensation expense from our operating results facilitates the ability of readers of our financial statements to compare our operating results to our historical results and to other companies in our industry.

We exclude the amortization of acquired intangible assets from non-GAAP expense and income measures. These amounts are inconsistent in amount and frequency and are significantly impacted by the timing and size of acquisitions. Although we exclude amortization of acquired intangible assets from our non-GAAP expenses, we believe that it is important for investors to understand that intangible assets contribute to revenue generation. We believe that excluding the non-cash amortization of intangible assets facilitates the comparison of our financial results to our historical operating results and to other companies in our industry as if the acquired intangible assets had been developed internally rather than acquired, and provides meaningful information regarding our liquidity.

As part of the assessment of the assets acquired and liabilities assumed in connection with the NET acquisition, we were required to increase the aggregate fair value of acquired property and equipment by $2.0 million. The acquired property and equipment is being depreciated over a weighted average useful life of approximately 2.5 years. We believe that excluding the incremental depreciation expense resulting from the fair value write-up of this acquired property and equipment facilitates the comparison of our operating results to our historical results and to other companies in our industry.

We consider certain transition, integration and other acquisition-related costs to be unpredictable and dependent on a significant number of factors that may be outside of our control. We do not consider these acquisition-related costs to be related to the organic continuing operations of the acquired business and accordingly, we believe they are generally not relevant in assessing or estimating the long-term performance of the acquired assets. In addition, the size, complexity and/or volume of an acquisition, which often drives the magnitude of acquisition-related costs, may not be indicative of such future costs. By excluding acquisition-related costs from our non-GAAP measures, management is able to evaluate our ability to utilize our existing assets and estimate the long-term value that acquired assets will generate for the Company.

We recorded $2.0 million of restructuring expense in the third quarter of fiscal 2012 and expect to record approximately $6 million of restructuring expense in the fourth quarter of fiscal 2012 for facilities associated with the continuing integration of NET, severance and related costs. We believe that excluding restructuring expenses facilitates the comparison of our financial results to our historical operating results and to other companies in our industry and provides meaningful information regarding our liquidity.

We believe that providing non-GAAP information to investors, in addition to the GAAP presentation, will allow investors to view the financial results in the way management views the operating results. We further believe that providing this information helps investors to better understand our financial performance and evaluate the efficacy of the methodology and information used by our management to evaluate and measure such performance.

SONUS NETWORKS, INC.
Condensed Consolidated Statements of Operations
(in thousands, except percentages and per share amounts)
(unaudited)
             
             
Three months ended
September 28, June 29, September 30,
2012 2012 2011
Revenue:
Product $ 33,520 $ 32,586 $ 41,892
Service   23,529     25,024     24,461  
Total revenue   57,049     57,610     66,353  
 
Cost of revenue:
Product 11,768 11,027 11,504
Service   12,839     13,788     12,633  
Total cost of revenue   24,607     24,815     24,137  
 
Gross profit   32,442     32,795     42,216  
 
Gross margin:
Product 64.9 % 66.2 % 72.5 %
Service 45.4 % 44.9 % 48.4 %
Total gross margin 56.9 % 56.9 % 63.6 %
 
Operating expenses:
Research and development 15,612 17,095 16,231
Sales and marketing 17,613 18,141 14,651
General and administrative 7,939 8,384 10,133
Acquisition-related 4,090 967 -
Restructuring   1,992     -     -  
Total operating expenses   47,246     44,587     41,015  
 
Income (loss) from operations (14,804 ) (11,792 ) 1,201
Interest income, net 20 222 269
Other expense, net   (2 )   -     -  
 
Income (loss) before income taxes (14,786 ) (11,570 ) 1,470
Income tax (provision) benefit   (833 )   (155 )   439  
 
Net income (loss) $ (15,619 ) $ (11,725 ) $ 1,909  
 
Earnings (loss) per share:
Basic $ (0.06 ) $ (0.04 ) $ 0.01
Diluted $ (0.06 ) $ (0.04 ) $ 0.01
 
Shares used to compute earnings (loss) per share:
Basic 280,145 279,926 278,721
Diluted 280,145 279,926 279,324
 
SONUS NETWORKS, INC.
Condensed Consolidated Statements of Operations
(in thousands, except percentages and per share amounts)
(unaudited)
         
       
Nine months ended
September 28, September 30,
2012 2011
Revenue:
Product $ 107,517 $ 107,291
Service   71,481     78,133  
Total revenue   178,998     185,424  
 
Cost of revenue:
Product 31,988 44,283
Service   40,019     42,364  
Total cost of revenue   72,007     86,647  
 
Gross profit   106,991     98,777  
 
Gross margin:
Product 70.2 % 58.7 %
Service 44.0 % 45.8 %
Total gross margin 59.8 % 53.3 %
 
Operating expenses:
Research and development 51,094 47,026
Sales and marketing 56,339 42,246
General and administrative 25,302 26,526
Acquisition-related 5,057 -
Restructuring   1,992     -  
Total operating expenses   139,784     115,798  
 
Loss from operations (32,793 ) (17,021 )
Interest income, net 457 1,036
Other expense, net   (2 )   -  
 
Loss before income taxes (32,338 ) (15,985 )
Income tax provision   (1,444 )   (448 )
 
Net loss $ (33,782 ) $ (16,433 )
 
Loss per share:
Basic $ (0.12 ) $ (0.06 )
Diluted $ (0.12 ) $ (0.06 )
 
Shares used to compute loss per share:
Basic 279,854 278,286
Diluted 279,854 278,286
 
SONUS NETWORKS, INC.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
       
 
September 28, December 31,
2012 2011
Assets
Current assets:
Cash and cash equivalents $ 72,608 $ 105,451
Marketable securities 206,614 224,090
Accounts receivable, net 46,638 53,126
Inventory 21,253 15,434
Deferred income taxes 751 486
Other current assets   21,605     12,246  
Total current assets 369,469 410,833
 
Property and equipment, net 25,452 22,084
Intangible assets, net 17,106 1,200
Goodwill 34,563 5,062
Investments 24,058 55,427
Deferred income taxes 1,708 1,137
Other assets   14,464     8,972  
$ 486,820   $ 504,715  
 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 14,114 $ 12,754
Accrued expenses 24,313 21,620
Current portion of deferred revenue 32,722 38,565
Current portion of convertible subordinated note 8,120 -
Current portion of other long-term liabilities   1,469     1,275  
Total current liabilities 80,738 74,214
 
Deferred revenue 9,568 11,601
Long-term portion of convertible subordinated note 2,380 -
Other long-term liabilities   3,471     3,599  
Total liabilities   96,157     89,414  
 
Commitments and contingencies
 
Stockholders equity:
Common stock 281 279
Additional paid-in capital 1,319,113 1,309,919
Accumulated deficit (935,986 ) (902,204 )
Accumulated other comprehensive income   7,255     7,307  
Total stockholders' equity   390,663     415,301  
$ 486,820   $ 504,715  
 
SONUS NETWORKS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
         
       
Nine months ended
September 28, September 30,
2012 2011
Cash flows from operating activities:
Net loss $ (33,782 ) $ (16,433 )
Adjustments to reconcile net loss to cash flows used in operating activities:
Depreciation and amortization of property and equipment 9,081 8,721
Amortization of intangible assets 904 300
Stock-based compensation 6,540 6,308
Loss on disposal of property and equipment 23 14
Changes in operating assets and liabilities:
Accounts receivable 13,020 8,762
Inventory (3,868 ) 19,113
Other operating assets (4,998 ) 9,763
Accounts payable (1,753 ) (7,234 )
Accrued expenses and other long-term liabilities (3,625 ) (12,046 )
Deferred revenue   (9,624 )   (33,477 )
Net cash used in operating activities   (28,082 )   (16,209 )
 
Cash flows from investing activities:
Purchases of property and equipment (7,792 ) (10,962 )
Business acquisition, net of cash acquired (35,508 ) -
Purchases of marketable securities (139,917 ) (152,402 )
Sale/maturities of marketable securities   200,380     192,769  
Net cash provided by investing activities   17,163     29,405  
 
Cash flows from financing activities:
Proceeds from sale of common stock in connection with employee stock purchase plan 1,693 1,513
Proceeds from exercise of stock options 151 818
Payment of tax withholding obligations related to net share settlements of restricted stock awards (169 ) (1,245 )
Principal payments of capital lease obligations (87 ) (66 )
Settlement of redeemable convertible subordinated debentures   (23,704 )   -  
Net cash (used in) provided by financing activities   (22,116 )   1,020  
 
Effect of exchange rate changes on cash and cash equivalents   192     (445 )
 
Net (decrease) increase in cash and cash equivalents (32,843 ) 13,771
Cash and cash equivalents, beginning of year   105,451     62,501  
Cash and cash equivalents, end of period $ 72,608   $ 76,272  
 
SONUS NETWORKS, INC.
Supplemental Information
(In thousands)
(unaudited)
     
 
The following tables provide the details of stock-based compensation and amortization of intangible assets included in the Company's Condensed Consolidated Statements of Operations and the line items in which these amounts are reported.
         
Three months ended

September 28,

June 29, September 30,
2012 2012 2011
Stock-based compensation
Cost of revenue - product $ 41 $ 36 $ 100
Cost of revenue - service   211   209   258
Cost of revenue   252   245   358
 
Research and development expense 524 633 505
Sales and marketing expense 500 491 408
General and administrative expense   1,124   654   796
Operating expense   2,148   1,778   1,709
 
Total stock-based compensation $ 2,400 $ 2,023 $ 2,067
 
 
Amortization of intangible assets
Cost of revenue - product $ 428 $ - $ -
 
Research and development 100 100 100
Sales and marketing   176   -   -
Operating expense   276   100   100
 
Total amortization of intangible assets $ 704 $ 100 $ 100
 
 
     
Nine months ended
September 28, September 30,
2012 2011
Stock-based compensation
Cost of revenue - product $ 130 $ 317
Cost of revenue - service   595   1,032
Cost of revenue   725   1,349
 
Research and development 1,773 1,565
Sales and marketing 1,458 1,468
General and administrative   2,584   1,926
Operating expense   5,815   4,959
 
Total stock-based compensation $ 6,540 $ 6,308
 
 
Amortization of intangible assets
Cost of revenue - product $ 428 $ -
 
Research and development 300 300
Sales and marketing   176   -
Operating expense   476   300
 
Total amortization of intangible assets $ 904 $ 300
 
SONUS NETWORKS, INC.
Statement on the Use of Non-GAAP Financial Measures and
Reconciliation of Non-GAAP to GAAP Financial Measures
(unaudited)
   
 
To supplement its condensed consolidated financial statements presented in accordance with accounting principles generally accepted in the United States ("GAAP"), the Company discloses certain non-GAAP financial measures, including Gross margin - product, Gross margin - service, Total gross profit, Total gross margin, Research and development expense, Sales and marketing expense, General and administrative expense, Operating expenses, Income (loss) from operations, Net income (loss), and Income (loss) per share. These non-GAAP financial measures are not presented in accordance with, nor are they 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. These non-GAAP financial measures 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, 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. We define continuing operations as the ongoing revenues and expenses of the business, excluding certain items. These excluded items for the periods presented are stock-based compensation expense, amortization of intangible assets, depreciation expense related to the fair value write-up of acquired property and equipment, acquisition-related costs and restructuring. We do not include any income tax effect of non-GAAP adjustments as we were unable to recognize a tax benefit on domestic losses incurred in any of the periods presented; accordingly, no adjustment to income taxes for non-GAAP items is required.
 
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.
 
Stock-Based Compensation
 
Stock-based compensation is different from other forms of compensation, as it is a non-cash expense. For example, a cash salary generally has a fixed and unvarying cash cost. In contrast, the expense associated with an equity-based award is generally unrelated to the amount of cash ultimately received by the employee, and the cost to us is based on a stock-based compensation valuation methodology and underlying assumptions that may vary over time. We believe that excluding non-cash stock-based compensation expense from our operating results facilitates the ability of readers of our financial statements to compare our operating results to our historical results and to other companies in our industry.
 
Amortization of Intangible Assets
 
On August 24, 2012, we acquired all of the outstanding common stock of Network Equipment Technologies, Inc. (“NET”) for $41.5 million, or $1.35 per share of NET common stock. The transaction has been accounted for as a business combination and the financial results of NET have been included in our condensed consolidated financial statements for the period subsequent to its acquisition. As part of the preliminary purchase price allocation, we recorded $16.8 million of identifiable intangible assets, comprised of developed technology, customer relationships, order backlog and internal use software, and $29.5 million of goodwill. We are amortizing the identifiable intangible assets in relation to the expected cash flows from the individual intangible assets over their respective useful lives, which range from 4 months to 7 years. The amortization of the developed technology, order backlog and internal use software intangible assets is being recorded as cost of revenue (product) and the amortization of the customer relationships is being recorded as sales and marketing expense.
 
On January 15, 2010, we entered into an intellectual property asset purchase and license agreement with Winphoria, Inc. (“Winphoria”) and Motorola, Inc. (“Motorola”) to purchase certain of Winphoria’s software code and related patents and to license certain other intellectual property from Winphoria and Motorola. The purchase price included an initial payment of $2.0 million and future potential royalty payments dependent upon future sales of certain of our products that include the Winphoria technology that was purchased or licensed. In connection with this transaction we recorded identifiable intangible assets which we have classified as developed technology and that are being amortized on a straight-line basis over five years, the expected useful life of the technology. The amortization expense for these identifiable intangible assets is charged to research and development expense.
 
We believe that excluding the non-cash amortization of intangible assets facilitates the comparison of our financial results to our historical operating results and to other companies in our industry, and provides meaningful information regarding our liquidity.
 
Depreciation Expense - Fair Value Write-up of Acquired Property and Equipment
 
As part of the assessment of the assets acquired and liabilities assumed in connection with the NET acquisition, we were required to increase the aggregate fair value of acquired property and equipment by $2.0 million. The acquired property and equipment is being depreciated over a weighted average useful life of approximately 2.5 years. We believe that excluding the incremental depreciation expense resulting from the fair value write-up of this acquired property and equipment facilitates the ability of readers of our financial statements to compare our operating results to our historical results and to other companies in our industry.
 
Acquisition-Related Costs
 
We consider certain transition, integration and other acquisition-related costs to be unpredictable and dependent on a significant number of factors that may be outside of our control. We do not consider these acquisition-related costs to be related to the organic continuing operations of the acquired business and accordingly, we believe they are generally not relevant in assessing or estimating the long-term performance of the acquired assets. In addition, the size, complexity and/or volume of an acquisition, which often drives the magnitude of acquisition-related costs, may not be indicative of such future costs. By excluding acquisition-related costs from our non-GAAP measures, management is able to evaluate our ability to utilize our existing assets and estimate the long-term value that acquired assets will generate for the Company.
 
Restructuring
 
We recorded $2.0 million of restructuring expense in the third quarter of fiscal 2012 and expect to record approximately $6 million of restructuring expense in the fourth quarter of fiscal 2012 for facilities associated with the continuing integration of NET, severance and related costs. We believe that excluding restructuring expenses facilitates the comparison of our financial results to our historical operating results and to other companies in our industry and provides meaningful information regarding our liquidity.
SONUS NETWORKS, INC.
Reconciliation of Non-GAAP and GAAP Financial Measures - Outlook
(in millions, except percentages and per share amounts)
(unaudited)
           
 
               
Three months ended Year ended
December 31, 2012 December 31, 2012
Range Range
 
Revenue $ 77   $ 81   $ 256   $ 260  
 
Gross margin
GAAP outlook 55.5 % 55.6 % 58.5 % 58.5 %
Stock-based compensation 0.4 % 0.4 % 0.4 % 0.4 %
Amortization of intangible assets 1.7 % 1.6 % 0.7 % 0.7 %
Depreciation expense - fair value write-up of acquired property and equipment   0.4 %   0.4 %   0.4 %   0.4 %
Non-GAAP outlook   58.0 %   58.0 %   60.0 %   60.0 %
 
Operating expenses
GAAP outlook $ 53.4 $ 54.4 $ 192.9 $ 193.9
Stock-based compensation (2.2 ) (2.2 ) (8.0 ) (8.0 )
Amortization of intangible assets (0.6 ) (0.6 ) (1.1 ) (1.1 )
Depreciation expense - fair value write-up of acquired property and equipment (0.6 ) (0.6 ) (0.7 ) (0.7 )
Acquisition-related costs - - (5.1 ) (5.1 )
Restructuring   (6.0 )   (6.0 )   (8.0 )   (8.0 )

Non-GAAP outlook

$ 44.0   $ 45.0   $ 170.0   $ 171.0  
 
(Loss) earnings per share
GAAP outlook $ (0.04 ) $ (0.03 ) $ (0.16 ) $ (0.15 )
Stock-based compensation expense 0.01 0.01 0.03 0.03
Amortization of intangible assets 0.01 0.01 0.01 0.01
Depreciation expense - fair value write-up of acquired property and equipment - * - * - * - *
Acquisition-related costs - - 0.02 0.02
Restructuring   0.02     0.02     0.03     0.03  
Non-GAAP outlook $ -   $ 0.01   $ (0.07 ) $ (0.06 )
 
 
 
* Less than $0.01 impact on earnings per share.
 
SONUS NETWORKS, INC.
Reconciliation of Non-GAAP and GAAP Financial Measures - Historical
(in thousands, except percentages and per share amounts)
(unaudited)
                   
Three months ended
September 28,     June 29,     September 30,
2012 2012 2011
 
GAAP gross margin - product 64.9 % 66.2 % 72.5 %
Stock-based compensation expense 0.1 % 0.1 % 0.3 %
Amortization of intangible assets 1.3 % 0.0 % 0.0 %
Depreciation expense - fair value write-up of acquired property and equipment   0.0 %   0.0 %   0.0 %
Non-GAAP gross margin - product   66.3 %   66.3 %   72.8 %
 
GAAP gross margin - service 45.4 % 44.9 % 48.4 %
Stock-based compensation expense 0.9 % 0.8 % 1.0 %
Depreciation expense - fair value write-up of acquired property and equipment   0.1 %   0.0 %   0.0 %
Non-GAAP gross margin - service   46.4 %   45.7 %   49.4 %
 
GAAP total gross profit $ 32,442 $ 32,795 $ 42,216
Stock-based compensation expense 252 245 358
Amortization of intangible assets 428 - -
Depreciation expense - fair value write-up of acquired property and equipment   33     -     -  
Non-GAAP total gross profit $ 33,155   $ 33,040   $ 42,574  
 
GAAP total gross margin 56.9 % 56.9 % 63.6 %
Stock-based compensation expense % of revenue 0.4 % 0.5 % 0.6 %
Amortization of intangible assets % of revenue 0.8 % 0.0 % 0.0 %
Depreciation expense - fair value write-up of acquired property and equipment % of revenue   0.0 %   0.0 %   0.0 %
Non-GAAP total gross margin   58.1 %   57.4 %   64.2 %
 
GAAP research and development expense $ 15,612 $ 17,095 $ 16,231
Stock-based compensation expense (524 ) (633 ) (505 )
Amortization of intangible assets (100 ) (100 ) (100 )
Depreciation expense - fair value write-up of acquired property and equipment   (89 )   -     -  
Non-GAAP research and development expense $ 14,899   $ 16,362   $ 15,626  
 
GAAP sales and marketing expense $ 17,613 $ 18,141 $ 14,651
Stock-based compensation expense (500 ) (491 ) (408 )
Amortization of intangible assets (176 ) - -
Depreciation expense - fair value write-up of acquired property and equipment   (19 )   -     -  
Non-GAAP sales and marketing expense $ 16,918   $ 17,650   $ 14,243  
 
GAAP general and administrative expense $ 7,939 $ 8,384 $ 10,133
Stock-based compensation expense (1,124 ) (654 ) (796 )
Depreciation expense - fair value write-up of acquired property and equipment   (24 )   -     -  
Non-GAAP general and administrative expense $ 6,791   $ 7,730   $ 9,337  
 
GAAP operating expenses $ 47,246 $ 44,587 $ 41,015
Stock-based compensation expense (2,148 ) (1,778 ) (1,709 )
Amortization of intangible assets (276 ) (100 ) (100 )
Depreciation expense - fair value write-up of acquired property and equipment (132 ) - -
Acquisition-related expense (4,090 ) (967 ) -
Restructuring   (1,992 )   -     -  
Non-GAAP operating expenses $ 38,608   $ 41,742   $ 39,206  
 
GAAP income (loss) from operations $ (14,804 ) $ (11,792 ) $ 1,201
Stock-based compensation expense 2,400 2,023 2,067
Amortization of intangible assets 704 100 100
Depreciation expense - fair value of acquired property and equipment 165 - -
Acquisition-related expense 4,090 967 -
Restructuring   1,992     -     -  
Non-GAAP income (loss) from operations $ (5,453 ) $ (8,702 ) $ 3,368  
 
GAAP net income (loss) $ (15,619 ) $ (11,725 ) $ 1,909
Stock-based compensation expense 2,400 2,023 2,067
Amortization of intangible assets 704 100 100
Depreciation expense - fair value of acquired property and equipment 165 - -
Acquisition-related expense 4,090 967 -
Restructuring   1,992     -     -  
Non-GAAP net income (loss) $ (6,268 ) $ (8,635 ) $ 4,076  
 
(Loss) per share/diluted earnings per share
GAAP $ (0.06 ) $ (0.04 ) $ 0.01
Non-GAAP $ (0.02 ) $ (0.03 ) $ 0.01
 
Shares used to compute (loss) per share/diluted earnings per share
GAAP shares used to compute (loss) per share/diluted earnings per share 280,145 279,926 279,324
Non-GAAP shares used to compute (loss) per share/diluted earnings per share 280,145 279,926 279,324
 
SONUS NETWORKS, INC.
Reconciliation of Non-GAAP and GAAP Financial Measures - Historical
(in thousands, except percentages and per share amounts)
(unaudited)
           
Nine months ended
September 28,     September 30,
2012 2011
 
GAAP gross margin - product 70.2 % 58.7 %
Stock-based compensation expense 0.1 % 0.3 %
Amortization of intangible assets 0.4 % 0.0 %
Depreciation expense - fair value write-up of acquired property and equipment   0.0 %   0.0 %
Non-GAAP gross margin - product   70.7 %   59.0 %
 
GAAP gross margin - service 44.0 % 45.8 %
Stock-based compensation expense 0.8 % 1.3 %
Depreciation expense - fair value write-up of acquired property and equipment   0.0 %   0.0 %
Non-GAAP gross margin - service   44.8 %   47.1 %
 
GAAP total gross profit $ 106,991 $ 98,777
Stock-based compensation expense 725 1,349
Amortization of intangible assets 428 -
Depreciation expense - fair value write-up of acquired property and equipment   33     -  
Non-GAAP total gross profit $ 108,177   $ 100,126  
 
GAAP total gross margin 59.8 % 53.3 %
Stock-based compensation expense % of revenue 0.4 % 0.7 %
Amortization of intangible assets % of revenue 0.2 % 0.0 %
Depreciation expense - fair value write-up of acquired property and equipment % of revenue   0.0 %   0.0 %
Non-GAAP total gross margin   60.4 %   54.0 %
 
GAAP research and development expense $ 51,094 $ 47,026
Stock-based compensation expense (1,773 ) (1,565 )
Amortization of intangible assets (300 ) (300 )
Depreciation expense - fair value write-up of acquired property and equipment   (89 )   -  
Non-GAAP research and development expense $ 48,932   $ 45,161  
 
GAAP sales and marketing expense $ 56,339 $ 42,246
Stock-based compensation expense (1,458 ) (1,468 )
Amortization of intangible assets (176 ) -
Depreciation expense - fair value write-up of acquired property and equipment   (19 )   -  
Non-GAAP sales and marketing expense $ 54,686   $ 40,778  
 
GAAP general and administrative expense $ 25,302 $ 26,526
Stock-based compensation expense (2,584 ) (1,626 )
Depreciation expense - fair value write-up of acquired property and equipment   (24 )   -  
Non-GAAP general and administrative expense $ 22,694   $ 24,900  
 
GAAP operating expenses $ 139,784 $ 115,798
Stock-based compensation expense (5,815 ) (4,959 )
Amortization of intangible assets (476 ) (300 )
Depreciation expense - fair value write-up of acquired property and equipment (132 ) -
Acquisition-related expense (5,057 ) -
Restructuring   (1,992 )   -  
Non-GAAP operating expenses $ 126,312   $ 110,539  
 
GAAP loss from operations $ (32,793 ) $ (17,021 )
Stock-based compensation expense 6,540 6,308
Amortization of intangible assets 904 300
Depreciation expense - fair value of acquired property and equipment 165 -
Acquisition-related expense 5,057 -
Restructuring   1,992     -  
Non-GAAP loss from operations $ (18,135 ) $ (10,413 )
 
GAAP net loss $ (33,782 ) $ (16,433 )
Stock-based compensation expense 6,540 6,308
Amortization of intangible assets 904 300
Depreciation expense - fair value of acquired property and equipment 165 -
Acquisition-related expense 5,057 -
Restructuring   1,992     -  
Non-GAAP net loss $ (19,124 ) $ (9,825 )
 

Loss per share

GAAP $ (0.12 ) $ (0.06 )
Non-GAAP $ (0.07 ) $ (0.04 )
 
Shares used to compute loss per share
GAAP shares used to compute loss per share 279,854 278,286
Non-GAAP shares used to compute loss per share 279,854 278,286
 

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@ThingsExpo Stories
Software AG helps organizations transform into Digital Enterprises, so they can differentiate from competitors and better engage customers, partners and employees. Using the Software AG Suite, companies can close the gap between business and IT to create digital systems of differentiation that drive front-line agility. We offer four on-ramps to the Digital Enterprise: alignment through collaborative process analysis; transformation through portfolio management; agility through process automation and integration; and visibility through intelligent business operations and big data.
There will be 50 billion Internet connected devices by 2020. Today, every manufacturer has a propriety protocol and an app. How do we securely integrate these "things" into our lives and businesses in a way that we can easily control and manage? Even better, how do we integrate these "things" so that they control and manage each other so our lives become more convenient or our businesses become more profitable and/or safe? We have heard that the best interface is no interface. In his session at Internet of @ThingsExpo, Chris Matthieu, Co-Founder & CTO at Octoblu, Inc., will discuss how these devices generate enough data to learn our behaviors and simplify/improve our lives. What if we could connect everything to everything? I'm not only talking about connecting things to things but also systems, cloud services, and people. Add in a little machine learning and artificial intelligence and now we have something interesting...
Last week, while in San Francisco, I used the Uber app and service four times. All four experiences were great, although one of the drivers stopped for 30 seconds and then left as I was walking up to the car. He must have realized I was a blogger. None the less, the next car was just a minute away and I suffered no pain. In this article, my colleague, Ved Sen, Global Head, Advisory Services Social, Mobile and Sensors at Cognizant shares his experiences and insights.
We are reaching the end of the beginning with WebRTC and real systems using this technology have begun to appear. One challenge that faces every WebRTC deployment (in some form or another) is identity management. For example, if you have an existing service – possibly built on a variety of different PaaS/SaaS offerings – and you want to add real-time communications you are faced with a challenge relating to user management, authentication, authorization, and validation. Service providers will want to use their existing identities, but these will have credentials already that are (hopefully) irreversibly encoded. In his session at Internet of @ThingsExpo, Peter Dunkley, Technical Director at Acision, will look at how this identity problem can be solved and discuss ways to use existing web identities for real-time communication.
Can call centers hang up the phones for good? Intuitive Solutions did. WebRTC enabled this contact center provider to eliminate antiquated telephony and desktop phone infrastructure with a pure web-based solution, allowing them to expand beyond brick-and-mortar confines to a home-based agent model. It also ensured scalability and better service for customers, including MUY! Companies, one of the country's largest franchise restaurant companies with 232 Pizza Hut locations. This is one example of WebRTC adoption today, but the potential is limitless when powered by IoT. Attendees will learn real-world benefits of WebRTC and explore future possibilities, as WebRTC and IoT intersect to improve customer service.
From telemedicine to smart cars, digital homes and industrial monitoring, the explosive growth of IoT has created exciting new business opportunities for real time calls and messaging. In his session at Internet of @ThingsExpo, Ivelin Ivanov, CEO and Co-Founder of Telestax, will share some of the new revenue sources that IoT created for Restcomm – the open source telephony platform from Telestax. Ivelin Ivanov is a technology entrepreneur who founded Mobicents, an Open Source VoIP Platform, to help create, deploy, and manage applications integrating voice, video and data. He is the co-founder of TeleStax, an Open Source Cloud Communications company that helps the shift from legacy IN/SS7 telco networks to IP-based cloud comms. An early investor in multiple start-ups, he still finds time to code for his companies and contribute to open source projects.
The Internet of Things (IoT) promises to create new business models as significant as those that were inspired by the Internet and the smartphone 20 and 10 years ago. What business, social and practical implications will this phenomenon bring? That's the subject of "Monetizing the Internet of Things: Perspectives from the Front Lines," an e-book released today and available free of charge from Aria Systems, the leading innovator in recurring revenue management.
The Internet of Things will put IT to its ultimate test by creating infinite new opportunities to digitize products and services, generate and analyze new data to improve customer satisfaction, and discover new ways to gain a competitive advantage across nearly every industry. In order to help corporate business units to capitalize on the rapidly evolving IoT opportunities, IT must stand up to a new set of challenges.
There’s Big Data, then there’s really Big Data from the Internet of Things. IoT is evolving to include many data possibilities like new types of event, log and network data. The volumes are enormous, generating tens of billions of logs per day, which raise data challenges. Early IoT deployments are relying heavily on both the cloud and managed service providers to navigate these challenges. In her session at 6th Big Data Expo®, Hannah Smalltree, Director at Treasure Data, to discuss how IoT, Big Data and deployments are processing massive data volumes from wearables, utilities and other machines.
All major researchers estimate there will be tens of billions devices – computers, smartphones, tablets, and sensors – connected to the Internet by 2020. This number will continue to grow at a rapid pace for the next several decades. With major technology companies and startups seriously embracing IoT strategies, now is the perfect time to attend @ThingsExpo in Silicon Valley. Learn what is going on, contribute to the discussions, and ensure that your enterprise is as "IoT-Ready" as it can be!
P2P RTC will impact the landscape of communications, shifting from traditional telephony style communications models to OTT (Over-The-Top) cloud assisted & PaaS (Platform as a Service) communication services. The P2P shift will impact many areas of our lives, from mobile communication, human interactive web services, RTC and telephony infrastructure, user federation, security and privacy implications, business costs, and scalability. In his session at Internet of @ThingsExpo, Erik Lagerway, Co-founder of Hookflash, will walk through the shifting landscape of traditional telephone and voice services to the modern P2P RTC era of OTT cloud assisted services.
While great strides have been made relative to the video aspects of remote collaboration, audio technology has basically stagnated. Typically all audio is mixed to a single monaural stream and emanates from a single point, such as a speakerphone or a speaker associated with a video monitor. This leads to confusion and lack of understanding among participants especially regarding who is actually speaking. Spatial teleconferencing introduces the concept of acoustic spatial separation between conference participants in three dimensional space. This has been shown to significantly improve comprehension and conference efficiency.
The Internet of Things is tied together with a thin strand that is known as time. Coincidentally, at the core of nearly all data analytics is a timestamp. When working with time series data there are a few core principles that everyone should consider, especially across datasets where time is the common boundary. In his session at Internet of @ThingsExpo, Jim Scott, Director of Enterprise Strategy & Architecture at MapR Technologies, will discuss single-value, geo-spatial, and log time series data. By focusing on enterprise applications and the data center, he will use OpenTSDB as an example to explain some of these concepts including when to use different storage models.
SYS-CON Events announced today that Gridstore™, the leader in software-defined storage (SDS) purpose-built for Windows Servers and Hyper-V, will exhibit at SYS-CON's 15th International Cloud Expo®, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Gridstore™ is the leader in software-defined storage purpose built for virtualization that is designed to accelerate applications in virtualized environments. Using its patented Server-Side Virtual Controller™ Technology (SVCT) to eliminate the I/O blender effect and accelerate applications Gridstore delivers vmOptimized™ Storage that self-optimizes to each application or VM across both virtual and physical environments. Leveraging a grid architecture, Gridstore delivers the first end-to-end storage QoS to ensure the most important App or VM performance is never compromised. The storage grid, that uses Gridstore’s performance optimized nodes or capacity optimized nodes, starts with as few a...
The Transparent Cloud-computing Consortium (abbreviation: T-Cloud Consortium) will conduct research activities into changes in the computing model as a result of collaboration between "device" and "cloud" and the creation of new value and markets through organic data processing High speed and high quality networks, and dramatic improvements in computer processing capabilities, have greatly changed the nature of applications and made the storing and processing of data on the network commonplace. These technological reforms have not only changed computers and smartphones, but are also changing the data processing model for all information devices. In particular, in the area known as M2M (Machine-To-Machine), there are great expectations that information with a new type of value can be produced using a variety of devices and sensors saving/sharing data via the network and through large-scale cloud-type data processing. This consortium believes that attaching a huge number of devic...
Innodisk is a service-driven provider of industrial embedded flash and DRAM storage products and technologies, with a focus on the enterprise, industrial, aerospace, and defense industries. Innodisk is dedicated to serving their customers and business partners. Quality is vitally important when it comes to industrial embedded flash and DRAM storage products. That’s why Innodisk manufactures all of their products in their own purpose-built memory production facility. In fact, they designed and built their production center to maximize manufacturing efficiency and guarantee the highest quality of our products.
Can call centers hang up the phones for good? Intuitive Solutions did. WebRTC enabled this contact center provider to eliminate antiquated telephony and desktop phone infrastructure with a pure web-based solution, allowing them to expand beyond brick-and-mortar confines to a home-based agent model. Download Slide Deck: ▸ Here
All major researchers estimate there will be tens of billions devices - computers, smartphones, tablets, and sensors - connected to the Internet by 2020. This number will continue to grow at a rapid pace for the next several decades. Over the summer Gartner released its much anticipated annual Hype Cycle report and the big news is that Internet of Things has now replaced Big Data as the most hyped technology. Indeed, we're hearing more and more about this fascinating new technological paradigm. Every other IT news item seems to be about IoT and its implications on the future of digital business.
BSQUARE is a global leader of embedded software solutions. We enable smart connected systems at the device level and beyond that millions use every day and provide actionable data solutions for the growing Internet of Things (IoT) market. We empower our world-class customers with our products, services and solutions to achieve innovation and success. For more information, visit www.bsquare.com.
With the iCloud scandal seemingly in its past, Apple announced new iPhones, updates to iPad and MacBook as well as news on OSX Yosemite. Although consumers will have to wait to get their hands on some of that new stuff, what they can get is the latest release of iOS 8 that Apple made available for most in-market iPhones and iPads. Originally announced at WWDC (Apple’s annual developers conference) in June, iOS 8 seems to spearhead Apple’s newfound focus upon greater integration of their products into everyday tasks, cross-platform mobility and self-monitoring. Before you update your device, here is a look at some of the new features and things you may want to consider from a mobile security perspective.