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Executive Editor

A good day for Sonus

Jul 16, 20033 mins
Application Performance ManagementTelecommunications IndustryVerizon

Having Verizon as a customer is good for Sonus' bottom line

When the earnings reports came out last week, Sonus Networks’ included an interesting factoid: Verizon purchases represented more than 10% of Sonus’s revenue.

When the earnings reports came out last week, Sonus Networks’ included an interesting factoid: Verizon purchases represented more than 10% of Sonus’s revenue.

That translates into something more than $2.1 million, and consists of a combination of the GSX9000 Open Services Switch and Insignus softswitch as well as Sonus Insight management platform.

Verizon says it is using the equipment as part of its long-distance network, but wouldn’t say where. Installing the Sonus products is part of the carrier’s stated long-term migration from circuit switching to packet switching in its network.

Having Verizon as a customer is good for Sonus. They’re in a tough spot along with other softswitch vendors, selling next-generation telecom equipment at a time when telecom spending is pinched. Long-term, it would be great for Sonus or any softswitch vendor to have Verizon as a customer buying lots of equipment for a significant, sustained network migration. But that is still a ways off.

To put it in perspective, Verizon announced earlier this month that it spent $6 million on traditional switch upgrades for switches that serve Boston – more than the Sonus deal. In making the Boston announcement, Verizon noted that over the past three years, it has spent more than $2 billion just on the network that serves Massachusetts. So the Sonus purchases are a spit in the ocean.

The flip side is that some day, Sonus and other softswitch vendors may be in a position to take a larger share of the ocean.

For now, Verizon and other major U.S. carriers seem to be trying various softswitches as they have the need to expand switch capacity, and moreso with in long-distance networks than in local networks. Verizon has previously announced using softswitch gear from Telica and Nortel, so it clearly is shopping around and putting many vendors through their paces.

From Sonus’ point of view, it now has some pretty big customers that represent a large chunk of its income. In addition to Verizon, Qwests and Global Crossing represent at least 10% of Sonus’ revenue. Wall Street analysts seem to like this. Raymond James Associates, for example, took this information and boosted its projections of how much Sonus will sell this year from $78.4 milllion to $89.8 million. It boosted its 2005 revenue projection from $217.8 million to $225.7 million.

This means two things. First, Raymond James thinks Sonus will do better than it previously thought. Second, it believes that Sonus will still be around in 2005. That’s good for Sonus and it’s also good for the industry that telecom network conversion is starting to happen.