UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549


FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

August 7, 2007

Date of Report (Date of earliest event reported)


SONUS NETWORKS, INC.
(Exact Name of Registrant as Specified in its Charter)

 
DELAWARE
000-30229
04-3387074
(State or Other Jurisdiction
(Commission File Number)
(IRS Employer
of Incorporation)
Identification No.)
 
 
7 TECHNOLOGY PARK DRIVE, WESTFORD, MASSACHUSETTS 01886
(Address of Principal Executive Offices) (Zip Code)

(978) 614-8100

(Registrant's telephone number, including area code)



Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 
 

 
Item 2.02.  Results of Operations and Financial Condition.

On August 7, 2007, Sonus Networks, Inc. (the “Registrant”) issued a press release reporting financial results for the quarter ended June 30, 2007. A copy of the press release is attached as Exhibit 99.1 hereto.
 
The information in this Item 2.02 and Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 5.02.  Departure of Directors or Principal Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On August 7, 2007, Albert A. Notini resigned as the Registrant’s President and Chief Operating Officer effective August 10, 2007 and resigned from the Registrant’s Board of Directors effective August 7, 2007. The resignation was not due to a disagreement relating to the Registrant’s operation, policies or practices.
 
In connection with Mr. Notini’s resignation, the Registrant and Mr. Notini entered into a Separation of Employment Agreement dated August 7, 2007 (“Separation Agreement”). This Separation Agreement is attached as Exhibit 10.1 to this Current Report on Form 8-K; the following summary of the Separation Agreement is qualified by reference to the Separation Agreement. Under the Separation Agreement, consistent with the terms of his Employment Agreement with the Registrant dated April 6, 2004, Mr. Notini will receive the following in connection with his separation from the Registrant:
 
·  
a lump sum payment of $901,783.00 payable six (6) months and a day after Mr. Notini’s Separation Date;
 
·  
premium payments for health benefits (medical, dental and vision) through eighteen (18) months from Mr. Notini’s Separation Date;
 
·  
continued vesting of stock options for eighteen (18) months following Mr. Notini’s Separation Date; and
 
·  
the ability to exercise vested stock options until the earlier of twenty-four (24) months from the Mr. Notini’s Separation Date or their original expiration date.
 
In addition, Mr. Notini and the Registrant have agreed to other customary terms regarding his termination of employment.
 
Hassan M. Ahmed, the Registrant’s Chief Executive Officer and Chairman, has been appointed President by the Board of Directors. Mr. Ahmed has been the Chief Executive Officer and a member of the Board of Directors of the Registrant since November 1998 and Chairman of the Board of Directors since April 2004. From November 1998 to April 2004, he also served as President.

 
2

 
Item 9.01. Financial Statements and Exhibits.

(d)  
Exhibits
 
The following exhibit relating to Item 2.02 shall be deemed to be furnished, and not filed:
 
 
10.1
Separation of Employment Agreement between Sonus Networks, Inc. and Albert A. Notini dated August 7, 2007.

 
99.1
Press release of Sonus Networks, Inc. dated August 7, 2007 reporting financial results for the quarter ended June 30, 2007.


  
SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


Date: August 7, 2007
Sonus Networks, Inc.
   
 
By:
/s/ Ellen Richstone
Ellen Richstone
Chief Financial Officer

 
3

 
Exhibit Index

10.1
Separation of Employment Agreement between Sonus Networks, Inc. and Albert A. Notini dated August 7, 2007.

99.1
Press release of Sonus Networks, Inc. dated August 7, 2007 reporting financial results for the quarter ended June 30, 2007.

 
 
4

 














          Sonus Networks Reports 2007 Second Quarter Financial Results

      WESTFORD, Mass., Aug. 7 /PRNewswire-FirstCall/ -- Sonus Networks, Inc.
(Nasdaq: SONS), a leading supplier of service provider Voice over IP (VoIP)
infrastructure solutions, today reported its financial results for the second
quarter ended June 30, 2007.

      Revenues for the second quarter of fiscal 2007 were $75.5 million compared
with $71.1 million in the first quarter of fiscal 2007 and $64.5 million for the
second quarter of fiscal 2006. Net loss for the second quarter of 2007 was $7.0
million, or $0.03 per share. This compared to a net loss of $4.0 million in the
first quarter of 2007, or $0.02 per share, and net income of $8.9 million for
the second quarter of 2006, or $0.03 per diluted share.

      Financial results included stock-based compensation and related expenses,
stock option review costs, withholding tax adjustments and amortization of
intangible assets of $18.8 million in the second quarter of 2007, $13.8 million
in the first quarter of 2007 and $2.8 million in the second quarter of 2006 on a
pre-tax basis.

      Revenues for the first six months of fiscal 2007 were $146.6 million
compared with $124.5 million in the same period last year. Net loss for the
first six months of fiscal 2007 was $11.0 million or $0.04 per share compared
with net income for the first six months of fiscal 2006 of $14.7 million or
$0.06 per diluted share.

      Financial results included stock-based compensation and related expenses,
stock option review costs, withholding tax adjustments and amortization of
intangible assets of $32.6 million in the first six months of fiscal 2007 and
$5.3 million in the first six months of 2006 on a pre-tax basis.

      The Company has provided additional supplemental financial information for
Q2 2007 on its website at
http://www.sonusnet.com/contents/corporate/investorrelations.cfm.

      "Sonus achieved 17.8% year-on-year revenue growth during the first six
months of 2007 as a result of our continued leadership in the expanding IP-voice
market and our strengthening position in the industry," said Hassan Ahmed,
Chairman and CEO. "The spirit of innovation and customer commitment continues to
thrive at Sonus, and we are proud to count the world's five largest operators as
customers. During the second quarter, we made significant strides in the
wireless industry as we acquired privately-held Zynetix. We also delivered new
features and capabilities for our core trunking and access solutions. Sonus is a
pioneer in the IP-Voice market and our continual innovation differentiates our
company in one of the most rapidly growing segments of the telecommunications
industry."

      Sonus Networks also announced today that President and Chief Operating
Officer, Bert Notini, will be leaving the company to join New Mountain Capital,
LLC as a Senior Advisor and to become the Chief Executive Officer of one of its
portfolio companies, Apptis Inc. Notini has been president and COO of the
Company since April 2004, and has been a member of the Board of Directors since
2003. New Mountain Capital LLC, is a New York based private equity and public
equity fund with aggregate assets under management totaling more than $3.3
billion. Apptis, Inc. is a rapidly growing IT and communications systems
integrator based in northern Virginia that provides a range of critical
networking and security solutions to the U.S. federal government and its
agencies. Notini is currently Chairman of the Board of Directors of Apptis and
also serves on the Board of Directors for Deltek Systems Inc., another New
Mountain Capital portfolio company.

      "I'm extremely proud to have been a part of the Sonus team for the past
four years, a critical period where both the company and the industry have seen
strong growth and change," said Notini. "Sonus is an established market leader
with exceptional prospects and the ability to meet the needs of the world's
largest operators. I'm confident in the company's ability to lead the continued
transformation of the world's communications networks and look forward to my new
roles at New Mountain Capital and Apptis."

Second Quarter Fiscal 2007 Business Highlights: In Q2 2007, Sonus Networks continued to partner with the world's largest and most innovative network operators. Sonus announced that the Company is partnering with France Telecom International Wholesale Division to build a robust IP-based network. With the addition of France Telecom to its roster of announced customers, Sonus Networks is now actively deployed in all five of the world's largest network operators. The Company also announced new deployments for complete IP-based voice networks with Veracity Communications, which is offering a Sonus-based Voice over Broadband solution, and CommPartners, a nationwide CLEC-certified, facilities-based network operator providing VoIP and TDM services to carriers as well as enhanced hosted applications to small- and medium-sized businesses. In addition to winning new business with leading network operators globally, Sonus continues to earn praise from existing customers for the Company's ability to build and support the world's largest, most scalable IP voice networks. In June, Sonus was recognized by AT&T as an outstanding supplier to AT&T, one of the world's leading data, voice, wireless and Internet services providers, for its ongoing commitment to excellence. Reflecting the Company's heritage of technology innovation leadership and recent efforts to drive the adoption of IP solutions to the edge of wireless voice networks, Sonus also announced that it is collaborating in SOFTBANK Group's demonstration of femtocell technologies. This groundbreaking technology leverages in-home base stations connected to an IP core network infrastructure to deliver indoor wireless coverage; to lay the foundation for the delivery of converged voice, data and multimedia services to end users on their mobile devices; and to enable network operators to leverage IP transport to run their networks more efficiently. This burgeoning market represents one of the strategic growth areas Sonus is pursuing. Partnering with leading network operators like SBB, Sonus is establishing itself as an early leader. Sonus' leadership position across the industry was validated by respected third party research firms in Q2. Synergy Research Group and Infonetics both published reports naming Sonus a market share leader in key segments of the IP voice market, and iLocus Research reaffirmed Sonus leadership in minutes of IP voice traffic, noting that Sonus carries approximately 4 out of 10 long distance IP voice minutes. In addition, Gartner's "Magic Quadrant for Softswitch Architecture, 2007" report (Bettina Tratz-Ryan, et al, March 2007), which ranks vendors in the IP-based voice industry, positioned Sonus in the "Leader" quadrant. Sonus maintains its industry leading position through continual development of its solutions, whether organically or through partnerships with other innovative technology vendors. Sonus is committed to evolving its platform to keep pace with emerging communications trends that embrace lifestyle-driven features such as mobility, personalization, and presence, while continuing to give network operators new operating leverage. In April, the Company introduced new support for the Electronic Number Mapping System (ENUM), a number mapping solution designed to streamline the convergence of IP-Based voice networks with the Public Switched Telephony Network (PSTN) and facilitate seamless IP-to-IP peering. The Company also announced new partnerships with companies such as Operax, a leading vendor of Network Service Quality control solutions, to facilitate faster service creation and superior service quality essential to protecting the consumer experience; Neustar, to create feature-rich IP Multimedia Subsystem (IMS)-based consumer applications with presence technology; and PCTel, to enable the delivery of broadband mobile converged services leveraging dual mode handsets. "We're at the point in the telecommunications industry where the business case for investing in IP voice infrastructure has moved beyond simple operational cost-savings," continued Ahmed. "Network operators are pushing IP further and further to the edge of their networks to touch the consumer with rich, multimedia applications and services, new innovations in wireless technology, and better overall service. For the past ten years, Sonus has led the evolution to IP, and as network operators globally embrace the transformative power of IP, Sonus continues to be recognized as the preeminent provider of next-generation solutions."

About Sonus Networks Sonus Networks, Inc. is a leading provider of voice over IP (VoIP) infrastructure solutions for wireline and wireless service providers. With its comprehensive IP Multimedia Subsystem (IMS) solution, Sonus addresses the full range of carrier applications, including residential and business voice services, wireless voice and multimedia, trunking and tandem switching, carrier interconnection and enhanced services. Sonus' voice infrastructure solutions are deployed in service provider networks worldwide. Founded in 1997, Sonus is headquartered in Westford, Massachusetts. Additional information on Sonus is available at http://www.sonusnet.com. This release contains forward-looking statements regarding future events that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results. Readers are referred to Item 1A "Risk Factors" of Sonus' Quarterly Report on Form 10-Q for the first quarter of 2007, filed with the SEC, which identifies important risk factors that could cause actual results to differ from those contained in the forward-looking statements. Risk factors include among others: the impact of material weaknesses in our disclosure controls and procedures and our internal control over financial reporting on our ability to report our financial results timely and accurately; the unpredictability of our quarterly financial results; whether the Company will remain listed on the NASDAQ Global Select Market; regulatory actions or litigation arising out of the Company's voluntary stock option review and related restatement; risks associated with our international expansion and growth; consolidation in the telecommunications industry; and potential costs resulting from pending securities litigation against the company. 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. Sonus is a registered trademark of Sonus Networks. All other company and product names may be trademarks of the respective companies with which they are associated.

SONUS NETWORKS, INC. Condensed Consolidated Statements of Operations (in thousands, except per share data) (unaudited) Three months Three months Three months ended ended ended June 30, March 31, June 30, 2007 2007 2006 Revenue: Product $ 52,171 $ 51,627 $ 48,853 Service 23,322 19,519 15,627 Total revenue 75,493 71,146 64,480 Cost of revenue: Product 23,561 17,082 16,199 Service 9,563 8,579 6,987 Total cost of revenue 33,124 25,661 23,186 Gross profit 42,369 45,485 41,294 Gross profit % Product 54.8% 66.9% 66.8% Service 59.0% 56.0% 55.3% Total gross profit 56.1% 63.9% 64.0% Operating expenses: Research and development 22,350 18,698 12,900 Sales and marketing 21,219 23,050 15,646 General and administrative 14,202 14,062 7,248 Total operating expenses 57,771 55,810 35,794 Income (loss) from operations (15,402) (10,325) 5,500 Interest expense (79) (4) (81) Interest income 4,522 4,624 3,899 Other income (expense), net (256) (680) -- Income (loss) before income taxes (11,215) (6,385) 9,318 Income tax benefit (provision) 4,239 2,407 (404) Net income (loss) $ (6,976) $ (3,978) $ 8,914 Net income (loss) per share: Basic $ (0.03) $ (0.02) $ 0.04 Diluted $ (0.03) $ (0.02) $ 0.03 Shares used in computing net income (loss) per share: Basic 259,786 259,768 252,664 Diluted 259,786 259,768 256,326

SONUS NETWORKS, INC. Condensed Consolidated Statements of Operations (in thousands, except per share data) (unaudited) Six months Six months ended ended June 30, June 30, 2007 2006 Revenue: Product $ 103,798 $ 93,395 Service 42,841 31,080 Total revenue 146,639 124,475 Cost of revenue: Product 40,643 32,082 Service 18,142 13,716 Total cost of revenue 58,785 45,798 Gross profit 87,854 78,677 Gross profit % Product 60.8% 65.6% Service 57.7% 55.9% Total gross profit 59.9% 63.2% Operating expenses: Research and development 41,048 25,976 Sales and marketing 44,269 29,671 General and administrative 28,264 14,228 Total operating expenses 113,581 69,875 Income (loss) from operations (25,727) 8,802 Interest expense (83) (218) Interest income 9,146 7,341 Other income (expense), net (936) -- Income (loss) before income taxes (17,600) 15,925 Income tax benefit (provision) 6,646 (1,195) Net income (loss) $ (10,954) $ 14,730 Net income (loss) per share: Basic $ (0.04) $ 0.06 Diluted $ (0.04) $ 0.06 Shares used in computing net income (loss) per share: Basic 259,777 251,371 Diluted 259,777 255,454

SONUS NETWORKS, INC. Condensed Consolidated Balance Sheets (in thousands, except share data) (unaudited) June 30, December 31, 2007 2006 Assets Current assets: Cash and cash equivalents $ 61,617 $ 44,206 Marketable debt securities 243,605 256,485 Accounts receivable, net 72,438 70,726 Inventory, net 33,177 22,266 Deferred income taxes 21,833 21,808 Other current assets 27,178 18,523 Total current assets 459,848 434,014 Property and equipment, net 20,174 19,051 Purchased intangible assets, net 2,900 -- Goodwill 7,841 -- Long-term investments 39,470 60,189 Deferred income taxes 46,968 52,613 Other assets 20,744 23,737 $ 597,945 $ 589,604 Liabilities and stockholders' equity Current liabilities: Accounts payable $ 24,989 $ 17,219 Accrued expenses 36,950 43,653 Accrued restructuring expenses -- 61 Current portion of deferred revenue 55,270 60,383 Current portion of long-term liabilities 1,630 501 Total current liabilities 118,839 121,817 Long-term deferred revenue 31,319 33,787 Deferred income taxes 912 -- Long-term liabilities, net of current portion 2,748 1,467 Total liabilities 153,818 157,071 Commitments and contingencies Stockholders equity: Common stock 262 262 Additional paid-in capital 1,183,548 1,160,853 Accumulated deficit (739,237) (728,233) Accumulated other comprehensive loss (179) (82) Treasury stock (267) (267) Total stockholders' equity 444,127 432,533 $ 597,945 $ 589,604

SONUS NETWORKS, INC. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Six months ended June 30, 2007 2006 Cash flows from operating activities: Net income (loss) $ (10,954) $ 14,730 Adjustments to reconcile net income (loss) to cash flows provided by operating activities: Depreciation and amortization of property and equipment 6,351 4,732 Amortization of purchased intangible assets 141 -- Stock-based compensation 23,486 5,042 Loss on disposal of property and equipment -- 6 Increase in fair value of modified stock options held by former employees 936 -- Deferred income taxes 5,645 -- Changes in operating assets and liabilities: Accounts receivable (1,261) (5,162) Inventory (10,579) 4,170 Other operating assets (5,693) (7,812) Accounts payable 6,541 (3,712) Accrued expenses, deferred rent and accrued restructuring expenses (6,901) 52 Deferred revenue (7,377) (6,661) Net cash provided by operating activities 335 5,385 Cash flows from investing activities: Purchases of property and equipment (7,138) (5,163) Acquisition of Zynetix Limited (8,825) -- Maturities of available-for-sale marketable debt securities 38,158 68,775 Purchases of available-for-sale marketable debt securities (36,008) (31,175) Maturities of held-to-maturity marketable debt securities and long-term investments 170,000 58,006 Purchases of held-to-maturity marketable debt securities and long-term investments (138,551) (225,007) Decrease in restricted cash 261 250 Net cash provided by (used in) investing activities 17,897 (134,314) Cash flows from financing activities: Sale of common stock in connection with employee stock purchase plan -- 2,310 Proceeds from exercise of stock options -- 11,386 Repayment of convertible subordinated note -- (10,000) Repayment of notes due to Zynetix Limited shareholders (335) -- Payment of tax withholding obligations related to net share settlement of restricted (300) -- stock award Principal payments of capital lease obligations (73) (23) Net cash provided by (used in) financing activities (708) 3,673 Effect of exchange rate changes on cash and cash equivalents (113) (40) Net increase (decrease) in cash and cash equivalents 17,411 (125,296) Cash and cash equivalents, beginning of period 44,206 155,679 Cash and cash equivalents, end of period $ 61,617 $ 30,383

For more information, please contact: Investor Relations: Media Relations: Jocelyn Philbrook Sarah McAuley 978-614-8672 978-614-8745 jphilbrook@sonusnet.com smcauley@sonusnet.com