Filed Pursuant to Rule 424(b)(3)
Registration No. 333-66982
PROSPECTUS
221,753 SHARES
SONUS NETWORKS, INC.
COMMON STOCK
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Selling stockholders identified in this prospectus may sell up to 221,753
shares of common stock of Sonus Networks, Inc. Sonus will not receive any of the
proceeds from the sale of shares by the selling stockholders. Sonus' common
stock is listed on the Nasdaq National Market under the symbol "SONS". On
August 17, 2001 the last sale price of the common stock, as reported on the
Nasdaq National Market, was $16.33 per share. When used herein, the term
"selling stockholder" includes donees, transferees, pledgees and other
successors in interest.
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Investing in the common stock of Sonus involves a high degree of risk.
See "Risk Factors," beginning on page 3.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The selling stockholders may sell the shares of common stock described in
this prospectus in public or private transactions, on or off the National Market
System of the Nasdaq Stock Market, at prevailing market prices, or at privately
negotiated prices. The selling stockholders may sell shares directly to
purchasers or through brokers or dealers. Brokers or dealers may receive
compensation in the form of discounts, concessions or commissions from the
selling stockholders. More information is provided in the section titled "Plan
of Distribution."
The date of this Prospectus is August 20, 2001.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC under the Securities Act of 1933 a registration
statement on Form S-3. This prospectus does not contain all of the information
contained in the registration statement since portions have been omitted under
the rules of the SEC. We also file annual, quarterly and special reports, proxy
statements and other information with the SEC under the Exchange Act. The
Exchange Act file number for our SEC filings is 000-30229. You may read and copy
the registration statement and any other document we file at the following SEC
public reference rooms:
Judiciary Plaza 500 West Madison Street 7 World Trade Center
450 Fifth Street, N.W. 14th Floor Suite 1300
Rm. 1024 Chicago, Illinois 60661 New York, New York 10048
Washington, D.C. 20549
You may obtain information on the operation of the public reference room in
Washington, D.C. by calling the SEC at 1-800-SEC-0330. We file information
electronically with the SEC. Our SEC filings are available from the SEC's
Internet site at HTTP://WWW.SEC.GOV, which contains reports, proxy and
information statements and other information regarding issuers that file
electronically. You may read and copy our SEC filings and other information at
the offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.
CERTAIN INFORMATION WE ARE INCORPORATING BY REFERENCE
The SEC allows us to "incorporate by reference" the documents we file with
it, which means that we can disclose important information to you by referring
you to those documents instead of reproducing that information in this
prospectus. The information incorporated by reference is considered to be part
of this prospectus, and information in documents that we file later with the SEC
will automatically update and supersede information in this prospectus. We
incorporate by reference the following documents:
- Our Annual Report on Form 10-K for our fiscal year ended December 31,
2000, filed on March 28, 2001;
- Our Current Report on Form 8-K, dated February 2, 2001, filed with the SEC
on February 2, 2001;
- Our Current Report on Form 8-K, dated May 11, 2001, filed with the SEC on
June 21, 2001;
- Our Current Report on Form 8-K, dated July 31, 2001, filed with the SEC on
August 7, 2001;
- Our Quarterly Report on Form 10-Q for our fiscal quarter ended March 31,
2001, filed with the SEC on May 15, 2001;
- Our Quarterly Report on Form 10-Q for our fiscal quarter ended June 30,
2001, filed with the SEC on August 13, 2001; and
- The description of our common stock contained in Sonus' Registration
Statement filed with the SEC under Section 12(g) of the Securities
Exchange Act including any amendment or report filed for the purpose of
updating such description.
Upon request, Sonus will provide without charge to each person to whom a
copy of this prospectus has been delivered a copy of any information that was
incorporated by reference in the prospectus (other than exhibits to documents,
unless the exhibits are specifically incorporated by reference into the
prospectus). Sonus will also provide upon request, without charge to each person
to whom a copy of this prospectus has been delivered, a copy of all documents
filed from time to time by Sonus with the SEC pursuant to the Securities
Exchange Act of 1934. Requests for copies should be directed to
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Investor Relations, Sonus Networks, Inc., 5 Carlisle Road, Westford, MA 01886.
Telephone requests may be directed to (978) 692-8999.
In addition to the documents listed above, we also incorporate by reference
any future filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934, including any filings after the date of
initial filing and prior to the effectiveness of the registration statement of
which this propectus is a part, until we have sold all of the offered securities
to which this prospectus relates or the offering is otherwise terminated.
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RISK FACTORS
ANY INVESTMENT IN OUR SHARES OF COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE BUYING OUR COMMON
STOCK. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, THE TRADING PRICE OF OUR
COMMON STOCK COULD DECLINE AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.
RISKS RELATING TO OUR BUSINESS AND FINANCIAL PERFORMANCE
WE EXPECT THAT A MAJORITY OF OUR REVENUES WILL BE GENERATED FROM A LIMITED
NUMBER OF CUSTOMERS AND OUR REVENUES WILL NOT GROW IF WE DO NOT SUCCESSFULLY
SELL PRODUCTS TO THESE CUSTOMERS.
To date, we have shipped our products to a limited number of customers and
only during the first quarter of fiscal 2000 did we begin to recognize revenues.
We expect that in the foreseeable future, substantially all of our revenues will
depend on sales of our products to a limited number of customers. For example,
three customers each contributed more than 10% of our revenues for the three and
six months ended June 30, 2001. Some of the customers to whom we have shipped
products have deployed our products in their commercial networks, while others
are using our products in laboratory testing or internal trials. Our customers
may not, or may not continue to, deploy our products in their commercial
networks on a timely basis, or at all, and any delay or failure by our customers
to introduce commercial services based on our products, or a downturn in their
business, would seriously harm our ability to sell products and generate
revenues.
WE WILL NOT BE SUCCESSFUL IF WE DO NOT GROW OUR CUSTOMER BASE.
Our future success will depend on our ability to attract additional
customers beyond our current limited number. The growth of our customer base
could be adversely affected by:
- customer unwillingness to implement our new voice infrastructure products;
- any delays or difficulties that we may incur in completing the development
and introduction of our planned products or product enhancements;
- our customers' inability to raise capital to finance their business plans;
- new product introductions by our competitors;
- any failure of our products to perform as expected; or
- any difficulty we may incur in meeting customers' delivery requirements.
If we do not expand our customer base to include additional customers that
deploy our products in operational commercial networks, our revenues will not
grow significantly, or at all.
THE MARKET FOR VOICE INFRASTRUCTURE PRODUCTS FOR THE NEW PUBLIC NETWORK IS
NEW AND EVOLVING AND OUR BUSINESS WILL SUFFER IF IT DOES NOT DEVELOP AS WE
EXPECT.
The market for our products is rapidly evolving. Packet-based technology may
not be widely accepted as a platform for voice and a viable market for our
products may not develop or be sustainable. If this market does not develop, or
develops more slowly than we expect, we may not be able to sell our products in
significant volumes, or at all.
WE ARE ENTIRELY DEPENDENT UPON OUR VOICE INFRASTRUCTURE PRODUCTS AND OUR
FUTURE REVENUES DEPEND UPON THEIR COMMERCIAL SUCCESS.
Our future growth depends upon the commercial success of our voice
infrastructure products. We intend to develop and introduce new products and
enhancements to existing products in the future. We may not successfully
complete the development or introduction of these products. If our target
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customers do not adopt, purchase and successfully deploy our current or planned
products, our revenues will not grow.
BECAUSE OUR PRODUCTS ARE SOPHISTICATED AND DESIGNED TO BE DEPLOYED IN
COMPLEX ENVIRONMENTS, THEY MAY HAVE ERRORS OR DEFECTS THAT WE FIND ONLY
AFTER FULL DEPLOYMENT, WHICH COULD SERIOUSLY HARM OUR BUSINESS.
Our products are sophisticated and are designed to be deployed in large and
complex networks. Because of the nature of our products, they can only be fully
tested when substantially deployed in very large networks with high volumes of
traffic. Some of our customers have only recently begun to commercially deploy
our products and they may discover errors or defects in the software or
hardware, or the products may not operate as expected.
If we are unable to fix errors or other performance problems that may be
identified after full deployment of our products, we could experience:
- loss of, or delay in, revenues;
- loss of customers and market share;
- a failure to attract new customers or achieve market acceptance for our
products;
- increased service, support and warranty costs and a diversion of
development resources; and
- costly and time-consuming legal actions by our customers.
IF WE DO NOT RESPOND RAPIDLY TO TECHNOLOGICAL CHANGES OR TO CHANGES IN
INDUSTRY STANDARDS, OUR PRODUCTS COULD BECOME OBSOLETE.
The market for voice infrastructure products for the new public network is
likely to be characterized by rapid technological change and frequent new
product introductions. We may be unable to respond quickly or effectively to
these developments. We may experience difficulties with software development,
hardware design, manufacturing or marketing that could delay or prevent our
development, introduction or marketing of new products and enhancements. The
introduction of new products by our competitors, the market acceptance of
products based on new or alternative technologies or the emergence of new
industry standards could render our existing or future products obsolete. If the
standards adopted are different from those that we have chosen to support,
market acceptance of our products may be significantly reduced or delayed. If
our products become technologically obsolete, we may be unable to sell our
products in the marketplace and generate revenues.
WE DEPEND UPON CONTRACT MANUFACTURERS AND ANY DISRUPTION IN THESE
RELATIONSHIPS MAY CAUSE US TO FAIL TO MEET THE DEMANDS OF OUR CUSTOMERS AND
DAMAGE OUR CUSTOMER RELATIONSHIPS.
We rely on a small number of contract manufacturers to manufacture our
products according to our specifications and to fill orders on a timely basis.
Our contract manufacturers provide comprehensive manufacturing services,
including assembly of our products and procurement of materials. Each of our
contract manufacturers also builds products for other companies and may not
always have sufficient quantities of inventory available to fill our orders or
may not allocate their internal resources to fill these orders on a timely
basis. We do not have long-term supply contracts with our manufacturers and they
are not required to manufacture products for any specified period. We do not
have internal manufacturing capabilities to meet our customers' demands.
Qualifying a new contract manufacturer and commencing commercial-scale
production is expensive and time consuming and could result in a significant
interruption in the supply of our products. If a change in contract
manufacturers results in delays in our fulfillment of customer orders or if a
contract manufacturer fails
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to make timely delivery of orders, we may lose revenues and suffer damage to our
customer relationships.
WE HAVE BEEN IN BUSINESS FOR A SHORT PERIOD OF TIME AND YOUR BASIS FOR
EVALUATING US IS LIMITED.
We were founded in August 1997, and only during the first quarter of fiscal
2000 did we begin to recognize any revenues. We have a limited meaningful
operating history upon which you may evaluate us and our prospects. Moreover, we
cannot be sure that we have accurately identified all of the risks to our
business. Also, our assessment of the prospects for our success may prove
inaccurate.
THE UNPREDICTABILITY OF OUR QUARTERLY RESULTS MAY ADVERSELY AFFECT THE
TRADING PRICE OF OUR COMMON STOCK.
Our revenues and operating results will vary significantly from quarter to
quarter due to a number of factors, many of which are outside of our control and
any of which may cause our stock price to fluctuate. Generally, purchases by
service providers of telecommunications equipment from manufacturers have been
unpredictable and clustered, rather than steady, as the providers build out
their networks. The primary factors that may affect our revenues and results
include the following:
- fluctuation in demand for our voice infrastructure products and the timing
and size of customer orders;
- the length and variability of the sales cycle for our products and the
corresponding timing of recognizing or deferring revenues;
- new product introductions and enhancements by our competitors and us;
- changes in our pricing policies, the pricing policies of our competitors
and the prices of the components of our products;
- our ability to develop, introduce and ship new products and product
enhancements that meet customer requirements in a timely manner;
- the mix of product configurations sold;
- our ability to obtain sufficient supplies of sole or limited source
components;
- our ability to attain and maintain production volumes and quality levels
for our products;
- costs related to acquisitions of complementary products, technologies or
businesses; and
- general economic conditions, as well as those specific to the
telecommunications, networking and related industries and other factors.
As with other telecommunications product suppliers, we may recognize a
substantial portion of our revenue in a given quarter from sales booked and
shipped in the last weeks of that quarter. As a result, a delay in customer
orders is likely to result in a delay in shipments and recognition of revenue
beyond the end of a given quarter, which would have a significant impact on our
operating results for that quarter.
Our operating expenses are largely based on anticipated organizational
growth and revenue trends. As a result, a delay in generating or recognizing
revenues for the reasons set forth above, or for any other reason, could cause
significant variations in our operating results. We believe that
quarter-to-quarter comparisons of our operating results are not a good
indication of our future performance. It is likely that in some future quarters,
our operating results may be below the expectations of public market analysts
and investors. In this event, the price of our common stock will probably
substantially decrease.
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WE MAY NOT BECOME PROFITABLE.
We have incurred significant losses since inception and expect to continue
to incur losses in the future. As of June 30, 2001, we had an accumulated
deficit of $217.8 million and had only recognized cumulative revenues since
inception of $145.9 million through June 30, 2001. We have not achieved
profitability on a quarterly or annual basis. As a result of our acquisition of
telecom technologies, inc., or TTI, we expect to incur significant additional
expenses for stock-based compensation and amortization of goodwill and purchased
intangibles, which will make achieving profitability more difficult in the near
to mid-term.
Our revenues may not grow and we may never generate sufficient revenues to
achieve or sustain profitability. We expect to continue to incur significant and
increasing sales and marketing, product development, administrative and other
expenses. As a result, we will need to generate significant revenues to achieve
and maintain profitability.
WE WILL NOT RETAIN CUSTOMERS OR ATTRACT NEW CUSTOMERS IF WE DO NOT
ANTICIPATE AND MEET SPECIFIC CUSTOMER REQUIREMENTS OR IF OUR PRODUCTS DO NOT
INTEROPERATE WITH OUR CUSTOMERS' EXISTING NETWORKS.
To achieve market acceptance for our products, we must effectively
anticipate, and adapt in a timely manner to, customer requirements and offer
products and services that meet changing customer demands. Prospective customers
may require product features and capabilities that our current products do not
have. The introduction of new or enhanced products also requires that we
carefully manage the transition from older products in order to minimize
disruption in customer ordering patterns and ensure that adequate supplies of
new products can be delivered to meet anticipated customer demand. If we fail to
develop products and offer services that satisfy customer requirements, or to
effectively manage the transition from older products, our ability to create or
increase demand for our products would be seriously harmed and we may lose
current and prospective customers.
Many of our customers will require that our products be designed to
interface with their existing networks, each of which may have different
specifications. Issues caused by an unanticipated lack of interoperability may
result in significant warranty, support and repair costs, divert the attention
of our engineering personnel from our hardware and software development efforts
and cause significant customer relations problems. If our products do not
interoperate with those of our customers' networks, installations could be
delayed or orders for our products could be cancelled, which would seriously
harm our gross margins and result in loss of revenues or customers.
IF WE FAIL TO COMPETE SUCCESSFULLY, OUR ABILITY TO INCREASE OUR REVENUES OR
ACHIEVE PROFITABILITY WILL BE IMPAIRED.
Competition in the telecommunications market is intense. This market has
historically been dominated by large companies, such as Lucent Technologies and
Nortel Networks, both of whom are our direct competitors. We also face
competition from other large telecommunications and networking companies,
including Cisco Systems, that have entered our market by acquiring companies
that design competing products. In addition, a number of smaller and mostly
private companies, including Convergent Networks, Unisphere Networks and others,
have announced plans for new products that address similar market opportunities
that we address. Because this market is rapidly evolving, additional competitors
with significant financial resources may enter these markets and further
intensify competition.
Many of our current and potential competitors have significantly greater
selling and marketing, technical, manufacturing, financial and other resources,
including the ability to offer vendor-sponsored financing programs. If we are
unable or unwilling to offer vendor-sponsored financing, prospective customers
may decide to purchase products from one of our competitors who offers this type
of financing. Furthermore, some of our competitors are currently selling
significant amounts of other
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products to our current and prospective customers. Our competitors' broad
product portfolios coupled with already existing relationships may cause our
customers to buy our competitors' products or harm our ability to attract new
customers.
To compete effectively, we must deliver innovative products that:
- provide extremely high reliability and voice quality;
- scale easily and efficiently;
- interoperate with existing network designs and other vendors' equipment;
- provide effective network management;
- are accompanied by comprehensive customer support and professional
services; and
- provide a cost-effective and space-efficient solution for service
providers.
If we are unable to compete successfully against our current and future
competitors, we could experience price reductions, order cancellations, loss of
revenues and reduced gross margins.
WE AND OUR CONTRACT MANUFACTURERS RELY ON SINGLE OR LIMITED SOURCES FOR
SUPPLY OF SOME COMPONENTS OF OUR PRODUCTS AND IF WE FAIL TO ADEQUATELY
PREDICT OUR MANUFACTURING REQUIREMENTS OR IF OUR SUPPLY OF ANY OF THESE
COMPONENTS IS DISRUPTED, WE WILL BE UNABLE TO SHIP OUR PRODUCTS.
We and our contract manufacturers currently purchase several key components
of our products, including commercial digital signal processors, from single or
limited sources. We purchase these components on a purchase order basis. If we
overestimate our component requirements, we could have excess inventory, which
would increase our costs. If we underestimate our requirements, we may not have
adequate supply, which could interrupt manufacturing of our products and result
in delays in shipments and revenues.
We currently do not have long-term supply contracts with our component
suppliers and they are not required to supply us with products for any specified
periods, in any specified quantities or at any set price, except as may be
specified in a particular purchase order. In the event of a disruption or delay
in supply, or inability to obtain products, we may not be able to develop an
alternate source in a timely manner or at favorable prices, or at all. A failure
to find acceptable alternative sources could hurt our ability to deliver
high-quality products to our customers and negatively affect our operating
margins. In addition, our reliance on our suppliers exposes us to potential
supplier production difficulties or quality variations. Our customers rely upon
our ability to meet committed delivery dates, and any disruption in the supply
of key components would seriously impact our ability to meet these dates and
could result in legal action by our customers, loss of customers or harm to our
ability to attract new customers.
IF WE ARE NOT ABLE TO OBTAIN NECESSARY LICENSES OF THIRD-PARTY TECHNOLOGY AT
ACCEPTABLE PRICES, OR AT ALL, OUR PRODUCTS COULD BECOME OBSOLETE.
We have incorporated third-party licensed technology into our current
products. From time to time, we may be required to license additional technology
from third parties to develop new products or product enhancements. Third-party
licenses may not be available or continue to be available to us on commercially
reasonable terms. The inability to maintain or re-license any third-party
licenses required in our current products or to obtain any new third-party
licenses to develop new products and product enhancements could require us to
obtain substitute technology of lower quality or performance standards or at
greater cost, and delay or prevent us from making these products or
enhancements, any of which could seriously harm the competitiveness of our
products.
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OUR FAILURE TO MANAGE OUR EXPANSION EFFECTIVELY IN A RAPIDLY CHANGING MARKET
COULD INCREASE OUR COSTS, HARM OUR ABILITY TO SELL FUTURE PRODUCTS AND
IMPAIR OUR FUTURE GROWTH.
We have expanded our operations rapidly and have hired a significant number
of employees during 2001. Our growth has placed, and our anticipated growth will
continue to place, a significant strain on our management systems and resources.
Our ability to successfully offer our products and implement our business plan
in a rapidly evolving market requires effective planning and management
processes. We expect that we will need to continue to improve our financial,
managerial and manufacturing controls and reporting systems, and will need to
continue to expand, train and manage our work force worldwide. If we fail to
implement adequate control systems in an efficient and timely manner, our costs
may be increased and our growth could be impaired and we may not be able to
accurately anticipate and fulfill market demand, the result of which will be a
loss of revenues and customers.
IF WE FAIL TO HIRE AND RETAIN NEEDED PERSONNEL, THE IMPLEMENTATION OF OUR
BUSINESS PLAN COULD SLOW OR OUR FUTURE GROWTH COULD HALT.
Competition for highly skilled engineering, sales, marketing and support
personnel is intense because there are a limited number of people available with
the necessary technical skills and understanding of our market. Any failure to
attract, assimilate or retain qualified personnel to fulfill our current or
future needs could impair our growth. The support of our products requires
highly trained customer support and professional services personnel. Once we
hire them, they may require extensive training in our voice infrastructure
products. If we are unable to hire, train and retain our customer support and
professional services personnel, we may not be able to increase sales of our
products. Our future success depends upon the continued services of our
executive officers who have critical industry experience and relationships that
we rely on to implement our business plan. Most of our officers or key employees
are not bound by an employment agreement for any specific term. The loss of the
services of any of our officers or key employees could delay the development and
introduction of, and negatively impact our ability to sell, our products.
OUR ABILITY TO COMPETE AND OUR BUSINESS COULD BE JEOPARDIZED IF WE ARE
UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY OR BECOME SUBJECT TO
INTELLECTUAL PROPERTY RIGHTS LITIGATION, WHICH COULD REQUIRE US TO INCUR
SIGNIFICANT COSTS.
We rely on a combination of patent, copyright, trademark and trade secret
laws and restrictions on disclosure to protect our intellectual property rights.
Despite our efforts to protect our proprietary rights, unauthorized parties may
attempt to copy or otherwise obtain and use our products or technology.
Monitoring unauthorized use of our products is difficult and we cannot be
certain that the steps we have taken will prevent unauthorized use of our
technology, particularly in foreign countries where the laws may not protect our
proprietary rights as fully as in the United States. If competitors are able to
use our technology, our ability to compete effectively could be harmed.
In addition, we may also become involved in litigation as a result of
allegations that we infringe the intellectual property rights of others. Any
parties asserting that our products infringe upon their proprietary rights would
force us to defend ourselves and possibly our customers or contract
manufacturers against the alleged infringement. These claims and any resulting
lawsuit, if successful, could subject us to significant liability for damages
and invalidation of our proprietary rights. Any potential intellectual property
litigation also could force us to do one or more of the following:
- stop selling, incorporating or using our products that use the challenged
intellectual property;
- obtain from the owner of the infringed intellectual property right, a
license to sell or use the relevant technology, which license may not be
available on reasonable terms, or at all; or
- redesign those products that use any allegedly infringing technology.
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Any lawsuits regarding intellectual property rights, regardless of their
success, would be time-consuming, expensive to resolve and would divert our
management's time and attention.
ANY INVESTMENTS OR ACQUISITIONS WE MAKE COULD DISRUPT OUR BUSINESS AND
SERIOUSLY HARM OUR FINANCIAL CONDITION.
Although we have no current agreements to do so, we intend to consider
investing in, or acquiring, complementary products, technologies or businesses.
In the event of future investments or acquisitions, we could, and in connection
with our recent acquisition of TTI, we did:
- issue stock that would dilute our current stockholders' percentage
ownership;
- incur debt or assume liabilities;
- incur significant amortization expenses related to goodwill and other
intangible assets; or
- incur large and immediate write-offs for in-process research and
development and stock-based compensation.
Our integration of any acquired products, technologies or businesses,
including those associated with our acquisition of TTI, will also involve
numerous risks, including:
- problems and unanticipated costs associated with combining the purchased
products, technologies or businesses;
- diversion of management's attention from our core business;
- adverse effects on existing business relationships with suppliers and
customers;
- risks associated with entering markets in which we have limited or no
prior experience; and
- potential loss of key employees, particularly those of the acquired
organizations.
We may be unable to successfully integrate any products, technologies,
businesses or personnel that we might acquire in the future, including those
associated with our acquisition of TTI, without significant costs or disruption
to our business.
WE MAY FACE RISKS ASSOCIATED WITH OUR INTERNATIONAL EXPANSION THAT COULD
IMPAIR OUR ABILITY TO GROW OUR REVENUES ABROAD.
Our expansion into international markets will require significant management
attention and financial resources to successfully develop direct and indirect
international sales and support channels. In addition, we may not be able to
develop international market demand for our products, which could impair our
ability to grow our revenues.
We have limited experience marketing and distributing our products
internationally and, to do so, we expect that we will need to develop versions
of our products that comply with local standards. Furthermore, international
operations are subject to other inherent risks, including:
- greater difficulty collecting accounts receivable and longer collection
periods;
- difficulties and costs of staffing and managing international operations;
- the impact of differing technical standards outside the United States;
- the impact of recessions in economies outside the United States;
- unexpected changes in regulatory requirements and currency exchange rates;
- certification requirements;
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- reduced protection for intellectual property rights in some countries; and
- potentially adverse tax consequences.
IF WE ARE SUBJECT TO UNFAIR HIRING CLAIMS, WE COULD INCUR SUBSTANTIAL COSTS
IN DEFENDING OURSELVES.
Companies in our industry whose employees accept positions with competitors
frequently claim that their competitors have engaged in unfair hiring practices.
We may be subject to claims of this kind in the future as we seek to hire
qualified personnel. Those claims may result in material litigation. We could
incur substantial costs defending ourselves or our employees against those
claims, regardless of their merits. In addition, defending ourselves from those
types of claims could divert our management's attention from our operations. If
we are found to have engaged in unfair hiring practices, or our employees are
found to have violated agreements with previous employers, we may suffer a
significant disruption in our operations.
WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE, WHICH MAY NOT BE AVAILABLE TO
US, AND IF IT IS AVAILABLE, MAY DILUTE OWNERS OF OUR COMMON STOCK.
We may need to raise additional funds through public or private debt or
equity financings in order to:
- fund ongoing operations;
- take advantage of opportunities, including more rapid expansion or
acquisition of complementary products, technologies or businesses;
- develop new products; or
- respond to competitive pressures.
Any additional capital raised through the sale of equity may dilute an
investor's percentage ownership of our common stock. Furthermore, additional
financings may not be available on terms favorable to us, or at all. A failure
to obtain additional funding could prevent us from making expenditures that may
be required to grow or maintain our operations.
RISKS RELATING TO THIS OFFERING
OUR STOCK PRICE MAY BE VOLATILE.
The market for technology stocks has been and will likely continue to be
extremely volatile. The following factors could cause the market price of our
common stock to fluctuate significantly:
- loss of any of our major customers;
- changes in the financial condition of any of our major customers;
- the addition or departure of key personnel;
- variations in our quarterly operating results;
- announcements by us or our competitors of significant contracts, new
products or product enhancements, acquisitions, distribution partnerships,
joint ventures or capital commitments;
- changes in financial estimates by securities analysts;
- sales of common stock or other securities by us or by our stockholders in
the future;
- release and sale of shares of common stock currently held in escrow;
- any acquisitions, distribution partnerships, joint ventures or capital
commitments;
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- the impact of recessions in economies outside the United States; and
- unexpected changes in regulatory requirements and currency exchange rates.
SALES OF A SUBSTANTIAL AMOUNT OF OUR COMMON STOCK IN THE FUTURE COULD CAUSE
OUR STOCK PRICE TO FALL.
Some stockholders who acquired shares prior to our initial public offering
or in connection with our acquisition of TTI may hold a substantial number of
shares of our common stock that have not yet been sold in the public market.
Further, additional shares may become available for sale upon the conversion or
redemption of outstanding convertible subordinated notes. Sales of a substantial
number of shares of our common stock within a short period of time in the future
could cause our stock price to fall. In addition, the sale of these shares could
impair our ability to raise capital through the sale of additional debt or
stock.
INSIDERS HAVE SUBSTANTIAL CONTROL OVER US AND COULD LIMIT YOUR ABILITY TO
INFLUENCE THE OUTCOME OF KEY TRANSACTIONS, INCLUDING A CHANGE OF CONTROL.
As of April 30, 2001, our executive officers, directors and entities
affiliated with them beneficially owned, in the aggregate, approximately 19.5%
of our outstanding common stock. These stockholders, if acting together, would
be able to influence significantly all matters requiring approval by our
stockholders, including the election of directors and the approval of mergers or
other business combination transactions.
PROVISIONS OF OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY HAVE ANTI-TAKEOVER
EFFECTS THAT COULD PREVENT A CHANGE OF CONTROL.
Provisions of our amended and restated certificate of incorporation, amended
and restated by-laws and Delaware law could make it more difficult for a third
party to acquire us, even if doing so would be beneficial to our stockholders.
12
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus constitute
forward-looking statements that involve substantial risks and uncertainties. In
some cases, you can identify these statements by forward-looking words such as
"may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate"
or "continue" and variations of these words or comparable words. In addition,
any statements which refer to expectations, projections or other
characterizations of future events or circumstances are forward-looking
statements. These forward-looking statements involve known and unknown risks,
uncertainties and situations that may cause our or our industry's actual
results, level of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these statements. The risk factors
contained in this prospectus, as well as any other cautionary language in this
prospectus, provide examples of risks, uncertainties and events that may cause
our actual results to differ from the expectations described or implied in our
forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. You should not place undue reliance on
these forward-looking statements, which apply only as of the date of this
prospectus. Except as required by law, we do not undertake to update or revise
any forward-looking statement, whether as a result of new information, future
events or otherwise.
13
ABOUT SONUS NETWORKS
We are a leading provider of voice infrastructure products for the new
public network. Our products are a new generation of carrier-class switching
equipment and software that enable voice services to be delivered over
packet-based networks. Our target customers include new and established
communications service providers, including long distance carriers, local
exchange carriers, Internet service providers, cable operators, international
telephone companies and carriers that provide services to other carriers. These
service providers are rapidly building packet-based networks to support the
dramatic growth in data traffic resulting from Internet use. Packet-based
networks, which transport traffic in small bundles, or "packets," offer a
significantly more flexible, cost-effective and efficient means for providing
communications services than existing circuit-based networks, designed years ago
for telephone calls. By enabling voice traffic to be carried over these
packet-based networks, our products will accelerate the convergence of voice and
data into the new public network.
Our suite of voice infrastructure products includes the GSX9000 Open
Services Switch, PSX6000 SoftSwitch, INtelligentIP softswitch, SGX2000 SS7
Signaling Gateway and System 9200 Internet offload solution. Our products,
designed for deployment at the core of a service provider's network,
significantly reduce the cost to build and operate voice services compared to
traditional alternatives. Moreover, our products offer a powerful and open
platform for service providers to increase their revenues through the creation
and delivery of new and innovative voice and data services. Our switching
equipment and software can be rapidly and easily deployed, and readily expanded
to accommodate growth in traffic volumes. Our products also interoperate with
service providers' existing telephone infrastructure, allowing them to preserve
the investment in their current networks. Designed for the largest telephone
networks in the world, our products offer the reliability and voice quality that
have been hallmarks of the public telephone network for decades.
A recognized leader in carrier-class packet voice infrastructure products,
Sonus' announced customers include some of the world's leading service
providers: BellSouth, Global Crossing, Intermedia Communications, Qwest
Communications, Time Warner Telecom, Williams Communications and XO
Communications. We sell our products principally through a direct sales force
and, in some markets, through distributors and resellers. We also collaborate
with our customers to identify and develop new advanced services and
applications that they can offer to their customers.
Our objective is to capitalize on our early technology and market lead and
build the premier franchise in voice infrastructure solutions for the new public
network. The following are key elements of our strategy:
- Leverage our technology leadership to achieve key service provider design
wins;
- Expand and broaden our customer base by targeting specific market
segments;
- Expand our global sales, marketing, support and distribution capabilities;
- Grow our base of software applications and development partners;
- Leverage our technology platform from the core of the network out to the
access edge;
- Actively contribute to the standards definition and adoption process; and
- Expand through investments in and acquisitions of complementary products,
technologies and businesses.
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USE OF PROCEEDS
Sonus will not receive any proceeds from the sale of the shares of common
stock offered pursuant to this registration statement by the selling
stockholders.
SELLING STOCKHOLDERS
In a transaction exempt from the registration provisions of the Securities
Act of 1933, the selling stockholders covered by this prospectus have received
shares of Sonus common stock in connection with the purchase by Sonus of certain
intellectual property and other assets of Linguateq Incorporated, a provider of
data distribution and billing application software for both next generation and
legacy networks. Pursuant to a Proceeds Agreement, dated as of July 31, 2001,
Sonus agreed to issue to the selling stockholders that number of shares of Sonus
common stock set forth below next to the name of each such selling stockholder.
The registration statement of which this prospectus is a part was filed in
connection with Sonus' obligations under a Registration Rights Agreement, dated
as of July 31, 2001, between Sonus and the selling stockholders.
The table set forth below includes certain information regarding the
beneficial ownership of our common stock by each of the selling stockholders as
of August 1, 2001. The information provided in the table below assumes that each
selling stockholder will sell all of such stockholder's Sonus common stock. Our
registration of the shares of common stock covered by this prospectus does not
necessarily mean that the selling stockholders will sell all or any of the
shares. None of the selling stockholders has, or within the past three years has
had, any position or other material relationship with Sonus or any of its
predecessors or affiliates. Because the selling stockholders may sell all or
some portion of the shares of common stock beneficially owned by them, only an
estimate (assuming each selling stockholder sells all of their shares offered
hereby) can be given as to the number of shares of common stock that will be
beneficially owned by the selling stockholders after this offering. In addition,
the selling stockholders may have sold, transferred or otherwise disposed of, or
may sell, transfer or otherwise dispose of, at any time or from time to time
since the date on which they last provided to Sonus any information regarding
the shares of common stock beneficially owned by them, all or a portion of the
shares of common stock beneficially owned by them in transactions exempt from
the registration requirements of the Securities Act of 1933.
NUMBER OF NUMBER OF
SHARES SHARES
BENEFICIALLY NUMBER BENEFICIALLY
OWNED OF SHARES OWNED
NAME OF BENEFICIAL OWNER PRIOR TO OFFERING BEING OFFERED AFTER OFFERING PERCENT
- ------------------------ ----------------- ------------- -------------- --------
Imperial Bank............................. 79,077 79,077 0 *
Linguateq Incorporated.................... 69,415 69,415 0 *
Imperial Creditcorp....................... 42,445 42,445 0 *
Comdisco, Inc............................. 30,816 30,816 0 *
- ------------------------
* Less than 1% of the 203,738,049 shares of Sonus common stock outstanding on
August 1, 2001.
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PLAN OF DISTRIBUTION
The shares of common stock may be sold from time to time by the selling
stockholders or their donees, pledgees, transferees and other successors in
interest in one or more transactions at fixed prices, at market prices at the
time of sale, at varying prices determined at the time of sale or at negotiated
prices. When used herein, the term "selling stockholders" refers to all of their
donees, pledgees, transferees and other successors in interest. The shares of
common stock may be sold in one or more of the following transactions:
- on any national securities exchange or quotation service on which the
common stock may be listed or quoted at the time of sale, including the
Nasdaq National Stock Market;
- in the over-the-counter market;
- in private transactions, block sales, short sales or other similar types
of transactions;
- through options; or
- a combination of any of the above transactions.
The shares of common stock described in this prospectus may be sold from
time to time directly by the selling stockholders. Alternatively, the selling
stockholders may from time to time offer shares of common stock to or through
broker/dealers or agents. The selling stockholders and any broker/dealers or
agents that participate in the distribution of the shares of common stock may be
deemed to be "underwriters" within the meaning of the Securities Act of 1933.
Any profits on the resale of shares of common stock and any compensation
received by any broker/dealer or agent may be deemed to be underwriting
discounts and commissions under the Securities Act of 1933.
Any shares covered by this prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act of 1933 may be sold under Rule 144 rather than
pursuant to this prospectus. The selling stockholders may decide not to sell all
of their shares. The selling stockholders may transfer, devise or gift such
shares by other means not described in this prospectus.
To comply with the securities laws of certain jurisdictions, if applicable,
the common stock must be offered or sold only through registered or licensed
brokers or dealers. In addition, in certain jurisdictions, the common stock may
not be offered or sold unless registered or qualified for sale or an exemption
is available and complied with.
Under applicable rules and regulations under the Securities Exchange Act of
1934, any person engaged in a distribution of the common stock offered hereby
may not simultaneously engage in market-making activities with respect to our
common stock for a specified period prior to the start of the distribution. In
addition, each selling stockholder and any other person participating in a
distribution will be subject to the Securities Exchange Act and the rules and
regulations promulgated under the Exchange Act, including Regulation M, which
may limit the timing of purchases and sales of common stock by the selling
stockholders or any such other person. These factors may affect the
marketability of the common stock and the ability of brokers or dealers to
engage in market-making activities.
All expenses of this registration will be paid by Sonus. These expenses
include the SEC's filing fees and fees under state securities or "blue sky"
laws. The selling stockholders will pay all selling commissions, if any.
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LEGAL MATTERS
Bingham Dana LLP, Boston, Massachusetts has given its opinion that the
shares offered in this prospectus have been duly authorized, validly issued,
fully paid and non-assessable. As of July 31, 2001, attorneys at Bingham Dana
LLP owned, in the aggregate 78,900 shares of Sonus' common stock.
EXPERTS
The consolidated financial statements of Sonus Networks, Inc. as of
December 31, 1999 and 2000, and for the years ended December 31, 1998, 1999 and
2000, incorporated by reference in this prospectus from Sonus' Annual Report on
Form 10-K for the year ended December 31, 2000, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and are incorporated in reliance upon the authority of said
firm as experts in giving said report.
The consolidated financial statements of telecom technologies, inc. as of
December 31, 1999 and 2000, and for the years ended December 31, 1998, 1999 and
2000, incorporated by reference in this prospectus from Sonus' Current Report on
Form 8-K filed on June 21, 2001, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated in reliance upon the authority of said firm as
experts in giving said report.
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR
ANY PROSPECTUS SUPPLEMENT. YOU MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION.
NEITHER THIS PROSPECTUS NOR ANY PROSPECTUS SUPPLEMENT IS AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THESE SECURITIES IN ANY JURISDICTION
WHERE AN OFFER OR SOLICITATION IS NOT PERMITTED. NO SALE MADE PURSUANT TO THIS
PROSPECTUS SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE AFFAIRS OF SONUS SINCE THE DATE OF THIS PROSPECTUS.
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