Why Sonus Sank and Resurfaced

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Sonus Networks (Nasdaq: SONS  ) started the day in a funk, losing 10% before recovering through the day to net 3% positive gains by early afternoon. The morning's drop came after the company narrowly missed revenue expectations and issued forward revenue guidance well below the Street's expectations.

So what: Sonus' revenue came in at $57.6 million, just under analyst estimates of $58.2 million for the quarter. Adjusted earnings were in line with expectations, as Sonus posted the $0.03 EPS loss analysts had projected. The company now expects to generate between $51 million and $53 million in third-quarter revenue, well below the Street's consensus of $68.5 million on the top line. This whiff led Northland Securities to downgrade the company to "market perform" from an outperform call made late last year.

Now what: Sonus has had a difficult time regaining and sustaining profitability since the recession. The company's turnaround seems to be reaching an inflection point, a thesis the market appears to agree with based on its quick dismissal of this negative report. Analysts still expect a full-year loss, but with a mere $500 million market cap, Sonus could return to reasonable valuation sooner rather than later.

Want more news and updates? Add Sonus to your Watchlist now.

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more news and insights. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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