Imagine tailgating to the biggest concert of the year and the band decided not to show. Not only that, no one thought to tell you in advance. So you endured traffic for hours to sit with thousands of other fans on hard seats and stare at a dark stage before someone came out to announce that the big event was postponed indefinitely. The action would surely earn more than a few disgruntled fans.
Well, essentially the same thing happened on Wall Street yesterday. Next-generation telecom equipment supplier Sonus Networks
Analysts had estimated that Sonus would report quarterly revenues of $32 million, but recent reports from peers had many believing that the company could blow significantly past this target. The telecom sector has been seeing signs of life in Q4 of 2003, and the network equipment sector -- particularly, voice over Internet protocol (VOIP) -- has been hot.
Yesterday's faux pas further damaged the credibility of the VOIP equipment maker, which has already tested investor patience by significantly diluting the share base to raise much-needed cash. In April and Sept. 2003, the company sold a total of 37 million shares to net almost $183 million in cash, pushing outstanding shares to more than 244 million. The company has a heavy dependency for revenues from emerging service providers such as XO Communications (OTC BB: XOCM.OB) and newly revivedGlobal Crossing (Pink Sheets: GLBCF), giving skeptics plenty of ammunition to call the $2 billion company immensely overvalued.
While there's too much potential in the VOIP area to count Sonus Networks out, this latest move will be a hard pill for some investors to swallow.
Want your money back from Sonus? Care to give your thoughts on VOIP? Launch your own jam session with other Fools on the Sonus Networks discussion board. Only on Fool.com.
Dave Mock barely remembers tailgating a Jimmy Buffett concert. Dave is co-author of Tapping into Wireless and can be reached at firstname.lastname@example.org.