Veraz Networks, Inc. Q2 2010 Earnings Call Transcript

Veraz Networks, Inc. Q2 2010 Earnings Call Transcript
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Veraz Networks, Inc. (VRAZ)

Q2 2010 Earnings Call Transcript

August 12, 2010 4:30 pm ET

Executives

Ron Vidal – IR, MBS Value Partners

Doug Sabella – CEO

Al Wood – CFO

Analysts

John Jung [ph] – Charlehead [ph]

Presentation

Operator

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Good afternoon and welcome to Veraz Networks Incorporated second quarter 2010 financial results conference call. All participants will be in listen-only mode. (Operator instructions) After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. At this time, I would now like to turn the conference call over to Mr. Ron Vidal. Please go ahead.

Ron Vidal

Thank you, operator. With me today on today's call are Doug Sabella, Veraz's President and Chief Executive Officer, and Al Wood, Veraz's Chief Financial Officer.

At approximately 4:10 PM Eastern Time, Veraz issued a press release with the results of its second quarter ended June 30, 2010 on Business Wire. The text of this release is available on our website at www.veraznetworks.com.

We would like to remind you that during the course of this conference call, Veraz management may make forward-looking statements, including financial projections; statements as to the plans and objectives of management for future operations and strategic opportunities; and statements as to the company's future economic performance, financial condition or results of operations. These forward-looking statements are not historical facts, but rather are based on Veraz's current expectations and beliefs and are based on information currently available to us.

Words such as may, will, expect, intends, plans, believes, targets and estimates and variations of these words are intended to identify forward-looking statements. By discussing our current perception of the market and making these forward-looking statements, we are not undertaking obligation to provide updates in the future. Veraz's actual results may differ materially from those projected in these forward-looking statements and no one should assume at a later date that these comments from today are still valid.

Please refer to Veraz's recent SEC filings for a more detailed description and discussion of these and other risk factors. Any future product, feature or related specification that may be referenced in today’s call are for informational purposes only and are not commitments to deliver any technology or enhancement. And Veraz reserves the right to modify future product plans at any time.

I would now like to turn the call over to Veraz's President and CEO, Doug Sabella.

Doug Sabella

Thanks, Ron. And thank you for joining us on our second quarter earnings call. With me today on the call is our CFO, Al Wood. I'll begin the call by providing an overview of our business and update on our pending merger with Dialogic, and then I’ll turn the call over to Al for a detailed description of our financial results.

We began to see significant traction in Q2 with our SBC product and significant customer interest in our soon to be released mobile backhaul solution. While we are encouraged by the market response to these new products, we saw lower than anticipated revenues for Q2, largely driven by restrictions in shipping already accepted orders in India, an issue that is being experienced by many of the technology companies selling into the Indian carriers.

We have traditionally recognized approximately $2 million of revenue from India each quarter. Yet for the second quarter in a row, we were unable to close the majority of our deals. We have recently received customer clearance for shipping product into India, but it is unclear if this is a temporary opening or something more sustainable.

In addition to India, we received approximately $600,000 of orders from Africa that we were unable to shift and approximately $1 million of orders from Brazil slipped into Q3. However, our order backlog remains at near all-time highs and we are confident that our announced plans to merge with Dialogic will give us the size and the scale needed to remain a true mission critical supplier to our customers.

In light of our revenue shortfall, we have taken action in the third quarter to streamline the business. Naturally, all of our actions have taken with careful thought toward the impact on the pending merger with Dialogic, anticipating that we enter the merger as a profitable company. While we continue to support the hybrid switching and gateway business with our fully featured products, our new investment focus is now exclusively targeting the IP switching, SBC and mobile backhaul businesses.

In the SBC arena, we have won five customers to date for both interconnect and access applications, have completed or are in trial with five additional customers, and expect to at least double our customer count at the end of 2010. We expect significant revenue growth in 2011 with important deployments occurring in all our major markets, with particular success expected in India, Brazil and Russia.

In a recent win, we beat out a large competitor who offered a lower price solution that also offered less value. We believe that our competitive advantages include performance, capacity and scalability in a cost-effective form factor, with five 9s reliability. These advantages coupled with ease of management and service reach provide us with a compelling value proposition for customers.

In the mobile backhaul market, there are many solutions for operators trying to accommodate their ever-expanding data requirements. However, most solutions are focused on fiber availability, which in most of the world and especially in the fastest growing markets is limited. We are thus focused on enabling service providers to use and optimize their existing infrastructure and thus enable data growth.

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