Getting Darker at Sonus

The gutwrenching plunge in Sonus Networks ( SONS) continued Monday after the company said it is considering expanding an ongoing accounting review further back in time.

The Massachusetts voice-over-Internet-protocol company also said the filing of its annual report for 2003 will be further delayed and that it expects the Nasdaq to begin delisting proceedings against it. The news sent the shares down 76 cents, or 17%, from their 4 p.m. Friday close to $3.80.

Sonus, which has already twice delayed filing its 2003 financials with the SEC, said Monday that while it has "made substantial progress towards the completion of its review of 2003 and 2002 financial results, is now considering whether to expand the review to include additional prior periods." Complicating matters, the company noted, is that its auditor on periods prior to 2002 isn't its current accountant, Ernst & Young, a situation that could make an extended review "lengthy."

"While today's announcement is regrettable, we are committed to accurate and transparent financial reporting and require additional time to complete our comprehensive review," the company said Monday. "Our business is strong and Sonus continues to build on its leadership position in the rapidly expanding VoIP market."

Sonus said in early February that it was examining its revenue-recognition procedures going back two years after firing several non-executive employees for unethical behavior. That disclosure knocked the stock to the low $5 range from $6.69, a level to which it fell from about $10 on Jan. 20 after first saying 2003 results would be delayed.

The stock hiccupped last week when rumors surfaced that Sonus' CFO had left the firm.

On a conference call with analysts Monday, CEO Hassan Ahmed and CFO Steve Nill declined to expand beyond the press release update on the internal audit. Nill said he was "deeply disappointed" with the current situation. The executives also said they plan a vigorous defense against a host of shareholder lawsuits.

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