Sonus ( SONSE) shares jumped 19% after the company posted a quarterly profit and completed a long-running audit. Facing imminent delisting from the Nasdaq, Sonus filed restated financial reports for 2001, 2002 and the first three quarters of 2003. Late Wednesday, the Internet phone switch maker also said it swung to a profit in the first quarter. For the first quarter ended March 31, the Chelmsford, Mass., company posted earnings of $3 million, or a penny a share. That reverses the year-ago restated loss of $4.4 million, or 2 cents a share. Revenue rose to $36.5 million from a restated $9.2 million a year ago. Late quarterly and annual financial reporting have jeopardized the company's stock-exchange listing, and Sonus says it is still in discussions with the Nasdaq about its status. Still, Sonus shares rose 84 cents to $5.19, as the company appears to have closed a chapter on its seemingly ever-deepening audit. The company plunged into an accounting scandal in February when it found revenue-recognition problems in its internal accounting and fired some managers for unethical behavior. On a conference call with analysts Thursday, CEO Hassan Ahmed said the company took action to fix the accounting problem. "When we discovered problems, we responded as quickly and forcefully as possible," said Ahmed. He added that the company is "in a strong position in a growing market, a growing segment of the market." The company says the majority of its accounting problem was related to one customer and the timing of when sales and shipments were booked as revenue. The biggest adjustment over the three-year restatement was an increase in deferred revenue to about $90 million from the $34 million that had previously been reported. Analysts and investors question how much of the company's future sales will come from new business vs. bookings of deferred revenue over time. The company declined to offer any guidance on sales, but said that about $29 million of the current deferred revenue will be booked in the next 12 months. The company's audit may be over, but it has lingering legal issues, including an investigation by the Securities and Exchange Commission. Because Sonus executives offered very little insight about the outlook for the company, many analysts were left to ponder the potential costs of the book-cleansing process. "We know that Sonus has been paying millions more in administrative expenses per quarter in extra legal, accounting, and consulting fees and that these expenses are not likely to diminish anytime soon," wrote Lehman Brothers analyst Steve Levy in a research note Thursday. Levy has a sell rating on the stock.
Even though AT&T tried a last-minute bribe of promising 5,000 new U.S. jobs to help gain support for the deal, the Justice Department filed a complaint to fight the combination of the nation's No. 2 and No. 4 wireless carriers.