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Sonus Bullish on Future Based on SBC Market Growth

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Sonus Bullish on Future Based on SBC Market Growth

October 23, 2014
By Erik Linask
Group Editorial Director

“We continue to see robust growth in SIP trunking,” said Ray Dolan, Sonus CEO when commenting on the company’s Q3 2014 results today. “Migration to SIP trunking is still in its early days and we see no sign of it slowing down.”

Based on market consensus, he is right, with analyst firms projecting continued SIP trunking growth through the remainder of the decade. SIP trunking adoption leads to increased unified communications utilization, which, in turn, leads to greater need for session border controllers, which are helping drive growth for Sonus.

Over the past year, Sonus has seen its total revenue ($73.2 million) grow 7.5 percent – 10.3 percent for product revenue and 3.4 percent for services. Despite a slight ($5.2 million) net loss for the quarter, a continued shift towards a software model (e.g., higher margin model) is likely to result in net profits, especially as NFV plays an increased role in networks.

Key to the growth of its SBC business were three ecosystem partnership enhancements

  • Sonus became a Genesys (News - Alert) Silver Technology Partner, allowing its SBCs to be deployed to support Genesys contact center installations;
  • It completed interop testing for its entire portfolio of SBCs for Broadsoft’s Broadworks platform, and Broadsoft, in fact, is deploying Sonus for access and peering as part of its Broadcloud managed services product;
  • The Sonus SBC SWe – its software edition – was certified for Lync 2013 deployments.

The SWe allows businesses to turn up SBC functionality in their existing virtualization environments, allowing them to scale their SBC capabilities in line with their UC and other services. The Lync certification, specifically, was central to the company’s enterprise business, which has been a major growth initiative and now represents about a quarter of its overall revenue.

“The SBC SWe recently received the 2014 Unified Communications (News - Alert) Product of the Year Award,” noted Dolan on today’s earnings call. “The traction we are seeing speaks to the fact that our competitive moat is widening and we are, without question, leading the marketing in virtualization.”

Among its current initiatives, Sonus is currently working on deploying its SBC SWe in Amazon’s cloud to provide SIP trunking termination, security, and policy for cloud-based UC services. According to Dolan, There is significant interest from the market and he hopes to deliver the solution to market quickly.

While the SBC SWe is still seeing expectedly light adoption – existing customers will wait until they need to replace their existing hardware SBCs before migrating over; and many others are trialing the SWe, including additional technology partners. As expected, when Sonus announced the SWe, interest has been high, and you would expect the sales funnel for the product to be quite robust, especially as customers continue to experiment with and implement SDN and NFV solutions.

In its traditional area of strength, the service provider market, Sonus continues to excel, adding seven new Tier 1 providers over the past five quarters and continues high-level discussions with several others on how to help service provider drive more revenue from the cloud.

All in all, despite slight losses and only modest growth from the same quarter last year, the signs are positive for Sonus. Not only are its sales encouraging, but its market share is growing – according to Infonetics (News - Alert), it has moved into a virtual tie for second place in the E-SBC market, but is one of only two if the top vendors that has seen significant market share growth in the past year. 

Edited by Maurice Nagle

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