Thoughts on Sonus (SONS)?

I read a couple positive articles on these guys recently, from my vantage point they seem like a great long term investment. The CEO recently bought a million shares back in October.

At $3.95, they seem like a bargain…I took a small position at $3.77 with the thought of holding for a year or two as I think they’re a $5+ stock.

Does anyone have any insight or thoughts on this company?

Thank you for your time,
Sweetadeline

Hi Sweetadeline,
I’ve always found it helpful to write out why I think something is a good investment. Give us something to start with. Why do you think their long term prospects are good? What competitive advantages do they have? What is their money situation? What kind of moat? How quickly are they growing? is that likely to continue in the future? Once you have answered those questions then are they expensive? cheap? if they are cheap then why are they cheap? Some of the questions are pretty similar but they are helpful for you and us to think about with an investment.

-e

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Hi Adeline, I did a quick scan of the company. Very quick. Here are some comments in no particular order.

First of all, not being a tech wizard, even after reading their discussion of the company, I wasn’t clear about

  1. what their products actually do
  2. what kind of a moat they have

Therefore, if you read some articles about the company it would be very helpful to post links to them.

It did seem clear though that they manufactured products for sale with good gross margins (good) but with no particular recurring income (not so good).

Their CEO has bought a million shares on two occasions in the last year (good) and there have been some small 10,000-15,000 share purchases by others. (good).

Two venture capital fund still own about 25 million shares each, which they are selling into the market. (bad)

The company has about 250 million shares and revenue in the range of $250 million so revenue is roughly $1 per share.

Adjusted EPS last quarter was 1 cent. GAAP earnings were a loss of 2 cents.

Total revenue last quarter was up 7.5% (weak), but they subtract out their legacy business and say the remainder is up 40% (possibly good for the future).

They repurchased 16% of total shares over the past two years (good).

Now this is a totally superficial 10 minute scan. If you’d like to really tell us something about the company and why we should buy it, please do.

Saul

They repurchased 16% of total shares over the past two years (good).

Now this is a totally superficial 10 minute scan. If you’d like to really tell us something about the company and why we should buy it, please do.

Saul

The share repurchase is BOGUS! It’s a cover for the huge number of options they have issued. From the last 10-K, page 33:

http://secfilings.nasdaq.com/filingFrameset.asp?FileName=000…


 **2013       2012       2011       2010       2009**
Basic      278,428    280,090    278,540    275,470    273,730
Diluted    278,428    280,090    278,540    275,470    273,730

I’d like to point out that while they are reporting a loss they don’t have to disclose the potential dilution of the options which is why “Basic” and “Diluted” are the same. As soon as they report a profit the diluted shares will jump putting a dent in both revenue per share and earnings per share.

In effect they are transferring money from the shareholders to the employees and covering the fact with “repurchases.” They buy a few million shares and give them to the employees. But if you count the number of shares outstanding, the ploy is uncovered.

From the same 10-K, page 22:

We historically have used stock options and restricted stock as a significant component of our employee compensation program in order to align our employees’ interests with the interests of our stockholders, encourage employee retention and provide competitive compensation packages.

If I were a shareholder I would not feel “aligned” until I saw huge earnings.

Denny Schlesinger

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I looked at their website and under blog there is a write up by a board member about cisoc’s lawsuit. Interesting reading.

Very difficult to play in this data center space, against Cisco.

Technology can be great, but selling against Cisco is tough.

Iain

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Wow! The board really came up with an analysis in short order. Not something to invest your last dollar in, for sure.

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Wow, thank you all for the words of wisdom. Hopefully with practice I’ll learn to research companies and know exactly what to look for and how to interpret what I’m reading beside the basics (low PE good, high PE bad, quarterly growth good, decline bad =P).

My trading site, has them listed as long (from Marketedge), improving (from Second Opinion Weekly Report), and 6/10 (from Thomson Reuters)…I combined that with their expected $.03/share quarter 4 earnings up from $.01/share in quarter 3, the CEO’s recent purchase of a million shares on oct 31, the two positive articles I read on seekingalpha and their cheap share price is very appealing.

I apologize if I annoyed anyone with my post since from my perspective you guys are like a bunch of post docs with 30+ years experience talking to a rookie fresh out of college…hell, I would be if the situation was reversed.

Thanks again for the advice, will try to find better companies
Sweetadeline

Shoot, and I forgot to mention they’re appealing with a short % of float at 5.33. The lower the percentage the better?

Sweetadeline

re: SONS.

gonna put this stock on my watchlist for the next signal to buy.

however, woulda coulda shoulda comes into play.

a beauty of a chart, Buy SONS on 10/15 @ 2.95 and letting it ride with 10,000 shares. As of today, it is still racking up some serious coins. Not to shabby. Should sell SONS at the xover or use the trailing stop loss order to protect your ASSettes. Okay 1 for 1 still batting 1000. I am teaching 2 7th graders (nieces) how to trade like a swing trader.

a scanning tool from Stockcharts dot com would have picked up SONS on the afternoon of the 15th of October.

Just a thought,
Quillnpenn - just a techie point of view. Not a fundie person. Could care less about fundamentals. Just want to make MONEY.

ps. what I do is place all the stocks mentioned on this board and place them in my Stockcharts watchlist and let the scanning tools find the stocks to play with. That simple.

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the two positive articles I read on seeking alpha… and their cheap share price is very appealing…I apologize if I annoyed anyone with my post… will try to find better companies Sweetadeline

Hi Adeline, One last reply:

  1. You never posted links to the two articles from lSeeking Alpha so that we could see what attracted you to the stock.

  2. Cheap stock price is irrelevant, because you have to multiply by the number of shares (which is quite large in this case). A low price is good for sheer gambling though as it can make large percentage moves up (or down). For example, a $2.50 stock that drops or gains 50 cents has lost or gained 20%.

  3. You have no need to apologize. People do expect though that if you recommend a stock you tell them why, not just say “great company” or the equivalent.

  4. If your goal is to be a swing trader, and try to ride brief short moves and sell right out, SONS may be a great stock for you. It’s just not what most of us on this board do though.

Best of luck with your investing.

Saul

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Hey Saul,

The two articles I read were:

http://seekingalpha.com/article/2765955-sonus-networks-makin…

http://seekingalpha.com/news/2086655-sonus-plus-4_8-percent-…

Sweetadeline

The two articles I read were:

Thanks, Sweet Adeline. That gives us an idea at least what it’s all about.

Thanks, Sweet Adeline. That gives us an idea at least what it’s all about.

It sure does!

- Foundation in place for double-digit growth in 2015.
Speculation.

- Insider buying and share repurchase plan in operation.
We disposed of the share repurchase

- Potential reverse split could be a catalyst.
Speculation, splits and reverse splits are effectively meaningless

- Sonus (NASDAQ:SONS) CEO Raymond Dolan bought 1M shares on Friday at $3.43.
- Dolan also bought 1M shares in April. CFO Mark Greenquist has made three purchases since then, and director John Schofield has also bought shares.

That leaves insider buying which is a good thing because insiders like their own dog food but it is still speculation. Thin gruel for investing.

There is an art to reading news which goes beyond reading the contents. One thing I like to read are the comments, you can get a lot of information from them. For example, there is a fellow who writes about rare earths who I came to trust, until his last piece.

UltraLong comments: “Didn’t you read the 9th of Dec press release fully since you comment they don’t appear close to release prefeasibility study? To me they state pretty clearly there that it’s almost done (“substantially complete”) and anticipated to be released in January 2015.”

http://seekingalpha.com/article/2772475-what-the-heck-is-goi…

This comment made me go back and read the referred 9th of Dec press release. As a result I added my comment: "The December 9 PR contradicts the article in important ways.

"1.- PFS: “The PFS is substantially complete, with only financial modeling and final validation to be completed. Release of the results of the PFS is anticipated for January 2015.”

"2.- Purpose of the drill program: “The recent diamond drill program has delivered approximately 8 tonnes of large diameter core that will be used for additional metallurgical test work during 2015.”

“It’s as if the author had never read the PR.”

The end result is that I’m not taking this article seriously. Mind you, I’m not casting aspersions on author Ben Kramer-Miller, just doubting this one particular item.

Getting back to the two articles you linked, between them they have just one comment from Joseph Cortes whom I have read several times on Kandi articles. No offense but he is a novice. His comment: “Something must be cooking!” is not very informative.

http://seekingalpha.com/news/2086655-sonus-plus-4_8-percent-…

The two articles you linked are by authors with no following, not a good sign. Good authors, like Saul, have a large following.

Denny Schlesinger

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Hi Denny, I made a much simpler calculation. I couldn’t see anything “special” about it which would give it any kind of moat. Specifically, anything which would make me choose to put money in SONS rather than one of the stocks I’m already invested in. That does NOT mean it won’t go up, and maybe go up very well, but just the way I looked at it.

Saul

Saul:

I have no idea if SONS is going up, down or sideways, that’s secondary. I was just trying to teach sweetadeline some of the tricks of the trade, how to read and interpret “news.”

Denny Schlesinger

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