1105472--2/26/2009--SONUS_NETWORKS

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The unpredictability of our quarterly results may adversely affect the trading price of our common stock. Our stock price has been and may continue to be volatile. Difficult conditions in the economy generally may materially adversely affect our business and results of operations and we do not expect these conditions to improve in the near future. Recent turmoil in the world's credit markets may have an adverse impact on the capital spending in the markets we serve and, as a result, could have a material adverse effect on our business and our results of operations. We have incurred and may continue to incur net losses. We expect that a majority of our revenue will be generated from a limited number of customers and we will not be successful if we do not grow our customer base. Restructuring activities could adversely affect our ability to execute our business strategy. We may face risks associated with our international expansion that could impair our ability to grow our international revenues. Our operating results may be adversely affected by unfavorable economic and market conditions and the uncertain geopolitical environment. We face risks related to securities litigation that could result in significant legal expenses and settlement or damage awards. Due to our reliance on significant customer contracts, we have financial exposure to the continued financial stability of our customers. We are exposed to the credit risk of some of our customers and to credit exposures in weakened markets, which could result in material losses. Our ability to compete and our business could be jeopardized if we are unable to protect our intellectual property or become subject to intellectual property rights claims, which could require us to incur significant costs. If we fail to compete successfully against incumbent telecommunications equipment companies, our ability to increase our revenues and sustain profitability will be impaired. The market for voice infrastructure products for the public network is evolving and our business will suffer if it does not develop as we expect. Consolidation in the telecommunications industry could harm our business. We are exposed to fluctuations in currency exchange rates that could negatively impact our financial results and cash flows. Man-made problems such as computer viruses or terrorism may disrupt our operations and harm our operating results. Provisions of our stockholder rights plan, charter documents and Delaware law have anti-takeover effects that could prevent a change of control. Actions that may be taken by significant stockholders may divert the time and attention of our board of directors and management from our business operations. The limitations of our director and officer liability insurance may require us to pay significant legal expenses and settlement or damage awards. The investigation of our historical stock option practices and the restatement of our prior financial statements required us to incur substantial expenses and diverted our management's attention from our business, which may continue to impact our business, financial position and results of operations and the trading price of our common stock. Matters related to the investigation into our historical stock option granting practices and the restatement of our financial statements may result in additional litigation, regulatory proceedings and government enforcement actions for which we may be required to pay damages or penalties or have other remedies imposed. We had material weaknesses in our internal control over financial reporting prior to 2008 and cannot assure you that additional material weaknesses will not be identified in the future. Failure or circumvention of our controls and procedures could impair our ability to report accurate financial results and could seriously harm our business. We have a limited number of shares available to issue to our employees, which could impact our ability to attract, retain and motivate key personnel. We are entirely dependent upon our voice infrastructure products, and our future revenues depend upon their commercial success. If we do not anticipate and meet specific customer requirements or if our products do not interoperate with our customers' existing networks, we may not retain current customers or attract new customers. Our large customers have substantial negotiating leverage, which may require that we agree to terms and conditions that may have an adverse effect on our business. We rely on distribution partners to sell our products in certain markets, and disruptions to or our failure to effectively develop and manage our distribution channel and the processes and procedures that support it could adversely affect our ability to generate revenues from the sale of our products in those markets. If we do not respond rapidly to technological changes or to changes in industry standards, our products could become obsolete. Because our products are sophisticated and designed to be deployed in complex environments, they may have errors or defects that we find only after full deployment, which could seriously harm our business. Because our products are deployed in large, complex networks around the world, failure to establish a support infrastructure and maintain required support levels could seriously harm our business. Changes in our business strategy related to product and maintenance offerings and pricing could affect vendor specific objective evidence ("VSOE") and revenue recognition. We have experienced changes in our senior management which could affect our business and operations. If we fail to hire and retain needed personnel, the implementation of our business plan could slow or our future growth could halt. If we are subject to employment claims, we could incur substantial costs in defending ourselves. We depend upon a single contract manufacturer and any disruption in this relationship may cause us to fail to meet the demands of our customers and damage our customer relationships. We and our contract manufacturer rely on single or limited sources for supply of some components of our products and if we fail to adequately predict our manufacturing requirements or if our supply of any of these components is disrupted, we will be unable to ship our products. If we are not able to obtain necessary licenses of third-party technology at acceptable prices, or at all, our products could become obsolete. Failure by our strategic partners or by us in integrating products provided by our strategic partners could seriously harm our business. Any investments or acquisitions we make could disrupt our business and seriously harm our financial condition. If our intangible assets or goodwill become impaired we may be required to record a significant charge to earnings. Regulation of the telecommunications industry could harm our operating results and future prospects.

Full 10-K form ▸

1105472--2/26/2009--SONUS_NETWORKS_INC