1105472--3/6/2008--SONUS_NETWORKS

related topics

{product, market, service}

{customer, product, revenue}

{financial, litigation, operation}

{personnel, key, retain}

{control, financial, internal}

{system, service, information}

{property, intellectual, protect}

{operation, international, foreign}

{tax, income, asset}

{stock, price, operating}

{regulation, government, change}

{acquisition, growth, future}

{stock, price, share}

{provision, law, control}

{product, candidate, development}

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. If we fail to compete successfully against incumbent telecommunications equipment companies, our ability to increase our revenues and sustain profitability will be impaired. We may face risks associated with our international expansion that could impair our ability to grow our international revenues. Consolidation in the telecommunications industry could harm our business. We face risks related to securities litigation that could result in 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 have identified material weaknesses in our internal control over financial reporting, which, if not remedied effectively, could have an adverse effect on the trading price of our common stock and impair our ability to timely file our SEC reports and otherwise seriously harm our business. Failure or circumvention of our controls and procedures could impair our ability to report accurate financial results and could seriously harm our business. The limitations of our director and officer liability insurance may require us to pay significant legal expenses and settlement or damage awards. If we are not current in our SEC filings, we will face several adverse consequences. Our common stock may be delisted from the NASDAQ Global Select Market and transferred to the National Quotation Service Bureau ("Pink Sheets"), which may, among other things, reduce the price of our common stock and the levels of liquidity available to our stockholders. 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. The market for voice infrastructure products for the public network is new and evolving and our business will suffer if it does not develop as we expect. 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. The unpredictability of our quarterly results may adversely affect the trading price of our common stock. We are entirely dependent upon our voice infrastructure products, and our future revenues depend upon their commercial success. 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. Any future changes in our business strategy related to service 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. Due to long-term customer contracts, we have financial exposure to the continued financial stability of our customers. 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. 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. Any investments or acquisitions we make could disrupt our business and seriously harm our financial condition. If our goodwill or amortizable intangible assets 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. Changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our results. Our stock price has been and may continue to be volatile. Changes in foreign exchange rates could adversely affect our results. Provisions of our charter documents and Delaware law have anti-takeover effects that could prevent a change of control.

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1105472--3/6/2008--SONUS_NETWORKS_INC