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Sonus Networks, Inc. Message Board

  • stewiewantstoretire stewiewantstoretire Feb 4, 2013 1:41 PM Flag

    Valuation of about $4.30 a share for SONS

    This is a rough back-of-the-napkin type estimate based on how much ORCL paid for APKT. It values SONS by parts and it only looks at the top line.

    APKT had $385 million in cash and was bought out for $2.1 billion. It had revenues of around $275 million. This means ex-cash it sold for about 6.2 times revenues (6.2 * 275 + 385 = 2.1 billion).

    SONS has about $390 million in cash and analysts expect revenues of about $257 million for 2012. A 6.2 multiple cannot be applied to all of SONS's revenue because a big lug is a legacy stream that is not very valuable. From various documents and guesses, I think SONS will do around 170 million in legacy revenue and 90 million in SBC-related revenue for 2012. (Does anyone have better numbers? Part of the confusion here is the contribution from NET. I own shares in SONS but have not paid too much attention to what's been going on with them in the last few years.)

    Applying an ad hoc multiple of about 1.5 times sales to SONS's legacy 170 million and a multiple of 6.2 to SONS's SB-related 90 million gives $813 million. Adding the $390 million in cash gives a market cap of $1.2 billion, palindromic. Dividing this by 280 million shares gives a share price of $4.30.

    Of course, naive applications of valuation logic lead to naive conclusions. But there might be some merit here. SONS is gaining share in the SBC market, so the high multiple that ORCL paid may actually be conservative for SONS. The 1.5 multiple to SONS's legacy business may be rich but that might be offset by the somewhat conservative multiple for the SBC-related stream.

    In any case, ORCL's acquisition of APKT should further SONS's business momentum. Acquisitions always disrupt the acquired company's business.

    As for the stock price, with SONS now in play, the games can begin.

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    • Could a deal aleady be done for a CSCO and SONS combination?

      The $6 share price was being thrown around during the 2010 rumored acquisition of SONS by CSCO.

      Is that reasonable? $1.67 Billion Valuation at $6 per share.

      After the recent $2.1 Billion acquisition of APKT by ORCL it seems a MINIMUM back of the envelope valuation for SONS seems to be $1 Billion Valuation which is 30% higher at $3.50.

      A Mid Range Guesstimate seems to be $1.25 Billion which is 70% higher at $4.50 per share.

      Top End seems to be the rumored $1.67 Billion which is over 100% higher at $6 per share.

    • Your numbers look realistic to me, but that's not how things always work with this stock. Good luck.

      • 1 Reply to serfbum1
      • $4.30, .. I don't even have a Pot to #$%$ in Serf as you have been write about me for many years. The only way I know how to respond is by using PERSONAL ATTACKS and well honed STEW POT that makes people believe I can REALLY IGNORE THEM.

        So HAHAHAHAHHA, I hope you have the last laugh as usual about ORCL buying APKT and all the bad calls I have made over the last couple of years.

    • How SONS could be valued at UNDER $1 Billion after the APKT transaction is hard to fathom.

      That puts any reasonable conservative valuation at around $3.50 oer share...up nearly 30% from todays close.

      A PREMIUM valuation can be seen at around $4.50 to $5.50 per share with some suggesting as high as $7.

      Believe $4.50 to $6 is a more reasonable near term best case valuation.

    • I haven't checked lately, but I know SONS has a pretty hefty tax loss carryforward which could add a buck or so to the valuation.

      • 1 Reply to spook2b
      • Some great discussion here. SONS has about $50 million in operating loss carryforwards, $5 million in capital loss carryforwards, and $20 million in R&D tax credits, so some nice tax assets.

        Who are realistic buyers for SONS? Easy to project take-out values, but who would actually step up?

        Is there any concern that SONS is less attractive since APKT enhanced its leadership position via being part of Oracle?

        Thanks in advance for your thoughts.

        Sentiment: Strong Buy

    • Good post.

      Mentioned $4 as a rough non buyout guesstimate earlier.

      Think anything below $3.50 is a very LOW valuation after today.

      That gives it a NON BUYOUT valuation nearly 30% + higher.

      BUYOUT valuation is about 60% higher (probably minimum). Nice risk reward.

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