Sonus Networks reported today its best year on record with 2004 revenue growth of 83%. The company's earnings per diluted share rose to $.10 from a loss last year of $0.07 on the strength of $170.7 million in revenue. Sonus Chairman and CEO Hassan Ahmed vowed to make the company's nagging internal control problems as strong as its new balance sheet.

Fourth quarter revenue of $45.1 million was down slightly from the third quarter ($46.8 million) and from the fourth quarter in 2003. However, Ahmed said Sonus' performance went well beyond what it reported in revenue.

"We remain enthusiastic about our future success. We won significant new business [in Q4] and, as we reported on March 3, this resulted in the strongest order activity in the company's history," Ahmed said.

The order activity is not fully reflected in either the company's revenue or its deferred revenue balance. Ahmed said that given the scope of its coming deployments, he anticipates a longer revenue conversion cycle for these projects. "We are excited about the major new networks we were selected for in the fourth quarter," he said. "We expect this will result in sequentially lower first quarter revenue. [However] we expect to start recognizing revenue from some of these projects throughout the remainder of 2005."

Sonus announced its engagement with AOL's planned residential VoIP launch last week at the VON conference in San Jose, Calif. During the quarter, Sonus also announced sales to NetVision, Israel's largest Internet Service Provider, and Interoute, which will expanding its Sonus platform to meet growing demand for its Virtual Voice Network in Europe. Sonus also expanded its direct sales operations in its Europe and Middle East and Africa regions and launched a new channel partnership with Marconi and a partnership in the Asia Pacific Region with Putian Capitel Group, a subsidiary of China Putian Corporation. "All in all, 2004 was a strong year for Sonus. We improved our business performance in almost every category and sustained our leading position in the carrier VoIP market," Ahmed said.

Despite the record year and the potential in its pipeline, Sonus continued to struggle with internal accounting controls that have plagued the company since 1993. Ahmed said he was pleased that the company met all of its FEC and Nasdaq filing requirements and that the results it filed were consistent with the preliminary results the company released on March 3. However, he was disappointed that by March 3rd the company was only able to provide a revenue and earnings range rather than a full set of preliminary financial statements. "When we filed financial results for 2003 in July of last year, we identified weaknesses in financial controls?we have been taking steps to remedy these weaknesses since that time," Ahmed said.

Ahmed said full results were delayed based on his desire to complete the process required to finalize financial statements and complete Sarbanes-Oxley Section 404 work. "We will remain focused on eliminating the material weakness we have so that our close and audit process will be less lengthy and our infrastructure will support our continued growth," he said.

Sonus grew its international business by 40% in 2004 and is optimistic about serious opportunity resulting from the mega-mergers of AT&T and AT&T Wireless.

"We will continue to make significant investment in technology to capitalize on our momentum and lead the transition to VoIP," Ahmed said. "Our future success depends on our investments and we are not wavering in our focus in this market."

Sonus' new chief financial officer, Ellen Richstone, said 2005 is an investment year for Sonus.