The appointment of a new CEO at Sonus Networks proves the IP gear-maker is not a target for takeover by the likes of Cisco Systems Inc.
That opinion comes from Catharine Trebnick, a senior research analyst at brokerage firm Avian Securities, one day after Sonus named Raymond Dolan to replace Richard Nottenburg. Dolans hiring took place months before Nottenburgs expected March 2011 retirement, a date that had the industry buzzing with speculation that Sonus was ripe for M&A, most likely by Cisco. However, Trebnick said, this weeks developments at Sonus mean the company probably wont be bought any time soon.
Dolan, Trebnick wrote in an Oct. 13 client memo, steps in at a key time, with IP-to-IP communications growing at about 40 percent year-over-year. Dolan brings a stronger customer focus [to Sonus,] which we expect will improve customer relationships at the senior level.”
Besides, Trebnick said, the number of companies looking to acquire assets in the VoIP sector has been significantly reduced over the past several years” as manufacturers such as Alcatel and Lucent, and Nokia and Siemens, have joined forces, and as the once-venerated Nortel Networks went bankrupt. That does leave data-networking players such as Cisco and Juniper Networks as potential acquirers, but, Trebnick noted, these are unlikely candidates as their growth strategies revolve around the data center.”
Both companies customer base overlaps with Sonus Networks and neither company is in need of the cash. That said, we do believe the sector has room for consolidation, with Metaswitch and GENBAND looking for public exit strategy in 2011.”
For those reasons, Avian Securities is maintaining its positive opinion on Sonus and keeping its price target at $4.25.
Migration to all-IP networks is a growth story for Sonus and Acme Packet,” Trebnick said. We believe the catalyst for stock price appreciation includes commercial deployments for the new platform.”
To that point, shares of Sonus were trading .87 percent higher by about 12:30 p.m. Eastern on Wednesday, reaching $3.46.
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