Good morning and thank you for standing by. Welcome to the Sonus Networks second quarter 2009 financial results conference call. At this time, I would like to remind everybody that today’s call is being recorded and all participants are currently in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator Instructions) I would now like to turn the conference over to David Roy at Sonus. Please go ahead Mr. Roy.

Thank you and good morning everyone. My name is David Roy and I handle Investor Relations for Sonus. And with me on the call this morning are Richard Nottenburg, our President and Chief Executive Officer and Rick Gaynor, our Chief Financial Officer, who will both address you shortly. And also with us today is Guru Pai, our Senior Vice President and General Manager whom some of you have met. Guru will be available after the comments to help answer your questions. Earlier this morning, we issued a press release announcing our results for the second quarter of 2009. The text of this release, along with the accompanying income statement, balance sheet, and operating statistics, as well as a reconciliation of the most directly comparable GAAP financial measures to any non-GAAP financial measures used during this call, and for certain prior periods, are available on the Investor Relations section of our website. And before Richard offers his opening remarks, I would like to remind you that during this call, we will make projections or forward-looking statements regarding items such as future market opportunities and the Company’s financial performance. These remarks about the Company’s future expectations, plans, and prospects constitute forward-looking statements for purposes of the Safe Harbor Provisions under the Private Securities Litigation Reform Act of 1995. These projections or statements are just predictions, and involve risks and uncertainties, such that the actual events or financial results may differ materially from those we have forecasted. As a result, we can make no assurances that any projections or future events or financial performance will be achieved. For a discussion of important risk factors that could cause actual events or financial results to vary from these forward-looking statements please refer to the risk factors section of our most recent annual report on Form 10-K, at our quarterly report on Form 10-Q for the first quarter, which is on file with the SEC. The second quarter Form 10-Q scheduled to be filed later today. Any forward-looking statements represent our views only as of today, and should not be relied upon as representing our views as of any subsequent date. While we may elect to update forward-looking statements at some point, we specifically disclaim any obligation to do so, unless required by law. During this call, we will be referring to non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with Generally Accepted Accounting Principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in the Investor Relations section of our website. I would now like to turn the call over to our CEO, Richard Nottenburg. Rich?

Thank you David and good morning everyone. Thank you for joining us on the call today. The operating environment remains challenging but we have made significant progress towards right-sizing and realigning our business to the market, reducing overall operating expenses and investing for future growth. In addition, we want new markets customers generating a meaningful sequential increase in revenue, continued to invest in our product roadmap and realized a profitable quarter. As we discussed on our last call in May, the macroeconomic environment makes replacing legacy infrastructure with next generation equipment less attractive than it was a year ago. The slowdown in consumer spending coupled with the lower ROI environment continues to drive many of our customers to reallocate capital toward revenue generating activities. We see this trend their strongest in the second half of 2008 continuing for many of our customers through the remainder of 2009. However, against this operating environment, our core value proposition is compelling and competitive as we have demonstrated by stronger operating results and ongoing activities. We believe that the investments we are making this year will better position Sonus for profitable growth by the end of 2009. The magnitude of the downturn notwithstanding a year ago that Sonus needs to be managed, more efficiently with a much lower cost structure, accordingly, we started to restructure the business towards the end of 2008. This restructuring coupled with a strong operating discipline has enabled us to deliver a profitable quarter. This has been accomplished while making important R&D investments for our future and maintaining a robust and differentiated product roadmap. As part of our 2009 plan, we have leveraged a nearly double the size of our world class facility in Bangalore. This center will now support existing Sonus products and customers that will drive innovation and…

Thank you, Rich, and good morning everyone. Please note that throughout my discussion I will reference both [broken audio]. Please also note [broken audio] our product as always, we encourage you to evaluate us on the longer term basis. Please be reminded that due to the sale of our Zynetix subsidiary in the fourth quarter of last year, the results of Zynetix have been classified as discontinued operations in our statements of operations for 2008. So they will be excluded from my discussion of our operating results for the fiscal 2008 periods. There is one more thing I want to cover before I get into the numbers. During the second quarter, we updated the third party equity software applications that we used for stock option administration and accounting. In so doing, we discovered through our internal control procedures that the prior version of the third party software had a logic error that impacted the timing of stock compensation expense recognition. The result was an immaterial understatement of our non-cash stock based compensation expense with the corresponding understatement of additional paid in capital in the amounts of $2.5 million in 2008 and $700,000 in 2007. The vendor is aware with the problems with prior version of the software and has fixed this problem in the current version and we have verified this fix independently. The amounts in error were immaterial to their respective periods, so as an immaterial restatement corrected historical amounts are reflected in our second quarter earnings release issue this morning and will be reflected in our Q2 2009 10-Q and other financial reports going forward. Of course stock compensation is not included in our non-GAAP numbers so there is no impact on our non-GAAP results. Revenue for the second quarter was $61.6 million, up approximately 50% from $41…

Thank you, Rick. Operator, could you please provide our callers with the instructions on how to ask a question?

(Operator Instructions) Your first question is coming from the line of Paul Silverstein - Credit Suisse.

Rich, I think you mentioned when you got a win at Cox for deployment, can you give a little bit more insight on that?

Paul, I would like to talk a lot more about that Paul and to be honest, you probably noticed that we have had a limited amount of information we have been able to release there. We are just not in a position we can release more information right now and we would love to and we will do so when we are able to.

On your top line customers given that they were 42%, I assume Global Crossing was greater than 10% wasn’t traumatically greater?

I would say this. It was somewhere between 10% and 20%.

Okay. And AT&T on the deferred revenue, I know you guys walked through that last around. If you could just revisit that Rick in terms of looking for minus 10 years to get the stuff with each quarter because it keeps building out.

Correct, correct, yes.

In terms of the recognition, as we go forward to the next two years, we should see the recognized portion from each pricing your quarter gets build in and therefore there is going to be natural increase. Is that correct?

That is absolutely correct.

Okay. Can you talk a little bit beyond the deferred revenue number? Can you talk about the quality of trend, at AT&T what you are seeing there and I recognized it is only so much you can give on any customer?

Let me just give you a little color on that. There is some interest here. I think we would like to say that AT&T is the stronger [31.52] and we have a very good relationship with them and we continue to see a lot more opportunities while providing excellent service and value given the size of our install base. We feel really good about AT&T but we really cannot comment on a lot of more specifics on new projects and what is going on there.

And one last question if I may, OpEx Richard has done a very good job, historically I know you are projecting and increasing Q3. What the [growth] here is, are you going start growing OpEx modestly or is Q3 an anomaly and you are going to hold the line and keep reducing as we go forward?

I think it is a mix of we are going to continue to look for opportunities to reduce over head where you can also continue to leverage out low cost footprint. But we are also making significant investments in the business, Paul and those investments do not come in a linear fashion. So, I think you should see we made significant amount of progress we intend to make but quarters will fluctuate up a bit and down a bit just based on what investments we are making in particularly in engineering.

Yes. Paul, I think the takeaway from that is as follows and I would like to redirect you on the last call. What we said in last call was, we will exit 2009 with the right cost structure for the business. But in addition, we will exit 2009 in a more competitive position that we entered 2009 and so given that these investments have to be made and maybe some more and even we are all committed here as we exit the year as we said we would and we will continue to be posting on progress.

Your next question comes from the line of George Notter - Jefferies & Co. George Notter - Jefferies & Co.: I also wanted to ask about AT&T. I understand how the revenue recognition worked certainly from a deferred revenue perspective. If I go back far enough in the model and, I looked at your progression with AT&T there are a lot of quarters here that were $20 million, $25 million and $30 million quarters from the revenue recognition perspective. And then obviously stepped down quite in December, in March and then here in June and again I understand the deferred revenue model but you have got $33 million and it gives that deferred revenue, you recognize over the next six quarters. You see here $5 million, $6 million, $7 million a quarter certainly there could be new deferred revenue coming in there but it feels like there has been a big step function down in your business level with AT&T and even looking through the new revenue recognition model. Am I reading that correctly? And then if that is right, could you kind of walk me through what exactly has happened with AT&T?

Clearly on the temporal basis, I am not going to give a lot of specific color on AT&T because this is really not something. We are not really in a position to talk about the detail about the specifics of network deployments in any one year. There are a lot of puts and takes on a quarter-by-quarter basis and even annual basis and clearly in the current operating environment all large operators have to make decisions about where they want to deploy capital and I think that we do have a relatively, I mean we are in an issue which functions with a relatively uneven type of business. Clearly networks get build out. They get build out in spurts they slowdown. They build up. I am not in a position to predict when, if, how we would return our actual revenue levels. What I would like to say is our relation with AT&T is very good. We are very significant install based to continue to service them and we continue to pursue opportunities with them. We will keep you posted of these if we can. George Notter - Jefferies & Co.: It is fair to say then that your market share is the same as it was back then or better or have you lost share or opportunity?

We do not believe we have a market share problem here. George Notter - Jefferies & Co.: I got it. Okay, great. And then just shifting gears very quickly, I know the deferred revenues were down I think $9 million or $10 million or so sequentially. They look like the AT&T deferred revenue was up a tad Can you talk about what the mechanics of that? What is going on with deferred revenue? Why is it turning down? Was there some pent up revenue recognition that you had run through here this quarter, any thoughts? Thanks.

I actually got it on the money. a couple of projects that we are in. deferred revenue that have built up over several prior quarters and they got released in the second quarter probably the contribution to revenue we saw in the quarter but offset a little bit by down tick in deferred revenue.

Your next question comes from the line of Subrahmanyan - Sanders Morris.

Two questions. I know you are not highlighting specific quarter-to-quarter guidance but we are at the midpoint of the year talking about significant down tick and I am just trying to understand just trend wise if you are thinking September gets weaker and then we have any improvement in December or kind of a stronger end of the year. That was one more question. And then on Asia, you talked about contract expansion with KDDI and I think you also referred to a partner about one business as one of their largest Japanese there, I wanted to make sure these are two separate things and if you can talk a little about revenue that started to be recognized for many of those opportunities or what the timeframe could be?

I will take the first part of question and then hand it over to Guru and to Rich for the second part. In terms of Q3 and Q4, we obviously have not given any guidance on revenue in the second half of this year other than saying that we do expect revenue to be lower than we were last year. I think we have also said in the past that we can project it to be below $250 million for the entire year. The second half of the year is traditionally stronger for us in the first half, with that being said, last year changed that fairly dramatically given the economic decline. We are not on the business of predicting the economy here. So hence while we think visibility is difficult for us and we are not prepared to give real guidance or detailed guidance for the quarterly basis for the second half of the year as of the guidance with KDDI. Guru, do you want to comment?

Sure. To answer your question, there are two separate and distinct projects. They are not the same and I think the second part of your question was - Did they contribute to the revenue this quarter? The answer is no.

Alright. And any color in terms of what the scope of the extension of the two customers kind of timing scope, give us a sense because these are too fairly large areas, just trying to understand how significant it could be?

Yes. Unfortunately, Subrah this time, we cannot give you customer-by-customer views.

Your next question comes from the line of Steven O’Brien - JP Morgan. Steven O’Brien - JP Morgan: I have, first off, a bigger picture question for Richard and then maybe a follow up on the business model. First question, can you help quantify Sonus’ maybe potential for share gains or at least change in the market from Nortel’s positioning and bankruptcy right now? Do you see a potential for footprint grab here and what are you hearing from customers in terms of more activity looking to perhaps transition from Nortel gear or looking for new solutions to sort of extend their work now?

That is a very good question. I think what we said in the past and I think we would like to reiterate right now is if you look at the Sonus solution setting, in fact, if you look at our platform solution set. It is extraordinary compelling and we have done a very good job of replacing not just Nortel but other legacy suppliers in the market. Clearly, as some of our competitors or some of our legacy suppliers have become more impaired and in this case one actually ended up filing for bankruptcy. It has been, obviously, a significant increase in velocity around making sure that these networks continue to operate properly. So, we do see a substantial uptick in activity around that but needless to say that, we run the business as we have always wanted, is that continue to replace legacy gear and I think that the overrunning part of the market right now is that it allowed that replacement cycle has been so much muted by the lower ROI environment, so kind of two different forces in the market and then multiple forces in the market playing at the same time. I am pretty encouraged by the fact that our solution set placed well and I am satisfied, I mean I like the opportunity that we are seeing. Steven O’Brien - JP Morgan: Okay. I think guess more on the business model, is the breakeven annual revenue level changed from $250 million and can you give us some more color around from this release, from deferred revenue that drove gross margin 66% above the long term target range this quarter?

Sorry, trying to answer the first cut, you might have to, probably with second part again, Steve. In terms of the breakeven, we did say that we felt that our revenue breakeven point would be around $250 million and we have modestly exceeded our expectations a bit in the first of the year. So, we would say we are now modestly better than $250 million, so not significantly because we are tracking pretty closely to our plans for the year or so. I would say that we are just slightly below now $250 million as a breakeven point for us. What is the second part of the question Steve? Steven O’Brien - JP Morgan: The gross margin this quarter going above the 58% to 62% target range and then sort of the indication that the full year would fall towards the lower end of that range, is that a function of projects getting released out of the deferred revenue or just something else in the mix?

No, I think it was partly a factor of the gross margin profile of deals that are coming out of deferred revenue. I think it is also reflective of the gross margin of just our book ship opportunities coming through the first half of the year. Net-net, we did have favorable mix in terms of what we are able to score and we do not expect to see that favorable mix in the second half. So I think we are closer to the lower end of our 58% to 62% range, but if you do the math on the map while we indicated prior that we felt we were at the low end of range for the year. I think we are going to be probably closer to the midpoint of our range for the year at this stage based on the strength of the second quarter particularly. Steven O’Brien - JP Morgan: Great, and then very last, on the cash flow, are you seeing that your cash expectations for the second straight quarter cash and any balance expectations? Can receivables, can they go any lower, it seems like you might have reached the point where they are just doing the normal course of business they might have to trend up in the coming quarters and perhaps the same for inventory. Looking out over the next couple of quarters, how should we think working capital impact cash?

Let me break it down. In terms AR, I guess our job is to assume as we grow in sales that I have not collected. So, our goal is to, and actually our AR performance is very good in the Company. We have a great customer base. They do prompt pay and it is not an area of concern for me. So, but yes, our AR has tipped to a lower level recently which puts some pressure on us in terms of the cash collection going forward which is the primary driver of why we think we will see a downturn in cash from $387 million level in between $370 million and $380 million in the third quarter. That is primarily driven by the amount of AR we have coming in to the third quarter. In terms of inventory, we actually have something of an uptick in inventory but that is driven primarily to two factors. One is we have a need for some last time buys in the first half of this year and just to protect our ability to service our customers and secondly we do have a shift in our contract manufacturer and we are moving from one CM to another and as a result to that transition, we built the certain level of safety stock in the middle part of this year and we stopped working that down. So, I would suggest that yes we would expect that is going up in the second part of this year and inventory we would expect it to tick down a little bit going into the second half of this year as that migration to new CM is completed.

Your next question comes from the line of Kenneth Muth - Robert Baird. Kenneth Muth - Robert Baird & Co.: Can you give us any more update on your initiatives then your execution on the session border control market opportunity that you are talking about stressing last quarter? And then how do you see maybe the potential to win the larger enterprise deals within the session border control market?

Let me handle that. No, let Guru handle that question. It would be good.

Sure. Again, we are very confident on our hybrid strategy that we talked about on the last call which is supporting both TDM-to-IP and IP-to-IP architectures of the same platform. One of the things that Rich talked about in this call is going to be the introduction of local policy Network Border Switch, which gives us the ability for the first time to deploy our GSX running our NBS software in a standalone configuration. So, that gives operators and certain segments of the market increased deployment flexibility and giving the same advantages that we had in our larger more complex network deployment included in all our network component. As we keep investing in the IP-to-IP space, you should expect us to continue to enhance our roadmap in the network border security products and in session border control as a domain. Kenneth Muth - Robert Baird & Co.: And then just on the enterprise side, do you see that market as opportunity coming up or do you have enterprise customers today?

Yes. I think the only thing I would like to say that is obviously a very interesting vertical. I have always been very intrigued by that market vertical. We are going to keep you posted as time goes on as we start to look at that vertical. Kenneth Muth - Robert Baird & Co.: Should we think about that as a growth opportunity for the Company or not?

I think you should think about the fact that I like it. I like that vertical than it is on top. Kenneth Muth - Robert Baird & Co.: And then just a follow up on global crossing, it looks like it has been awhile since there have been 10% customer. Have they changed any initiatives or taking new products or there are just more add on to what they have had historically?

No, I think it is a normal course the business growth for them.

Your next question comes from the line of Todd Koffman - Raymond James. Todd Koffman - Raymond James & Associates:

Your next question comes from the line of Edward Jackson - Cantor Fitzgerald.

I have a couple of questions. One of them just on geographic front, can you give a little color relative to geographic activity where I think is a strong, weaker in North America, Europe and A-Pac? I have another follow up on that.

Sure. This is Guru. Again, in our two traditionally strongest markets had been North America and Japan with Asia Pacific and I think that continues to be the case right now for us.

Yes. I think the thing we could say about Japan is that we have a very significant footprint in Japan. I have been over there a couple of times. Guru has been over there. Rick has been over there. I think we should be spending a lot more time over there. I think there are a lot of opportunities. So, we are going to continue to focus and leverage. We have a strongest ball base and we have a very strong team. I want to mention that we have a strong team in Japan which has enabled us to manage that base very effectively and grow our business there.

Excuse me?

I am sorry, go ahead. But do you want to amplify that question some?

No, I just move on to the next one. The other one is more interesting anyway. I just want to go back to something you guys had announced in April which had to do with the Trunking and through, the build with [50.10] with their enterprise and I wanted to touch base on that and have you all talked maybe a bit about the importance of that capability perhaps the need that you might have to do that with other vendors. Is that a situation that is simpler like back in the legacy days when people had to go and get the different interphases for the different [PBXs] to be able to interoperate with them, this kind of simpler type of situation? I mean I guess where I am getting at is - how complex is it, what kind of opportunity to do relative to other vendors and what kind of competitive differentiation that they possibly get?

Okay. Let me try to answer that question vis-à-vis the forum. So the set connect forum is essentially setup to allow interoperability with different translate devices from the network and if we participate in that that is what the press release was about and that advantages play us on both sides to make sure that interconnectivity does not impede deployment for our joint customers. So, I think the market has changed in that sense. It has progressed so that the anomaly that we talked about. Having said that we have a fairly significant IOP program that our products participate in, again in terms of interoperating with Sonus’ base equipment and I think that is just a sort of the needs and helps us both in development as well as serves the needs of our customers so that they can deploy with the confidence and knowing that has been tested into interoperability with Sonus base equipment.

Your next question comes from the line of Greg Mesniaeff - Needham & Co. Greg Mesniaeff - Needham & Co, Inc.: It is Greg Mesniaeff. Question, view at reference to the Bangalore facility expansion, I was wondering if you can give us some color as to what potential for further OpEx reductions you can obtain from leveraging that facility further and which areas?

Yes. Thanks for the question. What I wanted to very clear on the call about is that it is obviously an opportunity to basically transform our R&D cost structure but I think importantly we also recognized that we have hired some pretty phenomenal people there and that we also have the ability to innovate into our new product and service offerings. So, I think overall, I think they were going to get to a more, you can view it to a more industry normal type of balance between low costs, high costs, type of R&D overtime and I think that by the end of 2009 we will essentially be done with the substantial part of our plan which we ended the year with. I think that you should monitor and I think we are going to give you more information as it calls and we see much how we are making progress there. Greg Mesniaeff - Needham & Co, Inc.: Great, and besides R&D, are there any other functions such as service and fulfillment that could be off shored as well.

The only other function right now if you look at the headcount in Bangalore, the vast majority is engineering talent with a handful of that support infrastructure people but we do have plans moving forward to start trying to move some back office type activities, not so much for the service organization per se but some of the G&A type activities and IT activities that could be reasonably supported out of Bangalore. We obviously would proceed with extreme care there given, yes. We have made a lot of progress here in terms of our operational and competency and we do not want to lose any of that. But we do some thoughts that we are working on that for 2010. It might allow us to get some sort of back office opportunities as well.

Yes. And I think the other thing I want to add is that having a facility and having a strong center in Bangalore, I mean I have been over to Mumbai, meeting with customers over there. So I think there is an opportunity to help us regionally deal some of the, what I call customers in that part of the world.

Your next question comes from the line of Catharine Trebnick - Avian Securities.

My question has to deal with how much of the addressable market you are looking at is really SBC focused versus perhaps maybe a wireless strategy focused? Could you quantify that or give some opportunity? What I am trying to do is to understand your pipeline, how much of your product they are really IP-to-IP versus TDM-to-IP? And then also the last part of it is, what are you doing about LTE?

Okay. Hi Cath. It is Guru. So, majority of our proposals that go out now involved the NBS which is IP-to-IP in the IP-to-IP domain and we think we compete very effectively and we like our product strategy. With regard to LTE, again we are evaluating exactly where and how we participate in that effort. Obviously our products are based on the IMS standard as we have said publicly for a while and to the extent that IMS participates and becomes a predominant deployment [by April], we expect to participate and compete on that area.

The interesting part about again a part of our wireless strategy and then it is a big opportunity not only for our different industry. It is predominant portion of wireless voice is on TDM today and I think as there’s traffic, as there’s more and more voices originate and terminate on mobile networks as that portion of the overall voice full globally starts to migrate to IP. We believe there is an opportunity in the companies like ours which end up with TDM-to-IP state to participate and gain from it. We do not know when that would happen. We think in the long run. We are pretty confident with that traffic and multi IP but exact timing is clearly one that is impacted by each operator decision but also by I think in some sense by the macroeconomic conditions.

Operator, we are getting near the top of the hour. I think we have time for one more question.

It appears that we have time for only one more question. You have a follow up question comes from the line of Paul Silverstein - Credit Suisse.

Rich, I know you have touched on the responses to other questions but in previous calls you have highlighted your investment in your session border control, your border switch and you have spoken about the transition to marketplace to session management away from traditional TDM side to gateways. Can you give a little bit more color on what you are seeing in terms of that transition and where you are positioned? I trust you are still not at a point where you want to disclose the NBS revenue as a percentage.

Well, we are not in a position to disclose that as a specific revenue stream but I think you have identified an important change in the market and I think that we recognized that when we came in here. What I kind of believe is as follows is that we made a substantial investment in the space and I am feeling very comfortable. I think it was really a couple with how pickup some traction momentum here. I think overtime which you are going to see here is that the space is going to evolve, just setting session metrics going to do a lot of other things that are currently not done by point solutions in the market and I think that this is going to be an interesting story as these things evolve but I do not really need one, Rich do you have a commentary to add?

Paul, again, just repeating the answer that I said earlier. The majority of our proposals now include NBS or IP-to-IP as part of our responses and proposals to customers. The importance is certainly increasing, it does not mean however that the basic TDM-to-IP value proposition has gone away. In fact I think there was interesting network effect as more IP-to-IP traffics that the partner will interconnect in the world still TDM and most people show that TDM lines. So the need to do the gateway function both for quite sometime. However, there is I think you are correct in saying that the importance of IP-to-IP is significant and having said that I think the hybrid strategy and now our local policy NBS doesn’t give operators increased flexibility in being able to go after IP-to-IP traffic that they want to go out and compete for.

Hey Paul I think that we should answer the question about Global Crossing earlier. I think I can be a little bit more precise to my answer. I said it was somewhere between 10 and 20, I will ask TDS hard data point, there was 14%. Dave?

Okay. Thank you, Operator. That does complete this morning's financial results conference call. We would like to thank you all again for joining us and we appreciate your interest in Sonus Networks. Operator, could you please provide our callers with the replay instructions before we sign off.

Ladies and gentlemen that does conclude today’s conference call. For replay, please dial 1 800-633-8284 and a reservation number 21431767. Once again please 1 800-633-8284 and a reservation number 21431767. Alternatively, you can also dial toll at 142-977-9140 and once again on a reservation number 21431767. Thank you.