Sonus Breaks Through 52-Week Highs: Verizon Announcement Next?

It was only a few weeks ago when we were wondering what had happened to shares of Sonus Networks Inc. (SONS) when we took a look at them on March 6. The stock dropped that day by $.66, or 9%, to $6.67 on heavy volume of 9.7 million shares, continuing a three day skid that has knocked 15% off the value of Sonus shares. But we argued in many follow up posts that there was definitely a market overreaction to news of a formal investigation by the Securities and Exchange Commission into Sonus' stock option practices. Add this into the mix of a preliminary earnings report that blew away analyst expectations, and like most other investors, we were scratching our heads at the decline in Sonus share price.

But in an efficient market, prices will ultimately reflect their true value and that is what happened. The stock rebounded and cruised to a 52-week high Friday. However, yesterday's move was largely unexpected. The stock finished up $.55, or 6.85%, to $8.58. But heavy trading of 13.5 million shares compared to daily average volume of just 5.9 million shares leads me to believe there is something more behind the move.

Could it be that Sonus will soon receive an all clear signal from the SEC? Or maybe yesterday's move was inspired by Verizon (VZ)? Verizon Wireless and Alcatel-Lucent's (ALU) announced a $6 billion dollar deal in which Alcatel-Lucent will supply networking equipment and services to support Verizon Wireless' network expansion. This reminded me of a conference call earlier this month featuring Sonus Chief Technology Officer Vikram Saksenal who gave a pretty good outlook on Sonus. Saksenal also mentioned this tidbit: Verizon would be migrating their entire IP core network using Sonus technology over the next couple of years. After yesterday morning's news, it got me thinking: the move in Sonus shares could be related to a possible formal announcement of the company's working relationship with Verizon.

SONS 1-yr chart: