Sonus Networks (SONS) shares are trading higher this morning after the VoIP infrastructure provider reported better than expected first quarter profits.

Sonus posted Q1 revenue of $74 million, which was actually a tad below the Street consensus of $74.3 million. But non-GAAP profits of 2 cents a share was better than the penny a share loss the Street had expected.

Merriman Curhan Ford analyst Tim Savageaux observes in a research note this morning that gross margin in the quarter of 64.3% was well ahead of his estimate of 58.5%, “driven by both product and service margin upside.” He also notes that operating expenses came in below expectations, resulting in an operating margin of 6%, rather than the -0.3% he had forecast.

Savageaux raised his rating on the stock to Buy from Neutral. Among other things, he cited “the potential for a resurgence of next-generation network spending at NTT in Japan,” strong capex trents at AT&T (T), the company’s top customer, and a recent win at BT. He also notes that the company has a strong balance sheet with $400 million in cash and no debt.

He upped his 2008 EPS estimate for the company today to 17 cents from 13 cents; for next year he goes to 22 cents from 18 cents.

SONS today is up 21 cents, or 5.5%, at $4.10.