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Oracle buys Acme Packet for $2.1 billion, jumps into the SBC game

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Oracle is enhancing its enterprise and service provider service capabilities, reaching a deal on Monday to acquire Acme Packet (Nasdaq: APKT), a session border controller (SBC) vendor, for $2.1 billion.

The software vendor will pay $29.25 a share, a 22 percent premium over Acme Packet's closing price on the Nasdaq on Friday. Excluding cash, Acme's net worth is $1.7 billion.

By acquiring Bedford, Mass.-based Acme Packet, Oracle will have an even larger set of technologies, including SBCs, which helps service providers and enterprises secure packet traffic, particularly SIP, on their networks and modify the streams of call control (signaling) data involved in each call.

"It is not surprising that Oracle purchased a network vendor," Diane Myers, Principal Analyst, VoIP, UC, and IMS for Infonetics, told FierceTelecom. "It is a natural extension of its work on the service delivery layer. It will, however, put them in closer competition with many of its network partners. It was expected that Oracle would make a push into network equipment."

Another key benefit of the acquisition for Oracle is Acme's customer base of more than 100 service providers and enterprises. The list includes domestic and international service providers such as AT&T (NYSE: T), Verizon (NYSE: VZ) and BT (NYSE: BT), and large enterprise clients like ADP and Oracle itself.

"The addition of Acme Packet to Oracle's leading communications portfolio will enable service providers and enterprises to deliver innovative solutions that will change the way we interact, conduct commerce, deliver healthcare, secure our homes, and much more," said Mark Hurd, Oracle's president, in a release announcing the deal.

One market segment that Acme Packet has taken advantage of is enterprises' movement to SIP trunking, which allows a company to replace traditional fixed PSTN lines with PSTN connectivity via a SIP trunking service provider on the Internet. Northland Research forecast during a summit held at Harvard University last March that the enterprise's adoption of SIP trunking will help the vendor grow its earnings 33 percent in 2013.

However, Acme's hold on this market has been challenged by Cisco (Nasdaq: CSCO). According to a recent Infonetics Research report, Cisco stole the lead from Acme Packet in the enterprise SBC market, taking a 26 percent market share in the first half of 2012.

Myers said that Acme Packet faces a growing cadre of competitors, including Cisco, GENBAND, and Sonus (Nasdaq: SONS), making it more difficult to operate as a vendor that offers only SBC products. "For Acme Packet the competition for SBCs within the service provider and enterprise space has been heating up and being a standalone product specialist becomes more challenging."

Acme Packet's financial footing has been slipping in recent quarters. In Q4 2012, the vendor reported revenues of $70.7 million, down year-over-year from $83 million in Q4 2011, but up sequentially from $65.3 million in Q3 2012.

Already approved by Acme Packet's board, the acquisition is expected to be completed in the first half of this year when it gets stockholder approval and meets regulatory and closing conditions.

For more:
- see the release

Related articles:
Acme Packet bolsters its APAC, North America, and enterprise sales teams
Infonetics: Cisco steals lead from Acme Packet in SBC market
Sonus wraps acquisition of Network Equipment Technologies
Acme Packet's stock takes hit on lower Q2 forecast
Northland: SIP trunking adoption could push Acme Packet to 20% growth by 2013