Light Reading

Acme Shares Beaten After Earnings

Light Reading
News Analysis
Light Reading
11/7/2007
50%
50%
Repost This

Despite beating analyst estimates and raising guidance in its third-quarter earnings report, shares of VOIP equipment vendor Acme Packet Inc. (Nasdaq: APKT) fell more than 15 percent today.

The company earned $5.5 million, or 8 cents a share, on sales of $29.6 million in the third quarter. That compared with earnings of $8.6 million, or 12 cents per share, on sales of $22.3 million for the year-ago period. (See Acme Packet Reports Q3.)

Excluding stock-based compensation, Acme said, net income in the quarter was $6.7 million, or 10 cents per share, compared with $7.1 million, or 13 cents per share, for the year-ago quarter.

Acme's revenues were in line with analyst estimates of $29.3 million, and the company topped Wall Street's earnings forecast of 9 cents per share, according to Thomson Financial .

However, despite beating analyst expectations and upping guidance, shares of Acme Packet stock closed Wednesday down $2.36 (17.60 percent), to $11.05 each.

So what gives?

There are a few forces at work, says Cantor Fitzgerald analyst Edward Jackson. One reason for the selloff, he says, comes from disappointment with the company's earnings guidance.

While Acme Packet revised its earnings forecast upwards, it only brought guidance in line with Wall Street expectations. The company expects earnings, excluding one-time items for fiscal 2007, to be 35 cents or 36 cents per share, on revenues between $112 million and $113.5 million. Meanwhile, analysts expect the company to earn 34 cents per share on sales of $113.6 million.

More importantly, Jackson says that, while the overall results were good, certain details of the company's earnings may have spooked investors.

Chief among them is the fact that North American sales were down year-over-year and sequentially, which some see as a sign that Acme Packet is losing business with key customers, in particular Sprint Corp. (NYSE: S).

On Tuesday's earnings call, officials said Acme Packet had three 10-percent customers during the quarter, but Sprint was not among them.

The makeup of its large customers also signaled a shift, with 10-percent customers -- Alcatel-Lucent (NYSE: ALU), Nokia Solutions and Networks , and Ericsson AB (Nasdaq: ERIC) -- together accounting for 46 percent of all revenues.

"The company's business shifted much more to international sales and much more to third-party channels," Jackson says. "Dramatic moves like that raise concerns."

While results in the company's sales mix might have scared some investors, Acme maintains that its business is sound. The company forecasts a rebound in its North American business, which it expects will be helped by recent contract wins at Telus Corp. (NYSE: TU; Toronto: T) and Cbeyond Communications (Nasdaq: CBEY). And Acme says that it is seeing an uptick in strategic conversations with large service providers, many of which have long sales cycles. (See Acme Gets Wins.)

Despite the drop in Acme's share price today, Jackson believes the company has a strong future ahead. He reiterated a Buy rating on the stock today and raised his 12-month price target from $17 to $18.

"The fact of the matter is, these guys are a tremendous success story. They've made every quarter, and their financial performance has been solid. The issues with the stock have more to do with the Street not listening to the management team, not the management team not delivering on what they said they would."

— Ryan Lawler, Reporter, Light Reading

(0)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
Flash Poll
LRTV Documentaries
Cable Eyes Big Technology Shifts

4|16|14   |   03:02   |   (4) comments


US cable engineers are facing a lot of heavy lifting in the coming years, notes Light Reading Cable/Video Practice Leader Alan Breznick.
LRTV Custom TV
Maximizing Customer Experience & Assuring Service Delivery in an IP World

4|15|14   |   4:57   |   (0) comments


Steven Shalita, VP of Marketing, NetScout Systems, Inc., discusses the challenges cable/MSO operators face in assuring the delivery of new IP-based services. Key points include the value of proactively managing performance, and using rich analytics and operational intelligence to better understand service and usage trends, make smarter business decisions and ...
LRTV Documentaries
Bye-Bye DVD: Consumers Embrace Digital Video

4|10|14   |   04:17   |   (7) comments


Veteran video analyst Colin Dixon, founder and principal analyst of nScreenMedia, says research shows 56% are using digital video already.
LRTV Documentaries
Video: TW Cable Puts Multicast Gateways to the Test

4|8|14   |   04:13   |   (1) comment


Tom Gonder, a chief architect at Time Warner Cable, explains how its trial of multicast gateways is impacting IP-based video plans.
LRTV Custom TV
Managing & Monetizing Big Data in Operator Environments

4|7|14   |     |   (1) comment


At Mobile World Congress, Gigamon's Director of Service Provider Solutions, Andy Huckridge, and Heavy Reading Analyst Sarah Wallace discuss the 'big data' issues facing carriers and operators today.
LRTV Huawei Video Resource Center
Data Center Energy – Build Your Data Center in a Modular Way

4|7|14   |   2:13   |   (0) comments


Dr. Fang Liangzhou, VP Network Energy Product Line, shared his thoughts about the challenges for data centers during CeBIT 2014.
LRTV Huawei Video Resource Center
Agile Network Solution – An Overview of Huawei's Agile Network Solution

4|7|14   |   2:31   |   (0) comments


Ajay Gupta, Director of Product Marketing, Networking Product Line, gives an overview of the Agile Network Solutions during CeBIT 2014.
LRTV Huawei Video Resource Center
Huawei’s eLTE Voice Trunking, Video and Data Applied for Railways

4|7|14   |   1:38   |   (0) comments


Gottfried Winter is the Sales Director at Funkwerk, a German specialist in GSM-r terminals and a long-time partner of Huawei. At CeBIT 2014, Winter talks to Light Reading about this partnership and the integration of enhanced voice trunking, video and data functions.
LRTV Huawei Video Resource Center
LeaseWeb Speaks Highly of Huawei's Datacenter Products

4|7|14   |   1:37   |   (0) comments


Rene Olde Olthof, Operations Director LeaseWeb, talks about the next data center transformation during CeBIT 2014.
LRTV Documentaries
Comcast: Reshaping the Cable Network Architecture

4|3|14   |   07:11   |   (8) comments


Shamim Akhtar, Comcast's architect and senior director of network strategy, explains why the cable company is moving to a more distributed network architecture.
LRTV Custom TV
VMware CEO Pat Gelsinger at Mobile World Congress

4|1|14   |   3:41   |   (0) comments


VMware CEO Pat Gelsinger speaks to Heavy Reading about the value of virtualization spanning from the data center to service provider networks to mobile devices.
LRTV Huawei Video Resource Center
Analysts' Impressions of Huawei SoftCOM at ONS 2014

4|1|14   |   1:11   |   (0) comments


After visiting the Huawei booth at ONS, Lee Doyle of Doyle Research gives his appraisal of Huawei's SoftCOM solution.
Hot Topics
BlackBerry Invests in Healthcare IT Startup
Sarah Reedy, Senior Editor, 4/15/2014
Volvo: AT&T HSPA+ Can Drive My Car
Sarah Reedy, Senior Editor, 4/16/2014
T-Mobile Petitions Operators to Kill Overages
Sarah Reedy, Senior Editor, 4/14/2014
Cisco & VMware Are Apple & Google of SDN
Mitch Wagner, West Coast Bureau Chief, Light Reading, 4/14/2014
Mobile Apps Susceptible to Heartbleed, Too
Sarah Reedy, Senior Editor, 4/14/2014
Like Us on Facebook
Twitter Feed