Light Reading

Oracle to Acquire Acme for $1.7B

Ray Le Maistre
2/4/2013
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Oracle Corp. opened the week with a US$1.7 billion bang by announcing an agreement to acquire IP networking systems specialist Acme Packet Inc. for $29.25 per share, a 22 percent premium over Acme's closing price Friday of $23.93.

The deal values Acme Packet at $2.1 billion, but Oracle will be shelling out about $1.7 billion once the value of Acme's cash, short-term investments and other assets are taken into account.

The news sent Acme's share price soaring by 22.4 percent to $29.30, slightly above the agreed purchase price.

Acme is the long-term leader in the market for session border controllers (SBCs), which manage IP traffic at the borders of networks (where carrier networks intersect and where carrier networks connect with enterprise networks). It has 1,900 customers and has its technology deployed at 89 of the world's top 100 communication service providers (CSPs).

That technology will become increasingly important in the mobile world as SBCs play a critical role in the IMS (IP Multimedia Subsystem) architecture that's set to be adopted by many major wireless operators as they enable 4G voice services (otherwise known as Voice over LTE) on their networks.

Acme Packet, which just announced revenues of $274.4 million and a net loss of $5.2 million for the full year 2012, is also active in the growing and important market for Diameter signaling controllers. (See Diameter Matters.)

Oracle says it plans to combine Acme's portfolio with the various Service Provider Information Technology (SPIT) capabilities (multiple OSS and BSS products) its Oracle Communications unit already offers to CSPs.

Why this matters
Acme is embedded in the core networks of the world's largest network operators and, with its expertise in SIP voice traffic management and understanding of carrier network developments, is on course to become an even more invaluable supplier as 4G voice services are developed by mobile operators. It's also an important partner for many major equipment and software vendors.

Oracle clearly sees Acme as a way to develop deeper ties with the CSP community and leverage Acme's installed base to introduce its range of software and IT products, especially as cloud service architectures and Big Data analytics strategies take hold in the telecom sector.

It also signals Oracle's entry into the dedicated telecom infrastructure market, prompting the questions of whether this is the first of multiple strategic telecom equipment acquisitions for Oracle and whether it might lead other major IT/software players to follow suit.

The move will likely also affect some of Acme's existing partnerships, especially those with the likes of Hewlett-Packard Co. and IBM Corp..

— Ray Le Maistre, International Managing Editor, Light Reading

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LR1234
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LR1234,
User Rank: Light Beer
2/5/2013 | 12:17:29 AM
re: Oracle to Acquire Acme for $1.7B
I don't know of any service providers or enterprises that are specifically ASKING for Sun/Oracle hardware. Most people are trying to figure out how to get Sun/Oracle OUT of the datacenter. -á

First of all, you look at how Oracle is gouging all of the legacy Sun customers. Why keep Oracle/Sun if you can migrate to something newer and better? You'd have to be a die-hard Larry Ellison fan or a bitter clinger-on to maintain any loyalty at this point.-á

Second of all, apps just perform better on the Intel CPUs. Take an app that runs on Solaris/SPARC. Compile it on a Linux/Intel box. Compare the performance side-by-side. The Linux/Intel app almost always runs much faster (YMMV and depends on if the workload is CPU bound, I/O bound, or whatever).-á
LR1234
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LR1234,
User Rank: Light Beer
2/5/2013 | 12:11:36 AM
re: Oracle to Acquire Acme for $1.7B
I don't know much about Acme's offerings (not an SBC guru) but a quick search indicates that at least some of Acme's software runs on Linux. Maybe that's not the case for some of their other stuff, I dunno.

But the people I know in telecom tells me that Linux is where everything is going, if it's not there already, based on the fact that Solaris (licensing) and Oracle hardware (SPARC in particular) are at a price disadvantage.-á

If Acme is already on Linux, would they go back to Solaris and SPARC CPUs? I don't see that, unless Oracle can make sacrifices on the price point, and somehow I don't think Oracle can compete with Intel on those costs.-á

Oracle does have a nice lineup of Intel/AMD servers in both NEBS and non-NEBS categories; that's the only thing I can realistically see them bundling in hardware wise to stay price-competitive-áwith Acme's rivals (And even among Intel/AMD servers, Oracle is not very competitive price-wise).

Solaris on SPARC doesn't go into the "cloud" very well since you need pricey SPARC hardware to do it, if the intent is to use a customer's in-place infrastructure to do it (which would probably be already running VMWare or some other COTS Intel hypervisor). Nobody with any sense is going to deploy a Solaris/SPARC virtualization stack today.
brookseven
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brookseven,
User Rank: Light Sabre
2/4/2013 | 11:42:36 PM
re: Oracle to Acquire Acme for $1.7B
Ray,

You can not really go virtual...by that I mean run in a VM of some sort...and then expect to get HW optimization.

seven
Phil Harvey
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Phil Harvey,
User Rank: Light Beer
2/4/2013 | 11:14:59 PM
re: Oracle to Acquire Acme for $1.7B
I don't think selling Sun hardware is a big part of the logic for the deal, I was just remarking that it's a nice add-on. ORCL will likely be able to say to customers that they can deliver Acme software on whatever platform suits them GÇö or it can provide one.
Ray Le Maistre
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Ray Le Maistre,
User Rank: Light Sabre
2/4/2013 | 9:42:53 PM
re: Oracle to Acquire Acme for $1.7B
I think the 'packaging' will be tried but many comms service providers will still have different purchasing decision-makers for traditional Oracle stuff and the deep network tech that Acme has developed -- at least for now. Of course if Oracle/Acme can really get something going with a virtualized session border controller on a Sun server then you have the start of a double-whammy for Oracle, and then, of course, those SUn servers could start to host all sorts of software... BUt I imagine Oracle's biggest challenge will be in getting the RFP/purchase order logistics lined up in a way that will suit a suite (and sweet) sale.
FritzNelson
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FritzNelson,
User Rank: Light Beer
2/4/2013 | 9:03:22 PM
re: Oracle to Acquire Acme for $1.7B
Another possibility: Oracle often touts how many telco customers it has. It won't name them, but it's obviously really important to them. Now, with Acme, there are 1900. Even though there is overlap, I imagine that Oracle sees the potential to sell all of them either more Oracle "stuff" or an integrated, all-Oracle approach to even running their own businesses, analyzing customer data and so on. Oracle has done something similar on the cloud front, using some of its acquisitions of smaller cloud players to try to sell broad-based cloud offerings to enterprise customers -- ones that expand from just Taleo (talent management in the cloud) to Fusion apps like ERP.
kingcharles
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kingcharles,
User Rank: Light Beer
2/4/2013 | 7:01:33 PM
re: Oracle to Acquire Acme for $1.7B
Licence cost will go trough the roof :-(
Gabriel Brown
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Gabriel Brown,
User Rank: Light Sabre
2/4/2013 | 4:36:31 PM
re: Oracle to Acquire Acme for $1.7B
Oracle's a huge business. Even the comms part has quite a bit of diversity. I will be interested to hear from them on the analyst call what their motivations are for this deal.-á-á
Ray Le Maistre
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Ray Le Maistre,
User Rank: Light Sabre
2/4/2013 | 4:27:28 PM
re: Oracle to Acquire Acme for $1.7B
Good point, Gabe. IMS applications are prime for the network functions virtualization. -á I wonder to what extent Acme's capabilities could be 'optimized' for Oracle hardware?-á
Gabriel Brown
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Gabriel Brown,
User Rank: Light Sabre
2/4/2013 | 4:15:12 PM
re: Oracle to Acquire Acme for $1.7B
Moreover, Acme is further along than many vendors in virtualizing its applications. I'd venture that-áthis is-áa big part of the attraction.
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