"The acquisition clearly moves Acme Packet into the enterprise market by allowing it to sell end-to-end solutions for new features, such as SIP trunking, versus simply being a strategic partner," writes senior analyst Jim Hodges of Heavy Reading in an email reply to questions yesterday. "It provides them an established market channel, too."
Yes, by taking on Covergence Inc. , Acme now has a session border controller product for smaller enterprise locations and branch offices. Last month, it had launched into the enterprise space with the Net-Net 3800, but Acme says that product was aimed at branch offices and companies with 1,000 or more employees. It was smaller than what Acme had done before, but still kinda big. (See Acme Unveils Small SBC.)
By contrast, Covergence was hooking up smaller enterprises, with 500 to 1,000 employees, to service provider SIP trunking networks or larger corporate phone networks. Covergence made session border controller software, based on Linux, that could even be installed on off-the-shelf hardware to serve offices with as few as 20 employees. (See Covergence Launches SBC.)
With its Net-Net 3800, Acme took a step down the carrier-class, big-box ladder into the enterprise market. By buying Covergence, "we're now at ground level -- we've gone all the way down the ladder," says Seamus Hourihan, Acme's VP of marketing and product management.
It's unclear how far into the unified communications applications business Acme will go, as Covergence had some interesting assets there as well. (See Covergence Tackles UC.)
Covergence had raised more than $31 million in its life as a private company, and 39 of its 59 employees, which include full-timers and consultants, will join Acme at its headquarters in Burlington, Mass. On its earnings call yesterday, Acme said it has 70 enterprise customers without Covergence and Covergence had more than 100 enterprise customers on its own.
Acme's revenues for the first quarter of 2009 were down only 2 percent, while earnings and profits slid more noticeably. (See Acme Packet Reports Q1.)
Table 1: Earnings Snapshot: Acme Packet
|Net Income ($M)||5.000||2.800||-44%|
|Share Price ($)||9.31||8.41||-10%|
|Source: Acme Packet|
EPS and Net Income are GAAP; Share price current as of 12:25 PM EDT.
Acme brass says it expects to get $4 million in revenues from Covergence in the final eight months of the fiscal year, so that puts Covergence at about a $6 million a year business.
After noting that Acme's past revenue growth, one analyst says that upside of the session border controller market is still very high, but very hard to predict. "If carriers reaccelerate VoIP deployments faster than we currently anticipate, and if stand-alone SBCs prove to be the architecture of choice for carriers vs. integrated SBC functionality on routers and switches, revenues could reaccelerate faster than the 13 percent growth we currently forecast for 2009 and earnings could also exceed our forecasts by a wide margin," wrote JP.MorganChase analyst Ehud Gelblum, in a research note to clients this morning.
— Phil Harvey, Editor-in-Chief, and Craig Matsumoto, West Coast Editor, Light Reading