VoIP Systems

AudioCodes Warns; Analysts Blame Acquisitions

The Israeli VOIP gear maker AudioCodes Ltd. (Nasdaq: AUDC) warned Wednesday that its first quarter numbers would be less than expected. (See AudioCodes Alters Outlook.)

The company had forecast its first quarter 2007 revenues to be around $44.7 million, or 5 percent greater than its fourth quarter revenues of $42.5 million. AudioCodes says today its first quarter revenues will be in the $36 million to $38 million range. (See AudioCodes Reports Q4.)

AudioCodes stock closed down $2.10 (22.01%) at $7.44 on the Nasdaq Wednesday. AudioCodes blames the revenue sag on a "slower than expected intake of orders" caused by "weaker market conditions."

"We hope this is a minor setback and remain confident in our strengths and in the long term growth prospects of AudioCodes," AudioCodes CEO Shabtai Adlersberg said in a statement Wednesday.

Nollenberger Capital Partners analyst Reg King says some of AudioCodes's problems can be traced to its 2006 acquisitions of NetRake and Nuera.

AudioCodes bought the session border controller company Netrake last July for $11 million. It acquired fellow media gateway company Nuera last May for $90 million. (See AudioCodes to Buy Netrake and AudioCodes Nabs Nuera for $90M.)

"They have really sunk some resources into those companies in the last quarter to really buckle down and get those businesses on track," King says. But more work still needs to be done, he says.

"While we believe there may have been some softness on the technology side, we believe that the majority of the miss emanates from missed expectations within the Nuera and NetRake businesses," write ThinkEquity LLC analysts Eric Kainer and Anton Wahlman in a note issued Wednesday.

"Maybe some of those 'public company' disciplines didn't completely filter down to all the salespeople in all the different parts of the acquisitions," Kainer says. "I believe it was more of an issue with Nuera, although I think there were some issues on the NetRake side also."

Kainer and Wahlman also lowered their expectations for AudioCodes's 2007 revenue to $164 million from $190 million.

AudioCodes sells VOIP media gateways and session border controllers to OEM partners and directly to service providers.

AudioCodes executives did not return calls for comment by deadline.

— Mark Sullivan, Reporter, Light Reading

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