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Cisco Talk Boosts Acme's Stock

Ray Le Maistre
8/30/2012

IP networking specialist Acme Packet Inc. (Nasdaq: APKT) saw its share price leap by more than 10 percent to $19.73 Wednesday as rumors of a takeover bid from Cisco Systems Inc. (Nasdaq: CSCO) circulated on Wall Street.

That leap takes Acme Packet's share price back up to late June levels, but still way below the price it commanded for most of the first five months of 2012, when it ranged between $22.88 and $35.99.

The value of its stock has taken a hit during the past few months, though: The vendor, best known for its session border controllers (SBCs), is among the listed companies that have seen their market capitalizations dip in recent months due to slower carrier capex spending. (See Acme Packet Points to Capex Weakness.)

Acme Packet's current share price gives it a market capitalization of about $1.36 billion, much lower than the near $3 billion ($45 per share) the vendor's management team had allegedly targeted when, according to unconfirmed reports, it was fishing for bids earlier this year.

What would Cisco, or anyone else, want with Acme Packet? It's still the leader in the niche and, more importantly, the SBC market and has developed multiple unified communications capabilities. But it's also a player in two key developing areas for LTE mobile operators that would also be attractive to potential suitors: Its IMS (IP Multimedia Subsystem) systems enable 4G voice (or voice over LTE, VoLTE) services; and its Diameter signaling controller product (formerly known as the Policy Exchange Controller) manages the Diameter signaling traffic that runs over and between LTE networks. (See 4G Voice Still Just a Whisper , Acme Packet Supports VoLTE and Acme Unveils Policy Exchange Controller for LTE.)

In the second quarter of this year, Acme Packet generated revenues of $67.6 million and reported a small net loss of $0.1 million. (See Acme Packet Posts Slight Q2 Loss.)

— Ray Le Maistre, International Managing Editor, Light Reading

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