Acme Packet tumbles as Q4 falls short of expectations

After four straight quarters of earnings bonuses for investors, Acme Packet (Nasdaq: APKT) laid its second profit egg in a row today, reporting fourth quarter non-GAAP EPS of 26 cents, missing Wall Street expectations by 2 cents and falling 40 percent off its earnings a year ago. The market reacted quickly, dropping the company's share price by 10 percent in after hours trading.

The company said rising costs and a soft market in North America, where service providers were reining in capex, were to blame.

Those conditions are likely to persist, said CEO Andy Ory, during an earnings call in which he predicted more woe in the year ahead, growth of just 10 percent compared to Wall Street estimates of nearly double that. The company sad it expects full-year profits of 96 cents to $1 a share, below the $1.24 expected by analysts.

"This reflects a slowdown in capex in the second half of the year and delays caused by consolidation activities among various service providers," Ory said. "We don't expect the North American capex environment to improve in the first half."

Acme reported $83 million in revenue for the quarter, missing expectations of $85.2 million. Total revenue in 2011 was $307.3 million, an increase of 33 percent compared to $231.2 million in 2010.

In January, Acme Packets share price tumbled some 20 percent after the company downgraded guidance for the year, blaming a turbulent service provider market in North America then, too.

"Outside of the North American service provider market, Acme Packet continued to perform very well--particularly in our enterprise business as well as in our Europe and Latin America businesses," Ory said at the time. Unlike today, however, Ory took a positive note on the future, saying:"Looking ahead, we believe we are very well positioned to leverage the broad, multi-year, secular growth drivers associated with the global transition from TDM to IP for real time communications like voice and video."

The enterprise session border controller (SBC) market was busy earlier in 2011, seeing a 55 percent jump in the first quarter. Hosted unified communications and SIP trunking were among factors that played a role in the growth. As in the service provider SBC segment, Acme Packet is the lead dog in the enterprise market, with Cisco Systems (Nasdaq: CSCO) in second place, followed by Ingate and Sipera.

The enterprise SBC market, however, remains fragmented below that top tier, which means declining prices may loom.

For more:
- see this release
- see this Reuters article

Related articles:
Acme Packet stock takes a hit as it lowers guidance for year
Acme Packet launches first SBCs to be qualified under Microsoft's new Enterprise SBC category in UCOIP
Acme Packet E-SBCs integrated in to HP's UC solutions