Robert DeFrancesco s

TechStockProspector.com
July 21, 2011

Acme Packet (APKT) Shares Fall Sharply, But Q2 Earnings Strong

-----------------------------------------------------------------------------------------------------Tech-Stock Prospector is now available in the Amazon.com Kindle Store in the Business & Investing section of the online magazine stand. Here s the Kindle link: http://www.amzn.com/B004T6Z0ME ----------------------------------------------------------------------------------------------------The networking sector has come under heavy selling pressure this week because of weaker-than-expected results in the EMEA region at Riverbed Technology (RVBD) and F5 Networks (FFIV). In cautious anticipation of today s earnings report, shares ofAcme Packet (APKT, $60.10), a provider of session border controllers to enterprises and service providers, declined 13% during the past three trading sessions. The stock is down 20% from its July 7 high of $75.17 and is off 28% from its 52week high of $84.50, which was set on April 29. For Q2, Acme Packet reported EPS of 29 cents, two cents above the consensus estimate, on revenue of $79.7 million (+49% year over year), vs. the consensus of $76.9 million. Product revenue rose 8% sequentially to $64.7 million, with strength most evident in the Net-Net 4500 product line. Gross margin was stable at 84% and operating margin rose 100 basis points sequentially to 41%. Management went out of its way to emphasize that the EMEA region (about 25% of total revenue) experienced its third consecutive quarter of sequential revenue growth. North America, the biggest contributor to revenue at 58%, saw sequential growth as well. The company added a record 94 new customers, including 38 service providers and a record 56 enterprise accounts. Overall, sequential revenue growth is expected for both Q3 and Q4.For 2011, Acme Packet raised its EPS and revenue guidance once again. Management now sees EPS of $1.14 to $1.18 (previous guidance range was $1.10-$1.15) on revenue of $315 million to $320 million (previous range was $310 million to $315 million). The stock is trading around $59.50 after hours. Is the 2H outlook conservative? I ll provide full Acme Packet coverage tomorrow at TechStockProspector.com.

For more on the tech sector, check out the July 2011 issue of Tech-Stock Prospector (TSP #113), which is now available for the Amazon Kindle and via the TechStockProspector.com website. Here are some of the topics covered in this issue: *A look at the latest tech IPOs, including LinkedIn *A disruptive play in storage *Cloud stocks rebound *Two companies beating up on Cisco *A storage company that s gaining ground *Is Apple going to $500? *What s all the hype about Google+? *Volatility in optical networking *Playing the Big Data trend *Competition heats up in business intelligence/analytics *A potential takeover target for Hewlett-Packard *Oracle looks to growth in hardware *A beneficiary of the boom in mobile data -----------------------------------------------------------------------------------------------------Tech-Stock Prospector is now available in the Amazon.com Kindle Store in the Business & Investing section of the online magazine stand. Here s the Kindle link: http://www.amzn.com/B004T6Z0ME -----------------------------------------------------------------------------------------------------Tech-Stock Prospector Managing Editor Rob DeFrancesco has more than 20 years of experience covering the tech sector. He is a former senior writer with Louis Rukeyser s Wall Street. TechStockProspector.com, launched in 2003, is an investment-research service focused primarily on the networking, storage, security, wireless and software sectors. Annual subscription: $350. For more information or to place an order, call 800-392-0998.