June 28, 2010 - Acme Packet, Inc. (APKT-NASDAQ) provides session border controllers (SBCs) that enable service providers, enterprises, and contact centers to deliver interactive communications and data services across Internet protocol (IP) network borders in the United States, Canada, and internationally. The SBCs are deployed at the borders between IP networks, such as between two service providers; between a service provider and its enterprise, residential, or mobile customers; and between enterprises IP network and their service provider's network. The SBCs act as the source and destination for signaling messages and media streams entering and exiting the network.

It also provides Acme Packet Net-Net platforms to address a range of interactive communications requirements; Acme Packet Net-Net OS-E, an enterprise SBC software; Acme Packet Net-Net EMS, a network element management application for the Net-Net family of producs; Acme Packet Net-Net SAS that provides off-line collection, reporting, and analysis of session call detail records; and Acme Packet Net-Net RMC, an element management application.

In addition, the company has professional, post-installation, and training services. Acme Packet, Inc. sells indirectly through distribution partners and through a direct sales force. It serves primarily incumbent and competitive local exchange and long distance providers, international service providers, cable operators, voice application service providers, enterprises, universities, and government agencies. The company was formerly known as Primary Networks, Inc. and changed its name to Acme Packet, Inc. in January 2001. Acme Packet, Inc. was founded in 2000 and is headquartered in Burlington, Massachusetts.

In 2005 (when the company went public), earnings were negative 2 cents a share. Then they jumped to 50 cents, followed by 30 cents and 18 cents in 2008. In 2009, they turned, went up to 35 cents. This year, 9 analysts think the company will report 68 cents, almost double. Next year, they see 83 cents.

Revenues have grown nicely, every year since 2005: $36.1 million; $84.1 million; $113.1 million; $116.4 million; then 141.5 million in 2009. This year, 9 analysts have a consensus estimate of $211.78 million, up 49.7%, then see $262.19 million next year, up another 23.80%. Clearly, Acme is selling something people want.

The stock reflects this good news, and maybe more. It's up over 50% in the last 3 months. First quarter earnings were a nice source of fuel for the run up. They were 16 cents a share, 60% above the estimates of 10 cents. Then management upped its own 2010 profit outlook.

Better performance will come from the company's current product offerings as well as the new, next generation telecom networks. Margins will also increase as management has been cutting costs. Further its higher end products with better margins are selling better. In all, look for operating margins to continue to widen.

One of the reasons for APKT's success is the migration from circuit-switched based networks to Internet Protocol (IP) based networks. There's also increasing demand for Acme's Session Border Control devices. One other hot-seller: higher capacity, software rich models, ones like the 4500 Advanced Telecommunications Computing Architecture blade. (One you probably have on order for your personal use.)

New customers are being added, 58 in the first quarter. Now APKT has over 1000. IP communications networks are booming globally as well as domestically. About 40% of first quarter revenues came from overseas. One customer, Verizon Wireless, accounted for 14% of the first three months' sales.

As for future growth: Acme offers products in the multiservice security gateways market. These help connect mobile voice and data subscribers over wireless networks in locations with poor coverage. Analysts see this market growing 50% a year through 2015.

More numbers: Market cap is $1.75 billion. Forward P/E is 35. Price to book is 7.79. Book value is $3.67. Operating margin for the last 12 months was 17.74%. Profit margin was 14.04%. Return on assets was 7.98%. There's $188.57 million in cash for $3.11 a share. There is no debt. Current ratio is 5.29. Beta is 1.86. The 52-week low was $7.54, the high $30.67. There are 60.72 million shares outstanding with a Float of 45.95 million. Insiders own 25.95% of the stock while institutions own 73.20% of the Float. There is no dividend.

This is an exciting stock, one that has performed better than most over the last 15 months. It seems a little ahead of itself. But if management surprises every quarter with above estimated earnings, this stock may see much higher numbers. Remember, that stocks that run this far this fast sometimes come down even faster if one quarter's results are less than expected.

- Company Web site: www.acmepacket.com

- Ted Allrich