Thursday, February 08, 2007

Color on quarter: Acme Packet (NASDAQ:APKT)

Acme Packet (NASDAQ:APKT) is getting some comments this AM after the co issued results last night:

- JP Morgan notes Acme Packet posted strong Q4 results beating their ests. across the board. Revs of $23.7M, up 6.3% q/q and 87.0% y/y, beat firm's $22.5M by $1.2M while EPS (ex. stock comp) of $0.11 exceeded est. by $0.02. While Acme only reaffirmed its prior FY07 guidance rather than raising it, they continue to believe carriers are in the very early stages of an industry transformation leading to multiple Tier 1 services providers making broad and deep VoIP deployments with Acme poised to capitalize having a 1-2 year lead over its competitors and further entrenching its SBCs each day. Hence they reiterate Overweight rating.

They are raising their Q107 and FY07 EPS ests. (ex. stock comp) to $0.08 and $0.34 from $0.07 and $0.32 due somewhat to slightly higher Q1 revenue of $24.5M vs. firm's previous estimate of $24.1M, but mainly due to slower gross margin erosion from the increasing mix of international revenue through channel partners than previously expected.

Acme appears to be further entrenching itself in carriers' networks. JPM'sbiggest takeaways from management's commentary this quarter were 1) Acme saw greater sales of larger line-size SBCs leading to an increase in ASP, 2) the take-rate on additional features was stronger this quarter also contributing to the ASP increase, and 3) Acme saw no significant increase in competition.

They continue to believe the next leg up in Acme's revenue is a "when" not an "if" story.

- ThinkEquity says Acme Packet (APKT) beat 4Q slightly but solidly, as revenue and gross margin were ahead of plan. Guidance was unchanged. Firm continues to believe that APKT benefits from the broadest SBC product range, widest market coverage, and deepest network understanding, especially in Tier 1 accounts. Firm is not increasing their estimates, although they believe there is upside to model if APKT can maintain market share.

Firm's optimism is based on the expectation that the market continues growing briskly-between 50% and 100%-while Acme approximately maintains market share. They still see no consistent competition to Acme in the largest Tier 1 networks. Ultimately, they believe that Acme's clients will fire added growth both by building out more infrastructure within their networks, and also within their clients' and partners' networks.

Maintains Buy and $25 tgt.

Notablecalls: The stock was down 2 pts in after hrs action. I suspect the stock will retrace some of the decline over the trading day as things continue to be bright for the co.

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