CEO Gaffe of the Week: Acme Packet

It's a new year and time to try new things. As you'll recall, I had a field day trying to weed through the mound of CEOs on the naughty list in 2011 and had a downright difficult time picking out CEOs that did right by their shareholders.

Today, like a cartoonish light bulb that went off above my head, I came to the realization that it'd probably be pretty easy to highlight the constant gaffes of a new CEO each week. So, consider this the inaugural "CEO Gaffe of the Week" and look for this to be a regular look every Friday at some goofy or downright dumb calls made by some of the CEOs of stocks you potentially own.

No one wants to be the first CEO on this list, but Acme Packet (Nasdaq: APKT  ) CEO Andy Ory... come on down!

The dunce cap
Acme Packet has befuddled investors, having missed earnings and then lowering guidance in the subsequent quarter. Its stock price, following a meteoric multi-year ascent, has shed around 65% of its value since touching a high of $83.73 back in April.

Under normal circumstances, just missing earnings wouldn't be enough to land a CEO on a list of corporate snafus. Earnings misses happen, and if the company is making dedicated efforts at rectifying its problems, then its CEO could actually deserve a pat on the back. That's not the case here.

The problem began during the third-quarter conference call when Ory, following previously lowered earnings guidance which it attributed to an order delay from AT&T (NYSE: T  ) being pushed into the fourth-quarter, reaffirmed the company's full-year outlook of $315 million to $320 million in sales. In fact, here's a brief excerpt from Ory during Acme's third-quarter conference call:

We remain confident in our ability to execute on our full-year business outlook. Accordingly, we expect total revenues to range between $315 million and $320 million representing full-year growth of between 36% and 38%. ... It's clear that the fundamentals of our business and market demand for our products remain strong. ... Until then [January], we are very focused on executing what we expect will be the best quarter and the best year in the company's history.

In the words of Homer Simpson, "D'oh!"

This past Tuesday, Acme Packet issued yet another earnings warning, lowering its sales guidance down to $308 million to $310 million and dropping its earnings and gross margin expectations. Blamed for the shortfall was "uncertainty in the North American service providers market." This hardly sounds like the type of record fourth-quarter that Ory seemed all but certain about.

To the corner, Mr. Ory
Is this the end of the road for Acme Packet? Probably not, given that service providers are switching in droves to the company's VoIP products. But, this is a disturbing two-quarter trend of missing or revising expectations and hamstringing investors along for the ride. Until Acme can hit its own expectations, the company and CEO Andy Ory deserve to sit in the corner facing the wall until they've learned not to mess with shareholders' hopes and dreams.

Do you have a CEO you'd like to nominate for this dubious weekly honor? Shoot me an email and a one or two sentence description of why your choice deserves next week's nomination and you just may wind up seeing your nominee in the spotlight.

Also, if you'd like a surefire way to avoid investing in companies with questionable leadership practices, I invite you to download a copy of our latest special report, "11 Rock-Solid Dividend Stocks." This report contains a wide-array of companies and sectors that are likely to keep your best interests in mind regardless of whether the market is up or down. Best of all, this report is completely free for a limited time, so don't miss out!

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He is shameless when it comes to poking fun at dubious CEO antics. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. Motley Fool newsletter services have recommended buying shares of Acme Packet. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that never wears a dunce cap.


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  • Report this Comment On January 07, 2012, at 1:22 PM, afamiii wrote:

    CEO gaffe (or not) is a real investors paradise. In investing as in most other sports, the secret is to keep your eye on the ball. In this case APKTs ball (market growth, market potential, market position, competitive advantage, revenue and earnings growth, return on assets, free cash flow growth, levels of debt, inventory growth, amd cash conversion cycle,) is looking good. Now that it has missed guidance 3% and its PE is down from +100 to mid 30s, the smart money can get out their slide rule and focus on valuations and watching for a bottom.

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