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Is It Time to Give Up on Acme Packet?

It's been quite a ride for session border controller, or SBC, specialist Acme Packet (Nasdaq: APKT  ) , with shares skyrocketing above $80 within the past couple years, only to come crashing right back down to less than $16 as we speak.

APKT Chart

APKT data by YCharts

Shares have shed as much as 16% today alone after the company issued a second-quarter update, detailing a narrow range for how its results will look when it officially reports on July 26. I had personally thought that Acme Packet was bottoming out after its first-quarter report, but alas was sorely mistaken as shares have cratered even further since, down by almost half.

Acme Packet now expects second-quarter revenue to be $66 million to $68 million, with GAAP gross margin around 79% to 80%. It will likely report a net loss of $0.01 to $0.02 per share, but on a non-GAAP basis, its bottom line should be a profit of $0.12 to $0.13. CEO Andy Ory admitted that the company was disappointed with its preliminary results and cited "continued weakness in the North American service provider market."

That's the same line we've been hearing for the past nine months or so, and Acme Packet continues to execute poorly amid a tough spending environment. The voice over LTE, or VoLTE, story remains compelling, but it's simply taking too long to pan out and investors are justifiably losing patience. The two largest wireless carriers and Acme Packet customers AT&T (NYSE: T  ) and Verizon (NYSE: VZ  ) continue to build out their respective LTE networks, with Big Red currently enjoying a rollout advantage over Ma Bell.

Analysts were looking for nearly $74 million in revenue and $0.18 in adjusted earnings per share, so Acme Packet's results will certainly fall short. Just a couple weeks ago, Jefferies analyst James Kisner cut his rating on the stock to "hold" due to "near-term hesitation by North American carriers" as carriers focus more heavily on wireless investments as opposed to wireline investments.

I had previously given the company an outperform CAPScall when I thought shares were bottoming out, but I'm now giving up and ending that call today.

Acme Packet was always a risky pick, and unfortunately it hasn't worked out for investors. Instead, consider these three Dow stocks that dividend investors need for safer returns. They boast highly sustainable businesses and nothing pleases them more than giving it back to shareholders. This report is 100% free.

Fool contributor Evan Niu owns shares of AT&T and Verizon Communications, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Acme Packet. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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