Shares of Acme Packet
Buy
Acme Packet was the leader in the SBC, or Session Border Controller, market last year, with about 57% share. Today, more than 1,600 customers in 107 countries support the company's strong market position.
Wireless carriers including AT&T
Sell
The network solutions provider spooked investors again recently when it lowered its second-quarter guidance. Once again, Acme blamed cutbacks in telecom spending by some of its largest clients including AT&T, Verizon, and Sprint Nextel
Fellow Fool Evan Niu shared the disappointing forecast last week along with his decision to close his outperform CAPScall on the stock. As he pointed out, this isn't the first time Acme has lowered its guidance in recent quarters. According to Reuters, Acme's SBC business is showing signs of slowing growth, which is another headache for the company as it tries to regain investor confidence.
Hold
Acme remains a leader in the space, despite the gloomy near-term challenges it faces. The company's market position along with its healthy profit margins has some investors hoping for a turnaround. A solid balance sheet with zero debt is another positive. In fact, analyst James Kisner from Jefferies & Co. points out that Acme has grown its cash reserves since the previous quarter.
Current shareholders may wish to hold on to shares at least until the company reports earnings later this month. However, the longer-term outlook for Acme remains murky.
Final answer?
Concerns over enterprise spending have put a lot of pressure on Acme. Still, from where I sit it doesn't seem management has a handle on the challenges it faces, which is why I think the stock is a sell today. Shares are down nearly 80% so far this year, and unfortunately, with growth in SBC slowing, the risks outweigh the benefits.
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