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More Proof the Cloud Rally Isn't Over

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Skeptics point to insane social-media valuations, dot-com history, and Twitter's troubles when they declare that cloud computing is a bubble due to pop any day. Don't be too sure.

Last night, Acme Packet (Nasdaq: APKT  ) once again beat estimates and raised guidance. The implication? Network operators are still buying gear that makes it possible to reliably and securely deliver data via the cloud.

Revenue rose 45% to $74 million while adjusted earnings improved 69% to $0.27 a share. Analysts had been calling for $71.4 million and $0.25 a share, respectively, according to Yahoo! Finance data.

Management also boosted guidance. Last quarter, Acme executives told investors to expect $1.05 in per-share earnings on $300 million in 2011 revenue. Those figures have been updated to $1.10 to $1.15 a share on $310 million to $315 million in revenue, roughly in line with projections. And yet both Acme and analysts may still be lowballing.

"We estimate that our total addressable market is as simple as A plus B, where A is the opportunity for our solutions to replace legacy voice connection technologies," CEO and co-founder Andy Ory said during a call with analysts last night.

"We now estimate that more than $30 billion of legacy solutions such as gateways have been deployed in service provider and enterprise networks to support voice applications. Another $2 billion continues to be spent annually for these legacy technologies," Ory said. 

The message? Cloud services can't function properly without a more modern infrastructure for delivering data, especially VoIP services created by the likes of Skype, Vonage (Nasdaq: VG  ) , Google (Nasdaq: GOOG  ) , and 8x8 (Nasdaq: EGHT  ) , which reports earnings next month.

Interestingly, Acme Packet isn't the only company making this claim. Fast-growing Riverbed Technology (Nasdaq: RVBD  ) -- another Motley Fool Rule Breakers pick -- reported strong earnings and guided to 36% Q2 revenue growth due to demand for its Steelhead appliances for moving data efficiently across Web-connected networks.

So say what you will about crazy valuations and silly social-media apps. The more users turn to the cloud, the greater the need for network operators to make large, sustained investments in Acme Packet's and Riverbed's gear.

Do you agree? Disagree? Tell us in the comments box below. You can also rate Acme Packet in Motley Fool CAPS.

The Motley Fool recently introduced a free My Watchlist feature that allows users to stay ahead of the curve and receive up-to-date news on companies like Acme Packet, or any of its peers or competitors. To get up-to-date news and analysis, add these companies to your watchlist today:

Google is a Motley Fool Inside Value pick. Acme Packet, Google, and Riverbed Technology are Motley Fool Rule Breakers recommendations. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team. He owned shares of 8x8 and Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool owns shares of Google and is also on Twitter as @TheMotleyFool. Its disclosure policy can't get enough salty popcorn. You've been warned.

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