"They don't, they don't speak for us ...
No alarms and no surprises,
Silent, silent."
-- "No Surprises," Radiohead
This should have been the theme song for Acme Packet's (Nasdaq: APKT) earnings release last night, since the company had announced preliminary earnings a few weeks ago. Unfortunately, some doubts about a big order continue to weigh on shares.
The maker of session border controllers, or SBCs, saw its shares open with a 16.5% haircut the day after the preannouncement, as the knee-jerk reaction was to sell after Acme Packet said its revenue would fall short of estimates. The stock ended up somewhat recovering to close with "only" a 5.5% loss that day.
At issue was a particularly large order with AT&T (NYSE: T), as Ma Bell migrates from 3G to 4G LTE, that would bring in revenue upward of $10 million. The company had said that this order would be delayed from the third quarter into the fourth and reaffirmed its full-year outlook.
Revenue for the quarter tallied up to $70.6 million, a 25% jump from last year. Non-GAAP net income came in at $0.21 per share. These figures fell short of analysts' estimates, which were hoping for revenue of $74.6 million and $0.23 earnings per share. The results were right on target with what the company had previously disclosed.
The elephant in the room during the conference call was the AT&T order. Acme Packet CEO Andy Ory discussed the order and the overall size of the service provider but stopped short of confirming that any dotted lines had been signed. This uncertainty is contributing to the stock's plummet today, although Acme Packet is again reaffirming its outlook for the year, which has been including the order in question.
The company sees full-year revenue in the range of $315 million to $320 million and non-GAAP earnings per share of $1.14 to $1.18. In the first three quarters, revenue has totaled $224.3 million, so next quarter's revenue needs to jump in order to hit that target.
Despite the overhang, I still like the stock. It is in an enviable position to sell its wares during the inevitable transition to Voice over Internet Protocol, or VoIP, and boasts a market share upward of 60% in the SBC market. As all the major wireless carriers, like AT&T, Verizon (NYSE: VZ), and Sprint (NYSE: S), switch to LTE, Acme Packet should have plenty of opportunities ahead.
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