Acme Packet And Voice Over LTE

The reason the maker of session border controllers (SBC) has been sent packing is two fold. First, it had a tremendous run in 2009-2010, and became in the extreme overvalued on a P/E Ratio basis. Momentum traders pushed it into the stratosphere when its sector was in vogue. F5 Networks, another telecommunications infrastructure player, suffered a similar fate and was as well sent to the guillotine. In early 2011, F5 topped out at $145 and sunk to $69, only to bounce back into the $130 range. I'm not suggesting the same price/action will happen to Acme Packet, nevertheless it has the potential to do so based on its projected growth.

The second reason the stock has been unconscious is that they had a bad quarter and lowered guidance for the first half of 2012 while their last conference call. The smoking gun was that North American telecommunications carriers like AT&T and Verizon reduced capital expenditures. Andy Ory is at the helm of Acme Packet, and, here are some bullet points from the CEO's presentation while the last quarterly report:

Smartphone or tablet

You probably own a smartphone or tablet, and even if you don't, most people are aware of the explosive growth in the wireless industry. Right now, there is an introduction of LTE (Long Term Evolution, latest standard in the mobile network technology) networks by some of the major carries like Sprint. Television commercials bombard you with information about these faster 4G networks. Market innovation firm In-Stat predicts that LTE (Long Term Evolution, latest standard in the mobile network technology) mobile broadband subscriber growth will increase by 3,400% by 2015. Granted, you are starting with a small user base, nevertheless this is where mobile cyberspace is heading. Things just vanish into thin air.

Going back to CEO Ory, he comments about this possibility for Acme Packet in the conference call: "As LTE networks begin to take hold, we believe that a whole new world of communications known as voice over LTE will be assured in. We expect that significant growth in the number of smartphones and in the percentage of these that are IP-enabled will drive a significant growth possibility for us. During we have already secured a number of major architectural wins in voice over LTE networks, we believe that material investments in VoLTE , voice over LTE, may not begin until 2013."

The result of these VoLTE networks

Exponential growth in mobile traffic will be the result of these VoLTE networks. Furthermore your run of the mill phone calls, e-mails, and, text messages, there will as well be more robust applications like Skype and FaceTime that will flourish because of the faster mobile broadband.

According to a recent article in Investor's Business Daily: "Mobile traffic is often measured in exabytes. One exabyte is equal to 1 billion gigabytes. By 2016 global mobile traffic is expected to reach 10.8 exabytes a month, an increase of 18-fold over 0.6 per month of exabyte usage last year, says a February report by Cisco. In six years Cisco estimates mobile traffic will grow at an annual growth rate of 78%." Faster 4G LTE networks will be a big reason we will see the expansion of data use.

Another step Acme Packet has taken to get a running head start in VoLTE is a recent partnership with Broadsoft. Broadsoft is a VoIP (Voice over Internet Protocol) leader, and, the two entities offer a pre-intergrated platform that allows key operator services over VoLTE. These operator services may be functions like caller ID and call waiting; things we take for granted in cellular networks. The two companies did a joint presentation at the Mobile World Congress in Barcelona previously this year.