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Cisco eyeing Acme Packet?

Rumor boosted session border controller leader's stock this week, but skeptics don't see a fit

Rumors were circulating this week that Cisco was eyeing Acme Packet as a potential acquisition and it goosed Acme Packet's stock. Benzinga.com, citing unnamed sources, said Cisco was considering a bid for the Bedford, MA., session border controller leader and that Acme Packet has hired an advisor to handle potential bids.

Benzinga stated that Cisco and Acme Packet both declined to comment. The reports, though, bumped Acme Packet's stock up almost 10.5 % on Wednesday. Benzinga also reports that Acme Packet has been rumored to be seeking $45 per share offers since February, which, with 68.8 million shares outstanding, values the company at $3.1 billion vs. a market cap of $1.3 billion.

But there are those that believe the rumors were staged. This post by investment consultant Adam Gefvert on Seeking Alpha.com suggests the rumors were started by traders looking to make money.

Gefvery goes on to state that he does not believe Acme Packet makes sense for Cisco, which offers its own session border controller and other session delivery products for both enterprises and service providers:

Acme Packet's revenue is declining and it's losing more and more of its market share to competitors like Cisco. Acme Packet has shown no solid signs of turning its business around, so why would Cisco want to purchase a competitor that's losing market share? It probably wouldn't. It would let it struggle and try to steal more market share instead of buying its unpopular products to replace its own.

Dell'Oro Group notes that the session border controller market grew 20% year-over-year in Q1, but that vendors are taking share from Acme Packet. Acme Packet and Sonus, the No. 2 vendor, lost a combined eight points of revenue share in Q1, which was picked up by Alcatel-Lucent, Audiocodes and Metaswitch.

The market overall is attracting more entrants with its potential for high growth and profit margins, and the opportunity presented by voice-over-LTE (VoLTE), voice services for 4G wireless networks, according to Dell'Oro.  The market research firm expects 27% year-over-year revenue growth in 2012 for session border controllers as the number of vendors in the market grows.

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