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A billion dollar acquisition for Oracle

Ajit Deshpande - - 0 Comments

Acme Packet, a pioneer in and a leading manufacturer of Session Border Controllers (SBC) for VoIP (as well as for broader Unified Communications applications), was acquired last week by Oracle for approximately $1.7 billion in enterprise value. As of 2011, Acme Packet was the dominant player in the SBC segment, with ~57 % share of the carrier SBC segment and ~34% share of the enterprise SBC segment. 88 of the top 100 service providers count Acme Packet as a supplier at this time. The company had ~$44 million in net income on ~$307 million in revenue over 2011, although over the past year, the company seems to have lost market share to Cisco, especially in the enterprise segment.

As the public domain has noted, this is probably a good acquisition, for multiple reasons: First, this is a fast-growing market – about 96% of all phone lines were still circuit-switched as of 2010 , suggesting that there is immense room for growth in VoIP. By some accounts, the VoIP market is estimated to more than double between 2011 and 2015. Additionally, the continued evolution of LTE and the emergence of WebRTC and Unified Communications provide more momentum towards voice-data-convergence, benefitting SBC vendors significantly. Second, a virtual SBC appliance can be another component of a Sun server bundle for carriers and enterprises, improving Oracle’s hardware margins. And finally, SBCs, as important components in unified communications, will help Oracle fill out its Unified Communications suite.

Going forward, Oracle has a couple of avenues to build on this acquisition: they could further fill out their UC portfolio through other offerings such as telepresence and video conferencing, or they could go after more gateway services such as firewalls, IPS, etc. The former might be a better fit than the latter, but considering Oracle’s recent forays into the datacenter stack, no option can be discounted out. As for startups in this broad sector, this acquisition probably sets up a spending spree from UC competitors such as Cisco, HP and Microsoft across hardware and software, so here’s to many more billion dollar exits in the near future in this sector!

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