Acme Packet, Inc. Earnings Cheat Sheet: Increased Costs Strains Margins as Profit Drops

Acme Packet, Inc. (NASDAQ:APKT) reported its results for the third quarter. Acme Packet provides session border controllers that enable service providers to deliver secure interactive communications–voice, video, and other real-time multimedia sessions–across Internet Protocol network borders.

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Acme Packet Earnings Cheat Sheet for the Third Quarter

Results: Net income for the communication equipment company fell to $7.9 million (11 cents per share) vs. $10.5 million (15 cents per share) a year earlier. This is a decline of 24.3% from the year earlier quarter.

Revenue: Fell 6.2% to $53.1 million from the year earlier quarter.

Actual vs. Wall St. Expectations: APKT reported adjusted net income of 21 cents per share. By that measure, the company beat the mean estimate of 14 cents per share. It fell short of the average revenue estimate of $71 million.

Quoting Management: “The fundamentals of our business remain strong, and we remain well positioned to take advantage of the profound shift to Internet-based voice, video and unified communications,” said Andy Ory, President and CEO of Acme Packet, Inc. “We are excited about the new products and partnerships that we have launched to drive the next stage of our growth. We remain confident in our ability to execute on our full year business outlook.”

Key Stats:

Last quarter’s profit decrease breaks a streak of four consecutive quarters of year-over-year profit increases. In the second quarter, net income rose 44% from the year earlier, while the figure increased 64.5% in the first quarter, 59.9% in the fourth quarter of the last fiscal year and more than twofold in the third quarter of the last fiscal year.

A year-over-year revenue decrease last quarter snaps a streak of four consecutive quarters of revenue increases. The best quarter in that span was the fourth quarter of the last fiscal year, which saw revenue rise 70.2%.

Gross margin shrank 3.8 percentage points to 77.7%. The contraction appeared to be driven by increased costs, which rose 13% from the year earlier quarter while revenue fell 6.2%.

The company beat estimates last quarter after being in line with expectations in the second quarter with net income of 21 cents per share.

Looking Forward: Analysts have a more positive outlook for the company’s next quarter performance. Over the past month, the average estimate for the fourth quarter has gone up from 24 cents per share to 28 cents. For the fiscal year, the average estimate has moved down from 88 cents a share to 82 cents over the last ninety days.

Competitors to Watch: Sonus Networks, Inc. (NASDAQ:SONS), Telefonaktiebolaget LM Ericsson (NASDAQ:ERIC), Riverbed Technology, Inc. (NASDAQ:RVBD), Nokia Corporation (NYSE:NOK), Alcatel-Lucent (NYSE:ALU), Cisco Systems, Inc. (NASDAQ:CSCO), Ditech Networks Inc. (NASDAQ:DITC), Oracle Corporation (NASDAQ:ORCL), Motorola Solutions Inc (NYSE:MSI), and Motorola Mobility Hldgs. Inc (NYSE:MMI).

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(Source: Xignite Financials)