Acme Packet Warns, Shares Slide

Jan. 3.12 | About: Acme Packet, (APKT)

The fourth quarter recently ended, and we haven't officially made it to earnings season yet. Do you know what that means? It means we are in warnings season. For those of you who don't understand, warnings season is when companies pre-announce that earnings and or revenues won't be as expected. This can be done before the quarter ends, but a lot of time, is done right after the quarter ends.

Well today, we had one interesting warning after the bell, and it might have some lingering effects in the technology space. Acme Packet (NASDAQ:APKT), a network solutions leader, guided lower for its fourth quarter results. Before I get into the ramifications of their warning, here is what the company said, along with pre-warning estimates.

For the Fourth Quarter:

  • Revenues will come in between $84 and $86 million. Analysts had been expecting $93.42 million.
  • Earnings (non-GAAP) will be $0.26 to $0.28. Analysts were expecting $0.37.

For the Full Fiscal Year 2011:

  • Revenues will be $308 million to $310 million, down from previous guidance of $315 to $320 million. Analysts were expecting $317.95 million.
  • Earnings (non-GAAP) will be between $1.03 and $1.05, down from previous guidance of $1.14 to $1.18. Analysts were expecting $1.14.
  • Earnings (GAAP) will be between $0.66 and $0.68, down from previous guidance of $0.78 and $0.82.

The company blamed uncertainty in the North American service provider market, but said that the market outside of the North American region was performing well. As most companies always throw in, they believe that going into 2012 they are "well positioned to leverage growth in our industry". Everyone says that, whether or not they can actually make it happen is another story.

Acme Packet's warning sent the stock down nearly 20% in after-hours trading, and the warning took down some other names in the industry.

  • Cisco Systems (NASDAQ:CSCO) was down 0.5%.
  • Juniper Networks (NYSE:JNPR) was down 2.5%.
  • Riverbed Technology (NASDAQ:RVBD) was down 3.0%.
  • F5 Networks (NASDAQ:FFIV) was down 3.0%.

So which of these names will be hurt the most? Well, obviously this was not good news from Acme Packet. Especially after Tuesday's trading, where Riverbed and Cisco saw nice gains after analyst upgrades. I don't think Cisco will be impacted as much (I have another article coming out on them Wednesday), but any North American weakness will have an impact on them.

Acme Packet was projected for 33% revenue growth in fourth quarter and 37.5% for the full year, before the warning. In terms of growth, Riverbed was expecting the next highest amount, followed by F5 Networks and then Juniper.

Juniper would be the truest competitor according to Yahoo, but only 50% of its revenues came from the Americas region in the latest quarter. Approximately 56% of Riverbed's revenues came from the US in the latest quarter (rest of North American revenues not detailed in quarterly report). Nearly 59% of F5 Networks' revenues came from the Americas in the past year. Acme Packet had 52% of revenues from the US and Canada in the previous quarter.

Today's news cast a shadow over the gains we saw during the trading day. I don't want to definitely say this is a company specific problem until we hear from the rest of the companies. However, Acme Packet said that there was weakness in North America, and these companies do generate a lot of revenues from that region. Look for these names to see some weakness on Wednesday, and perhaps for the analyst downgrades to be out the rest of the week.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.