* Deal allows Oracle to compete better against Cisco
* Price represents a 22 pct premium to Acme's Friday close
* Acme Packet shares up 22 pct on Monday afternoon
* Oracle shares down 3 pct
(Adds analyst comments, financial details, updates stock price)
By Jim Finkle and Sayantani Ghosh
Feb 4 Software maker Oracle Corp will
buy Acme Packet Inc for $1.7 billion net of cash as
billionaire CEO Larry Ellison expands into the networking
equipment market long dominated by Cisco Systems Inc.
Acme is best-known for selling hardware that
telecommunications companies and big corporations buy to manage
the transmission of phone calls using the same technology as
Oracle is the world's No. 3 software maker and one of the
top makers of high-end business computers. Analysts said the
deal could signal a broader move into networking equipment, one
of the few areas in technology where Oracle is not a major
"We have been expecting Oracle to make a bigger push into
the networking market," said Brian White, an analyst at Topeka
Capital Markets. "Convergence across the IT world appears to be
Analysts described Acme as a good fit for Ellison's company
because it expands existing ties with telecommunications
providers, many of whom are already heavily dependent on
Oracle's business management software and database for running
their internal operations.
"It's Oracle continuing to broaden out their product and
footprint step by step," said FBR Capital Markets analyst Dan
Ives. "This fits right in with their strategy."
Acme said that 89 of the world's top 100 communications
companies use its products to help deliver communications
traffic. They include BT Group Plc, China Telecom Corp
, Microsoft Corp's Skype, O2 and Verizon
Analysts said Acme's jewel is its software, which they
expect Ellison to bundle into appliances running on Oracle's
existing line of Sun computers. They expect Oracle to build out
a new line of networking equipment running on Sun servers, with
Acme Packet being one of the first such products.
The agreed-upon price represents a 22 percent premium to
Acme Packet's closing price on the Nasdaq on Friday. Oracle
agreed to pay $29.25 per share in cash, representing a fully
diluted equity value of $2.1 billion.
Oracle shares were down 2.9 percent at $35.14 on Monday
afternoon on the Nasdaq. Shares of Acme Packet were up 22
percent at $29.23.
An Oracle spokeswoman declined comment.
In July, Oracle bought Xsigo, another company involved in
this emerging and rapidly growing technology area that has
become known as software-defined networking. Its products allow
businesses to reduce the amount of networking gear in data
centers by replacing much of their functionality with software
that is centralized in one or more servers.
Cisco and Oracle rival VMware Inc have also made
several acquisitions of software-defined networking companies
over the past year.
"Software-defined networking is still in the early stages,
but it is something that Oracle is clearly looking at," said
Gartner analyst Akshay Sharma.
Oracle did not disclose terms of the Xsigo deal, one of
about a dozen companies it bought in 2012.
"Acme is a quick, easy beachhead for them," said Maxim Group
analyst Greg Mesniaeff. "They have a lot more to do, but it
certainly is a start."
Shares of Acme rival Sonus Networks Inc also rose
on the news, and were up 17.5 percent at $2.68 on Monday
Acme has been hit by weak telecom spending in the last few
quarters as carriers spend less on new projects and delay
existing ones. Its shares had fallen 18 percent in the last year
as of Friday.
Also on Monday, Acme reported fourth-quarter earnings of 9
cents per share, excluding items, on revenue of $70.7 million.
Analysts expected an adjusted profit of 8 cents per share
and revenue of $68.9 million, according to Thomson Reuters
(Reporting by Sayantani Ghosh in Bangalore, Jim Finkle in
Boston, and Nicola Leske in New York; editing by Sreejiraj
Eluvangal, Saumyadeb Chakrabarty and Matthew Lewis)