Oracle's (ORCL) /Acme (APKT) Acquisition Gets Tech-Related M&A Juices Flowing

February 4, 2013 11:17 AM EST
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This morning, Oracle (Nasdaq: ORCL) announced it was buying session border control technology vender Acme Packet (Nasdaq: APKT) for $29.25 per share cash. The deal came at a respectable 22 percent premium to Acme Packe Friday's close. At $2.1 billion ($1.7B net cash), the Acme acquisition is the largest deal in technology so far this year, but it undoubtedly will not be the last, or the largest. In fact, traders are already looking past Acme and they have their eye on Sonus Networks (Nasdaq: SONS), another company involved in session border control technology. Its shares spiked higher by 13.5 percent in response to today's announcement.

Why the sudden interest in session boarder control? Bhaskar Gorti, Senior Vice President and General Manager, Oracle Communications put it this way:

"The communications industry is undergoing a dramatic shift as users become more connected and dependent on mobile applications and devices. Service providers and enterprises need a comprehensive communications solution that will enable them to more effectively engage with their customers."

In the view of Nomura, Oracle's acquisition of Acme will help the company position itself in mobile and better enable communications across service provider and enterprise networks, as well as across different devices and on the cloud.

"Strengthening its networking offering may signal a stronger strategic interest in this space as competitors work on software defined networking solutions," said analyst Rick Sherlund.

Shares of Acme topped out at $80 per share in April 2011. However, like many other tech stocks, macro uncertainly eventually led to a selloff in APKT. Acme has long been viewed by investors as an acquisition target, so in that sense today's announcement is not a surprise, nor is the price which was in-line with previous Oracle acquisitions at 5.8x NTM revenues.

Considering depressed valuation in many other technology stocks, there is speculation that today's announcement signals the start of a boom in technology-related M&A. This, of course, remains to be seen, but today's deal certainly helps get the M&A juices flowing on an otherwise slow merger-Monday.

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