Acme Packet, Another VoIPO

With all the attention focused on the Vonage’s initial public offering, it just might be the beginning of a steady and long line of VoIPOs (aka Voice over IP public offerings.) Acme Packet, a Burlington, Massachusetts has just filed its registration statement (S-1) with the Securities and Exchange Commission, indicating its desire to go public. Goldman Sachs, JP Morgan and CS First Boston are running the underwriters of this offering. Acme plans to raise $85 million from the public markets, and will list on the NASDAQ under the ticker symbol, APKT.

Acme Packet, which started life in 2000 as Primary Networks, has raised about $45 million from Menlo Ventures, Cannan Partners, and Advanced Technology Partners. The company makes session border controllers (SBC), a key component of the new IP-based networks. The company had sales of around $36 million in 2005, and lost $35,000 for the year. SBC were developed to provide connections between various VoIP networks, but in recent times have mutated, and are now being used in many different ways. (Wikipedia has a great tutorial on SBCs.)

Which explains why Acme Packet is finding buyers amongst large mobile carriers such as Italtel, T-Com, KDDI and Vodafone Spain have started to buy from Acme in increasing numbers. Acme is also is a key supplier to Alcatel, which is using the technology in British Telecom’s 21CN Network. Acme Packet had sales of $19 million for the quarter ending March 31, 2006 and turned in a profit of $6 million. Impressive numbers, but on a more macro-level SBC-market is not that huge. Infonetics Research shows that global sales of session border controllers in 2005 was $86 million and expects them to grow to $613 million by 2009.

Our revenue growth may be constrained by our product concentration and lack of revenue diversification…..Three customers accounted for 72% of our total revenue in 2003, three customers accounted for 39% of our total revenue in 2004, four customers accounted for 51% of our total revenue in 2005 and three customers accounted for 42% of our total revenue for the three months ended March 31, 2006.

It is a highly competitive market which is overcrowded to say the least. Netrake, Newport Networks and NexTone, Ditech Communications ( which acquired Jasomi,) and Juniper Networks, (through its acquisition of Kagoor) are some of the players in this space. Of course there is Sonus Networks. If you recall, during the last round of SBC consolidation, prices went south really fast.