Tuesday, April 24, 2012

The Facebook IPO Primer

If you are interested in the upcoming Facebook IPO, or Initial Public Offerings in general, look no further than The Facebook IPO Primer. Written by Nancy Miller and produced by eWallstreeter.com, this 42 page e-book is so well done it will make your head spin. When Tim Berners-Lee invented the Web browser and took HTML to another level, he had this type on an interactive product in mind. It's a concise, compact, informative piece of work that knows no bounds.

The document is divided into four sections, each one a learning experience in its own right. Readers can jump to each chapter depending on what it is they are looking for. Even as an experienced investor, I read the book cover to cover, and not only did I learn some things about Facebook, but it also refreshed my memory about past manias.

If you are novice investor, Part I will be of great importance to you. Not only does it give a brief history of Internet IPOs beginning with Netscape, but it also discusses technical terms associated with the process: road show, primary offering, and most importantly, secondary offering. There's a trade-off when jumping in on first day of trading, and the author highlights the pros and cons of investing at this juncture. She points out that many companies that were supposed to put your portfolio in a higher orbit ended up being flameouts.

Part II could be dubbed: 'Everything you wanted to know about Facebook, but were afraid to ask'. It delves into the Facebook culture, what their mission is, the possible backlash of having too much information about you and their collision course with Google (GOOG). Here is an excerpt from the text: "Google remains a formidable competitor. It may have the whiff of an underdog but it’s bearing its teeth. It, too, is entering the world of social gaming. And it is charging just 5% fees versus 30% over at Facebook for the use of its platform.".

There is a lot of discussion about Google, which I found extremely informative, not so much about Google and Facebook, but just about the entire Internet sector as a whole. The Big Brother aspect to Facebook, as they mine your digital footprints for prospective advertising dollars, was equally as fascinating. Their lifeblood is peer-to-peer social networking, but let's face it, you're not valued as a $100 billion company without some sort of financial incentive as altruistic as they may seem.

The third section of The Facebook IPO Primer gets down and dirty with the econometrics of the company from the S-1 statement. Here are some bullet points I found helpful:

  • Revenues in 2011 topped $3.7 billion, up 88% from 2010, but not as torrid as the 154% gain posted in 2010.
  • Net income in 2011 was a cool $1 billion, up 65% from 2010; net income grew more than twice as fast, by 164%, in 2010.
  • Earnings per share rose to 52 cents in 2011, up from 34 cents in 2010 and 12 cents in 2009.
  • Facebook is a lean machine: costs and expenses were nearly $1.8 billion, just 47% of revenues.
  • The company has an incredible war chest of cash - nearly $4 billion.
This just scratches the surface of some of the data that the author presents. Much more fun than reading an IPO prospectus. Additionally, she breaks down the valuation of the company from five different scenarios in easy to read and understandable language. The final chapter is a laundry list of links to a variety of credible Internet articles that will enable you to delve further into the subject if you are so inclined to do so.

The Navy Seals motto is, "The more you sweat in training, the less you bleed in battle.". If you are interested in investing in Facebook, or any IPO, it's always best to do your homework before you go overboard. This e-book doesn't pull any punches, and succinctly boils down the entire Facebook investment story in 42 pages. The Facebook IPO Primer currently is on sale on Amazon (AMZN) for under $4. It's a great tool for investors of all stripes. I am very happy I read this, and has a prominent place in my digital library. It's a keeper.

Sunday, April 22, 2012

Book Review: The Facebook IPO Pitch

Last week on CNBC, commentator Gary Kaminsky caught my attention by featuring a new e-book published by Barrington Brown Press titled, The Facebook IPO Pitch: The Real Reasons You Should Buy the Facebook IPO From an Internet Marketing Insider. The author goes by the moniker Anonymous, so that may tip you off to the lopsided hatchet job the book does, which is actually not a book, but more like a pamphlet or brochure, a scant 47 pages chock full of pictures and large text. However, to be fair, like the title states, it's meant to be a pitch, or presentation wooing individual investors to invest in Facebook's upcoming IPO.

What got me interested in reading it was one prediction from the text that Kaminsky highlighted: " Microsoft (MSFT) stops funding billions in losses for Bing, and swaps Bing to Facebook for more Facebook stock. Facebook can then take a Google-class (GOOG) algorithm based search engine, and configure it very tightly with its own social search engine to produce a search product that will cross the 50% threshold for search market share.". Although that's a tall order to fill, I wished the author gave more insights like that. There just wasn't enough.

My intent isn't to do a smear campaign on this book, but to point out that it is very one-sided. It doesn't break down the numbers, just gives you a sales presentation of why you should invest in Facebook. According to the book, here are the main themes of why you should invest in the social networking giant. I'm taking these bullet points verbatim from the presentation:

  • Facebook is The destination on the Internet.It is the Four Seasons resort property of all time online.
  • It has the greatest advertising platform ever and marketing database of all time.
  • Be part of history. Tell your kids and grandkids that you bought into the IPO of the most important company ever to go public.
Pretty weak stuff.

I can't go out and call this e-book a pump and dump scheme because like Yahoo (YHOO), Amazon (AMZN) and Google, Facebook will probably launch at warp speed, and make early investors filthy rich. Although the anonymous author is intoxicated with the company, he or she doesn't caution individual investors about the pitfalls of IPO investing. That raises a red flag with me.

I realize that there are many institutional investors that are able to get in on the ground floor of the Facebook IPO, and they may be well compensated for their efforts even if they don't flip their shares. However, as a retail investor (and a lot of retail investors are young fans of Facebook), you should know that shares of stock are bought and sold like cattle at auction. The whales at the high-limit table lock in their prices by being offered shares early. As a Main Street investor, you may score some dough once trading begins, but beware that if you don't use limit orders, you may be very disappointed by your purchase price.

I follow some of the teachings of Peter Lynch, and he floated an idea to individual investors concerning IPOs. His theory is that you don't jump into IPOs because many times the companies don't pan out. His suggestion is to wait for a few quarters and see if you can take a position once the initial circus act is over. That's a strategy I follow. If you jump in during the first day of trading, you may be playing into the hands of all of the hype, and, be knee-deep in it.

I don't know what prompted Kaminsky to feature The Facebook IPO Pitch. It only costs $4.95, but I could have bought an Americano with that money. Granted, Facebook won't be held in check once it hits the trading exchanges. It's one of the big stories of our time, especially if you are a Millennial. The book came off as one big schmooze by the top brass at Facebook, or at least one of the underwriters. Technology IPOs are hot right now, but to invest in them on the first day of trading may be a fixed race for Main Street.

Thursday, April 19, 2012

The Technology Adoption S-Curve and Wireless Broadband

You don't need a high score on the Wonderlic IQ Test to comprehend that the technology world isn't standing still. Engineering and design brilliance have turned complicated handheld mobile devices into simple appliances. Apple (AAPL) doesn't even include instruction manuals for their popular products. They're intuitive. You either get it, or, you don't. The same can be said for Google's (GOOG) Android phones. Apple evangelicals can chide the competitive products, but they're on the same wavelength.

One statistic that has been a big influence on my recent investing decisions is that new smartphone activation will increase from 170 million devices worldwide in 2011, to 1.75 billion in 2016. This forecast is from market research firm Maravedis and is in the ballpark with projections from similar research firms. The report doesn't even include the embryonic tablet market which is supposed to cannibalize PC sales for the next few years. Infinite Research is predicting a 56% compound annual growth rate for tablets for the next half decade.

From my vantage point, this proliferation of multi-touch input devices like the iPhone and iPad creates an enormous opportunity for investors. In reading Walter Isaacson's biography of Steve Jobs, there was a quote by Mr. Jobs about his innovation philosophy. He used Wayne Gretzky's maxim, "Skate where the puck's going, not where it's been.". I think all long-term stock market investors attempt to utilize this strategy, but getting the timing right is often difficult. Sometimes it's the luck of the draw when a sector gets in gear. Well, for those investing in smartphone and tablet plays, the time might be now.

To illustrate my thesis, let's examine the technology adoption s-curve developed by Everett Rogers in the early 1960's (graph courtesy of Wikipedia).

What this graph demonstrates is that with successive groups of consumers adopting the new technology (shown in blue), its market share (yellow) will eventually reach the saturation level. We've got a long way to go before we reach the point of diminishing returns. As market share increases so does your propensity to reap big rewards from the companies that flourish in this space.

When you think internationally, we're in the beginning part of the early adopter phase of the iOS and Android operating systems. China and India are just starting to purchase smartphones, let alone the rest of the world. Don't forget that these two operating systems also power the tablets in their respective ecosystems. Throw in new entrant Microsoft (MSFT) with their collaboration with Nokia (NOK), and you've got a high-voltage uptake in mobile devices. My view is that the next few years could be interesting if you are so inclined to invest in the sector. The future isn't what it used to be.

For the past two months, I've been blogging about small pure plays in the sector in addition to an article featuring industry leader Apple. Since earnings season is upon us, I want to do a quick review of some of these securities before I start to dissect their numbers and guidance, once they hold their respective conference calls. I've taken positions in a number of these entities and have structured my portfolio to be set-up like a mini wireless broadband mutual fund:

  • Although Apple and Google are instrumental in the wireless broadband sector, I have opted not to take positions in either company because their market caps are much too large from my perspective. Patient investors may double their money in these stocks at their current valuations, but ten baggers are out of the question. Apple reports on Tuesday, April 24th, and could supercharge the entire sector if they have another blowout quarter.
  • Sequans Communications (SQNS) reports earnings on April 26th. I bought this integrated circuit manufacturer at a fraction of its IPO price. Their crown jewels are their patents of 4G LTE semiconductors and their relationships in China. It sells for roughly $2.50 and keeps me up at night. I believe in holding stocks for years if they still hold promise, but, considering its scatter shot earnings history, I will consider selling if the guidance in the upcoming quarter is unexciting.
  • Acme Packet (APKT) is a telecom infrastructure play that is broadening its scope into wireless with their position in Voice Over LTE. They report on May 2nd. Average analyst earnings estimate is for $.21/share. I wanted to include Broadsoft (BSFT) in the portfolio, but they are overvalued. Acme Packet and Broadsoft partner in the wireless space, and I believe I got a better valuation by taking shares in Acme Packet.
  • Glu Mobile (GLUU) is an internationally positioned, platform agnostic game application developer for handheld mobile broadband devices. It reports on May 2nd and is projected to lose $.08/share for the quarter, although be profitable for the year. There is seasonality to the gaming business, and Glu makes considerable profits in the 4th quarter when customers upgrade to new phones for the holidays.
  • Ceva (CEVA) is another semiconductor company and also reports earnings on May 2nd. They license specialized processor cores that convert analog information such as voice, video and images into a format that can be used by digital devices. I bought this stock recently when it was trading at a 52 week low, and it still trades in that range. Average analysts estimates are for a profit of $.22/share. I've seen this stock described as a mini ARM Holdings (ARMH).
  • Synchronoss Technologies (SNCR) is one of my favorite stocks in the sector and reports on May 2nd. The caveat to this security is that they do 50% of their business with AT&T (T). If they lose that contract, the stock gets hammered, but they are expanding their client base. Synchronoss does a lot of the behind the scenes processing on smartphones. Average earnings expectations are for $.25/share. I paid a premium price for the security, but wanted to lock in my price in case it trended higher.
  • The last stock I purchased is also reporting on May 7th. Velti (VELT) is a European company with a worldwide advertising distribution platform for smartphones and tablets. Their weakest market is the United States, but they have a strong presence in Europe, India and China. They are expected to lose money this quarter, but be profitable for the year. This equity could be a cash cow with its global footprint.
Two other companies I've covered, but did not buy are Allot Communications (ALLT), and NXP Semiconductors (NXPI). Allot does Deep Packet Inspection, and has been running up because Investor's Business Daily and Jim Cramer have given it a lot of coverage. If it sells off, or, the market gets a major correction, I will consider buying some shares. NXP Semiconductor makes the inner components for Near Field Communications, which enables you to make credit card transactions with your smartphone. This technology won't ramp up for another year, so I'm waiting to get some shares at a more advantageous level.

Wednesday, April 11, 2012

NXP Semiconductors Has a Running Start in Near Field Communications

From 2012 to 2016, smartphone activation is projected to grow from 220 million to 1.75 billion according to market research firm Maravedis. This exponential growth underscores the potent financial incentive for investors to identify and invest in companies that may be beneficiaries of the wireless broadband revolution. Organizations like Apple (AAPL) and Google (GOOG) are already household names in the handheld sector with their hot selling handsets, but the dragnet is also on to discover companies whose products reside inside the popular Android and iPhone mobile computers.

If you are looking for companies that may gain traction once mobile payments become a norm with handheld devices, then NXP Semiconductors (NXPI) may be tailor-made for your portfolio. NXP is the worldwide leader in Near Field Communications (NFC) as reported in their most recent annual report, and from a variety of other sources I have read. In fact, they invented the technology along with Sony (SNE) ten years ago. With an NFC enabled device, you'll be able to wave your Android or iPhone close to a payment terminal, and complete your transaction with companies such as Visa (V) or MasterCard (MA) without swiping your credit card.

According to MarketResearch.com's new Software and Services market report: "Currently only 5% of all smart phones and mobile devices are NFC-enabled. It is estimated that NFC support for mobile devices will increase in the next 5 years, and, by 2016, 46% of smart phones will be NFC-enabled. Revenue in NFC is expected to grow at an estimated compound annual growth rate (CAGR) of 35% from $7,686 million in 2011, to $34,515 million in 2016. They predict that the most attractive segment is mobile payments...".

In addition to NXP's pioneering efforts in the field, they also have an advantage by being the only NFC player that provides security, protocol stack, and RF Radio to prospective customers. One stop shopping for three critical elements. Ownership of the largest patent portfolio in the sector is also in their favor. As of this date, OEMs have selected NXP's NFC technology for more than 130 mobile devices. Most of these handheld mobile computers utilize Google's Android operating system.

NXP's annual report expounds on this by discussing their relationship with Google: "On December 6, 2010, we announced a strategic collaboration with Google to provide a complete open source software stack for NFC integration and validation on Gingerbread, the latest version of the Android platform. Google also integrated our NFC controller into its newly launched Nexus STM phone, co-developed by Google and Samsung...".

With Android accounting for 48% of all smartphones shipped in 2011, NXP could strike it rich if their nascent technology takes off as projected. Then there is also the prospect of Apple with an NFC enabled iPhone5 rumored to be released later this year. Although the phone is under wraps, and nobody knows who the semiconductor suppliers will be until after it hits the street, NXP may very well be the vendor of choice based not only on its superior technology, but also because it already has a relationship with Apple.

In going through the NXP annual report, they list Apple as one of their OEM customers. NFC standard chips (non near field communication) are used in some of Apple's desktop and laptop computers. I would think that having an already existing business arrangement with them would bode well to seal a deal. Android and iOS are in a head-on collision for worldwide market share, and Apple has a reputation of putting out a quality product. NXP NFC chips would fit that bill.

There is intense economic interest in Near Field Communication, and competition has come out of the woodwork attempting to steal NXP's thunder. In a February 10th, Motley Fool article, reporter Evan Niu states: "Some very capable rivals are threatening NXP's spot at the NFC forefront. Rival Broadcom (BRCM) announced that it was getting in on the NFC action late last year. Chip king Intel (INTC) is "highly interested" in NFC, recently partnering with Inside Secure for that reason. Mobile processor maker Qualcomm (QCOM) is interested in integrating NFC into its Snapdragon lineup.".

Although NXP had its IPO in August of 2010, they are not an up and comer in the semiconductor industry. They are a 2006 spin-off from Philips (PHG) with a 50 year track record. They work with a laundry list of heavy hitters in the technology space, and 57% of their revenue in 2011 was derived from Asia/Pacific (excluding Japan). Some of their ten largest customers include Apple, Nokia (NOK), Samsung, and, ZTE. They are well positioned in the mobile market.

If we look at the numbers for NXP, it's not a pretty picture. The Street has a flat out Sell on the equity due to a two year declining earnings pattern. Right now, growth for the company is about zero. NXP's trailing P/E Ratio is 16, and, it's forward P/E Ratio is 14.8. It also carries a lot of debt. On the positive side, Price/Sales is 1.42. It currently trades at $23/share, right in the middle of it's 52 week range of $13-$35. However, as that age-old investing conviction goes, it's not where it's been, it's where it's going.

My 2012 investing strategy is to purchase smartphone auxiliary plays like NXP Semiconductors. Right now, their inclusion in the Android devices hasn't budged the security, but Near Field Communications is in its infancy. My impression is that if indeed NXP chips are included in the iPhone5, the stock may move higher based on investor psychology.

Saturday, April 7, 2012

My Mea Culpa With Apple

Even if you don't own shares of Apple (AAPL), you're probably well aware that a couple of sell side analysts put a $1,000 price tag on the stock last week. This price appreciation isn't projected to hit that mark until 2014, but it's still a sizable gain from the current tape of $633. You're talking about roughly a 75%-80% profit in a little over two years if these expectations are met. Apple also pays a 1.7% dividend now, which is much, much better than a Certificate of Deposit at your local bank.

I'm a subscriber to ValueLine, and, they've been on the Apple bandwagon for years. In fact, ValueLine was early to the game in calling for a $1,000 price target at the beginning of the year. Recently, their share projections for the next 3-5 years for the company increased to $1070 for the low side, and, $1450 to the higher end of the range. ValueLine analyst Justin Hellman sees no reason to sell the stock, and believes the momentum will persist through this year and into 2013.

My first article about Apple was in early January of 2011. The stock was selling for about $335, and I believed the law of large numbers had caught up to it just like Cisco (CSCO) in 1999. As you may surmise, I was wrong. The stock has done nothing but leave trails of smoke behind it, and catapulted itself to investing royalty for a second time in its long and storied career. Apple continues to hit tape measure shots to the upper deck during earnings season, and, if sales of their products continue to simmer at a steady boil, they just may hit that trillion dollar valuation in the next few years.

The company is reasonably valued with an impressive growth story still in front of them. Yahoo Finance has an average compound annual growth rate estimate of 19% for the next 5 years. In addition, the P/E Ratio is about 18. You've got to like those kind of numbers. That said, although I believe the company is a wrecking machine, and you probably shouldn't cash in your winning tickets if you already own it, I personally wouldn't buy Apple at this level. If it falls back to the $500 area, I would consider it, but not until.

The primary reason I hesitate to put money to work in Apple right now is the most obvious; it's come too far, too fast. It crossed the tape at $410 in early January, and, has had a 30% move in four short months. Going back to mid 2011, the stock has increased 100% from a low of $310 of last year. My take is that stocks revert to the mean, and, if I am patient, I may catch it on a dip. Apple has a 50 Day moving average of $547. If we get a healthy 5%-10% correction in the market, it can decrease $60-$70 in a heartbeat.

I'm also not buying the Apple TV story yet which has gotten Apple enthusiasts extremely excited. I own Apple handheld products, so I'm very confident that whatever Steve Jobs concocted to to help his company commandeer the living room will be successful. I'm just not convinced that there will be that large of an uptake in the product to make a big impact on earnings for a few more years. iPhone and iPad sales? Sure. iTV, not for at least a few more years.

You'll notice the picture to the left of Bill Gates on the cover of Wired (courtesy of Conde Nast), lounging in the pool back in Microsoft's (MSFT) heyday. In the last technology boom in the 1990s, Microsoft was supposed to take over the world, too. They were expected to engulf and devour the movie and broadcast business. MSNBC stands for Microsoft/NBC. It never really panned out, and the stock has been a dog, capital D, for the past ten years (although it's had a nice pop since January). I'm very cautious when I hear all of the hype about total global domination. I look forward to the prospect of possibly purchasing an Apple television, but not for another five years, after first mover adapters have pushed prices down.

That said, I've fully bought in to the whole wireless broadband revolution that Apple helped create. Investing in select companies that fuel the wireless bandwidth engine may be a way to kick-start your portfolio, and, lead you down a pathway to wealth. I've taken stakes in companies like Synchronoss Technologies (SNCR), Velti (VELT), and, Glu Mobile (GLUU), among others, to take advantage of the halo effect from industry leaders like Apple, and, Google (GOOG) with their Android operating system.

The floodgates have flown open and mobile subscribers worldwide are scrambling to upgrade their feature phones to the more robust smartphones. My impression is that we are in the very early stages globally with the mobile Internet and handheld application phenomenon. The next 3-5 years could prove to be very interesting as consumers from all levels of economic and social strata migrate to these utilitarian devices. My preference is to invest in small promising companies that are platform agnostic to take advantage of this growth no matter what brand is in favor.

If you go back to the Personal Computer revolution in the 1980s, products like Lotus 123, Peachtree Software, dBase, and Hayes Modems became common buzzwords in the corporate workplace. These long forgotten companies made significant money to early investors, at least the ones that went public. You could have made money in Apple and Microsoft, too, but how much appreciation do you really expect in their shares in 2012? One hundred percent? That's quite possible, but nowhere near the multiples you may get from these smaller companies.

If you own shares of Apple, you've got to love the fact that they are currently number one on the Investor's Business Daily top 50 stock list. This is a momentum based listing and it signals that the wind is at their back. From a technical aspect, the equity is 48% past the $428 buy point in cup with handle with no sell signals. From a value perspective, IBD states a 68% annual earnings per share growth rate with that meager P/E Ratio of 18. This P/E Ratio of 18 is well below their historical norm in the 20's. If the market takes off again, the stock still has some room to run.

Monday, April 2, 2012

Acme Packet and Voice Over LTE

In Silence of the Lambs, I believe it was Hannibal "the cannibal" Lecter who said to FBI agent Clarice Starling: "All good things to those who wait.". I've had a radar lock on Acme Packet (APKT) for well over a year now, writing articles about the company on April 7th, 2011, and again on November 28th. At both times, the stock was much too expensive for my investing style, although I really liked the organization. Last week it dropped to $25/share, down from its 52 week high of $83, and I took a position in it.

The reason the maker of session border controllers (SBC) has been sent packing is two fold. First, it had a tremendous run in 2009-2010, and became extremely overvalued on a P/E Ratio basis. Momentum traders pushed it into the stratosphere when its sector was in vogue. F5 Networks (FFIV), another telecommunications infrastructure player, suffered a similar fate and was also sent to the guillotine. In early 2011, F5 topped out at $145 and sunk to $69, only to bounce back into the $130 range. I'm not suggesting the same price/action will happen to Acme Packet, but it has the potential to do so based on its projected growth.

The second reason the stock has been unconscious is that they had a bad quarter and lowered guidance for the first half of 2012 during their last conference call. The smoking gun was that North American telecommunications carriers like AT&T (T) and Verizon (VZ) reduced capital expenditures. Andy Ory is at the helm of Acme Packet, and, here are some bullet points from the CEO's presentation during the last quarterly report:

  • While we expect demand for our solutions to grow at a compound annual growth rate of 25% to 30% over the next three to five years, we expect it to be closer to 20% in 2012.
  • We expect to maintain our win rate in both the enterprise market and the service provider market in 2012.
  • Our solutions are deployed at 550 enterprise customers globally including 320 here in North America. What’s exciting is that there are over 40,000 enterprises in the United States with at least 250 employees, all of whom are candidates for our solution. We are already the leading provider of SBCs enterprises with 35% market share.
  • Our enterprise business represents a 21% of our business in 2011 compared to just 3% in 2008.
  • We’ve just started to tap into the second major growth driver for our business, the wireless market. Only 1% of the 300 plus million mobile subscribers in North America today use IP voice or video communication.
You probably own a smartphone or tablet, and even if you don't, most people are aware of the explosive growth in the wireless industry. Right now, there is an introduction of LTE (long term evolution) networks by some of the major carries like Sprint (S). Television commercials bombard you with information about these faster 4G networks. Market research firm In-Stat predicts that LTE mobile broadband subscriber growth will increase by 3,400% by 2015. Granted, you are starting with a small user base, but this is where mobile cyberspace is heading. Things just vanish into thin air.

Going back to CEO Ory, he comments about this opportunity for Acme Packet in the conference call: "As LTE networks begin to take hold, we believe that a whole new world of communications known as voice over LTE will be assured in. We expect that significant growth in the number of smartphones and in the percentage of these that are IP-enabled will drive a significant growth opportunity for us. While we have already secured a number of major architectural wins in voice over LTE networks, we believe that material investments in VoLTE , voice over LTE, may not begin until 2013.".

Exponential growth in mobile traffic will be the result of these VoLTE networks. Besides your run of the mill phone calls, e-mails, and, text messages, there will also be more robust applications like Skype (MSFT) and FaceTime (AAPL) that will flourish because of the faster mobile broadband.

According to a recent article in Investor's Business Daily: "Mobile traffic is often measured in exabytes. One exabyte is equal to 1 billion gigabytes. By 2016 global mobile traffic is expected to reach 10.8 exabytes a month, an increase of 18-fold over 0.6 per month of exabyte usage last year, says a February report by Cisco (CSCO). In six years Cisco estimates mobile traffic will grow at an annual growth rate of 78%.". Faster 4G LTE networks will be a big reason we will see the expansion of data use.

Acme Packet Senior Vice President Seamus Hourihan talks about the macro conditions in the LTE sector in the last conference call: "On the VoLTE side, there are about 40 LTE networks around the world that are in production today. And we’re currently on the VoLTE side alone...we’re involved in 25 different opportunities today, of those 25, one is either right in production or going about to production or part of that’s MetroPCS (PCS). We also have in addition to that nine architectural wins that were part of in three major geographies, North America, Europe and Asia-Pacific.".

Another step Acme Packet has taken to get a running head start in VoLTE is a recent partnership with Broadsoft (BSFT). Broadsoft is a VoIP leader, and, the two entities offer a pre-intergrated platform that allows key operator services over VoLTE. These operator services may be functions like caller ID and call waiting; things we take for granted in cellular networks. The two companies did a joint presentation at the Mobile World Congress in Barcelona earlier this year.

The intangibles for Acme Packet sound enticing, but what about the numbers? There are 20 analysts that cover the stock on Yahoo Finance, and the consensus average for earnings in 2012 is $.99/share. With a current price of $27, this gives us a forward P/E Ratio of 27. Expensive when you consider earnings are projected to be flat this year, but, looking at 2013, earnings are expected to grow 31.3%, right in line with the projected five year compound annual growth rate of 33%. This gives us a PEG (price/earnings/growth) ratio of one, a reasonable price for a growth stock.

If the numbers 02-04-23-38-46 and the Mega Ball 23 mean nothing to you, it means you didn't win the Mega Millions Lottery drawing this past weekend for $640 million. A dollar and a dream. I prefer bottom fishing, and, think I bought a good one in Acme Packet. The market had a tremendous run the past six months, and we are probably due for a pullback, so you may be able to pick up some shares at a reduced rate. I backed up the truck at $25, and, unless the market collapses again, I believe I got a great price on this terrific company.