Most specifically, two relationships they have with Broadsoft (BSFT) and privately held Aicent are a bit cloudy to me. I took the opportunity to contact the company, and they were very helpful in filling in the blanks. Julia Dunlea (in media relations) coordinated this effort, and Kevin Mitchell, Acme Packet's Solutions Marketing Director fielded all of my inquiries. Before I begin, just some background on the interview process. I submitted all of my questions via e-mail in the form of a questionnaire. They were promptly returned and I am reporting the Q&A session verbatim.
Ted Stamas: I'll start with Broadsoft first. All I know about the company is that it is a cloud company in VoIP. I realize that your two companies offer an integrated platform that allows key operator services over VoLTE. My question is, what are these operator services? Is it services like caller ID and call waiting, or something else?
Kevin Mitchell:Acme Packet and Broadsoft have a lengthy history of working together to deploy VoIP infrastructure so service providers can offer consumer and business hosted IP voice and unified communications. Building on that track record, we announced a joint solution based on Acme Packet’s core IMS platform and BroadSoft’s application server suite. The combined solution, company experience can vastly simplify the transition to all-IP networks, streamlining the overall architecture and result in capital and long term operational cost savings.
The services involved are all voice and interactive communications in the all-IP world of LTE and fixed broadband. Voice, caller IM, messaging, video chat, multimedia collaboration, fixed mobile convergence and more.
BroadSoft sells both software as well as a cloud offering to service providers.
Ted Stamas: How long have you been working with Broadsoft?
Kevin Mitchell: Our companies entered the VoIP world around the same in 2000 and have worked together closely since inception.
Ted Stamas: With this partnership with Broadsoft, who is your competition?
Kevin Mitchell: For the most part, it’s the big, expensive, slow legacy telecom manufacturers that bring over engineered solutions to market.
Ted Stamas: With this particular relationship with Broadsoft, where do you see the overall market going in two to three years?
Kevin Mitchell: All service provider networks are moving to a pure IP environment. IMS is one such flavor of the communications service environment in that all-IP world. Together, Acme Packet and Broadsoft can address all communication network needs.
Ted Stamas: Finally, do you have any idea what share of the market your recent joint venture has? I know you are the worldwide leader in SBC's, but what about in VoLTE?
Kevin Mitchell: Our SBC leadership extends across all aspects and applications of VoIP and IMS and Broadsoft is a global leader in voice application servers. Acme Packet is involved in over 150 IMS projects globally and roughly 30 VoLTE engagements. VoLTE is nascent, but deployment plans are increasing.
Ted Stamas: Now I'll concentrate on the recent Aicent announcement. Again, in layman terms, what does this relationship with Aicent do in regards to technology?
Kevin Mitchell: Aicent is a carrier’s carrier. They connect service providers around the globe to enable end-to-end communications. This includes voice and data roaming and international phone calls. How LTE voice and data sessions will work while roaming is critical to smoothly transitioning mobile communications to the 4G era and satisfying subscriber expectations.
A major issue for LTE roaming is that the underlying technology is IP, a fundamental difference from 3G and relies on specialized signaling called Diameter to enable connection to and use of the network. As communications transition to these IP networks, service providers face new challenges to build reliable roaming architectures that include interoperability, routing, and security. Our solutions solved those problems for Aicent.
Ted Stamas: I noticed in the press release that Aicent does business in China with China Mobile (CHL) and China Unicom (CHU). Is this a potentially new geographic market for Acme Packet?
Kevin Mitchell: Acme Packet has over 1700 customers in 109 countries. We have long standing customers in China Telecom and China Mobile and many others in the Asia Pacific region. While this is not a new geographic market for Acme Packet, the Aicent relationship broadens the types of customers we serve in that market.
Ted Stamas: Why would investors take notice of this partnership with Aicent? Without getting into specific numbers, is it a potentially lucrative market?
Kevin Mitchell: This is a concrete example of helping service providers accelerate the move to all-IP. This particular solution is a combination of our SBC and a similar product called the Diameter signaling controller that provides security, routing, and interworking for Diameter signaling. Together our solutions are providing essential control functions for the two major signaling protocols that underpin all services in the LTE and IMS.
Ted Stamas: Who is your competition in this sub-sector?
Kevin Mitchell: In the wholesale carrier/roaming hub market, we individually compete with other SBC and DSC vendors, but there is not a single vendor that can provide the combined solution.
Ted Stamas: I've read your last five conference calls, so I've got a good idea where your company is going in regards to wireless. However, how will the smartphone and tablet space benefit or be useful to your business?
Kevin Mitchell: Service providers face an influx of more: devices, connections, sessions and data. To effectively monetize this demand, session delivery networks are critical for service providers to build. We help service providers do that and successfully enable the all-IP evolution.
Conclusion:
Acme Packet's share price has experienced a nice run the past six weeks since my last article. You can find fundamental evaluations there, if you are so inclined. At the time of that writing, the stock traded at $15 and now hovers in the $18 range. Granted, the market has experienced a concurrent run, but this is not the year of Acme Packet.
In fact, it's been a tough year for shareholders. However, to use a timeworn investing expression, "It's not where the stock's been, but where it's going". They've built a better mousetrap, and with solid management, a squeaky-clean balance sheet, and a bird's eye view of the next five to ten years, this stock is one I'm personally betting on. I'm a firm believer of the wireless infrastructure buildup, and Acme Packet doing a significant amount of the behind the scenes heavy lifting.
Again, I'd like to thank everybody at Acme Packet for making this interview possible.