This morning, when Oracle Corporation (NASDAQ:ORCL) announced its intention to buy digital communications specialist Acme Packet, Inc. (NASDAQ:APKT) , the move ignited a firestorm of speculation.
Is this the start of a buyout binge in the networked communications market, like the storage binge of 2009 or the data security party in 2010? Investors in the sector sure hope so. Oracle’s deal sparked huge gains in this sector, even as the broader market hit “pause” on its recent gains.
Speculation may be exciting, but does it make any sense?
Well, maybe. As a Sonus owner myself, I’ll admit that a buyout would be appreciated. The stock hasn’t done much for me over the last two years, due to the telecom industry’s seemingly endless reluctance to invest in truly next-generation technologies like voice over IP.
Sonus is also considerably cheaper than Acme, based on standard metrics like price-to-book or price-to-sales. But then, Acme is profitable today while Sonus isn’t. Any prospective buyer would have to stomach an extra-large dose of risk here. I’m not holding my breath for Sonus to find a buyer.
BroadSoft Inc (NASDAQ:BSFT) provides software-based alternatives to the hardware solutions wrangled by Sonus or Acme. This stock jumped 10% today, and got a favorable mention as analyst firm Needham poked and prodded the Acme deal’s implications.
This is a mixed bag. BroadSoft is more profitable than Acme and knows how to grow revenue, to boot. But it’s also a more expensive stock with a P/E ratio north of 85. This is another unlikely acquisition target right now.
But then, market makers totally ignored another voice-over-IP specialist: 8×8, Inc. (NASDAQ:EGHT) went nowhere on Monday, despite being the most likely follow-up acquisition target in this sector (to my mind).
Like BroadSoft, 8×8 specializes in high-margin software and services. Like Sonus, this stock looks objectively cheap today. With a $500 million market cap, it’s also a much smaller than either of the billion-dollar potential targets we just discussed.
If I was into betting on networking buyouts, my money would be on 8×8. It’s kind of crazy how little attention the stock is getting on a day like this.
The article Who’s the Next Buyout Target? originally appeared on Fool.com and is written by Anders Bylund.
Fool contributor Anders Bylund owns shares of Sonus Networks, but he holds no other position in any company mentioned. Check out Anders’ bio and holdings or follow him on Twitter and Google+. The Motley Fool owns shares of Oracle. Motley Fool newsletter services have recommended buying shares of Acme Packet.
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