Oracle (ORCL), the second-largest maker of business applications, agreed to acquire Acme Packet for $2.1 billion, gaining networking gear that helps corporations securely transmit information over the Internet.
Redwood City-based Oracle will pay $29.25 a share in cash, according to a statement Monday. That marks a 22 percent premium over Acme's stock price on Feb. 1, the last trading day before the deal was announced. Excluding Acme's cash, Oracle is paying $1.7 billion.
Oracle Chief Executive Officer Larry Ellison has spent more than $50 billion on more than 80 acquisitions since 2005 to expand in the market for software and tools that deliver computing over the Internet, moving beyond the company's traditional applications that run on corporate servers. Acme's tools to transmit voice and video via the Web may help Oracle challenge Cisco Systems (CSCO) in networking -- a market that's benefiting from the boom in mobile devices.
"Either the total addressable market is on the verge of a huge, transformational inflection point and will quickly balloon into a multi-billion dollar market, or Oracle senses that the future of its business model is in the control of communications data flow, and this acquisition, pricey as it is, is a sure beachhead into a new leg of growth," Greg Mesniaeff, an analyst at Maxim Group, wrote in a research note.
Net of cash, Oracle's offer for Acme is more than six times the target company's sales over the last 12 months, according to data compiled by Bloomberg. That's a steep premium for Acme, a leader in a market for so-called Internet-session border control that is worth less than $1 billion, Mesniaeff said.
Acme's gear may help revive slumping sales of hardware Oracle gained through the $7.4 billion 2010 purchase of Sun Microsystems, Ross MacMillan, an analyst at Jefferies & Co., wrote in a note to clients. Net of cash Oracle paid $5.7 billion for Sun, or about half trailing 12 month sales, according to Bloomberg data.
"We see the acquisition bolstering demand for Sun hardware, expanding Oracle's unified communications portfolio, and expanding Oracle's relationship with large telco service providers," MacMillan wrote in a note to clients.
The shares of Acme surged 23.6 percent to $29.59 in Monday's trading, while Oracle fell 2.9 percent to $35.13. Acme's board unanimously approved the acquisition, which is expected to close in the first half of 2013. The deal remains subject to Acme shareholder and regulatory approval.
Brian White at Topeka Capital Markets said that the deal might herald more acquisitions of communications gear makers by companies like IBM, Hewlett-Packard (HPQ) and Dell Inc. Targets could include Juniper Networks and F5 Networks, he said.
BroadSoft, a maker of networking software, surged as much as 10 percent to $38.60 on speculation that it may also be acquired.
Oracle or another company focused on corporate customers might consider buying BroadSoft, Richard Valera, an analyst at Needham & Co., said in an interview.
Acme and BroadSoft have equipment that's complementary, he said. "Acme makes the pipe; BroadSoft makes the application that runs through the pipe," Valera said. "If Oracle's taking the plunge, maybe other big historically enterprise-focused companies might be looking."
Acme, based in Bedford, Mass., will help speed the transition to cloud computing by enabling secure communications from any device, across any network, Oracle said. Acme has more than 1,925 customers in 109 countries.
"The communications industry is undergoing a dramatic shift as users become more connected and dependent on mobile applications and devices," Bhaskar Gorti, senior vice president and general manager of Oracle Communications, said in the statement. "Service providers and enterprises need a comprehensive communications solution that will enable them to more effectively engage with their customers."
The Associated Press contributed to this report.