Xconomist of the Week: Andy Ory on the Real Opportunity for Acme Packet

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security, quality of service, regulatory compliance. Voice is definitely going away as a stand-alone service. But we’re interactive beings by nature. The way we deal with our friends, family, and customers, is going to be interactive, it’s not just over e-mail or text. So the notion of providing a unified communication that’s secure, has high quality, you can trust— that’s going to require the technology we make.

It impacts every business, it impacts every homeowner, and it impacts everyone carrying a phone. That’s really hard for people to come to grips with. The real question is, can Acme Packet maintain or grow our market share? All last year, our service provider market share stayed the same, at around 57 percent. So I think 50 to 60 percent is the right kind of market share we ought to have. The next closest didn’t even have a fifth of our market share. So we think we’re in the right position at the right time.

X: Talk about the company’s performance over the past year, and how you see its growth going this year.

AO: You always want it to go as high and fast as you can go. I was pleased with last year. I think the thing I wasn’t pleased with last year is the business predictability. The 33 percent revenue growth came at the expense of building backlog; it came at the expense of visibility. We specifically provided guidance this year that was really designed around growing the business. We want to create cash, we want to be profitable, that’s really important to us. At the same time we don’t want to under-invest, and we want to build backlog. I think we can accomplish all those objectives this year. You know, it’s a journey. It’s not a Q1 issue, it’s a 2012 journey.

X: So what are the big areas of investment for Acme Packet?

AO: There are two horses in the barn. There’s mobile, and there’s enterprise. When I say mobile, the whole world is going wireless—you have to solve the mobile issue, your LTE [4G data network] issue for services. Once you do, you’re going to extrapolate that solution over all of your different networks and subscribers. That’s why mobile or LTE is a watershed event. It’s a product that’s much more Web-like. It’s abstracted from the actual hardware, and it can be deployed as all software in data centers. It can dynamically expand and contract the amount of capacity, and it is the way that service providers, like the AT&Ts and Verizons of the world, are going to be able to compete with the over-the-top players [like Apple, Google, Yahoo, Facebook]. We’re really, really high on that.

The other thing we’re excited about is enterprise. We think that the enterprise market clearly is moving all-IP. Everyone’s bringing their own devices to work now, and they’re all untrusted. They’re all running their own applications, and the IT managers are sitting there saying, my gosh, how am I going to unify my services so they can work with every device and provide security? That’s what session border controllers do for IP connectivity.

So, 41 of the Fortune 100 are starting to use our technology. We really feel like we’re moving in the right direction. We’ve talked recently about our relationships with Hewlett-Packard and Microsoft. Distribution is really important for Acme Packet. It’s one of the more strategic aspects of us moving forward. We don’t need—though would like it—everyone distributing us into the enterprise. We just need someone distributing us into every enterprise. Once we get in, people can look at our technology as a tool they can start to use for other issues as well.

X: How do you see the carriers vs. Web software companies playing out?

AO: There are three states. One state is a pure over-the-top service … Next Page »

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