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Sonus And AudioCodes: Your 1-2 Punch For Potential TakeoversJun 5 2013, 9:48 | by Josh Franklin | about:AUDC include:SONSLast week, the session border controller (SBC) pure play Sonus Networks (SONS) met with Jefferies & Co. The analyst subsequently upgraded the shares to outperform sending Sonus' shares up over 30% in 3 days of trading.
Also, last week, AudioCodes (AUDC) announced that it released a new SBC with increased sessions to broaden its offering from 800 sessions to 10,000 sessions in 2013 and to greater than 10,000 sessions in 2014, a significant revenue driver for it. In addition, AudioCodesreleased its new software for cloud and hosted environments which services the Carrier space something it has never done before.
This now makes it a direct competitor to Sonus, Cisco Systems (CSCO) and Oracle (ORCL) (via Acme Packet acquisition) in the Carrier space. The SBC enterprise market is estimated to be worth $1 billion by 2016 while the SBC carrier market is estimated to be $1 billion plus.
Recently, Oracle cleverly swooped in to acquire Acme Packet at 6.5 times sales and now Sonus and AudioCodes are positioned to be taken out next.
Here are the reasons to own Sonus and AudioCodes at what I believe are deep discounts to their intrinsic value:Sonus Networks:· Empire Capital management, a technology driven hedge fund, has acquired 15% of the shares over the past 12 months. When funds go over 10% it is a sign of confidence and indicates that a tremendous amount of homework has been assigned to the investment.· Fidelity Management has now increased its investment in Sonus over the past two quarters from about 1 million shares to over 9 million shares. Speculation is that it will increase its position to 20 - 27 million shares.·
Sonus is referred to as the pure play of the publicly traded companies in the SBC market.· Sonus acquired Network Equipment Technologies (NET) (a weaker competitor of AudioCodes) in 2012 in order to participate in the enterprise SBC and unified communications (UC) markets helping it grow its total available market (TAM).· 2014 Revenues (estimate): $300 million. Revenues will see 11% growth over 2013.· 2014 EPS (estimate): $0.12 per share.· $1 per share in cash which is equal to $278 million.·
I estimate the company could earn $0.25 - $0.35 per share with costs taken out post acquisition.· 20 times post acquisition EPS gives you a target price of $5.00 - $7.00 per share.· Likely acquirers: Cisco Systems, Polycom (PLCM), Ericcson (ERIC). |
