Home Oracle’s Acme Packet Deal Pushes It Deeper Into Cisco’s Territory

Oracle’s Acme Packet Deal Pushes It Deeper Into Cisco’s Territory

Oracle’s footprint in the tech industry just keeps getting bigger and bigger. Since 2005, the company has spent $50 billion on more than 80 acquisitions to extend its reach from business software to hardware to cloud computing and networking. On Monday, Oracle announced plans to acquire Bedford, Mass.-based, Acme Packet for $2.1 billion. If the deal closes by July as planned, Oracle will be facing off against Cisco in providing gear for transmitting voice, video and data over the Internet.

IT And Telecom

The Acme Packet deal reflects how information technology and telecommunications are coming together in ways that are forcing big shifts in the competitive landscape. As the industry enters the post-PC era, mobile devices will increasingly dominate the enterprise and corporations will need to work with carriers and IT companies to establish better communications between employees’ smartphones and tablets and business systems.

Oracle sees this blending of IT and telecom, and Acme will make the second-largest maker of business applications a player in the new market. More than 1,900 global service providers and enterprise customers use Acme’s gear. The days when separate companies could provide IT and networking gear are over. Carriers and enterprises are now looking for full-service tech vendors that can provide products for building all-Internet communication systems.

While hardware still matters, software’s role in driving network capabilities is growing. “Although hardware is still important in many applications to provide needed performance, software is more and more critical for both differentiating and monetizing network capabilities,” Dana Cooperson, analyst for market researcher Ovum, said in a statement. “Performance without monetization is only half the equation.”

Oracle is certainly in a position to provide a complete software and hardware package to carriers and other large communications and content providers. Because of its $7.4 billion acquisition of Sun Microsystems in 2010, Oracle has the hardware to carry Acme technology. As an added bonus, Acme is likely to boost Oracle hardware sales, which have been in a slump.

Oracle vs. Cisco

Oracle has been encroaching on Cisco’s market for a while. Last July, the company bought Xsigo Systems, marking Oracle’s move into network virtualization, a potentially game-changing technology for moving data more efficiently in and out of data centers. The deal was announced a week after VMware agreed to pay $1.26 billion for Nicira, another network virtualization startup. Oracle did not disclose terms of the Xsigo deal.

Within the area of Internet communications, Cisco, still the networking leading, has been moving aggressively. While Acme is seen as a pioneer in the technology, some analysts believe it has lost some of its mojo as Cisco and the rest of the industry turn to mobile communications. The Wall Street Journal reported that analysts for Mizuho Bank are among the skeptics.

“While we appreciate Acme’s pioneer status and historically dominant position in fixed wireline networks, we argue that the company’s current wireless strategy will achieve limited success over time,” Mizuho said in a recent note. If Muzuho analysts are correct, then Oracle will have to correct Acme’s weakness in wireless technology while also contending with increasing competition from Cisco and others.

Nevertheless, Oracle has the cash to get the technology it needs through acquisition. Cisco is in the same position, so expect to see more mergers and acquisitions throughout the year as competition heats up. “Oracle and Cisco can both afford to be aggressive with M&A whereas many of their peers cannot,” Cooperson said. “Expect the buying spree to continue.”

Image courtesy of maxhphoto / Shutterstock.

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