Acme Packet Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What:Acme Packet (NAS: APKT) dropped 19% in intraday trading today after an analyst downgraded the stock.

So what: Pacific Crest downgraded Acme Packet from "outperform" to "sector perform." The analyst is concerned about eroding industry fundamentals and increased downside risk to estimates for the second half of 2011 and for the 2012 fiscal year.

Now what: It isn't personal; it's business. Citing weakening demand for IT products, the analyst also downgraded Cisco, EMC, Meru Networks, and Riverbed to "sector perform" from "outperform," and Brocade, Emulex, and Hewlett-Packard to "underperform" from "sector perform." Acme needs strong earnings growth to justify its frothy non-GAAP P/E ratio of 54 times at today's intraday price of $40.54.

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At the time thisarticle was published Fool contributor Cindy Johnson does not own shares of any company named above.The Motley Fool owns shares of EMC. The Fool owns shares of and has created a bull call spread position on Cisco Systems. Motley Fool newsletter services have recommended buying shares of Cisco Systems, Acme Packet, and Riverbed Technology. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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