* Deal allows Oracle to compete better against Cisco
* Price represents a 22 pct premium to Acme's Friday close
* Acme Packet shares up 22 pct on Monday afternoon
* Oracle shares down 3 pct (Adds analyst comments, financial details, updates stock price)
By Jim Finkle and Sayantani Ghosh
Feb 4 (Reuters) - Software maker Oracle Corp willbuy Acme Packet Inc for $1.7 billion net of cash asbillionaire CEO Larry Ellison expands into the networkingequipment market long dominated by Cisco Systems Inc.
Acme is best-known for selling hardware thattelecommunications companies and big corporations buy to managethe transmission of phone calls using the same technology asInternet communications.
Oracle is the world's No. 3 software maker and one of thetop makers of high-end business computers. Analysts said thedeal could signal a broader move into networking equipment, oneof the few areas in technology where Oracle is not a majorplayer.
"We have been expecting Oracle to make a bigger push intothe networking market," said Brian White, an analyst at TopekaCapital Markets. "Convergence across the IT world appears to beinevitable."
Analysts described Acme as a good fit for Ellison's companybecause it expands existing ties with telecommunicationsproviders, many of whom are already heavily dependent onOracle's business management software and database for runningtheir internal operations.
"It's Oracle continuing to broaden out their product andfootprint step by step," said FBR Capital Markets analyst DanIves. "This fits right in with their strategy."
Acme said that 89 of the world's top 100 communicationscompanies use its products to help deliver communicationstraffic. They include BT Group Plc, China Telecom Corp, Microsoft Corp's Skype, O2 and VerizonWireless.
Analysts said Acme's jewel is its software, which theyexpect Ellison to bundle into appliances running on Oracle'sexisting line of Sun computers. They expect Oracle to build outa new line of networking equipment running on Sun servers, withAcme Packet being one of the first such products.
The agreed-upon price represents a 22 percent premium toAcme Packet's closing price on the Nasdaq on Friday. Oracleagreed to pay $29.25 per share in cash, representing a fullydiluted equity value of $2.1 billion.
Oracle shares were down 2.9 percent at $35.14 on Mondayafternoon on the Nasdaq. Shares of Acme Packet were up 22percent at $29.23.
An Oracle spokeswoman declined comment.
In July, Oracle bought Xsigo, another company involved inthis emerging and rapidly growing technology area that hasbecome known as software-defined networking. Its products allowbusinesses to reduce the amount of networking gear in datacenters by replacing much of their functionality with softwarethat is centralized in one or more servers.
Cisco and Oracle rival VMware Inc have also madeseveral acquisitions of software-defined networking companiesover the past year.
"Software-defined networking is still in the early stages,but it is something that Oracle is clearly looking at," saidGartner analyst Akshay Sharma.
Oracle did not disclose terms of the Xsigo deal, one ofabout a dozen companies it bought in 2012.
"Acme is a quick, easy beachhead for them," said Maxim Groupanalyst Greg Mesniaeff. "They have a lot more to do, but itcertainly is a start."
Shares of Acme rival Sonus Networks Inc also roseon the news, and were up 17.5 percent at $2.68 on Mondayafternoon.
Acme has been hit by weak telecom spending in the last fewquarters as carriers spend less on new projects and delayexisting ones. Its shares had fallen 18 percent in the last yearas of Friday.
Also on Monday, Acme reported fourth-quarter earnings of 9cents per share, excluding items, on revenue of $70.7 million.
Analysts expected an adjusted profit of 8 cents per shareand revenue of $68.9 million, according to Thomson ReutersI/B/E/S. (Reporting by Sayantani Ghosh in Bangalore, Jim Finkle inBoston, and Nicola Leske in New York; editing by SreejirajEluvangal, Saumyadeb Chakrabarty and Matthew Lewis)