Polycom's Video Platform Wins Contracts, Competition Rife - Analyst Blog

On Nov 28, 2014, we issued an updated research report on Polycom, Inc. (PLCM). The company shows strong signs of improvement on the back of significant global growth at its Unified Communications Personal Devices segment.

 

Polycom has delivered positive earnings surprises in three quarters last year, with an average beat of 51.34%. Meanwhile, the company reported third-quarter 2014 financial results wherein both the top and the bottom line surpassed the Zacks Consensus Estimate. 

 

At present, Polycom is the only pure-play unified collaborative solutions provider with an estimated 32% market share. Management has decided to strengthen the company's foothold in the unified collaborating cloud computing, collaboration software, and mobile video markets. Meanwhile, Polycom's RealPresence platform is gaining considerable popularity. Earlier, the U.K. government bought 250 of the company's video endpoints while a government department in Asia selected both RealPresence and the video platform of Polycom. 

 

In a separate development, a major U.S. research center decided to implement 5,000 units of the company's Lync Polycom technology. The company also won a contract from the U.S. Department of Defense in the reported quarter. Meanwhile, Polycom extended its video conferencing technology agreement with Microsoft Corporation (MSFT), primarily targeting the enterprise unified collaboration market.

 

On the downside, in the third quarter of 2014, Polycom witnessed a drop in sales in the lucrative North American region. Notably, North America contributes nearly 51% of the company's revenues. Hence, a decline in North American sales may further dampen top-line growth going forward.

 

Meanwhile, the uniform collaborative communications market is becoming fiercely competitive, resulting in a cut-throat pricing strategy. Post the acquisition of Norway's Tandberg TV, Cisco Systems, Inc. (CSCO) will pose serious competitive threat to Polycom. 

 

Polycom currently carries a Zacks Rank #3 (Hold). A better-ranked stock worth considering in this sector is Aruba Networks, Inc. (ARUN) with a Zacks Rank #1 (Strong Buy).