We reiterate our long-term Neutral recommendation on
Polycom Inc. ( PLCM ) following mixed
financial results for the fourth quarter of 2012. While earnings
per share fell short of the Zacks Consensus Estimate, revenue was
slightly ahead of the same.
Why Remains Neutral?
Polycom operates in the unified collaborative solutions market,
especially the corporate Videoconferencing segment, which is
becoming immensely competitive day by day. Additionally, the
company is in the midst of its transition from hardware centric to
cloud- and software-based business models, which is the main reason
behind the sales execution problem.
However, Polycom has made several product enhancements for its
popular RealPresence platform and has entered into a strategic
agreement with AT&T Inc. ( T ), to offer cloud-based
video conferencing services to different organizations. Meanwhile,
the stock price of Polycom plunged 55% in the last year and is
currently trading at the low-end of its 52-week price range. Both
Polycom and AT&T currently have a Zacks Rank #3 (Hold).
Risk - Reward Virtually Balanced
Unified collaboration solutions market is currently booming as
enterprises, governments, and educational institutions increasingly
recognize the productivity-enhancing benefits of video
conferencing. The company's rivals like Cisco acquired Tandberg TV
of Norway while Logitech purchased high definition video
conferencing manufacturer LifeSize Communications Inc. Stiff
competition in the unified collaborative solutions market has led
to cut throat pricing strategy among rivals thereby affecting both
the top and the bottom line of the segment.
According to research firm IDC, unified communication and
collaboration market is expected to reach $11.7 billion in 2016 in
the EMEA (Europe, Middle East and Africa), which provides a
significant growth opportunity for the company in the international
market. Polycom has made a couple of acquisitions in the
Videoconferencing segment, which will allow Polycom to
differentiate its products from those of its rivals.
Recently, the company partnered IBM (IBM) to
jointly develop unified communication, managed video and
cloud-based services, which we believe will be accretive to the
company's top line.
Other Stocks to Consider
Other stocks to consider in the Unified Collaboration market are
Cisco Systems Inc. ( CSCO ) and
Microsoft Corporation ( MSFT ). Cisco
currently has a Zacks Rank #2 (Buy), whereas Microsoft carries a
Zack Rank #3 (Hold).CISCO SYSTEMS (CSCO): Free Stock Analysis
ReportINTL BUS MACH (IBM): Free Stock Analysis ReportMICROSOFT CORP (MSFT): Free Stock Analysis
ReportPOLYCOM INC (PLCM): Free Stock Analysis ReportAT&T INC (T): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment