We reaffirm our Neutral recommendation on
) following the mixed financial results of its third quarter of
2012. The unified collaborative solutions market, especially the
corporate video conferencing segment, is becoming immensely
competitive day by day. The global macro-economy is growing at a
very slow pace, resulting in uneven tech spending. Further,
Polycom currently is in the midst of its transition from
hardware-centric to cloud- and software-centric business model,
which is the main reason behind its sales execution problems.
Polycom has lowered its previously given financial outlook for
the ensuing fourth quarter. Meanwhile, Polycom has decided to
sell its enterprise handset business, which we believe will be
fruitful in the long term as the company is slowly disinvesting
its non-core hardware businesses. We believe Polycom is currently
fairly valued as the stock price plummeted nearly 54% in the last
The business model of Polycom is gradually becoming software
centric, while significantly raising its market opportunity.
Cloud software solutions for telecom service providers,
application software for mobile devices, and collaboration
software for enterprises customers are the core focus areas of
the company. Polycom is streamlining its cost structure by
reducing headcounts in order to realign and reinvest resources in
strategic growth areas.
Polycom has expanded its video conferencing technology
), primarily targeting the enterprise unified collaboration
market. The company is one of the most vital business
partners of Microsoft and provides hardware for Microsoft's video
chat and VoIP software, Lync, which can be used to replace
traditional phone systems.We believe the massive success of Lync
has also helped Polycom to expand its top line in the previous
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