On Jun 23, 2015, Zacks Investment Research downgraded Polycom, Inc. PLCM by a notch to a Zacks Rank #3 (Hold).
In the first quarter of 2015, Polycom witnessed lower sales in the lucrative North American region owing to weak conference phone OEM revenues generated from Cisco. Importantly, North America contributes nearly 51% of the company’s total revenue. Hence, a decline in North American sales directly affects the top line.
Meanwhile, the uniform collaborative communications market is becoming fiercely competitive, resulting in the adoption of cut-throat pricing strategies by companies. Moreover, foreign currency exchange rate risks coupled with mergers and acquisitions will likely result in increased customer churn for the company.
However, at present, Polycom is the only pure-play unified collaborative solutions provider with a significant market share. Management has decided to strengthen the company’s foothold in the unified collaborating cloud computing, collaboration software, and mobile video markets through continuous product enhancement.
Meanwhile, Polycom’s RealPresence platform is gaining considerable popularity. The company is expected to raise its total addressable market opportunity to more than $12 billion in 2015 compared with a little over $6.5 billion in 2011.
Notably, Polycom is one of the important business partners of Microsoft Corporation MSFT and provides hardware for the latter’s video chat and VoIP software, Lync. Voice devices compatible with Lync have become a major growth driver for Polycom. Moreover, continuous contract wins coupled with an improving macroeconomic scenario are likely to propel growth for the company while moving ahead.
Stocks to Consider
Better-ranked stocks in the same sector are InterDigital, Inc. IDCC and QUALCOMM Incorporated QCOM. InterDigital sports a Zacks Rank #1 (Strong Buy) while QUALCOMM carries a Zacks Rank #2 (Buy).
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