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Polycom Beats on Q4 Earnings and Revs

Zacks Equity Research

Videoconferencing equipment maker, Polycom Inc. (PLCM), posted better-than-expected financial results for the fourth quarter of 2013.

This was primarily due to strong business of the company’s Unified Communications Personal Devices segment which provides hardware and software for real-time communication services such as video conferencing, speech recognition and instant messaging coupled with solid growth in Europe, the Middle East, and Africa and the Asia-Pacific regions.

GAAP net loss in the third quarter of 2013 was $2 million or a loss of 1 cent per share compared with a net income of $1.9 million or 1 cent per share in the prior-year quarter. However, quarterly adjusted (excluding special items) earnings per share of 12 cents were significantly above the Zacks Consensus Estimate of 6 cents.

Total revenue in the fourth quarter of 2013 was $347.9 million, down 1.4% year over year but well above the Zacks Consensus Estimate of $341 million. Segment-wise, Product revenues were $251 million, down 4.1% year over year. Service revenues were $96.9 million, up 6.3% over the prior-year quarter.

Technological Distribution of Sales

UC Group Systems revenues were $218.1 million, down 8% year over year. UC Personal Devices revenues were $62.1 million, up 33% from the year-ago quarter. UC Platform (Network Infrastructure) revenues were $67.7 million, almost same year over year.

Geographic Distribution of Sales

The Americas (North and South) generated approximately $170.6 million of revenues, down 3% year over year. Europe, the Middle East and Africa generated $89.2 million, down 5% year over year. The Asia-Pacific region accounted for the remaining $88.1 million, up 4% year over year.

Margins

Gross margin in the reported quarter was 56.8% compared with 58.6% in the year-ago quarter. Quarterly operating expenses were $197.5 million, down 2.4% year over year. Quarterly operating margin was -0.13% against 1.3% in the year-ago quarter.

Balance Sheet

At the end of fiscal 2013, Polycom had nearly $583.7 million of cash and marketable securities on its balance sheet compared with $724.6 million at the end of fiscal 2012. The total debt was $248.4 million and the debt-to-capitalization ratio was 0.20 at the end of fiscal 2013.

Cash Flow

Cash flow from operations, during fiscal 2013, was $168.4 million against $189.4 million in fiscal 2012. Free cash flow, during fiscal 2013, was $113.2 million compared with $122.1 in fiscal 2013.

Future Plan

Polycom has decided to retrench 6% of its total workforce in 2014. For this, the company is expected to incur $9 - $11 million charges through the third quarter of 2014.

Other Stocks to consider

Polycom currently has a Zacks Rank #3 (Hold). Other stocks worth considering in this sector include Comtech Telecommunications Corp. (CMTL), InterDigital Inc. (IDCC) and Sierra Wireless Inc. (SWIR). All the three stocks currently have a Zacks Rank #2 (Buy).

Read the Full Research Report on SWIR
Read the Full Research Report on PLCM
Read the Full Research Report on IDCC
Read the Full Research Report on CMTL


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