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Analyst Blog

Yesterday, after the closing bell, videoconferencing equipment maker, Polycom Inc. (PLCM - Analyst Report), posted mixed financial results for the third quarter of 2013. However, the company provided a disappointing financial outlook for the ensuing fourth quarter.

GAAP net loss in the third quarter of 2013 was $24 million or 14 cents per share compared with $14.8 million or 8 cents per share in the prior-year quarter. However, quarterly adjusted (excluding special items) earnings per share of 2 cents fell below the Zacks Consensus Estimate of 4 cents.

Total revenue in the third quarter of 2013 was $336.5 million, up 0.3% year over year and nominally above the Zacks Consensus Estimate of $336 million. Segment wise, Product revenues were $242.5 million, down 1.8% year over year. Service revenues were $94 million, up 6.4% over the prior-year quarter.

Technological Distribution of Sales

UC Group Systems revenues were $221.4 million, down 2% year over year. UC Personal Devices revenues were $56.9 million, up 24% from the year-ago quarter. UC Platform (Network Infrastructure) revenues were $58.2 million, down 9% year over year.

Geographic Distribution of Sales

The Americas (North and South) generated approximately $177.3 million of revenues, up 4% year over year. Europe, the Middle East and Africa generated $80 million, up 2% year over year. The Asia-Pacific region accounted for the remaining $79.2 million, down 8% year over year.


Gross margin in the reported quarter was 58% compared with 58.5% in the year-ago quarter. Quarterly operating expenses were $217.4 million, up 1.5% year over year. Quarterly operating margin was -6.6% compared with -5.3% in the year-ago quarter.

Balance Sheet

At the end of third quarter of 2013, Polycom had nearly $953.8 million of cash and marketable securities on its balance sheet compared with $724.6 million at the end of 2012. The total debt was $250 million and the debt-to-capitalization ratio was 0.15.

Cash Flow

Cash flow from operations, during the first nine months of 2013, was $117.5 million against $121.4 million in the year-ago period. Free cash flow, during the reported period, was $75.7 million compared with $69.4 in the prior-year comparable period.

Financial Outlook

Management stated that the company’s total revenue for the fourth quarter of 2013 is likely to be in the range of $336–$346 million. Its mid-point of $341 million is well below the current Zacks Consensus Estimate of $352 million.

GAPP earnings per share are anticipated between a loss of 1 cent and an income of 2 cents per share. Non-GAAP earnings per share is likely to range from 13–16 cents. Assuming an average stock-based compensation of 10 cents per share, the mid-point of the non-GAAP earnings per share of 4.5 cents is well below the current Zacks Consensus Estimate of 9 cents. 

Other Stocks to Consider

Polycom currently has a Zacks Rank #3 (Hold). Other stocks worth considering in this sector include Harris Corp. (HRS - Analyst Report), ShoreTel Inc. (SHOR - Snapshot Report) and Ericsson LM (ERIC - Analyst Report). While Harris and ShoreTel have a Zacks Rank #1 (Strong Buy), Ericsson has a Zacks Rank #2 (Buy).

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