We reaffirm our long-term Neutral recommendation on Polycom Inc. (PLCM - Analyst Report). The company reported mixed financial results for the third quarter of 2013. While revenues managed to beat the Zacks Consensus Estimate, net income fell below the same.
Why Kept at Neutral?
Polycom is currently in the midst of its transition from a hardware-centric to a cloud and software-centric business model. The company has made several enhancements for its popular RealPresence platform. Polycom’s state-of-the-art software platform, called RealPresence, can interoperate among a variety of devices and other platforms. 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.
Currently, the company remains the only pure play unified collaborative solutions provider with an estimated 32% market share. Management has decided to strengthen the company’s foothold in the unified collaborating cloud computing, collaboration software and mobile video markets.
Nevertheless, the worldwide unified collaborative solutions market, especially the video conferencing segment is going through a volatile phase during the last couple of years. Moreover, the market is becoming immensely competitive day by day. Polycom provided a disappointing financial outlook for the ensuing fourth quarter of 2013. Contraction of the U.S. Federal budget and the ongoing global economic volatility are the near-term headwinds for the company.
Other Stocks to Consider
Polycom Currently has a Zacks Rank #3 (Hold). There are some other stocks in the same industry which are performing well. Notable among them include ShoreTel Inc. (SHOR - Snapshot Report), Ubiquiti Networks Inc. (UBNT - Analyst Report) and PCTEL Inc. (PCTI - Snapshot Report). ShoreTel and Ubiquiti currently have a Zacks Rank #1 (Strong Buy) while PCTEL carries a Zacks Rank #2 (Buy).