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Analyst Blog

On Feb 13, 2014, we issued an updated research report on Polycom, Inc. (PLCM - Analyst Report). The company continues to show strong signs of improvements as its Unified Communications Personal Devices segment (62% of total revenue) reported solid global growth.

Polycom has delivered positive earnings surprise in three quarters last year, with an average beat of 141.67%. The company reported improved financial results for the fourth quarter of fiscal 2013 with both the top and the bottom line beating the respective Zacks Consensus Estimate.

Moreover, the company’s cost-control policy in fiscal 2014 is likely to improve margins. Polycom is currently undergoing a transition from a hardware-centric to a cloud and software-centric business model. It has also made several product enhancements for its popular RealPresence platform, which we believe will act as tailwinds for the company going forward.

Polycom extended its video conferencing technology agreement with Microsoft, 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. Lync-compatible voice devices, with double-digit growth rate, have become a major growth driver for Polycom.

Polycom had a low debt-to-capitalization ratio of 0.20 at the end of 2013. Moreover, Polycom purchased $400 million shares under its buy-back program by the end of fourth-quarter 2013.

Polycom currently carries a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Other stocks worth considering in this sector include ShoreTel, Inc. (SHOR - Snapshot Report), Harris Corp. (HRS - Analyst Report) and Nokia Corp. (NOK - Analyst Report). ShoreTel currently carries a Zacks Rank #1 (Strong Buy) while Harris and Nokia have a Zacks Rank #2 (Buy).

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