Reasonable Value for Polycom

We maintain our Hold recommendation and the same valuation target for Polycom, Inc. (PLCM - Analyst Report), a leading provider of voice/video conferencing solutions, ahead of its second quarter 2008 financial results. Robust market demand for online voice/video collaborative solutions and strong business relationships with several large companies are considered enablers for the company's long-term prospects.

Polycom's high-definition, mid-range products have generated impressive growth in an increasingly interactive world. Demand is expected to remain firm in future reporting periods as the use of collaborative conferencing technology is highly correlated with restrictive travel budgets at business enterprises. This pattern is exhibited, most often, when the economy is on the verge of an expected recessionary cycle. Beyond macroeconomic demand factors, the company's balance sheet is capable of supporting initiatives for new ventures.

Polycom is trading at 19.3x our fiscal 2008 earnings estimate. This represents a premium to the S&P 500 average but a discount to the peer group average. Furthermore, after adjusting $3.80 of net cash per diluted share, Polycom is trading at more reasonable 16.06x our fiscal 2008 earnings estimates.

We maintain the same six-month target valuation of $33, based on a net of cash P/E multiple of 24.5x our fiscal 2008 forward earnings estimates, a premium over its peers due to Polycom's dominant position in the video/voice  collaborative solutions market, plus net cash balance of $3.80/diluted share.

Nalak Das contributed to the report.

Read the full analyst report on PLCM