Yesterday, videoconferencing equipment manufacturer Polycom Inc. announced that its board of directors has approved a $400 million share buy-back program of its common stocks. The company is expected repurchase 20% of its outstanding common shares through this program. The new capital return program will be funded through $150 million in cash and $250 million in loan.
For loan financing, Polycom will launch a modified Dutch auction self-tender offer on Sep 13, 2013 which will expire on Oct 30, 2013. The price range of these tenders will be $10 to $11.50 per share. Shareholders will decide how many share to sell at what price within this price range. Polycom expects to purchase approximately 23 million shares of its common outstanding stocks at the mid-point of this price range.
Polycom’s business model is currently undergoing a transition from hardware-centric to cloud and software-centric. Meanwhile, Polycom has made several product enhancements for its popular RealPresence platform. Recently, Polycom entered into a strategic agreement with AT&T Inc. (T - Free Report) to offer cloud-based video conferencing services to different organizations, which will be accretive for its long-term growth.
Further, Polycomis one of the most vital business partners of Microsoft Corp. (MSFT - Free Report) 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 have become a major growth driver for Polycom.
On the other hand, contraction of the U.S. Federal budget, ongoing global economic volatility and highly competitive market structure may impede Polycom’s future growth. Cisco Systems Inc. (CSCO - Free Report) is the closest competitor of the company. Polycom currently has a Zacks Rank #3 (Hold).