Seeking Alpha
Venture capitalist, tech
Profile| Send Message|
( followers)

Driven by globalization, telecommuting, and offshoring, an enterprise is no longer limited to one building or one geography. With this ever increasing distance between people working in an enterprise, there is a growing stress on applications that facilitate collaboration. Applications like video conferencing are critical today for meetings with offshore employees or even employees on the move. In this post, I will analyze Polycom’s standing as an online video beneficiary.

Related posts of interest can be found here and here. Note, enterprise video conferencing is not the only trend driving the online video market momentum. The advent of YouTube and its compatriots have set in motion a rollicking online entertainment industry that has also been a major contributor to the phenomenon.

Polycom, Inc. (NASDAQ: PLCM) is a leading global provider of unified collaborative communications solutions with revenue of $682 million in 2006. It has four core product lines: Video Communications, Voice Communications, Network Systems, and Services. It has a wide range of video conferencing products that target the small and medium scale enterprises as well as large companies. Its key differentiator is its platform-independent collaboration solutions. To facilitate this, it has strategic partnerships with leaders such as Alcatel-Lucent, Avaya, BroadSoft, Cisco, Digium, IBM, Microsoft, and Nortel among others.

Another key aspect of Polycom’s strategy is its commitment to providing advanced security features. In July this year, it got the distinction of being the first vendor to receive the Federal Information Processing Standards (FIPS) 140-2 Validation: Security Requirements for Cryptograhic Modules for its VSX™ line of video conferencing products. This validation would enable Polycom to extend its secure video conferencing facilities to federal agencies as well as banking firms. Polycom also has a video network management platform, ReadiManager SE200, that increases the reliability and accessibility of IP based video networks.

Polycom has recently acquired SpectraLink Corporation in a strategic move to extend its video conferencing capabilities to the mobile individual. SpectraLink on-premises wireless telephone systems complement existing telephone systems by providing mobile communications in a building or campus environment.

Another strategic acquisition is Destiny for $47.6 million in January 2007. This acquisition would help Polycom gain core intellectual property as well as key Telepresence customer relationships with Capital One, AOL, and Deloitte & Touche. The edge to its Telepresence solutions is its standards-based technology, high definition audio and video, and multipoint links. With this, it attempts to take on rivals Cisco, Tandberg, HP, RadVision, and Lifesize. The Telepresence segment would likely see some further acquisition activity. HP has already formed a partnership with Tandberg. Polycom itself could be an interesting merger with another networking player, not dissimilar to the Cisco-Webex story, drawing on its twin trend alignment: online video and collaboration.

On the financial front, Polycom reported revenues of $233.9 million for Q2 2007, a 42% increase over the same period of 2006. Video communications revenues increased 26% to $99.8 million for the quarter from $79.2 million in Q2 2006. This increase in revenue was primarily due to higher sales and higher average selling prices of its VSX™ and HDX group video systems. The RPX telepresence products also contributed to the increased revenues. Its stock is is currently trading between $29 and $31 and reached a high of $35.5 in July.

telepresence

Source: Polycom To Benefit From Online Video Growth