Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Polycom, Inc. (NASDAQ:PLCM)

Q4 2007 Earnings Call

January 23, 2008 10:00 am

Executives

Robert Hagerty – Chairman. Chief Exec. Officer and Pres

Michael Kourney – Chief Financial Officer, Sr. Vice President of Fin.

Sunsil Bhalla – Sr. Sunil Bhalla

Philip Keenan – Sr. VP Strategy

James Ellett – Sr. Vice President

Analysts

Scott Sutherland – Wedbush Morgan Securities Inc.

Manuel Recarey – Kaufman Bros.

Tavis Mccourt – Morgan, Keegan & Company Inc.

Jason Ader – Thomas Weisel Partners

John Anthony – Cowen and Company

Bill Choi – Jefferies & Co.

Mikael Clement – Pareto/Nordic Partners

Jeff Embersits – Shareholder Value Management

Troy Jensen – Piper Jaffray

Elliot Gold - TeleSpan Publishing

Jim Kelleher- Argus Research Corp.

Sanjiv Wadhwani – Stifel Nicolaus & Company, Inc.

Operator

Ladies and gentlemen thank you for standing by welcome to the Polycom, Inc. Fourth Quarter Earnings call. During the presentation our participants will be in a listen-only mode afterwards we will conduct the question and answer session.

(Operator Instructions)

I would now like to turn the conference over to Michael Kourney, Polycom’s CFO, please go ahead sir.

Michael Kourney

Welcome to Polycom’s Fourth Quarter Earnings Call, I am Michael Kourney, Polycom’s Chief Financial Officer and here with me today is Bob Hagerty, Chairman and CEO. As with previous quarterly calls we are again augmenting today’s voice conference call at the webcast. If you would like to receive the webcast, please open your web browser at this time in the Polycom’s home page, which is polycom.com and click on Q4 Earnings Call, then follow the instructions provided. For the analyst participating in the Q & A session, leave your call live so that you can use your Conference Call Connection for the Q & A session at the end of our call.

Please note that Q & A is for financial and market research analyst. We welcome all others to listen in to the Q & A session. Please also note that this entire webcast, including Q & A will be maintained on Polycom’s website for 12 months from today for your convenience and replay. Most of you participating in this call are aware of the of the Federal Legislation regarding forward looking statements.

Accordingly, we would like you to note that during the course of this conference call, Bob and I will be making forward looking statements and present forward looking visual materials regarding events, anticipated future trends, future product offerings or the future performance of the company including financial guidance.

We wish to caution you that such statements and visual materials are just predictions that involve risk and uncertainties and the natural events or results could differ materially. We discussed a number of these risks in our business in detail in the company’s SEC reports including most recently in the companies form 10Q for the quarter end at September 30, 2007 and any forward looking statements must be considered in the context of such risks and uncertainties. Also please note that Polycom’s application of US generally accepted the counting principles or US GAAP requires disclosure that availability of new products, plan, features and upgrades discussed during this call are subject to change or cancellation.

At this time, let me turn the call over to Bob Hagerty, Chairman and CEO.

Robert Hagerty

Thank you Mike, to begin I would like to provide our Fourth Quarter financial highlights, later in the call, Mike will go through the operating results in greater detail. Revenues for the Fourth Quarter were a record, $263.3 million representing a 10% sequential increase from the third quarter revenues and a year over year growth rate of 41%. Excluding SpectraLink revenues of $37.2 million, Polycon revenues grew 21% year-over-year. Importantly for the first time out history customer demand drove Polycom right through the $1 billion revenue run rate in the Fourth Quarter.

Coupled with this strong revenue, Polycom exited Q4 with a record backlog of $57.7 million of 14% sequentially and 43% year-over-year. Polycom’s deferred revenues also grew to a record $87 million in Q4 increasing 9% sequentially and 43% over the year ago period. Non-GAAP gross margins increased slightly to 60.3% in Q4 and non-GAAP earnings grew to $0.42 per diluted share representing a 20 % growth in EPS year-over-year.

Q4 also marked an important milestone for Polycom. We believe our rapid growth underscores the strong market demand for enterprise wide collaboration solutions and the strength of our unique value proposition to our customers.

In fact, global demand for collaboration solutions has never been stronger. For example, market research firm Gartner Group determined in late 2007 that for the third year in a row, collaboration technology is a top 10 budget priority for CIOs. Specific to Polycom, the CMO council recently conducted a quantitative survey of more than 1500 key stake holders across senior, IT, channel providers and other key individuals.

At the conclusion of the study, the CMO Council reported that Polycom ranked 4 of the top 75 IP companies in the world with respect to customer affinity. This market research data points indicate that not only is collaboration technology a top priority but that Polycom is recognized as the top brand in the space. We have noted that collaboration technology is often a top budget priority because of its immediate cost savings benefits.

Let me give you a recent example, we deployed nearly 100 HDX video systems at a large multinational pharmaceutical company in 2007 who adopted our solution to save out-of-pocket cost and to increase productivity and efficiency. Having experienced the value of our proposition first hand, the same pharmaceutical company is now getting ready to expand its network to deployment of Polycom’s leading TelePresence technology.

One very simplistic way to look at it is this, if three people use video collaboration rather than just making one international trip, the HDX 9000 video conferencing system just paid for itself. Moreover, the customer benefits from two days of productive time that would otherwise been lost to travel.

We find this and many other stories like it to be especially relevant in an environment where the stock of potential macroeconomic issues. One could argue that our value proposition, in fact, increases in a tougher economic environment. Another key driver of the fast video adoption we are seeing is the quantum leap in quality. With Polycom’s number one ranking in HD video and voice. The customer experience of our high definition video enables remote collaboration that is essentially better than being there.

In other words, all the benefits of collaboration, without the inefficiency and cost of logistics. Also, with our HD video platform available from the executive desktop to the meeting room, to the TelePresence room, the extended enterprise can now connect on demand at anytime and in HD.

Importantly at the same time of this huge quality improvement, HD video and voice has become plug and play of our standard IP networks, that means through Polycom’s standards-based offerings, customers can broadly adopt this solution without the need for special network requirements or in-house expertise.

Finally, we have seen demand drivers go significantly over the last several quarters. Whether it is applied chain management, go to market integration, business process outsourcing, employee training, remote depositions, sustainability compliance or other purposes that spend the campuses or geography, IP based collaboration is being adopted at unprecedented rates.

To fully capitalize in the growing demand for HD collaboration and further establish Polycom as the industry leader, we offer our customers an innovative suite of best-in-breed collaboration products, a compelling delivery model through our strategic and reseller partnerships and an unmatched service platform.

On the product side we significantly expanded our HD product line in eh Fourth Quarter. These expansions are further manifestations of our HD 9000 product line. Rated the highest performing HD video product by market research firm, Wainhouse Research. For instance, we launched the HDX 4000, the first executive desktop video product with HD voice, video, and content sharing.

We also began shipping the HDX 8000 and HD video system for medium-sized meeting rooms. Further, as we announced Monday, we are launching the new HDX 7000 an HD solution for smaller conference rooms. This completes our line of high definition video solutions.

With these expansions to our HD product line and our full range of TPX and RPX TelePresence solutions, we believe Polycom as the most expensive and robust video collaboration offering in the industry. In addition to our product offerings Polycom is leveraging its strategic partnerships with leaders in the communications industry. For example, working closely with our strategic partners, we are identifying and monetizing significant customer opportunities that are breaking the mold in terms of deal size and creating annuities in the process.

In fact, one such opportunity that we closed with the strategic partner at a major services firm will deliver literally millions of dollars of revenue in each of the next three years. Many of these opportunities exist across our impressive list of strategic partners including Avia, Nortel, IBM, Cisco, Alcatel, AT&T, BT Verizon and many others.

Lastly our services platform is recognized by our customers for having the broadest and most complete service offerings in the collaboration industry. At this juncture we have approximately 400 people world wide that are providing professional services, installation training and other technical partnering activities with our customers around the globe. With collaboration solutions, now mission critical, IP network based application our customers appreciate and pay for these high value services making them happy and long-term customers for Polycom.

I would now like to update you on the progress of our Go-to-Market Model. Clearly, our unique value proposition, our tight strategic partnerships and or highly differentiated services are key elements of our go-to-market strategy. In addition, with the strong market drivers present at this fast growth market, we are adding sales and sales engineering staff, which we believe yields fast high return results. In concert with these editions, we are making key marketing investments to reach both end customers and decision makers and their IP counterparts.

In fact, with Polycom becoming a key provider for many of the organizations worldwide, we are having significantly more exposure to the (inaudible) at our customers. This increases the size of our deployment and creates the opportunity for directed marketing such as executive briefing centers and directed media. Of course with our hi-tech approach, we will continue to fulfill product through what we believe is the best channel network in the industry.

Before I turn the call over to Mike Kourney, I would like you to give you a brief update on our Wireless Business. As we discussed on our last call, we successfully moved manufacturing for the primary product lines from an insourced manufacturing process to Polycom’s Standard Outsourced Asia Model. These moves give us a cost improvement and better capacity. Although we did exit Q4 with some unfulfilled wireless orders, which kept us from showing the wireless growth in the Fourth Quarter demand was strong, which we believe should position us well for Q1 and beyond.

For voice overall, Polycom set an important record in 2007 by shipping more than 1 million phones in one year for the first time in history. In addition you may note, that the year-over-year growth rate for organic voice increased to 17% in Q4.

Looking into 2008, we anticipate our voice business to be another key growth driver for Polycom. First, Polycom’s highly differentiated Voice Over IP product line has become the go-to standard for customers adopting IP telephony through hosted provider or a broad array of next generation IP call managers. Our tight zip integration, HD voice quality, and intuitive user interfase are making Polycom the standard for many of today’s call management providers.

In addition in the IP domain, our triangular sound station conference phones are also experiencing the real benefit of being Plug-and-play. This makes attaining the benefits or our voice quality easy and at low cost. Of course, we have also made and are making enhancements through our voice conference phones such as mobile phone, noise immunity. So that for a few hundred dollars, a customer can replace their old sound station with the unit that is immune to interference from nearby mobile phone or BlackBerry-type device.

Finally the wireless business has now been integrated and with the need for mobile collaboration growing, Polycom believes, it is in a position to capture the market for wireland voice connectivity.

In summary, Q4 was an excellent record setting quarter for Polycom. The dynamics of this market and Polycom’s execution set the stage with promises to be an exciting 2008. On that note, let me turn the call over to Mike Kourney for discussion of Polycom’s finances.

Michael Kourney

Before I get started, please note for the financial guidance that Bob and I are giving today, Polycom is not assuming the responsibility to provide any updates regarding this financial guidance, regardless of changes adverse or otherwise which may occur in the future. Also, during this portion of the call, I remind you that we will both be making forward looking statements, including our expectations of future financial execution performance, which is subject to many risks and uncertainties.

Moving to look at our results as Bob stated earlier, revenues for the Fourth Quarter were 253.3 million dollars. This represents a sequential revenue increase of 10% and a growth rate of 41% over Q4 of last year. Excluding Spectral Inc. revenues of $37.2 million dollars, Polycom grew 21% year over year. On a product line basis, which includes a service element of this product line, revenues for video solutions were a record, $164.9 million, up sequentially by (audio gap) 30% and up 23% year-over-year.

Video Solutions was comprised of video communications and network systems. Of these product lines, video communications generated $129.2 million in revenues, up sequentially by 14% and at 26% year-over-year. On a unit basis, we shipped a record 21,010 group video units comprised primarily of our world leading HDX and DSX product lines. On the desktop video front, we shipped 10,928 units in season Q4.

The Network Systems product line generated $35.7 million in revenues, up a significant 9% sequentially and up 15% year-over-year. The Voice Communications Business also generated record revenues at 98.4 million dollars representing a 5% sequential increase from Q3 and an 88% increase from the year-ago period. Excluding SpectraLink revenues, the voice revenue growth rate increased to 17% year-over-year.

Linearly, was solid in Q4 with 43% of revenues in the last month of the quarter. Polycom exited Q4 with a record of 57.7 million dollars in backlog, up 14% sequentially and 43% year-over-year. Polycom’s differed revenues also grew to a record $87 million in Q4 increasing 9% sequentially and 43 % over the year-ago period.

We believe there is revenue growth and strong forward indicators indicate that IP based collaboration technology is at the forefront of budget priority for CIOs. Moreover with the demand drivers above discussed earlier, we believe that Polycom is in best position to capture this growing demand for our solutions, which improve productivity, increase sustainability compliance and immediately save operating costs, regardless of the customer’s industry.

Moving to revenue by geography in the Fourth Quarter, North America revenues were down 2% sequentially but grew 35% over the year-ago period. Avia grew significant 23% sequentially and 51% over the year-ago period. Asia revenues grew a significant 34% sequentially and 48% year-over-year. Latin America was up 22% sequentially and up at significant 32% year-over-year. Excluding SpectraLink revenues, North America revenues were 10% over the year-ago period and Avia grew 26%. Asia and Latin America were not significantly impacted by SpectraLink revenues.

From the Channel standpoint, the revenue breakout for the Fourth Quarter is as follows: 36% to value added resellers, 52% through distributors, 5% through service providers and 7% direct. We are pleased with the sharp increase in Network Systems revenues due to the fast growing adoption of our new RMX unified collaboration platform.

In fact, Network Systems grew sequentially in year-over-year levels, we have not seen in years. Of course, video also jumped significantly both sequentially in year-over-year. Due to our best in class HD solution, Plug-and-play install, and the demand drivers that Bob discussed earlier. Organic voice year-over-year growth also increased in Q4 with Wireless revenues off 2% sequentially due to the start-up of our cost reduced Asia Manufacturing Outsource Model.

Looking forward into the First Quarter we have in past years seen a 5 to 6% sequential decrease in revenues. However, in Q1 ’06 and Q1 ’07, we actually saw a 1% organic sequential growth. Essentially illustrating that secular demand for collaboration has been overwhelming Q1 seasonality. For Q1 of 2008 we have taken into account that we will have a full quarter of our expanded HD video product line with the HDX 4000, 7000, and 8000 and our TPX and RPX TelePresence product lines.

Of course we also have the growing adoption of Polycom’s RMX Network platform. Furthermore, we have our new voice relationship with 3Com and the continuing opportunity with Microsoft as well as growing strategic relationships with Avia, Nortel, and others across our broad product portfolio. However, even with collaboration proving to be a mission critical application, we need to consider the view regarding the macro economy, particularly in the US. Laying all of these factors we expect First Quarter revenues to be roughly consistent with the Fourth Quarter.

Moving on to the statement of operations non-GAAP growth margins for the Fourth Quarter was 60.3%. Breaking outgrowth margins by product family, our Network Systems product line continues to have targeted growth margins in the high 60s range. For the voice and video communications products have growth margins stronger than the high 50s to mid 60s range while desktop voice and service growth margins are targeted in the low 40s range.

For the Fourth Quarter, Network Systems and Service operated above their target ranges. Video and group voice operated within their target ranges and desktop voice operated slightly below its target range.

Growth margins in the future maybe higher or lower and a set of variations and other factors. Switching gears to non-GAAP operating expenses for the Fourth Quarter Polycom’s operating expenses increased sequentially in absolute dollars that decreased out of percent of revenue basis in Q4.

Looking at the specific non-GAAP operating expense lined items for the Fourth Quarter, sales and marketing represent 24.5% of revenues for the period, up slightly from 24.2% in Q3. R&D closed at 12.4% of revenues down from 13.6% in the third quarter. G&A was 5.1% of revenues, down from 5.2% in Q3. In total, Q4 non-GAAP operating expenses represented 42% of net revenues for the Fourth Quarter down to the percent of revenues from 43% in the Third Quarter.

Moving to a look at the company’s operating income, Polycom generated Fourth Quarter non-GAAP operating income of $48.1 million or 18.3% of net revenues. This result represents a 38.9% growth in operating income from 34.6% in non-GAAP operating income in Q4 of 2006.

As a recap of our performance against our previously stated long-term target model, we are within our target growth margin range of 56% to 63%. Sales and marketing operated within its target range. R&D operated 0.4 percentage points over our target range and G&A operated well within its target range. Q4 non-GAAP net income was $38.5 million. This represents a 20.5% growth from $32 million in non-GAAP net income in the comparable period last year. Non-GAAP diluted EPS in Q4 $0.04 grew by 20% from $0.35 per diluted share in Q4 of 2006. GAAP profitability for the quarter was $22.8 million or $0.25 per diluted share in Q4 of 2007 versus $25.8 million at $0.28 per diluted share in the comparable period last year.

This represents 11.5% decline in GAAP net income due to acquisition related cost, stock compensation cost, and for its intangible charges. Looking forward to the quarter based on our mixed assumptions, we anticipate that growth margins will remain at roughly Q$ levels. With our sales and marketing coverage investments beginning to show traction, we plan to continue to invest in this area to capture the transformational trends and collaboration, arguably one of the fastest growing sectors in technology at the time when Polycom’s strategic partnerships and product line are at unprecedented levels. As such, we are trying to increase sales and marketing investments to approximately 27% of revenues in Q1.

With the expected benefits of these investments, we expect to see the sales and marketing percentage decrease gradually over the ensuing quarters. In R&D and G&A, we expect expanding to decrease slightly as a percent of revenues in the First Quarter.

Moving to tax guidance you will notice that due to our global mix of profits, coupled with favorable tax rollings, our full year tax rate was reduced from 28% to 27%. As a result of the year to date adjustments to this tax rate, Polycom’s Q4 non-GAAP tax rate was 25%. As Polycom’s Q4 non-GAAP diluted EPS would have been $0.41 at a constant 28% tax rate in Q4.

Looking forward to 2008, we are also forecasting our non-GAAP tax rate to 27% due to our expected geographic mix and other factors and we recommend that you update your models accordingly.

Of course, this 27% tax rate is subject to change based upon changes in geographic mix as well as changes resulting from many new US or international regulations or interpretations. Other income for the Fourth Quarter was $3.5 million dollars. In Q1 we expect other income to be roughly consistent with Q4 levels, not including the impact of further share repurchases.

Before turning to the balance sheet, I would like to briefly highlight our full year performance in 2007. Before the year, Polycom delivered record revenues of $929.9 million, an increase of 36% over the prior year. Excluding SpectraLink revenues revenues of $113.5 million Polycom grew 20% year-over-year. This is an acceleration from the 17.5 % revenue growth rate that we had in 2006 over 2005.

Profitability also hit a record level in 2007 with non-GAAP net income at $128.9 million, an increase of 31% over 2006. This was driven by significant revenue growth and the increase in non-GAAP operating profitability to 17.1%. Moving to cash, as a result of this excellent profit growth, Polycom’s operating cash flow in 2007 set a new record by generating $145 million for the year.

In Q4 Polycom generated a record $55.8 million in positive operating cash flow, representing Polycom’s 40th consecutive quarter of positive operating cash flow. These excellent operating cash results were driven largely by a strong profitability and working capital management. Cash investments at the end of the Fourth Quarter totaled $374.6 million.

Moving to DSO, the company’s net trade receivables of $138.1 million resulted in a DSO of 48 days, up to date sequentially and up nine days year-over-year, primarily due to the shift in the geographic mix. Looking forward we are continuing our best in class DSO guidance of 40 to 50 days. Inventory returns at the end of the Fourth Quarter increased to 5.9 turns. Over the next few quarters we expect to see gradual improvement in inventory returns toward guidance in 6 to 7 turns.

Regarding expected share count, we expect Polycom’s waited average shares for diluted EPS to grow by approximately 100,000 shares in Q1 exclusive of stock repurchases. During the Fourth Quarter we did repurchase $50 million worth of our common stock. Note that we have an authorization or purchase approximately an additional $140 million of our common stock against the $250 million share by that authorization given by our board in May of last year.

We plan to be active in that program in Q1 as we continue to bring value back to our share holders. In addition, the future potential buyback from our stock are shared counted change based upon Polycom stock price and the acquisition activity in other factors.

Moving to headcount, Polycom had 2478 employees at the end of Q4, representing a net increase of 30 employees over the prior quarter. These additions were primarily driven by additions in sales and offshore engineering, offset partially by acquisition synergies due to transitioning the wireless products to our Asia Outsource Manufacturing Model.

Looking forward we expect to continue to invest in sales and sales engineering headcount to optimize Polycom’s global coverage in the fast growing collaboration market space.

As a final note on the financials, we represent both non-GAAP and GAAP financial measures here today. Please refer to our reconciliation of non-GAAP to GAAP financial measures and the tables to GAAP and non-GAAP reconciliation in today’s earnings release.

At this time, I will turn the call back over to Bob Hagerty for closing comments.

Robert Hagerty

In summary, unprecedented demand for Polycom’s IP based collaboration solutions drove us to dwell over the billion dollar revenue run rate mark. For the first time in Q4 video collaborations clearly emerges to top priority due to its immediate cost savings benefits and rapid return on investment. At the same time, Polycom’s HD quality, TelePresence and plug-and-play IP connectivity are delivering an amazing customer experience, Polycom’s leading HD video and Voice over IP solutions are enabling this growth for our company worldwide.

Furthermore, our strategic partnerships with Avia, Nortel, Cisco and others are adding fuel to our business opportunities. In fact, revenues from our new voice relationship with Microsoft that we launched in October and our recent voice launched with 3Com provides yet another engine for revenue growth in 2008. This meaningful partnerships coupled with strong execution from our sales and service teams are driving increase traction and expansion on a global basis.

2008 promises to be an exciting year for Polycom, our HD video-voice and content collaboration solutions solved real business problems across a broad range of industries. Adopting our solution yields fast returns and increases the customer’s agility and cohesiveness, and facilitates a green corporate policy. Yet another crucial driver in many geographies. The employees and partners of Polycom are ready to fulfill the growing demand for this market.

On that note we would like to open the floor to financial and market analysts for any questions you might have for all of these we invite you to stay on the call to listen in. Of course as we discussed earlier in the call, many of the statements we have made and will made during the Q & A period are forward looking statements which are subject to many risks and uncertainties.

Is the conference call operator available at this time?

Question and Answer Session

Operator:

(Operator instructions)

And the first question comes from the line of Jeff Lubert with Bank of America Securities, please proceed with your question.

Jeff Lubert - Bank of America

Can you comment regarding what you are seeing from a macro perspective in the US and some of the other geographies and maybe just talk a little bit about how customers are looking at video conferencing now, is it becoming less discretionary and our people starting to look at conferencing at the technology that they are willing to spend on because it is able to save them, the money on going forward?

Robert Hagerty

I absolutely think so, what we are seeing globally is that we have had long period, attractive period of people globalizing their enterprise and they were teams across the globe but they need to connect. As we bring people up to speed on this new technology they are astounded by the video quality and the reliability of it which is materially different from what they had on ISDN years ago. So it is definitely really staged and the more we get to show people the more people network on this you know they talk to their friends, talk to industry associates and they see the kind of returns they are getting. I think it is moving to more of the must-have technology.

Jeff Lubert - Bank of America

So, I mean obviously a lot of new products came out turning the quarter excluding the contribution form those products, can you give us an idea what kind of improvement we would have seen this quarter and I do not think you said what percentage of video revenues HD represented this quarter.

Michael Kourney

We did not cover that but it was in the high 20’s percent so it was a nice contributor when do you need to keep on—you cannot just strip that out and look at it in isolation because obviously some people move to HD, you ISASP pop of course because by the map you probably that the ISP and video did go up this quarter, but what you find is people who might have bought standard definition get HD and then of course just in general many more units for purchase and entire periods.

Jeff Lubert - Bank of America

And then finally there is obviously a lot of buzz surrounding TelePresence can you give us a sense of as you did about $2 million in TelePresence revenues last quarter, what you did this quarter and maybe give us a sense of in order of how many more deals you are working on, how long these deals take to kind of float through the model and I guess where you see the market for TelePresence going, as it worth for 2008.

Robert Hagerty

I think not much difference than last quarter. We are saying about six-month cycle to get them thru the pipeline on deals.

Six to nine, six to get the order and then we got a delivery and install and all the rest. We are seeing a big step up in demand and people looking at it. It is probably the single most requested demonstration that we have. Every sales person I have talked to, and I talk to a lot them last week because I have been with him.

Is TelePresence, TelePresence, TelePresence but more importantly, as you are doing a TelePresence demonstration. We are showing a full line of products and we are getting, if they buy or do not, we are getting, whether they are buying or not buying, we are getting great pull on the HD product and the rest of the product line.

And it is giving us a great leg end to talk to people about our wireless solutions and our VOIP solution. So, it is a real cattle race for us.

Michael Kourney

Yes. We know we do not break out everything in the garage for details obviously for competitive reasons and everything else but yes, that was a very nice sequential increase in the RPX revenues in this last period in Q4.

Yes, there was a significant step up. It is still early because of the cycle but it is a big step up in Q4.

Jeff Lubert - Bank of America

More than a hundred percent?

Michael Kourney

Operator

And our question goes to the line of John Anthony with Cowen and Company. Please proceed with your question.

John Anthony - Cowen and Company

Good evening guys, a few questions. So, I apologize if you had cover any of this. How would spill over what is there in the SpectraLink side into Q1?

Michael Kourney

There was some backlog that Bob mentioned. We do not give all those numbers by product scheme or anything. But yes, there would have been.

Let us look at this way. There would have been some nice growth in SpectraLink. There are some wireless orders left on the table just to do the missing transition. But we have completed that and that all works out here in Q1.

John Anthony - Cowen and Company

Given the hiccups and earlier part of 2007, do you feel like you guys have passed at, at this point?

Do you expect SpectraLink revenues to kind a grow at the rate that they were historically before you acquire the company?

Robert Hagerty

I hope faster, we are materially through the problems and the issues that we encountered. Acquisition is always challenging. You never knew where the challenges are going to pop up. You think you have more covered and I think we are sitting at this stage and I think we have seen, we have seen all of it and now we are fully integrated.

I had a great sales meeting with all of our team, SpectraLink veterans as well and I think we got many good things going for 2008.

John Anthony - Cowen and Company

A couple of quick clarification. The HDX 4000 was available for all of Q4 correct?

Robert Hagerty

No, there is an available in December.

John Anthony - Cowen and Company

Okay., so, both the 4000 and the 8000 was shipping only in December?

Robert Hagerty

Correct.

Michael Kourney

It might have been in the very end of November, but materially, yes.

John Anthony - Cowen and Company

Any contribution from Proxies?

Michael Kourney

Limited on that, that would not be a material item. But H6 4000 8000 did contribute however.

John Anthony - Cowen and Company

Lastly, at this point with the increase investment with sales marketing which is certainly understandable, what do you foresee, what are the dynamics that are going to take to get you guys to 20% operation margins?

Robert Hagerty

I think this market has all the making of a market that we can do that in. We clearly see enormous amount of opportunity and we are going to invest for we think it make sense.

We think that right now, our product line is in phenomenal good shape. We want to get our coverage model, a little bit more filled out.

We think that there are a lot of uncovered that we need to go out and capture and that is our primary motivation right now. I do believe that in the reasonable near term, we should be able to get right fully into the business model, but no prediction on exactly when that is going to be.

John Anthony - Cowen and Company

Do you think it is possible to see in 2008?

Robert Hagerty

I think, depending on the demand cycle, we do not want to fall behind the demand curve at this stage, so it is possible, but we do not give forward guidance beyond the next quarter.

Michael Kourney

With the dynamic in the space, obviously, the coverage increase to make out of sense hardly to get nearly returns and sending the flame at this point just seem to make a lot of sense.

Speaker 4

Our next question comes from the line of Jason Ader with Thomas Weisel Partners, please proceed with the question

Jason Ader – Thomas Weisel Partners

I have a few questions, some of them were answered but on the North American business being down sequentially, could you provide any color there by product line?

Michael Kourney

Well one thing is a big chunk is the SpectraLink Business is US based, so that is a driver. The other factor to consider is coming off of the Q3 US Federal Business where government drops noticeably 2% of revenue particularly in the US from a Q3 to a Q4. So those are the two headlines that I would take out of that.

Jason Ader - Thomas Weisel Partners

You have not seen any significant signs of macro weakness in the US that might have driven some corporate customers to spend a little bit less robust than normal?

Robert Hagerty

Well I think a little bit less but clearly it was not strong as I would have liked. But I did not see anything that was alarming, I guess that is the way I would put it. I mean, across the line, across the industries you would say financial services but the numbers really do not point to that. People are addressing this market, understanding the cost reduction capabilities.

We did see a lot of people talk to us about; we kind of cringed at it because we do not like it to be a travel avoidance solution. It is really productivity solution but clearly people were looking at it to offset travel cost, and that pressure continuous. We like to get in there and if it travel avoidance that gets it in there that is great, and we talked about the productivity improvements and build on that.

We can show real documented ROIs and we have ROI models that we can provide around productivity improvement as well as cost avoidance.

Jason Ader - Thomas Weisel Partners

One of the reasons I asked is because another company that I noticed that goes through a lot of the same channels as you is a Plantronics, on the headset side, and they talked about some weakness specifically in North America with headset business being driven by some macro issues. And so, I guess I was wondering on the voice side absent of VOIP business and some of the secondary drivers there and specifically you have the incremental contribution from 3com and Microsoft but the conference phone business, I mean, how do you view that Plantronics comments in the context?

Michael Kourney

First of all, we really should not comment on Plantronics. They are great company and that should be for their calls. What I would say about Polycom and Bob has been saying the same thing in the call is there is a real cost avoidance aspect kind of immediate payback. It sounds a brain teaser but they have big complex net press of value algorithms. So that maybe a difference between us and just other sectors within technology, however, that all being said, well clearly there is an awful load of discussion about the macro economy and actions and et cetera. You are the expert on what that means for the equity market facility kind of things.

But we are saying is obviously what we had is a very strong OU at the quarter and an okay US quarter, so was their economy mixed into that? Frankly possibly right, I think it is impossible for us to sit here and say, “No we didn’t see any”. There is nothing alarming as Bob said at all but with 10% up year-over-year and the OU US market work sharply.

But they were the two other factors which are very noticeable of the US Federal Government Camp of Q3 and the SpectraLink roll over on the shortages which hits the US a lot more than anywhere else. That is probably as much detail we could give.

Robert Hagerty

You have been around this space for a while, I am really excited about what the conference call cringe, I think is what we are calling it. No buzz campaign is going to do. These devices like the BlackBerries and the Palms, they really do cause a lot of interferences.

I talked to end user customers, more and more and I hear, “Can you do something about that?” And the answer is “Yes we have”, and it is across the board now. We are launching everything across the board with our conference call cringe of campaign and these products are, nothing is immune, but I have actually taken mine and put on top of the speaker phone, so that is how good they are. Given the price points we have on these products that it is no brainer because it is such an annoyance in these conference calls to have that “tictictic-noise or buzz noise”, whatever you want to call it, coming across.

So we are excited that that is going to help us because there are over 2 million of these circuit switch conference phones out there and they all have that problem of being able to be induced, have induced noise from a BlackBerry. So we will make that go away and I’d love to see us, so many phones, it would be nice to replace. And it has been a long time, there are 15-year-old phones out there.

Jason Ader - Thomas Weisel Partners

We would like to see that yeah. The other question I have for you, it is more for you Mike, I am trying to reconcile a little bit, don’t cringe but I am just trying the guidance on the top line which you seem to somewhat conservative on given all the drivers and I think obviously being prudent about factoring the macro uncertainty. But trying to reconcile that with your expanding plans which seem pretty aggressive especially that the sales marketing going up, by my math, at least a few million dollars.

So, what I am saying is if you were maybe a little bit worried about macro why would you be expanding the plan as you say?

Michael Kourney

I think we are cautious about the macro. It is possible that unlike in the past last economic issue obviously being six or seven years ago this video collaboration was not Plug-and-Play. There no HD quality. There was no TelePresence movement. It was not a Top 10 priority with CIOs for three years running, etc, etc. This is a dramatically different backdrop than it was last time there was an economic issue but these are all the other demand drivers around BPO and all these other things that people may need the stuff. So yes, that is just quite different.

I think we are being prudently cautious as we should be. And at the same time however, all of the micro factors being micro to Polycom, being micro to the industry, the collaboration sector would point into the direction of this is a very exciting time absent that macro economic thing out there. There will be none of this talk. So we are making the investments because what appears to be happening in our space and our company with our product line or partnerships in the space is a huge opportunity doing from really good, not price-driven frankly, its fees are going up. They are doing good, just covers land grab during that period of time when we believe we have all these superiority in product, and partnership and channel we are acting on it. And that hangs very well with the backdrop that we are seeing inside the company.

Robert Hagerty

And what we are seeing as the Fourth Quarter developed, what we saw is potential demand and the places where we were going out and touching customers, these are similar customers that we could go visit but we were more or less flat out with our resources. So, I think it makes enormous sense to make this investment at this time, and again we got very good measurements and monitoring tools that are rather disposable so we can watch this demand as it unfolds here.

Jason Ader - Thomas Weisel Partners

Last question, I got to hitch on the operating leverage because with the top line blow out that you have, I guess I was little surprised that you did not get a little more leverage. I know you are talking about sales and marketing growing but it seems like it grew more than I expected. Is there a point where, I guess you focused little bit more on returning some of these just to the shareholders rather than spending it, how do you make that decision? I guess that maybe a tough question to answer.

Robert Hagerty

I think in the few years ago we saw the need and the opportunity to invest in research and development which we did. We now see that because we are benefiting out from that research and development, it manifested itself in great solutions. With the customer pick up on these solutions and how attractive they are to customers really demand that we put more people to answer the phones and get up there and touch customers because they are buying stuff, that we put some people out in the Fourth Quarter.

We put a few out in the Third Quarter and in every case we have seen good returns. So I think it makes enormous sense to do this. We need to scale. The technology is working and the solution is giving real benefit to customers. It makes sense to do it this time. And you said, “When we wouldn’t do it?” If the demand brought up is changed.

Clearly if demand drives change, we would back off. And I think even with that, I think we can grow our way into the business model and on revenues. And I will point out, we are starting to get the leverage out of the R&D.

Operator

Our next question comes in the line of Troy Jensen with Piper Jaffray, please proceed with the question.

Troy Jensen – Piper Jaffray

Just clarifications here, Mike, you said, HD is 20% currently or are you talking our of – high 20s and that is of video revenues?

Is the overall video revenue providing or just the old business line? Are you following me?

Michael Kourney

Of overall.

Troy Jensen – Piper Jaffray

Of overall revenue, okay perfect. And then you guys introduced the HDX 7000 here this week I know you have your in channel partner conference done in San Diego; obviously I think a lot of (inaudible) knew this was coming Dargate probably sooner than I thought, I am just curious in what kind you guys’ strategy at the channel partner conference, is this in all HD story right now or you are trying to convince everybody to go HD you know why buy standard Res if it is only about a thousand dollars difference here.

Robert Hagerty

We think that the benefits of our new HDX solution whether you run it in standard Res or run it in high definition is tremendous and there is a place for standard resolution, it is doing nicely, we expect it to do nicely for a long time to come; but without a doubt depending on the application, HD is a much, much way better to go. The flexibility of the product line gives you the resolution that gives you in at the lower bandwidth in fact it is tremendous. You do not have to pay more for the higher resolution cameras and all the rest, it comes with it. But we are seeing a very, very attractive market for that product line right now.

Troy Jensen – Piper Jaffray

Does that help me out with the message down at the channel for a conference or you guys really pitched in on HD?

Robert Hagerty

The message is we have the best product line in the industry. We have the best product line in the industry, without a doubt there is a place for standard resolution, without a doubt but we are counting the benefits of what we brought out which is—with third party acknowledgment this is the best product line we have done. Side by side comparisons we have them all down there, we have done full side by sides on everybody’s product line and it has been very nice I would say to be able to show the differences.

Troy Jensen – Piper Jaffray

I agree. Okay now one for Michael here, I know you are not going to get any specific country by country guidance I know that, but if you think about your guidance to be flat sequentially, you know I know you have some things as 3com and Microsoft is ramping up, I mean if the sense of North America is going to have normal season in reality or is it just Europe is been like this huge driving out for video that is kind of carrying the flag here on forward?

Michael Kourney

Yes we will break it out by theater in advance we do only retrospectively, so you know if you look at the drivers there are the things that I mentioned with John’s question around the spillover on the SpectaLink for the new drivers around 3Com, you got Microsoft and many of these things you are familiar with, I had that all placed out exactly on the theaters I mean they have an internal plan before that, but we just do not air that out in advance.

Troy Jensen – Piper Jaffray

Okay then last one, just tell a present thought having pipeline of deals and would you guys—is the pipeline big enough, the opportunity big enough that we could see doubling our TelePresence revenues on a quarterly basis for a while?

Michael Kourney

We do not predict by bottom line we are very pleased—we have a lot of competitors listening to this call but the bottom line is if it had a great quarter it has been ramping we are very happy with what TelePresence is doing directly all by itself as well as the full mechanism that Bob described so we are quite happy with where we are on TelePresence.

Robert Hagerty

I think TelePresence is a great story; you got a full product line. We can deal; we are more scalable in the competition, we are more efficient on bandwidth use in the competition, we are more immersive than the competition, and we are fully standards compatible today, no gateways to be able to be compatible with legacy equipment in the field. And we are doing quite well, we are very happy we have done it.

Operator

And our next question comes from the line of Elliot Gold with TeleSpan Publishing Company, please proceed with your question.

Elliot Gold - TeleSpan Publishing

I got a couple of questions one is just I want to make sure that I misheard Bob, Bob when the slide was up above the million phones sold, I believe you said Q407 then I thought I heard you say FY07.

Robert Hagerty

It is the FY07; it is the first time a million phones in FY07.

Elliot Gold - TeleSpan Publishing

Okay so it is a million phones sold for FY07.

Robert Hagerty

If you remember we just gave NASDAQ the 2 million phones I think at the beginning—in the spring so we were pretty happy with that run rate because it took us 15 years to get the 2 million and 16 years to get the 2 million.

Elliot Gold - TeleSpan Publishing

And then—I want to make sure I heard Mike’s group in desktop. The group you said was 21010?

Michael Kourney

Yes.

Elliot Gold - TeleSpan Publishing

Okay and that staff was 10998?

Michael Kourney

928.

Elliot Gold - TeleSpan Publishing

And then there was a question raised earlier now I have lost track who was about TelePresence and what they said in a kind of fed it to you was—we are saying TelePresence is a sales range of 2 million per quarter and then asked if it is grown and you said yes it is about right.

Michael Kourney

What he ask he said last quarter you said it was around 2 million and then how much it grow kind of a thing, I did not try to dodge as best as I could, but he did ask the question did it grow over a 100% and I gave a monosyllabic response of yes.

Elliot Gold - TeleSpan Publishing

Okay that is what I thought, okay. So it grew over a 100% that 2 million.

Michael Kourney

For Q3 and so with the growth on top of that number.

Elliot Gold - TeleSpan Publishing

I understand. The last question is on the network sales you know I always ask about that going back to the voice side, I looked at the network sales revenues above sequentially to quarter to quarter and they were strong and then flat for the year 2% for the whole year and then in noticed that when you addressed net sales you put it under video solutions so I am a little confused; does that number the network solutions revenue number that you gave out for the quarter and for the year, does that include what I would call the old Voyant Stuff the audio, or is that in the audio number?

Michael Kourney

Yeah and so these video solutions which includes all the video products and all of the network systems products; that is because they are exposed under the same wire it has all been organized as one group on the divisional side, I believe you know. What we do have the network systems sub element to that, that is comprised of just two things: video communications, network systems. The network systems piece of that does include yes the formerly known as Voyant business as well as the video and bridging gateway side. It is a unified collaboration network infrastructure, streaming servers all those things going to that bucket.

Robert Hagerty

And remember we introduced the IMS architecture which makes it a little cloudy as to what the fact that the media server that we shipped can handle video or voice in depends in which application you want.

Elliot Gold - TeleSpan Publishing

Okay so the network solutions includes that?

Michael Kourney

Network systems. Not to be confused with video solutions.

Elliot Gold - TeleSpan Publishing

Any comment on the audio only line coming out of Colorado the Voyant, any growth there or how are we doing there?

Michael Kourney

We only report down to the network systems area and that is bundled in and spots that…

Elliot Gold - TeleSpan Publishing

Yeah it kind of blended now.

Michael Kourney

Yeah it is getting real blended.

Operator

Our next question comes from the line of Scott Sutherland with Wedbush Morgan Securities, please proceed with your question.

Scott Sutherland – Wedbush Morgan Securities Inc.

Couple of questions first; another one of macro questions, I am sure you have anticipated you had the partners conference last week you know, what kind of talk or discussions have you had with the partners, you know how the US market is going, I know we are few weeks in the January maybe some of the guys out in Europe have an outlook have there been any change with the credit concerns spreading a bit?

Robert Hagerty

You know I have been there, I just flew in this morning form that meeting and I would say with the sales folks and with the partners that were there it is more or less we do not understand what is going on in Wall Street. I have not met anybody yet they said we see it in the business. So that does not mean it is not there, it does not mean that you know one particular supplier or just doing extraordinarily well at the sake of somebody else who I did not get to meet, but I did not see a lot of gloom and doom right all, in fact it is the opposite.

Scott Sutherland – Wedbush Morgan Securities Inc.

Okay, now you have introduced the 4000, 7000, high definition products in video, you know queerly you lost the market share earlier in 2007 giving them a full product line, can you talk about when you go into customers and discussions now you have a full product line you think you are standing in the tide and maybe gaining share at least toadying market share at this point and market is doing better for everyone?

Robert Hagerty

I think the market is doing better for everyone, I think we have a great shot at improving our market position, I think that that depends on getting more coverage in the field and I think the market has changed in a way people are buying, and they buy more from folks who visit them; and so it is important that we get out and get the coverage model and clue when we get to a customer, we clearly have a phenomenal story that we can tell so we need to tell that story. We need to be out there and telling it and you know not let people who do not have a quite as robust as solution to sway people to think they do. And so it is important that we are out there and touching customer based, and you get to be the single biggest issue that we faced in 2007 and needs to be addressed in 2008.

Scott Sutherland – Wedbush Morgan Securities Inc.

Okay last question Bob, I think for demo I think you need to put your BlackBerry on the phone there in the video stream.

Michael Kourney

Yeah. I used a palm because I think that is the best and it is a superior product line.

Robert Hagerty

We get the point, it is an exciting upgrade opportunity.

Michael Kourney

It is a great opportunity and I could do it, and it is in the other room but I do not want to get up from the call and got get it. But you could absolutely do it, it is amazing. And it is such a contrast and it is almost like one of those radio active detectors you see in the science fiction movies you get close to the and they go “tictictic” and you get ours and they do not do anything so I think they pretty much ripped old the old ones out of here so you have to go find one other customer. That is probably a good selling tool, just have to go up and put their phone on top of the speaker phones, you want that to go away? We can replace it.

Operator

Our next question comes from the line of Tavis Mccourt with Morgan, Keegan & Company please proceed with your question.

Tavis Mccourt – Morgan, Keegan & Company Inc.

Follow up details, Mike what was the impairment of the intangibles in the quarter?

Michael Kourney

We did not have an impairment around the trade names and some other important caudal secession with the blank tax position that we have conclude back on 2004.

Tavis Mccourt – Morgan, Keegan & Company Inc.

And in terms of the guidance, I got your SG&A guidance could you give any detail on G&A on the year.

Michael Kourney

We would expect it will come down a little bit as presented on revenue on Q1 versus Q4.

Tavis Mccourt – Morgan, Keegan & Company Inc.

Can you run through maybe just qualitatively and a kind of running, two different hard or platform here the standard in high depth?

How difficult it is to manage that? Have you been through this transition before? Are there enough common component worth not that big of a deal?

You can ramp up one line and ramp one down one line, pretty close to real time or just run through. How do you deal with that this year?

Robert Hagerty

You mean from a manufacturing perspective and logistic perspective?

Tavis Mccourt – Morgan, Keegan & Company Inc.

Yes, exactly. Exactly. So, taste the extort. Start coming way above forecast, is there a risk of excess signatory or the older product line or vice versa?

Robert Hagerty

I think, we are on pretty good shape on that. We got really close monitor on what is going on with that. They are different components. They are different supply change or almost completely, quite frankly.

The lines are interchangeable for the most part. Some of the equipment but it is not very expensive equipment. It is unique to the product and we have good flexibility and scalability.

We do up the monitor and watch the supply change but there is nothing in short supply if you want on the HD product line, so we could scale that as we need to.

And, we are watching very closely the transition and we do have the history. Remember, we did transition from view station to VFX. We know that place out over the years not quarters. So, we got a new tail. We could see exactly what is happening.

Tavis Mccourt – Morgan, Keegan & Company Inc.

And then, in terms of e-pocket, if I have my number right, it grow up to 40% you said?

Michael Kourney

It was up the specific the number for Asia was 40%, 48%.

Tavis Mccourt – Morgan, Keegan & Company Inc.

Some of the phenomenal quarter, was there any specifically that happened over there in the new distribution or was there some pen top demand, which it seem, is a big sequential job?

Robert Hagerty

I think it was just great market. You see more and more global accounts developed that of Asia. We did increase our sales force on a small amount that took hold really well and I think just global demand for this product line is doing well.

We are trying to have a very, very good quarter and it was also in India. It is a real problem solver for people who are globally deployed their resources. And we are seeing more and more that on Asia headquarter based or companies based with their headquarters in Asia are reaching out globally just as other countries have done the same thing and these tools are very, very good solutions for them.

Tavis Mccourt – Morgan, Keegan & Company Inc.

In terms of the ramp of the three camp piece of businesses , that is something that is shipping now and can you talk about kind a when that starts to ship if it none already?

Michael Kourney

That is that begins this quarter and it should ramp as it all comes on line, get through their hob model, etc. Obviously, we can not talk about the size that. Our contract do not allow it, but that begins this quarter.

Operator

Next question comes on the line of Manuel Recarey with Kaufman Bros, please proceed with your question.

Manuel Recarey - Kaufman Bros

If the wirelesses or VOIP can you talk a little bit that kind of success you are having in the distribution there used, have you seen more success to the traditional in Polycom voice distribution or to the PDX vendors?

Robert Hagerty

I knew suppose certainly the OEM relationship continue to do well for us and yet we have our team going out and selling into GEMs markets, enterprise market, retail markets and doing quite well. So, it is a blend.

Manuel Recarey - Kaufman Bros

A promise that would interest within the enterprise because I know that there is an area that expects to really want to try to penetrate but they are having a difficulty with that.

Robert Hagerty

Carpeted area is more difficult and remains more difficult but we are seeing more interest in the factory floor, retail floor, and certainly it healthcares are very strong vertical and I suppose we are pursuing all those all those things.

Manuel Recarey - Kaufman Bros

One question for Mike. Your guidance with sales and marketing in the first quarter is what about 27% on revenue?

Michael Kourney

As we look out through out the rest of the year, that is going to come as a percentage but this is not going to be any step down on the absolute level as high stage in the confident to move up a little bit?

Operator

Our next question comes from line of Troy Jensen with Piper Jaffray. Please proceed with your question.

Troy Jensen – Piper Jaffray

Thanks. Clarification first. When you recognized revenue from Asia pack how do you account for products that on company that have headquarters in the US but manufacturing on other things out in China?

If you ship out to product out of China, is that recorded as Asia pack or US.

Michael Kourney

Asia.

Troy Jensen – Piper Jaffray

It is where it lands

Michael Kourney

Yes.

Troy Jensen – Piper Jaffray

I thought if you already discussed in a bit headcount. Only if you can give additional information on where you are really looking to add headcount, it is obviously seem to very big international growth and you have been increasing that count on place like Kamya(ph), where are you looking to add both in an industry vertical basis and original basis?

Michael Kourney

I do not think it is prudent for us to give up the details of where we will be going to be putting those investments, either by theater or region or by vertical. We have competitors who like to understand where we are headed and I do not them to know where we are headed.

But, we have been adding in all theatres, in all areas, and we are probably continuing with that model, but I rather not have that out there.

I am sorry but I do not think it is not prudent to take that out. It is not on the best interest of anybody to have that up there except maybe our competitors.

Troy Jensen – Piper Jaffray

That is fair. Headcount, how many are you looking to have in Q1.

Robert Hagerty

We again, for similar reasons, we are not getting specific about that number of people and all of that because then, our competitors can try to get ahead of that. And, otherwise, we live in a state of mystery which is better for us competitively.

However, we have given we have given the financial guidance so, that is a proxy that you could use to at least to send back the envelope, I am sure.

Troy Jensen – Piper Jaffray

Okay. I also wanted to get an update on your growing relationship with Nortel as a partner on the video side and whether they have had any meaningful impact in penetrating the US, you do have a very big government selling business. How big is the US business for you now and how relevant is the Nortel as a partner?

Michael Kourney

So, Nortel is relevant. They have built up a big investment in teleprocess including the video network operation centers and network operation services as well as demonstration capabilities and we have closed deals with them. In terms of the government, I do not know, we give that level in detail.

Robert Hagerty

We do not break that out exactly. Public sector revenues are typically down a bit in the fourth quarter of the year because of the US federal that comes down in Q4.

Operator

Our next question comes from the line of Tom Naire with (inaudible), please proceed with your question.

Tom Naire

I would actually to ask my question about that 3Com, but just out of curiosity, in terms of the Microsoft relationship, where is that either qualitatively or how could you describe in terms of how is that growing?

Michael Kourney

We are very happy with that. It began in October, I thing it is October 16 to be exact and it began in Q4. There are revenues in Q4. We are having a lot of success there and we believe that it could be a nice contributor in a way, as Bob said in his prepared comments.

Tom Naire

In terms of the 3Com relationship, I do not know if your three comments has sort of discuss like once you had hit run rate is that sort of, that will be their phone offering or how should I think about that?

Michael Kourney

I think you should think about as a key strategic partner. We would like to think about we will have all or most of their business. They do have an alternative today and some of the legacy products and it depends on how those things ramp and how those things are forward.

How the new things ramp with our phone and how old things fade away, but this is something that we keep guidance on

Robert Hagerty

But we are the partner for the new platform.

Operator

And there are no further questions from the phone lines.

Robert Hagerty

Thank you very for following Polycom. 2008 promises to be a year in which Polycom captures the benefit of our partnering strategy and our increased sales coverage and our product differentiation at a level to delight to our customers across industries. We look forward to updating you on our successes throughout the year. We will see you next time.

Operator

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Polycom, Inc. Q4 2007 Earnings Call Transcript
This Transcript
All Transcripts