Earnings Preview: Polycom

| About: Polycom, Inc. (PLCM)
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Polycom (NASDAQ:PLCM) is expected to report Q3 earnings after market close Wednesday (Oct. 15) with a conference call scheduled for 5:00 pm ET.


The consensus estimate is 35c for EPS and $279.45M for revenue, according to First Call.

Analyst Views

On Oct. 9, Jefferies said that its quarter-end channel checks suggested Polycom would likely meet its Q3 estimates as demand for video conferencing solutions remains strong.

Wedbush expects Polycom to post in-line Q3 results, but believes the business environment is challenging and the outlook may be subdued from the company. For Q3, Wedbush expects EPS of 35c and revenue of $280M, which matches consensus expectations and management's guidance of sequential growth. The firm also expects growth to be driven by Federal spending and video products, which should be offset by softness in enterprise spending and voice products. Wedbush expect EPS to benefit from share repurchases and cost management. While Wedbush expects in-line results, quality will be key. The firm's checks indicate payment terms may be extending out and thus would expect to see an increase in account receivables.

Wedbush also has started to see backlog growth top out for Polycom and would not be surprised to see a modest decline in Q3. Wedbush remains concerned on margins and pricing as new competition further encroaches. Thus, Wedbush believes margins will remain below corporate goals. The firm expects an operating margin of 14.8% for Q3. Looking forward, Wedbush anticipates more subdued revenue guidance for Q4. However, it believes with cost management and the share buyback, EPS guidance will likely be closer to expectations, or could be a bit light. For 2009, Wedbush is becoming more cautious given the hazy outlook. The firm maintains a Hold rating.