Later this month, Microsoft (NASDAQ:MSFT) will roll out its latest version of Lync which will have Skype integrated into it. Lync is Microsoft's unified communications platform for enterprises. This is a long awaited integration that will make Lync a complete IP communications system which Microsoft is selling as a PBX replacement. Enterprises have been embracing Lync (without voice) in increasing numbers these past two years and Microsoft is hoping that the integration of Skype will lead these enterprises to add voice to their Lync subscriptions. Among the many benefits that the updated Lync will offer enterprises is the ability of Lync and Skype users to connect to make voice calls and IM each other.
Microsoft provides enterprises with Lync servers, but it looks to a number of partners to help it offer the remaining hardware and software enterprises need to complete the Unified Communications package. These partners provide hardware such as IP phones/headsets, session border controllers (SBCs) and media gateways. They also provide software for call handling, voice quality and call retention. The launch of Lync with Skype will put the spotlight on these partners. I have selected four partners and have rated on a scale from 1 to 10 the upside correlation of how each partner will benefit from a successful Lync with Skype launch.
Polycom, Inc. (NASDAQ:PLCM):
Polycom partners with Microsoft on its Lync UC platform by supplying video and voice solutions along with IP phones. Polycom is very strong in IP phones and recently sold its ten millionth IP phone. Polycom seems certain to benefit from any increase in Lync seats by seeing an increase in the number of IP phones it sells. With $675 million in cash and profitable, it could acquire a company like AudioCodes to diversify its product offering and have more expertise in DSP technologies (engineering) and know how (services). That acquisition would be accretive and would deepen its ties to Microsoft Lync.
Looking at a weekly chart we can see that Polycom has been making a bottom for almost a year now. A close above $12.40 will set up a run to $15 where it should see some resistance. Once it clears $15 the next move will be to $22.50 which will be a double from here.
|Market Capitalization:||$1.86 billion|
|2014 Revenue Estimates||$1.42 billion|
|2014 EPS Estimates||$0.64 per share|
|Cash per Share||$3.96 per share|
|Other:||$100 million stock buyback in place|
|Short-Term Price Target:||$15|
|Long-Term Price Target:||$22.50|
Sonus Networks (SONS):
Sonus Networks sells mostly to the service provider market, but its 2012 purchase of Network Equipment Technologies (NYSE:NET) gave it access to the enterprise market and to Microsoft Lync. Sonus partners with Microsoft to supply enterprises with SBCs and media gateways. Sonus should benefit from its Microsoft Lync partnership and revenues from Lync could help it meet or beat its revenue expectations. However, with Lync responsible for only a small portion of Sonus' revenues it's going to take more than just Microsoft sales to excite Wall Street.
Looking at the weekly chart we can see that Sonus broke out above resistance at $2.60 last week. Sonus should make a run to $4.00 where it will meet long time resistance. After $4.00, the next target will be $6.50.
|Market Capitalization:||$685 million|
|2014 Revenue Estimates||$278 million|
|2014 EPS Estimates||$0.05 per share|
|Cash per Share||$0.99 per share|
|Short-Term Price Target:||$4.00|
|Long-Term Price Target:||$6.50|
AudioCodes Ltd (NASDAQ:AUDC):
A few years ago, AudioCodes realigned itself away from its legacy business and aligned itself with Microsoft and Microsoft Lync. AudioCodes is a Microsoft gold partner and supplies SBCs, media gateways, IP phones, call routing and call recording software, and support services. In fact, AudioCodes is the only company that can supply a complete package to the enterprise. It has called this suite of products "One Voice for Microsoft Lync" and has teamed up with Microsoft on bidding for contracts. By partnering with AudioCodes, Microsoft can now bid a single price per seat in contracts. AudioCodes is very closely aligned with Microsoft Lync and an increase in Lync voice seats will be a big positive for AudioCodes.
Looking at the weekly chart we can see AudioCodes completing an inverse head and shoulders pattern. A break above $4.50 should take the stock to $7.50, the next target will be $12.00.
|Market Capitalization:||$155 million|
|2014 Revenue Estimates||$150 million|
|2014 EPS Estimates||$0.30 per share|
|Cash per Share||$0.90 per share|
|Short-Term Price Target:||$7.50|
|Long-Term Price Target:||$12.00|
Plantronics, Inc (NYSE:PLT):
Plantronics is the headset king. Plantronics partners with Microsoft in supplying headsets, wireless headset systems and USB phones. Plantronics is a very strong player in the headset market for both wired and wireless devices. Microsoft's Lync success will have little bearing to Plantronics' overall success, but if enterprises switch to the soft phone from Lync then Plantronics will be sure to get the lion share of headset orders worldwide.
Looking at the weekly chart we can see that in January 2013, Plantronics broke out of a trading range at $40.00. Plantronics is in an uptrend and I have a short-term target at $52.00 where it should see some resistance and then a longer-term target at $62.00
|Market Capitalization:||$1.91 billion|
|2014 Revenue Estimates||$893 million|
|2014 EPS Estimates||$3.39 per share|
|Cash per Share||$8.20 per share|
|Short-Term Price Target:||$52|
|Long-Term Price Target:||$62|
Correlation on a Successful Lync/Skype launch:
Polycom: Correlation is 8. The only reason it is not higher is that Lync revenues while significant will only be a fraction of its total revenues. Polycom has a fortified balance sheet and looks like it could be a strong mover when it breaks out.
Sonus Networks: Correlation is 5.5. Sonus had a great move of late. Microsoft Lync success will affect top line revenues. I would buy on pullbacks.
AudioCodes: Correlation is 9. AudioCodes has aligned itself with Lync. The company has a complete SBC product portfolio mainly for the enterprises where Lync resides. Most recently, AudioCodes extended its SBCs to compete in the carrier market. I believe that the stock is one piece of good news away from hitting 52 week highs. No need to wait, I would be an aggressive buyer of AudioCodes here.
Plantronics: Correlation is 6. Plantronics will benefit from a successful Lync launch as its headsets will do well. I would wait for a pullback to buy the stock.
Disclosure: I am long AUDC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.