Saturday, November 15, 2014

Polycom Earnings Analysis

Video conferencing company Polycom's (NASDAQ: PLCM  ) earnings are always likely to cause some fireworks because of the company's high-risk, high-reward nature. Some investors will balk at the mention of high risk, while others will warm to the idea of high reward. With Polycom's third-quarter results just in, it's clear that the optimists have won this round -- but not by much.




Polycom wants you to collaborate. Source: Polycom.

Polycom beats estimates; guidance was a bit light

A quick recap of the third-quarter earnings and fourth-quarter guidance:

  • Third-quarter revenue came in flat at $335.7 million, versus analyst estimates of $334.9 million.
  • Third-quarter Non-GAAP diluted EPS came in at $0.22, versus analyst estimates of $0.20.
  • Fourth-quarter revenue guidance of $342 million to $352 million straddled analyst estimates of $349 million.
  • Fourth-quarter non-GAAP EPS guidance of $0.21 to $0.23 also straddled analyst estimates of $0.22.

Third-quarter revenue and EPS beat estimates, but Fools should note that the midpoint of fourth-quarter revenue guidance is below the market consensus. In addition, management gave fourth-quarter guidance of non-GAAP gross margins of 59% to 59.2%, implying a decline from the 59.4% level he company achieved in the third quarter.

What Polycom is trying to achieve with its earnings

Essentially, Polycom is competing against the unified communications operations of two giant tech companies: Cisco Systems (NASDAQ: CSCO  ) and China's Huawei. It also faces a number of small competitors offering cheaper, less sophisticated solutions and even Google's (NASDAQ: GOOG  ) Chromebox at the low end.


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