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Polycom Inc. Reports Operating Results (10-Q)

July 30, 2010 | About:
10qk

10qk

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Polycom Inc. (PLCM) filed Quarterly Report for the period ended 2010-06-30.

Polycom Inc. has a market cap of $2.53 billion; its shares were traded at around $29.68 with a P/E ratio of 41.7 and P/S ratio of 2.6. Polycom Inc. had an annual average earning growth of 5.6% over the past 10 years.PLCM is in the portfolios of Columbia Wanger of Columbia Wanger Asset Management, Bruce Kovner of Caxton Associates, RS Investment Management, Chuck Royce of Royce& Associates, Pioneer Investments, Steven Cohen of SAC Capital Advisors, George Soros of Soros Fund Management LLC, Jeremy Grantham of GMO LLC.

Highlight of Business Operations:

Our Video Communications Solutions, Voice Communications Solutions and Services segments accounted for 52%, 31% and 17%, respectively, of our revenues during the three months ended June 30, 2010, compared with 55%, 27% and 18%, respectively, of our revenues in the three months ended June 30, 2009. Our Video Communications Solutions, Voice Communications Solutions and Services segments accounted for 53%, 30% and 17%, respectively, of our revenues during the six months ended June 30, 2010, compared with 55%, 27% and 18%, respectively, of our revenues in the six months ended June 30, 2009. See Note 12 of Notes to Condensed Consolidated Financial Statements for further information on our segments, including a summary of our segment revenues, segment contribution margin and segment inventory.

Video Communications Solutions segment revenues include revenues from sales of our video communications and network systems product lines. Revenue from video communications products increased to $127.4 million for the three months ended June 30, 2010 from $105.1 million in the year ago period, a 21% increase. Revenue from video communications products increased to $245.6 million for the six months ended June 30, 2010 from $206.6 million in the year ago period, a 19% increase. The revenue increase in the three and six month periods was primarily due to an increase in sales volumes of our HDX® product family and new video communications products, such as our Polycom® CX5000 unified conference station, QDX 6000 video conferencing system and VVX 1500 business media phone, partially offset by decreases in sales volumes of our VSX® product family due to the transition to HD products. While we experienced strong revenue growth in our immersive telepresence products both sequentially and year-over-year in the second quarter of 2010, revenues from our immersive telepresence products in the first six months of 2010 were down year-over-year as revenue recognized in any given period will fluctuate depending on a number of factors, including the size and timing of orders, customer request dates and timing of product acceptance where contractually required. Revenues from our network systems products for the three months ended June 30, 2010 were $26.8 million, up 23% from revenues of $21.8 million in the comparable 2009 period. Network systems product revenues for the six months ended June 30, 2010 were $56.9 million, up 35% from revenues of $42.1 million in the comparable 2009 period. The revenue increase is primarily due to increases in our video network systems revenues, which were driven primarily by the introduction of new products and enhancements to existing products. While we experienced strong year-over-year revenue growth in our network systems products, our network systems product revenues declined sequentially in the second quarter of this year following a seasonally down first quarter. During the third quarter of 2010, we have taken a number of actions surrounding our sales compensation incentives, increased technical support for our sales force and training and marketing around the capabilities of our network systems product portfolio, which are aimed at driving increased network system revenues.

International revenues, defined as revenues outside of the U.S. and Canada, accounted for 51% and 46% of total revenues for the three month periods ended June 30, 2010 and 2009, respectively, and 50% and 47% for the six months ended June 30, 2010 and 2009, respectively. On a regional basis, North America, EMEA, Asia Pacific and Latin America accounted for 49%, 25%, 22% and 4%, respectively, of our total revenues for the three months ended June 30, 2010 and 50%, 25%, 21% and 4%, respectively, of our total revenues for the six months ended June 30, 2010. North America, EMEA, Asia Pacific and Latin America revenues increased 16%, 33%, 50% and 66%, respectively, in the three months ended June 30, 2010, over the comparable 2009 period. North America, EMEA, Asia Pacific and Latin America revenues increased 16%, 25%, 44% and 77%, respectively, in the six months ended June 30, 2010, over the comparable 2009 period. Revenue increases across these geographic regions were across all three of our segments, except for North America which experienced decreases in video communications solutions product revenues during the three months ended June 30, 2010 as compared to the comparable 2009 period.

During the three months ended June 30, 2010, one channel partner accounted for 13% of our total net revenues, 10% of our Video Communications Solutions segment revenues and 19% of our Voice Communications Solutions segment revenues. In addition, during the three months ended June 30, 2010, a second channel partner accounted for 10% of our Voice Communications Solutions segment revenues. During the six months ended June 30, 2010, one channel partner accounted for 13% of our total net revenues, 12% of our Video Communications Solutions segment revenues and 18% of our Voice Communications Solutions segment revenues. No one customer accounted for more than 10% of our Services segment revenues during the three and six months ended June 30, 2010. During the three months ended June 30, 2009, one channel partner accounted for 11% of our total net revenues, 11% of our Video Communications Solutions segment revenues and 16% of our Voice Communications Solutions segment revenues. During the six months ended June 30, 2009, one channel partner accounted for 10% of our total net revenues, 11% of our Video Communications Solutions segment revenues and 13% of our Voice Communications Solutions segment revenues. No one customer accounted for more than 10% of our Services segment revenues during the three and six months ended June 30, 2009. We believe it is unlikely that the loss of any of our channel partners would have a long term material adverse effect on our consolidated net revenues or segment net revenues as we believe end-users would likely purchase our products from a different channel partner. However, a loss of any one of these channel partners could have a material adverse impact during the transition period.

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