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Polycom Inc. Reports Operating Results (10-Q)

November 02, 2010 | About:
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10qk

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Polycom Inc. (PLCM) filed Quarterly Report for the period ended 2010-09-30.

Polycom Inc. has a market cap of $2.81 billion; its shares were traded at around $33.76 with a P/E ratio of 43.9 and P/S ratio of 2.9. 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, Chuck Royce of Royce& Associates, Steven Cohen of SAC Capital Advisors, Pioneer Investments, Jeremy Grantham of GMO LLC.

Highlight of Business Operations:

Revenues for the three and nine months ended September 30, 2010 were $308.1 million and $878.9 million, respectively, as compared to $243.0 million and $699.1 million for the three and nine months ended September 30, 2009, respectively. The increase in revenues primarily reflects an increase in sales volumes of our video communications and voice communication solutions products, and to a lesser extent an increase in service revenues. We experienced strong year-over-year growth in both the third quarter and the first nine months of 2010 across all three reporting segments and all geographies. Revenues grew sequentially from the second quarter of 2010, driven by North America growing 9% sequentially, while EMEA was seasonally flat and Asia was down sequentially by 1%. Comparing our performance in 2010 against the same period in 2009, the increase in revenues is also attributable to improvements in global economic conditions, which negatively impacted our revenues in 2009 and resulted in the decline of our revenues year-over-year in each quarter through the third quarter of 2009. While we have grown sequentially since the first quarter of 2009, we did not return to year-over-year growth until the fourth quarter of 2009.

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 September 30, 2010, compared with 53%, 29% and 18%, respectively, of our revenues in the three months ended September 30, 2009. Our Video Communications Solutions, Voice Communications Solutions and Services segments accounted for 53%, 30% and 17%, respectively, of our revenues during the nine months ended September 30, 2010, compared with 54%, 28% and 18%, respectively, of our revenues in the nine months ended September 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 $128.9 million for the three months ended September 30, 2010 from $104.7 million in the year ago period, a 23% increase. Revenue from video communications products increased to $374.5 million for the nine months ended September 30, 2010 from $311.3 million in the year ago period, a 20% increase. The revenue increase in the three and nine 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 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. Revenues from our network systems products for the three months ended September 30, 2010 were $32.0 million, up 38% from revenues of $23.2 million in the comparable 2009 period. Network systems product revenues for the nine months ended September 30, 2010 were $88.9 million, up 36% from revenues of $65.3 million in the comparable 2009 period. The revenue increase was driven primarily by the introduction of new products and enhancements to existing products. During the third quarter of 2010, we took a number of actions surrounding our sales compensation incentives, increased technical support for our sales force and increased training and marketing around the capabilities of our network systems product portfolio, which actions were aimed at driving increased network system revenues.

International revenues, defined as revenues outside of the U.S. and Canada, accounted for 49% and 47% of total revenues for the three month periods ended September 30, 2010 and 2009, respectively, and 50% and 47% for the nine months ended September 30, 2010 and 2009, respectively. On a regional basis, North America, EMEA, Asia Pacific and Latin America accounted for 51%, 24%, 21% and 4%, respectively, of our total revenues for the three months ended September 30, 2010 and 50%, 25%, 21% and 4%, respectively, of our total revenues for the nine months ended September 30, 2010. North America, EMEA, Asia Pacific and Latin America revenues increased 23%, 33%, 28% and 49%, respectively, in the three months ended September 30, 2010, over the comparable 2009 period. North America, EMEA, Asia Pacific and Latin America revenues increased 18%, 27%, 38% and 66%, respectively, in the nine months ended September 30, 2010, over the comparable 2009 period. Revenue increases across these geographic regions were across all of our segments.

During the three months ended September 30, 2010, one channel partner accounted for 14% of our total net revenues, 13% of our Video Communications Solutions segment revenues and 19% of our Voice Communications Solutions segment revenues. In addition, during the three months ended September 30, 2010, a second channel partner accounted for 11% of our Voice Communications Solutions segment revenues. During the nine months ended September 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 nine months ended September 30, 2010. During the three months ended September 30, 2009, one channel partner accounted for 13% of our total net revenues, 14% of our Video Communications Solutions segment revenues and 17% of our Voice Communications Solutions segment revenues. During the nine months ended September 30, 2009, one channel partner accounted for 11% of our total net revenues, 12% of our Video Communications Solutions segment revenues and 14% of our Voice Communications Solutions segment revenues. No one customer accounted for more than 10% of our Services segment revenues during the three and nine months ended September 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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