Polycom comes back to Earth in Q1
What a difference a quarter makes... Polycom (Nasdaq: PLCM) in January blew through fourth quarter earnings estimates, saw its stock bump better than 9 percent and rode the excitement that surrounded its RealPresence product line to record results.
Not so in the first quarter of 2012. The company has come back to Earth with a thud, posting net income of $15 million or 8 cents per share, down from $34 million, or 19 cents per share, last year, a 56 percent drop and its first decline since 2010.
And, said CEO Andy Miller, the company isn't too optimistic about the second quarter. Polycom said it expects to earn between 20 and 22 cents per share on revenue of $367 million to $377 million. Wall Street was looking for a forecast of 25 cents per share and $387.3 million in revenue.
Miller said Polycom's first quarter woes stemmed from slower than expected sales in Asia and North America; APAC sales were up 7.3 percent, sales in the America's edges up 1.7 percent and EMEA revenues rose 16 percent.
"We saw government spending in several key geographies including China, Australia, India and in U.S. federal civilian come in lower than expected. This was combined with an already slow growth rate in North America," Miller said, adding that he believed the industry is "in the midst of the company and industry transition from point products to solution selling. This mindset shift affects both our customers and our sales force."
Customers, he said, considered more UC centric strategies versus point product or endpoint-only deployments.
"We believe this transition has many positive benefits for our company over the longer term that clearly created softness in Q1," he said.
As to the over-exuberant sales projections for the first quarter, Miller said Polycom was "too optimistic."
"Hindsight is 20-20 and we got ahead of ourselves, and our Q4 to Q1 had a larger sequential decline that we had planned for," he said. "We overestimated the positive effect of Q4 year-end deal closure rates and we underestimated the work required to effectively ramp the North America sales team."
Polycom cut its first quarter revenue outlook April 5, prompting shares to decline to $13.46 April 11. The stock closed at $12.89 Friday.
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