Polycom's stock drops as firm sees earnings free fall

Recent deal with AT&T could help company recover from difficult quarter

Videoconferencing system provider Polycom (Nasdaq: PLCM) saw its net income plummet to $2 million in the fourth quarter, a 96 percent year-over-year free fall, and its revenues dropped to $353 million, a more modest 9 percent year-over-year decline.

For all of 2012, Polycom reported a net income of $9.8 million, down from $135.8 million in 2011, and revenue of $1.39 billion, down slightly from $1.40 billion in 2011.

The fourth quarter results include a $39.1 million tax charge, which was offset by a $35 million gain from the sale of discontinued operations.

As a result of the poor financial results, Polycom's stock took a hit, dropping from $11.80 to $10.42 per share in morning trading Thursday, but the stock was back to $11.23 per share at the close of trading on Friday.

Analysts polled by S&P Capital IQ had predicted the company would post revenue of $350.7 million for the fourth quarter, according to a report in The Motley Fool. For next quarter, the analysts expect revenue of $340.4 million.

During a conference call announcing the results, Andrew Miller, president and CEO of Polycom, said he is not concerned about possible competition from low-priced alternatives such as Skype. He judged that these services are fine for ad hoc calls, but "[f]rom a true experience, I think customers are voting with their wallet on Polycom," Miller was quoted as saying by Enterprise Networking Planet.

Miller said Polycom's CloudAXIS product is expected to be available by the end of the first quarter. The CloudAXIS Suite, first announced in October, enables interoperability among different videoconferencing vendors' systems as well as services such as Skype, Facebook and Google Talk.

The Polycom chief said the company plans to virtualize core components of its RealPresence platform for customers "who choose to deploy virtualized solutions in the software defined data center environment," according to the report.

Along with its financial results, Polycom announced the appointment of two regional presidents: Damian Artt to head its Americas business and Michael Alp to head the Asia Pacific business.

Zacks Equity Research expects Polycom's recent agreement with AT&T (NYSE: T) to offer cloud-based videoconferencing services will help it rebound and gain on market leader Cisco (Nasdaq: CSCO) in the immersive telepresence market.

As part of the agreement, AT&T will incorporate the Polycom RealPresence platform into its AT&T Telepresence Solution service, enabling the telecom giant to offer on-demand virtual meeting room capabilities and collaboration with business customers, partners and suppliers through AT&T Business Exchange.

While Polycom struggled this quarter, it is likely the company will rebound as its agreement with AT&T and the slew of new products it announced last October bear fruit.

For more:
- see Polycom's earnings release
- check out The Motley Fool report
- read the Enterprise Networking Planet article

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Related article:
AT&T and Polycom ink deal on cloud-based videoconferencing