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Polycom (PLCM) Q2 Earnings and Revenues Miss Estimates

Zacks Equity Research

Polycom, Inc. PLCM recently posted second-quarter 2016 results. The quarterly adjusted (including stock-based compensation expense) earnings per share came in at 8 cents and missed the Zacks Consensus Estimate of 13 cents. Polycom incurred a GAAP net loss of $10 million or 7 cents per share compared with a profit of $19.6 million or 14 cents in the prior-year quarter.

 Quarterly total revenue declined 9% year over year to $288 million and also missed the Zacks Consensus Estimate of $295 million. Product revenues totaled $201.72 million, while Service revenues grossed $86.1 million. Meanwhile, both were down 9.1% from the prior-year quarter level.

Segment-wise Sales

UC Group Systems revenues totaled $171.4 million, down 12% year over year. UC Personal Devices revenues grossed $68.8 million, up 3% from the year-ago quarter. UC Platform revenues came in at $47.6 million, down 13% year over year.

Geographic Distribution of Sales

The Americas (North and South) generated $142 million in revenues, down 10% year over year. Europe, the Middle East and Africa contributed $72.7 million, down 10% year over year. Meanwhile, the Asia-Pacific region accounted for the remaining $73.1 million, down 6% year over year.

Margins

Gross margin in the quarter stood at 57.4% compared with 59.2% in the year-ago quarter. Quarterly operating expenses totaled $129 million, down 16.3% year over year. Quarterly operating margin was 12.7% versus 11.3% in the prior-year quarter.

POLYCOM INC Price, Consensus and EPS Surprise

POLYCOM INC Price, Consensus and EPS Surprise | POLYCOM INC Quote

Balance Sheet & Cash Flow

At the end of the second quarter of 2016, Polycom had nearly $722 million of cash and short-term investments on its balance sheet compared with $660 million at the end of the second quarter of 2015. Total debt for the same period stood at $232 million compared with $237 million in the same period of 2015. Cash flow from operations, at the end of second-quarter 2016, was $19 million compared with $30.4 million at the end of 2015.

Meanwhile, Polycom agreed to end the merger agreement with Mitel and approved a  new deal with Siris Capital Group LLC valued at $2 billion. The agreement has been chalked out with Triangle Private Holdings I, LLC and Triangle Private Merger Sub, Inc., which are affiliated to Siris Capital. Each share of Polycom would be exchanged for $12.5 in cash on completion of the merger expected in the third quarter of 2016.

Zacks Rank & Key Picks

Polycom currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the broader technology sector include ARI Network Services, Inc. ARIS and Mobile TeleSystems PJSC MBT with a Zacks Rank #1 (Strong Buy) and F5 Networks Inc. FFIV with a Zacks Rank #2 (Buy).

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