Polycom Gets out of the Wireless Voice Business
Video communications specialist Polycom (NASDAQ: PLCM) is divesting its enterprise wireless voice solutions business for $110 million to an affiliate of private equity firm Sun Capital Partners, signaling a major shift for the company to focus more on unified communications (UC) and video collaboration solutions — those technologies that bring more sales and higher gross margins, according to the company.
The enterprise wireless voice portfolio, part of Polycom’s UC personal product category, includes Wi-Fi and cordless handsets and related infrastructure and accessories. It pulled in approximately $94 million in revenue last year.
In a statement, Polycom President and CEO Andy Miller said the divestiture enables the company to set its focus more on video and unified communications, including expanding the reach of Polycom’s RealPresence UC platform.
“Polycom has evolved rapidly over the last 18 to 24 months, and taken actions designed to capture and lead the fast-growing video collaboration market through traditional and new delivery platforms including mobile, social and cloud,” he said. “The closing of this transaction will allow Polycom to concentrate on initiatives that support our vision of making video collaboration ubiquitous through open, standards-based software delivered to anyone, across any environment and device. Moreover, the divestiture of the enterprise wireless voice solutions business will allow us to focus on the stronger sales growth and higher gross margins of Polycom’s core unified communications business.”
The company said it plans to use $104 million of the sales proceeds to boost its share buyback program to $182 million from $78 million. Prior to the transaction, Polycom had a share repurchase authorization of $800 million.
As a result of the transaction, the company lowered its guidance for the second quarter to 18 cents to 20 cents per share from 22 cents to 24 cents per share.
Polycom’s Open Visual Communications Consortium (OVCC) recently got a big boost when tech giant Microsoft climbed on board, and the company is busy expanding compatibility for RealPresence. With the divestment of its hardware business, it looks as though Polycom, which in April warned of weaker earnings, is looking to devote more time and energy to the visual communications space — the first services from OVCC are scheduled to launch later this year.