Polycom on its way to enhanced shareholder value
The company's new share repurchase program should help boost its bottom line, while other measures should help boost the top line.
By Zacks Equity Research
Polycom (PLCM) announced that its board of directors has approved a new share repurchase program. This will allow the market leader in open standard based unified communications ("UC") to buy back shares up to $100 million. The share repurchase program is expected to expire on May 2, 2014.
Polycom, which offers video conferencing and collaboration services, declared that the new $100 million share buyback program is in addition to the $39 million remaining under the previous share repurchase authorization of $800 million. The shareholders also reacted positively to the news as the stock price soared more than 2.52% in the Monday trade on Nasdaq.
Polycom announced that the timing and the quantity of the share repurchase will depend on the company's cash position, market condition and the dilutive effects of the share based compensation plans. Nevertheless, Polycom will also take into consideration alternative investment opportunities and working capital needs of the company before repurchasing shares.
Polycom has sufficient cash to carry out this program. The company exited the first quarter of fiscal 2013 with $682.8 million of cash and marketable securities and with no outstanding debt on its balance sheet.
Recently, Polycom reported better-than-expected first-quarter 2013 financial results with both the top line and the bottom line beating the Zacks Consensus Estimate. The company has launched multiple new products and has entered into a strategic agreement with AT&T (T) to offer cloud-based video conferencing services to different organizations.
We believe that the new product launches and tie ups will allow the company to improve its top line, while an unlevered balance sheet will boost its bottom line, thus paving the way for enhanced shareholders' value.
Currently, Polycom carries a Zacks Rank #2 (buy). Other stocks within the same industry that are worth considering are Interdigital (IDCC) and Ubiquiti Networks (UBNT). Currently, both the stocks carry a Zacks Rank #2 (buy).
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The company is scrambling to protect its equities arm, which could face declining volume and revenue as competitors close the gap.
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