Couple of notes on growth & issues from the Polycom call

2% q/q growth (Tandberg is 7.9%)

15% y/y growth (Tandberg is 27%)

60.2% gross margin (Tandberg is 65.9%)

21,126 group video units sold (Tandberg sold 17,487)

4% y/y network systems (Tandberg had growth of 111% y/y)
[of note...network systems did have 21% q/q growth]

$33.9M Sales of Network systems (Tandberg had sales of $39M of Network Systems)

There is significant weakness in Polycom's business. While they are still selling more units than TAA, they are selling them at a lower gross margin. Averaging out group systems, looks like TAA takes in $1k more per system. If PLCM could bring that up by $1K per system, it would be an additional $21M. PLCM just recently raised MSRP on their products; but if you look at their business they are discounting the heck out of their products to try to keep up with TAA. This will continue to erode the gross margin..my guess is that you will see it drop below 60% in the next 1-2 quarters. I think PLCM has figured this out...as Mike's guidance shows that PLCM should be between 59-63. PLCM will be at the bottom end of their own estimates which are considerably lower their major competitor. (as well, compare to CSCO as well at 65%)

There is also weakness on the audio side, I didn't note the numbers, but they were down. My guess is that Spectralink is the big downside...as most of the wireless handsets are being sold into the retail side.


Interesting things that Bob & Mike said:

"we've not seen budgets decrease, only sales cycles have increased" -Bob

Interesting comment since PLCMs largest customers are all financial. Being that many of them have evaporated, I'm not sure how this can be true.

"um....yeah..." - Mike

Looks like the street is punishing PLCM. PLCM's last trade was at $18.19...or down $2.66.. -12.76% for the day. I really hope Mike & Bob can figure out the mix here...they have great potential, but it seems that all the missteps that are being made, TAA and Lifesize are taking away business.