In the meantime, RBC Capital Markets Managing Director - Mark Sue, provides his take on what to expect, "After a couple of bumpy quarters with share shifts back and forth with Cisco/Tandberg, we think the situation is normalizing for Polycom and we're looking for in line results with the Street's $302M (+2.5%) and $0.35 when the company reports this Thursday. Our checks indicate decent trends, some strong, some in line, some mixed. Trading at 16X our CY11E EPS of $1.80 (consensus of $1.86), we're positively inclined considering our view of an improving pipeline. Polycom has $5.50/share in cash.
"Backlog at the end of last quarter was $64M down slightly from the $66M in the prior quarter. Backlog is not the easiest line item for us to predict yet our view of improving trends in North America (49%) coupled with a rebound in Europe (26%) points to a modest sequential uptick in the overall backlog. Growth trends may be improving in Asia (22%) and the Emerging Markets as well. We estimate Polycom may provide guidance in a range of 4% to 7% QoQ, or $314M to $323M vs. the consensus or $318M."
Sue continued, "Another bright spot for Polycom is the federal segment. The U.S. federal sector is still in its build phase for video and Polycom is investing in headcount and product development specific to this segment."
Sue added, "Cisco is expanding its telepresence into the consumer segment and Logitech is moving aggressively with a partnership with Avaya. Polycom, in our view, is set to focus on the high end video market for the enterprise and we don't expect much deviation from this stated goal. An expanding partnership with Microsoft may be a positive catalyst for the sequential revenue growth looking ahead as new product developments move into backlog. Polycom and Microsoft will co-develop new video products for the Microsoft OCS platform."
Sue concluded, "During the quarter, Polycom expanded their management team with hires from companies like Cisco, Motorola, OracleDirect, Xerox, and others. Polycom may not get all its hires right and operating margins improvements towards the company's stated goal of 20%-22% may not be linear every quarter. G&A reduction may be a large component of the OM improvements near term from last quarter's 13.9% though we do expect a meaningful overall improvement in 4Q10."
