Did Plantronics Bail Out Polycom or Is This Perfect Timing?

As the rest of the advertiser-supported AV press just reprints the Polycom or Plantronics press releases, we’re going to call it how we see it — with the truth about this “acquisition.”

Yes, Plantronics is taking control of Polycom — a history-making videoconferencing company that all but invented the space — for what amounts to $2.0 billion in enterprise value, but the financial breakdown of the deal is this:

  • Plantronics assumes about $690 Million of Polycom debt.
  • They pay about $948 in cash and 6.4 million Plantronics shares (that’s valued at $362 Million the moment the deal was announced yesterday).
  • Polycom shareholders end up owning about 16 percent of Plantronics

The transaction has been unanimously approved by the boards of directors of both companies, is subject to regulatory approvals and other customary closing conditions, and is expected to close by the end of the third calendar quarter of 2018. Polycom is privately held and for CY2017, Polycom had GAAP revenue of $1.1 billion, Non-GAAP gross margin of 56.6 percent, Non-GAAP operating income of $183.1 million and Non-GAAP operating margin of 16.0 percent.

But, who wins and who loses in this deal?

Well, to be frank, this could be one of those win-win deals in a few different ways. First off, Plantronics has been begging to be noticed in the commercial AV space ever since debuting its Habitat Soundscaping sound-masking environment last year. It’s garnered a lot of popular press and some nods from the integration community (and they’ve paid for a few awards) but it hasn’t yet taken hold in a big way. The system is truly unique and one of the most creative products we’ve seen in years. It should sell but it’s a bit complicated to pitch as it’s not simply sound masking.

Simultaneously, companies like Zoom and products like Skype for Business have been eating Polycom’s lunch when it comes to conferencing and collaboration. To combat this, Polycom even partnered with Zoom back in 2017 but in reality, most people use Zoom as a stand-alone product/service. Zoom is currently valued (remember, it’s private) in excess of $2 Billion by many financial analysts. Zoom has publicly stated it’s in 90 percent of the top-200 US-based universities and that more than 50 percent of the Fortune 50 companies primarily use Zoom.

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So, this is the perfect time for Plantronics to buy Polycom. Plantronics needs distribution in the commercial AV market and Polycom needs both a tech and financial boost if it wants to eventually compete with the likes of Skype, Zoom and even Cisco’s Spark platform. Plus, as an added bonus, Plantronics has key contacts inside the IT world of the Fortune 1000 via nearly unanimous adoption of its phone headset market — it has well in excess of a 90 percent market share there. Polycom could benefit selling its hardware-based systems into that already-developed market owned by Plantronics.

In the public statement yesterday after the acquisition announcement, Plantronics said that Polycom “brings a global leadership position in voice and video collaboration, accelerating Plantronics vision of delivering new communications and collaboration experiences.” This is absolutely true. Polycom has some of the best people in AV and its brand is like the “Kleenex” of the VTC market.

This will help Plantronics ease Habitat Soundscaping in to the ProAV market — or, at the very least, get noticed.

Polycom is a provider of communications and collaboration technologies. Polycom is privately held and has been an innovator in personal collaboration, group collaboration, and services (including customer care, managed and professional services, and cloud services for interoperability, management, and analytics). For CY2017, Polycom had GAAP revenue of $1.1 billion, Non-GAAP gross margin of 56.6 percent, Non-GAAP operating income of $183.1 million and Non-GAAP operating margin of 16.0 percent. Significantly Enhances Plantronics Long-Term Shareholder Value

The transaction is expected to be immediately accretive to Non-GAAP EPS. Plantronics targets achieving annual run-rate cost synergies of $75 million within 12 months of transaction close.

Plantronics intends to fund the cash portion of the consideration with cash on hand and approximately $1.375 billion in new, fully-committed debt financing. Wells Fargo Bank and affiliates have committed to provide the debt financing for the transaction, subject to customary conditions. Plantronics expects to pay down a significant portion of the debt within the next several years with cash on the balance sheet and through cash generation.

Plantronics is here and Polycom is here.

Gary Kayye

About Gary Kayye

Gary Kayye, founder of rAVe Publications, is one of the most prominent personalities in the audiovisual industry. He has been a contributor to WIRED magazine and a technical advisor and columnist for Sound & Communications magazine as well as an opinionated columnist for rAVe [Publications] since 2003. In addition to his writing and market analysis, Gary has been a product, marketing and business operations consultant to dozens of AV companies in the U.S. and overseas. Clients have included companies such as Sony, Sharp, Epson, Lutron, InFocus, Sanyo, Mitsubishi, NEC and Philips.   Gary, who has been involved with the audiovisual market for over 20 years, was the recipient of the InfoComm 2003 Educator of the Year Award and the 2007 NSCA Instructor of the Year Award. Over the years, he has donated much of his time as an active volunteer in the AV industry’s trade association and served as chairman of InfoComm’s Professional Education & Training Committee (PETC), chairman of the ICIA Design School Committee and chairman of InfoComm’s Installation School Committee. In addition, he has served on the InfoComm board of governors. He also helped grow the InfoComm Projection Shoot-Out as the premiere AV industry trade show special event serving on the committee from 1991 through 1997, and was instrumental in launching the Shoot-Out in the European market at the Photokina Expo in 1994 and 1996 as well as the Asian market at the 1995 and 1997 INFOCOMM Asia shows.   Prior to founding his own company, Gary was vice president of sales and marketing for AMX Corporation (www.amx.com), a manufacturer specializing in professional AV and residential AV control systems. Prior to AMX, Gary spent nine years at Extron Electronics (www.extron.com), rising to the position of vice president of sales and marketing. Gary earned his bachelor’s degree in journalism in 1987 from the University of North Carolina and is currently Adjunct Faculty at UNC in the School of Journalism teaching a class on how future technologies will affect the future of advertising, PR and marketing.   He is also the founder of Swim for Smiles, a non-profit that raises money for the N.C. Children’s Hospital through swimming and other fitness-related events for kids. You can contact him at gary@ravepubs.com..

  • Frederick Ampel

    Nice analysis wonder why we are the only source of such details – hmmmmmmmmmmmmmm maybe its because we actually know something?