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Polycom, Inc. PLCM recently posted first-quarter 2016 results wherein GAAP net income came in at $3.3 million or 2 cents per share compared with $21.2 million or 15 cents in the prior-year quarter. The company posted quarterly adjusted (including stock-based compensation expense) earnings per share of 12 cents, which were in line with the Zacks Consensus Estimate.
 
Quarterly total revenue declined 12% year over year to $290.1 million and also missed the Zacks Consensus Estimate of $302 million. Product revenues totaled $203.3 million, down 13% year over year. Service revenues grossed $86.8 million, down 10.5% from the prior-year quarter level.

Segment-wise Sales

UC Group Systems revenues totaled $178.9 million, down 13% year over year. UC Personal Devices revenues grossed $67.8 million, up 1% from the year-ago quarter. UC Platform (Network Infrastructure) revenues came in at $43.4 million, down 26% year over year.

Geographic Distribution of Sales

The Americas (North and South) generated approximately $155.5 million in revenues, down 1% year over year. Europe, the Middle East and Africa contributed $73.5 million, down 22% year over year. Meanwhile, the Asia-Pacific region accounted for the remaining $61.1 million, down 23% year over year.

Margins

Gross margin (on a reported basis) in the quarter stood at 56.5% compared with 58.3% in the year-ago quarter. Quarterly operating expenses (on a reported basis) totaled $156.6 million, down 4.4% year over year. Quarterly operating margin was 2.5% versus 8.8% in the prior-year quarter.

Balance Sheet

At the end of the first quarter of 2016, Polycom had nearly $672.1 million of cash and short-term investments on its balance sheet compared with $619.3 million at the end of 2015. Total debt for the same period stood at $227.4 million compared with $228.8 million at the end of 2015. The debt-to-capitalization ratio was 17.5% at the end of first-quarter 2016 compared with 17.9% at the end of 2015.

Cash Flow

Cash flow from operations, at the end of first-quarter 2016, was $52.9 million compared with $30.4 million at the end of 2015. Free cash flow was $46.1 million compared with $18.7 million in the same quarter last year.

Meanwhile, IP-based integrated communications solution provider Mitel Networks Corp. MITL announced plans of acquiring videoconferencing giant Polycom for approximately $1.96 billion. The deal is expected to close in the third quarter of 2016, subject to shareholder and regulatory approvals and other customary conditions.

Zacks Rank & Key Picks

Polycom currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the sector include Motorola Solutions Inc. MSI and Extreme Networks Inc. EXTR. Motorola Solutions sports a Zacks Rank #1 (Strong Buy) while Extreme Networks carry a Zacks Rank #2 (Buy).