Video conference use soars as airlines squirm

By Helen Chernikoff - Analysis

NEW YORK (Reuters) - Airlines' pain is video conferencing's gain.

As companies slash travel budgets in the face of higher travel costs and a softer economy, they're increasingly adopting technology that enables employees to collaborate face-to-face without boarding a plane.

The businesses that make such technology, such as Polycom Inc (PLCM.O), Cisco Systems Inc (CSCO.O) and Hewlett-Packard Co (HPQ.N), are seeing profits from video conferencing soar alongside the price of jet fuel and gasoline.

With oil prices hitting an all-time high of $135.09 per barrel in May, Cisco has been hearing customers talk more in recent weeks about using video conferencing to avoid travel, said Erica Schroeder, who heads marketing for Cisco's advanced video conference product, TelePresence.

"Travel is the topic of conversation from customers to us," said Polycom Chief Financial Officer Michael Kourey. "We're not having to pitch this."

As part of an effort to cut travel costs by 10 percent, staffing services company Manpower Inc (MAN.N) has ramped up use of its video conference equipment in the last couple of months, said Allan McKisson, a vice president of human resources at Manpower.

"It used to be, when you can video conference, do it. Now it's do video conference first, or maybe don't have the meeting," said McKisson, who must approve his direct reports' travel requests.

In companywide e-mails, office furniture maker Herman Miller Inc (MLHR.O) has encouraged employees to use video conferencing in addition to conference calls and car-pooling to cut operating costs, spokeswoman Susan Koole said.

"Herman Miller is really encouraging its employees to ask if their travel is truly necessary," Koole said.

HIGH ANXIETY

This anxiety over oil prices has translated into improved results for video conference equipment makers.

Sales of Polycom's high-end technology, which aims to make international colleagues feel like they're in the same room, grew about 58 percent between the fourth quarter of 2007 and the first quarter of 2008, Kourey said.

Cisco spokeswoman Jacqueline Pigliucci said the company's advanced video conference technology is the fastest-growing technology ever at the company, which is known as the largest U.S. maker of routers and switches that direct Web traffic.

Hewlett-Packard attributes some acceleration in sales to energy prices, said Ken Crangle, who manages the company's HP Halo videoconference technology unit. "Most of our customers come back to us pretty quickly and say: 'We justified this on the cost savings.'"

Repeat business happens because videoconferencing boosts productivity by cutting travel time and making more frequent, focused meetings possible, Crangle added.