April 15, 2009 / 8:45 PM / 10 years ago

UPDATE 2-Polycom first-quarter profit falls, sees weak Q2 rev

* Q1 adj EPS $0.27 vs est. of $0.26

* Q1 rev $225.4 mln vs est. $234.3 mln

* Sees Q2 revenue flat to down 4 pct sequentially

* Shares down about 7 pct after the bell (Adds outlook, analyst’s comments, updates share movement)

By Mansi Dutta

BANGALORE, April 15 (Reuters) - Video conferencing products maker Polycom Inc PLCM.O posted a nearly 44 percent drop in quarterly profit hurt by a sharp fall in sales of its voice communications products, and forecast lower-than-expected revenue for the second quarter.

Shares of the company were down more than 7 percent in trading after the bell. They had closed at $16.93 in regular trading Wednesday on Nasdaq.

Revenue from the voice communications segment, which makes conference phone products, dropped more than 30 percent to $69 million in the first quarter. Sales from the video services segment fell 2 percent to $156.4 million.

Polycom and Norway’s Tandberg TAA.OL dominate the video conferencing market, which is expected to grow as companies looking to cut travel costs in a bleak economy choose video conferencing as a cheaper alternative to face-to-face meetings.

However, the prolonged downturn in the United States is affecting Polycom as firms hold back on budget decisions.

Polycom’s telepresence services grew 45 percent during the quarter, the company said in a statement. Telepresence is a market that could reach $1.5 billion in annual revenue by 2010, market researcher Gartner has forecast.

“Video as a category in general is outperforming most areas of IT spending... though Polycom has improved its execution it could be losing share to Tandberg,” Piper Jaffray analyst Troy Jensen told Reuters by phone.

The analyst, however, was bullish on the company’s infrastructure products such as video and voice media servers and network management services. Jensen has a “buy” rating on the stock.

On a conference call with analysts, the company said it expects second-quarter revenue to be flat to down 4 percent on a sequential basis.

The outlook indicates a range of $216.4 million to $225.4 million in first-quarter revenue, which is well below analysts’ expectation of $240.8 million.

It expects gross margin to remain roughly flat with first-quarter levels.

For the first quarter, the company posted a net income of $8 million, or 10 cents a share, compared with $14.2 million, or 16 cents a share, a year ago.

Excluding items, the company earned 27 cents a share. Lower expenses helped the company beat Wall Street expectations for earnings by a cent.

Revenue fell 13 percent to $225.4 million, compared with analysts’ expectations of $234.3 million.

Polycom’s customers include Deloitte Touche Tohmatsu [DLTE.UL], Time Warner Inc TWX.N, Amgen Inc (AMGN.O) and Targus Inc.

For related alerts, please double click [ID:nWNAB3760] (Editing by Himani Sarkar, Saumyadeb Chakrabarty)

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