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RBC Capital Lowers Price Target On Polycom (PLCM) To $19

 April 09, 2012 02:40 PM

RBC Capital Markets lowered its price target on shares of Polycom Inc. (Nasdaq: PLCM) to $19.00 from $26.00.

"Our rating is now Sector Perform as Polycom moves into the show me cage," the brokerage wrote in a note.

"End-market weakness, market share loss or sales execution seems to be the debate as Polycom missed its revenue target by a wide margin. Considering the company has been going through and revamping its sales force in North America, we believe the challenges at Polycom are mostly company specific," RBC said.

With no clarity in the outlook and its expense structure RBC believes Polycom will remove its 18 percent - 20 percent operating margin target off the table.

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RBC slashed its 2012 EPS estimate for the company to $1.00 from $1.30.

"We expect a buyer's strike on Polycom's shares until the company can say with confidence that its sales execution across all geographies may improve," RBC wrote.

Polycom has an expanding list of partnerships yet most of the go-to-market spending seems to be coming out of Polycom's wallet and not their partners', the brokerage said.

"Competitively, Cisco (CSCO) may be in a stronger position this year than last year, which was when Polycom was able to gain share. In our broad analysis, we believe Polycom has 33 percent endpoint unit share while Cisco has 30 percent. However, based on revenue share, we believe Polycom has 29 percent vs. Cisco's 43 percent," RBC said.

[Related -Cisco Systems, Inc. (NASDAQ:CSCO): What Cisco May Add To Next-Gen UCS?]

On Monday, the stock lost 4.02 percent to trade at $13.99. In the past 52 weeks, shares have been trading in the range of $13.90 to $34.30.

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