Transcript for UCStrategies Experts Discuss Polycom Announcements
Dave Michels: Hi, this is Dave Michels from the UCStrategies team and today we are going to talk about Polycom. Over the past two weeks they’ve made a number of announcements. They announced acquisition of HP Halo, they announced the Open Visual Communication Consortium, the OVCC, and they announced a new project called Rally, integrating with Microsoft Lync. Those were all two weeks ago. And just more recently, they have announced a significant upgrade to an intelligent core product. They announced a new immersive telepresence solution, the OTX 100 at a little lower cost. And they have now announced upgrades to their video content management solution, going back to the Accordent acquisition, as well as the sound structure product upgrading from voice to analog. So they have been fairly busy lately and let’s see what some of our experts have to say about this. John, why don’t we start out with you?
John Bartlett: Thanks Dave. Starting at the top, a year ago we were wondering whether Polycom was going to be the next one to be acquired, since Tandberg had been acquired and Lifesize had been acquired. It just seemed like the logical thing. But Andy Miller was quoted as saying, “I’m not looking to be acquired, I’m looking to acquire.” Which is a pretty bold statement and at the time I thought, well, does he mean it or not or is he just positioning? But I think that the set of introductions that you talked about and most especially the agreement with Hewlett-Packard, really says that he’s putting his money where his mouth is. He is really going at it and I think Polycom is becoming a much stronger contender in this space. And I think it speaks well for what Polycom is attempting to do and how successful they are at doing that.
Just going back to the Hewlett-Packard thing, you mentioned that they are acquiring Halo, but I see it as much broader than that. There’s an agreement for them – for Polycom to acquire all of the video conferencing assets and one of those is a strong move that Hewlett-Packard was in the midst of with building out a desktop and room-based video conferencing offering. They had licensed software technology from Vidyo, which is an SVC-based technology. So they have a whole plan there that they are essentially capping and handing over to Polycom. Now, there’s an open question that I don’t know the answer to, which is does that video license come with that acquisition? Will Polycom take up that SVC licensing? We know that Polycom is already doing some SVC work of their own. Maybe they stay with that, what is the future of that? So I think that is an interesting piece that falls out of this same agreement.
But Hewlett-Packard does not just hand over Halo. They are essentially saying, we’re not in the video business, it's not going to be our core strength, and we want to partner with Polycom for this. And so I think that’s big. That’s a huge partner. I thought it was a big deal for Vidyo to have signed up Hewlett-Packard, I think it's a big deal that Polycom essentially got a big distribution channel at Hewlett-Packard, who is already gearing up to push video conferencing out to their clients.
Dave Michels: John, you talked briefly about the idea that they have been an acquisition target and a lot of people were thinking that and clearly that is not the case right now. But Vidyo and Broadvision are clearly looking for their partners to take on the video space and the deal with HP is pretty significant because it marks an exclusive arrangement with Polycom. So you mentioned the Vidyo arrangement was a question, but it really took one of the most eligible bachelors off the market for those two companies. Marty, what do you think about these Polycom announcements?
Marty Parker: Well, I would echo what you and John have both said so well to begin and that is that Polycom really is on an aggressive program of leadership and the HP acquisition, I think John captured very well, but it's a major move in building their lead. Another announcement they made was an extension of their relationship with Microsoft bringing telepresence to the Microsoft Lync product line through an initiative known by code name “Rally.” That reflects I think, Polycom’s aggressive view that in a SIP-based world, in a UC-based world the historical telecom proprietary lock-in model of your end points have to match switch, is history and they are going to do their best to make it history. So they are actively working with the likes of Microsoft, IBM and others who adopt the eco-system type of model, which is the software supplier makes the core technology and a partner such as Polycom makes the devices and the tools to bring that technology into business applications. So we see a really strong move there. I recall that Polycom was quite present at the Microsoft Lync announcement back in New York last fall, and they are now just doubling down in that relationship with Microsoft and with others that I mentioned already.
Another thing that I think they are proving to the market and part of their announcements today make the point – they are proving that they are the “go-to” company for video. And they are doing that in a couple of ways. I was very impressed by their announcement back on June 1st that they have organized a consortium of carriers to support their open video initiative. John, I think the term for that was Open Visual Communications Consortium, the OVCC, where these carriers agree to support interoperability between enterprises. So that in again, in an internet-based and SIP-based and video IP world – your endpoints that you buy in your enterprise, whether they are PCs or they’re flat screens and room-based systems, those will interoperate with your clients, your business partners, or with other locations of your enterprise so that you might route this through the cloud and the network, rather than having to invest in your own enterprise NPLS wide area network. So they are trying to lower the barriers to entry and assure people that their investments in video are going to be utile—very useful. So I see them really trying to bring down the barriers, while at same time in an announcement that they made today concurrent with Infocomm, they also talked about a Wainhouse Research video conferencing spotcheck for first quarter 2011, where Wainhouse is now ranking Polycom with a 45% share of video endpoint shipments in the first quarter of 2011. Which was growing at five points year over year, and their nearest competitor declined six points year over year. So they are gaining share with a 45% market share, compared to their nearest competitor with a 25% share. That is starting to look like a dominant leader.
I think, but I don’t know because I haven’t seen the report, but I think that other competitor they are talking about is Cisco Tandberg. And clearly, that acquisition of Tandberg, taking Tandberg out of play and putting it under the Cisco label gave Polycom a pretty open field to run for leadership. Yes, they still have to think about Vidyo, and they still have to think about Lifesize under the Logitech banner, but they are running for that leadership position pretty hard. They made a similar point about leadership and market share leadership on a revenue basis. They don’t have quite the largest share on revenue—it’s only 34%, but still gaining while their nearest competitor is declining.
So I see them really making that play, as John described. I think there is every reason to believe that they are going to continue to do well at that and they are going to continue to reinforce the ecosystem model—which is, the companies who are making UC software can depend on Polycom to deliver the devices and endpoints that are needed.
Dave Michels: You talk about the OVCC there, and I think what’s really interesting about that is that they’ve got a bunch of the carriers to align and agree on call setup parameters, but it wasn’t just run-of-the-mill carriers, they got AT&T, BT, Verizon included in the stack. It's pretty impressive what they pulled off in this announcement for interoperability.
Marty Parker: It's impressive by brand; it's impressive also that they had international players, not just North American.
John Bartlett: And really this consortium is not just about enabling video within the enterprise, but between the enterprises. And that’s a direct response to Cisco. Cisco got into this game early and kind of locked up AT&T in the space and some others. But of course, they made it Cisco-specific. I think that this is a strong move on Polycom’s part to make sure they are in that space. It is not clear to me how strong that space is yet, but I think everybody wants that capability, whether they are quite ready for it or not. So I think it is an accomplishment and it is quite an accomplishment to get those carriers in. I think that’s like bringing spitting cats into a room and trying to get them to cooperate, so I think they’ve done quite a good job there.
Dave Michels: Jim Burton, I know you have some history with Polycom, what do you think about all this stuff?
Jim Burton: I have a lot to say. One of things and kind of following up on Marty’s comments about them making a run for becoming the market leader. They were the market leader. When Polycom acquired ViaVideo, they had a next generation of technology and they dominated the video market for quite a number of years, but they lost their way. And with Andy Miller now at the helm, he has done remarkable things to get them back on track on multiple fronts, to be very successful, I believe. If you take a look at his organization that he has built from a management team, the partnerships that he’s developed and the fact they’ve identified that their biggest competitor is the Cisco Tandberg alliance or the Cisco Tandberg acquisition. They have gone out and they’ve done very well with everyone else in the marketplace, with one minor exception and that would be Avaya. They have certainly done well with IBM and they are doing well with Microsoft. And you can see that they have developed strategies on multiple fronts to put themselves in a position to become the market leader and to dominant this space, which is growing by leaps and bounds. I think that Andy Miller has just done a remarkable job. He has not been there all that long, when you consider all the things that he has done and I think that they will do well going forward. And then if you look at the fact that Cisco is going through a few challenging moments right now, they should be able to dominant this market even more, with that situation going on.
So these announcements – a variety of very interesting ones – I do believe, and as John pointed out, their acquisition of the technologies within HP not only adding to their product portfolio, but then gaining a very, very large customer is also important. And clearly some of the things that they are doing, many of us would think that maybe Microsoft would offer some of those services and solutions as part of their offering, but it's very clear that they developed a relationship between the two companies -- Microsoft and Polycom – where Polycom is going to be delivering those solutions for Microsoft. So, we’ll see how that goes.
Marty Parker: I would like to add to what Jim said and that is to point out another factor in Polycom’s leadership activities and mention that they have done a good job of developing the channel. I think primarily, my main example of that is the work they’ve done with ScanSource Communications. They have been very smart in developing the distribution model, so they have good reach into the broad range of audio/video integrators. So people can look up almost anywhere and find an integrator to bring these video tools into their enterprise, without having to wait until they do, say, a PBX replacements or look to some other provider for that. So I think that as part Jim, of their revenue growth, which is 25% year over year and their leadership position development.
Dave Michels: Without question, Polycom has been very busy with a lot of announcements in a very short amount of time. My response after reading the news today was, what are they going to announce in the next two weeks? It's a pretty impressive clip at any rate. With that we will wrap it up and thank you very much, experts, for contributing.