Why Polycom's Shares Dropped


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of communications equipment provider Polycom (NAS: PLCM) fell 16% today after the company reported earnings and guidance.

So what: For the second quarter the company reported a 4% rise in revenue to $379.3 million and earnings per share of $0.22. This was ahead of the $361 million in revenue and $0.20 in earnings per share analysts had expected.

But what spooked investors was the company's outlook. Current-quarter estimates of $325 million-$335 million in revenue and between $0.06 and $0.09 in earnings per share were below expectations and fourth-quarter estimates fell short as well.

Now what: Polycom is expecting to divest from its enterprise wireless business, which accounts for about $20 million in revenue, so this accounted for some of the missed guidance but not all of it. The bottom line is that revenue isn't growing and it might actually decline significantly in the remaining quarters of this year. The stock doesn't look expensive trading at 12 times trailing earnings but the slowing revenue growth will keep me from buying the drop in price today.

Interested in more info on Polycom? Add it to your watchlist byclicking here.

The article Why Polycom's Shares Dropped originally appeared on Fool.com.

Fool contributorTravis Hoiumdoes not have a position in any company mentioned. You can follow Travis on Twitter at@FlushDrawFool, check out hispersonal stock holdingsor follow his CAPS picks atTMFFlushDraw.Motley Fool newsletter serviceshave recommended buying shares of Polycom. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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