Plantronics moves far beyond headsets by buying Polycom, which brings them into three additional businesses that are synergistic to their headset core.
Plantronics has announced that it has entered into a definitive agreement through which they will acquire Polycom in a cash and stock transaction valued at $2.0 billion. The deal has been unanimously approved by the boards of directors of both companies, is subject to regulatory approvals and other customary closing conditions, and is expected to close by the end of the third calendar quarter of 2018.
“We are very excited to announce that we are accelerating and expanding our vision with the acquisition of Polycom,” said Joe Burton, Plantronics’ CEO and President, in a conference call announcing the acquisition. “We stated previously that investors could expect us to become more acquisitive if we found the right business at the right time that fit precisely into our strategic vision – and that’s exactly what we found with Polycom.”
Polycom is a longstanding partner of Plantronics, and Burton said that they have similar go to market routes with familiar channel partners.
Burton emphasized that the purpose of this deal is to make Plantronics, a headset vendor, a power across the breadth of the unified communications and collaboration [UCC] market.
“It’s an opportunity to play a larger role in the $39.9 billion communications and collaboration industry,” Burton said. “Customers, now more than ever, need a good partner who can offer a completely integrated experience across headsets, software, deskphones, audio and video conferencing, analytics and services – while remaining completely agnostic to the platform or environment. The addition of Polycom’s exceptional portfolio of products and services in both audio and video will rapidly accelerate Plantronics’ vision to be our customers’ preferred communication and collaboration touchpoint across the open collaboration ecosystem.”
Burton emphasized the advantages of being able to offer a one-stop shop to customers for a broad swath of their UCC needs. Plantronics now has four key businesses. They previously were focused on the professional headset market, which is growing at a 7 per cent clip. Polycom brings them into three additional markets: the Open SIP desktop phone market; the video conferencing endpoint market; and the voice conferencing market.
“The real key is the open SIP desktop phone market,” Burton said, noting that it has enabled Polycom to work closely with vendors like 8×8, Microsoft and Metaswitch. “This area has a 16 per cent CAGR projected over the next five years, and Polycom is the leader in the market.”
Burton noted that the videoconferencing endpoint market is growing at 4 per cent CAGR, and the voice conferencing market at 8 per cent.
“We now have four very nice diversified UCC markets all tied together with the software and analytics story that Plantronics has been talking about, and that Polycom has as well – and we pick up a services arm to help integrate all this into a compelling experience,” he stated
Burton also stressed that the endpoint business is the largest part of Polycom’s business by far. He acknowledged that their video infrastructure business is in slight decline, but that what is there tends to be used for mission-critical purposes. He also indicated that the services arm around the infrastructure business still has a nice revenue.
“In the past, customers have needed to stitch this together on their own – go to one company to get headsets, go to another for video, sometimes yet another for conferencing phones or deskphones,” Burton said. “By bringing this all together, we can simplify the buying experience, simplify the customer experience, and create something really compelling.”
He also noted the highly collaborative nature of the businesses.
“Very often, when we don’t sell a headset, we don’t lose it to another headset maker, we lose it to a deskphone.”
For Polycom, this completes an evolution in which they have been sold – for around the same $2 billion price – three times in the last two years. The first sale, to Mitel, was scrubbed when private equity firm Siris Capital Group jumped in, with Mitel being paid $60 million to go away, and later buying ShoreTel. While Polycom’s purchase price hasn’t changed much since Siris bought them, Burton stressed that the company was really enhanced under Siris’ tenure.
“During the time it has been run by Siris Capital, it has really been run phenomenally,” he said. “Polycom has done incredible work to pivot themselves. They have refreshed their core product lines and evolved focus to the UCaaS and Video-as-a Service ecosystem, and introduced cloud-based analytics services. They have turned it around and returned to growth.”
Burton also stressed that Polycom “has done a really nice job of going through the strategic pivot of de-emphasizing their infrastructure to the open collaboration model,” so that they are now working with the likes of Zoom, Blue Jeans or Microsoft, providing them with endpoints, rather than competing with them.
Going forward, once the deal closes, Burton said that Plantronics will optimize the areas in which the two companies’ investments have overlapped. They expect to realize $75 million in cost synergies in the first 12 months after close. He also stressed that they would gain efficiency from commonalities in channel partners, and by integrating complementary product sets to create a broad portfolio of prodcts and services.
While both companies have large channels, their past collaboration means that the two companies already have many common partners, who will also benefit from Plantronics’ new capability as a one-stop shop.
“In many cases, it is exactly the same channel partners,” Burton said.