The fate of Polycom Inc. has become more uncertain now that a private equity group has stepped in with a counteroffer...
to Mitel Networks Corp.'s $1.96 billion offer to purchase the video conferencing vendor. The direction of the sale will result in pros and cons for Polycom customers and future tech buyers.
Polycom has received an offer for purchase from Siris Capital Group LLC that could be superior to Mitel's bid, according to a Securities and Exchange Commission filing from May 23. Insiders close to the deal told Bloomberg News the offer from Siris Capital Group is more cash-based, as opposed to Mitel's stock offering. If the Mitel-Polycom deal unravels, however, Mitel stands to get $60 million.
Pros and cons for the tech buyers
Should Polycom be picked up by the New York-based private equity firm, as opposed to Mitel, the vendor could be driven down an entirely different path than expected, analysts said. And both routes have pros and cons.
"They're very different forks in the road," said Ira Weinstein, an analyst at Wainhouse Research LLC, based in Duxbury, Mass.
Under the Siris Capital Group, Polycom will likely continue as an individual company, Weinstein said. Some of the changes the private equity group could make range from putting more money into products, changing the company's business strategy or downsizing on the number of employees to increase revenue.
"When a hedge fund comes in, they make changes -- and those changes can be trivial or disruptive," Weinstein said.
These changes could be beneficial for tech buyers, because Polycom has had several kinks in its product strategy -- namely, the video conferencing system has no call control, Weinstein said. Call control, which acts as the network's brains by controlling connections between endpoints, has become expected in today's market for unified communications (UC) products. Tech buyers have come to prefer simple, easy-to-control services that many vendors offer nowadays, analysts said.
"With Mitel, they will get call control as Mitel has a call control platform," Weinstein said. "With Siris, it is possible they will find a call control platform."
On the other hand, if Mitel ends up purchasing Polycom, the video conferencing vendor will likely become part of a larger UC offering. Mitel has maintained, however, that Polycom would retain its own offerings and branding.
One benefit Mitel can offer Polycom is a developed cloud services platform, said Rob Arnold, an analyst with Frost & Sullivan. Cloud services are an area where Polycom has largely played catch-up, according to Arnold.
"It's not clear that a hedge fund would bring a wealth of similar practical portfolio experiences to Polycom," Arnold said.
Either way, Customers and tech buyers will likely experience some hesitancy regarding what the future holds, since customers want to ensure any investments will be viable, Arnold said.
Nevertheless, Arnold said he thinks Polycom products will hold value. "The last thing either owner would want to do is alienate its strategically important [customer] base," he said.
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