Plantronics Inc. will acquire Polycom Inc. in a $2 billion deal that will give the headset manufacturer a more comprehensive portfolio of endpoints for unified communications. Following the Polycom acquisition, Plantronics' strategy is to make its hardware products agnostic to platform and environment as more enterprises look to conduct voice and video calling in the cloud.
The combination of Plantronics' headsets and Polycom's phones and video conferencing equipment will make the vendor a one-stop shop for enterprise UC endpoints. Plantronics and Polycom already have similar go-to-market strategies and rely on many of the same channel partners.
"It just makes sense to combine forces now," Joe Burton, the president and CEO of Plantronics, told investors on a conference call Wednesday announcing the Polycom acquisition. "In no way, shape or form is this a consolidation play."
After outbidding Mitel, the private equity firm Siris Capital Group LLC bought Polycom for approximately $2 billion cash in September 2016, taking the company private amid declining revenues. The acquisition by Plantronics, which will be financed by a combination of cash, debt and stock, is expected to close in the third quarter of 2018.
"More and more enterprises are seeking a single-stop shop for varied communication devices in order to avoid being saddled with interoperability challenges," said Roopam Jain, an analyst at Frost & Sullivan. "There is little to no technology overlap between the two companies, which makes Polycom's acquisition truly additive for Plantronics, extending its reach into new customers and markets."
Betting on hardware as industry moves to software
With the Polycom acquisition, Plantronics has signaled that it will continue to focus on hardware at a time when the industry is moving toward software and services.
Plantronics should be able to tap into Polycom's install base of 400,000 businesses to increase headset sales while continuing Polycom's growth in the market for open SIP desk phones, which can be used to connect to hosted callings services from cloud vendors like 8x8 and RingCentral, said analyst Alaa Saayed, also with Frost & Sullivan. In January, Polycom added software and hardware for VoIP phones to its portfolio with the acquisition of Obihai Technology Inc., based in San Jose, Calif.
"Although Plantronics is well aware that more businesses are moving to a software communications-only environment, different companies are still opting for IP desktop phones, especially open SIP phones," Saayed said. "Polycom has not only been the leader of open SIP phones but has been noticeably increasing its device shipment in the hosted/cloud-communications space."
The Polycom acquisition will also extend Plantronics' reach into Microsoft's customer base. "Polycom has been the most deployed IP phone brand within the Microsoft ecosystem, while Plantronics has been shipping millions of headsets within Microsoft Lync/Skype for Business/Teams environments," Saayed said.
In the audio and video conferencing markets, Polycom has recently opted to double down on its hardware division rather than try to compete with software against UC leaders Microsoft and Cisco and pure-cloud web conferencing vendors like Zoom and BlueJeans.
"Polycom has always been the ecosystem friend, which means you bring your parts to the table, we bring our parts," said analyst Ira Weinstein, the managing partner of Recon Research Inc., based in Fort Lauderdale, Fla. "Moving over to Plantronics will allow them to continue that stance, for better or worse."
The outfitting of smaller, less expensive huddle rooms has driven much of the recent growth in the web conferencing market, Weinstein said. But users report that audio and video quality aren't their top priority for those spaces, which could pose a challenge to Plantronics following the Polycom acquisition, especially if the vendor can't provide value-added software to improve the meeting experience.
"A channel partner that has been doing very well equipping enterprises with Plantronics headsets could very easily justify an upsell, a cross-sell, to phones. It's a very logical thing to do," Weinstein said. "The question is does that translate into video conferencing endpoints in a meeting room? It's a little bit more challenging."