2008 Interview with: Polycom, Inc. (PLCM-Nasdaq), CFO, Michael R. Kourey - featuring: their telepresence, video, and voice solutions that enable people to connect and collaborate everywhere.. |
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| Polycom, Inc. (PLCM-Nasdaq) | |
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Polycom, The Leader In Unified
Collaboration, Enables People To Meet At A Distance As They Would
Face-To-Face—Eliminating Travel Cost And Carbon Emissions Along The Way
Senior Vice President, Finance and Administration, Chief Financial Officer and Director
Michael R. Kourey has been a
member of the Board of Directors since January 1999. Mr. Kourey has served
as Polycom’s Senior Vice President, Finance and Administration, since
January 1999 and as Chief Financial Officer since January 1995. He also
served as Vice President, Finance and Administration from January 1995 to
January 1999, Vice President, Finance and Operations from July 1991 to
January 1995, Secretary from June 1993 to May 2003, and Treasurer from May
2003 to May 2004. Prior to joining Polycom, he was Vice President,
Operations of Verilink Corporation. Mr. Kourey currently serves as a member
of the Board of Directors of Aruba Networks, Inc. and Riverbed Technology,
Inc. and serves on the Advisory Board of the Business School at Santa Clara
University. Mr. Kourey holds a B.S. in Managerial Economics from the
University of California, Davis, and an M.B.A. from Santa Clara University.
Polycom, Inc. (Nasdaq: PLCM) is the global
leader in telepresence, video, and voice solutions and a visionary in
communications that empower people to connect and collaborate everywhere. Mr. Kourey: “Our vision for Polycom is to be the worldwide leader in unified collaboration, enabling people to cross boundaries and meet at a distance as effectively as they would face-to-face.”
CEOCFO: What do you actually provide and to whom do you provide it? Mr. Kourey: “We provide a full suite of voice and video solutions, enabling collaborative communication between people in the enterprise, government and education sectors. This includes a telepresence solution that also enables an essentially surreal face-to-face meeting experience. With our broad array of products, we enable you to connect with people from any meeting room, or from your desktop, and even while mobile. We enable you to collaborate with other individuals or groups wherever you are, and wherever they are–anywhere in the world. The range of products that support those solutions span from telepresence products to video conferencing products and desktop video solutions, to Voice over IP handset phones, to wireless phones, and to our famous triangular voice conferencing devices.”
CEOCFO: Are
people purchasing or leasing your systems; what is the revenue model?
CEOCFO: Do most companies today understand teleconferencing or telepresence, or is education still required in order for people to understand? Mr. Kourey: “If you had asked me that question a year ago I would have said there is still a fair amount of education to be done, but over the last twelve months something fairly fundamentally has changed and this is worth noting. First off, travel cost—such as airplane travel, or even driving across town for a meeting—has absolutely gone through the roof. Therefore, companies worldwide are aggressively looking not just to maintain parity in travel cost, but are looking to radically reduce their travel cost. This is the number-one market driver that has dramatically changed the dynamics in this business. Another significant global driver, particularly in Europe and Canada, is the issue of green responsibility in response to climate change. Commercial and public sector customers alike are looking for ways to aggressively demonstrate what they are doing to reduce their carbon emissions and, in some cases, achieve carbon neutrality. This is another big driver in our marketplace. By pure serendipity, these drivers occurred at a time when there has been a quantum leap in the quality of collaboration solutions to high definition video and telepresence. As a result, these demand drivers are occurring at a time when our technology has lunged ahead, making unified collaboration solutions a truly viable substitute for face-to-face meetings.”
CEOCFO: What is the competitive landscape like? Mr. Kourey: “We have some healthy competition, and we are well positioned in the competitive environment. Importantly, with the low, early penetration rates in our market, simply capturing the demand is the primary revenue growth opportunity. Of course, from a share perspective, we look to grow at or above market rates in our various market segments. In fact, one of the most exciting segments in our space is telepresence, which grew by 500% year-over-year or over 20% sequentially in our most recent quarter, albeit against early year-ago numbers. In telepresence, our competition includes some good companies, but we have a highly-differentiated offering and appear to be growing faster than the market. Additionally, HD video conferencing is growing fast and we have also performed well competitively here for, I believe, a couple of key reasons. First, we believe we have the best product offerings in the world in these areas and have superior technological innovations. Second, we are completely devoted to open standards and are not looking to have any proprietary interfaces. This focus makes us very popular not just with the end users on the operating side but with the IT folks inside our customers. Beyond our highly differentiated technology, we have been investing in our go-to-market model and the growth of our sales force, including sales engineering on the presale and post sales side. This strategy is doing well for us competitively.”
CEOCFO: Tell me about your geographic footprint and where you see that changing? Mr. Kourey: “Geographically, some of our fastest growth areas are in Europe. As a result, the EMEA region, comprised of Europe, the Middle East, and Africa is now 26% of our business in Q2 2008, for instance. In our most recent quarter, Asia Pacific was 17% of revenues, with Latin America at 3% and North America at 54% of revenues. From a growth rate perspective, the fastest growing territories are currently outside US areas. That being said, the US is a huge market and great growth engine, but as to rate of growth, you will find countries such as Brazil, Russia, India, China, and the Middle East are growing rapidly.”
CEOCFO: Are there industries where you would like to have more of a presence? Mr. Kourey: “We have a particular strength in the financial services, pharmaceuticals, technology, and oil and gas sectors. In the public sector, we have particular strength in US Federal and some of the other government, education, and healthcare markets throughout the world. Even though we are a horizontal company, we have great vertical applications in all key sectors.”
CEOCFO: What would surprise people that they could actually do with your products? Mr. Kourey: “If you looked at some of this collaboration technology even a couple years ago, you might have walked away with the impression that it is a great productivity tool and it really can help with your communication requirements. However, you would not have thought it is a substitute for hopping on a plane and spending a couple of days of travel for a two-hour meeting. You may have thought that it wouldn’t even substitute for getting into your car and driving across London traffic to have a meeting. Today, what people would be surprised about from a customer viewpoint is just how much the technology under Polycom’s industry leadership has dramatically improved over the last year or two with telepresence, high definition video, which includes the integration of high-def graphics and high-def voice. As a result, the surprise is that the technology just doesn’t require nearly as much education of the market as it did in the past. In fact, unified collaboration solutions have become a top budget priority today and are becoming mission critical solutions in many organizations worldwide.”
CEOCFO: What is the financial picture for Polycom? Mr. Kourey: “We are a company with a very strong cash flow generation. We have had 42 quarters in a row of positive operating cash flow. We are investing our cash flow and our excess cash into purchasing our own stock. Last quarter alone, we purchased $80 million of our common stock and we entered this quarter with a fresh board approved program for $300 million more. We have no debt on our balance sheet and we operate with a DSO, or Date of Sales Outstanding, that is best in class—at 44 days last quarter, for instance. We have an efficient model with significant operating leverage. From a revenue growth perspective, we are experiencing strong growth as a business. In Q2, our video business grew 25%, up from a 21% year-over-year growth rate in the first quarter. Voice grew 14%, up from an 11% growth rate in Q-1. This is a business with a strong growth profile and great cash flow generation as a result.”
CEOCFO: The CFO role has taken on much more prominence in the last few years; has that changed for you as CFO? Mr. Kourey: “Yes it has; the CFO has a critical role in an enterprise. Of course, there are all the dynamics around ensuring financial statement accuracy, the operating control structure, and disclosure controls to ensure transparency. Beyond that, there is the business partnering aspect of the job with the business units and geographic theater structure. The CFO needs to spend a fair amount of time out in the field if at all possible with direct exposure to customers and strategic and channel partners and with the direct staff. For a global company, it is important to go to Asia, Europe, or spend time away from your home theatre of operation. Of course, if the company’s strategy drives acquisition activity, the CFO needs to play an active or leadership role in evaluating, negotiating, and implementing the effective integration of new, inorganic units. Ultimately, integration is where the rubber meets the road and needs to be planned and executed thoroughly. The CFO role is broad and complex, but frankly, the most exciting time for CFOs in my view is right now, because the CFO is looked to as a real business partner to the entire executive team and to the customer and partner community at large.”
CEOCFO: In closing, why should potential investors show interest in Polycom today, and what might people not realize about the company that they should absolutely know?
Mr. Kourey:
“I don’t want to be redundant, but in summary, there are a few things to
think about. First is that the huge travel cost issue, with the resultant
fast ROI for adopting our solutions, is not episodic; this travel cost issue
is likely to be with us for years, if not decades. Then there is the green
issue, which is particularly strong in Europe and Canada and, over time,
likely to be strong worldwide. Again, this is an issue that will unlikely go
away any time soon. These are significant demand drivers that are happening
at the same time as the huge leap in quality of the solutions being offered,
such as telepresence and high definition that I discussed earlier. If you
put that all together with what we bring to bear with our close customer
relationships, our strong brand, strategic partnerships, high sales
coverage, and industry-leading product innovations, we believe it puts us
alone in the space and best positions us to capitalize on this opportunity.” |
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“Of course, from a share perspective, we look to grow at or above market rates in our various market segments. In fact, one of the most exciting segments in our space is telepresence, which grew by 500% year-over-year or over 20% sequentially in our most recent quarter, albeit against early year-ago numbers. In telepresence, our competition includes some good companies, but we have a highly-differentiated offering and appear to be growing faster than the market. Additionally, HD video conferencing is growing fast and we have also performed well competitively here for, I believe, a couple of key reasons. First, we believe we have the best product offerings in the world in these areas and have superior technological innovations. Second, we are completely devoted to open standards and are not looking to have any proprietary interfaces. This focus makes us very popular not just with the end users on the operating side but with the IT folks inside our customers. Beyond our highly differentiated technology, we have been investing in our go-to-market model and the growth of our sales force, including sales engineering on the presale and post sales side. This strategy is doing well for us competitively.” - Michael R. Kourey |
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