Suitors May Be Calling on Polycom

A technology sector that has attracted scant investor attention is videoconferencing, even though it’s on its way to becoming the chosen tool for companies seeking efficiency and productivity with greatly reduced travel costs. The major Wall Street houses have all but ignored the group, so not much is known about stocks that excel here.

Cisco Systems, which recently acquired videoconferencing firm Tandberg, is the top provider of videoconferencing gear. But another key, if smaller player, in this rising market that has caught the eye of some investors is Polycom. It develops and makes video-, voice-, data- and Web-conferencing equipment systems that provide corporate users with a complete communications and videoconferencing network infrastructure.

But what adds spice to the stock is its potential as an attractive takeover target. Rumors have swirled that Polycom has been approached last year by two different groups with feelers proposing a merger or a buyout. Such speculation is fueled in part by Polycom’s alliances to develop and market voice over Internet protocol (VOIP) communications products with several major tech companies, including Hewlett-Packard, Microsoft and Avaya, a unit of Nortel Networks.

In Microsoft’s case, Polycom has a deeper relationship that involves a development and marketing pact to integrate its desktop, conference-room video system and network hardware and software systems.