Plantronics/Polycom – Consolidation Continues

Today Plantronics began the process of purchasing Polycom for $2B. This acquisition continues the consolidation in the industry, now in the UC peripherals space. There are three observations from my perspective that come out of this acquisition.

Quick Private Equity Exit

The private equity deal that took Polycom private less than a year ago was for about $2B. The deal to sell the company is for $2B, generating no significant return (reduced by some additional closing costs) for about 21 months of work. While the overall acquisition sale was of no gain, there may have been some cash return to Siris based on interest during the period or reduction of the $700M cash/investments that were in Polycom at the Siris acquisition. This is much less than what Private Equity firms expect for a successful venture. They generally hold the company for an extended period to strengthen both the top and bottom lines and the sell or go IPO for a large gain. The deal to sell Skype to Microsoft generated billions in return, for example. The key question is what drove Siris to take a modest return and exit so quickly from their investment in Polycom? While the returns may have been positive, the downside of the Broadsoft deal with Cisco and changes in Microsoft (Teams, SfB video rooms), may have shown an uphill battle in growing the revenue and moving to an IPO. The fact that Siris exited so quickly may be a commentary on the outlook of Polycom as a stand-alone business.

Plantronics is Doing Great

While most of the industry is challenged by cloud transitions, pricing challenges, and new competitors, Plantronics seems to be doing very well in their niche of personal connectivity. While there are new headphone/peripheral players like Jabra and Sennheiser, the brand awareness, customer loyalty and channel penetration that Plantronics enjoys have maintained its position, delivering a financial platform from which to make a $2B purchase. The Plantronics management team has done well in managing these changing times.

The personal workspace will get very interesting

Combining Plantronics and Polycom brings together the largest desktop and conference room endpoint device manufacturer with the largest personal device vendor. This has the potential of creating a new paradigm at the personal workspace, whether at the desktop, mobile, or in a conference room. Plantronics has been focused on the added value of device sensors and applications interaction from their devices for quite a while. By integrating that functionality with intelligent endpoints at the desk and in the conference room, the combined company may be able to create a truly transformational user and organizational experience. For example, if all Polycom endpoints could recognize the personal devices close to them, application integration could deliver significant value in automating personal process and business solutions.

I will be following this area with great interest. The challenge is for the two companies to create a compelling vision that is both comprehensive and engaging in its value and capabilities. The key will be how these new functions integrate into the emerging UCaaS and Team Workspaces solutions to change the overall capabilities and user experience.