Videoconferencing Shares Surge

CBS.MarketWatch.com, 9/17/01
By MIKE TARSALA

SAN FRANCISCO (CBS.MW) — Shares of video conferencing equipment makers surged Monday as sales are expected to increase due to the effect of last weeks' terrorist attacks on business travel.

Nearly every company in the $400 million niche saw its shares go higher. Shares of market leader Polycom (PLCM: news, chart, profile) gained $7.42, or 39 percent, to $26.56. PictureTel Corp.(PCTL: news, chart, profile), which PolyCom is acquiring, rose 18 percent. ACT Teleconferencing (ACTT: news, chart, profile) gained 46 percent. Wire One Technologies (WONE: news, chart, profile) added 22 percent. Mcsi Inc. (MCSI: news, chart, profile) tacked on 14 percent.

"People are going to embrace video conferencing because there will be huge inconveniences with travel over the next few months, at minimum," said Brian Alger, analyst with Pacific Growth Equities. "I think you're going to see a massive shift in business behavior."

Alger raised his 12-month price target on Polycom to $45 from $35. He said previous concerns that the company might miss its September revenue targets are now gone. He also expects improved December quarter and fiscal-year 2002 sales.

There is also significantly fewer worries about Polycom's build-up of product inventories among distributors, he says.

"At this point, having more in the sales channel is better," Alger said.

The average long-term growth rate for the videoconferencing-equipment market is about 20 to 25 percent, said Troy Jensen, analyst with Dain Rauscher Wessels. There hasn't been any growth so far this year, he says.

But now, "all the underlying assumptions in the market have now changed," Jensen said. He expects there could be much stronger growth over the next year. Jensen says he's working with product distributors to try and estimate the potential market revenue increase.

One type of product that could see a sales resurgence is voice bridging-equipment, which lets businesses conference in several geographic locations at the same time, according to Jensen. Polycom is one of the companies that makes such equipment.

Mike Tarsala is a San Francisco-based reporter for CBS.MarketWatch.com.