U.S. videoconferencing company Polycom Inc forecast strong second-quarter sales as it continued to benefit from its partnerships with companies like Microsoft and from business disruptions at bigger rival Cisco.
Shares of Polycom, which has reported market-beating or in-line results for the last seven quarters, jumped more than 8 percent in extended trading.
Video conferencing, which gained visibility during the economic downturn, is now more popular as companies are still unwilling to spend on travel in the face of a shaky economy.
Cisco, which has been struggling to manage its diverse product portfolio and is now trying to recoup losses at its consumer business, has said it will focus on video, among other initiatives, to drive growth.
William Blair analyst Jason Ader said Polycom seemed to be winning market share over Cisco, but declined to provide the specifics.
Polycom said it saw soft sales to the public sector in the first quarter due to the U.S. federal budget impasse, but expects pent-up demand to drive growth for the rest of the year.
The business, which accounts for a quarter of Polycom's revenue, is also expected to get a boost after it gets a particular government certification in the second quarter.
Polycom expects second-quarter revenue to grow 4-6 percent from first-quarter levels. This implies revenue of about $358-$365 million, comfortably above analysts' estimates of $350.6 million, according to Thomson Reuters I/B/E/S.
EMERGING MARKETS DRIVE Q1
The company's first-quarter results handily beat analysts' expectations on strong sales of its video products to large companies, especially in China and India.
We expect China to be a positive top- and bottom-line tailwind in the coming quarters, Chief Executive Andy Miller said in a conference call.
China contributed 11 percent of total global revenue in the quarter, while India revenue doubled to contribute 3 percent of total sales.
Their enterprise business was the best performer this quarter, William Blair's Ader said, adding he expects the trend to continue into the year.
The company's software and hardware tie-ups with partners like Microsoft and Ericsson accounted for 23 percent of sales.
First-quarter net income soared 6-fold to about $34 million, or 38 cents a share, while revenue jumped 25 percent.
Shares of the Pleasanton, California-based company, which closed at $51.90 on Thursday on Nasdaq, rose to $56.20 in trading after the bell.
They have risen 36 percent since Polycom reported fourth-quarter results on January 20.
(Reporting by Sayantani Ghosh in Bangalore; Editing by Sriraj Kalluvila and Unnikrishnan Nair)