Polycom Exits Wireless Phone Business

Polycom will divest its wireless phone systems business to an affiliate of Sun Capital Partners, meaning the well-known SpectraLink and KIRK handset brands will soon no longer be Polycom's.

Under the terms of the deal, which Polycom disclosed in a statement late last week, Sun Capital gets the Polycom unit that includes Wi-Fi and DECT handsets, along with infrastructure and accessories, for about $110 million in cash.

The figure is about half of the $220 million Polycom paid to acquire SpectraLink in 2007. The business yielded only about $94 million in revenue in calendar 2011, according to Polycom, and is a fraction of the $1.5 billion Polycom posted for 2011.

[Related: Polycom Firms Up Software, Services Strategies For Partners ]

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Andy Miller, Polycom's president and CEO, said the move was a "further step toward focusing our product and technology portfolio on our core unified communications and video collaboration solutions."

"The closing of this transaction will allow Polycom to concentrate on initiatives that support our vision of making video collaboration ubiquitous through open, standards-based software delivered to anyone, across any environment and device," Miller said in a statement.

Boca Raton, Fla.-based Sun Capital -- known for "carving out" and then turning around struggling businesses -- is committed to supporting Polycom's wireless handset partners and customers, Miller added. Polycom SpectraLink phones are often packaged up in PBX and UC deals with other vendors' communications systems.

"With this investment we see a tremendous opportunity to apply our deep experience in assisting management teams in building corporate carve-outs into market leaders," said Marc Leder, Sun Capital's co-CEO, in a statement.

The sale is expected to close in the third quarter of 2012.

After a year of substantial sales gains, Polycom's growth has slowed -- just as video rival Cisco appears to be back on track. In mid-April, Polycom reported lower-than-expected revenue for its fiscal first quarter and a 56 percent profit decline. It also forecast earnings of 20 to 22 cents a share on revenue of $367 million to $377 million for the second quarter, well short of analyst projections of 25 cents a share on $387 million.

Polycom said during its first-quarter announcement that it is working to reduce operating costs.

NEXT: Polycom Focuses On UC, Video To Combat Cisco

A shift away from handset sales is consistent with Polycom's recent strategic priorities. Under Miller, who became CEO in May 2010, Polycom has turned its focus toward UC and video, with a particular emphasis on software and services, to combat Cisco.

In the past two years, it also has significantly revamped its channel program and continued to make over its executive team. Major hires in the Miller era include Eric Brown, who became CFO in February; Tracey Newell, executive vice president of sales; Sudhakar Ramakrishna, president of products and services; and David Ruggiero, president, North America.

Last year, Polycom acquired three companies all with direct bearing on its video business: Accordent, which specializes in video content management; the high-end video business and related managed services assets of Hewlett-Packard, which now exclusively resells Polycom video products in its enterprise services arm; and ViVu, which makes software to embed high-definition video in collaboration applications.