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Poly Has a New CEO, Now What?
Poly announced this week that Dave Shull would be its next CEO. Shull replaces interim CEO, Robert Hagerty, who is also chairman of Poly’s board of directors and has been in that role since CEO Joe Burton, stepped down earlier this year. Poly indicated Shull would assume the position on Sept. 8, in the press release.
Shull has an interesting background of telecom and consumer with his most recent role being CEO of TiVo, where he stayed for about a year with his tenure culminating in a $3 billion merger between his company and Xperi. Prior, Shull was the CEO of The Weather Channel for two years, and before that, he held executive roles at Dish Network and other companies.
Going outside of the UC industry was an interesting choice. I know Poly did interview some UC “insiders” but ultimately chose to look for someone that could bring a fresh look to the company, and that’s not a bad thing. There have been several executives who come to UC from other industries and do well. Rowan Trollope is a great example, as he came from a security vendor before joining Cisco, and now he’s CEO of one of the most successful cloud communications companies.
There are several differences between the situation Shull is walking into and the one Trollope had, with the most notable being that success for Poly comes from its ability to build relationships and alliances and to sell alongside Microsoft, Zoom, RingCentral, and others. When I first saw the hire, I did wonder if that would be a key requirement Shull doesn’t have, but he is blessed with an excellent team. Chief Revenue Officer, Carl Wiese, has decades of collaboration experience. EVP and GM, Tom Puorro, is well connected with most of the cloud communication providers from his days at Cisco and likely was key in getting the deals done with Zoom and RingCentral. There’s also VP Laura Marx that arguably knows how to navigate Microsoft better than most Microsoft employees. Shull should listen carefully to the strong industry people inside Poly and then use his operational strength to build a go-forward plan.
Looking ahead, there are a number of key areas for Shull to focus on, including:
- Hire a chief marketing officer — The Plantronics/Polycom merger hasn’t exactly gone smoothly. Puorro has cleaned up engineering and the products, but there’s no real story to the end-to-end portfolio that Poly is selling. Even the fact that the company is called “Poly” yet trades under the ticker symbol “PLT” is confusing, as many investors I talk to still refer to it as Plantronics.
- Shift to a recurring/cloud revenue model — The entire communications industry has been focused on driving more recurring and cloud revenue. I’m unsure of the exact percentage for Poly, as it’s not in their earnings transcript, but I believe it’s very small. The company makes hardware, so this shift can be difficult, but there are ways to do it. Poly could decouple hardware and software sales, which would have a short-term impact on revenue but would create better predictability. Also, when vendors shift to this model, gross and operating margins tend to go up, and Poly has been sliding fast ever since the merger.
- Make some tough decisions on products — This will be Shull’s big test as a CEO, and nothing can be off the table. Make no mistake, COVID-19 has forever changed the world. Poly makes technology that goes into corporate offices, but the number of people that return to the office post-pandemic won’t be the same amount — at least not for a long time. This has a dramatic impact on the products you make and the ones you can sell. For example, Poly sells a bazillion (not sure how many 0s in a bazillion) phones through the Internet telephony providers, but that market could get cut in half. Sure, headsets will be on the rise, but it’s hard to see how that offsets phones. Poly incurred a significant amount of debt in the merger, and with no growth and declining margins, it might be time to divest some business units that have an uncertain outlook post-COVID-19.
- Continue to expand strategic partners — Before the merger, Polycom relied heavily on Microsoft and a handful of Internet telephony service providers (ITSP) to sell phones and some video equipment. As noted earlier, the company has recently added Zoom and others, and this must be a top priority for the company both domestically and internationally, with no idea being too crazy. Perhaps a partnership with Cisco is in order?
Poly is a company at a crossroads. While COVID-19 has created some short-term tailwinds, it poses some bigger, long-term headwinds. The stock is already down sharply from the merger, as it’s not been able to make 1 + 1 = 3 yet. Puorro has fixed development, and many of the new products have had a strong ramp, and Wiese should get sales humming. However, Shull needs to come in and be a real change agent and make Poly look much different than the one we know today.