Poly Earnings Fallout: CEO Joe Burton is Out

by Jim Lundy

Poly had a bad earnings report on February 4th. In fact, revenue was down $118 million on a year over year basis. As a result, last Wednesday, the stock price of enterprise headset manufacturer Poly fell to $17.31, a quarterly loss of 36%. All signs suggest that the company’s flagship headset products may be in trouble.

The unfortunate news comes at the same time that Poly is moving to sell its consumer gaming business, and on the heels of a big new hire. In addition, CEO Joe Burton has just stepped down. With much change under way at Poly, the company has stated that its failure to meet revenue goals is attributable to “product transitions, sales integration and channel consolidation.” And while this could only be a temporary miss in target earnings, Aragon feels there may be more to the story. This blog is about the recent turmoil at Poly and what it could mean for the enterprise headset market more generally.

After reaching an agreement with the company board, Poly CEO Joe Burton has stepped down to be temporarily replaced by board chairman Robert Hagerty until a new candidate can be found. The exact reasons for this change are unclear, but some speculate Plantronics’ 2018 acquisition of Polycom and its subsequent rebrand ran into obstacles.

Recently, Aragon covered Poly’s new hire, Cisco veteran Carl Wiese. Carl joins Poly as chief revenue officer, executive president, and global head of sales. We predicted that Carl’s expertise in collaboration technology would add a new competitive edge to Poly’s product strategy. It is, however, hard to predict what will happen next given so many shakeups in the company’s structure. While interim CEO Robert Hagerty is battle tested (he was CEO of Polycom from 1998 to 2010), he will need to lean on his new CRO to right the ship and get things back on track.

One of the factors Poly blamed for its failure to meet earnings targets was missing headset shipments. According to Poly, certain deliveries of product are only shipping out now. Having assessed the enterprise headset business in 2020, though, Aragon believes there may be other explanations for this drop-off.

Aragon feels that the huge impact of the Apple AirPods and AirPods Pro may be a good explanation of Poly’s struggles and the challenges faced by other companies in the enterprise headset market. Effective digital headphones are critical parts of streamlined workplace collaboration technology, especially when sales or customer service comprises a significant amount of business processes.

As Business Insider observes, Apple’s wearable division grew by 54% last quarter. In general, wireless earbuds are the fastest growing category of wearable technologies. While the consumer adoption of AirPods is an obvious phenomenon, we have found that enterprises are also turning to the headsets to support their sales, customer service, and HR teams. Apple’s outstanding design and brand recognition pose a formidable challenge to competitors, even those whose products offer unique and sought after features. When understanding Poly’s recent troubles, it is difficult not to consider the struggle in the context of Apple’s resounding success.

Aragon believes there is more at stake in Poly’s recent revenue challenges than internal struggles with shipment and company strategy. Indeed, Poly’s issues provide a window into the broader financial landscape that surrounds the enterprise headset market. As a critical component of collaboration technology, wireless business headsets represent an important segment to keep an eye on. Hopefully, with its new headsets, Poly will find ways to recover from this major revenue miss.