posted 25 September 2002 03:54 PM               

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Dear Andrew:

I note that currently Polycom's market capitalization is approximately $0.7B (down from a high of $5B+ two years ago), while Tandberg's market cap is approximately $1.3B (up from around $0.7B two years ago), nearly twice that of Polycom.

This is a radical change in stock market perception of the value of these two companies over the last two years (-85% versus +100%). While Tandberg stock is listed on the Oslo stock exchange, the minimal exchange rate fluctuations in the last two years do not materially affect these valuations.

I believe both companies have a comparable mix of US and international revenues that eliminates geographical market variations as a factor. Therefore it is interesting to speculate as to the underlying reason for this change-over. Are the prospects for Polycom's broad product range too complex for investors to comprehend versus Tandberg’s Videoconferencing product focus? Alternatively, could Polycom's decline in valuation be attributed only to large numbers of US mutual funds selling Polycom inline with other of their US holdings?

Finally, while these stock-market valuations may appear to have no direct bearing on purchasing decisions of end-users, significant valuation shifts such as these create acquisition opportunities, such as that leading to Polycom's acquisition of PictureTel in 2001. Food for thought for those end-users who are standardizing on a single vendor's products.

Chris Dunford

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