Polycom shares fell Thursday as Cisco Systems ramped up competition in the video-conferencing market with its $3 billion acquisition of Norway's Tandberg.
Polycom shares had soared as high as $27.96 on Thursday, but then closed Thursday 4.4 percent lower at $25.57.
In a note to investors, Jefferies & Co. analyst William Choi said Cisco's acquisition "makes the competitive environment even more challenging for Polycom." Polycom is the second-largest provider of video-conferencing hardware in the world, based on market share. Tandberg is No. 1.
Choi said Tandberg has "solid" products, strong relationships with its customers and "significant scale."
However, analysts split on the possibility of a takeover of Polycom.
Choi said the Pleasanton, Calif., company has few suitors of its own. Its most-likely suitor, Avaya, just bought a large chunk of Nortel Networks, the network-gear maker selling itself off in Chapter 11 proceedings. Another potential bidder, Hewlett-Packard, is more focused on building its data center business, Choi said.
Given what San Jose, Calif.-based Cisco was willing to pay for Tandberg, Choi raised his price target for Polycom to $25 from $21. He maintained a "Hold" rating.
Morgan Keegan analyst Tavis McCourt called the Cisco deal a "positive" for Polycom shareholders. They "now own the next most obvious buyout candidate in a consolidating industry that larger tech vendors clearly are looking at with more interest," McCourt said. He kept an "Outperform" rating on the company.