Meet the Street: Polycom CEO Robert Hagerty

In the wake of the terrible events of Sept. 11, uneasy executives have looked for ways to avoid the hassles -- and perceived dangers -- of air travel.

Robert Hagerty President and CEO, Polycom

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This trend has helped send airline stocks into a downward spiral, but has also lifted the shares of providers of videoconferencing services. WebEx (WEBX) and Polycom (PLCM), two providers of the service, are each up more than 50% since Sept. 10. We spoke to Robert Hagerty, CEO of Polycom, about the trends in videoconferencing and where he sees his company going.

TSC: Have you seen a pickup in demand for your products since the attacks?

Hagerty: We've seen a significant jump in inquiries and calls for information. But the increase in interest started at the beginning of the year with the slump in the economy. People wanted a way to communicate without having to travel. Our technology is low-cost and easy to use.

TSC: What do you see happening when business travel resumes?

Hagerty: We've been seeing steady growth already over the last three years. There have been fundamental changes in the industry over the past few years. Five years ago, for example, video conferencing products cost $50,000. Our start-up unit now costs $4,000. Five years ago, the quality was herky-jerky. Now, it is dramatically better. In fact, ESPN recently used videoconferencing to interview coaches during the NFL draft. And the quality was good enough to then broadcast it directly on the air.

TSC: Can you describe how your videoconferencing technology works?

Hagerty: We use a camera and microphone to capture images and voice, which are then encoded in high-speed processors and sent over a local-area network or an ISDN telephone line. The image is then projected onto a screen. That's basically the idea.

TSC: What have been the major changes in the technology?

Hagerty: We've upgraded the speed of our processors and written brand-new software that works a lot better. We've also standardized communications, so that networks from different manufacturers can talk to each other.

TSC: Can you talk about your company's proposed acquisition of PictureTel (PCTL)?

Hagerty: It will be accretive and it has multiple benefits. They are strong in places where we aren't. We were servicing appliance-based applications, while they were servicing PC-based applications. Now, we have coverage of PC-based products.

TSC: Who has been using your product and what is the feedback you've gotten?

Hagerty: FEMA [Federal Emergency Management Agency] and emergency relief groups are using it. Vice President Cheney was using it to connect to President Bush while he was in Nebraska on Sept. 11. Bristol-Myers (BMY) has used it and saved on travel because of it. Ernst & Young and Ford (F) are customers.

Our product has great potential for education. Oklahoma implemented a video network across the state to help educators bring university classes to the high-school level.

TSC: What has Polycom done specifically to respond to the events of Sept. 11?

Hagerty: We've set up a video relief program for victims, families and relief agencies affected. Our facilities will arrange, free of charge, a videoconference anywhere in the world. The communication shutdown made it difficult for people to communicate. This is one way that our company believed it could help.

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