Alas, poor Polycom (NASDAQ:PLCM), we knew you well. Once upon a time (in May 2007), in fact, we knew you well enough for our team at Motley Fool Rule Breakers to recommend you to our subscribers. But for the past year, it seems you've slipped off the radar. High time for that to change.

For those who've forgotten about Polycom, it's the self-proclaimed "largest company in the Unified Collaboration industry." And true to the name, Polycom does a whole lot of collaborating of its own. Management boasts of Polycom's strategic partnerships to develop VoIP and video communications solutions with Avaya , Cisco (NASDAQ:CSCO), IBM (NYSE:IBM), and others. (Relegated to the status of "other" are firms like Nortel, which just filed for bankruptcy protection, and Alcatel-Lucent (NYSE:ALU), which has also been struggling.) 

The company also features a co-development and marketing partnership that provides phones and other services for Microsoft's (NASDAQ:MSFT) own Unified Communications offering.

Now that your memory is refreshed on who Polycom is, here's a quick rundown of what Polycom did last year:

  • Fiscal 2008 revenues increased 15% to $1.1 billion.
  • Profits leapt 30% to $0.87 per share.
  • Yet free cash flow flatlined, sitting essentially unchanged from one year ago at $119.2 million (Hmm. So maybe we didn't miss much over the past year after all!).
  • Contributing to the anemic free cash flow is the fact that Polycom's letting its inventories run up (26%, or significantly faster than sales).

Which leads us to the reason the shares declined yesterday. Ordinarily, you wouldn't expect a 15% rise in sales to upset investors. Even less so a rise in profits twice as great. But according to Polycom, business isn't looking quite so brisk right now. Management forecasts a first-quarter decline in sales of somewhere between 9% and 13%, which is a steeper sales drop than the 6% decline expected by Wall Street.

Valuation
So a bleak Q1 forecast accounts for the shares' decline yesterday, and analysts aren't predicting much of a future for the company even further out. Turns out, the consensus of nearly a dozen analysts polled is that Polycom won't grow its profits much more than 6% a year over the next half-decade. My reaction?

Bunk.

I simply don't believe the number. These same analysts expect Polycom's industry to grow at a significantly higher pace than Polycom itself. This makes little sense to me. I think teleconferencing has a future, and that Polycom's front-runner status and strong partnerships in the growing unified collaboration field ensure its days of greatest growth lie ahead of it -- not behind. And I also think I'll be watching this company -- and writing more about it -- in the years to come.

Further Foolishness on Polycom can be found in:

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Fool contributor Rich Smith does not own shares of any company named above. Microsoft is a Motley Fool Inside Value recommendation, and Polycom is a Motley Fool Rule Breakers selection. The Motley Fool has a disclosure policy.