New York: Polycom Inc., the maker of videoconferencing systems, is working with Morgan Stanley to study strategic options, including a possible sale, according to three people familiar with the situation.

Polycom is preparing for increased competition after rival Tandberg was snapped up by Cisco Systems Inc. and as free Internet videoconferencing services such as those offered by Skype Technologies and Google Inc. gain popularity, said another person close to the situation, who declined to be identified because the company's plans aren't public.

Challenge

A buyer would be able to challenge Cisco in a market that may more than double by 2014 as executives invest in equipment that lets them cut travel expenses. Based in Pleasanton, California, Polycom sells conferencing gear ranging from cameras attached to personal computers to large-sized screens.

"Polycom is the only significant independent provider of videoconferencing systems right now," Marc Beattie, managing partner at research firm Wainhouse Research LLC, said in an interview. "They have some terrific audio and video technology that a larger organisation would definitely want."

Cisco, the biggest maker of networking gear, agreed to buy Tandberg for $3.2 billion (Dh11.76 billion) last year to add less-expensive products that complement its larger videoconferencing systems. The deal hasn't yet closed, though Cisco said it has the needed regulatory approvals.

Alyson Barnes, a Morgan Stanley spokeswoman, and Kevin Young, a Polycom spokesman, declined to comment.

Polycom was in talks with Gores Group LLC last month and failed to reach an agreement because the Los Angeles-based private-equity fund wanted to merge it with its portfolio company Siemens Enterprise Communications, while Polycom wanted a cash deal, the people said.

Frank Stefanik, a spokesman for Gores, didn't return a call seeking comment.

"There's a buyer for Polycom if the price is right," Samuel Wilson, a San Francisco-based analyst with JMP Securities LLC, said in an interview. "The problem may be that Polycom wants more money than buyers are willing to spend — and that limits the universe of buyers."

Polycom's sales dropped 9.6 per cent to $967 million last year after gaining for the previous five years. Its profit declined 34 per cent to $49.9 million.

To help reverse that trend, Polycom has signed strategic alliances with Hewlett-Packard Co. (HP), Siemens Enterprise and Juniper Networks Inc. this year to jointly sell its products. Juniper is the No. 2 maker of networking gear, trailing Cisco.

Opportunity

"Polycom is experiencing tremendous opportunity in the evolving landscape of the visual communications market," Polycom Chief Executive Officer Robert Hagerty said in an emailed statement, without commenting on a possible sale.

"There is significant momentum for the Polycom Open Collaboration Network both in terms of partner activity with leaders like Microsoft, HP, Avaya, Siemens, IBM, Juniper and BroadSoft, as well as with customer acceptance. Our go-to-market approach is aligned with this strategy and we are capitalising on the opportunities," he said.