Shares of Shoretel (NASDAQ:SHOR) climbed by nearly 11% after JP Morgan Chase’s (NYSE:JPM) brokerage unit upgrade the service provider of internet telephony to “overweight” from “underweight”, citing market-share gains in the enterprise IP voice market.
JP Morgan has set a price target of $8.00 on the stock and projects that the enterprise IP telephony business will grow 3% during the next 12 months to $6.2 billion, following a decline of almost 25% in 2009.
Analyst Steven O’brien said in a research note that, “We view employment levels as the key underlying driver of phone system demand.” O’Brien also said that declining initial jobless claims is a positive indicator for a turnaround in demand.
Information Technology managers that have been delaying upgrades to preserve capital are beginning to see the potential for lower ongoing operating expenses using internet telephony services worth the initial investment of getting the system setup, O’brien said.
The analyst also said that the bankruptcy of Canada’s Nortel also gives Shoretel the potential for additional market gains as internet telephony vendors such as Shoretel attempt to attract some of Nortel’s customer base.
