Polycom Reports Fourth Quarter and Fiscal Year 2007 Earnings

01-23-2008

Revenue Growth of 41 Percent Year-over-Year; Revenue Growth of 21 Percent Year-over-Year Excluding SpectraLink; Record Operating Cash Flow of $55.8 Million

PLEASANTON, Calif. – Jan. 23, 2008 – Polycom, Inc. (NASDAQ: PLCM), the world's leading provider of unified collaborative communications solutions, today reported its earnings for the fourth quarter and fiscal year ended Dec. 31, 2007.

Fourth quarter 2007 consolidated net revenues were $263.3 million, compared to $186.5 million for the fourth quarter of 2006. SpectraLink contributed $37.2 million to net revenues for the fourth quarter of 2007. As previously reported, Polycom's acquisition of SpectraLink was completed on March 26, 2007. Non-GAAP net income in the fourth quarter of 2007 was $38.5 million, or 42 cents per diluted share. This compares to Non-GAAP net income of $32.0 million, or 35 cents per diluted share, for the fourth quarter of 2006. GAAP net income for the fourth quarter of 2007 was $22.8 million, or 25 cents per diluted share, compared to $25.8 million, or 28 cents per diluted share, for the same period last year.

For the year ended Dec. 31, 2007, net revenues were $929.9 million, compared to $682.4 million for the year ended Dec. 31, 2006. SpectraLink contributed $113.5 million to net revenues for the year ended Dec. 31, 2007. Non-GAAP net income for the year ended Dec. 31, 2007 was $128.9 million, or $1.37 per diluted share, compared to $98.1 million, or $1.09 per diluted share, for the comparable period of 2006. GAAP net income for the year ended Dec. 31, 2007 was $62.9 million, or 67 cents per diluted share, compared to GAAP net income of $71.9 million, or 80 cents per diluted share, for the same period last year.

The reconciliation between GAAP net income and Non-GAAP net income is provided in the tables entitled "GAAP to Non-GAAP Reconciliation" in this release.

On a product line basis, consolidated net revenues for the fourth quarter of 2007 were comprised of:

63 percent video solutions, or $164.9 million (49 percent video communications, or $129.2 million, and 14 percent network systems, or $35.7 million); and
37 percent voice communications, or $98.4 million.

This compares to the fourth quarter of 2006, in which consolidated net revenues were comprised of:

72 percent video solutions, or $134.1 million (55 percent video communications, or $103.0 million, and 17 percent network systems, or $31.1 million); and
28 percent voice communications, or $52.4 million.

"Unprecedented demand for Polycom's IP-based collaboration solution drove us to well over the $1 billion revenue run-rate for the first time in Q4," said Robert Hagerty, chairman and CEO. "Video collaboration has clearly emerged as a top priority due to its immediate cost savings benefits and rapid return on investment. At the same time, Polycom's HD quality, telepresence, and ‘plug and play' IP connectivity are delivering an amazing customer experience. Polycom's leading HD video and voice over IP solutions are enabling this growth for our company worldwide."

Hagerty continued, "Our strategic partnerships with Avaya, Nortel, Cisco, and others are adding fuel to our business opportunities. In fact, revenues from our new VoIP relationship with Microsoft that we launched in October and our recent voice launch with 3COM provide yet another engine for revenue growth in 2008. These meaningful partnerships, coupled with strong execution from our sales and service teams, are driving increased traction and expansion on a global basis."

"2008 promises to be an exciting year for Polycom. Our HD video, voice, and content collaboration solutions solve real business problems across a broad range of industries. Adopting our solution yields fast returns and increases a customer's agility and cohesiveness—and facilitates ‘greener' corporate policies—yet another critical driver in many geographies. The employees and partners of Polycom are ready to fulfill the growing demand of this market."

"We delivered strong operating results in the fourth quarter, including record revenues of $263.3 million and $55.8 million in operating cash flow," said Michael Kourey, senior vice president, finance and administration, and CFO. "In concert with these operating results, backlog and deferred revenues also grew to record levels. During the fourth quarter, we purchased $50 million in Polycom stock, exiting the quarter with a remaining $140 million authorization under the current share repurchase program."

About Polycom
Polycom, Inc. is the worldwide leader in unified collaborative communications (UCC) that maximize the efficiency and productivity of people and organizations by integrating the broadest array of high definition video, wired and wireless voice, and content solutions to deliver the ultimate collaborative experience. Polycom's high quality, standards-based conferencing and collaboration solutions are easy to deploy and manage, as well as intuitive to use. Supported by an open architecture, they integrate seamlessly with leading telephony, workplace wireless telephony, and presence-based networks. With its market-driving technologies, best-in-class products, alliance partnerships, and world-class service, Polycom is the smart choice for organizations seeking proven solutions and a competitive advantage from on-demand communications and collaboration. For additional information, call 800-POLYCOM or visit the Polycom web site at www.polycom.com.

This release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 regarding future events, future demand for our products, and the future performance of the Company, including statements regarding the anticipated contributions of Polycom's HD video and voice over IP solutions to Polycom's future growth, the impact that our strategic and other partnerships, including our new VoIP relationship with Microsoft and the other partnerships highlighted in this release, and our recent voice launch with 3COM, will have on Polycom's future revenues, the anticipated growing market demand for collaboration solutions in 2008 and Polycom's ability to address such demand through its product offerings and solutions, and the ability of our sales and services teams to execute effectively in future periods. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the impact of competition on our product sales and for our customers and partners, the effectiveness of our SpectraLink integration efforts, potential fluctuations in results and future growth rates, the market acceptance of Polycom's products and changing market demands, including demands for differing technologies or product and services offerings, possible delays in the development, availability and shipment of new products, increasing costs and differing uses of capital, changes in key personnel, the impact of global conflicts such as those in the Middle East, and risks associated with general economic conditions, including current negative macroeconomic indicators that may adversely impact our business. Many of these risks and uncertainties are discussed in the Company's Quarterly Report on Form 10-Q for the quarter ended Sept. 30, 2007, and in other reports filed by Polycom with the SEC. Polycom disclaims any intent or obligations to update these forward-looking statements.

As has been noted on the Company's web site since Jan. 14, 2008, Polycom will hold a conference call today, Jan. 23, 2008, at 5:00 p.m. ET/2:00 p.m. PT to discuss its fourth quarter earnings. Robert Hagerty, chairman, president and CEO, and Michael Kourey, chief financial officer, will host the conference. You may participate by viewing the webcast at www.polycom.com or, for callers in the US and Canada, by calling 800.935.5014; and for callers outside of the US and Canada, by calling 212.231.2900, with the pass code being Polycom. A replay of the call will also be available at www.polycom.com or, for callers in the US and Canada, at 800.633.8284; and for callers outside of the US and Canada, at 402.977.9140. The access number for the replay is 21370996. A replay of the call will also be maintained on our website for twelve months at www.polycom.com under Investor Relations – Financial Summaries – Financial Results Archives.

Polycom reserves the right to modify future product plans at any time. Products and/or related specifications referenced in this press release are not guaranteed, and will be delivered on a when and if available basis.