Polycom Reports First Quarter 2008 Earnings

04-16-2008

Revenue Growth of 34 Percent Year-over-Year; Revenue Growth of 15 Percent Year-over-Year Excluding SpectraLink

PLEASANTON, Calif. – April 16, 2008 – Polycom, Inc. (NASDAQ: PLCM), the world's leading provider of unified collaborative communications solutions, today reported its earnings for the first quarter ended March 31, 2008.

First quarter 2008 consolidated net revenues were $258.9 million, compared to $192.7 million for the first quarter of 2007. SpectraLink contributed $39.4 million to net revenues for the first quarter of 2008 compared to $2.1 million in the first quarter of 2007 for the six-day period following the acquisition, which was completed on March 26, 2007. Non-GAAP net income for the first quarter of 2008 was $32.7 million, or 36 cents per diluted share. This compares to Non-GAAP net income of $28.6 million, or 30 cents per diluted share, for the first quarter of 2007. GAAP net income for the first quarter of 2008 was $14.2 million, or 16 cents per diluted share, compared to $10.2 million, or 11 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 at the end of this release.

On a product line basis, consolidated net revenues for the first quarter of 2008 were comprised of:

• 62 percent video solutions, or $159.5 million (51 percent video communications, or $130.3 million, and 11 percent network systems, or $29.2 million); and
• 38 percent voice communications, or $99.4 million.

This compares to the first quarter of 2007, in which consolidated net revenues were comprised of:

• 71 percent video solutions, or $136.6 million (56 percent video communications, or $108.0 million, and 15 percent network systems, or $28.6 million); and
• 29 percent voice communications, or $56.1 million.

"Unified Collaboration continues to be a key priority for our customers worldwide," said Robert Hagerty, chairman and CEO. "We believe the fast return on investment of our solution, compliance with the green initiatives in Europe and other important markets, and globalization of the workforce, are driving adoption within enterprise and public sector customers alike. In addition, we are pleased to report that first quarter revenues for our SpectraLink wireless products grew sharply from the fourth quarter, validating both the customer demand for voice mobility solutions and the successful completion of the integration of this strategically important acquisition."

"Looking forward, we expect growing contributions from our strategic partnerships such as Microsoft, Nortel, Avaya, IBM, and others as we deliver our highly differentiated video and voice collaboration solutions. Coupled with these partnerships, our new offerings in telepresence, HD video, and voice over IP products differentiate Polycom and illustrate the exceptional value proposition that our innovations are delivering to customers. With these products and partnerships, we believe Polycom is best positioned to capture customer demand being driven by rapidly growing travel costs, globalization, and environmental concerns. Further, through the sales investments we made in late 2007 and in Q1, we have increased our coverage in both existing and emerging markets. This is enabling Polycom to drive close customer relationships that deliver near-term business opportunity and long-term annuities through product adoption and service opportunities," Hagerty concluded.

"We delivered solid operating results in the first quarter, including revenues of $258.9 million and $36.3 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 grew to record levels. During the first quarter, we purchased $60 million in Polycom stock, exiting the quarter with a remaining $80 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. Polycom delivers the broadest array of high definition telepresence video, wired and wireless voice, and content solutions so people can enjoy the best communications, whether from a real-time collaborative interaction or on-demand streamed video experience. Spanning from the desktop to the industry's only immersive telepresence suite, Polycom's high quality collaboration and communications solutions are easy to deploy and manage, as well as intuitive to use. Based on open standards, they integrate seamlessly with leading telephony and presence-based networks. With innovative market-driving technologies, a compelling vision for next generation visual communications, best-in-class products, alliance partnerships, and world-class service, Polycom is the smart choice for organizations to gain a competitive advantage with proven and trusted communication solutions. 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 drivers for the adoption of our products, the anticipated growing contributions of our strategic partnerships in future periods, our ability to capture customer demand through our product offerings and solutions, and the ability of our sales and services teams to create near-term opportunities and long-term annuity streams. 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, 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 in the United States and globally, that may adversely impact our business. Many of these risks and uncertainties are discussed in the Company's Annual Report on Form 10-K for the year ended Dec. 31, 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 April 9, 2008, Polycom will hold a conference call today, April 16, 2008, at 5:00 p.m. ET/2:00 p.m. PT to discuss its first quarter earnings. Robert Hagerty, chairman, president and CEO, and Michael Kourey, chief financial officer, will host the conference call. You may participate by viewing the webcast at www.polycom.com or, for callers in the US and Canada, by calling 800.931.6358; and for callers outside of the US and Canada, by calling 212.231.2924, with the passcode 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 21380669. A replay of the call will also be maintained on our website for twelve months at www.polycom.com under Investor Relations – Earnings Calls-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.

Polycom, the Polycom logo, SpectraLink, and the SpectraLink logo are registered trademarks of Polycom in the U.S. and various countries. ©2008, Polycom, Inc. All rights reserved.