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Polycom Reports Second Quarter Earnings

Revenue Growth of 42 Percent Year-over-Year; Revenue Growth of 20 Percent Year-over-Year Excluding SpectraLink

PLEASANTON, Calif. - Jul 19, 2007 : Polycom, Inc. (NASDAQ: PLCM), the world's leading provider of unified collaborative communications solutions, today reported its earnings for the second quarter ended June 30, 2007.

Second quarter 2007 consolidated net revenues were $233.9 million, compared to $165.0 million for the second quarter of 2006. As previously reported, we completed our acquisition of SpectraLink on March 26, 2007. SpectraLink contributed $36.4 million to net revenues for the second quarter of 2007. Non-GAAP net income in the second quarter of 2007 was $28.9 million, or 30 cents per diluted share. This compares to Non-GAAP net income of $21.9 million, or 24 cents per diluted share, for the second quarter of 2006. Non-GAAP financial measures exclude stock-based compensation expense, the effect of stock-based compensation expense on warranty rates, impact to cost of sales from purchase accounting adjustments to inventory, acquisition-related costs, purchased in-process research and development costs, amortization and impairment of purchased intangibles, restructuring costs, litigation reserves and payments, gain (loss) on strategic investments, and the income tax effect of the preceding adjustments. GAAP net income for the second quarter of 2007 was $10.1 million, or 11 cents per diluted share, compared to $15.0 million, or 17 cents per diluted share, for the same period last year.

For the six months ended June 30, 2007, net revenues were $426.6 million, compared to $322.7 million for the first six months of 2006. Non-GAAP net income for the period was $57.5 million, or 60 cents per diluted share, compared to $41.7 million, or 47 cents per diluted share, for the first six months of 2006. GAAP net income for the six months ended June 30, 2007 was $20.3 million, or 21 cents per diluted share, compared to GAAP net income of $29.0 million, or 32 cents per diluted share, for the same period last year.

The reconciliation of the GAAP statement of operations to the respective Non-GAAP statement of operations, for the three and six month periods ended June 30, 2007 and 2006, is set forth at the end of this press release.

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

  • 62 percent video solutions, or $144.3 million (49 percent video communications, or $113.3 million, and 13 percent network systems, or $31.0 million); and
  • 38 percent voice communications, or $89.6 million.

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

  • 72 percent video solutions, or $119.2 million (54 percent video communications, or $89.0 million, and 18 percent network systems, or $30.2 million); and
  • 28 percent voice communications, or $45.8 million.

"The backdrop for IP-based collaborative communications is the best in history,"said Robert Hagerty, president and CEO. "Enterprises, governments, and educational institutions alike are adopting video, voice, and content collaboration to enable them to achieve greater agility and faster growth. Drivers such as high definition and telepresence are serving to catalyze this growth through an unprecedented quality of experience. In Q2, this was evidenced by the continued fast growth of Polycom's video business and the return to growth of our network systems products. Our newly acquired voice over wireless business also generated strong revenues in Q2 as we began to integrate these solutions into the broader Polycom portfolio."

Hagerty continued, "Looking into the second half of 2007, I could not be more excited about our increasing customer coverage and our breadth of new product offerings. These products include the RMX high definition multimedia conferencing platform, the new Proxias™ service provider application server, the HDX high definition video products, the RPX™ telepresence products, and the suite of new voice products–from the line of Microsoft VoIP phones to our new wireless LAN voice offerings. With the strong market dynamics, Polycom's strategic partnerships, our industry leading products, and our ever-increasing sales coverage, we believe we are poised to have fast growth in the second half and 2008."

"Polycom's revenues grew 20 percent year-over-year in the second quarter, excluding our SpectraLink product line revenues, and 42 percent year-over-year including SpectraLink,"said Michael Kourey, senior vice president, finance and administration, and CFO. "This strong growth was driven by demand for our video product lines, the contributions of our new wireless voice business, and the return to growth of Polycom's network systems offering."

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 Polycom as being poised for fast growth in the second half of 2007 and 2008 and the factors contributing to such anticipated growth. 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, our ability to rapidly and effectively integrate SpectraLink and its operations, potential fluctuations in results and future growth rates, the market acceptance of Polycom's products, such as our video collaboration and voice and video over IP 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 changes in general economic conditions. Many of these risks and uncertainties are discussed in the Company's Quarterly Report on Form 10-Q for the quarter ended March 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 July 9, 2007, Polycom will hold a conference call today, July 19, 2007, at 5:00 p.m. ET/2:00 p.m. PT to discuss its second 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 800-926-7385; 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 21344062. A replay of the call will also be maintained on our website at www.polycom.com under Investor Relations – Archived Conference Calls for twelve months.

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 and Proxias and RPX are trademarks of Polycom in the U.S. and various countries. ©2007, Polycom, Inc. All rights reserved.