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Polycom Reports First Quarter 2009 Earnings

Telepresence Revenues Grew 45 Percent Year-over-Year; Network Systems Revenues Grew 10 Percent Year-over-Year

PLEASANTON, Calif. - Apr 15, 2009 : Polycom, Inc. (NASDAQ: PLCM), the global leader in telepresence, video and voice communications solutions, today reported its earnings for the first quarter ended March 31, 2009.

First quarter 2009 consolidated net revenues were $225.4 million, compared to $258.9 million for the first quarter of 2008. Non-GAAP net income for the first quarter of 2009 was $22.5 million, or 27 cents per diluted share. This compares to Non-GAAP net income of $32.7 million, or 36 cents per diluted share, for the first quarter of 2008. GAAP net income for the first quarter of 2009 was $8.0 million, or 10 cents per diluted share, compared to $14.2 million, or 16 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, including applicable service revenues, consolidated net revenues for the first quarter of 2009 were comprised of:

  • 69 percent video solutions, or $156.4 million (55 percent video communications, or $124.3 million, and 14 percent network systems, or $32.1 million); and
  • 31 percent voice communications, or $69.0 million.

This compares to the first quarter of 2008, in which consolidated net revenues 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.

"Although we experienced the challenges of the current economic environment in the first quarter, we believe the core drivers of our business remain strong," said Robert Hagerty, Polycom chairman and CEO. "Now, more than ever, our customers are sensitive to discretionary spending and are increasingly focused on solutions that drive a hard-dollar return on investment (ROI) to improve their bottom line. We are fulfilling this need, as evidenced by customer adoption of Polycom's highly-differentiated RPX and TPX solutions, driving 45 percent growth in our telepresence business, to a record level for us. Also, fueled by our wave of new network infrastructure products, Polycom's network systems product line returned to double-digit, year-over-year growth. One of the factors offsetting this growth was our performance in the voice business, which continues to be adversely impacted by the economic downturn. However, the voice business continues to perform well competitively and remains integral to our Unified Collaboration (UC) solution, and we expect this business to return to growth as the economy improves."

"Looking forward, we expect our broad range of new products to expand our market opportunity and to enable us to make competitive gains in our video solutions business. Our customers continue to tell us that video conferencing, telepresence and network infrastructure solutions are critical in reducing costs and managing their business during this challenging time. For example, with our recent launch of the Polycom® RMX 2000™ Version 4.0, the Polycom Converged Management Application (CMA™), and the Polycom Distributed Media Application (DMA™) solutions, we believe Polycom has now surpassed all competitive technologies to manage video-centric networks, providing extensive benefits to our customers. In fact, our DMA solution is the first media server virtualization product in the UC market, enabling exceptional management, scalability and reliability for our customers' UC environments. In addition, through our strategic partnership with Microsoft, we jointly introduced the CX5000, a room-based video system that leverages Microsoft's Office Communications Server 2007 and Live Meeting Service. Lastly, we launched the Polycom QDX™ 6000 and the Polycom VVX™ 1500 video products, designed to broaden our offering at the desktop and throughout organizations of all sizes," Hagerty concluded.

"We executed prudent cost controls during the quarter by proactively aligning our cost structure to the current economic climate," said Michael Kourey, Polycom senior vice president, finance and administration, and CFO. "As a result, we achieved a solid operating margin in spite of the revenue challenges. In addition, driven by our strong profits and working capital management, we generated $26.8 million in positive operating cash flow, our 45th consecutive quarter of positive operating cash flow. We exited the quarter with a robust balance sheet, including $338.7 million in cash and investments and no debt."

About Polycom
Polycom, Inc. (NASDAQ: PLCM) is the global leader in telepresence, video, and voice solutions and a visionary in communications that empower people to connect and collaborate everywhere. Please visit www.polycom.com for more information.

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 strength of the core drivers of our business, the return to growth of our voice business, the expected expansion of our market opportunity and competitive gains in our video solutions business due to our new product offerings and our surpassing of competitive technologies with respect to managing video-centric networks. 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, risks associated with general economic conditions, including the continuation and prolonged impact of the crisis in the worldwide financial markets and the global recession, 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 and our sales organization and the impact of recent restructuring actions, and the impact of global conflicts such as those in the Middle East 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, 2008, 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 8, 2009, Polycom will hold a conference call today, April 15, 2009, at 5:00 p.m. EDT/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 800.913.1647; and for callers outside of the US and Canada, by calling 212.231.2900, 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 21420413. 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.

© 2009 Polycom, Inc. All rights reserved. POLYCOM®, the Polycom "Triangles" logo and the names and marks associated with Polycom's products are trademarks and/or service marks of Polycom, Inc. and are registered and/or common law marks in the United States and various other countries. All other trademarks are property of their respective owners.


Contacts

www.polycom.com provides product specific information for telepresence, voice and video conferencing customers in the North America region.

4750 Willow Road, Pleasanton, CA 94588-2708, USA. Sales inquiries: 1 800 POLYCOM

© Polycom, Inc. All rights reserved.