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Polycom Reports Second Quarter 2009 Earnings

Network Systems Revenues Year-over-Year Growth Rate Increases to 18 Percent; Video Communications Revenues Return to Quarter-to-Quarter Growth; Voice Revenues Stabilize

PLEASANTON, Calif. - Jul 15, 2009 : Polycom, Inc. (NASDAQ: PLCM), the global leader in telepresence, video and voice communications solutions, today reported its earnings for the second quarter ended June 30, 2009.

Second quarter 2009 consolidated net revenues were $230.7 million, compared to $271.6 million for the second quarter of 2008. Non-GAAP net income for the second quarter of 2009 was $24.3 million, or 29 cents per diluted share. This compares to Non-GAAP net income of $30.7 million, or 35 cents per diluted share, for the second quarter of 2008. GAAP net income for the second quarter of 2009 was $15.3 million, or 18 cents per diluted share, compared to $17.8 million, or 20 cents per diluted share, for the same period last year.

For the six months ended June 30, 2009, net revenues were $456.1 million, compared to $530.5 million for the first six months of 2008. Non-GAAP net income for the period was $46.8 million, or 55 cents per diluted share, compared to $63.4 million, or 71 cents per diluted share, for the first six months of 2008. GAAP net income for the six months ended June 30, 2009 was $23.4 million, or 28 cents per diluted share, compared to GAAP net income of $32.0 million, or 36 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 second quarter of 2009 were comprised of:

  • 70 percent video solutions, or $161.7 million (56 percent video communications, or $128.7 million, and 14 percent network systems, or $33.0 million); and
  • 30 percent voice communications, or $69.0 million.

This compares to the second quarter of 2008, in which consolidated net revenues were comprised of:

  • 62 percent video solutions, or $169.2 million (52 percent video communications, or $141.2 million, and 10 percent network systems, or $28.0 million); and
  • 38 percent voice communications, or $102.4 million.

"We experienced a notable improvement in customer demand across a broad-base of vertical markets within the commercial and public sectors during the second quarter," said Robert Hagerty, Polycom chairman and CEO. "In fact, our video product lines have already returned to sequential growth, our network systems solutions year-over-year growth rate increased significantly from first quarter levels, and voice communications showed signs of stabilization. We believe this demonstrates that customers are increasingly prioritizing unified collaboration as a means to proactively manage their business, which our solutions deliver through a tangible return on investment (ROI) and productivity improvements."

"Looking forward, I am excited by several important developments that position us for long-term growth. First, we believe Andrew Miller, executive vice president, Global Field Operations, is uniquely qualified to optimize our sales execution, both through our customer relationships and in building closer alignment with our channel partners. Second, we have made significant strides in our network systems solutions, which we believe now offer our customers the best quality, scalability, and ease of use in the business. Third, we are building closer strategic partnerships with the most important unified communications partners in the world. Recent examples include the launch of our Polycom® CX5000 video solution with Microsoft and the Cisco SIP certification of our new VVX™ business video phone. Fourth, cloud-based solutions create new opportunities for business-to-business communications through managed service offerings, and we are working closely with the leading global service providers to be at the forefront of these initiatives. With these developments in mind, I am confident we are poised to take advantage of growing opportunities in the marketplace to deliver solutions that literally transform our customers' business models," Hagerty concluded.

"Driven by the sequential growth in revenue and ongoing cost controls, we significantly improved our operating margins in the second quarter," said Michael Kourey, Polycom senior vice president, finance and administration, and CFO. "Through improved revenue linearity and strong working capital management, we improved DSO, decreased inventories and, as a result, generated $46.8 million in positive operating cash flow, our 46th consecutive quarter of positive operating cash flow. We exited the quarter with a robust balance sheet, including $375.5 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 customer prioritization of unified collaboration and the developments positioning us for long-term growth and growing marketplace opportunities, such as the optimization of our sales execution, our network systems product offerings, our strategic partnerships and new opportunities created by our cloud-based solutions. 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 that may cause disruption to the business, 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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, 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 8, 2009, Polycom will hold a conference call today, July 15, 2009, at 5:00 p.m. EDT/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 call. You may participate by viewing the webcast at www.polycom.com or, for callers in the US and Canada, by calling 800.954.1052; 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 21429624. 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.


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