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Polycom Reports Second Quarter 2008 Earnings

Revenue Growth of 16 Percent Year-over-Year to a Record $271.6 Million

PLEASANTON, Calif. - 16 Jul 2008 : 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, 2008.

Second quarter 2008 consolidated net revenues were $271.6 million, compared to $233.9 million for the second quarter of 2007. Non-GAAP net income for the second quarter of 2008 was $30.7 million, or 35 cents per diluted share. This compares to Non-GAAP net income of $28.9 million, or 30 cents per diluted share, for the second quarter of 2007. GAAP net income for the second quarter of 2008 was $17.8 million, or 20 cents per diluted share, compared to $10.1 million, or 11 cents per diluted share, for the same period last year.

For the six months ended June 30, 2008, net revenues were $530.5 million, compared to $426.6 million for the first six months of 2007. Non-GAAP net income for the period was $63.4 million, or 71 cents per diluted share, compared to $57.5 million, or 60 cents per diluted share, for the first six months of 2007. GAAP net income for the six months ended June 30, 2008 was $32.0 million, or 36 cents per diluted share, compared to GAAP net income of $20.3 million, or 21 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 second quarter of 2008 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.

This compares to the second quarter of 2007, in which consolidated net revenues 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.

"Sales of our video communications solutions accelerated in the second quarter," said Robert Hagerty, Polycom's chairman and CEO. "Soaring travel costs are becoming an increasingly important driver for the adoption of our unified collaboration solutions worldwide. In fact, due to the immersive experience of Polycom's high definition (HD) telepresence solutions, our customers can reduce travel while increasing productivity—saving high out-of-pocket costs and eliminating the opportunity cost of being on the road.

In addition to the substantial cost-savings benefits our customers can achieve, both commercial and public sector customers are utilizing Polycom's solutions to achieve carbon emission reductions and comply with environmental standards in key geographies throughout the world."

"As a result of Polycom's investments in global sales coverage and high-impact marketing, Polycom is becoming widely recognized for our innovations and market leadership. For example, Media and Entertainment giant Time Warner recently selected Polycom's RealPresence™ Experience (RPX™) immersive telepresence solution to facilitate increased communications between the CEOs of Time Warner, Turner Broadcasting, Warner Brothers, and AOL. Polycom's solution with its full screen, cinematic view and true-to-life people dimensions will help promote dynamic group interactions among all of Time Warner's executives while at the same time supporting Time Warner's commitment to social responsibility and goal to reduce its carbon footprint and conduct business in an environmentally sustainable manner. Another key example is Deloitte's recent selection of Nortel's Managed Global Telepresence Services, which is based on Polycom's RPX immersive telepresence and HDX 9000™ HD video solutions. Finally, in June, we received CIO Magazine's 2008 CIO 100 Award, recognizing Polycom as a company that exemplifies the highest level of operational and strategic excellence in information technology (IT). These are but a few examples of how fast-rising travel costs and green initiatives are driving the use of Polycom's leading solutions." Hagerty concluded.

"We generated 5 percent sequential revenue growth in Q2 with record revenues of $271.6 million," said Michael Kourey, Polycom's senior vice president, finance and administration, and CFO. "Fueled by this top-line growth, Polycom delivered $39.5 million in positive operating cash flow and improved Days Sales Outstanding (DSOs) by five days sequentially. In the second quarter, we repurchased $80 million of our common stock and have a remaining repurchase authorization of $300 million."

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 drivers for the adoption of our products. 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 Quarterly Report on Form 10-Q for the quarter ended March 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 July 9, 2008, Polycom will hold a conference call today, July 16, 2008, 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 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 21387502. 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 and the Polycom logo are registered trademarks and HDX 9000, RealPresence and RPX are trademarks of Polycom in the U.S. and various countries. ©2008, Polycom, Inc. All rights reserved.


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