15 July 2009

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."

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