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POLYCOM REPORTS THIRD QUARTER 2008 EARNINGS

October 16, 2008 | Chris Payatagool

polycom_160x87px.jpgRevenue Growth of 15 Percent Year-over-Year to a Record $275.8 Million; Operating Cash Flow of $40.4 Million

PLEASANTON, Calif. - Oct. 15, 2008 - Polycom, Inc. (NASDAQ: PLCM), the global leader in telepresence, video and voice communications solutions, today reported its earnings for the third quarter ended Sept. 30, 2008.

Third quarter 2008 consolidated net revenues were $275.8 million, compared to $240.0 million for the third quarter of 2007.  Non-GAAP net income for the third quarter of 2008 was $31.7 million, or 37 cents per diluted share. This compares to Non-GAAP net income of $32.8 million, or 35 cents per diluted share, for the third quarter of 2007. GAAP net income for the third quarter of 2008 was $17.9 million, or 21 cents per diluted share, compared to $19.8 million, or 21 cents per diluted share, for the same period last year.

For the nine months ended Sept. 30, 2008, net revenues were $806.3 million, compared to $666.6 million for the first nine months of 2007. Non-GAAP net income for the period was $95.2 million, or $1.08 per diluted share, compared to $90.3 million, or 95 cents per diluted share, for the first nine months of 2007. GAAP net income for the nine months ended Sept. 30, 2008 was $50.0 million, or 57 cents per diluted share, compared to GAAP net income of $40.1 million, or 42 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 third quarter of 2008 were comprised of:

*    65 percent video solutions, or $178.1 million (52 percent video communications, or $144.2 million, and 12 percent network systems, or $33.9 million); and

*    35 percent voice communications, or $97.7 million.

This compares to the third quarter of 2007, in which consolidated net revenues were comprised of:

*    61 percent video solutions, or $146.4 million (47 percent video communications, or $113.7 million, and 14 percent network systems, or $32.6 million); and

*    39 percent voice communications, or $93.7 million.

"Polycom collaboration solutions are delivering rapid ROI for our customers," said Robert Hagerty, Polycom's chairman and CEO.  "Everyday, our customers identify new ways in

bob_hagerty_polycom.jpgwhich to deploy our solutions that streamline their business processes, significantly reducing travel costs while at the same time increasing productivity.  Also, during the third quarter, we noted that business trends exhibited particular strength in Asia, Latin America, and US Federal sales."

"From a product perspective, our network systems business returned to growth, both sequentially and year-over-year.  The launch of our new RMX 1000(TM) HD Videoconferencing Media Server contributed to the growth in this product area.  This innovative HD solution is optimized for small and medium enterprises, complementing our fast-growing RMX 2000 product line.  Extending Polycom's customer solution further, we also announced our new Converged Management Application (CMA), an enterprise-wide visual communication solution that seamlessly integrates video network management and desktop video into a customer's unified collaboration environment.  Polycom's CMA product will begin shipping this month, which we expect to further drive our network systems adoption in Q4," Hagerty concluded.

"We generated 2 percent sequential revenue growth in Q3 with record revenues of $275.8 million," said Michael Kourey, Polycom's senior vice president, finance and administration, and CFO.  "In the third quarter, Polycom delivered a 170 basis point sequential improvement in gross margins while reducing inventories by $2.2 million from Q2 levels.  Driven by these operating results, Polycom generated $40.4 million in positive operating cash flow--yielding a quarter-ending cash and investments balance of $287.4 million 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.







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