Polycom Reports Third Quarter 2008 Earnings

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

PLEASANTON, Calif. - 15 Oct 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 which 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™ 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..

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 future results that Polycom solutions deliver for customers, the drivers for improvements in our margins and the impact of new product launches on future results. 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, risks associated with general economic conditions, including current negative macroeconomic indicators in the United States and globally, increasing costs and differing uses of capital, changes in key personnel, 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 June 30, 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 Oct. 8, 2008, Polycom will hold a conference call today, Oct. 15, 2008, at 5:00 p.m. EDT/2:00 p.m. PT to discuss its third 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 800.909.4804; and for callers outside of the US and Canada, by calling 212.231.2901, 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 21395974. 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.