Polycom (PLCM) 8-K Polycom Reports First Quarter Results

Exhibit 99.1

Contact:	Michael R. Kourey, CFO
	Polycom, Inc.
	925-924-5742
	mkourey@polycom.com

POLYCOM REPORTS FIRST QUARTER RESULTS

Revenue Growth of 28 Percent to $119.1 Million in Q1 2004

PLEASANTON, Calif. – April 22, 2004 – Polycom, Inc. (NASDAQ: PLCM), the world’s leader in video and voice conferencing, conference bridges, and integrated web collaboration solutions, today reported its operating results for the first quarter ended March 31, 2004.

First quarter 2004 consolidated net revenues were $119.1 million, compared to $92.9 million recorded for the first quarter of 2003. Pro forma net income in the first quarter of 2004 was $12.9 million, or 13 cents per diluted share. This compares to pro forma net income of $1.7 million, or 2 cents per diluted share, for the first quarter of 2003. Pro forma financial measures exclude acquisition-related costs, purchased in-process research and development, amortization of purchased intangibles, restructuring costs, gain (loss) on strategic investments, income tax effect of the preceding adjustments, income (loss) from discontinued operations, net of taxes, and gain from sale of discontinued operations, net of taxes. GAAP net income for the first quarter of 2004 was $3.3 million, or 3 cents per diluted share, compared to a GAAP net loss of $2.4 million, or a 2 cent net loss per diluted share, for the same period last year. Also, as previously announced, Polycom completed its acquisition of Voyant^® Technologies, Inc., a leading provider of voice conferencing and collaboration network solutions on January 5, 2004.

The reconciliation of the GAAP statement of operations amounts to the respective pro forma figures, for the three months ended March 31, 2004 and 2003 is set forth at the end of this press release.

On a product line basis, consolidated net revenues for the first quarter of 2004 were comprised of 58 percent video communications, or $68.6 million; 23 percent network systems, or $28.0 million; and 19 percent voice communications, or $22.5 million. This compares to the first quarter of 2003, in which consolidated net revenues were comprised of 61 percent video communications, or $56.6 million; 19 percent network systems, or $17.4 million; and 20 percent voice communications, or $18.9 million. Certain prior year revenue items have been reclassified to conform to the current year presentation.

“The economic environment and the demand for IP-based converged communication solutions have created a far superior start to 2004 versus the beginning of 2003,” stated Robert Hagerty, president and CEO. “In addition to these two important macro drivers, Polycom has entered 2004 with a new product roadmap that is again positioned to provide the best end-to-end solution in the industry.”

“Our new VSX^™7000 group video product increasingly contributed to our video revenues in the first quarter,” continued Hagerty. “Adding to our suite of leading video solutions, we announced the VSX3000 executive video device this week, the new flagship product of our desktop video line. In the voice arena, we just announced the SoundStation^® 2W, our first wireless conference phone that includes voice encryption, enabling use of our world leading voice conferencing technology with flexibility and mobility. In addition, we broadened our voice over IP (VoIP) product line with the new SoundPoint® IP 300. We also demonstrated at the recent Voice on the Net (VON) show the industry’s first integrated voice, video, and web applications across the H.323 and SIP standards. In the network systems area, we launched Convene^™, the first integrated, carrier-grade voice, video and web collaboration solution for service providers. In Q1, we also announced MobileMeeting® , the first instant group calling application for mobile devices and networks. Clearly, our development teams are continuing to innovate across the broad spectrum of converged collaboration solutions, solving the critical needs of our customers in both the commercial and public sector.”

“We are pleased with our 28 percent year over year revenue growth in the first quarter,” said Michael Kourey, senior vice president, finance and administration, and CFO. “This solid revenue and resultant operating margin, coupled with our continued success in managing inventory and receivables, yielded our twenty-fourth consecutive quarter of positive operating cash flow at $18.6 million.”

About Polycom

Polycom, Inc. is the world’s technology leader of high-quality, easy-to-use video, voice, data and web conferencing and collaboration solutions. The Polycom Office^™ is our continued commitment to make distance communications as natural and interactive as being there by providing best-in-class conferencing solutions that are interoperable, integrated and intuitive to the user. The Polycom Office is based on industry standards and supported by an open architecture that promotes interoperability in multi-vendor environments and complements leading network infrastructure platforms. For additional information call 1-800-POLYCOM (765-9266) or +1-408-526-9000, or visit the Polycom website atwww.polycom.com.

This release contains forward-looking statements regarding future events, future demand for our products, and the future performance of the Company that involve known and unknown risks and uncertainties, including the potential fluctuations in results and future growth rates, the market acceptance of Polycom’s products, possible delays in the development, availability and shipment of new products, and risks associated with changes in general economic conditions. Many of these risks and uncertainties are discussed in the Form 10-K for 2003, and other reports filed by Polycom with the SEC.

As has been noted on the Company’s web site since April 15, 2004, Polycom will hold a conference call today at 5:00 p.m. ET/2:00 p.m. PT to discuss its first quarter results. Robert Hagerty, chairman, president and CEO, and Michael Kourey, chief financial officer, will host the conference. You may participate by viewing the webcast atwww.polycom.com or, for callers in the US and Canada, call 888-433-1674; and for callers outside of the US and Canada, call 212-271-4650, with the pass code being Polycom. A replay of the call will also be available through April 29, 2004 atwww.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 21192466. A replay of the call will also be maintained on our website atwww.polycom.com under Investor Relations – Archived Conference Calls for twelve months.

Polycom, ViewStation, SoundStation, SoundPoint, MobileMeeting and the Polycom logo are registered trademarks and Polycom Office, Convene, Voyant and VSX are trademarks of Polycom in the U.S. and various countries. All other trademarks are the property of their respective owners. ©2004, Polycom, Inc. All rights reserved.

POLYCOM, INC.

Pro Forma Condensed Consolidated Statements of Operations

Excluding Acquisition-related costs, Purchased in-process R&D, Amortization of

purchased intangibles, Restructuring costs, Gain (loss) on strategic investments,

Income (loss) from discontinued operations and Gain from sale of discontinued operations

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended
	March 31, 2004			March 31, 2003
Revenues:
Product revenues	$	106,605		$	83,771
Service revenues		12,542			9,149
Total revenues		119,147			92,920
Cost of revenues:
Cost of product revenues		35,063			31,708
Cost of service revenues		9,064			6,925
Total cost of revenues		44,127			38,633
Gross profit		75,020			54,287
Operating expenses:
Sales and marketing		28,446			26,664
Research and development		22,026			19,820
General and administrative		8,066			7,732
Total operating expenses		58,538			54,216
Operating income		16,482			71
Interest income, net		1,681			2,433
Other expense, net		(474	)		(194	)
Income before provision for income taxes		17,689			2,310
Provision for income taxes		4,776			624
Pro forma net income	$	12,913		$	1,686
Basic net income per share	$	0.13		$	0.02
Diluted net income per share	$	0.13		$	0.02
Weighted average shares outstanding for basic net income per share		99,866			99,312
Weighted average shares outstanding for diluted net income per share		102,664			100,032

Use of Pro Forma Financial Information

To supplement our consolidated financial statements presented on a GAAP basis, Polycom uses pro forma measures of operating results, net income and income per share, which are adjusted to exclude certain costs, expenses, gains and losses we believe appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future. These adjustments to our current period GAAP results are made with the intent of providing both management and investors a more complete understanding of Polycom’s underlying operational results and trends and our marketplace performance. For example, the pro forma results are an indication of our baseline performance before gains, losses or other charges that are considered by management to be outside of our core operating results. In addition, these adjusted pro forma results are among the primary indicators management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income or diluted net income per share prepared in accordance with generally accepted accounting principles in the United States.

POLYCOM, INC.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended
	March 31, 2004			March 31, 2003
Revenues:
Product revenues	$	106,605		$	83,771
Service revenues		12,542			9,149
Total revenues		119,147			92,920
Cost of revenues:
Cost of product revenues		35,063			31,708
Cost of service revenues		9,064			6,925
Total cost of revenues		44,127			38,633
Gross profit		75,020			54,287
Operating expenses:
Sales and marketing		28,446			26,664
Research and development		22,026			19,820
General and administrative		8,066			7,732
Acquisition-related costs		825			73
Purchased in-process research and development		4,600			—
Amortization of purchased intangibles		6,363			4,398
Restructuring costs		—			703
Total operating expenses		70,326			59,390
Operating income (loss)		4,694			(5,103	)
Interest income, net		1,681			2,433
Gain (loss) on strategic investments		9			(215	)
Other expense, net		(474	)		(194	)
Income (loss) from continuing operations before provision for (benefit from) income taxes		5,910			(3,079	)
Provision for (benefit from) income taxes		2,854			(838	)
Income (loss) from continuing operations		3,056			(2,241	)
Income (loss) from discontinued operations, net of taxes		151			(676	)
Gain from sale of discontinued operations, net of taxes		106			497
Net income (loss)	$	3,313		$	(2,420	)
Basic net income (loss) per share:
Income (loss) per share from continuing operations	$	0.03		$	(0.02	)
Income (loss) per share from discontinued operations, net		—			(0.01	)
Gain per share from sale of discontinued operations, net		—			0.01
Basic net income (loss) per share	$	0.03		$	(0.02	)
Diluted net income (loss) per share:
Income (loss) per share from continuing operations	$	0.03		$	(0.02	)
Income (loss) per share from discontinued operations, net		—			(0.01	)
Gain per share from sale of discontinued operations, net		—			0.01
Diluted net income (loss) per share	$	0.03		$	(0.02	)
Weighted average shares outstanding for basic net income (loss) per share		99,866			99,312
Weighted average shares outstanding for diluted net income (loss) per share		102,664			99,312

POLYCOM, INC.

GAAP to Pro Forma Reconciliation

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended
	March 31, 2004
	GAAP			Excluded			Pro Forma
Revenues:
Product revenues	$	106,605		$	—		$	106,605
Service revenues		12,542			—			12,542
Total revenues		119,147			—			119,147
Cost of revenues:
Cost of product revenues		35,063			—			35,063
Cost of service revenues		9,064			—			9,064
Total cost of revenues		44,127			—			44,127
Gross profit		75,020			—			75,020
Operating expenses:
Sales and marketing		28,446			—			28,446
Research and development		22,026			—			22,026
General and administrative		8,066			—			8,066
Acquisition-related costs		825			825			—
Purchased in-process research and development		4,600			4,600			—
Amortization of purchased intangibles		6,363			6,363			—
Total operating expenses		70,326			11,788			58,538
Operating income		4,694			(11,788	)		16,482
Interest income, net		1,681			—			1,681
Gain on strategic investments		9			9			—
Other expense, net		(474	)		—			(474	)
Income from continuing operations before provision for income taxes		5,910			(11,779	)		17,689
Provision for income taxes		2,854			(1,922	)		4,776
Income from continuing operations		3,056			(9,857	)		12,913
Income from discontinued operations, net of taxes		151			151			—
Gain from sale of discontinued operations, net of taxes		106			106			—
Net income	$	3,313		$	(9,600	)	$	12,913
Basic net income per share:
Income per share from continuing operations	$	0.03		$	(0.10	)	$	0.13
Income per share from discontinued operations, net		—			—			—
Gain per share from sale of discontinued operations, net		—			—			—
Basic net income per share	$	0.03		$	(0.10	)	$	0.13
Diluted net income per share:
Income per share from continuing operations	$	0.03		$	(0.10	)	$	0.13
Income per share from discontinued operations, net		—			—			—
Gain per share from sale of discontinued operations, net		—			—			—
Diluted net income per share	$	0.03		$	(0.10	)	$	0.13
Weighted average shares outstanding for basic net income per share		99,866						99,866
Weighted average shares outstanding for diluted net income per share		102,664						102,664

POLYCOM, INC.

GAAP to Pro Forma Reconciliation

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended
	March 31, 2003
	GAAP			Excluded			Pro Forma
Revenues:
Product revenues	$	83,771		$	—		$	83,771
Service revenues		9,149			—			9,149
Total revenues		92,920			—			92,920
Cost of revenues:
Cost of product revenues		31,708			—			31,708
Cost of service revenues		6,925			—			6,925
Total cost of revenues		38,633			—			38,633
Gross profit		54,287			—			54,287
Operating expenses:
Sales and marketing		26,664			—			26,664
Research and development		19,820			—			19,820
General and administrative		7,732			—			7,732
Acquisition-related costs		73			73			—
Amortization of purchased intangibles		4,398			4,398			—
Restructuring costs		703			703			—
Total operating expenses		59,390			5,174			54,216
Operating income (loss)		(5,103	)		(5,174	)		71
Interest income, net		2,433			—			2,433
Loss on strategic investments		(215	)		(215	)		—
Other expense, net		(194	)		—			(194	)
Income (loss) from continuing operations before provision for (benefit from) income taxes		(3,079	)		(5,389	)		2,310
Provision for (benefit from) income taxes		(838	)		(1,462	)		624
Income (loss) from continuing operations		(2,241	)		(3,927	)		1,686
Loss from discontinued operations, net of taxes		(676	)		(676	)		—
Gain from sale of discontinued operations, net of taxes		497			497			—
Net income (loss)	$	(2,420	)	$	(4,106	)	$	1,686
Basic net income (loss) per share:
Income (loss) per share from continuing operations	$	(0.02	)	$	(0.04	)	$	0.02
Loss per share from discontinued operations, net		(0.01	)		(0.01	)		—
Gain per share from sale of discontinued operations, net		0.01			0.01			—
Basic net income (loss) per share	$	(0.02	)	$	(0.04	)	$	0.02
Diluted net income (loss) per share:
Income (loss) per share from continuing operations	$	(0.02	)	$	(0.04	)	$	0.02
Loss per share from discontinued operations, net		(0.01	)		(0.01	)		—
Gain per share from sale of discontinued operations, net		0.01			0.01			—
Diluted net income (loss) per share	$	(0.02	)	$	(0.04	)	$	0.02
Weighted average shares outstanding for basic net income (loss) per share		99,312						99,312
Weighted average shares outstanding for diluted net income (loss) per share		99,312						100,032

POLYCOM, INC.

Condensed Consolidated Balance Sheets

(In thousands)

	March 31, 2004		December 31, 2003
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	199,028	$	212,562
Short-term investments		16,631		15,703
Trade receivables, net		41,735		42,836
Inventories		26,733		24,845
Deferred taxes		21,255		20,589
Prepaid expenses and other current assets		19,160		19,472
Total current assets		324,542		336,007
Property and equipment, net		37,902		28,493
Long-term investments		306,288		368,020
Goodwill		360,619		289,508
Purchased intangibles, net		41,074		15,236
Deferred taxes		46,963		56,513
Other assets		9,873		10,013
Total assets	$	1,127,261	$	1,103,790
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	30,866	$	36,247
Accrued payroll and related liabilities		12,675		12,644
Taxes payable		50,694		49,417
Deferred revenue		24,239		20,524
Other accrued liabilities		26,964		26,846
Total current liabilities		145,438		145,678
Long-term liabilities		27,726		28,833
Total liabilities		173,164		174,511
Stockholders’ equity		954,097		929,279
Total liabilities and stockholders’ equity	$	1,127,261	$	1,103,790

POLYCOM, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Three Months Ended
	March 31, 2004			March 31, 2003
Cash Flows from operating activities:
Net income (loss)	$	3,313		$	(2,420	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Gain from sale of discontinued operations, net of taxes		(106	)		(497	)
Depreciation and amortization		4,699			3,967
Amortization of purchased intangibles		6,363			4,398
Provision for doubtful accounts		(210	)		447
Provision for excess and obsolete inventories		787			261
Tax benefit from exercise of stock options		1,692			151
Loss on strategic investments		(9	)		215
Amortization of unearned stock-based compensation		63			94
Purchase of in-process research and development		4,600			—
Changes in assets and liabilities, net of the effect of acquisitions:
Trade receivables		3,503			5,670
Inventories		617			3,964
Prepaid expenses and other assets		3,782			(2,546	)
Accounts payable		(6,861	)		3,763
Taxes payable		494			(572	)
Other accrued liabilities		(4,084	)		(6,893	)
Net cash provided by operating activities		18,643			10,002
Cash flows from investing activities:
Purchase of property and equipment		(4,659	)		(4,808	)
Purchase of licensed technology		—			(3,528	)
Purchases of investments		(199,862	)		(227,585	)
Proceeds from sale and maturity of investments		261,895			217,629
Proceeds from sale of discontinued operations		167			1,000
Purchase of convertible note receivable		—			(522	)
Net cash paid in purchase acquisitions		(95,162	)		—
Net cash used in investing activities		(37,621	)		(17,814	)
Cash flows from financing activities:
Proceeds from issuance of common stock under employee option and stock purchase plans		5,444			2,421
Purchase of treasury stock		—			(4,411	)
Net cash provided by (used in) financing activities		5,444			(1,990	)
Net decrease in cash and cash equivalents		(13,534	)		(9,802	)
Cash and cash equivalents, beginning of period		212,562			155,191
Cash and cash equivalents, end of period	$	199,028		$	145,389