Polycom (PLCM) 8-K Polycom Reports Second Quarter Earnings

Exhibit 99.1

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

POLYCOM REPORTS SECOND QUARTER EARNINGS

Revenue Growth of 42 Percent Year-over-Year;

Revenue Growth of 20 Percent Year-over-Year Excluding SpectraLink

PLEASANTON, Calif. – July 19, 2007 – Polycom, Inc. (NASDAQ: PLCM), the world’s leading provider of unified collaborative communications solutions, today reported its earnings for the second quarter ended June 30, 2007.

Second quarter 2007 consolidated net revenues were $233.9 million, compared to $165.0 million for the second quarter of 2006. As previously reported, we completed our acquisition of SpectraLink on March 26, 2007. SpectraLink contributed $36.4 million to net revenues for the second quarter of 2007. Non-GAAP net income in the second quarter of 2007 was $28.9 million, or 30 cents per diluted share. This compares to Non-GAAP net income of $21.9 million, or 24 cents per diluted share, for the second quarter of 2006. Non-GAAP financial measures exclude stock-based compensation expense, the effect of stock-based compensation expense on warranty rates, impact to cost of sales from purchase accounting adjustments to inventory, acquisition-related costs, purchased in-process research and development costs, amortization and impairment of purchased intangibles, restructuring costs, litigation reserves and payments, gain (loss) on strategic investments, and the income tax effect of the preceding adjustments. GAAP net income for the second quarter of 2007 was $10.1 million, or 11 cents per diluted share, compared to $15.0 million, or 17 cents per diluted share, for the same period last year.

For the six months ended June 30, 2007, net revenues were $426.6 million, compared to $322.7 million for the first six months of 2006. Non-GAAP net income for the period was $57.5 million, or 60 cents per diluted share, compared to $41.7 million, or 47 cents per diluted share, for the first six months of 2006. GAAP net income for the six months ended June 30, 2007 was $20.3 million, or 21 cents per diluted share, compared to GAAP net income of $29.0 million, or 32 cents per diluted share, for the same period last year.

The reconciliation of the GAAP statement of operations to the respective Non-GAAP statement of operations, for the three and six month periods ended June 30, 2007 and 2006, is set forth at the end of this press release.

On a product line basis, consolidated net revenues for the second quarter of 2007 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.

This compares to the second quarter of 2006, in which consolidated net revenues were comprised of:

• 72 percent video solutions, or $119.2 million (54 percent video communications, or $89.0 million, and 18 percent network systems, or $30.2 million); and

• 28 percent voice communications, or $45.8 million.

“The backdrop for IP-based collaborative communications is the best in history,” said Robert Hagerty, president and CEO. “Enterprises, governments, and educational institutions alike are adopting video, voice, and content collaboration to enable them to achieve greater agility and faster growth. Drivers such

as high definition and telepresence are serving to catalyze this growth through an unprecedented quality of experience. In Q2, this was evidenced by the continued fast growth of Polycom’s video business and the return to growth of our network systems products. Our newly acquired voice over wireless business also generated strong revenues in Q2 as we began to integrate these solutions into the broader Polycom portfolio.”

Hagerty continued, “Looking into the second half of 2007, I could not be more excited about our increasing customer coverage and our breadth of new product offerings. These products include the RMX high definition multimedia conferencing platform, the new Proxias™ service provider application server, the HDX high definition video products, the RPX™ telepresence products, and the suite of new voice products—from the line of Microsoft VoIP phones to our new wireless LAN voice offerings. With the strong market dynamics, Polycom’s strategic partnerships, our industry leading products, and our ever-increasing sales coverage, we believe we are poised to have fast growth in the second half and 2008.”

“Polycom’s revenues grew 20 percent year-over-year in the second quarter, excluding our SpectraLink product line revenues, and 42 percent year-over-year including SpectraLink,” said Michael Kourey, senior vice president, finance and administration, and CFO. “This strong growth was driven by demand for our video product lines, the contributions of our new wireless voice business, and the return to growth of Polycom’s network systems offering.”

About Polycom

Polycom, Inc. is the worldwide leader in unified collaborative communications (UCC) that maximize the efficiency and productivity of people and organizations by integrating the broadest array of high definition video, wired and wireless voice, and content solutions to deliver the ultimate collaborative experience. Polycom’s high quality, standards-based conferencing and collaboration solutions are easy to deploy and manage, as well as intuitive to use. Supported by an open architecture, they integrate seamlessly with leading telephony, workplace wireless telephony, and presence-based networks. With its market-driving technologies, best-in-class products, alliance partnerships, and world-class service, Polycom is the smart choice for organizations seeking proven solutions and a competitive advantage from on-demand communications and collaboration. For additional information, call 800-POLYCOM or visit the Polycom web site at www.polycom.com.

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 Polycom as being poised for fast growth in the second half of 2007 and 2008 and the factors contributing to such anticipated growth. 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, our ability to rapidly and effectively integrate SpectraLink and its operations, potential fluctuations in results and future growth rates, the market acceptance of Polycom’s products, such as our video collaboration and voice and video over IP 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 changes in general economic conditions. Many of these risks and uncertainties are discussed in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, 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, 2007, Polycom will hold a conference call today, July 19, 2007, 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. You may participate by viewing the webcast atwww.polycom.com or, for callers in the US and Canada, by calling 800-926-7385; and for callers outside of the US and Canada, by calling 212-231- 2900,

with the pass code being Polycom. A replay of the call will also be available 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 21344062. 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 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, the Polycom logo, SpectraLink, and the SpectraLink logo are registered trademarks of Polycom and Proxias and RPX are trademarks of Polycom in the U.S. and various countries.^©2007, Polycom, Inc. All rights reserved.

POLYCOM, INC.

Non-GAAP Condensed Consolidated Statements of Operations

Excluding Stock-based compensation expense, Effect of stock-based compensation expense on warranty rates, Impact to cost of sales from purchase accounting adjustments to inventory, Acquisition-related costs, Purchased in-process research and development costs, Amortization and impairment of purchased intangibles, Restructuring costs, Litigation reserves and payments, Gain (loss) on strategic investments, and Income tax effect of the preceding adjustments

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended					Six Months Ended
	June 30, 2007			June 30, 2006		June 30, 2007			June 30, 2006
Revenues:
Product revenues	$	201,902		$	144,841	$	371,374		$	283,509
Service revenues		31,950			20,114		55,196			39,159
Total revenues		233,852			164,955		426,570			322,668
Cost of revenues:
Cost of product revenues		75,280			51,898		137,661			102,004
Cost of service revenues		15,187			10,455		26,443			20,086
Total cost of revenues		90,467			62,353		164,104			122,090
Gross profit		143,385			102,602		262,466			200,578
Operating expenses:
Sales and marketing		58,764			40,152		107,176			78,887
Research and development		33,164			26,784		61,262			52,541
General and administrative		14,270			9,925		24,695			18,859
Total operating expenses		106,198			76,861		193,133			150,287
Operating income		37,187			25,741		69,333			50,291
Interest income, net		4,022			4,608		10,590			8,526
Other income (expense), net		(470	)		870		(534	)		734
Income before provision for income taxes		40,739			31,219		79,389			59,551
Provision for income taxes		11,814			9,365		21,863			17,865
Non-GAAP net income	$	28,925		$	21,854	$	57,526		$	41,686
Basic net income per share	$	0.32		$	0.25	$	0.63		$	0.47
Diluted net income per share	$	0.30		$	0.24	$	0.60		$	0.47
Weighted average shares outstanding for basic net income per share		91,718			87,829		91,263			87,953
Weighted average shares outstanding for diluted net income per share		95,492			89,761		95,240			89,553

Use of Non-GAAP Financial Information

To supplement our consolidated financial statements presented on a GAAP basis, Polycom uses non-GAAP 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 non-GAAP 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 non-GAAP 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					Six Months Ended
	June 30, 2007			June 30, 2006		June 30, 2007			June 30, 2006
Revenues:
Product revenues	$	201,902		$	144,841	$	371,374		$	283,509
Service revenues		31,950			20,114		55,196			39,159
Total revenues		233,852			164,955		426,570			322,668
Cost of revenues:
Cost of product revenues		81,627			52,495		145,909			102,949
Cost of service revenues		16,027			10,932		27,926			20,967
Total cost of revenues		97,654			63,427		173,835			123,916
Gross profit		136,198			101,528		252,735			198,752
Operating expenses:
Sales and marketing		61,991			41,937		112,927			82,112
Research and development		36,258			28,757		66,933			56,280
General and administrative		16,742			11,622		29,218			21,799
Acquisition-related costs		1,547			40		2,717			85
Purchased in-process research and development		—			—		9,400			—
Amortization of purchased intangibles		2,376			1,601		3,807			3,189
Restructuring costs		—			—		213			555
Total operating expenses		118,914			83,957		225,215			164,020
Operating income		17,284			17,571		27,520			34,732
Interest income, net		4,022			4,608		10,590			8,526
Loss on strategic investments		(7,400	)		—		(7,400	)		—
Other income (expense), net		(470	)		870		(534	)		734
Income before provision for income taxes		13,436			23,049		30,176			43,992
Provision for income taxes		3,359			8,046		9,888			14,957
Net income	$	10,077		$	15,003	$	20,288		$	29,035
Basic net income per share	$	0.11		$	0.17	$	0.22		$	0.33
Diluted net income per share	$	0.11		$	0.17	$	0.21		$	0.32
Weighted average shares outstanding for basic net income per share		91,718			87,829		91,263			87,953
Weighted average shares outstanding for diluted net income per share		95,492			89,761		95,240			89,553

POLYCOM, INC.

GAAP to Non-GAAP Reconciliation

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended June 30, 2007											Six Months Ended June 30, 2007
	GAAP			Excluded					Non-GAAP			GAAP			Excluded					Non-GAAP
Revenues:
Product revenues	$	201,902		$	—				$	201,902		$	371,374		$	—				$	371,374
Service revenues		31,950			—					31,950			55,196			—					55,196
Total revenues		233,852			—					233,852			426,570			—					426,570
Cost of revenues:
Cost of product revenues		81,627			6,347		(a	)		75,280			145,909			8,248		(c	)		137,661
Cost of service revenues		16,027			840		(b	)		15,187			27,926			1,483		(b	)		26,443
Total cost of revenues		97,654			7,187					90,467			173,835			9,731					164,104
Gross profit		136,198			(7,187	)				143,385			252,735			(9,731	)				262,466
Operating expenses:
Sales and marketing		61,991			3,227		(b	)		58,764			112,927			5,751		(b	)		107,176
Research and development		36,258			3,094		(b	)		33,164			66,933			5,671		(b	)		61,262
General and administrative		16,742			2,472		(b	)		14,270			29,218			4,523		(b	)		24,695
Acquisition-related costs		1,547			1,547					—			2,717			2,717					—
Purchased in-process research and development		—			—					—			9,400			9,400					—
Amortization of purchased intangibles		2,376			2,376					—			3,807			3,807					—
Restructuring costs		—			—					—			213			213					—
Total operating expenses		118,914			12,716					106,198			225,215			32,082					193,133
Operating income		17,284			(19,903	)				37,187			27,520			(41,813	)				69,333
Interest income, net		4,022			—					4,022			10,590			—					10,590
Loss on strategic investments		(7,400	)		(7,400	)				—			(7,400	)		(7,400	)				—
Other income (expense), net		(470	)		—					(470	)		(534	)		—					(534	)
Income before provision for income taxes		13,436			(27,303	)				40,739			30,176			(49,213	)				79,389
Provision for income taxes		3,359			(8,455	)				11,814			9,888			(11,975	)				21,863
Net income	$	10,077		$	(18,848	)			$	28,925		$	20,288		$	(37,238	)			$	57,526
Basic net income per share	$	0.11		$	(0.21	)			$	0.32		$	0.22		$	(0.41	)			$	0.63
Diluted net income per share	$	0.11		$	(0.19	)			$	0.30		$	0.21		$	(0.39	)			$	0.60
Weighted average shares outstanding for basic net income per share		91,718								91,718			91,263								91,263
Weighted average shares outstanding for diluted net income per share		95,492								95,492			95,240								95,240

(a) Excluded amount includes $3,357 related to the amortization of purchased intangibles for core and existing technologies, $690 for stock-based compensation expense recorded in accordance with SFAS 123R, “Share-Based Payment,” during the period, $231 related to the effect of stock-based compensation on warranty expense rates and $2,069 related to purchase accounting adjustments made to inventory.

(b) Excluded amount represents stock-based compensation expense recorded in accordance with SFAS 123R, “Share-Based Payment,” during the period.

(c) Excluded amount includes $4,168 related to the amortization of purchased intangibles for core and existing technologies, $1,216 for stock-based compensation expense recorded in accordance with SFAS 123R, “Share-Based Payment,” during the period, $400 related to the effect of stock-based compensation on warranty expense rates and $2,464 related to purchase accounting adjustments made to inventory.

POLYCOM, INC.

GAAP to Non-GAAP Reconciliation

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended June 30, 2006									Six Months Ended June 30, 2006
	GAAP		Excluded					Non-GAAP		GAAP		Excluded					Non-GAAP
Revenues:
Product revenues	$	144,841	$	—				$	144,841	$	283,509	$	—				$	283,509
Service revenues		20,114		—					20,114		39,159		—					39,159
Total revenues		164,955		—					164,955		322,668		—					322,668
Cost of revenues:
Cost of product revenues		52,495		597		(a	)		51,898		102,949		945		(c	)		102,004
Cost of service revenues		10,932		477		(b	)		10,455		20,967		881		(b	)		20,086
Total cost of revenues		63,427		1,074					62,353		123,916		1,826					122,090
Gross profit		101,528		(1,074	)				102,602		198,752		(1,826	)				200,578
Operating expenses:
Sales and marketing		41,937		1,785		(b	)		40,152		82,112		3,225		(b	)		78,887
Research and development		28,757		1,973		(b	)		26,784		56,280		3,739		(b	)		52,541
General and administrative		11,622		1,697		(b	)		9,925		21,799		2,940		(b	)		18,859
Acquisition-related costs		40		40					—		85		85					—
Amortization of purchased intangibles		1,601		1,601					—		3,189		3,189					—
Restructuring costs		—		—					—		555		555					—
Total operating expenses		83,957		7,096					76,861		164,020		13,733					150,287
Operating income		17,571		(8,170	)				25,741		34,732		(15,559	)				50,291
Interest income, net		4,608		—					4,608		8,526		—					8,526
Other income (expense), net		870		—					870		734		—					734
Income before provision for income taxes		23,049		(8,170	)				31,219		43,992		(15,559	)				59,551
Provision for income taxes		8,046		(1,319	)				9,365		14,957		(2,908	)				17,865
Net income	$	15,003	$	(6,851	)			$	21,854	$	29,035	$	(12,651	)			$	41,686
Basic net income per share	$	0.17	$	(0.08	)			$	0.25	$	0.33	$	(0.14	)			$	0.47
Diluted net income per share	$	0.17	$	(0.07	)			$	0.24	$	0.32	$	(0.15	)			$	0.47
Weighted average shares outstanding for basic net income per share		87,829							87,829		87,953							87,953
Weighted average shares outstanding for diluted net income per share		89,761							89,761		89,553							89,553

(a) Excluded amount includes $401 for stock-based compensation expense recorded in accordance with SFAS 123R, “Share-Based Payment,” during the period and $196 related to the effect of stock-based compensation on warranty expense rates.

(b) Excluded amount represents stock-based compensation expense recorded in accordance with SFAS 123R, “Share-Based Payment,” during the period.

(c) Excluded amount includes $749 for stock-based compensation expense recorded in accordance with SFAS 123R, “Share-Based Payment,” during the period and $196 related to the effect of stock-based compensation on warranty expense rates.

POLYCOM, INC.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

	June 30, 2007		December 31, 2006
ASSETS
Current assets
Cash and cash equivalents	$	223,594	$	316,368
Investments		83,474		157,345
Trade receivables, net		114,733		79,057
Inventories		68,112		48,029
Deferred taxes		42,571		22,459
Prepaid expenses and other current assets		19,104		16,719
Total current assets		551,588		639,977
Property and equipment, net		56,001		39,426
Long-term investments		64,060		102,133
Goodwill		494,536		356,755
Purchased intangibles, net		99,603		12,935
Deferred taxes		10,602		16,746
Other assets		14,527		22,043
Total assets	$	1,290,917	$	1,190,015
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	61,906	$	53,602
Accrued payroll and related liabilities		28,644		22,182
Taxes payable		1,536		58,092
Deferred revenue		50,807		40,227
Other accrued liabilities		50,618		39,780
Total current liabilities		193,511		213,883
Non-current liabilities
Deferred revenue		24,684		20,798
Taxes payable		33,333		—
Deferred taxes		6,314		—
Other long-term liabilities		10,553		8,614
Total non-current liabilities		74,884		29,412
Total liabilities		268,395		243,295
Stockholders’ equity		1,022,522		946,720
Total liabilities and stockholders’ equity	$	1,290,917	$	1,190,015

POLYCOM, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Six Months Ended
	June 30, 2007			June 30, 2006
Cash flows from operating activities:
Net income	$	20,288		$	29,035
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		11,656			10,337
Amortization of purchased intangibles		7,976			3,189
Provision for doubtful accounts		—			59
Provision for (benefit from) excess and obsolete inventories		320			(92	)
Non-cash stock based compensation		18,644			11,534
Excess tax benefits from stock-based compensation		(11,645	)		(2,273	)
Loss on strategic investments		7,400			—
Purchase of in-process research and development		9,400			—
Loss on disposals of property and equipment		58			85
Changes in assets and liabilities, net of the effect of acquisitions:
Trade receivables		(18,038	)		(8,605	)
Inventories		(805	)		3,719
Deferred taxes		3,405			—
Prepaid expenses and other assets		(1,647	)		(2,110	)
Accounts payable		(1,180	)		311
Taxes payable		3,519			4,228
Other accrued liabilities		2,384			15,304
Net cash provided by operating activities		51,735			64,721
Cash flows from investing activities:
Purchase of property and equipment		(14,500	)		(10,443	)
Purchases of investments		(201,859	)		(364,042	)
Proceeds from sale and maturity of investments		313,292			344,933
Net cash paid in purchase acquisitions		(275,619	)		—
Net cash used in investing activities		(178,686	)		(29,552	)
Cash flows from financing activities:
Proceeds from issuance of common stock under employee option and stock purchase plans		48,264			23,470
Repurchase of common stock		(25,732	)		(52,405	)
Excess tax benefits from stock-based compensation		11,645			2,273
Net cash provided by (used in) financing activities		34,177			(26,662	)
Net increase (decrease) in cash and cash equivalents		(92,774	)		8,507
Cash and cash equivalents, beginning of period		316,368			189,271
Cash and cash equivalents, end of period	$	223,594		$	197,778