Polycom (PLCM) 8-K Polycom Reports Fourth Quarter and Fiscal Year 2007 Earnings

Exhibit 99.1

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

POLYCOM REPORTS FOURTH QUARTER AND FISCAL YEAR 2007 EARNINGS

Revenue Growth of 41 Percent Year-over-Year;

Revenue Growth of 21 Percent Year-over-Year Excluding SpectraLink;

Record Operating Cash Flow of $55.8 Million

PLEASANTON, Calif. – Jan. 23, 2008 – Polycom, Inc. (NASDAQ: PLCM), the world’s leading provider of unified collaborative communications solutions, today reported its earnings for the fourth quarter and fiscal year ended Dec. 31, 2007.

Fourth quarter 2007 consolidated net revenues were $263.3 million, compared to $186.5 million for the fourth quarter of 2006. SpectraLink contributed $37.2 million to net revenues for the fourth quarter of 2007. As previously reported, Polycom’s acquisition of SpectraLink was completed on March 26, 2007. Non-GAAP net income in the fourth quarter of 2007 was $38.5 million, or 42 cents per diluted share. This compares to Non-GAAP net income of $32.0 million, or 35 cents per diluted share, for the fourth quarter of 2006. GAAP net income for the fourth quarter of 2007 was $22.8 million, or 25 cents per diluted share, compared to $25.8 million, or 28 cents per diluted share, for the same period last year.

For the year ended Dec. 31, 2007, net revenues were $929.9 million, compared to $682.4 million for the year ended Dec. 31, 2006. SpectraLink contributed $113.5 million to net revenues for the year ended Dec. 31, 2007. Non-GAAP net income for the year ended Dec. 31, 2007 was $128.9 million, or $1.37 per diluted share, compared to $98.1 million, or $1.09 per diluted share, for the comparable period of 2006. GAAP net income for the year ended Dec. 31, 2007 was $62.9 million, or 67 cents per diluted share, compared to GAAP net income of $71.9 million, or 80 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 entitled “GAAP to Non-GAAP Reconciliation” in this release.

On a product line basis, consolidated net revenues for the fourth quarter of 2007 were comprised of:

• 63 percent video solutions, or $164.9 million (49 percent video communications, or $129.2 million, and 14 percent network systems, or $35.7 million); and

• 37 percent voice communications, or $98.4 million.

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

• 72 percent video solutions, or $134.1 million (55 percent video communications, or $103.0 million, and 17 percent network systems, or $31.1 million); and

• 28 percent voice communications, or $52.4 million.

“Unprecedented demand for Polycom’s IP-based collaboration solution drove us to well over the $1 billion revenue run-rate for the first time in Q4,” said Robert Hagerty, chairman and CEO. “Video collaboration has clearly emerged as a top priority due to its immediate cost savings benefits and rapid return on investment. At the same time, Polycom’s HD quality, telepresence, and ‘plug and play’ IP connectivity are delivering an amazing customer experience. Polycom’s leading HD video and voice over IP solutions are enabling this growth for our company worldwide.”

Hagerty continued, “Our strategic partnerships with Avaya, Nortel, Cisco, and others are adding fuel to our business opportunities. In fact, revenues from our new VoIP relationship with Microsoft that we launched in October and our recent voice launch with 3COM provide yet another engine for revenue growth in 2008. These meaningful partnerships, coupled with strong execution from our sales and service teams, are driving increased traction and expansion on a global basis.”

“2008 promises to be an exciting year for Polycom. Our HD video, voice, and content collaboration solutions solve real business problems across a broad range of industries. Adopting our solution yields fast returns and increases a customer’s agility and cohesiveness—and facilitates ‘greener’ corporate policies—yet another critical driver in many geographies. The employees and partners of Polycom are ready to fulfill the growing demand of this market.”

“We delivered strong operating results in the fourth quarter, including record revenues of $263.3 million and $55.8 million in operating cash flow,” said Michael Kourey, senior vice president, finance and administration, and CFO. “In concert with these operating results, backlog and deferred revenues also grew to record levels. During the fourth quarter, we purchased $50 million in Polycom stock, exiting the quarter with a remaining $140 million authorization under the current share repurchase program.”

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 the anticipated contributions of Polycom’s HD video and voice over IP solutions to Polycom’s future growth, the impact that our strategic and other partnerships, including our new VoIP relationship with Microsoft and the other partnerships highlighted in this release, and our recent voice launch with 3COM, will have on Polycom’s future revenues, the anticipated growing market demand for collaboration solutions in 2008 and Polycom’s ability to address such demand through its product offerings and solutions, and the ability of our sales and services teams to execute effectively in future periods. 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, the effectiveness of our SpectraLink integration efforts, 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, 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 general economic conditions, including current negative macroeconomic indicators 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 Sept. 30, 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 Jan. 14, 2008, Polycom will hold a conference call today, Jan. 23, 2008, at 5:00 p.m. ET/2:00 p.m. PT to discuss its fourth 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 800.935.5014; 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 21370996. A replay of the call will also be maintained on our website for twelve months atwww.polycom.com under Investor Relations – Financial Summaries – Financial Results 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.

Polycom, the Polycom logo, SpectraLink, and the SpectraLink logo are registered trademarks of Polycom in the U.S. and various countries.^©2008, 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					Twelve Months Ended
	December 31, 2007			December 31, 2006		December 31, 2007			December 31, 2006
Revenues:
Product revenues	$	228,129		$	164,784	$	806,482		$	600,703
Service revenues		35,162			21,725		123,426			81,682
Total revenues		263,291			186,509		929,908			682,385
Cost of revenues:
Cost of product revenues		88,348			59,837		306,139			216,932
Cost of service revenues		16,289			10,973		58,239			41,380
Total cost of revenues		104,637			70,810		364,378			258,312
Gross profit		158,654			115,699		565,530			424,073
Operating expenses:
Sales and marketing		64,572			43,188		229,845			163,060
Research and development		32,624			27,585		126,529			107,020
General and administrative		13,344			10,287		50,516			39,409
Total operating expenses		110,540			81,060		406,890			309,489
Operating income		48,114			34,639		158,640			114,584
Interest income, net		3,859			7,022		18,646			21,164
Other income (expense), net		(389	)		139		(738	)		540
Income before provision for income taxes		51,584			41,800		176,548			136,288
Provision for income taxes		13,044			9,815		47,668			38,161
Non-GAAP net income	$	38,540		$	31,985	$	128,880		$	98,127
Basic net income per share	$	0.43		$	0.36	$	1.42		$	1.11
Diluted net income per share	$	0.42		$	0.35	$	1.37		$	1.09
Weighted average shares outstanding for basic net income per share		89,839			89,397		90,878			88,419
Weighted average shares outstanding for diluted net income per share		92,521			91,880		94,391			90,373

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					Twelve Months Ended
	December 31, 2007			December 31, 2006		December 31, 2007			December 31, 2006
Revenues:
Product revenues	$	228,129		$	164,784	$	806,482		$	600,703
Service revenues		35,162			21,725		123,426			81,682
Total revenues		263,291			186,509		929,908			682,385
Cost of revenues:
Cost of product revenues		92,614			60,211		322,988			218,810
Cost of service revenues		17,216			11,394		61,599			43,114
Total cost of revenues		109,830			71,605		384,587			261,924
Gross profit		153,461			114,904		545,321			420,461
Operating expenses:
Sales and marketing		68,073			44,980		242,510			169,828
Research and development		36,072			29,357		139,011			114,331
General and administrative		16,113			11,717		60,994			45,410
Acquisition-related costs		1,118			24		4,258			161
Purchased in-process research and development		—			—		9,400			—
Amortization and impairment of purchased intangibles		5,323			2,812		11,546			7,452
Restructuring costs		197			543		410			2,410
Total operating expenses		126,896			89,433		468,129			339,592
Operating income		26,565			25,471		77,192			80,869
Interest income, net		3,859			7,022		18,646			21,164
Gain (loss) on strategic investments		—			176		(7,400	)		176
Other income (expense), net		(389	)		139		(738	)		540
Income before provision from income taxes		30,035			32,808		87,700			102,749
Provision for income taxes		7,234			7,045		24,819			30,825
Net income	$	22,801		$	25,763	$	62,881		$	71,924
Basic net income per share	$	0.25		$	0.29	$	0.69		$	0.81
Diluted net income per share	$	0.25		$	0.28	$	0.67		$	0.80
Weighted average shares outstanding for basic net income per share		89,839			89,397		90,878			88,419
Weighted average shares outstanding for diluted net income per share		92,521			91,880		94,391			90,373

POLYCOM, INC.

GAAP to Non-GAAP Reconciliation

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended December 31, 2007									Twelve Months Ended December 31, 2007
	GAAP			Excluded			Non-GAAP			GAAP			Excluded			Non-GAAP
Revenues:
Product revenues	$	228,129		$	—		$	228,129		$	806,482		$	—		$	806,482
Service revenues		35,162			—			35,162			123,426			—			123,426
Total revenues		263,291			—			263,291			929,908			—			929,908
Cost of revenues:
Cost of product revenues		92,614			4,266	(a)		88,348			322,988			16,849	(c)		306,139
Cost of service revenues		17,216			927	(b)		16,289			61,599			3,360	(b)		58,239
Total cost of revenues		109,830			5,193			104,637			384,587			20,209			364,378
Gross profit		153,461			(5,193	)		158,654			545,321			(20,209	)		565,530
Operating expenses:
Sales and marketing		68,073			3,501	(b)		64,572			242,510			12,665	(b)		229,845
Research and development		36,072			3,448	(b)		32,624			139,011			12,482	(b)		126,529
General and administrative		16,113			2,769	(b)		13,344			60,994			10,478	(b)		50,516
Acquisition-related costs		1,118			1,118			—			4,258			4,258			—
Purchased in-process research and development		—			—			—			9,400			9,400			—
Amortization and impairment of purchased intangibles		5,323			5,323			—			11,546			11,546			—
Restructuring costs		197			197			—			410			410			—
Total operating expenses		126,896			16,356			110,540			468,129			61,239			406,890
Operating income		26,565			(21,549	)		48,114			77,192			(81,448	)		158,640
Interest income, net		3,859			—			3,859			18,646			—			18,646
Gain (loss) on strategic investments		—			—			—			(7,400	)		(7,400	)		—
Other income (expense), net		(389	)		—			(389	)		(738	)		—			(738	)
Income before provision from income taxes		30,035			(21,549	)		51,584			87,700			(88,848	)		176,548
Provision for income taxes		7,234			(5,810	)		13,044			24,819			(22,849	)		47,668
Net income	$	22,801		$	(15,739	)	$	38,540		$	62,881		$	(65,999	)	$	128,880
Basic net income per share	$	0.25		$	(0.18	)	$	0.43		$	0.69		$	(0.73	)	$	1.42
Diluted net income per share	$	0.25		$	(0.17	)	$	0.42		$	0.67		$	(0.70	)	$	1.37
Weighted average shares outstanding for basic net income per share		89,839						89,839			90,878						90,878
Weighted average shares outstanding for diluted net income per share		92,521						92,521			94,391						94,391

(a) Excluded amount includes $3,343 related to the amortization of purchased intangibles for core and existing technologies, $733 for stock-based compensation expense recorded in accordance with SFAS 123R, “Share-Based Payment,” during the period and $190 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 $10,860 related to the amortization of purchased intangibles for core and existing technologies, $2,674 for stock-based compensation expense recorded in accordance with SFAS 123R, “Share-Based Payment,” during the period, $851 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 December 31, 2006							Twelve Months Ended December 31, 2006
	GAAP		Excluded			Non-GAAP		GAAP		Excluded			Non-GAAP
Revenues:
Product revenues	$	164,784	$	—		$	164,784	$	600,703	$	—		$	600,703
Service revenues		21,725		—			21,725		81,682		—			81,682
Total revenues		186,509		—			186,509		682,385		—			682,385
Cost of revenues:
Cost of product revenues		60,211		374	(a)		59,837		218,810		1,878	(c)		216,932
Cost of service revenues		11,394		421	(b)		10,973		43,114		1,734	(b)		41,380
Total cost of revenues		71,605		795			70,810		261,924		3,612			258,312
Gross profit		114,904		(795	)		115,699		420,461		(3,612	)		424,073
Operating expenses:
Sales and marketing		44,980		1,792	(b)		43,188		169,828		6,768	(b)		163,060
Research and development		29,357		1,772	(b)		27,585		114,331		7,311	(b)		107,020
General and administrative		11,717		1,430	(b)		10,287		45,410		6,001	(b)		39,409
Acquisition-related costs		24		24			—		161		161			—
Amortization and impairment of purchased intangibles		2,812		2,812			—		7,452		7,452			—
Restructuring costs		543		543			—		2,410		2,410			—
Total operating expenses		89,433		8,373			81,060		339,592		30,103			309,489
Operating income		25,471		(9,168	)		34,639		80,869		(33,715	)		114,584
Interest income, net		7,022		—			7,022		21,164		—			21,164
Gain (loss) on strategic investments		176		176			—		176		176			—
Other income (expense), net		139		—			139		540		—			540
Income before provision from income taxes		32,808		(8,992	)		41,800		102,749		(33,539	)		136,288
Provision for income taxes		7,045		(2,770	)		9,815		30,825		(7,336	)	��	38,161
Net income	$	25,763	$	(6,222	)	$	31,985	$	71,924	$	(26,203	)	$	98,127
Basic net income per share	$	0.29	$	(0.07	)	$	0.36	$	0.81	$	(0.30	)	$	1.11
Diluted net income per share	$	0.28	$	(0.07	)	$	0.35	$	0.80	$	(0.29	)	$	1.09
Weighted average shares outstanding for basic net income per share		89,397					89,397		88,419					88,419
Weighted average shares outstanding for diluted net income per share		91,880					91,880		90,373					90,373

(a) Excluded amount includes $366 for stock-based compensation expense recorded in accordance with SFAS 123R, “Share-Based Payment,” during the period and $8 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 $1,474 for stock-based compensation expense recorded in accordance with SFAS 123R, “Share-Based Payment,” during the period and $404 related to the effect of stock-based compensation on warranty expense rates.

POLYCOM, INC.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

	December 31, 2007		December 31, 2006
ASSETS
Current assets
Cash and cash equivalents	$	279,560	$	316,368
Investments		62,663		157,345
Trade receivables, net		138,133		79,057
Inventories		71,106		48,029
Deferred taxes		43,295		22,459
Prepaid expenses and other current assets		23,104		16,719
Total current assets		617,861		639,977
Property and equipment, net		57,610		39,426
Long-term investments		32,340		102,133
Goodwill		495,943		356,755
Purchased intangibles, net		86,423		12,935
Deferred taxes		8,062		16,746
Other assets		14,687		22,043
Total assets	$	1,312,926	$	1,190,015
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	75,802	$	53,602
Accrued payroll and related liabilities		29,518		22,182
Taxes payable		3,790		58,092
Deferred revenue		59,130		40,227
Other accrued liabilities		48,814		39,780
Total current liabilities		217,054		213,883
Non-current liabilities
Deferred revenue		27,853		20,798
Taxes payable		34,899		—
Deferred taxes		4,709		—
Other long-term liabilities		13,429		8,614
Total liabilities		297,944		243,295
Stockholders’ equity		1,014,982		946,720
Total liabilities and stockholders’ equity	$	1,312,926	$	1,190,015

POLYCOM, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Twelve Months Ended
	December 31, 2007			December 31, 2006
Cash flows from operating activities:
Net income	$	62,881		$	71,924
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		24,502			21,035
Amortization and impairment of purchased intangibles		22,389			7,452
Provision for doubtful accounts		370			120
Provision for excess and obsolete inventories		264			1,306
Non-cash stock-based compensation		41,659			23,288
Excess tax benefits from stock-based compensation		(15,505	)		(10,246	)
(Gain)/loss on strategic investments		7,400			(176	)
Purchase of in-process research and development		9,400			—
Loss on disposals of property and equipment		175			116
Changes in assets and liabilities, net of the effect of acquisitions:
Trade receivables		(41,689	)		(9,774	)
Inventories		(3,743	)		(3,568	)
Deferred taxes		6,893			9,264
Prepaid expenses and other assets		(5,719	)		(4,783	)
Accounts payable		12,716			6,720
Taxes payable		10,742			9,139
Other accrued liabilities		16,780			25,869
Net cash provided by operating activities		149,515			147,686
Cash flows from investing activities:
Purchase of property and equipment		(30,050	)		(23,475	)
Purchases of investments		(380,598	)		(660,668	)
Proceeds from sale and maturity of investments		544,113			669,812
Net cash paid in purchase acquisitions		(275,917	)		(188	)
Net cash used in investing activities		(142,452	)		(14,519	)
Cash flows from financing activities:
Proceeds from issuance of common stock under employee option and stock purchase plans		66,474			87,304
Repurchase of common stock		(125,850	)		(103,620	)
Excess tax benefits from stock-based compensation		15,505			10,246
Net cash used in financing activities		(43,871	)		(6,070	)
Net increase (decrease) in cash and cash equivalents		(36,808	)		127,097
Cash and cash equivalents, beginning of period		316,368			189,271
Cash and cash equivalents, end of period	$	279,560		$	316,368