Polycom (PLCM) 8-K Polycom Reports Second Quarter 2008 Earnings

Exhibit 99.1

Investor Contact:	Michael R. Kourey, CFO
	Polycom, Inc.
	925-924-5742
	mkourey@polycom.com
Press Contact:	Caroline Japic
	Polycom, Inc.
	408-474-2265
	caroline.japic@polycom.com

POLYCOM REPORTS SECOND QUARTER 2008 EARNINGS

Revenue Growth of 16 Percent Year-over-Year to a Record $271.6 Million

PLEASANTON, Calif. – July 16, 2008 – Polycom, Inc. (NASDAQ: PLCM), the global leader in telepresence, video and voice communications solutions, today reported its earnings for the second quarter ended June 30, 2008.

Second quarter 2008 consolidated net revenues were $271.6 million, compared to $233.9 million for the second quarter of 2007. Non-GAAP net income for the second quarter of 2008 was $30.7 million, or 35 cents per diluted share. This compares to Non-GAAP net income of $28.9 million, or 30 cents per diluted share, for the second quarter of 2007. GAAP net income for the second quarter of 2008 was $17.8 million, or 20 cents per diluted share, compared to $10.1 million, or 11 cents per diluted share, for the same period last year.

For the six months ended June 30, 2008, net revenues were $530.5 million, compared to $426.6 million for the first six months of 2007. Non-GAAP net income for the period was $63.4 million, or 71 cents per diluted share, compared to $57.5 million, or 60 cents per diluted share, for the first six months of 2007. GAAP net income for the six months ended June 30, 2008 was $32.0 million, or 36 cents per diluted share, compared to GAAP net income of $20.3 million, or 21 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 second quarter of 2008 were comprised of:

• 62 percent video solutions, or $169.2 million (52 percent video communications, or $141.2 million, and 10 percent network systems, or $28.0 million); and

• 38 percent voice communications, or $102.4 million.

This compares to the second quarter of 2007, in which consolidated net revenues 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.

“Sales of our video communications solutions accelerated in the second quarter,” said Robert Hagerty, Polycom’s chairman and CEO. “Soaring travel costs are becoming an increasingly important driver for the adoption of our unified collaboration solutions worldwide. In fact, due to the immersive experience of Polycom’s high definition (HD) telepresence solutions, our customers can reduce travel while increasing productivity—saving high out-of-pocket costs and eliminating the opportunity cost of being on the road. In addition to the substantial cost-savings benefits our customers can achieve, both commercial and public sector customers are utilizing Polycom’s solutions to achieve carbon emission reductions and comply with environmental standards in key geographies throughout the world.”

“As a result of Polycom’s investments in global sales coverage and high-impact marketing, Polycom is becoming widely recognized for our innovations and market leadership. For example, Media and Entertainment giant Time Warner recently selected Polycom’s Real Presence™ Experience (RPX™) immersive telepresence solution to facilitate increased communications between the CEOs of Time Warner, Turner Broadcasting, Warner Brothers, and AOL. Polycom’s solution with its full screen, cinematic view and true-to-life people dimensions will help promote dynamic group interactions among all of Time Warner’s executives while at the same time supporting Time Warner’s commitment to social responsibility and goal to reduce its carbon footprint and conduct business in an environmentally sustainable manner. Another key example is Deloitte’s recent selection of Nortel’s Managed Global Telepresence Services, which is based on Polycom’s RPX immersive telepresence and HDX 9000™ HD video solutions. Finally, in June, we receivedCIO Magazine’s 2008 CIO 100 Award, recognizing Polycom as a company that exemplifies the highest level of operational and strategic excellence in information technology (IT). These are but a few examples of how fast-rising travel costs and green initiatives are driving the use of Polycom’s leading solutions.” Hagerty concluded.

“We generated 5 percent sequential revenue growth in Q2 with record revenues of $271.6 million,” said Michael Kourey, Polycom’s senior vice president, finance and administration, and CFO. “Fueled by this top-line growth, Polycom delivered $39.5 million in positive operating cash flow and improved Days Sales Outstanding (DSOs) by five days sequentially. In the second quarter, we repurchased $80 million of our common stock and have a remaining repurchase authorization of $300 million.”

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 visitwww.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 drivers for the adoption of our products. 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, 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 in the United States and globally, 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 March 31, 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 July 9, 2008, Polycom will hold a conference call today, July 16, 2008, 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 call. You may participate by viewing the webcast atwww.polycom.com or, for callers in the US and Canada, by calling 800.931.6358; and for callers outside of the US and Canada, by calling 212.231.2924, 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 21387502. A replay of the call will also be maintained on our website for twelve months atwww.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.

Polycom and the Polycom logo are registered trademarks and HDX 9000, RealPresence and RPX are 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						Six Months Ended
	June 30, 2008			June 30, 2007			June 30, 2008			June 30, 2007
Revenues:
Product revenues	$	233,845		$	201,902		$	456,296		$	371,374
Service revenues		37,736			31,950			74,205			55,196
Total revenues		271,581			233,852			530,501			426,570
Cost of revenues:
Cost of product revenues		93,758			75,280			179,451			137,661
Cost of service revenues		18,933			15,187			36,117			26,443
Total cost of revenues		112,691			90,467			215,568			164,104
Gross profit		158,890			143,385			314,933			262,466
Operating expenses:
Sales and marketing		72,508			58,764			143,199			107,176
Research and development		33,618			33,164			65,638			61,262
General and administrative		12,694			14,270			25,420			24,695
Total operating expenses		118,820			106,198			234,257			193,133
Operating income		40,070			37,187			80,676			69,333
Interest income, net		2,003			4,022			5,189			10,590
Other expense, net		(1,067	)		(470	)		(7	)		(534	)
Income before provision for income taxes		41,006			40,739			85,858			79,389
Provision for income taxes		10,299			11,814			22,409			21,863
Non-GAAP net income	$	30,707		$	28,925		$	63,449		$	57,526
Basic net income per share	$	0.36		$	0.32		$	0.73		$	0.63
Diluted net income per share	$	0.35		$	0.30		$	0.71		$	0.60
Weighted average shares outstanding for basic net income per share		86,357			91,718			87,441			91,263
Weighted average shares outstanding for diluted net income per share		88,204			95,492			89,225			95,240

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, 2008			June 30, 2007			June 30, 2008			June 30, 2007
Revenues:
Product revenues	$	233,845		$	201,902		$	456,296		$	371,374
Service revenues		37,736			31,950			74,205			55,196
Total revenues		271,581			233,852			530,501			426,570
Cost of revenues:
Cost of product revenues		97,947			81,627			188,134			145,909
Cost of service revenues		19,764			16,027			38,018			27,926
Total cost of revenues		117,711			97,654			226,152			173,835
Gross profit		153,870			136,198			304,349			252,735
Operating expenses:
Sales and marketing		76,042			61,991			149,903			112,927
Research and development		36,501			36,258			71,435			66,933
General and administrative		15,028			16,742			29,922			29,218
Acquisition-related costs		3			1,547			162			2,717
Purchased in-process research and development		—			—			—			9,400
Amortization of purchased intangibles		1,810			2,376			3,637			3,807
Restructuring costs		839			—			4,454			213
Litigation reserves and payments		1,163			—			7,401			—
Total operating expenses		131,386			118,914			266,914			225,215
Operating income		22,484			17,284			37,435			27,520
Interest income, net		2,003			4,022			5,189			10,590
Loss on strategic investments		—			(7,400	)		—			(7,400	)
Other expense, net		(1,067	)		(470	)		(7	)		(534	)
Income before provision for income taxes		23,420			13,436			42,617			30,176
Provision for income taxes		5,578			3,359			10,569			9,888
Net income	$	17,842		$	10,077		$	32,048		$	20,288
Basic net income per share	$	0.21		$	0.11		$	0.37		$	0.22
Diluted net income per share	$	0.20		$	0.11		$	0.36		$	0.21
Weighted average shares outstanding for basic net income per share		86,357			91,718			87,441			91,263
Weighted average shares outstanding for diluted net income per share		88,204			95,492			89,225			95,240

POLYCOM, INC.

GAAP to Non-GAAP Reconciliation

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended June 30, 2008									Six Months Ended June 30, 2008
	GAAP			Excluded			Non-GAAP			GAAP			Excluded			Non-GAAP
Revenues:
Product revenues	$	233,845		$	—		$	233,845		$	456,296		$	—		$	456,296
Service revenues		37,736			—			37,736			74,205			—			74,205
Total revenues		271,581			—			271,581			530,501			—			530,501
Cost of revenues:
Cost of product revenues		97,947			4,189	(a)		93,758			188,134			8,683	(c)		179,451
Cost of service revenues		19,764			831	(b)		18,933			38,018			1,901	(b)		36,117
Total cost of revenues		117,711			5,020			112,691			226,152			10,584			215,568
Gross profit		153,870			(5,020	)		158,890			304,349			(10,584	)		314,933
Operating expenses:
Sales and marketing		76,042			3,534	(b)		72,508			149,903			6,704	(b)		143,199
Research and development		36,501			2,883	(b)		33,618			71,435			5,797	(b)		65,638
General and administrative		15,028			2,334	(b)		12,694			29,922			4,502	(b)		25,420
Acquisition-related costs		3			3			—			162			162			—
Purchased in-process research and development		—			—			—			—			—			—
Amortization of purchased intangibles		1,810			1,810			—			3,637			3,637			—
Restructuring costs		839			839			—			4,454			4,454			—
Litigation reserves and payments		1,163			1,163			—			7,401			7,401			—
Total operating expenses		131,386			12,566			118,820			266,914			32,657			234,257
Operating income		22,484			(17,586	)		40,070			37,435			(43,241	)		80,676
Interest income, net		2,003			—			2,003			5,189			—			5,189
Other expense, net		(1,067	)		—			(1,067	)		(7	)		—			(7	)
Income before provision for income taxes		23,420			(17,586	)		41,006			42,617			(43,241	)		85,858
Provision for income taxes		5,578			(4,721	)		10,299			10,569			(11,840	)		22,409
Net income	$	17,842		$	(12,865	)	$	30,707		$	32,048		$	(31,401	)	$	63,449
Basic net income per share	$	0.21		$	(0.15	)	$	0.36		$	0.37		$	(0.36	)	$	0.73
Diluted net income per share	$	0.20		$	(0.15	)	$	0.35		$	0.36		$	(0.35	)	$	0.71
Weighted average shares outstanding for basic net income per share		86,357						86,357			87,441						87,441
Weighted average shares outstanding for diluted net income per share		88,204						88,204			89,225						89,225

(a) Excluded amount includes $3,448 related to the amortization of purchased intangibles for core and existing technologies, $644 for stock-based compensation expense recorded in accordance with SFAS 123R, “Share-Based Payment,” during the period and $97 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 $6,941 related to the amortization of purchased intangibles for core and existing technologies, $1,450 for stock-based compensation expense recorded in accordance with SFAS 123R, “Share-Based Payment,” during the period and $292 related to the effect of stock-based compensation on warranty expense rates.

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			—
Litigation reserves and payments		—			—			—			—			—			—
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 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.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

	June 30, 2008		December 31, 2007
ASSETS
Current assets
Cash and cash equivalents	$	203,212	$	279,560
Investments		96,870		62,663
Trade receivables, net		130,339		138,133
Inventories		94,380		71,106
Deferred taxes		34,437		43,295
Prepaid expenses and other current assets		26,442		23,104
Total current assets		585,680		617,861
Property and equipment, net		63,724		57,610
Long-term investments		17,045		32,340
Goodwill		504,809		504,955
Purchased intangibles, net		77,011		86,423
Deferred taxes		16,094		8,062
Other assets		17,451		14,687
Total assets	$	1,281,814	$	1,321,938
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	69,208	$	75,802
Accrued payroll and related liabilities		29,411		29,518
Taxes payable		1,441		3,790
Deferred revenue		63,874		59,130
Other accrued liabilities		55,044		48,814
Total current liabilities		218,978		217,054
Non-current liabilities
Deferred revenue		41,716		27,853
Taxes payable		34,594		34,899
Deferred taxes		3,076		4,709
Other long-term liabilities		15,662		13,429
Total liabilities		314,026		297,944
Stockholders’ equity		967,788		1,023,994
Total liabilities and stockholders’ equity	$	1,281,814	$	1,321,938

POLYCOM, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Six Months Ended
	June 30, 2008			June 30, 2007
Cash flows from operating activities:
Net income	$	32,048		$	20,288
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		13,472			11,656
Amortization of purchased intangibles		10,567			7,976
Provision for doubtful accounts		245			—
Provision for excess and obsolete inventories		1,197			320
Non-cash stock based compensation		20,353			18,644
Excess tax benefits from stock-based compensation		(2,075	)		(11,645	)
Gain on strategic investments		—			7,400
Purchase of in-process research and development		—			9,400
Loss on disposals of property and equipment		68			58
Changes in assets and liabilities, net of the effect of acquisitions:
Trade receivables		7,723			(18,038	)
Inventories		(24,471	)		(805	)
Deferred taxes		(486	)		3,405
Prepaid expenses and other assets		(7,147	)		(1,647	)
Accounts payable		(6,594	)		(1,180	)
Taxes payable		(135	)		3,519
Other accrued liabilities		31,001			2,384
Net cash provided by operating activities		75,766			51,735
Cash flows from investing activities:
Purchase of property and equipment		(19,056	)		(14,500	)
Purchases of investments		(206,649	)		(201,859	)
Proceeds from sale and maturity of investments		183,973			313,292
Net cash paid in purchase acquisitions		—			(275,619	)
Net cash used in investing activities		(41,732	)		(178,686	)
Cash flows from financing activities:
Proceeds from issuance of common stock under employee option and stock purchase plans		30,001			48,264
Repurchase of common stock		(142,458	)		(25,732	)
Excess tax benefits from stock-based compensation		2,075			11,645
Net cash provided by (used in) financing activities		(110,382	)		34,177
Net decrease in cash and cash equivalents		(76,348	)		(92,774	)
Cash and cash equivalents, beginning of period		279,560			316,368
Cash and cash equivalents, end of period	$	203,212		$	223,594