Polycom (PLCM) 8-K Polycom Reports Fourth Quarter and Fiscal Year 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 FOURTH QUARTER AND FISCAL YEAR 2008 EARNINGS

2008 Full-Year Revenue Growth of 15 Percent to a Record $1.1 Billion;

2008 Operating Cash Flow of $166.6 Million;

Fourth Quarter Revenues of $263.0 Million with Operating Cash Flow of $50.5 Million

PLEASANTON, Calif. – Jan. 21, 2009 –Polycom, Inc. (NASDAQ: PLCM), the global leader in telepresence, video and voice communications solutions, today reported its earnings for the fourth quarter ended Dec. 31, 2008.

Fourth quarter 2008 consolidated net revenues were $263.0 million, compared to $263.3 million for the fourth quarter of 2007. Non-GAAP net income for the fourth quarter of 2008 was $35.2 million, or 42 cents per diluted share. This compares to Non-GAAP net income of $38.5 million, or 42 cents per diluted share, for the fourth quarter of 2007. GAAP net income for the fourth quarter of 2008 was $25.7 million, or 30 cents per diluted share, compared to $22.8 million, or 25 cents per diluted share, for the same period last year.

For the year ended Dec. 31, 2008, net revenues were $1.1 billion, compared to $929.9 million for the year ended Dec. 31, 2007. Non-GAAP net income for the year ended Dec. 31, 2008 was $130.4 million, or $1.49 per diluted share, compared to $128.9 million, or $1.37 per diluted share, for the comparable period of 2007. GAAP net income for the year ended Dec. 31, 2008 was $75.7 million, or 87 cents per diluted share, compared to GAAP net income of $62.9 million, or 67 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 fourth quarter of 2008 were comprised of:

• 67 percent video solutions, or $175.9 million (54 percent video communications, or $141.7 million, and 13 percent network systems, or $34.2 million); and

• 33 percent voice communications, or $87.1 million.

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

“We are pleased to have surpassed the $1 billion revenue mark in 2008,” said Robert Hagerty, Polycom’s chairman and CEO. “As the largest company in the Unified Collaboration industry, Polycom generated year-over-year growth in our Video Solutions business, illustrating the resilience of our fast-ROI video offering. With our Voice business showing more sensitivity to the economic environment, Polycom proactively took action in Q4 to reduce our operating cost structure and, as we announced earlier this month, we have implemented a restructuring plan designed to optimize our cost structure as we move into 2009.”

“With our rapid pace of innovation and the full breadth of our offering, we believe Polycom is the best positioned in the industry to deliver the cost-savings benefits of video adoption to our customers. Our strategic partnerships with Avaya, Cisco, IBM, Microsoft, and others enable us to provide integrated solutions that capture the full benefits of Unified Collaboration. These partnerships differentiate Polycom as the solutions provider of choice for companies who describe our collaboration solution as a strategic technology investment. In spite of the challenging economy, through our leading solutions and go-to-market strategy and, of course, our improved cost structure, we expect to continue to gain strength competitively in 2009 and to deliver solid operating results,” Hagerty concluded.

“Driven by $263.0 million in revenues and strong operating margins, Polycom generated $50.5 million in positive operating cash flow during the fourth quarter,” said Michael Kourey, Polycom’s senior vice president, finance and administration, and CFO. “Contributing to Polycom’s 44^th consecutive quarter of positive operating cash flow was the four day year-over-year improvement in DSO to 44 days and a 3 percent sequential reduction in inventories. Polycom exits 2008 with a strong balance sheet, including $324.5 million in cash and investments 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 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 resilience of Polycom’s video solutions business in the current global economic environment, the optimization of our cost structure in 2009, Polycom as best-positioned in the industry to deliver the cost-savings benefits of video adoption to our customers, and our expectation to continue to gain competitive strength and deliver solid operating results in 2009. 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, risks associated with general economic conditions, including the impact of the crisis in the worldwide financial markets, the current recession in the United States and negative macroeconomic indicators and recessionary factors globally, 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 and the impact of recent restructuring actions, 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 Sept. 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 Jan. 14, 2009, Polycom will hold a conference call today, Jan. 21, 2009, at 5:00 p.m. EDT/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 call. You may participate by viewing the webcast atwww.polycom.com or, for callers in the US and Canada, by calling 800.954.0648; and for callers outside of the US and Canada, by calling 212.231.2900, with the passcode 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 21411274. A replay of the call will also be maintained on our website for twelve months atwww.polycom.com under Investor Relations – Earnings Calls-Archives.

^© 2009 Polycom, Inc. All rights reserved. POLYCOM^®, the Polycom “Triangles” logo and the names and marks associated with Polycom’s products are trademarks and/or service marks of Polycom, Inc. and are registered and/or common law marks in the United States and various other countries. All other trademarks are property of their respective owners.

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, 2008			December 31, 2007			December 31, 2008			December 31, 2007
Revenues:
Product revenues	$	222,067		$	228,129		$	913,760		$	806,482
Service revenues		40,976			35,162			155,560			123,426
Total revenues		263,043			263,291			1,069,320			929,908
Cost of revenues:
Cost of product revenues		87,072			88,348			357,608			306,139
Cost of service revenues		18,233			16,289			73,003			58,239
Total cost of revenues		105,305			104,637			430,611			364,378
Gross profit		157,738			158,654			638,709			565,530
Operating expenses:
Sales and marketing		70,426			64,572			292,239			229,845
Research and development		28,051			32,624			125,445			126,529
General and administrative		13,334			13,344			52,153			50,516
Total operating expenses		111,811			110,540			469,837			406,890
Operating income		45,927			48,114			168,872			158,640
Interest income, net		1,180			3,859			7,938			18,646
Other expense, net		(3,247	)		(389	)		(5,512	)		(738	)
Income before provision for income taxes		43,860			51,584			171,298			176,548
Provision for income taxes		8,698			13,044			40,940			47,668
Non-GAAP net income	$	35,162		$	38,540		$	130,358		$	128,880
Basic net income per share	$	0.42		$	0.43		$	1.52		$	1.42
Diluted net income per share	$	0.42		$	0.42		$	1.49		$	1.37
Weighted average shares outstanding for basic net income per share		83,301			89,839			85,616			90,878
Weighted average shares outstanding for diluted net income per share		84,338			92,521			87,246			94,391

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, 2008			December 31, 2007			December 31, 2008			December 31, 2007
Revenues:
Product revenues	$	222,067		$	228,129		$	913,760		$	806,482
Service revenues		40,976			35,162			155,560			123,426
Total revenues		263,043			263,291			1,069,320			929,908
Cost of revenues:
Cost of product revenues		90,736			92,614			374,119			322,988
Cost of service revenues		18,652			17,216			76,179			61,599
Total cost of revenues		109,388			109,830			450,298			384,587
Gross profit		153,655			153,461			619,022			545,321
Operating expenses:
Sales and marketing		71,971			68,073			303,436			242,510
Research and development		29,397			36,072			135,288			139,011
General and administrative		14,178			16,113			60,201			60,994
Acquisition-related costs		—			1,118			162			4,258
Purchased in-process research and development		—			—			—			9,400
Amortization of purchased intangibles		1,686			5,323			7,098			11,546
Restructuring costs		1,480			197			10,316			410
Litigation reserves and payments		—			—			7,401			—
Total operating expenses		118,712			126,896			523,902			468,129
Operating income		34,943			26,565			95,120			77,192
Interest income, net		1,180			3,859			7,938			18,646
Loss on strategic investments		—			—			—			(7,400	)
Other expense, net		(3,247	)		(389	)		(5,512	)		(738	)
Income before provision for income taxes		32,876			30,035			97,546			87,700
Provision for income taxes		7,170			7,234			21,850			24,819
Net income	$	25,706		$	22,801		$	75,696		$	62,881
Basic net income per share	$	0.31		$	0.25		$	0.88		$	0.69
Diluted net income per share	$	0.30		$	0.25		$	0.87		$	0.67
Weighted average shares outstanding for basic net income per share		83,301			89,839			85,616			90,878
Weighted average shares outstanding for diluted net income per share		84,338			92,521			87,246			94,391

POLYCOM, INC.

GAAP to Non-GAAP Reconciliation

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended December 31, 2008									Twelve Months Ended December 31, 2008
	GAAP			Excluded			Non-GAAP			GAAP			Excluded			Non-GAAP
Revenues:
Product revenues	$	222,067		$	—		$	222,067		$	913,760		$	—		$	913,760
Service revenues		40,976			—			40,976			155,560			—			155,560
Total revenues		263,043			—			263,043			1,069,320			—			1,069,320
Cost of revenues:
Cost of product revenues		90,736			3,664	(a)		87,072			374,119			16,511	(c)		357,608
Cost of service revenues		18,652			419	(b)		18,233			76,179			3,176	(b)		73,003
Total cost of revenues		109,388			4,083			105,305			450,298			19,687			430,611
Gross profit		153,655			(4,083	)		157,738			619,022			(19,687	)		638,709
Operating expenses:
Sales and marketing		71,971			1,545	(b)		70,426			303,436			11,197	(b)		292,239
Research and development		29,397			1,346	(b)		28,051			135,288			9,843	(b)		125,445
General and administrative		14,178			844	(b)		13,334			60,201			8,048	(b)		52,153
Acquisition-related costs		—			—			—			162			162			—
Amortization of purchased intangibles		1,686			1,686			—			7,098			7,098			—
Restructuring costs		1,480			1,480			—			10,316			10,316			—
Litigation reserves and payments		—			—			—			7,401			7,401			—
Total operating expenses		118,712			6,901			111,811			523,902			54,065			469,837
Operating income		34,943			(10,984	)		45,927			95,120			(73,752	)		168,872
Interest income, net		1,180			—			1,180			7,938			—			7,938
Gain (loss) on strategic investments		—			—			—			—			—			—
Other expense, net		(3,247	)		—			(3,247	)		(5,512	)		—			(5,512	)
Income before provision for income taxes		32,876			(10,984	)		43,860			97,546			(73,752	)		171,298
Provision for income taxes		7,170			(1,529	)		8,698			21,850			(19,090	)		40,940
Net income	$	25,706		$	(9,455	)	$	35,162		$	75,696		$	(54,662	)	$	130,358
Basic net income per share	$	0.31		$	(0.11	)	$	0.42		$	0.88		$	(0.64	)	$	1.52
Diluted net income per share	$	0.30		$	(0.12	)	$	0.42		$	0.87		$	(0.62	)	$	1.49
Weighted average shares outstanding for basic net income per share		83,301						83,301			85,616						85,616
Weighted average shares outstanding for diluted net income per share		84,338						84,338			87,246						87,246

(a) Excluded amount includes $3,331 related to the amortization of purchased intangibles for core and existing technologies, $276 for stock-based compensation expense recorded in accordance with SFAS 123R, “Share-Based Payment,” during the period and $57 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 $13,691 related to the amortization of purchased intangibles for core and existing technologies, $2,378 for stock-based compensation expense recorded in accordance with SFAS 123R, “Share-Based Payment,” during the period and $442 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 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 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
Loss on strategic investments		—			—			—			(7,400	)		(7,400	)		—
Other expense, net		(389	)		—			(389	)		(738	)		—			(738	)
Income before provision for 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.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

	December 31, 2008		December 31, 2007
ASSETS
Current assets
Cash and cash equivalents	$	165,669	$	279,560
Investments		152,407		62,663
Trade receivables, net		126,497		138,133
Inventories		89,730		71,106
Deferred taxes		29,295		43,295
Prepaid expenses and other current assets		34,207		23,104
Total current assets		597,805		617,861
Property and equipment, net		77,294		57,610
Long-term investments		6,420		32,340
Goodwill		495,083		504,955
Purchased intangibles, net		65,369		86,423
Deferred taxes		19,415		8,062
Other assets		16,298		14,687
Total assets	$	1,277,684	$	1,321,938
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	57,731	$	75,802
Accrued payroll and related liabilities		28,711		29,518
Taxes payable		—		3,790
Deferred revenue		69,238		59,130
Other accrued liabilities		58,402		48,814
Total current liabilities		214,082		217,054
Non-current liabilities
Deferred revenue		43,285		27,853
Taxes payable		35,878		34,899
Deferred taxes		2,638		4,709
Other long-term liabilities		13,459		13,429
Total liabilities		309,342		297,944
Stockholders’ equity		968,342		1,023,994
Total liabilities and stockholders’ equity	$	1,277,684	$	1,321,938

POLYCOM, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Twelve Months Ended
	December 31, 2008			December 31, 2007
Cash flows from operating activities:
Net income	$	75,696		$	62,881
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		28,507			24,502
Amortization of purchased intangibles		20,798			22,406
Provision for doubtful accounts		1,665			370
Provision for excess and obsolete inventories		3,775			264
Non-cash stock based compensation		34,635			41,659
Excess tax benefits from stock-based compensation		(4,526	)		(15,505	)
Loss on strategic investments		—			7,400
Purchase of in-process research and development		—			9,400
Write down of investments other than temporarily impaired		981			—
Loss on disposals of property and equipment		478			175
Changes in assets and liabilities, net of the effect of acquisitions:
Trade receivables		10,145			(41,689	)
Inventories		(22,399	)		(3,743	)
Deferred taxes		1,133			6,893
Prepaid expenses and other assets		(10,834	)		(5,736	)
Accounts payable		(18,018	)		12,716
Taxes payable		2,794			10,742
Other accrued liabilities		41,801			16,780
Net cash provided by operating activities		166,631			149,515
Cash flows from investing activities:
Purchase of property and equipment		(47,457	)		(30,050	)
Purchases of investments		(451,833	)		(380,598	)
Proceeds from sale and maturity of investments		384,381			544,113
Net cash paid in purchase acquisitions		—			(275,917	)
Net cash used in investing activities		(114,909	)		(142,452	)
Cash flows from financing activities:
Proceeds from issuance of common stock under employee option and stock purchase plans		52,461			66,474
Repurchase of common stock		(222,600	)		(125,850	)
Excess tax benefits from stock-based compensation		4,526			15,505
Net cash used in financing activities		(165,613	)		(43,871	)
Net decrease in cash and cash equivalents		(113,891	)		(36,808	)
Cash and cash equivalents, beginning of period		279,560			316,368
Cash and cash equivalents, end of period	$	165,669		$	279,560