Polycom (PLCM) 8-K Polycom Reports Second Quarter 2009 Earnings

Exhibit 99.1

Investor Contact:	Michael R. Kourey, CFO
	Polycom, Inc.
	925-924-5742
	mkourey@polycom.com
Press Contact:	Kevin Young
	Polycom, Inc.
	925-924-5706
	kyoung@polycom.com

POLYCOM REPORTS SECOND QUARTER 2009 EARNINGS

Network Systems Revenues Year-over-Year Growth Rate Increases to 18 Percent;

Video Communications Revenues Return to Quarter-to-Quarter Growth;

Voice Revenues Stabilize

PLEASANTON, Calif. – July 15, 2009 – 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, 2009.

Second quarter 2009 consolidated net revenues were $230.7 million, compared to $271.6 million for the second quarter of 2008. Non-GAAP net income for the second quarter of 2009 was $24.3 million, or 29 cents per diluted share. This compares to Non-GAAP net income of $30.7 million, or 35 cents per diluted share, for the second quarter of 2008. GAAP net income for the second quarter of 2009 was $15.3 million, or 18 cents per diluted share, compared to $17.8 million, or 20 cents per diluted share, for the same period last year.

For the six months ended June 30, 2009, net revenues were $456.1 million, compared to $530.5 million for the first six months of 2008. Non-GAAP net income for the period was $46.8 million, or 55 cents per diluted share, compared to $63.4 million, or 71 cents per diluted share, for the first six months of 2008. GAAP net income for the six months ended June 30, 2009 was $23.4 million, or 28 cents per diluted share, compared to GAAP net income of $32.0 million, or 36 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, including applicable service revenues, consolidated net revenues for the second quarter of 2009 were comprised of:

• 70 percent video solutions, or $161.7 million (56 percent video communications, or $128.7 million, and 14 percent network systems, or $33.0 million); and

• 30 percent voice communications, or $69.0 million.

This compares to the second quarter of 2008, in which consolidated net revenues 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.

“We experienced a notable improvement in customer demand across a broad-base of vertical markets within the commercial and public sectors during the second quarter,” said Robert Hagerty, Polycom chairman and CEO. “In fact, our video product lines have already returned to sequential growth, our network systems solutions year-over-year growth rate increased significantly from first quarter levels, and voice communications showed signs of stabilization. We believe this demonstrates that customers are increasingly prioritizing unified collaboration as a means to proactively manage their business, which our solutions deliver through a tangible return on investment (ROI) and productivity improvements.”

“Looking forward, I am excited by several important developments that position us for long-term growth. First, we believe Andrew Miller, executive vice president, Global Field Operations, is uniquely qualified to optimize our sales execution, both through our customer relationships and in building closer alignment with our channel partners. Second, we have made significant strides in our network systems solutions, which we believe now offer our customers the best quality, scalability, and ease of use in the business. Third, we are building closer strategic partnerships with the most important unified communications partners in the world. Recent examples include the launch of our Polycom® CX5000 video solution with Microsoft and the Cisco SIP certification of our new VVX™ business video phone. Fourth, cloud-based solutions create new opportunities for business-to-business communications through managed service offerings, and we are working closely with the leading global service providers to be at the forefront of these initiatives. With these developments in mind, I am confident we are poised to take advantage of growing opportunities in the marketplace to deliver solutions that literally transform our customers’ business models,” Hagerty concluded.

“Driven by the sequential growth in revenue and ongoing cost controls, we significantly improved our operating margins in the second quarter,” said Michael Kourey, Polycom senior vice president, finance and administration, and CFO. “Through improved revenue linearity and strong working capital management, we improved DSO, decreased inventories and, as a result, generated $46.8 million in positive operating cash flow, our 46^th consecutive quarter of positive operating cash flow. We exited the quarter with a robust balance sheet, including $375.5 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 customer prioritization of unified collaboration and the developments positioning us for long-term growth and growing marketplace opportunities, such as the optimization of our sales execution, our network systems product offerings, our strategic partnerships and new opportunities created by our cloud-based solutions. 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 continuation and prolonged impact of the crisis in the worldwide financial markets and the global recession, 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 our sales organization that may cause disruption to the business, 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 March 31, 2009, 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 8, 2009, Polycom will hold a conference call today, July 15, 2009, at 5:00 p.m. EDT/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 800.954.1052; 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 21429624. 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.

© 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					Six Months Ended
	June 30, 2009			June 30, 2008		June 30, 2009			June 30, 2008
Revenues:
Product revenues	$	188,419		$	233,845	$	371,713		$	456,296
Service revenues		42,272			37,736		84,388			74,205
Total revenues		230,691			271,581		456,101			530,501
Cost of revenues:
Cost of product revenues		76,634			93,758		149,605			179,451
Cost of service revenues		18,974			18,933		38,690			36,117
Total cost of revenues		95,608			112,691		188,295			215,568
Gross profit		135,083			158,890		267,806			314,933
Operating expenses:
Sales and marketing		63,942			72,508		128,275			143,199
Research and development		26,187			33,618		52,767			65,638
General and administrative		11,126			12,694		22,840			25,420
Total operating expenses		101,255			118,820		203,882			234,257
Operating income		33,828			40,070		63,924			80,676
Other income (expense), net		(1,077	)		936		(1,358	)		5,182
Income before provision for income taxes		32,751			41,006		62,566			85,858
Provision for income taxes		8,424			10,299		15,729			22,409
Non-GAAP net income	$	24,327		$	30,707	$	46,837		$	63,449
Basic net income per share	$	0.29		$	0.36	$	0.56		$	0.73
Diluted net income per share	$	0.29		$	0.35	$	0.55		$	0.71
Weighted average shares outstanding for basic net income per share		83,753			86,357		83,689			87,441
Weighted average shares outstanding for diluted net income per share		85,054			88,204		84,652			89,225

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, 2009			June 30, 2008			June 30, 2009			June 30, 2008
Revenues:
Product revenues	$	188,419		$	233,845		$	371,713		$	456,296
Service revenues		42,272			37,736			84,388			74,205
Total revenues		230,691			271,581			456,101			530,501
Cost of revenues:
Cost of product revenues		80,483			97,947			158,490			188,134
Cost of service revenues		19,591			19,764			40,060			38,018
Total cost of revenues		100,074			117,711			198,550			226,152
Gross profit		130,617			153,870			257,551			304,349
Operating expenses:
Sales and marketing		66,553			76,042			132,786			149,903
Research and development		28,075			36,501			56,528			71,435
General and administrative		12,728			15,028			26,317			29,922
Acquisition-related costs		—			3			—			162
Amortization of purchased intangibles		1,434			1,810			2,898			3,637
Restructuring costs		427			839			6,844			4,454
Litigation reserves and payments		—			1,163			—			7,401
Total operating expenses		109,217			131,386			225,373			266,914
Operating income		21,400			22,484			32,178			37,435
Other income (expense), net		(1,077	)		936			(1,358	)		5,182
Income before provision for income taxes		20,323			23,420			30,820			42,617
Provision for income taxes		4,998			5,578			7,470			10,569
Net income	$	15,325		$	17,842		$	23,350		$	32,048
						��
Basic net income per share	$	0.18		$	0.21		$	0.28		$	0.37
Diluted net income per share	$	0.18		$	0.20		$	0.28		$	0.36
Weighted average shares outstanding for basic net income per share		83,753			86,357			83,689			87,441
Weighted average shares outstanding for diluted net income per share		85,054			88,204			84,652			89,225

POLYCOM, INC.

GAAP to Non-GAAP Reconciliation

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended June 30, 2009									Six Months Ended June 30, 2009
	GAAP			Excluded			Non-GAAP			GAAP			Excluded			Non-GAAP
Revenues:
Product revenues	$	188,419		$	—		$	188,419		$	371,713		$	—		$	371,713
Service revenues		42,272			—			42,272			84,388			—			84,388
Total revenues		230,691			—			230,691			456,101			—			456,101
Cost of revenues:
Cost of product revenues		80,483			3,849	(a)		76,634			158,490			8,885	(c)		149,605
Cost of service revenues		19,591			617	(b)		18,974			40,060			1,370	(b)		38,690
Total cost of revenues		100,074			4,466			95,608			198,550			10,255			188,295
Gross profit		130,617			(4,466	)		135,083			257,551			(10,255	)		267,806
Operating expenses:
Sales and marketing		66,553			2,611	(b)		63,942			132,786			4,511	(b)		128,275
Research and development		28,075			1,888	(b)		26,187			56,528			3,761	(b)		52,767
General and administrative		12,728			1,602	(b)		11,126			26,317			3,477	(b)		22,840
Acquisition-related costs		—			—			—			—			—			—
Amortization of purchased intangibles		1,434			1,434			—			2,898			2,898			—
Restructuring costs		427			427			—			6,844			6,844			—
Litigation reserves and payments		—			—			—			—			—			—
Total operating expenses		109,217			7,962			101,255			225,373			21,491			203,882
Operating income		21,400			(12,428	)		33,828			32,178			(31,746	)		63,924
Other income (expense), net		(1,077	)		—			(1,077	)		(1,358	)		—			(1,358	)
Income before provision for income taxes		20,323			(12,428	)		32,751			30,820			(31,746	)		62,566
Provision for income taxes		4,998			(3,426	)		8,424			7,470			(8,259	)		15,729
Net income	$	15,325		$	(9,002	)	$	24,327		$	23,350		$	(23,487	)	$	46,837
Basic net income per share	$	0.18		$	(0.11	)	$	0.29		$	0.28		$	(0.28	)	$	0.56
Diluted net income per share	$	0.18		$	(0.11	)	$	0.29		$	0.28		$	(0.27	)	$	0.55
Weighted average shares outstanding for basic net income per share		83,753						83,753			83,689						83,689
Weighted average shares outstanding for diluted net income per share		85,054						85,054			84,652						84,652

(a) Excluded amount includes $3,354 related to the amortization of purchased intangibles for core and existing technologies, $421 for stock-based compensation expense recorded in accordance with SFAS 123R, “Share-Based Payment,” during the period and $74 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 $6,680 related to the amortization of purchased intangibles for core and existing technologies, $1,050 related to past license fees claims, $969 for stock-based compensation expense recorded in accordance with SFAS 123R, “Share-Based Payment,” during the period and $186 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, 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			—
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
Other income (expense), net		936		—			936		5,182		—			5,182
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.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

	June 30, 2009		December 31, 2008
ASSETS
Current assets
Cash and cash equivalents	$	198,784	$	165,669
Investments		168,514		152,407
Trade receivables, net		111,956		126,497
Inventories		78,417		89,730
Deferred taxes		31,161		29,295
Prepaid expenses and other current assets		30,229		34,207
Total current assets		619,061		597,805
Property and equipment, net		78,806		77,294
Long-term investments		8,190		6,420
Goodwill		494,535		495,083
Purchased intangibles, net		55,742		65,369
Deferred taxes		20,923		19,415
Other assets		13,234		16,298
Total assets	$	1,290,491	$	1,277,684
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	56,233	$	57,731
Accrued payroll and related liabilities		18,810		28,711
Taxes payable		5,124		—
Deferred revenue		73,759		69,238
Other accrued liabilities		47,863		58,402
Total current liabilities		201,789		214,082
Non-current liabilities
Deferred revenue		43,155		43,285
Taxes payable		25,978		35,878
Deferred taxes		2,648		2,638
Other long-term liabilities		12,165		13,459
Total liabilities		285,735		309,342
Stockholders’ equity		1,004,756		968,342
Total liabilities and stockholders’ equity	$	1,290,491	$	1,277,684

POLYCOM, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Six Months Ended
	June 30, 2009			June 30, 2008
Cash flows from operating activities:
Net income	$	23,350		$	32,048
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		16,105			13,472
Amortization of purchased intangibles		9,579			10,567
Provision for doubtful accounts		247			245
Provision for excess and obsolete inventories		2,395			1,197
Non-cash stock based compensation		14,088			20,353
Excess tax benefits from stock-based compensation		—			(2,075	)
Loss on disposals of property and equipment		14			68
Changes in assets and liabilities, net of the effect of acquisitions:
Trade receivables		14,295			7,723
Inventories		8,918			(24,471	)
Deferred taxes		(1,492	)		(486	)
Prepaid expenses and other assets		633			(7,147	)
Accounts payable		(1,498	)		(6,594	)
Taxes payable		4,030			(135	)
Other accrued liabilities		(17,071	)		31,001
Net cash provided by operating activities		73,593			75,766
Cash flows from investing activities:
Purchase of property and equipment		(17,083	)		(19,056	)
Purchases of investments		(268,245	)		(206,649	)
Proceeds from sale and maturity of investments		244,619			183,973
Net cash used in investing activities		(40,709	)		(41,732	)
Cash flows from financing activities:
Proceeds from issuance of common stock under employee option and stock purchase plans		15,606			30,001
Repurchase of common stock		(15,375	)		(142,458	)
Excess tax benefits from stock-based compensation		—			2,075
Net cash provided by (used in) financing activities		231			(110,382	)
Net decrease in cash and cash equivalents		33,115			(76,348	)
Cash and cash equivalents, beginning of period		165,669			279,560
Cash and cash equivalents, end of period	$	198,784		$	203,212