Polycom (PLCM) 8-K Polycom Reports Third Quarter 2009 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 THIRD QUARTER 2009 EARNINGS

Consolidated Revenues Grow Over 5 Percent Quarter-to-Quarter;

All Product Lines and Geographic Theatres Generate Sequential Revenue Growth

PLEASANTON, Calif. – Oct. 20, 2009 –Polycom, Inc. (NASDAQ: PLCM), the global leader in telepresence, video and voice communications solutions, today reported its earnings for the third quarter ended Sept. 30, 2009.

Third quarter 2009 consolidated net revenues were $243 million, compared to $231 million for the second quarter of 2009 and to $276 million for the third quarter of 2008. Non-GAAP net income for the third quarter of 2009 was $27 million, or 31 cents per diluted share. This compares to Non-GAAP net income of $24 million, or 29 cents per diluted share, for the second quarter of 2009 and to Non-GAAP net income of $32 million, or 37 cents per diluted share, for the third quarter of 2008. GAAP net income for the third quarter of 2009 was $14 million, or 16 cents per diluted share, compared to $15 million, or 18 cents per diluted share, for the second quarter of 2009, and to $18 million, or 21 cents per diluted share, for the third quarter of 2008.

For the nine months ended Sept. 30, 2009, net revenues were $699 million, compared to $806 million for the first nine months of 2008. Non-GAAP net income for the period was $74 million, or 86 cents per diluted share, compared to $95 million, or $1.08 per diluted share, for the first nine months of 2008. GAAP net income for the nine months ended Sept. 30, 2009 was $37 million, or 44 cents per diluted share, compared to GAAP net income of $50 million, or 57 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 third quarter of 2009 were comprised of:

¡ 68 percent video solutions, or $165 million (53 percent video communications, or $130 million, and 15 percent network systems, or $35 million); and

¡ 32 percent voice communications, or $78 million.

This compares to the third quarter of 2008, in which consolidated net revenues were comprised of:

¡ 65 percent video solutions, or $178 million (52 percent video communications, or $144 million, and 12 percent network systems, or $34 million); and

¡ 35 percent voice communications, or $98 million.

“We are particularly pleased with our results for the third quarter as recent initiatives to improve our go-to-market strategy, coupled with our steadfast commitment to delivering superior innovation, contributed to strong sequential revenue growth,” said Robert Hagerty, Polycom chairman and CEO. “Under the leadership of Andy Miller, our new executive vice president of Global Field Operations, we swiftly executed several actions to improve and intensify customer ownership and support across the enterprise, government, and service provider sectors. Specifically, we made sales management changes, drove new enhancements to our sales analytics, and developed specific programs with our various partners to improve both channel and Polycom margins through deeper customer engagement. These efforts have already yielded a higher level of visibility with our customers and partners alike and, for instance, contributed to the fast turnaround in voice revenue growth.”

“Polycom continues to lead the industry in product innovation, most recently with improvements to our higher margin network infrastructure solution, which contributed to our significant growth and key customer wins during the third quarter. High customer adoption is being driven by our platform’s unique advantages, namely superior HD video quality, flexible port configuration, scalability and redundancy. With this new platform, customers can easily manage large HD video networks across their telepresence, room-based, and desktop video installations. As a result of the early success of our new solution and driven by increased customer demand for even larger video networks, we announced the expansion of this product line with our new Polycom RMX and RSS™ 4000 products, which will begin shipping this quarter.”

“With an improving go-to-market execution, continued success in product innovation, broad strategic and service provider partnerships, and the industry’s most open solution, we believe Polycom is best suited to capture the rapid adoption of business-to-business (B2B) unified collaboration (UC) over the coming quarters and years,” Hagerty concluded.

“Broad customer demand drove sequential revenue growth, increased deferred revenues, and a sharp sequential increase in order backlog in the third quarter,” said Michael Kourey, Polycom senior vice president, finance and administration, and CFO. “As a result of this top-line performance and our proactive inventory reductions, we generated positive operating cash flow of over $39 million, representing Polycom’s 47th consecutive quarter of positive operating cash flow. Our sound balance sheet continues to underpin solid fundamentals and, net of $20 million in share repurchases in Q3, we exited the quarter with $408 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 intended results of actions taken in the Company’s worldwide sales organization, the factors believed to be contributing to turnaround in our voice revenue growth and to our revenue growth and customer wins generally, the drivers of customer adoption and Polycom as being best suited to capture the rapid adoption of B2B unified collaboration 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 impact of increased competition due to consolidation in our industry or competition from companies that are larger or that have greater resources than we do, 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 June 30, 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 Oct. 13, 2009, Polycom will hold a conference call today, Oct. 20, 2009, at 5 p.m. EDT/2 p.m. PT to discuss its third quarter earnings. Robert Hagerty, chairman, president and CEO, Michael Kourey, chief financial officer, and Andrew Miller, executive vice president of global field operations, 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 800.950.7243; and for callers outside of the US and Canada, by calling 212.231.2901, 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 21438721. 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						Nine Months Ended
	September 30, 2009			September 30, 2008			September 30, 2009			September 30, 2008
Revenues:
Product revenues	$	198,955		$	235,397		$	570,668		$	691,693
Service revenues		44,064			40,379			128,452			114,584
Total revenues		243,019			275,776			699,120			806,277
Cost of revenues:
Cost of product revenues		80,338			91,085			229,943			270,536
Cost of service revenues		19,769			18,653			58,459			54,770
Total cost of revenues		100,107			109,738			288,402			325,306
Gross profit		142,912			166,038			410,718			480,971
Operating expenses:
Sales and marketing		68,277			78,614			196,552			221,813
Research and development		27,335			31,756			80,102			97,394
General and administrative		11,291			13,399			34,131			38,819
Total operating expenses		106,903			123,769			310,785			358,026
Operating income		36,009			42,269			99,933			122,945
Interest and other income (expense), net		(637	)		(689	)		(1,995	)		4,493
Income before provision for income taxes		35,372			41,580			97,938			127,438
Provision for income taxes		8,709			9,833			24,438			32,242
Non-GAAP net income	$	26,663		$	31,747		$	73,500		$	95,196
Basic net income per share	$	0.32		$	0.38		$	0.88		$	1.10
Diluted net income per share	$	0.31		$	0.37		$	0.86		$	1.08
Weighted average shares outstanding for basic net income per share		84,189			84,278			83,855			86,387
Weighted average shares outstanding for diluted net income per share		86,199			86,194			85,168			88,215

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						Nine Months Ended
	September 30, 2009			September 30, 2008			September 30, 2009			September 30, 2008
Revenues:
Product revenues	$	198,955		$	235,397		$	570,668		$	691,693
Service revenues		44,064			40,379			128,452			114,584
Total revenues		243,019			275,776			699,120			806,277
Cost of revenues:
Cost of product revenues		84,288			95,249			242,778			283,383
Cost of service revenues		20,509			19,509			60,569			57,527
Total cost of revenues		104,797			114,758			303,347			340,910
Gross profit		138,222			161,018			395,773			465,367
Operating expenses:
Sales and marketing		70,819			81,562			203,605			231,465
Research and development		29,004			34,456			85,532			105,891
General and administrative		13,556			16,101			39,873			46,023
Acquisition-related costs		—			—			—			162
Amortization of purchased intangibles		1,446			1,775			4,344			5,412
Restructuring costs		4,632			4,382			11,476			8,836
Litigation reserves and payments		700			—			700			7,401
Total operating expenses		120,157			138,276			345,530			405,190
Operating income		18,065			22,742			50,243			60,177
Interest and other income (expense), net		(637	)		(689	)		(1,995	)		4,493
Income before provision for income taxes		17,428			22,053			48,248			64,670
Provision for income taxes		3,722			4,111			11,192			14,680
Net income	$	13,706		$	17,942		$	37,056		$	49,990
Basic net income per share	$	0.16		$	0.21		$	0.44		$	0.58
Diluted net income per share	$	0.16		$	0.21		$	0.44		$	0.57
Weighted average shares outstanding for basic net income per share		84,189			84,278			83,855			86,387
Weighted average shares outstanding for diluted net income per share		86,199			86,194			85,168			88,215

POLYCOM, INC.

GAAP to Non-GAAP Reconciliation

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended									Nine Months Ended
	September 30, 2009									September 30, 2009
	GAAP			Excluded			Non-GAAP			GAAP			Excluded			Non-GAAP
Revenues:
Product revenues	$	198,955		$	—		$	198,955		$	570,668		$	—		$	570,668
Service revenues		44,064			—			44,064			128,452			—			128,452
Total revenues		243,019			—			243,019			699,120			—			699,120
Cost of revenues:
Cost of product revenues		84,288			3,950	(a)		80,338			242,778			12,835	(c)		229,943
Cost of service revenues		20,509			740	(b)		19,769			60,569			2,110	(b)		58,459
Total cost of revenues		104,797			4,690			100,107			303,347			14,945			288,402
Gross profit		138,222			(4,690	)		142,912			395,773			(14,945	)		410,718
Operating expenses:
Sales and marketing		70,819			2,542	(b)		68,277			203,605			7,053	(b)		196,552
Research and development		29,004			1,669	(b)		27,335			85,532			5,430	(b)		80,102
General and administrative		13,556			2,265	(b)		11,291			39,873			5,742	(b)		34,131
Acquisition-related costs		—			—			—			—			—			—
Amortization of purchased intangibles		1,446			1,446			—			4,344			4,344			—
Restructuring costs		4,632			4,632			—			11,476			11,476			—
Litigation reserves and payments		700			700			—			700			700			—
Total operating expenses		120,157			13,254			106,903			345,530			34,745			310,785
Operating income		18,065			(17,944	)		36,009			50,243			(49,690	)		99,933
Interest and other income (expense), net		(637	)		—			(637	)		(1,995	)		—			(1,995	)
Income before provision for income taxes		17,428			(17,944	)		35,372			48,248			(49,690	)		97,938
Provision for income taxes		3,722			(4,987	)		8,709			11,192			(13,246	)		24,438
Net income	$	13,706		$	(12,957	)	$	26,663		$	37,056		$	(36,444	)	$	73,500
Basic net income per share	$	0.16		$	(0.16	)	$	0.32		$	0.44		$	(0.44	)	$	0.88
Diluted net income per share	$	0.16		$	(0.15	)	$	0.31		$	0.44		$	(0.42	)	$	0.86
Weighted average shares outstanding for basic net income per share		84,189						84,189			83,855						83,855
Weighted average shares outstanding for diluted net income per share		86,199						86,199			85,168						85,168

(a) Excluded amount includes $3,386 related to the amortization of purchased intangibles for core and existing technologies, $469 for stock-based compensation expense recorded during the period and $95 related to the effect of stock-based compensation on warranty expense rates.

(b) Excluded amount represents stock-based compensation expense recorded during the period.

(c) Excluded amount includes $10,066 related to the amortization of purchased intangibles for core and existing technologies, $1,050 related to past license fees claims, $1,437 for stock-based compensation expense recorded during the period and $282 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									Nine Months Ended
	September 30, 2008									September 30, 2008
	GAAP			Excluded			Non-GAAP			GAAP		Excluded			Non-GAAP
Revenues:
Product revenues	$	235,397		$	—		$	235,397		$	691,693	$	—		$	691,693
Service revenues		40,379			—			40,379			114,584		—			114,584
Total revenues		275,776			—			275,776			806,277		—			806,277
Cost of revenues:
Cost of product revenues		95,249			4,164	(a)		91,085			283,383		12,847	(c)		270,536
Cost of service revenues		19,509			856	(b)		18,653			57,527		2,757	(b)		54,770
Total cost of revenues		114,758			5,020			109,738			340,910		15,604			325,306
Gross profit		161,018			(5,020	)		166,038			465,367		(15,604	)		480,971
Operating expenses:
Sales and marketing		81,562			2,948	(b)		78,614			231,465		9,652	(b)		221,813
Research and development		34,456			2,700	(b)		31,756			105,891		8,497	(b)		97,394
General and administrative		16,101			2,702	(b)		13,399			46,023		7,204	(b)		38,819
Acquisition-related costs		—			—			—			162		162			—
Amortization of purchased intangibles		1,775			1,775			—			5,412		5,412			—
Restructuring costs		4,382			4,382			—			8,836		8,836			—
Litigation reserves and payments		—			—			—			7,401		7,401			—
Total operating expenses		138,276			14,507			123,769			405,190		47,164			358,026
Operating income		22,742			(19,527	)		42,269			60,177		(62,768	)		122,945
Interest and other income (expense), net		(689	)		—			(689	)		4,493		—			4,493
Income before provision for income taxes		22,053			(19,527	)		41,580			64,670		(62,768	)		127,438
Provision for income taxes		4,111			(5,722	)		9,833			14,680		(17,562	)		32,242
Net income	$	17,942		$	(13,805	)	$	31,747		$	49,990	$	(45,206	)	$	95,196
Basic net income per share	$	0.21		$	(0.17	)	$	0.38		$	0.58	$	(0.52	)	$	1.10
Diluted net income per share	$	0.21		$	(0.16	)	$	0.37		$	0.57	$	(0.51	)	$	1.08
Weighted average shares outstanding for basic net income per share		84,278						84,278			86,387					86,387
Weighted average shares outstanding for diluted net income per share		86,194						86,194			88,215					88,215

(a) Excluded amount includes $3,419 related to the amortization of purchased intangibles for core and existing technologies, $652 for stock-based compensation expense recorded during the period and $93 related to the effect of stock-based compensation on warranty expense rates.

(b) Excluded amount represents stock-based compensation expense recorded during the period.

(c) Excluded amount includes $10,360 related to the amortization of purchased intangibles for core and existing technologies, $2,102 for stock-based compensation expense recorded during the period and $385 related to the effect of stock-based compensation on warranty expense rates.

POLYCOM, INC.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

	September 30, 2009		December 31, 2008
ASSETS
Current assets
Cash and cash equivalents	$	244,517	$	165,669
Investments		151,843		152,407
Trade receivables, net		124,678		126,497
Inventories		69,358		89,730
Deferred taxes		25,203		29,295
Prepaid expenses and other current assets		29,750		34,207
Total current assets		645,349		597,805
Property and equipment, net		79,041		77,294
Long-term investments		11,626		6,420
Goodwill		496,112		495,083
Purchased intangibles, net		51,261		65,369
Deferred taxes		23,184		19,415
Other assets		13,112		16,298
Total assets	$	1,319,685	$	1,277,684
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	58,262	$	57,731
Accrued payroll and related liabilities		19,657		28,711
Deferred revenue		76,606		69,238
Other accrued liabilities		50,160		58,402
Total current liabilities		204,685		214,082
Non-current liabilities
Deferred revenue		43,159		43,285
Taxes payable		28,575		35,878
Deferred taxes		2,763		2,638
Other long-term liabilities		12,151		13,459
Total liabilities		291,333		309,342
Stockholders’ equity		1,028,352		968,342
Total liabilities and stockholders’ equity	$	1,319,685	$	1,277,684

POLYCOM, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Nine Months Ended
	September 30, 2009			September 30, 2008
Cash flows from operating activities:
Net income	$	37,056		$	49,990
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		24,931			20,620
Amortization of purchased intangibles		14,405			15,779
Provision for doubtful accounts		247			570
Provision for excess and obsolete inventories		3,124			2,510
Non-cash stock based compensation		21,772			30,212
Excess tax benefits from stock-based compensation		(1,638	)		(4,487	)
Write down of investments other than temporarily impaired		—			921
Loss on disposals of property and equipment		90			102
Changes in assets and liabilities, net of the effect of acquisitions:
Trade receivables		1,572			4,395
Inventories		17,248			(23,542	)
Deferred taxes		1,460			1,447
Prepaid expenses and other assets		213			(9,131	)
Accounts payable		531			(8,935	)
Taxes payable		2,974			(1,278	)
Other accrued liabilities		(10,974	)		36,995
Net cash provided by operating activities		113,011			116,168
Cash flows from investing activities:
Purchase of property and equipment		(25,994	)		(35,287	)
Purchases of investments		(408,413	)		(313,695	)
Proceeds from sale and maturity of investments		400,087			278,888
Net cash paid in purchase acquisitions		—			—
Net cash used in investing activities		(34,320	)		(70,094	)
Cash flows from financing activities:
Proceeds from issuance of common stock under employee option and stock purchase plans		33,958			51,854
Repurchase of common stock		(35,439	)		(222,458	)
Excess tax benefits from stock-based compensation		1,638			4,487
Net cash provided by (used in) financing activities		157			(166,117	)
Net increase (decrease) in cash and cash equivalents		78,848			(120,043	)
Cash and cash equivalents, beginning of period		165,669			279,560
Cash and cash equivalents, end of period	$	244,517		$	159,517