Polycom (PLCM) 8-K Polycom Reports Fourth Quarter and Fiscal Year 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 Fourth Quarter and Fiscal Year 2009 Earnings

Consolidated Fourth Quarter Revenues Return to Year-Over-Year Growth at $268 Million;

Revenue Growth of 10 Percent Quarter-to-Quarter;

Record Quarterly Operating Cash Flow of $68 Million

PLEASANTON, Calif. – Jan. 26, 2010 –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, 2009.

Fourth quarter 2009 consolidated net revenues were $268 million, compared to $263 million for the fourth quarter of 2008. Non-GAAP net income for the fourth quarter of 2009 was $28 million, or 33 cents per diluted share. This compares to Non-GAAP net income of $35 million, or 42 cents per diluted share, for the fourth quarter of 2008. GAAP net income for the fourth quarter of 2009 was $13 million, or 15 cents per diluted share, compared to $26 million, or 30 cents per diluted share, for the same period last year.

For the year ended Dec. 31, 2009, net revenues were $967 million, compared to $1,069 million for the year ended Dec. 31, 2008. Non-GAAP net income for the year ended Dec. 31, 2009 was $102 million, or $1.19 per diluted share, compared to $130 million, or $1.49 per diluted share, for the comparable period of 2008. GAAP net income for the year ended Dec. 31, 2009 was $50 million, or 58 cents per diluted share, compared to GAAP net income of $76 million, or 87 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 2009 were comprised of:

• 70 percent video solutions, or $187 million (53 percent video communications, or $143 million, and 17 percent network systems, or $44 million); and

• 30 percent voice communications, or $81 million.

On a product line basis, consolidated net revenues for the fourth quarter of 2008 were comprised of:

• 67 percent video solutions, or $176 million (54 percent video communications, or $142 million, and 13 percent network systems, or $34 million); and

• 33 percent voice communications, or $87 million.

“Polycom’s strategic investment plan announced last quarter has already yielded positive results, evidenced by double-digit sequential revenue growth and record backlog during the fourth quarter,” said Robert Hagerty, Polycom chairman and CEO. “We added go-to-market coverage in key geographies and verticals and deepened our strategic partnerships, all of which helped to accelerate broad-based improvements in our revenue engine and solutions-selling capability. With our thriving go-to-market team and best of breed product portfolio, we are enabling our growing customer base to capture the benefits of Unified Collaboration in meeting rooms, at the desktop, and while mobile.”

“A critical component of our investment plan is building an ecosystem of strategic partners to deliver customers the best and most integrated collaboration solutions. This increased investment in time and resources has resulted in several powerful partnerships, including Avaya, BT, IBM, Juniper and Siemens. In combination with our improved go-to-market capability, our strategic partnerships are enabling Polycom to deliver an open architecture solution that is easy to adopt and use. As the largest pure play Unified Collaboration company with an open platform, we are solidifying our role as the ecosystem’s partner of choice,” Hagerty concluded.

“Strong customer demand, supported by our investment plan, fueled our revenue growth and drove record order backlog and deferred revenues,” said Michael Kourey, Polycom senior vice president, finance and administration, and CFO. “As a result of this operating performance and working capital management, we generated a record positive operating cash flow of $68 million, representing Polycom’s 48th consecutive quarter of positive operating cash flow. We exited the quarter with $467 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 results yielded by the Company’s strategic investment plan and the Company’s future role as the ecosystem’s partner of choice. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the fact that the Company’s strategic investment plan may not yield the intended results or may take longer than originally anticipated to achieve such results, 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 Sept. 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 Jan. 25, 2010, Polycom will hold a conference call today, Jan. 26, 2010, at 5 p.m. EST/2 p.m. PST 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 800.952.4629; and for callers outside of the US and Canada, by calling 212.231.2903, 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 21455246. 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.

© 2010 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, 2009			December 31, 2008			December 31, 2009			December 31, 2008
Revenues:
Product revenues	$	220,840		$	222,067		$	791,508		$	913,760
Service revenues		47,024			40,976			175,476			155,560
Total revenues		267,864			263,043			966,984			1,069,320
Cost of revenues:
Cost of product revenues		88,946			87,072			318,889			357,608
Cost of service revenues		21,023			18,233			79,482			73,003
Total cost of revenues		109,969			105,305			398,371			430,611
Gross profit		157,895			157,738			568,613			638,709
Operating expenses:
Sales and marketing		78,235			70,426			274,787			292,239
Research and development		29,454			28,051			109,556			125,445
General and administrative		12,414			13,334			46,545			52,153
Total operating expenses		120,103			111,811			430,888			469,837
Operating income		37,792			45,927			137,725			168,872
Interest and other income (expense), net		(92	)		(2,067	)		(2,087	)		2,426
Income before provision for income taxes		37,700			43,860			135,638			171,298
Provision for income taxes		9,282			8,698			33,720			40,940
Non-GAAP net income	$	28,418		$	35,162		$	101,918		$	130,358
Basic net income per share	$	0.34		$	0.42		$	1.21		$	1.52
Diluted net income per share	$	0.33		$	0.42		$	1.19		$	1.49
Weighted average shares outstanding for basic net income per share		84,432			83,301			84,000			85,616
Weighted average shares outstanding for diluted net income per share		86,732			84,338			85,559			87,246

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, 2009			December 31, 2008			December 31, 2009			December 31, 2008
Revenues:
Product revenues	$	220,840		$	222,067		$	791,508		$	913,760
Service revenues		47,024			40,976			175,476			155,560
Total revenues		267,864			263,043			966,984			1,069,320
Cost of revenues:
Cost of product revenues		92,918			90,736			335,696			374,119
Cost of service revenues		21,743			18,652			82,312			76,179
Total cost of revenues		114,661			109,388			418,008			450,298
Gross profit		153,203			153,655			548,976			619,022
Operating expenses:
Sales and marketing		81,707			71,971			285,312			303,436
Research and development		32,043			29,397			117,575			135,288
General and administrative		14,138			14,178			54,011			60,201
Acquisition-related costs		—			—			—			162
Amortization of purchased intangibles		1,456			1,686			5,800			7,098
Restructuring costs		4,459			1,480			15,935			10,316
Litigation reserves and payments		—			—			700			7,401
Total operating expenses		133,803			118,712			479,333			523,902
Operating income		19,400			34,943			69,643			95,120
Interest and other income (expense), net		(92	)		(2,067	)		(2,087	)		2,426
Income before provision for income taxes		19,308			32,876			67,556			97,546
Provision for income taxes		6,485			7,170			17,677			21,850
Net income	$	12,823		$	25,706		$	49,879		$	75,696
Basic net income per share	$	0.15		$	0.31		$	0.59		$	0.88
Diluted net income per share	$	0.15		$	0.30		$	0.58		$	0.87
Weighted average shares outstanding for basic net income per share		84,432			83,301			84,000			85,616
Weighted average shares outstanding for diluted net income per share		86,732			84,338			85,559			87,246

POLYCOM, INC.

GAAP to Non-GAAP Reconciliation

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended December 31, 2009									Twelve Months Ended December 31, 2009
	GAAP			Excluded			Non-GAAP			GAAP			Excluded			Non-GAAP
Revenues:
Product revenues	$	220,840		$	—		$	220,840		$	791,508		$	—		$	791,508
Service revenues		47,024			—			47,024			175,476			—			175,476
Total revenues		267,864			—			267,864			966,984			—			966,984
Cost of revenues:
Cost of product revenues		92,918			3,972	(a)		88,946			335,696			16,807	(d)		318,889
Cost of service revenues		21,743			720	(b)		21,023			82,312			2,830	(b)		79,482
Total cost of revenues		114,661			4,692			109,969			418,008			19,637			398,371
Gross profit		153,203			(4,692	)		157,895			548,976			(19,637	)		568,613
Operating expenses:
Sales and marketing		81,707			3,472	(b)		78,235			285,312			10,525	(b)		274,787
Research and development		32,043			2,589	(c)		29,454			117,575			8,019	(e)		109,556
General and administrative		14,138			1,724	(b)		12,414			54,011			7,466	(b)		46,545
Acquisition-related costs		—			—			—			—			—			—
Amortization of purchased intangibles		1,456			1,456			—			5,800			5,800			—
Restructuring costs		4,459			4,459			—			15,935			15,935			—
Litigation reserves and payments		—			—			—			700			700			—
Total operating expenses		133,803			13,700			120,103			479,333			48,445			430,888
Operating income		19,400			(18,392	)		37,792			69,643			(68,082	)		137,725
Interest and other income (expense), net		(92	)		—			(92	)		(2,087	)		—			(2,087	)
Income before provision for income taxes		19,308			(18,392	)		37,700			67,556			(68,082	)		135,638
Provision for income taxes		6,485			(2,797	)		9,282			17,677			(16,043	)		33,720
Net income	$	12,823		$	(15,595	)	$	28,418		$	49,879		$	(52,039	)	$	101,918
Basic net income per share	$	0.15		$	(0.19	)	$	0.34		$	0.59		$	(0.62	)	$	1.21
Diluted net income per share	$	0.15		$	(0.18	)	$	0.33		$	0.58		$	(0.61	)	$	1.19
Weighted average shares outstanding for basic net income per share		84,432						84,432			84,000						84,000
Weighted average shares outstanding for diluted net income per share		86,732						86,732			85,559						85,559

(a) Excluded amount includes $3,404 related to the amortization of purchased intangibles for core and existing technologies, $449 for stock-based compensation expense recorded during the period and $119 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 $2,220 related to stock-based compensation expense recorded during the period and $369 related to severance, legal and other benefits due under the Severance Agreement and Release between the Company and Sunil K. Bhalla dated November 25, 2009.

(d) Excluded amount includes $13,472 related to the amortization of purchased intangibles for core and existing technologies, $1,050 related to past license fees claims, $1,886 for stock-based compensation expense recorded during the period and $399 related to the effect of stock-based compensation on warranty expense rates.

(e) Excluded amount includes $7,650 related to stock-based compensation expense recorded during the period and $369 related to severance, legal and other benefits due under the Severance Agreement and Release between the Company and Sunil K. Bhalla dated November 25, 2009.

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 and other income (expense), net		(2,067	)		—			(2,067	)		2,426		—			2,426
Income before provision for income taxes		32,876			(10,984	)		43,860			97,546		(73,752	)		171,298
Provision for income taxes		7,170			(1,528	)		8,698			21,850		(19,090	)		40,940
Net income	$	25,706		$	(9,456	)	$	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 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 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 during the period and $442 related to the effect of stock-based compensation on warranty expense rates.

POLYCOM, INC.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

	December 31, 2009		December 31, 2008
ASSETS
Current assets
Cash and cash equivalents	$	331,098	$	165,669
Investments		123,686		152,407
Trade receivables, net		132,813		126,497
Inventories		76,863		89,730
Deferred taxes		23,824		29,295
Prepaid expenses and other current assets		24,299		34,207
Total current assets		712,583		597,805
Property and equipment, net		81,252		77,294
Long-term investments		12,687		6,420
Goodwill		495,299		495,083
Purchased intangibles, net		46,255		65,369
Deferred taxes		23,943		19,415
Other assets		13,882		16,298
Total assets	$	1,385,901	$	1,277,684
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	87,233	$	57,731
Accrued payroll and related liabilities		23,707		28,711
Taxes payable		617		—
Deferred revenue		79,504		69,238
Other accrued liabilities		52,360		58,402
Total current liabilities		243,421		214,082
Non-current liabilities
Deferred revenue		46,787		43,285
Taxes payable		27,111		35,878
Deferred taxes		2,702		2,638
Other long-term liabilities		12,027		13,459
Total liabilities		332,048		309,342
Stockholders’ equity		1,053,853		968,342
Total liabilities and stockholders’ equity	$	1,385,901	$	1,277,684

POLYCOM, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Twelve Months Ended
	December 31, 2009			December 31, 2008
Cash flows from operating activities:
Net income	$	49,879		$	75,696
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		34,075			28,507
Amortization of purchased intangibles		19,268			20,798
Provision for doubtful accounts		247			1,665
Provision for excess and obsolete inventories		3,830			3,775
Non-cash stock based compensation		30,358			34,635
Excess tax benefits from stock-based compensation		(3,082	)		(4,526	)
Write down of investments other than temporarily impaired		—			981
Loss on disposals of property and equipment		706			478
Changes in assets and liabilities, net of the effect of acquisitions:
Trade receivables		(6,563	)		10,145
Inventories		9,037			(22,399	)
Deferred taxes		2,223			1,133
Prepaid expenses and other assets		8,474			(10,448	)
Accounts payable		29,502			(18,018	)
Taxes payable		2,222			2,794
Other accrued liabilities		588			41,801
Net cash provided by operating activities		180,764			167,017
Cash flows from investing activities:
Purchase of property and equipment		(37,766	)		(47,457	)
Purchases of investments		(538,440	)		(451,833	)
Proceeds from sale and maturity of investments		556,731			384,381
Net cash used in investing activities		(19,475	)		(114,909	)
Cash flows from financing activities:
Proceeds from issuance of common stock under employee option and stock purchase plans		36,497			52,075
Repurchase of common stock		(35,439	)		(222,600	)
Excess tax benefits from stock-based compensation		3,082			4,526
Net cash provided by (used in) financing activities		4,140			(165,999	)
Net increase (decrease) in cash and cash equivalents		165,429			(113,891	)
Cash and cash equivalents, beginning of period		165,669			279,560
Cash and cash equivalents, end of period	$	331,098		$	165,669