Polycom Reports Third Quarter 2010 Earnings

Q3 Revenue Growth of 27 Percent Year-over-Year to a Record $308 Million

(PresseBox) (London/Slough, Uk and Pleasanton, U.S., ) Polycom, Inc. (Nasdaq: PLCM), a global leader in unified communications solutions, today reported its earnings for the third quarter ended Sept. 30, 2010.

Third quarter 2010 consolidated net revenues were a record $308 million, compared to $243 million for the third quarter of 2009. GAAP net income for the third quarter of 2010 was $17 million, or 20 cents per diluted share, compared to $14 million, or 16 cents per diluted share, for the same period last year. Non-GAAP net income for the third quarter of 2010 was $34 million, or 38 cents per diluted share. This compares to Non-GAAP net income of $27 million, or 31 cents per diluted share, for the third quarter of 2009.

For the nine months ended Sept. 30, 2010, net revenues were $879 million, compared to $699 million for the first nine months of 2009. GAAP net income for the nine months ended Sept. 30, 2010 was $35 million, or 40 cents per diluted share, compared to GAAP net income of $37 million, or 44 cents per diluted share, for the same period last year. Non-GAAP net income for the period was $89 million, or $1.02 per diluted share, compared to $74 million, or 86 cents per diluted share, for the first nine months of 2009.

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 third quarter of 2010 were comprised of:

- 67 percent video solutions, or $206 million (52 percent video communications, or $160 million, and 15 percent network systems, or $46 million); and

- 33 percent voice communications, or $102 million.

On a product line basis, 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.

"Q3 represented a hallmark quarter for Polycom across the business, validating the speed and precision with which we have executed our go-to-market strategy and underscoring our unique role as the UC ecosystem partner of choice," said Andrew Miller, Polycom president and CEO. "Importantly, we generated sharp growth in network systems revenues, driven by the launch of the Polycom UC Intelligent Core, leveraging our best-in-class infrastructure technology and our highly-effective sales engine. These customer wins at the core not only contributed to Polycom's record revenues but, more importantly, bodes well for the proliferation of our collaboration solution into our growing customer base. We also achieved significant gains with the Polycom Open Collaboration Network, which was punctuated by our new strategic relationship with Microsoft where we are jointly developing and marketing a unified communications solution that leverages the demand for the next-generation Microsoft Lync UC server."

"Looking to Q4 and 2011, we believe Polycom is in a unique position to capture the emerging network effect of UC adoption by enterprise, public sector, service providers, SMB, and, ultimately, the connected home. In order to most effectively deliver on this mounting demand, we recruited a slate of world-class executives from industry leading companies to execute on the strategy that we set forth one year ago today. Through our unparalleled innovations, strategic partnerships, and customer-centric go-to-market capabilities, we have been taking share and, more importantly, leading this industry to unprecedented levels of customer adoption. The strategic investment plan is working, our margins are expanding, and we are now staged to take this business to the next level," concluded Miller.

"In the third quarter, revenues grew 27 percent year-over-year, underpinned by record bookings that generated record backlog exiting Q3," said Michael Kourey, Polycom executive vice president, finance and administration, and CFO. "Driven by network systems growth of 15 percent sequentially and 31 percent year-over-year and the robust demand environment for Polycom's entire solution, gross margins increased more than one point sequentially and over two points year-over-year. As a result of these strong operating results and effective working capital management, we generated third quarter positive operating cash flow of $41 million, exiting the third quarter with $500 million in cash and investments and no debt."

Polycom Germany GmbH

Polycom, Inc. (Nasdaq: PLCM) is a global leader in unified communications solutions with industry-leading telepresence, video, voice and infrastructure solutions built on open standards. Polycom powers smarter conversations, transforming lives and businesses worldwide. Please visit www.polycom.com for more information or connect with Polycom on Twitter, Facebook, and LinkedIn.

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 future proliferation of our collaboration solution into a growing customer base and Polycom as being uniquely positioned to capture the emerging network effect of UC adoption and as leading the industry to unprecedented levels of customer adoption. 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 continuing 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 and external market factors, 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 that may cause disruption to the business, any disruptive impact to the Company that may result from the new executive hires, the impact of 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, 2010, and in other reports filed by Polycom with the SEC. Polycom disclaims any intent or obligations to update these forward-looking statements.

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.

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