SOURCE: Polycom

Polycom

July 21, 2011 16:05 ET

Polycom Reports Second Quarter 2011 Earnings

Q2 Revenue Growth of 24 Percent Year-Over-Year to a Record $366 Million

PLEASANTON, CA--(Marketwire - Jul 21, 2011) - Polycom, Inc. (NASDAQ: PLCM), a global leader in unified communications (UC), today reported its earnings for the second quarter ended June 30, 2011.

Second quarter 2011 consolidated net revenues were a record $366 million, compared to $295 million for the second quarter of 2010. GAAP net income for the second quarter of 2011 was $29 million, or 16 cents per diluted share, compared to $13 million, or 7 cents per diluted share, for the same period last year. Non-GAAP net income for the second quarter of 2011 was $48 million, or 26 cents per diluted share, compared to non-GAAP net income of $30 million, or 17 cents per diluted share, for the second quarter of 2010.

For the six months ended June 30, 2011, net revenues were $710 million, compared to $571 million for the first six months of 2010. GAAP net income for the six months ended June 30, 2011 was $63 million, or 34 cents per diluted share, compared to GAAP net income of $18 million, or 10 cents per diluted share, for the same period last year. Non-GAAP net income for the period was $91 million, or 50 cents per diluted share, compared to $55 million, or 32 cents per diluted share, for the first six months of 2010.

Note that the share and per share data for all periods presented in this release have been adjusted to reflect a two-for-one stock split that was effective July 1, 2011.

The reconciliation between GAAP net income and non-GAAP net income is provided in the tables at the end of this release.

On a geographic basis, consolidated net revenues for the second quarter of 2011 were comprised of:

--  52 percent Americas, or $189.2 million;
--  24 percent Europe, Middle East, and Africa, or $89.3 million; and
--  24 percent Asia Pacific, or $87.1 million.

On a geographic basis, consolidated net revenues for the second quarter of 2010 were comprised of:

--  53 percent Americas, or $155.8 million;
--  25 percent Europe, Middle East, and Africa, or $74.3 million; and
--  22 percent Asia Pacific, or $64.5 million.

"Q2 was a hallmark quarter for Polycom, both in terms of strategic achievement and financial accomplishments," said Andrew Miller, Polycom president and CEO. "We made significant progress with our key partners through the Polycom Open Collaboration Network™, experienced significant acceleration in the adoption of our UC Intelligent Core™ network infrastructure solutions, and again benefitted from broad-based demand for our suite of solutions across all major geographies."

"Specifically, during the second quarter, we announced the acquisition of HP's Visual Collaboration business which is expected to close later this month, and the execution of a strategic agreement that makes Polycom an exclusive partner to HP for our wide array of telepresence and video solutions. We also expanded our strategic partnership with Microsoft through our upcoming launch of the Polycom CX7000 unified collaboration system that natively integrates with Microsoft's leading Lync platform. Built on this and our numerous other strategic successes with Microsoft, we were thrilled to be named the 2011 Microsoft Unified Communications Innovation Partner of the Year. As a further testament to our role as UC ecosystem partner of choice, we also announced the launch of the industry's first open video exchange cloud with AT&T, BT Conferencing, Telefonica, Verizon, and other global leading service providers, enabling B2B and B2C video communications and the network effect of video adoption worldwide."

"In Q2, we continued to experience strong demand in emerging markets such as China, India, Russia, and Brazil and also began to see momentum in select verticals such as the US Federal market, yielding record revenues in each major geography and product category. In fact, in order to fully optimize our opportunity, I have added Tracey Newell to the executive team as Polycom's new executive vice president of Global Sales. Each of the theatre presidents and global sales operations will report to her in this newly created role. Tracey is the ideal fit for this position and an excellent addition to the team with her proven go-to-market track record in both Cloud and customer premise-based sales at Juniper Networks and Cisco Systems."

"In summary, we continue to leverage our unparalleled position in the UC industry as the only independent provider of scale. Through our Cloud, Mobility, and Ecosystem advances and market gains, we believe Polycom is poised to capture the momentum of the video communications market. With these exciting market dynamics and Polycom's industry-leading capabilities, we expect to continue to deliver strong revenue growth and continued operating margin expansion," concluded Miller.

"Polycom generated strong sequential and year-over-year growth in revenues, gross margins, and operating margins in the second quarter," said Michael Kourey, Polycom's executive vice president, finance and administration, and CFO. "Coupled with effective working capital management, we delivered a record quarterly operating cash flow of $85 million. As a result of these excellent operating results, Polycom exited Q2 with $609 million in cash and investments and no debt."

About Polycom

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 closing of Polycom's acquisition of HP's Visual Collaboration business, our future offering of the Polycom CX7000 unified collaboration system, Polycom as being poised to capture the momentum of the video communications market and the future delivery of strong revenue growth and expanding operating margins by Polycom. 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; our ability to successfully integrate our acquisitions into our business; 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 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, 2011, 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.

Earnings Call Details

As has been noted on the Company's web site since July 7, 2011, Polycom will hold a conference call today, July 21, 2011, at 5 p.m. EDT/2 p.m. PDT to discuss its second quarter earnings. Andrew Miller, president and CEO, and Michael Kourey, chief financial officer, will host the conference call. You may participate by viewing the webcast at www.polycom.com/investors or, for callers in the US and Canada, by calling 800.913.1647; and for callers outside of the US and Canada, by calling 212.231.2900. The pass code for the call is "Polycom." A replay of the call will also be available at www.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 21529290. A replay of the call will be available on www.polycom.com for approximately 12 months.

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.

© 2011 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.
                      GAAP to Non-GAAP Reconciliation
                 (In thousands, except per share amounts)
                                (Unaudited)



                                               Three Months Ended
                                       -----------------------------------
                                                  June 30, 2011
                                       -----------------------------------
                                         GAAP     Excluded       Non-GAAP
                                       ---------  ---------      ---------

 Revenues:
    Product revenues                   $ 301,458  $       -      $ 301,458
    Service revenues                      64,151          -         64,151
                                       ---------  ---------      ---------
       Total revenues                    365,609          -        365,609
                                       ---------  ---------      ---------

 Cost of revenues:
    Cost of product revenues             119,664      3,514  (a)   116,150
    Cost of service revenues              24,952      1,044  (b)    23,908
                                       ---------  ---------      ---------
       Total cost of revenues            144,616      4,558        140,058
                                       ---------  ---------      ---------

 Gross profit                            220,993     (4,558)       225,551
                                       ---------  ---------      ---------

 Operating expenses:
    Sales and marketing                  106,988      6,401  (b)   100,587
    Research and development              49,296      3,715  (b)    45,581
    General and administrative            21,217      4,240  (c)    16,977
    Amortization of purchased
     intangibles                           1,702      1,702              -
    Restructuring costs                      897        897              -
    Acquisition-related costs              1,997      1,997              -
                                       ---------  ---------      ---------
       Total operating expenses          182,097     18,952        163,145
                                       ---------  ---------      ---------

 Operating income                         38,896    (23,510)        62,406

 Other income (expense), net                (728)         -           (728)
                                       ---------  ---------      ---------

 Income before provision for income
  taxes                                   38,168    (23,510)        61,678
 Provision for income taxes                9,625     (4,402) (e)    14,027
                                       ---------  ---------      ---------
 Net income                            $  28,543  $ (19,108)     $  47,651
                                       =========  =========      =========

 Basic net income per share            $    0.16  $   (0.11)     $    0.27
                                       =========  =========      =========

 Diluted net income per share          $    0.16  $   (0.10)     $    0.26
                                       =========  =========      =========

 Weighted average shares outstanding
  for basic net income per share         176,670                   176,670
                                       =========                 =========

 Weighted average shares outstanding
  for diluted net income per share       182,329                   182,329
                                       =========                 =========





                                                 Six Months Ended
                                       -----------------------------------
                                                  June 30, 2011
                                       -----------------------------------
                                         GAAP     Excluded       Non-GAAP
                                       ---------  ---------      ---------

 Revenues:
    Product revenues                   $ 586,927  $       -      $ 586,927
    Service revenues                     122,847          -        122,847
                                       ---------  ---------      ---------
       Total revenues                    709,774          -        709,774
                                       ---------  ---------      ---------

 Cost of revenues:
    Cost of product revenues             231,651      7,553  (a)   224,098
    Cost of service revenues              51,376      1,626  (b)    49,750
                                       ---------  ---------      ---------
       Total cost of revenues            283,027      9,179        273,848
                                       ---------  ---------      ---------

 Gross profit                            426,747     (9,179)       435,926
                                       ---------  ---------      ---------

 Operating expenses:
    Sales and marketing                  207,609     11,225  (b)   196,384
    Research and development              93,527      6,115  (b)    87,412
    General and administrative            39,646      7,215  (c)    32,431
    Amortization of purchased
     intangibles                           3,084      3,084              -
    Restructuring costs                    3,475      3,475              -
    Acquisition-related costs              4,346      4,346              -
                                       ---------  ---------      ---------
       Total operating expenses          351,687     35,460        316,227
                                       ---------  ---------      ---------

 Operating income                         75,060    (44,639)       119,699

 Other income (expense), net              (2,007)      (500) (d)    (1,507)
                                       ---------  ---------      ---------

 Income before provision for income
  taxes                                   73,053    (45,139)       118,192
 Provision for income taxes               10,532    (16,776) (e)    27,308
                                       ---------  ---------      ---------
 Net income                            $  62,521  $ (28,363)     $  90,884
                                       =========  =========      =========

 Basic net income per share            $    0.36  $   (0.16)     $    0.52
                                       =========  =========      =========

 Diluted net income per share          $    0.34  $   (0.16)     $    0.50
                                       =========  =========      =========

 Weighted average shares outstanding
  for basic net income per share         175,863                   175,863
                                       =========                 =========

 Weighted average shares outstanding
  for diluted net income per share       181,464                   181,464
                                       =========                 =========


(a) For the three months ended June 30, 2011, the excluded amount includes
$2,789 related to the amortization of purchased intangibles for core and
existing technologies, $608 for stock-based compensation expense recorded
during the period and $117 related to the effect of stock-based
compensation on warranty expense rates. For the six months ended June 30,
2011, the excluded amount includes $6,075 related to the amortization of
purchased intangibles for core and existing technologies, $1,250 for
stock-based compensation expense recorded during the period and $228
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) For the three months ended June 30, 2011, the excluded amount includes
$4,116 for stock-based compensation expense recorded during the period and
$124 for the legal costs related to the indemnification of a former officer
of the Company. For the six months ended June 30, 2011, the excluded amount
includes $5,923 for stock-based compensation expense recorded during the
period and $1,292 for the legal costs related to the indemnification of a
former officer of the Company.

(d) Excluded amount represents the impairment of an investment in a private
company.

(e) For the three months ended June 30, 2011 the excluded amount represents
the tax impact on expenses which are excluded in items (a)-(c) above.  For
the six months ended June 30, 2011, the excluded amount represents the tax
impact on expenses which are excluded in items (a) - (d) above, as well as
a $7,487 benefit related to the resolution of a multi-year tax audit.






                              POLYCOM, INC.
                      GAAP to Non-GAAP Reconciliation
                 (In thousands, except per share amounts)
                                (Unaudited)





                                               Three Months Ended
                                       ------------------------------------
                                                  June 30, 2010
                                       ------------------------------------
                                         GAAP     Excluded       Non-GAAP
                                       ---------- ---------      ---------

 Revenues:
    Product revenues                   $  244,795 $       -      $ 244,795
    Service revenues                       49,840         -         49,840
                                       ---------- ---------      ---------
       Total revenues                     294,635         -        294,635
                                       ---------- ---------      ---------

 Cost of revenues:
    Cost of product revenues               99,001     4,011  (a)    94,990
    Cost of service revenues               24,733       960  (b)    23,773
                                       ---------- ---------      ---------
       Total cost of revenues             123,734     4,971        118,763
                                       ---------- ---------      ---------

 Gross profit                             170,901    (4,971)       175,872
                                       ---------- ---------      ---------

 Operating expenses:
    Sales and marketing                    94,361     7,273  (b)    87,088
    Research and development               36,240     2,367  (b)    33,873
    General and administrative             20,205     6,194  (c)    14,011
    Amortization of purchased
     intangibles                            1,421     1,421              -
    Restructuring costs                     1,524     1,524              -
    Litigation reserves and payments        1,235     1,235              -
                                       ---------- ---------      ---------
       Total operating expenses           154,986    20,014        134,972
                                       ---------- ---------      ---------

 Operating income                          15,915   (24,985)        40,900

 Other income (expense), net                  357       957  (d)      (600)
                                       ---------- ---------      ---------

 Income before provision for income
  taxes                                    16,272   (24,028)        40,300
 Provision for income taxes                 3,668    (6,496)        10,164
                                       ---------- ---------      ---------
 Net income                            $   12,604 $ (17,532)     $  30,136
                                       ========== =========      =========

 Basic net income per share            $     0.07 $   (0.11)     $    0.18
                                       ========== =========      =========

 Diluted net income per share          $     0.07 $   (0.10)     $    0.17
                                       ========== =========      =========

 Weighted average shares outstanding
  for basic net income per share          170,316                  170,316
                                       ==========                =========

 Weighted average shares outstanding
  for diluted net income per share        176,488                  176,488
                                       ==========                =========





                                                 Six Months Ended
                                       -----------------------------------
                                                  June 30, 2010
                                       -----------------------------------
                                         GAAP     Excluded       Non-GAAP
                                       ---------  ---------      ---------

 Revenues:
    Product revenues                   $ 472,852  $       -      $ 472,852
    Service revenues                      97,937          -         97,937
                                       ---------  ---------      ---------
       Total revenues                    570,789          -        570,789
                                       ---------  ---------      ---------

 Cost of revenues:
    Cost of product revenues             191,550      8,265  (a)   183,285
    Cost of service revenues              49,019      2,139  (b)    46,880
                                       ---------  ---------      ---------
       Total cost of revenues            240,569     10,404        230,165
                                       ---------  ---------      ---------

 Gross profit                            330,220    (10,404)       340,624
                                       ---------  ---------      ---------

 Operating expenses:
    Sales and marketing                  185,277     13,564  (b)   171,713
    Research and development              70,145      5,449  (b)    64,696
    General and administrative            36,187      8,691  (c)    27,496
    Amortization of purchased
     intangibles                           2,861      2,861              -
    Restructuring costs                    3,273      3,273              -
    Litigation reserves and payments       1,235      1,235              -
                                       ---------  ---------      ---------
       Total operating expenses          298,978     35,073        263,905
                                       ---------  ---------      ---------

 Operating income                         31,242    (45,477)        76,719

 Other income (expense), net              (8,224)    (5,573) (d)    (2,651)
                                       ---------  ---------      ---------

 Income before provision for income
  taxes                                   23,018    (51,050)        74,068
 Provision for income taxes                5,003    (13,599)        18,602
                                       ---------  ---------      ---------
 Net income                            $  18,015  $ (37,451)     $  55,466
                                       =========  =========      =========

 Basic net income per share            $    0.11  $   (0.22)     $    0.33
                                       =========  =========      =========

 Diluted net income per share          $    0.10  $   (0.22)     $    0.32
                                       =========  =========      =========

 Weighted average shares outstanding
  for basic net income per share         169,822                   169,822
                                       =========                 =========

 Weighted average shares outstanding
  for diluted net income per share       175,608                   175,608
                                       =========                 =========


(a) For the three months ended June 30, 2010, the excluded amount includes
$3,312 related to the amortization of purchased intangibles for core and
existing technologies, $587 for stock-based compensation expense recorded
during the period and $112 related to the effect of stock-based
compensation on warranty expense rates. For the six months ended June 30,
2010, the excluded amount includes $6,675 related to the amortization of
purchased intangibles for core and existing technologies, $1,357 for
stock-based compensation expense recorded during the period and $233
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) For the three months ended June 30, 2010, the excluded amount includes
$2,607 for stock-based compensation expense recorded during the period and
$3,587 for severance, legal and other costs associated with the CEO
transition in May 2010.  For the six months ended June 30, 2010, the
excluded amount includes $5,104 for stock-based compensation expense
recorded during the period and $3,587 for severance, legal and other costs
associated with the CEO transition in May 2010.

(d) For the three months ended June 30, 2010, the excluded amount
represents the net gain realized during the period on preferred equity
securities for which we previously recognized a loss as the securities were
deemed to be other than temporarily impaired. For the six months ended June
30, 2010, the excluded amount represents the loss recognized during the
period on preferred securities considered to be other than temporarily
impaired, net of any subsequent realized gains.






                              POLYCOM, INC.
                  Condensed Consolidated Balance Sheets
                              (In thousands)
                                (Unaudited)





                                                    June 30,   December 31,
                                                      2011         2010
                                                  ------------ ------------

 ASSETS
 Current assets
    Cash and cash equivalents                     $    363,559 $    324,188
    Short-term investments                             197,239      170,154
    Trade receivables, net                             186,897      154,507
    Inventories                                        104,209      113,994
    Deferred taxes                                      39,412       32,357
    Prepaid expenses and other current assets           44,669       41,884
                                                  ------------ ------------
       Total current assets                            935,985      837,084

 Property and equipment, net                           117,504      110,321
 Long-term investments                                  48,168       41,316
 Goodwill and purchased intangibles                    567,299      519,685
 Deferred taxes                                         16,613       18,388
 Other assets                                           19,344       20,611
                                                  ------------ ------------
       Total assets                               $  1,704,913 $  1,547,405
                                                  ============ ============



 LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities
    Accounts payable                              $     95,630 $     90,890
    Accrued payroll and related liabilities             43,494       35,222
    Deferred revenue                                   121,913      104,919
    Other accrued liabilities                           60,863       54,651
                                                  ------------ ------------
       Total current liabilities                       321,900      285,682

 Non-current liabilities
 Deferred revenue                                       65,400       55,292
 Taxes payable                                          14,537       16,690
 Deferred taxes                                            864        2,057
 Other non-current liabilities                          13,066       12,714
                                                  ------------ ------------
       Total liabilities                               415,767      372,435

 Stockholders' equity                                1,289,146    1,174,970
                                                  ------------ ------------
       Total liabilities and stockholders'
        equity                                    $  1,704,913 $  1,547,405
                                                  ============ ============






                              POLYCOM, INC.
              Condensed Consolidated Statements of Operations
                 (In thousands, except per share amounts)
                                (Unaudited)





                                 Three Months Ended     Six Months Ended
                                --------------------  --------------------
                                June 30,   June 30,   June 30,   June 30,
                                  2011       2010       2011       2010
                                ---------  ---------- ---------  ---------


 Revenues:
    Product revenues            $ 301,458  $  244,795 $ 586,927  $ 472,852
    Service revenues               64,151      49,840   122,847     97,937
                                ---------  ---------- ---------  ---------
       Total revenues             365,609     294,635   709,774    570,789
                                ---------  ---------- ---------  ---------

 Cost of revenues:
    Cost of product revenues      119,664      99,001   231,651    191,550
    Cost of service revenues       24,952      24,733    51,376     49,019
                                ---------  ---------- ---------  ---------
       Total cost of revenues     144,616     123,734   283,027    240,569
                                ---------  ---------- ---------  ---------

 Gross profit                     220,993     170,901   426,747    330,220
                                ---------  ---------- ---------  ---------

 Operating expenses:
    Sales and marketing           106,988      94,361   207,609    185,277
    Research and development       49,296      36,240    93,527     70,145
    General and administrative     21,217      20,205    39,646     36,187
    Amortization of purchased
     intangibles                    1,702       1,421     3,084      2,861
    Restructuring costs               897       1,524     3,475      3,273
    Acquistion-related expenses     1,997           -     4,346          -
    Litigation reserves and
     payments                           -       1,235         -      1,235
                                ---------  ---------- ---------  ---------
       Total operating expenses   182,097     154,986   351,687    298,978
                                ---------  ---------- ---------  ---------

 Operating income                  38,896      15,915    75,060     31,242

 Other income (expense), net         (728)        357    (2,007)    (8,224)
                                ---------  ---------- ---------  ---------

 Income before provision for
  income taxes                     38,168      16,272    73,053     23,018
 Provision for income taxes         9,625       3,668    10,532      5,003
                                ---------  ---------- ---------  ---------
 Net income                     $  28,543  $   12,604 $  62,521  $  18,015
                                =========  ========== =========  =========

                                ---------  ---------- ---------  ---------
 Basic net income per share     $    0.16  $     0.07 $    0.36  $    0.11
                                =========  ========== =========  =========

                                ---------  ---------- ---------  ---------
 Diluted net income per share   $    0.16  $     0.07 $    0.34  $    0.10
                                =========  ========== =========  =========

 Weighted average shares
  outstanding for basic
  net income per share            176,670     170,316   175,863    169,822
                                =========  ========== =========  =========

 Weighted average shares
  outstanding for diluted
  net income per share            182,329     176,488   181,464    175,608
                                =========  ========== =========  =========






                              POLYCOM, INC.
              Condensed Consolidated Statements of Cash Flows
                              (In thousands)
                                (Unaudited)



                                                        Six Months Ended
                                                      --------------------
                                                      June 30,   June 30,
                                                        2011       2010
                                                      ---------  ---------


 Cash flows from operating activities:
 Net income                                           $  62,521  $  18,015
 Adjustments to reconcile net income to net cash
  provided by operating activities:
    Depreciation and amortization                        25,202     18,975
    Amortization of purchased intangibles                 9,159      9,536
    Provision for excess and obsolete inventories         5,299      1,551
    Non-cash stock based compensation                    26,139     27,612
    Impairment of private company investments               500          -
    Excess tax benefits from stock-based
     compensation                                       (11,977)    (5,931)
    Write down of investments other than
     temporarily impaired                                     -      6,530
    Loss on disposals of property and equipment             699        141

    Changes in assets and liabilities, net of the
     effect of acquisitions:
         Trade receivables                              (30,254)    (1,005)
         Inventories                                      4,624    (16,648)
         Deferred taxes                                  (6,635)    (3,664)
         Prepaid expenses and other assets               (4,920)   (20,230)
         Accounts payable                                 4,533      6,787
         Taxes payable                                    9,531      2,945
         Other accrued liabilities                       36,476     16,266
                                                      ---------  ---------
 Net cash provided by operating activities              130,897     60,880
                                                      ---------  ---------

 Cash flows from investing activities:
     Purchases of property and equipment                (32,029)   (33,596)
     Purchases of investments                          (228,251)  (231,113)
     Proceeds from sale of investments                   26,722     83,636
     Proceeds from maturities of investments            167,646     49,725
     Net cash paid in purchase acquisitions             (50,041)         -
                                                      ---------  ---------
 Net cash used in investing activities                 (115,953)  (131,348)
                                                      ---------  ---------

 Cash flows from financing activities:
     Proceeds from issuance of common stock
      under employee option and stock purchase plans     29,891     29,325
     Repurchase of common stock                         (17,441)   (46,997)
     Excess tax benefits from stock-based
      compensation                                       11,977      5,931
                                                      ---------  ---------
 Net cash provided by (used in) financing
  activities                                             24,427    (11,741)
                                                      ---------  ---------

 Net increase (decrease) in cash and cash
  equivalents                                            39,371    (82,209)
 Cash and cash equivalents, beginning of period         324,188    331,098
                                                      ---------  ---------
 Cash and cash equivalents, end of period             $ 363,559  $ 248,889
                                                      =========  =========



Contact Information