SOURCE: Polycom

October 15, 2008 16:05 ET

Polycom Reports Third Quarter 2008 Earnings

Revenue Growth of 15 Percent Year-Over-Year to a Record $275.8 Million; Operating Cash Flow of $40.4 Million

PLEASANTON, CA--(Marketwire - October 15, 2008) - 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, 2008.

Third quarter 2008 consolidated net revenues were $275.8 million, compared to $240.0 million for the third quarter of 2007. Non-GAAP net income for the third quarter of 2008 was $31.7 million, or 37 cents per diluted share. This compares to Non-GAAP net income of $32.8 million, or 35 cents per diluted share, for the third quarter of 2007. GAAP net income for the third quarter of 2008 was $17.9 million, or 21 cents per diluted share, compared to $19.8 million, or 21 cents per diluted share, for the same period last year.

For the nine months ended Sept. 30, 2008, net revenues were $806.3 million, compared to $666.6 million for the first nine months of 2007. Non-GAAP net income for the period was $95.2 million, or $1.08 per diluted share, compared to $90.3 million, or 95 cents per diluted share, for the first nine months of 2007. GAAP net income for the nine months ended Sept. 30, 2008 was $50.0 million, or 57 cents per diluted share, compared to GAAP net income of $40.1 million, or 42 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 third quarter of 2008 were comprised of:

    65 percent video solutions, or $178.1 million (52 percent video
    communications, or $144.2 million, and 12 percent network systems, or $33.9
    million); and
    35 percent voice communications, or $97.7 million.
    

This compares to the third quarter of 2007, in which consolidated net revenues were comprised of:

    61 percent video solutions, or $146.4 million (47 percent video
    communications, or $113.7 million, and 14 percent network systems, or $32.6
    million); and
    39 percent voice communications, or $93.7 million.
    

"Polycom collaboration solutions are delivering rapid ROI for our customers," said Robert Hagerty, Polycom's chairman and CEO. "Everyday, our customers identify new ways in which to deploy our solutions that streamline their business processes, significantly reducing travel costs while at the same time increasing productivity. Also, during the third quarter, we noted that business trends exhibited particular strength in Asia, Latin America, and US Federal sales."

"From a product perspective, our network systems business returned to growth, both sequentially and year-over-year. The launch of our new RMX 1000™ HD Videoconferencing Media Server contributed to the growth in this product area. This innovative HD solution is optimized for small and medium enterprises, complementing our fast-growing RMX 2000™ product line. Extending Polycom's customer solution further, we also announced our new Converged Management Application (CMA™), an enterprise-wide visual communication solution that seamlessly integrates video network management and desktop video into a customer's unified collaboration environment. Polycom's CMA product will begin shipping this month, which we expect to further drive our network systems adoption in Q4," Hagerty concluded.

"We generated 2 percent sequential revenue growth in Q3 with record revenues of $275.8 million," said Michael Kourey, Polycom's senior vice president, finance and administration, and CFO. "In the third quarter, Polycom delivered a 170 basis point sequential improvement in gross margins while reducing inventories by $2.2 million from Q2 levels. Driven by these operating results, Polycom generated $40.4 million in positive operating cash flow -- yielding a quarter-ending cash and investments balance of $287.4 million 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 visit www.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 future results that Polycom solutions deliver for customers, the drivers for improvements in our margins and the impact of new product launches on future results. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the impact of competition on our product sales and for our customers and partners, potential fluctuations in results and future growth rates, 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, risks associated with general economic conditions, including current negative macroeconomic indicators in the United States and globally, increasing costs and differing uses of capital, changes in key personnel, 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, 2008, 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. 8, 2008, Polycom will hold a conference call today, Oct. 15, 2008, at 5:00 p.m. EDT/2:00 p.m. PT to discuss its third 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 at www.polycom.com or, for callers in the US and Canada, by calling 800.909.4804; 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 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 21395974. A replay of the call will also be maintained on our website for twelve months at www.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.

Polycom and the Polycom logo are registered trademarks and CMA, RMX 1000, and RMX 2000 are trademarks of Polycom in the U.S. and various countries. ©2008, Polycom, Inc. All rights reserved.

                              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  September  September  September
                                   30,        30,        30,        30,
                                  2008       2007       2008       2007
                                ---------  ---------- ---------  ---------

 Revenues:
   Product revenues             $ 235,397  $  206,979 $ 691,693  $ 578,353
   Service revenues                40,379      33,068   114,584     88,264
                                ---------  ---------- ---------  ---------
     Total revenues               275,776     240,047   806,277    666,617
                                ---------  ---------- ---------  ---------

 Cost of revenues:
   Cost of product revenues        91,085      80,130   270,536    217,791
   Cost of service revenues        18,653      15,507    54,770     41,950
                                ---------  ---------- ---------  ---------
     Total cost of revenues       109,738      95,637   325,306    259,741
                                ---------  ---------- ---------  ---------

 Gross profit                     166,038     144,410   480,971    406,876
                                ---------  ---------- ---------  ---------

 Operating expenses:
   Sales and marketing             78,614      58,097   221,813    165,273
   Research and development        31,756      32,643    97,394     93,905
   General and administrative      13,399      12,477    38,819     37,172
                                ---------  ---------- ---------  ---------
     Total operating expenses     123,769     103,217   358,026    296,350
                                ---------  ---------- ---------  ---------

 Operating income                  42,269      41,193   122,945    110,526

 Interest income, net               1,569       4,197     6,758     14,787
 Other income (expense), net       (2,258)        185    (2,265)      (349)
                                ---------  ---------- ---------  ---------

 Income before provision for
  income taxes                     41,580      45,575   127,438    124,964
 Provision for income taxes         9,833      12,761    32,242     34,624
                                ---------  ---------- ---------  ---------
 Non-GAAP net income            $  31,747  $   32,814 $  95,196  $  90,340
                                =========  ========== =========  =========

 Basic net income per share     $    0.38  $     0.36 $    1.10  $    0.99
                                =========  ========== =========  =========
 Diluted net income per share   $    0.37  $     0.35 $    1.08  $    0.95
                                =========  ========== =========  =========

 Weighted average shares
  outstanding for basic
  net income per share             84,278      91,148    86,387     91,224
                                =========  ========== =========  =========

 Weighted average shares
  outstanding for diluted
  net income per share             86,194      94,561    88,215     95,014
                                =========  ========== =========  =========


 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  September  September  September
                                   30,        30,        30,        30,
                                  2008       2007       2008       2007
                                ---------  ---------- ---------  ---------


 Revenues:
   Product revenues             $ 235,397  $  206,979 $ 691,693  $ 578,353
   Service revenues                40,379      33,068   114,584     88,264
                                ---------  ---------- ---------  ---------
     Total revenues               275,776     240,047   806,277    666,617
                                ---------  ---------- ---------  ---------

 Cost of revenues:
   Cost of product revenues        95,249      84,465   283,383    230,374
   Cost of service revenues        19,509      16,457    57,527     44,383
                                ---------  ---------- ---------  ---------
     Total cost of revenues       114,758     100,922   340,910    274,757
                                ---------  ---------- ---------  ---------

 Gross profit                     161,018     139,125   465,367    391,860
                                ---------  ---------- ---------  ---------

 Operating expenses:
   Sales and marketing             81,562      61,510   231,465    174,437
   Research and development        34,456      36,006   105,891    102,939
   General and administrative      16,101      15,663    46,023     44,881
   Acquisition-related costs            -         423       162      3,140
   Purchased in-process
    research and development            -           -         -      9,400
   Amortization of purchased
    intangibles                     1,775       2,416     5,412      6,223
   Restructuring costs              4,382           -     8,836        213
   Litigation reserves and
    payments                            -           -     7,401          -
                                ---------  ---------- ---------  ---------
     Total operating expenses     138,276     116,018   405,190    341,233
                                ---------  ---------- ---------  ---------

 Operating income                  22,742      23,107    60,177     50,627

 Interest income, net               1,569       4,197     6,758     14,787
 Loss on strategic investments          -           -         -     (7,400)
 Other income (expense), net       (2,258)        185    (2,265)      (349)
                                ---------  ---------- ---------  ---------

Income before provision for
 income taxes                      22,053      27,489    64,670     57,665
  Provision for income taxes        4,111       7,697    14,680     17,585
                                ---------  ---------- ---------  ---------
  Net income                    $  17,942  $   19,792 $  49,990  $  40,080
                                =========  ========== =========  =========

                                ---------  ---------- ---------  ---------
  Basic net income per share    $    0.21  $     0.22 $    0.58  $    0.44
                                =========  ========== =========  =========

                                ---------  ---------- ---------  ---------
  Diluted net income per share  $    0.21  $     0.21 $    0.57  $    0.42
                                =========  ========== =========  =========

  Weighted average shares
   outstanding for basic
   net income per share            84,278      91,148    86,387     91,224
                                =========  ========== =========  =========

  Weighted average shares
   outstanding for diluted
   net income per share            86,194      94,561    88,215     95,014
                                =========  ========== =========  =========





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



                                               Three Months Ended
                                      ------------------------------------
                                               September 30, 2008
                                      ------------------------------------
                                        GAAP     Excluded        Non-GAAP
                                      ---------  ---------       ---------

 Revenues:
   Product revenues                   $ 235,397  $       -       $ 235,397
   Service revenues                      40,379          -          40,379
                                      ---------  ---------       ---------
     Total revenues                     275,776          -         275,776
                                      ---------  ---------       ---------

 Cost of revenues:
   Cost of product revenues              95,249      4,164   (a)    91,085
   Cost of service revenues              19,509        856   (b)    18,653
                                      ---------  ---------       ---------
     Total cost of revenues             114,758      5,020         109,738
                                      ---------  ---------       ---------

 Gross profit                           161,018     (5,020)        166,038
                                      ---------  ---------       ---------

 Operating expenses:
   Sales and marketing                   81,562      2,948   (b)    78,614
   Research and development              34,456      2,700   (b)    31,756
   General and administrative            16,101      2,702   (b)    13,399
   Acquisition-related costs                  -          -               -
   Amortization of purchased
    intangibles                           1,775      1,775               -
   Restructuring costs                    4,382      4,382               -
   Litigation reserves and payments           -          -               -
                                      ---------  ---------       ---------
     Total operating expenses           138,276     14,507         123,769
                                      ---------  ---------       ---------

 Operating income                        22,742    (19,527)         42,269

 Interest income, net                     1,569          -           1,569
 Gain (loss) on strategic investments         -          -               -
 Other expense, net                      (2,258)         -          (2,258)
                                      ---------  ---------       ---------

Income before provision for income
 taxes                                   22,053    (19,527)         41,580
  Provision for income taxes              4,111     (5,722)          9,833
                                      ---------  ---------       ---------
  Net income                          $  17,942  $ (13,805)      $  31,747
                                      =========  =========       =========

  Basic net income per share          $    0.21  $   (0.17)      $    0.38
                                      =========  =========       =========

  Diluted net income per share        $    0.21  $   (0.16)      $    0.37
                                      =========  =========       =========

  Weighted average shares outstanding
   for basic net income per share        84,278                     84,278
                                      =========                  =========

  Weighted average shares outstanding
   for diluted net income per share      86,194                     86,194
                                      =========                  =========




                                                Nine Months Ended
                                      ------------------------------------
                                               September 30, 2008
                                      ------------------------------------
                                        GAAP     Excluded        Non-GAAP
                                      ---------  ---------       ---------

 Revenues:
   Product revenues                   $ 691,693  $       -       $ 691,693
   Service revenues                     114,584          -         114,584
                                      ---------  ---------       ---------
     Total revenues                     806,277          -         806,277
                                      ---------  ---------       ---------

 Cost of revenues:
   Cost of product revenues             283,383     12,847   (c)   270,536
   Cost of service revenues              57,527      2,757   (b)    54,770
                                      ---------  ---------       ---------
     Total cost of revenues             340,910     15,604         325,306
                                      ---------  ---------       ---------

 Gross profit                           465,367    (15,604)        480,971
                                      ---------  ---------       ---------

 Operating expenses:
   Sales and marketing                  231,465      9,652   (b)   221,813
   Research and development             105,891      8,497   (b)    97,394
   General and administrative            46,023      7,204   (b)    38,819
   Acquisition-related costs                162        162               -
   Amortization of purchased
    intangibles                           5,412      5,412               -
   Restructuring costs                    8,836      8,836               -
   Litigation reserves and payments       7,401      7,401               -
                                      ---------  ---------       ---------
     Total operating expenses           405,190     47,164         358,026
                                      ---------  ---------       ---------

 Operating income                        60,177    (62,768)        122,945

 Interest income, net                     6,758          -           6,758
 Gain (loss) on strategic investments         -          -               -
 Other expense, net                      (2,265)         -          (2,265)
                                      ---------  ---------       ---------

Income before provision for income
 taxes                                   64,670    (62,768)        127,438
  Provision for income taxes             14,680    (17,562)         32,242
                                      ---------  ---------       ---------
  Net income                          $  49,990  $ (45,206)      $  95,196
                                      =========  =========       =========

  Basic net income per share          $    0.58  $   (0.52)      $    1.10
                                      =========  =========       =========

  Diluted net income per share        $    0.57  $   (0.51)      $    1.08
                                      =========  =========       =========

  Weighted average shares outstanding
   for basic net income per share        86,387                     86,387
                                      =========                  =========

  Weighted average shares outstanding
   for diluted net income per share      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 in accordance with SFAS 123R,
"Share-Based Payment," 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 in
accordance with SFAS 123R, "Share-Based Payment," 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 in accordance with SFAS 123R,
"Share-Based Payment," during the period and $385 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
                                      -------------------------------------
                                               September 30, 2007
                                      -------------------------------------
                                        GAAP     Excluded        Non-GAAP
                                      ---------- ---------       ----------


 Revenues:
   Product revenues                   $  206,979 $       -       $  206,979
   Service revenues                       33,068         -           33,068
                                      ---------- ---------       ----------
     Total revenues                      240,047         -          240,047
                                      ---------- ---------       ----------

 Cost of revenues:
   Cost of product revenues               84,465     4,335   (a)     80,130
   Cost of service revenues               16,457       950   (b)     15,507
                                      ---------- ---------       ----------
     Total cost of revenues              100,922     5,285           95,637
                                      ---------- ---------       ----------

 Gross profit                            139,125    (5,285)         144,410
                                      ---------- ---------       ----------

 Operating expenses:
   Sales and marketing                    61,510     3,413   (b)     58,097
   Research and development               36,006     3,363   (b)     32,643
   General and administrative             15,663     3,186   (b)     12,477
   Acquisition-related costs                 423       423                -
   Purchased in-process research and
    development                                -         -                -
   Amortization of purchased
    intangibles                            2,416     2,416                -
   Restructuring costs                         -         -                -
                                      ---------- ---------       ----------
     Total operating expenses            116,018    12,801          103,217
                                      ---------- ---------       ----------

 Operating income                         23,107   (18,086)          41,193

 Interest income, net                      4,197         -            4,197
 Loss on strategic investments                 -         -                -
 Other income (expense), net                 185         -              185
                                      ---------- ---------       ----------

Income before provision for income
 taxes                                    27,489   (18,086)          45,575
  Provision for income taxes               7,697    (5,064)          12,761
                                      ---------- ---------       ----------
  Net income                          $   19,792 $ (13,022)      $   32,814
                                      ========== =========       ==========

                                      ---------- ---------       ----------
  Basic net income per share          $     0.22 $   (0.14)      $     0.36
                                      ========== =========       ==========

                                      ---------- ---------       ----------
  Diluted net income per share        $     0.21 $   (0.14)      $     0.35
                                      ========== =========       ==========

  Weighted average shares outstanding
   for basic net income per share         91,148                     91,148
                                      ==========                 ==========

  Weighted average shares outstanding
   for diluted net income per share       94,561                     94,561
                                      ==========                 ==========




                                                Nine Months Ended
                                      ------------------------------------
                                               September 30, 2007
                                      ------------------------------------
                                        GAAP     Excluded        Non-GAAP
                                      ---------  ---------       ---------


 Revenues:
   Product revenues                   $ 578,353  $       -       $ 578,353
   Service revenues                      88,264          -          88,264
                                      ---------  ---------       ---------
     Total revenues                     666,617          -         666,617
                                      ---------  ---------       ---------

 Cost of revenues:
   Cost of product revenues             230,374     12,583   (c)   217,791
   Cost of service revenues              44,383      2,433   (b)    41,950
                                      ---------  ---------       ---------
     Total cost of revenues             274,757     15,016         259,741
                                      ---------  ---------       ---------

 Gross profit                           391,860    (15,016)        406,876
                                      ---------  ---------       ---------

 Operating expenses:
   Sales and marketing                  174,437      9,164   (b)   165,273
   Research and development             102,939      9,034   (b)    93,905
   General and administrative            44,881      7,709   (b)    37,172
   Acquisition-related costs              3,140      3,140               -
   Purchased in-process research and
    development                           9,400      9,400               -
   Amortization of purchased
    intangibles                           6,223      6,223               -
   Restructuring costs                      213        213               -
                                      ---------  ---------       ---------
     Total operating expenses           341,233     44,883         296,350
                                      ---------  ---------       ---------

 Operating income                        50,627    (59,899)        110,526

 Interest income, net                    14,787          -          14,787
 Loss on strategic investments           (7,400)    (7,400)              -
 Other income (expense), net               (349)         -            (349)
                                      ---------  ---------       ---------

Income before provision for income
 taxes                                   57,665    (67,299)        124,964
  Provision for income taxes             17,585    (17,039)         34,624
                                      ---------  ---------       ---------
  Net income                          $  40,080  $ (50,260)      $  90,340
                                      =========  =========       =========

                                      ---------  ---------       ---------
  Basic net income per share          $    0.44  $   (0.55)      $    0.99
                                      =========  =========       =========

                                      ---------  ---------       ---------
  Diluted net income per share        $    0.42  $   (0.53)      $    0.95
                                      =========  =========       =========

  Weighted average shares outstanding
   for basic net income per share        91,224                     91,224
                                      =========                  =========

  Weighted average shares outstanding
   for diluted net income per share      95,014                     95,014
                                      =========                  =========

(a) Excluded amount includes $3,349 related to the amortization of
purchased intangibles for core and existing technologies, $725 for
stock-based compensation expense recorded in accordance with SFAS 123R,
"Share-Based Payment," during the period and $261 related to the effect of
stock-based compensation on warranty expense rates.
(b) Excluded amount represents stock-based compensation expense recorded in
accordance with SFAS 123R, "Share-Based Payment," during the period.
(c) Excluded amount includes $7,518 related to the amortization of
purchased intangibles for core and existing technologies, $1,941 for
stock-based compensation expense recorded in accordance with SFAS 123R,
"Share-Based Payment," during the period, $661 related to the effect of
stock-based compensation on warranty expense rates and $2,464 related to
purchase accounting adjustments made to inventory.






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



                                            September 30,    December 31,
                                                 2008            2007
                                            --------------- ---------------

 ASSETS
 Current assets
         Cash and cash equivalents          $       159,517 $       279,560
         Investments                                121,710          62,663
         Trade receivables, net                     133,342         138,133
         Inventories                                 92,138          71,106
         Deferred taxes                              29,375          43,295
         Prepaid expenses and other current
          assets                                     33,504          23,104
                                            --------------- ---------------
            Total current assets                    569,586         617,861

 Property and equipment, net                         73,099          57,610
 Long-term investments                                6,219          32,340
 Goodwill                                           500,097         504,955
 Purchased intangibles, net                          70,505          86,423
 Deferred taxes                                      18,240           8,062
 Other assets                                        17,576          14,687
                                            --------------- ---------------
            Total assets                    $     1,255,322 $     1,321,938
                                            =============== ===============



 LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities
         Accounts payable                   $        66,867 $        75,802
         Accrued payroll and related
          liabilities                                29,166          29,518
         Taxes payable                                  170           3,790
         Deferred revenue                            69,290          59,130
         Other accrued liabilities                   58,488          48,814
                                            --------------- ---------------
            Total current liabilities               223,981         217,054

 Non-current liabilities
 Deferred revenue                                    40,359          27,853
 Taxes payable                                       32,400          34,899
 Deferred taxes                                       2,744           4,709
 Other long-term liabilities                         14,543          13,429
                                            --------------- ---------------
            Total liabilities                       314,027         297,944

 Stockholders' equity                               941,295       1,023,994
                                            --------------- ---------------
            Total liabilities and
             stockholders' equity           $     1,255,322 $     1,321,938
                                            =============== ===============




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




                                                    Nine Months Ended
                                              ----------------------------
                                              September 30,  September 30,
                                                  2008           2007
                                              -------------  -------------


   Cash flows from operating activities:
   Net income                                 $      49,990  $      40,080
   Adjustments to reconcile net income
    to net cash provided by operating
    activities:
      Depreciation and amortization                  20,620         18,205
      Amortization of purchased intangibles          15,779         13,726
      Provision for doubtful accounts                   570            (33)
      Provision for excess and obsolete
       inventories                                    2,510             50
      Non-cash stock-based compensation              30,212         30,281
      Excess tax benefits from stock-based
       compensation                                  (4,487)       (14,190)
      Loss on strategic investments                       -          7,400
      Purchase of in-process research and
       development                                        -          9,400
      Write down of investments other than
       temporarily impaired                             921              -
      Loss on disposals of property and
       equipment                                        102             56

      Changes in assets and liabilities, net
       of the effect of acquisitions:
          Trade receivables                           4,395        (24,051)
          Inventories                               (23,542)        (2,264)
          Deferred taxes                              1,447          4,394
          Prepaid expenses and other assets          (9,131)        (3,029)
          Accounts payable                           (8,935)        (1,551)
          Taxes payable                              (1,278)         6,566
          Other accrued liabilities                  36,995          8,704
                                              -------------  -------------
   Net cash provided by operating activities        116,168         93,744
                                              -------------  -------------

   Cash flows from investing activities:
       Purchase of property and equipment           (35,287)       (23,131)
       Purchases of investments                    (313,695)      (286,492)
       Proceeds from sale and maturity of
        investments                                 278,888        421,624
       Net cash paid in purchase acquisitions             -       (275,619)
                                              -------------  -------------
   Net cash used in investing activities            (70,094)      (163,618)
                                              -------------  -------------

   Cash flows from financing activities:
       Proceeds from issuance of common stock
        under employee option and stock
        purchase plans                               51,854         63,152
       Repurchase of common stock                  (222,458)       (75,849)
       Excess tax benefits from stock-based
        compensation                                  4,487         14,190
                                              -------------  -------------
   Net cash provided by (used in) financing
    activities                                     (166,117)         1,493
                                              -------------  -------------

   Net decrease in cash and cash equivalents       (120,043)       (68,381)
   Cash and cash equivalents, beginning of
    period                                          279,560        316,368
                                              -------------  -------------
   Cash and cash equivalents, end of period   $     159,517  $     247,987
                                              =============  =============

Contact Information

  • Investor Contact:
    Michael R. Kourey
    CFO
    Polycom, Inc.
    925-924-5742
    Email Contact

    Press Contact:
    Caroline Japic
    Polycom, Inc.
    408-474-2265
    Email Contact