Polycom Reports Fourth Quarter and Fiscal Year 2007 Earnings

Fourth quarter 2007 consolidated net revenues were $263.3 million, compared to $186.5 million for the fourth quarter of 2006. SpectraLink contributed $37.2 million to net revenues for the fourth quarter of 2007. As previously reported, Polycom's acquisition of SpectraLink was completed on March 26, 2007. Non-GAAP net income in the fourth quarter of 2007 was $38.5 million, or 42 cents per diluted share. This compares to Non-GAAP net income of $32.0 million, or 35 cents per diluted share, for the fourth quarter of 2006. GAAP net income for the fourth quarter of 2007 was $22.8 million, or 25 cents per diluted share, compared to $25.8 million, or 28 cents per diluted share, for the same period last year.

For the year ended Dec. 31, 2007, net revenues were $929.9 million, compared to $682.4 million for the year ended Dec. 31, 2006. SpectraLink contributed $113.5 million to net revenues for the year ended Dec. 31, 2007. Non-GAAP net income for the year ended Dec. 31, 2007 was $128.9 million, or $1.37 per diluted share, compared to $98.1 million, or $1.09 per diluted share, for the comparable period of 2006. GAAP net income for the year ended Dec. 31, 2007 was $62.9 million, or 67 cents per diluted share, compared to GAAP net income of $71.9 million, or 80 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 entitled "GAAP to Non-GAAP Reconciliation" in this release.

On a product line basis, consolidated net revenues for the fourth quarter of 2007 were comprised of:

63 percent video solutions, or $164.9 million (49 percent video communications, or $129.2 million, and 14 percent network systems, or $35.7 million); and
37 percent voice communications, or $98.4 million.
This compares to the fourth quarter of 2006, in which consolidated net revenues were comprised of:

72 percent video solutions, or $134.1 million (55 percent video communications, or $103.0 million, and 17 percent network systems, or $31.1 million); and
28 percent voice communications, or $52.4 million.
"Unprecedented demand for Polycom's IP-based collaboration solution drove us to well over the $1 billion revenue run-rate for the first time in Q4," said Robert Hagerty, chairman and CEO. "Video collaboration has clearly emerged as a top priority due to its immediate cost savings benefits and rapid return on investment. At the same time, Polycom's HD quality, telepresence, and ‘plug and play' IP connectivity are delivering an amazing customer experience. Polycom's leading HD video and voice over IP solutions are enabling this growth for our company worldwide."

Source: www.polycom.com

Hagerty continued, "Our strategic partnerships with Avaya, Nortel, Cisco, and others are adding fuel to our business opportunities. In fact, revenues from our new VoIP relationship with Microsoft that we launched in October and our recent voice launch with 3COM provide yet another engine for revenue growth in 2008. These meaningful partnerships, coupled with strong execution from our sales and service teams, are driving increased traction and expansion on a global basis."

"2008 promises to be an exciting year for Polycom. Our HD video, voice, and content collaboration solutions solve real business problems across a broad range of industries. Adopting our solution yields fast returns and increases a customer's agility and cohesiveness-and facilitates ‘greener' corporate policies-yet another critical driver in many geographies. The employees and partners of Polycom are ready to fulfill the growing demand of this market."

"We delivered strong operating results in the fourth quarter, including record revenues of $263.3 million and $55.8 million in operating cash flow," said Michael Kourey, senior vice president, finance and administration, and CFO. "In concert with these operating results, backlog and deferred revenues also grew to record levels. During the fourth quarter, we purchased $50 million in Polycom stock, exiting the quarter with a remaining $140 million authorization under the current share repurchase program."