Polycom Reports Fourth Quarter Results Record Revenue at $146.5 Millio

    Business Editors/High-Tech Writers

    PLEASANTON, Calif.--(BUSINESS WIRE)--Jan. 26, 2005--Polycom(R), Inc. (Nasdaq:PLCM), the world's leading provider of unified collaborative communications solutions, today reported its operating results for the fourth quarter ended December 31, 2004.
    Fourth quarter 2004 consolidated net revenues were a record $146.5 million, compared to $118.3 million recorded for the fourth quarter of 2003. Non-GAAP net income in the fourth quarter of 2004 was $22.5 million, or 22 cents per diluted share. This compares to non-GAAP net income of $17.2 million, or 17 cents per diluted share, for the fourth quarter of 2003. Non-GAAP financial measures exclude acquisition-related costs, purchased in-process research and development costs, amortization of purchased intangibles, restructuring costs, litigation reserves and payments, gain (loss) on strategic investments, income tax effect of the preceding adjustments, income (loss) from discontinued operations, net of taxes, and gain from sale of discontinued operations, net of taxes. GAAP net income for the fourth quarter of 2004 was $8.1 million, or 8 cents per diluted share, compared to $13.7 million, or 13 cents per diluted share, for the same period last year. During the fourth quarter of 2004, the Company recorded a charge of $15.8 million related to the Collaboration Properties, Inc. litigation. Also, as previously announced, Polycom completed its acquisition of Voyant(R) Technologies, Inc., a leading provider of voice conferencing and collaboration network solutions on January 5, 2004.
    For the year ended December 31, 2004, net revenues were $540.3 million, compared to $420.4 million for the year ended December 31, 2003. Non-GAAP net income for 2004 was $71.4 million, or 70 cents per diluted share, compared to $40.6 million, or 40 cents per diluted share, for the comparable period of 2003. GAAP net income for the year ended December 31, 2004 was $35.3 million, or 35 cents per diluted share, compared to GAAP net income of $22.8 million, or 23 cents per diluted share, for the same period last year.
    The reconciliation of the GAAP statement of operations amounts to the respective non-GAAP figures, for the three and twelve months ended December 31, 2004 and 2003 is set forth at the end of this press release.
    On a product line basis, consolidated net revenues for the fourth quarter of 2004 were comprised of 53 percent video communications, or $78.0 million; 26 percent network systems, or $37.8 million; and 21 percent voice communications, or $30.7 million. This compares to the fourth quarter of 2003, in which consolidated net revenues were comprised of 62 percent video communications, or $72.7 million; 21 percent network systems, or $25.3 million; and 17 percent voice communications, or $20.3 million. Certain prior year revenue items have been reclassified to conform to the current year presentation.
    "Polycom crossing the half billion Dollar mark in annual revenue for the first time is a testament to the growing demand for voice and video IP communications worldwide" said Robert Hagerty, president and CEO. "In fact, converged collaboration has moved to mission-critical status in both commercial and public sector enterprises throughout 2004. This powerful shift is creating demand for Polycom's unified collaborative communications solutions at the desktop, in the meeting room, and at the network core. As this shift continues into 2005, Polycom is continuing its leadership position in SIP and H.323 standards, including our recent work to enable IP-based 'any-to-any' communications--securely crossing firewalls and making these IP video calls as simple as an ordinary phone call."
    Hagerty continued, "As our company drives to the next level against this industry backdrop, we are taking actions to further deploy the benefits of converged collaboration into the major markets worldwide. For instance, in the fourth quarter, we announced new partnerships with Telstra, the leading communications service provider in Australia, and Japan Telecom to bundle Polycom product solutions with their respective service offerings. We also announced an IP-based video telephony solution with our strategic partner Avaya that makes face-to-face communications easy and effective for office, home, or mobile workers. Importantly, we are actively co-developing the communications solution with Microsoft's Live Communications Server, which is scheduled to drive integrated product deliveries in 2005 for Microsoft and Polycom customers everywhere. Through our strategic partnerships and with our robust delivery of new products in the IP-enabled world, Polycom is well positioned to capture the growing demand for converged communication solutions."
    "We are pleased with our record quarter and full-year revenues," said Michael Kourey, senior vice president, finance and administration, and CFO. "This strong revenue and record gross margins, coupled with our continued success in managing inventory and accounts receivables, generated our twenty-seventh consecutive quarter of positive operating cash flow."

    About Polycom

    Polycom, Inc. is the world's technology leader of high-quality, easy-to-use video, voice, data and web conferencing and collaboration solutions. The Polycom Office(TM) is our continued commitment to make distance communications as natural and interactive as being there by providing best-in-class conferencing solutions that are interoperable, integrated and intuitive to the user. The Polycom Office is based on industry standards and supported by an open architecture that promotes interoperability in multi-vendor environments and complements leading network infrastructure platforms. For additional information call 1-800-POLYCOM (765-9266) or +1-925-924-6000, or visit the Polycom website at www.polycom.com.
    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 growing worldwide demand for voice and video IP communications, increasing demand for converged collaboration solutions, and the anticipated product rollout through our collaboration with Microsoft. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the potential fluctuations in results and future growth rates, the market acceptance of Polycom's products, possible delays in the development, availability and shipment of new products, and risks associated with changes in general economic conditions. Many of these risks and uncertainties are discussed in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, and in the 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 January 17, 2005, Polycom will hold a conference call today, January 26, 2005, at 5:00 p.m. ET/2:00 p.m. PT to discuss its fourth quarter results. Robert Hagerty, chairman, president and CEO, and Michael Kourey, chief financial officer, will host the conference. You may participate by viewing the webcast at www.polycom.com or, for callers in the US and Canada, call 888-939-6307; and for callers outside of the US and Canada, call 415-908-4701, with the pass code 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 21227704. A replay of the call will also be maintained on our website at www.polycom.com under Investor Relations - Archived Conference Calls for twelve months.

    Polycom, the Polycom logo, SoundStation and Voyant are registered trademarks and Polycom Office, VSX and People + Content are trademarks of Polycom in the U.S. and various countries. All other trademarks are the property of their respective owners. (C)2004, Polycom, Inc. All rights reserved.

POLYCOM, INC. Non-GAAP Condensed Consolidated Statements of Operations Excluding Acquisition-related costs, Purchased in-process R&D, Amortization of purchased intangibles, Restructuring costs, Litigation reserves and payments, Gain (loss) on strategic investments, Income (loss) from discontinued operations and Gain from sale of discontinued operations (In thousands, except per share amounts) (Unaudited)

Three Months Ended Twelve Months Ended --------------------- --------------------- Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2004 2003 2004 2003 --------- --------- --------- ---------

Revenues: Product revenues $130,987 $108,025 $483,535 $381,439 Service revenues 15,523 10,262 56,717 38,984 --------- --------- --------- --------- Total revenues 146,510 118,287 540,252 420,423 --------- --------- --------- ---------

Cost of revenues: Cost of product revenues 43,641 36,857 161,619 137,685 Cost of service revenues 9,605 7,108 37,092 27,892 --------- --------- --------- --------- Total cost of revenues 53,246 43,965 198,711 165,577 --------- --------- --------- ---------

Gross profit 93,264 74,322 341,541 254,846 --------- --------- --------- ---------

Operating expenses: Sales and marketing 31,139 26,406 120,699 101,884 Research and development 22,582 17,630 92,076 72,638 General and administrative 10,279 8,084 36,942 31,334 --------- --------- --------- --------- Total operating expenses 64,000 52,120 249,717 205,856 --------- --------- --------- ---------

Operating income 29,264 22,202 91,824 48,990

Interest income, net 2,283 2,054 7,279 8,451 Other expense, net (762) (630) (1,330) (1,774) --------- --------- --------- ---------

Income before provision for income taxes 30,785 23,626 97,773 55,667 Provision for income taxes 8,311 6,379 26,398 15,030 --------- --------- --------- --------- Non-GAAP net income $22,474 $17,247 $71,375 $40,637 ========= ========= ========= =========

Basic net income per share $0.23 $0.17 $0.72 $0.41 ========= ========= ========= ========= Diluted net income per share $0.22 $0.17 $0.70 $0.40 ========= ========= ========= =========

Weighted average shares outstanding for basic net income per share 98,678 99,514 99,334 99,244 ========= ========= ========= =========

Weighted average shares outstanding for diluted net income per share 101,901 101,843 102,018 100,752 ========= ========= ========= =========

Use of Non-GAAP Financial Information

To supplement our consolidated financial statements presented on a GAAP basis, Polycom uses non-GAAP measures of operating results, net income and income per share, which are adjusted to exclude certain costs, expenses, gains and losses we believe appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future. These adjustments to our current period GAAP results are made with the intent of providing both management and investors a more complete understanding of Polycom's underlying operational results and trends and our marketplace performance. For example, the non-GAAP results are an indication of our baseline performance before gains, losses or other charges that are considered by management to be outside of our core operating results. In addition, these adjusted non-GAAP results are among the primary indicators management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income or diluted net income per share prepared in accordance with generally accepted accounting principles in the United States.

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

Three Months Ended Twelve Months Ended --------------------- --------------------- Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2004 2003 2004 2003 --------- --------- --------- ---------

Revenues: Product revenues $130,987 $108,025 $483,535 $381,439 Service revenues 15,523 10,262 56,717 38,984 --------- --------- --------- --------- Total revenues 146,510 118,287 540,252 420,423 --------- --------- --------- ---------

Cost of revenues: Cost of product revenues 43,641 36,857 161,619 137,685 Cost of service revenues 9,605 7,108 37,092 27,892 --------- --------- --------- --------- Total cost of revenues 53,246 43,965 198,711 165,577 --------- --------- --------- ---------

Gross profit 93,264 74,322 341,541 254,846 --------- --------- --------- ---------

Operating expenses: Sales and marketing 31,139 26,406 120,699 101,884 Research and development 22,582 17,630 92,076 72,638 General and administrative 10,279 8,084 36,942 31,334 Acquisition-related costs 66 198 1,394 386 Purchased in-process research and development - - 4,600 - Amortization of purchased intangibles 2,725 4,398 20,522 17,591 Restructuring costs 1,125 - 1,387 5,029 Litigation reserves and payments 15,905 - 20,950 - --------- --------- --------- --------- Total operating expenses 83,821 56,716 298,570 228,862 --------- --------- --------- ---------

Operating income 9,443 17,606 42,971 25,984

Interest income, net 2,283 2,054 7,279 8,451 Gain (loss) on strategic investments 4 (140) (12) (737) Other expense, net (762) (630) (1,330) (1,774) --------- --------- --------- ---------

Income from continuing operations before provision for income taxes 10,968 18,890 48,908 31,924 Provision for income taxes 2,944 5,282 14,332 8,958 --------- --------- --------- --------- Income from continuing operations 8,024 13,608 34,576 22,966

Income (loss) from discontinued operations, net of taxes - - 296 (695) Gain from sale of discontinued operations, net of taxes 115 59 477 552 --------- --------- --------- --------- Net income $8,139 $13,667 $35,349 $22,823 ========= ========= ========= =========

Basic net income per share: Income per share from continuing operations $0.08 $0.14 $0.36 $0.23 Income (loss) per share from discontinued operations, net - - - (0.01) Gain per share from sale of discontinued operations, net - - - 0.01 --------- --------- --------- --------- Basic net income per share $0.08 $0.14 $0.36 $0.23 ========= ========= ========= =========

Diluted net income per share: Income per share from continuing operations $0.08 $0.13 $0.35 $0.23 Income (loss) per share from discontinued operations, net - - - (0.01) Gain per share from sale of discontinued operations, net - - - 0.01 --------- --------- --------- --------- Diluted net income per share $0.08 $0.13 $0.35 $0.23 ========= ========= ========= =========

Weighted average shares outstanding for basic net income per share 98,678 99,514 99,334 99,244 ========= ========= ========= =========

Weighted average shares outstanding for diluted net income per share 101,901 101,843 102,018 100,752 ========= ========= ========= =========

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

Three Months Ended December 31, 2004 ----------------------------- GAAP Excluded Non-GAAP --------- --------- ---------

Revenues: Product revenues $130,987 $- $130,987 Service revenues 15,523 - 15,523 --------- --------- --------- Total revenues 146,510 - 146,510 --------- --------- ---------

Cost of revenues: Cost of product revenues 43,641 - 43,641 Cost of service revenues 9,605 - 9,605 --------- --------- --------- Total cost of revenues 53,246 - 53,246 --------- --------- ---------

Gross profit 93,264 - 93,264 --------- --------- ---------

Operating expenses: Sales and marketing 31,139 - 31,139 Research and development 22,582 - 22,582 General and administrative 10,279 - 10,279 Acquisition-related costs 66 66 - Purchased in-process research and development - - - Amortization of purchased intangibles 2,725 2,725 - Restructuring costs 1,125 1,125 - Litigation reserves and payments 15,905 15,905 - --------- --------- --------- Total operating expenses 83,821 19,821 64,000 --------- --------- ---------

Operating income 9,443 (19,821) 29,264

Interest income, net 2,283 - 2,283 Gain (loss) on strategic investments 4 4 - Other expense, net (762) - (762) --------- --------- ---------

Income from continuing operations before provision for income taxes 10,968 (19,817) 30,785 Provision for income taxes 2,944 (5,367) 8,311 --------- --------- --------- Income from continuing operations 8,024 (14,450) 22,474

Income from discontinued operations, net of taxes - - - Gain from sale of discontinued operations, net of taxes 115 115 - --------- --------- --------- Net income $8,139 $(14,335) $22,474 ========= ========= =========

Basic net income per share: Income per share from continuing operations $0.08 $(0.15) $0.23 Income per share from discontinued operations, net - - - Gain per share from sale of discontinued operations, net - - - --------- --------- --------- Basic net income per share $0.08 $(0.15) $0.23 ========= ========= =========

Diluted net income per share: Income per share from continuing operations $0.08 $(0.14) $0.22 Income per share from discontinued operations, net - - - Gain per share from sale of discontinued operations, net - - - --------- --------- --------- Diluted net income per share $0.08 $(0.14) $0.22 ========= ========= =========

Weighted average shares outstanding for basic net income per share 98,678 98,678 ========= =========

Weighted average shares outstanding for diluted net income per share 101,901 101,901 ========= =========

Twelve Months Ended December 31, 2004 ----------------------------- GAAP Excluded Non-GAAP --------- --------- ---------

Revenues: Product revenues $483,535 $- $483,535 Service revenues 56,717 - 56,717 --------- --------- --------- Total revenues 540,252 - 540,252 --------- --------- ---------

Cost of revenues: Cost of product revenues 161,619 - 161,619 Cost of service revenues 37,092 - 37,092 --------- --------- --------- Total cost of revenues 198,711 - 198,711 --------- --------- ---------

Gross profit 341,541 - 341,541 --------- --------- ---------

Operating expenses: Sales and marketing 120,699 - 120,699 Research and development 92,076 - 92,076 General and administrative 36,942 - 36,942 Acquisition-related costs 1,394 1,394 - Purchased in-process research and development 4,600 4,600 - Amortization of purchased intangibles 20,522 20,522 - Restructuring costs 1,387 1,387 - Litigation reserves and payments 20,950 20,950 - --------- --------- --------- Total operating expenses 298,570 48,853 249,717 --------- --------- ---------

Operating income 42,971 (48,853) 91,824

Interest income, net 7,279 - 7,279 Gain (loss) on strategic investments (12) (12) - Other expense, net (1,330) - (1,330) --------- --------- ---------

Income from continuing operations before provision for income taxes 48,908 (48,865) 97,773 Provision for income taxes 14,332 (12,066) 26,398 --------- --------- --------- Income from continuing operations 34,576 (36,799) 71,375

Income from discontinued operations, net of taxes 296 296 - Gain from sale of discontinued operations, net of taxes 477 477 - --------- --------- --------- Net income $35,349 $(36,026) $71,375 ========= ========= =========

Basic net income per share: Income per share from continuing operations $0.36 $(0.36) $0.72 Income per share from discontinued operations, net - - - Gain per share from sale of discontinued operations, net - - - --------- --------- --------- Basic net income per share $0.36 $(0.36) $0.72 ========= ========= =========

Diluted net income per share: Income per share from continuing operations $0.35 $(0.35) $0.70 Income per share from discontinued operations, net - - - Gain per share from sale of discontinued operations, net - - - --------- --------- --------- Diluted net income per share $0.35 $(0.35) $0.70 ========= ========= =========

Weighted average shares outstanding for basic net income per share 99,334 99,334 ========= =========

Weighted average shares outstanding for diluted net income per share 102,018 102,018 ========= =========

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

Three Months Ended December 31, 2003 ----------------------------- GAAP Excluded Non-GAAP --------- ---------- ----------

Revenues: Product revenues $108,025 $- $108,025 Service revenues 10,262 - 10,262 --------- -------- --------- Total revenues 118,287 - 118,287 --------- -------- ---------

Cost of revenues: Cost of product revenues 36,857 - 36,857 Cost of service revenues 7,108 - 7,108 --------- -------- --------- Total cost of revenues 43,965 - 43,965 --------- -------- ---------

Gross profit 74,322 - 74,322 --------- -------- ---------

Operating expenses: Sales and marketing 26,406 - 26,406 Research and development 17,630 - 17,630 General and administrative 8,084 - 8,084 Acquisition-related costs 198 198 - Amortization of purchased intangibles 4,398 4,398 - Restructuring costs - - - --------- -------- --------- Total operating expenses 56,716 4,596 52,120 --------- -------- ---------

Operating income 17,606 (4,596) 22,202

Interest income, net 2,054 - 2,054 Loss on strategic investments (140) (140) - Other expense, net (630) - (630) --------- -------- ---------

Income from continuing operations before provision for income taxes 18,890 (4,736) 23,626 Provision for income taxes 5,282 (1,097) 6,379 --------- -------- --------- Income from continuing operations 13,608 (3,639) 17,247

Loss from discontinued operations, net of taxes - - - Gain from sale of discontinued operations, net of taxes 59 59 - --------- -------- --------- Net income $13,667 $(3,580) $17,247 ========= ======== =========

Basic net income per share: Income per share from continuing operations $0.14 $(0.03) $0.17 Loss per share from discontinued operations, net - - - Gain per share from sale of discontinued operations, net - - - --------- -------- --------- Basic net income per share $0.14 $(0.03) $0.17 ========= ======== =========

Diluted net income per share: Income per share from continuing operations $0.13 $(0.04) $0.17 Loss per share from discontinued operations, net - - - Gain per share from sale of discontinued operations, net - - - --------- -------- --------- Diluted net income per share $0.13 $(0.04) $0.17 ========= ======== =========

Weighted average shares outstanding for basic net income per share 99,514 99,514 ========= =========

Weighted average shares outstanding for diluted net income per share 101,843 101,843 ========= =========

Twelve Months Ended December 31, 2003 ------------------------------ GAAP Excluded Non-GAAP --------- --------- ----------

Revenues: Product revenues $381,439 $- $381,439 Service revenues 38,984 - 38,984 --------- --------- --------- Total revenues 420,423 - 420,423 --------- --------- ---------

Cost of revenues: Cost of product revenues 137,685 - 137,685 Cost of service revenues 27,892 - 27,892 --------- --------- --------- Total cost of revenues 165,577 - 165,577 --------- --------- ---------

Gross profit 254,846 - 254,846 --------- --------- ---------

Operating expenses: Sales and marketing 101,884 - 101,884 Research and development 72,638 - 72,638 General and administrative 31,334 - 31,334 Acquisition-related costs 386 386 - Amortization of purchased intangibles 17,591 17,591 - Restructuring costs 5,029 5,029 - --------- --------- --------- Total operating expenses 228,862 23,006 205,856 --------- --------- ---------

Operating income 25,984 (23,006) 48,990

Interest income, net 8,451 - 8,451 Loss on strategic investments (737) (737) - Other expense, net (1,774) - (1,774) --------- --------- ---------

Income from continuing operations before provision for income taxes 31,924 (23,743) 55,667 Provision for income taxes 8,958 (6,072) 15,030 --------- --------- --------- Income from continuing operations 22,966 (17,671) 40,637

Loss from discontinued operations, net of taxes (695) (695) - Gain from sale of discontinued operations, net of taxes 552 552 - --------- --------- --------- Net income $22,823 $(17,814) $40,637 ========= ========= =========

Basic net income per share: Income per share from continuing operations $0.23 $(0.18) $0.41 Loss per share from discontinued operations, net (0.01) (0.01) - Gain per share from sale of discontinued operations, net 0.01 0.01 - --------- --------- --------- Basic net income per share $0.23 $(0.18) $0.41 ========= ========= =========

Diluted net income per share: Income per share from continuing operations $0.23 $(0.17) $0.40 Loss per share from discontinued operations, net (0.01) (0.01) - Gain per share from sale of discontinued operations, net 0.01 0.01 - --------- --------- --------- Diluted net income per share $0.23 $(0.17) $0.40 ========= ========= =========

Weighted average shares outstanding for basic net income per share 99,244 99,244 ========= =========

Weighted average shares outstanding for diluted net income per share 100,752 100,752 ========= =========

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

December 31, December 31, 2004 2003 ----------- -----------

ASSETS Current assets Cash and cash equivalents $175,356 $212,562 Short-term investments 38,984 15,703 Trade receivables, net 62,535 42,836 Inventories 27,804 24,845 Deferred taxes 20,879 20,589 Prepaid expenses and other current assets 19,898 19,472 ----------- ----------- Total current assets 345,456 336,007

Property and equipment, net 37,544 28,493 Long-term investments 320,907 368,020 Goodwill 352,572 289,508 Purchased intangibles, net 26,915 15,236 Deferred taxes 49,060 56,513 Other assets 22,187 10,013 ----------- ----------- Total assets $1,154,641 $1,103,790 =========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $45,682 $36,247 Accrued payroll and related liabilities 18,852 12,644 Taxes payable 52,665 49,417 Deferred revenue 32,127 20,524 Other accrued liabilities 30,065 26,846 ----------- ----------- Total current liabilities 179,391 145,678

Long-term liabilities 10,636 28,833 ----------- ----------- Total liabilities 190,027 174,511

Stockholders' equity 964,614 929,279 ----------- ----------- Total liabilities and stockholders' equity $1,154,641 $1,103,790 =========== ===========

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

Twelve Months Ended ------------------------------ December 31, December 31, 2004 2003 ----------- -----------

Cash flows from operating activities: Net income $35,349 $22,823 Adjustments to reconcile net income to net cash provided by operating activities: Gain from sale of discontinued operations, net of taxes (477) (552) Depreciation and amortization 19,971 15,263 Amortization of purchased intangibles 20,522 17,591 Provision for (benefit from) doubtful accounts (210) 521 Provision for (benefit from) excess and obsolete inventories (202) 1,805 Tax benefit from exercise of stock options 6,530 1,821 Loss on strategic investments 12 737 Amortization of unearned stock- based compensation 214 320 Purchase of in-process research and development 4,600 - Loss on disposals of property and equipment 513 -

Changes in assets and liabilities, net of the effect of acquisitions: Trade receivables (17,297) 22,113 Inventories 614 8,440 Deferred taxes 423 1,281 Prepaid expenses and other assets (2,837) (4,389) Accounts payable 8,324 6,546 Taxes payable 2,257 4,763 Other accrued liabilities 1,271 1,724 ----------- ----------- Net cash provided by operating activities 79,577 100,807 ----------- -----------

Cash flows from investing activities: Purchase of property and equipment (19,285) (14,819) Purchase of licensed technology - (3,528) Purchases of investments (853,967) (960,880) Proceeds from sale and maturity of investments 869,440 932,417 Proceeds from sale of discontinued operations 751 1,396 Purchase of convertible note receivable - (522) Net cash paid in purchase acquisitions (94,993) - ----------- ----------- Net cash used in investing activities (98,054) (45,936) ----------- -----------

Cash flows from financing activities: Proceeds from issuance of common stock under employee option and stock purchase plans 33,816 9,415 Repurchase of common stock (52,545) (6,915) ----------- ----------- Net cash provided by (used in) financing activities (18,729) 2,500 ----------- -----------

Net increase (decrease) in cash and cash equivalents (37,206) 57,371 Cash and cash equivalents, beginning of period 212,562 155,191 ----------- ----------- Cash and cash equivalents, end of period $175,356 $212,562 =========== ===========

--30--AC/sf*

CONTACT: Polycom, Inc. Michael R. Kourey, 925-924-5742 (CFO) mkourey@polycom.com

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: SOFTWARE INTERNET E-COMMERCE EARNINGS CONFERENCE CALLS SOURCE: Polycom, Inc.

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