Polycom Q1 Revenues Slip

PLEASANTON, Calif. -- Polycom(R), Inc. (Nasdaq: PLCM), the world's leader in video and voice conferencing, conference bridges, and integrated web collaboration solutions, today reported its operating results for the first quarter ended March 31, 2003. First quarter consolidated net revenues were $92.9 million, compared to $132.3 million recorded for the first quarter of 2002. Pro forma net income in the first quarter was $1.7 million, or 2 cents per diluted share. This compares to pro forma net income of $22.8 million, or 23 cents per diluted share, for the first quarter of 2002. Pro forma financial measures exclude acquisition-related costs, amortization of purchased intangibles, restructure costs, litigation settlement, loss on strategic investments, income tax effect of the preceding adjustments, loss from discontinued operations, net of taxes, and gain from sale of discontinued operations, net of taxes. The GAAP net loss for the first quarter of 2003 was $2.4 million, or a 2 cent net loss per diluted share, compared to GAAP net income of $14.5 million, or 14 cents per diluted share, for the same period last year. Prior year revenue and pro forma net income per diluted share figures include certain reclassifications to reflect the effect of discontinued operations associated with the sale of the network access product line. Network access revenue and related expenses, net of taxes, are shown as discontinued operations in the financial statements. The reconciliation of the GAAP statement of operations amounts to the respective pro forma figures, for the three months ended March 31, 2003 and 2002 is set forth at the end of this press release. On a product line basis, consolidated net revenues for the first quarter of 2003 were comprised of 56 percent video communications, or $51.7 million; 18 percent network systems, or $16.9 million; 20 percent voice communications, or $18.9 million; and 6 percent iPower(TM)-related services or $5.4 million. This compares to the first quarter of 2002, in which consolidated net revenues were comprised of 61 percent video communications, or $80.9 million; 17 percent network systems, or $23.1 million; 15 percent voice communications, or $19.1 million; and 7 percent iPower-related services, or $9.2 million. "We are disappointed with our revenue and profit results for the quarter," stated Robert Hagerty, president and CEO. "In spite of the fact that we appear to have had some market share improvements in the first quarter, this challenging economic environment has clearly impacted sales cycles for our products." "Polycom achieved $10 million in positive operating cash flow during the first quarter," said Michael Kourey, senior vice president, finance and administration, and CFO. "This represents Polycom's twentieth consecutive quarter of positive operating cash flow. Netting out the stock buyback and capital procurements, this cash flow yielded a period-ending cash and investments balance of $513 million with no debt." Polycom Inc.