UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
April 23, 2014

POLYCOM, INC.
(Exact name of registrant as specified in its charter)

 
					
State of Delaware	 	000-27978	 	94-3128324	
(State or Other Jurisdiction
of Incorporation)	 	(Commission
File Number)	 	(IRS Employer
Identification No.)	
		
6001 America Center Drive
San Jose, California	 	95002	
(Address of principal executive offices)	 	(Zip Code)	
(408) 586-6000
Registrant’s telephone number, including area code
N/A
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	
 
¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	
 
¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	
 
¨	Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4(c))	

 

Item 2.02. Results of Operations and Financial Condition
On April 23, 2014, Polycom, Inc. issued a press release announcing its financial results for the three months ended March 31, 2014. The full text of the press release is furnished as Exhibit 99.1.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
99.1 Press Release, dated April 23, 2014, entitled “Polycom Reports First Quarter 2014 Revenue of $329 Million.”

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

POLYCOM, INC.	
		
By:	 	/s/ Laura J. Durr	
	 	Laura J. Durr	
	 	Chief Accounting Officer and Interim Chief Financial Officer	
Date: April 23, 2014

EXHIBIT INDEX

Exhibit No.	  	Description	
		
99.1	  	Press Release, dated April 23, 2014, entitled “Polycom Reports First Quarter 2014 Revenue of $329 Million.”	

Exhibit 99.1

 
							
Investor Contact:	  	Laura Graves
Polycom, Inc.
1.408.586.4271
laura.graves@polycom.com	  		  		
				
Press Contact:	  	Ryan Batty
Polycom, Inc.
1.408.586.4467
ryan.batty@polycom.com	  		  		
Polycom Reports First Quarter 2014 Revenue of $329 Million
Company Targets Improved Operating Performance in 2014
SAN JOSE, Calif. – April 23, 2014 – Polycom, Inc. (Nasdaq: PLCM) today reported first quarter 2014 revenues of $329 million, non-GAAP net income of $26 million and non-GAAP earnings per diluted share of 18 cents. GAAP net loss for the first quarter was $4 million, or 3 cents per share. A reconciliation of GAAP to non-GAAP results is provided in the tables at the end of this press release.
“We are successfully executing on our goal to improve operating performance,” said Peter Leav, Polycom President and Chief Executive Officer. “Future earnings growth at Polycom will be driven by improvements in processes across the organization, operational cost containment, and the pursuit of profitable revenue growth.”
“Operating margins and earnings per share were better than expected as a result of strong execution in the first quarter,” said Laura Durr, Chief Accounting Officer and Interim Chief Financial Officer.
On a comparative basis, consolidated financial results were:

($ in millions, except per share data)	  	Q1 2014	 	 	Q4 2013	 	 	Q1 2013	 	  	Year-
Over-
Year
Change	 	
Revenues	  	$	328.5	  	 	$	347.9	  	 	$	338.8	  	  	 	-3	% 	
Non-GAAP Net Income	  	$	26.1	  	 	$	25.4	  	 	$	23.3	  	  	 	12	% 	
Non-GAAP EPS	  	$	0.18	  	 	$	0.16	  	 	$	0.13	  	  	 	38	% 	
GAAP Net Income (Loss)	  	$	(4.0	) 	 	$	(2.0	) 	 	$	2.6	  	  	 	-254	% 	
GAAP EPS	  	$	(0.03	) 	 	$	(0.01	) 	 	$	0.01	  	  	 	-400	% 	

On a geographic basis, consolidated revenues were comprised of:

($ in millions)	  	Q1 2014	 	 	Q4 2013	 	 	Q1 2013	 	 	Year-Over-
Year
Change	 	
Americas	  	$	163.1	  	 	$	170.6	  	 	$	171.0	  	 	 	-5	% 	
% of revenues	  	 	50	%  	 	 	49	%  	 	 	51	%  	 				
Europe, Middle East & Africa (EMEA)	  	 	89.0	  	 	 	89.2	  	 	 	89.1	  	 	 	0	% 	
% of revenues	  	 	27	%  	 	 	26	%  	 	 	26	%  	 				
Asia Pacific	  	 	76.4	  	 	 	88.1	  	 	 	78.7	  	 	 	-3	% 	
% of revenues	  	 	23	%  	 	 	25	%  	 	 	23	%  	 				
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Totals *	  	$	328.5	  	 	$	347.9	  	 	$	338.8	  	 	 	-3	%	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
*	may not foot due to rounding	
By product category, inclusive of its service component, consolidated revenues were comprised of:

($ in millions)	  	Q1 2014	 	 	Q4 2013	 	 	Q1 2013	 	 	Year-Over-
Year
Change	 	
UC Group Systems	  	$	213.4	  	 	$	218.1	  	 	$	232.4	  	 	 	-8	% 	
% of revenues	  	 	65	%  	 	 	63	%  	 	 	69	%  	 				
UC Personal Devices	  	 	56.5	  	 	 	62.1	  	 	 	49.3	  	 	 	15	% 	
% of revenues	  	 	17	%  	 	 	18	%  	 	 	15	%  	 				
UC Platform	  	 	58.7	  	 	 	67.7	  	 	 	57.1	  	 	 	3	% 	
% of revenues	  	 	18	%  	 	 	19	%  	 	 	19	%  	 				
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Totals *	  	$	328.5	  	 	$	347.9	  	 	$	338.8	  	 	 	-3	%  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
*	may not foot due to rounding	
In Q1 2014, Polycom generated a total of $19 million in operating cash flow. Operating cash flow on a trailing 12 month basis was $138 million. Cash and investments at the end of Q1 2014 totaled $596 million. Net of existing debt, cash and investments at the end of Q1 2014 totaled $349 million.
Earnings Call Details
Polycom will hold a conference call today, April 23, 2014, at 5:00 p.m. ET/2:00 p.m. PT to discuss these first quarter 2014 financial results. You may participate by listening to the webcast at www.polycom.com/investors or, for callers in the U.S. and Canada, you may participate by calling 1.800.926.7713 and for callers outside of the U.S. and Canada, by calling 1.212.231.2930. 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 U.S. and Canada, at 1.800.633.8284 and, for callers outside of the U.S. and Canada, at 1.402.977.9140. The access number for the replay is 21713337. A replay of the call will be available on www.polycom.com for at least three months.
Forward Looking Statements and Risk Factors
This release contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 regarding improved operating performance, earnings growth, process improvements, operational cost containment and profitable revenue growth. 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

and any resulting loss of business; 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 global economic conditions and external market factors; the market acceptance of our products and changing market demands, including demands for differing technologies or product and services offerings; our ability to successfully implement process improvements and cost containment initiatives; changes to our strategic areas of focus; our ability to successfully integrate our acquisitions into our business; possible delays in the development, availability and shipment of new products due to engineering, manufacturing or other delays; increasing costs and differing uses of capital; changes in key personnel that may cause disruption to the business; 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 Annual Report on Form 10-K for the year ended December 31, 2013, and in other reports filed by Polycom with the SEC. Polycom disclaims any intent or obligations to update these forward-looking statements.
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.
GAAP to non-GAAP Reconciliation
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.
About Polycom
Polycom helps organizations unleash the power of human collaboration. More than 400,000 companies and institutions worldwide defy distance with secure video, voice and content solutions from Polycom to increase productivity, speed time to market, provide better customer service, expand education and save lives. Polycom and its global partner ecosystem provide flexible collaboration solutions for any environment that deliver the best user experience, the broadest multi-vendor interoperability and unmatched investment protection. Visit www.polycom.com or connect with us on Twitter, Facebook and LinkedIn to learn more.
© 2014 Polycom, Inc. All rights reserved. POLYCOM ® , the Polycom 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.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)

 	  	Three Months Ended	 	
 	  	March 31,
2014	 	 	March 31,
2013	 	
Revenues:	  				 				
Product revenues	  	$	231,509	  	 	$	246,129	  	
Service revenues	  	 	97,015	  	 	 	92,623	  	
	  	 	 	 	 	 	 	 	
Total revenues	  	 	328,524	  	 	 	338,752	  	
	  	 	 	 	 	 	 	 	
Cost of revenues:	  				 				
Cost of product revenues	  	 	97,636	  	 	 	101,878	  	
Cost of service revenues	  	 	38,903	  	 	 	37,777	  	
	  	 	 	 	 	 	 	 	
Total cost of revenues	  	 	136,539	  	 	 	139,655	  	
	  	 	 	 	 	 	 	 	
Gross profit	  	 	191,985	  	 	 	199,097	  	
	  	 	 	 	 	 	 	 	
Operating expenses:	  				 				
Sales and marketing	  	 	93,968	  	 	 	108,715	  	
Research and development	  	 	48,147	  	 	 	55,935	  	
General and administrative	  	 	23,793	  	 	 	23,694	  	
Amortization of purchased intangibles	  	 	2,492	  	 	 	2,502	  	
Restructuring costs	  	 	30,343	  	 	 	5,423	  	
Transaction-related costs	  	 	156	  	 	 	3,323	  	
	  	 	 	 	 	 	 	 	
Total operating expenses	  	 	198,899	  	 	 	199,592	  	
	  	 	 	 	 	 	 	 	
Operating loss	  	 	(6,914	) 	 	 	(495	) 	
Interest expense	  	 	(1,474	) 	 	 	(407	) 	
Other income (expense)	  	 	779	  	 	 	(352	) 	
	  	 	 	 	 	 	 	 	
Interest and other income (expense), net	  	 	(695	) 	 	 	(759	) 	
Loss from continuing operations before benefit for income taxes	  	 	(7,609	) 	 	 	(1,254	) 	
Benefit from income taxes	  	 	(3,618	) 	 	 	(3,371	) 	
	  	 	 	 	 	 	 	 	
Loss from continuing operations	  	 	(3,991	) 	 	 	2,117	  	
Gain from sale of discontinued operations, net of taxes	  	 	—  	  	 	 	459	  	
	  	 	 	 	 	 	 	 	
Net income (loss)	  	$	(3,991	) 	 	$	2,576	  	
	  	 	 	 	 	 	 	 	
Basic and diluted net income (loss) per share:	  				 				
Net income (loss) per share from continuing operations	  	$	(0.03	) 	 	$	0.01	  	
Gain per share from sale of discontinued operations, net of taxes	  	$	—  	  	 	$	—  	  	
Net income (loss) per share from discontinued operations, net of taxes	  	$	—  	  	 	$	—  	  	
	  	 	 	 	 	 	 	 	
Basic and diluted net income (loss) per share	  	$	(0.03	) 	 	$	0.01	  	
	  	 	 	 	 	 	 	 	
Number of shares used in computation of net income (loss) per share:	  				 				
Basic	  	 	136,795	  	 	 	176,079	  	
	  	 	 	 	 	 	 	 	
Diluted	  	 	136,795	  	 	 	179,140	  	
	  	 	 	 	 	 	 	 	
Note:
Earnings per share amounts for continuing operations, discontinued operations and net income (loss), as presented above, are calculated individually and may not sum due to rounding differences. *
 
*	As a result of the net loss from continuing operations for all periods presented, all potentially issuable common shares have been excluded from the diluted shares used in the computation of net income (loss) per share from continuing operations as their effect is anti-dilutive.	

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

 	  	Three Months Ended	 	
 	  	March 31,
2014	 	 	March 31,
2013	 	
GAAP net income (loss)	  	$	(3,991	) 	 	$	2,576	  	
Gain from sale of discontinued operations, net of taxes	  	 	—  	  	 	 	(459	) 	
Amortization of purchased intangibles	  	 	3,333	  	 	 	3,750	  	
Restructuring costs	  	 	30,343	  	 	 	5,423	  	
Transaction-related expenses	  	 	156	  	 	 	3,323	  	
Stock-based compensation expense	  	 	5,647	  	 	 	17,771	  	
Effect of stock-based compensation on warranty rates	  	 	129	  	 	 	157	  	
Costs associated with CEO separation and related SEC investigation	  	 	610	  	 	 	—  	  	
Income tax effect of non-GAAP exclusions	  	 	(10,140	) 	 	 	(9,205	) 	
	  	 	 	 	 	 	 	 	
Non-GAAP net income	  	$	26,087	  	 	$	23,336	  	
	  	 	 	 	 	 	 	 	
GAAP net income (loss) per share	  				 				
Basic	  	$	(0.03	) 	 	$	0.01	  	
	  	 	 	 	 	 	 	 	
Diluted	  	$	(0.03	) 	 	$	0.01	  	
	  	 	 	 	 	 	 	 	
Non-GAAP net income per share	  				 				
Basic	  	$	0.19	  	 	$	0.13	  	
	  	 	 	 	 	 	 	 	
Diluted	  	$	0.18	  	 	$	0.13	  	
	  	 	 	 	 	 	 	 	
Number of shares used in computation of GAAP net income (loss) per share:	  				 				
Basic and diluted	  	 	136,795	  	 	 	176,079	  	
Number of shares used in computation of non-GAAP net income per share:	  				 				
Basic	  	 	136,795	  	 	 	176,079	  	
Diluted	  	 	142,165	  	 	 	179,140	  	
Note: As a result of the GAAP net loss from continuing operations for all periods presented, all potentially issuable common shares have been excluded from the diluted shares used in the computation of net income (loss) per share from continuing operations as their effect is anti-dilutive.

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

 	  	March 31,
2014	 	  	December 31,
2013	 	
ASSETS	  				  				
Current assets	  				  				
Cash and cash equivalents	  	$	380,214	  	  	$	392,629	  	
Short-term investments	  	 	149,890	  	  	 	134,684	  	
Trade receivables, net	  	 	184,239	  	  	 	183,369	  	
Inventories	  	 	103,280	  	  	 	103,309	  	
Deferred taxes	  	 	37,079	  	  	 	37,085	  	
Prepaid expenses and other current assets	  	 	58,982	  	  	 	50,352	  	
	  	 	 	 	  	 	 	 	
Total current assets	  	 	913,684	  	  	 	901,428	  	
Property and equipment, net	  	 	109,146	  	  	 	115,157	  	
Long-term investments	  	 	65,835	  	  	 	56,372	  	
Goodwill and purchased intangibles, net	  	 	593,340	  	  	 	596,918	  	
Deferred taxes	  	 	44,425	  	  	 	51,398	  	
Other assets	  	 	27,654	  	  	 	27,757	  	
	  	 	 	 	  	 	 	 	
Total assets	  	$	1,754,084	  	  	$	1,749,030	  	
	  	 	 	 	  	 	 	 	
LIABILITIES AND STOCKHOLDERS’ EQUITY	  				  				
Current liabilities	  				  				
Accounts payable	  	$	92,616	  	  	$	84,640	  	
Accrued payroll and related liabilities	  	 	32,051	  	  	 	40,162	  	
Taxes payable	  	 	3,797	  	  	 	5,389	  	
Deferred revenue	  	 	172,703	  	  	 	172,408	  	
Current portion of long-term debt	  	 	6,250	  	  	 	6,250	  	
Other accrued liabilities	  	 	76,841	  	  	 	77,744	  	
	  	 	 	 	  	 	 	 	
Total current liabilities	  	 	384,258	  	  	 	386,593	  	
Non-current liabilities	  				  				
Long-term deferred revenue	  	 	86,078	  	  	 	87,467	  	
Taxes payable	  	 	12,553	  	  	 	12,419	  	
Deferred taxes	  	 	150	  	  	 	149	  	
Long-term debt	  	 	240,625	  	  	 	242,188	  	
Other non-current liabilities	  	 	50,204	  	  	 	43,849	  	
	  	 	 	 	  	 	 	 	
Total liabilities	  	 	773,868	  	  	 	772,665	  	
Stockholders’ equity	  	 	980,216	  	  	 	976,365	  	
	  	 	 	 	  	 	 	 	
Total liabilities and stockholders’ equity	  	$	1,754,084	  	  	$	1,749,030	  	

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

 	  	Three Months Ended	 	
 	  	March 31,
2014	 	 	March 31,
2013	 	
Cash flows from operating activities:	  				 				
Net income (loss)	  	$	(3,991	) 	 	$	2,576	  	
Adjustments to reconcile net income (loss) to net cash provided by operating activities:	  				 				
Depreciation and amortization	  	 	14,533	  	 	 	16,430	  	
Amortization of purchased intangibles	  	 	3,352	  	 	 	3,768	  	
Amortization of software development costs	  	 	288	  	 	 	—  	  	
Amortization of debt issuance costs	  	 	134	  	 	 	—  	  	
Amortization of discounts and premiums on investments, net	  	 	442	  	 	 	386	  	
Write-down of excess and obsolete inventories	  	 	1,781	  	 	 	2,934	  	
Stock-based compensation expense	  	 	5,647	  	 	 	17,771	  	
Excess tax benefits from stock-based compensation expense	  	 	(1,695	) 	 	 	(155	) 	
Loss on disposal of property and equipment	  	 	3,685	  	 	 	1,206	  	
Gain from sale of discontinued operations, net of tax	  	 	—  	  	 	 	(459	) 	
Changes in assets and liabilities, net of effects of acquisitions:	  				 				
Trade receivables	  	 	(870	) 	 	 	17,179	  	
Inventories	  	 	(1,752	) 	 	 	(525	) 	
Deferred taxes	  	 	(1,762	) 	 	 	1,994	  	
Prepaid expenses and other assets	  	 	(8,623	) 	 	 	(4,530	) 	
Accounts payable	  	 	6,750	  	 	 	7,857	  	
Taxes payable	  	 	4,936	  	 	 	(1,681	) 	
Other accrued liabilities and deferred revenue	  	 	(3,761	) 	 	 	(15,351	) 	
	  	 	 	 	 	 	 	 	
Net cash provided by operating activities	  	 	19,094	  	 	 	49,400	  	
	  	 	 	 	 	 	 	 	
Cash flows from investing activities:	  				 				
Purchases of property and equipment	  	 	(10,929	) 	 	 	(12,757	) 	
Capitalized software development costs for products to be sold	  	 	(1,073	) 	 	 	—  	  	
Purchases of investments	  	 	(90,663	) 	 	 	(55,754	) 	
Proceeds from sale of investments	  	 	30,114	  	 	 	9,227	  	
Proceeds from maturity of investments	  	 	35,430	  	 	 	68,136	  	
Net cash received from sale of discontinued operations	  	 	—  	  	 	 	556	  	
Net cash paid in purchase acquisitions	  	 	—  	  	 	 	(8,350	) 	
	  	 	 	 	 	 	 	 	
Net cash provided by (used in) investing activities	  	 	(37,121	) 	 	 	1,058	  	
	  	 	 	 	 	 	 	 	
Cash flows from financing activities:	  				 				
Proceeds from issuance of common stock under employee option and stock purchase plans	  	 	13,295	  	 	 	13,206	  	
Payments on debt	  	 	(1,562	) 	 	 	—  	  	
Purchase and retirement of common stock	  	 	(7,816	) 	 	 	(38,041	) 	
Excess tax benefits from stock-based compensation expense	  	 	1,695	  	 	 	155	  	
	  	 	 	 	 	 	 	 	
Net cash provided by (used in) financing activities	  	 	5,612	  	 	 	(24,680	) 	
	  	 	 	 	 	 	 	 	
Net increase (decrease) in cash and cash equivalents	  	 	(12,415	) 	 	 	25,778	  	
Cash and cash equivalents, beginning of period	  	 	392,629	  	 	 	477,073	  	
	  	 	 	 	 	 	 	 	
Cash and cash equivalents, end of period	  	$	380,214	  	 	$	502,851	  	
	  	 	 	 	 	 	 	 	
Certain prior period amounts have also been reclassified to conform to the current period presentation.

POLYCOM, INC.
Selected Summary Data
(In millions except per share amounts and headcount)
(Unaudited)

 	  	March 31,
2014	 	 	December 31,
2013	 	 	March 31,
2013	 	
Balance Sheet Highlights	  				 				 				
Cash and investments	  	$	596	  	 	$	584	  	 	$	728	  	
Number of shares outstanding	  	 	138	  	 	 	135	  	 	 	175	  	
Cash and investments per share	  	$	4.31	  	 	$	4.32	  	 	$	4.17	  	
Debt	  	$	247	  	 	$	248	  	 	$	—  	  	
Operating cash flow - quarterly	  	$	19	  	 	$	50	  	 	$	49	  	
Operating cash flow - trailing 12 months	  	$	138	  	 	$	168	  	 	$	204	  	
DSO (Days Sales Outstanding)	  	 	51	  	 	 	48	  	 	 	48	  	
Inventory turns - GAAP	  	 	5.3	  	 	 	5.8	  	 	 	5.7	  	
Inventory turns - non-GAAP	  	 	5.2	  	 	 	5.5	  	 	 	5.6	  	
Deferred revenue	  	$	259	  	 	$	260	  	 	$	253	  	
Share repurchases:	  				 				 				
Quarter-to-date share purchases - shares	  	 	—  	  	 	 	35.4	  	 	 	3.4	  	
Quarter-to-date share repurchases - dollars	  	$	—  	  	 	$	400	  	 	$	34	  	
Year-to-date share purchases - shares	  	 	—  	  	 	 	45	  	 	 	3.4	  	
Year-to-date share repurchases - dollars	  	$	—  	  	 	$	502	  	 	$	34	  	
Remaining authorization for share repurchases (1)	  	$	—  	  	 	$	—  	  	 	$	39	  	
Ending headcount	  	 	3,578	  	 	 	3,774	  	 	 	3,800	  	
		
 	  	For the three months ended	 	
 	  	March 31,
2014	 	 	December 31,
2013	 	 	March 31,
2013	 	
Income Statement Highlights	  				 				 				
GAAP:	  				 				 				
Revenues	  	$	329	  	 	$	348	  	 	$	339	  	
Gross margin	  	 	58.4	% 	 	 	56.6	% 	 	 	58.8	% 	
Operating expenses	  	$	199	  	 	$	197	  	 	$	200	  	
Operating margin	  	 	(2.1	%) 	 	 	(0.1	%) 	 	 	(0.1	%) 	
Diluted EPS	  	$	(0.03	) 	 	$	(0.01	) 	 	$	0.01	  	
Non-GAAP:	  				 				 				
Revenues	  	$	329	  	 	$	348	  	 	$	339	  	
Gross margin	  	 	59.2	% 	 	 	58.8	% 	 	 	59.9	% 	
Operating expenses	  	$	161	  	 	$	171	  	 	$	173	  	
Operating margin	  	 	10.1	% 	 	 	9.8	% 	 	 	8.8	% 	
Diluted EPS	  	$	0.18	  	 	$	0.16	  	 	$	0.13	  	
 
(1)	Polycom is not obligated to purchase any specific number of shares under its Share Repurchase Program and the program may be modified, suspended or discontinued at any time.	

POLYCOM, INC.
Reconciliations of GAAP Measures to Non-GAAP Measures
(In thousands)
(Unaudited)

 	  	Three Months Ended	 	
 	  	March 31,
2014	 	 	March 31,
2013	 	
GAAP cost of revenues used in inventory turns	  	$	136,539	  	 	$	139,655	  	
Stock-based compensation expense	  	 	(1,601	) 	 	 	(2,337	) 	
Effect of stock-based compensation expense on warranty rates	  	 	(129	) 	 	 	(157	) 	
Amortization of purchased intangibles	  	 	(841	) 	 	 	(1,248	) 	
	  	 	 	 	 	 	 	 	
Non-GAAP cost of revenues used in inventory turns	  	$	133,968	  	 	$	135,913	  	
	  	 	 	 	 	 	 	 	
GAAP gross profit	  	$	191,985	  	 	$	199,097	  	
Stock-based compensation expense	  	 	1,601	  	 	 	2,337	  	
Effect of stock-based compensation expense on warranty rates	  	 	129	  	 	 	157	  	
Amortization of purchased intangibles	  	 	841	  	 	 	1,248	  	
	  	 	 	 	 	 	 	 	
Non-GAAP gross profit	  	$	194,556	  	 	$	202,839	  	
	  	 	 	 	 	 	 	 	
Non-GAAP gross margin	  	 	59.2	%  	 	 	59.9	%  	
GAAP sales and marketing expense	  	$	93,968	  	 	$	108,715	  	
Stock-based compensation expense	  	 	(391	) 	 	 	(6,636	) 	
	  	 	 	 	 	 	 	 	
Non-GAAP sales and marketing expense	  	$	93,577	  	 	$	102,079	  	
	  	 	 	 	 	 	 	 	
Non-GAAP sales and marketing expense as percent of revenues	  	 	28.5	%  	 	 	30.1	%  	
GAAP research and development expense	  	$	48,147	  	 	$	55,935	  	
Stock-based compensation expense	  	 	(1,042	) 	 	 	(4,721	) 	
	  	 	 	 	 	 	 	 	
Non-GAAP research and development expense	  	$	47,105	  	 	$	51,214	  	
	  	 	 	 	 	 	 	 	
Non-GAAP research and development expense as percent of revenues	  	 	14.3	%  	 	 	15.1	%  	
GAAP general and administrative expense	  	$	23,793	  	 	$	23,694	  	
Stock-based compensation expense	  	 	(2,613	) 	 	 	(4,077	) 	
Costs associated with CEO separation and related SEC investigation	  	 	(610	) 	 	 	—  	  	
	  	 	 	 	 	 	 	 	
Non-GAAP general and administrative expense	  	$	20,570	  	 	$	19,617	  	
	  	 	 	 	 	 	 	 	
Non-GAAP general and administrative expense as percent of revenues	  	 	6.3	%  	 	 	5.8	%  	
GAAP total operating expenses	  	$	198,899	  	 	$	199,592	  	
Stock-based compensation expense	  	 	(4,046	) 	 	 	(15,434	) 	
Amortization of purchased intangibles	  	 	(2,492	) 	 	 	(2,502	) 	
Restructuring costs	  	 	(30,343	) 	 	 	(5,423	) 	
Transaction-related expenses	  	 	(156	) 	 	 	(3,323	) 	
Costs associated with CEO separation and related SEC investigation	  	 	(610	) 	 	 	—  	  	
	  	 	 	 	 	 	 	 	
Non-GAAP total operating expenses	  	$	161,252	  	 	$	172,910	  	
	  	 	 	 	 	 	 	 	
Non-GAAP total operating expenses as percent of revenues	  	 	49.1	%  	 	 	51.0	%  	
GAAP operating loss	  	$	(6,914	) 	 	$	(495	) 	
Stock-based compensation expense	  	 	5,647	  	 	 	17,771	  	
Effect of stock-based compensation expense on warranty rates	  	 	129	  	 	 	157	  	
Amortization of purchased intangibles	  	 	3,333	  	 	 	3,750	  	
Restructuring costs	  	 	30,343	  	 	 	5,423	  	
Transaction-related expenses	  	 	156	  	 	 	3,323	  	
Costs associated with CEO separation and related SEC investigation	  	 	610	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	
Non-GAAP operating income	  	$	33,304	  	 	$	29,929	  	
	  	 	 	 	 	 	 	 	
Non-GAAP operating margin	  	 	10.1	%  	 	 	8.8	%  	

POLYCOM, INC.
Summary of Stock-Based Compensation Expense
(In thousands)
(Unaudited)

 	  	Three Months Ended	 	
 	  	March 31,
2014	 	  	March 31,
2013	 	
Cost of product revenues	  	$	640	  	  	$	861	  	
Cost of service revenues	  	 	961	  	  	$	1,476	  	
	  	 	 	 	  	 	 	 	
Stock-based compensation expense in total cost of revenues	  	 	1,601	  	  	 	2,337	  	
	  	 	 	 	  	 	 	 	
Sales and marketing	  	 	391	  	  	 	6,636	  	
Research and development	  	 	1,042	  	  	 	4,721	  	
General and administrative	  	 	2,613	  	  	 	4,077	  	
	  	 	 	 	  	 	 	 	
Stock-based compensation expense in operating expenses	  	 	4,046	  	  	 	15,434	  	
	  	 	 	 	  	 	 	 	
Total stock-based compensation expense	  	$	5,647	  	  	$	17,771