Press Release

Quarterly Bookings Up 8% Year-Over-Year

SAN JOSE, Calif. - April 24, 2012 - Harmonic Inc. (NASDAQ: HLIT), a global leader in video infrastructure solutions, today announced its preliminary and unaudited results for the quarter ended  March 30, 2012.  

Net revenue for the first quarter of 2012 was $127.7 million, compared to $132.8 million in the first quarter of 2011. As previously announced, net revenue for the first quarter of 2012 was adversely impacted by an unexpectedly slow order rate in the early part of the quarter and a decline in demand from European customers throughout the quarter.

Total bookings in the first quarter of 2012 were approximately $142.5 million, up 8% from approximately $131.6 million for the first quarter of 2011.

The Company reported a GAAP net loss for the first quarter of 2012 of $7.5 million, or ($0.06) per share, compared to GAAP net income of $0.5 million, or $0.00 per share, for the first quarter of 2011. Non-GAAP net income for the first quarter of 2012 was $3.2 million, or $0.03 per diluted share, compared to $10.3 million, or $0.09 per diluted share, for the first quarter of 2011. See "Use of Non-GAAP Financial Measures" and "GAAP to Non-GAAP Net Income (Loss) Reconciliation" below.

For the first quarter of 2012, Harmonic had GAAP gross margins of 42% and GAAP operating margins of (7%), compared to 47% and 0%, respectively, for the same period of 2011. Non-GAAP gross margins were 47% and non-GAAP operating margins were 3% for the first quarter of 2012, compared to 51% and 10%, respectively, for the same period of 2011. As previously announced, gross margins for the first quarter of 2012 were impacted by a revenue mix with lower video processing sales and increased cable edgeQAM sales. The Company's new edgeQAM products initially carry lower gross margins, but are expected to enable future sales of higher margin software licenses as network traffic increases.

As of March 30, 2012, the Company had cash, cash equivalents and short-term investments of $168.5 million, up from $161.8 million as of December 31, 2011 and $117.3 million as of April 1, 2011. In a separate press release, Harmonic also announced today that its board of directors has approved the repurchase of up to $25 million of the Company's common stock.

"We got off to an unusually slow start in the first quarter and our European business remained soft throughout the quarter, but our bookings growth in other geographies underscores the fundamental strength of our business," said Patrick Harshman, president and chief executive officer. "During the first quarter, we saw robust demand for our HectoQAM product and record professional services and support bookings. We're also encouraged by the positive customer response to the introductions of our powerful new playout, distribution and multiscreen delivery solutions.

"While we have uncertain near-term visibility regarding our European business, we continue to expect sequential growth in the second quarter and believe that the global proliferation of video content and media outlets, along with increasing demand for higher quality video in every format delivered over bandwidth constrained networks, plays to our core strengths."

Business Outlook

Harmonic anticipates net revenue in a range of $130 million to $140 million for the second quarter of 2012. GAAP gross margins and operating expenses for the second quarter of 2012 are expected to be in the range of 44% to 46% and $62 million to $63 million, respectively. Non-GAAP gross margins and operating expenses for the second quarter of 2012, which will exclude charges for stock-based compensation and the amortization of intangibles, are anticipated to be in the range of 49% to 51% and $56 million to $57 million, respectively.

Conference Call Information

Harmonic will host a conference call today to discuss its financial results at 2:00 p.m. Pacific (5:00 p.m. Eastern). A listen-only broadcast of the conference call can be accessed on the Company's website at www.harmonicinc.com or by calling +1.706.634.9047 (conference identification code 67072332). The replay will be available after 6:00 P.M. Pacific at the same website address or by calling +1.404.537.3406 (conference identification code 67072332).

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About Harmonic Inc.

Harmonic Inc. (NASDAQ: HLIT) provides infrastructure that powers the video economy. The company enables content and service providers to efficiently create, prepare, and deliver differentiated video services for television and new media platforms. More information is available at www.harmonicinc.com.

Legal Notice Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements related to our expectations: regarding our final results for the first quarter ended March 30, 2012; regarding higher margin software licenses as network traffic increases, regarding uncertain near-term visibility of our European business; regarding sequential growth in the second quarter; that the global proliferation of video content and media outlets, along with increasing demand for higher quality video in every format delivered over bandwidth constrained networks, play to our core strengths; and regarding net revenue, GAAP gross margins, GAAP operating expenses, non-GAAP gross margins and non-GAAP operating expenses for the second quarter of 2012. Our expectations regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include the possibility, in no particular order, that: the trends toward more high-definition, on-demand and anytime, anywhere video will not continue to develop at its current pace, or at all; the possibility that our products will not generate sales that are commensurate with our expectations or that our cost of revenue or operating expenses may exceed our expectations; the mix of products and services sold in various geographies and the effect it has on gross margins; delays or decreases in capital spending in the cable, satellite and telco and broadcast and media industries; customer concentration and consolidation; the impact of general economic conditions, including as a result of recent turmoil in the global financial markets, particularly on our European and other international sales and operations; our ability to develop new and enhanced products and market acceptance of new or existing Harmonic products; losses of one or more key customers; risks associated with Harmonic's international operations; inventory management; the lack of timely availability of parts or raw materials necessary to produce our products; the impact of increases in the prices of raw materials and oil; the effect of competition; difficulties associated with rapid technological changes in Harmonic's markets;  risks associated with unpredictable sales cycles; our dependence on contract manufacturers and sole or limited source suppliers; the effect on Harmonic's business of natural disasters; and the risks that our international sales and support center will not provide the operational or tax benefits that we anticipate or that its expenses exceed our plans. The forward-looking statements contained in this press release are also subject to other risks and uncertainties, including those more fully described in Harmonic's filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2011 and our Current Reports on Form 8-K. The forward-looking statements in this press release are based on information available to the Company as of the date hereof, and Harmonic disclaims any obligation to update any forward-looking statements.

EDITOR'S NOTE - Product and company names used herein are trademarks or registered trademarks of their respective owners.

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Note: We have revised our market categories to combine the Telco revenue with the Satellite category. The data for prior periods has been revised to conform with this presentation.

Use of Non-GAAP Financial Measures

In establishing operating budgets, managing its business performance, and setting internal measurement targets, the Company excludes a number of items required by GAAP. Management believes that these accounting charges and credits, most of which are non-cash or non-recurring in nature, are not useful in managing its operations and business. Historically, the Company has also publicly presented these supplemental non-GAAP measures in order to assist the investment community to see the Company "through the eyes of management," and thereby enhance understanding of its operating performance. The non-GAAP measures presented here are gross margins, operating expense, net income and net income per share. The presentation of non-GAAP information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP, and is not necessarily comparable to non-GAAP results published by other companies. A reconciliation of the historical non-GAAP financial measures discussed in this press release to the most directly comparable historical GAAP financial measures is included with the financial statements contained in this presentation. The non-GAAP adjustments described below have historically been excluded from our GAAP financial measures. These adjustments are excess facilities charges and non-cash items, such as stock-based compensation expense, amortization of intangibles, and discrete tax items and adjustments.

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GAAP to Non-GAAP Net Income (Loss) Reconciliation
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