Press Release

International Revenue Up 26% Year-Over-Year on Pro Forma Basis

San Jose, Calif. - July 21, 2011 - Harmonic Inc. (NASDAQ: HLIT), a global leader in video infrastructure solutions, today announced its preliminary and unaudited results for the quarter ended July 1, 2011. Results for 2011 include contributions from Omneon Inc., acquired on September 15, 2010.

Net revenue for the second quarter of 2011 was $134.0 million, up from $95.5 million in the second quarter of 2010. International sales represented 59% of total revenue for the second quarter of 2011. For the first six months of 2011, net revenue was $266.8 million, up from $180.4 million in the same period of 2010. Total bookings in the second quarter of 2011 were approximately $131.7 million, up from approximately $103.9 million for the second quarter of 2010.

The Company reported GAAP net income for the second quarter of 2011 of $0.4 million, or $0.00 per diluted share, compared to net income of $4.4 million, or $0.05 per diluted share, for the second quarter of 2010. For the first six months of 2011, GAAP net income was $0.9 million, or $0.01 per diluted share, compared to $9.8 million, or $0.10 per diluted share, for the same period of 2010. Non-GAAP net income for the second quarter of 2011 was $10.5 million, or $0.09 per diluted share, compared to $9.1 million, or $0.09 per diluted share, for the same period of 2010. For the first six months of 2011, non-GAAP net income was $20.7 million, or $0.18 per diluted share, compared to $15.0 million, or $0.15 per diluted share, for the same period of 2010. See “Use of Non-GAAP Financial Measures” and “GAAP to Non-GAAP Net Income Reconciliation” below.

For the second quarter of 2011, Harmonic had GAAP gross margins of 46% and GAAP operating margins of 1%, compared to 48% and 4%, respectively, for the same period of 2010. Non-GAAP gross margins were 51% and non-GAAP operating margins were 11% for the second quarter of 2011, compared to 51% and 13%, respectively, for the same period of 2010.

As of July 1, 2011, the Company had cash, cash equivalents and short-term investments of $134.3 million, up from $117.3 million as of April 1, 2011.

“While our international business grew 26% year-over-year on a pro-forma basis, we saw reduced demand from our domestic customers in the second quarter,” said Patrick Harshman, President and Chief Executive Officer. “We’re pleased to see our Omneon revenue up 14% from the prior quarter. We are also optimistic about the progress with both international and domestic customers on a range of new Internet and multiscreen video initiatives. We remain focused on carefully managing our operational expenses while executing our growth strategy.”

Business Outlook
Harmonic anticipates net revenue in a range of $130 million to $140 million for the third quarter of 2011 and $540 million to $550 million for the full year of 2011. GAAP gross margins and operating expenses for the third quarter of 2011 are expected to be in the range of 45% to 47% and $60 to $61 million, respectively. Non-GAAP gross margins and operating expenses for the third quarter of 2011, which will exclude charges for stock-based compensation and the amortization of intangibles, are anticipated to be in the range of 50% to 52% and $53 to $54 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 51970033). The replay will be available after 6:00 p.m. Pacific at the same website address or by calling +1.706.645.9291 (conference identification code 51970033).

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 second quarter ended July 1, 2011; our progress with international and domestic customers on a range of new Internet and multiscreen video initiatives; our focus on managing expenses while executing our growth strategy; and regarding net revenue, GAAP gross margins, GAAP operating expenses, non-GAAP gross margins and non-GAAP operating expenses for the third quarter of 2011 and net revenue for the full year. 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: we will not be able to fully integrate Omneon into our business as effectively or efficiently as expected; Omneon does not provide Harmonic with the benefits that we expected from the acquisition; 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; 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 recent turmoil in the global financial markets, particularly on our European and other international sales and operations; 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; the need to introduce new and enhanced products and the risk that our product development is not timely or does not result in expected benefits or market acceptance; risks associated with unpredictable sales cycles; our dependence on contract manufacturers; 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, 2010, our Quarterly Reports on Form 10-Q 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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