Press Release

SAN JOSE, Calif. - October 23, 2012 -- Harmonic Inc. (NASDAQ: HLIT), a global leader in video infrastructure solutions, announced today its preliminary and unaudited results for the quarter ended September 28, 2012.

Net revenue for the third quarter of 2012 was $136.7 million, compared with $132.6 million for the second quarter of 2012 and $138.9 million for the third quarter of 2011.

Total bookings in the third quarter of 2012 were approximately $128.7, compared with $141.4 million for the third quarter of 2011.  Total backlog and deferred revenue was $137.7 million as of September 28, 2012, compared with $125.4 million as of September 30, 2011.

The company reported a GAAP net loss for the third quarter of 2012 of $(8.2) million, or $(0.07) per share, compared with a GAAP net income for the third quarter of 2011 of $3.5 million or $0.03 per share.  Non-GAAP net income for the third quarter of 2012 was $8.1 million, or $0.07 per share, compared with $12.7 million, or $0.11 per share for the third quarter of 2011.  See "Use of Non-GAAP Financial Measures" and "GAAP to Non-GAAP Net Income (Loss) Reconciliation" below.

Harmonic reported GAAP gross margins of 44% and GAAP operating margins of (1)% for the third quarter of 2012, compared to 46% and 3%, respectively, for the same period of 2011. Non-GAAP gross margins were 48% and non-GAAP operating margins were 8% for the third quarter of 2012, compared to 51% and 12%, respectively, for the same period of 2011.

As of September 28, 2012, the Company had cash, cash equivalents and short-term investments of $192.0 million, an increase from $177.8 million as of June 29, 2012.  The company generated approximately $22.0 million of cash from operations in the third quarter of 2012, and repurchased 1.65 million shares of common stock for approximately $7.4 million under its previously announced stock repurchase program.

"Harmonic delivered sequential revenue and earnings growth, and more than $20 million of cash from operations, in what continues to be a challenging economic environment," said Patrick Harshman, President and Chief Executive Officer. "Our competitive position remains strong, and we believe we gained market share in both domestic and international markets.  We also made significant progress on new product developments that position Harmonic to capitalize on the next wave of investment by our customers, including cable access (CCAP), high efficiency video coding (HEVC) for next-generation Internet-delivered and Ultra HD video, and a further strengthened solution portfolio enabling multiscreen video services."

Business Outlook

Harmonic anticipates net revenue in the range of $132 million to $142 million for the fourth quarter of 2012.  GAAP gross margins and operating expenses for the fourth quarter of 2012 are expected to be in the range of 44% to 46% and $60 million to $61.5 million, respectively.  Non-GAAP gross margins and operating expenses for the fourth quarter of 2012, which will exclude stock-based compensation and the amortization of intangibles, are anticipated to be in the range of 48% to 50% and $55 million to $56.5 million, respectively.  

Conference Call Information

Harmonic will host a conference call to discuss its financial results at 2:00 p.m. Pacific (5:00 p.m. Eastern) on Tuesday, October 23, 2012. A listen-only broadcast of the conference call can be accessed either from the Company's website at www.harmonicinc.com or by calling +1.847.944.7317 or +1.866.297.6395 (conference confirmation number 33516255). The replay will be available after 6:00 p.m. Pacific at the same website address or by calling +1.630.652.3042 or +1.888.843.7419 (pass code 33516255#).

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 third quarter ended September 28, 2012; , regarding the challenging economic environment; regarding our strong competitive position; regarding gains in market share in domestic and international markets; regarding significant progress on new product developments that position Harmonic to capitalize on the next wave of investment by its customers; and regarding net revenue, GAAP gross margins, GAAP operating expenses, non-GAAP gross margins and non-GAAP operating expenses for the fourth 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 will expire; 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 in a timely manner and market acceptance of new or existing Harmonic products; losses of one or more key customers; risks associated with Harmonic's international operations; dependence on market acceptance of several broadband services, on the adoption of new broadband technologies and on broadband industry trends; and  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, on both revenue and gross margins; 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.

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 margin, operating expenses, 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 and severance charges and non-cash items, such as stock-based compensation expense, amortization of intangibles, and discrete tax items and adjustments.

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