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Dolby Labs Prepares Third-Generation Rio Line With New, High Quality Music Format

In addition, Dolby will work with S3 to optimize AAC for the Rio platform, ensuring that consumers benefit from the high fidelity audio the AAC format provides.

``AAC offers high quality sound in a very small size, enhancing the music experience for Rio listeners,'' said Mike Reed, vice president of marketing for S3's Rio Division. ``Dolby has always been synonymous with a simple way to get great sound. That's exactly what consumers get with Rio.''

High Quality Sound, Compression

AAC is the latest audio format standardized by the International Organization for Standardization (ISO) as part of the MPEG specification. According to an ISO-funded study, music encoded in the AAC was found to be ``indistinguishable'' from the CD original. Compared to MP3 (MPEG Layer-3), AAC provides improved audio quality while requiring approximately 30% less storage and/or bandwidth.

``We're pleased to announce that S3's Rio Group will be supporting AAC with its third-generation Rio players,'' said Ramzi Haidamus, Dolby Laboratories' Technical/Business Strategist. ``S3 pioneered the portable digital audio player market and has done a lot to make this format a success. With AAC and other new technologies, digital music will move beyond a grassroots phenomenon to become an e-commerce phenomenon and S3's Rio products will help make this a reality.''

About S3 Incorporated

Following its acquisition of Diamond Multimedia and the transfer of its graphics chip assets to a joint venture company, S3 has been relaunched as a digital media company focused on creating products and partnerships that help build the digital home. Combining significant financial assets with a strong technology portfolio, that includes the Rio family of digital audio players and the HomeFree series of home networking solutions, S3 is uniquely positioned to capitalize on high growth opportunities in the rapidly converging Internet and consumer device markets.

Except for historical information contained herein, the matters set forth in this press release are forward-looking statements that are subject to risk and uncertainties, including the impact of competitive products and pricing and of alternative technological advances and other risks detailed from time to time in S3's SEC reports, including its quarterly report on Form 10-Q for the quarter ended March 31, 2000. S3 is a registered trademark of S3 Incorporated. The S3 corporate logo, Diamond Multimedia and HomeFree are trademarks of S3 Incorporated. Rio is a trademark of RioPort.com, Inc. and is used by S3 under license from RioPort.com, Inc. Other marks referenced herein are the property of their respective owners.

Contact:

     Porter Novelli Convergence Group
     Rob McMurtrie, 206/727-2880
     rob.mcmurtrie@pnicg.com