3DsoundSurge Press Release: SONICblue Reports Strong Q1 Results

SONICblue Reports Strong Q1 Results

Increases Year-On-Year Revenue More Than 100 Percent

Achieves Earnings Expectations; Continues to Improve Margins and Operating Results

SANTA CLARA, Calif.--(BUSINESS WIRE)--April 25, 2002-- SONICblue(TM) Incorporated (Nasdaq: SBLU ) reported strong first quarter results demonstrating significant sales increases in its core markets. Net revenue for the quarter was $65.1 million, reflecting a year-on-year increase of more than 100 percent for like business. Net revenues for the first quarter excluded the majority of ReplayTV revenue, which will be deferred over a 48 month period. In the first quarter, the Company adopted a service oriented ReplayTV revenue recognition policy and will recognize 100 percent of ReplayTV product revenue ratably over a 48-month period.

The Company achieved a first quarter gross margin of 18.2 percent, a 0.3-point improvement, and reduced pro forma operating expenses to $18.8 million. Pro forma first quarter operating loss met adjusted analysts expectations, taking into consideration the Company's revenue recognition policy for its ReplayTV business.

SONICblue reported a pro forma first quarter operating loss of $7.0 million, or $0.07 per share, as compared with a pro forma operating loss of $35.6 million, or $0.44 per share, in the first quarter of 2001. The Company's actual net loss for the first quarter was $16.6 million, or $0.18 per share, as compared to $335.8 million, or $4.16 per share, in the first quarter of 2001. Pro forma operating expenses and loss from operations excludes restructuring expenses and amortization of goodwill, intangibles and deferred compensation, as well as a $1.0 million legal charge in the first quarter of 2002 relating to the previously announced securities litigation settlement.

``We continue to experience strong demand for all products and are very pleased with our success in executing on the Company's channel expansion strategies,'' said Ken Potashner, chairman and CEO, SONICblue. ``We have made significant progress in reducing our overhead expenses and are recognizing the benefits of our cost reduction and revenue enhancement efforts. We expect the results of our activities to become more pronounced as we continue to drive scale on existing products and introduce additional products and services.''

``On a comparable basis, we expect 2002 revenue to be $30 million higher than current consensus estimates,'' said John Todd, chief operating officer, SONICblue. ``Relative to existing consensus projections, including all ReplayTV shipments, we plan to achieve a 2002 revenue of $318 million versus current consensus of $288 million. We believe we are still on track to achieve previously stated profitability objectives for the second half of the year.''

The Company ended the quarter with approximately 106.4 million shares of UMC, with a market value of approximately $159.6 million, based on the closing price of UMC shares on the Taiwan Stock Exchange and the prevailing U.S. dollar to New Taiwan Dollar exchange rate on March 31, 2002. In addition, the Company will receive a 15 percent stock dividend from UMC in August.

The Company began shipping the RioŽ EX1000 - the first name-brand executive shelf stereo system with MP3/CD playback, Rio Central, a digital audio server, and Rio Riot, a portable, hard disk-based audio player capable of storing and managing up to 5,000 songs. The Rio business continues to experience growth with its Rio digital audio players and enjoys approximately 39 percent market share in the portable compressed audio device space.

Growing demand for the Company's video products contributed significantly to the Company's better-than expected revenue. During the quarter, SONICblue focused on expanding distribution channels for its popular ReplayTV 4000 Digital Video Recorder (DVR) and Go Video DVD/VCR and Dual Deck VCR products. The Company announced a ReplayTV 4000 distribution deal with Amazon.com, a planned June retail deployment for ReplayTV 4000, and a 2002 launch of its mass market DVR product in preparation for the holiday buying season. The Company introduced the DHT7100, an all-in-one home theater solution and two new Go-VideoŽ Dual-Deck DVD/VCR players: the DVR4200 and the DVR4250, both adding advanced features and functionality, while targeting expanded distribution opportunities. The Company also finalized several licensing agreements with well-known consumer electronics companies including Samsung, LG Electronics and Thomson Multimedia.

About SONICblue Incorporated (www.SONICblue.com)

SONICblue is a leader in the converging Internet, digital media, entertainment and consumer electronics markets. Working with partners that include some of the biggest brands in consumer electronics, SONICblue creates and markets products that let consumers enjoy all the benefits of a digital home and connected lifestyle. SONICblue holds significant financial assets, global marketing capabilities and a focused technology portfolio that includes RioŽ digital audio players; ReplayTVŽ personal television technology and software solutions; Go-VideoŽ Dual-Deck(TM) VCRs and integrated DVD+VCRs and California Audio Labs(TM) high-end home entertainment theater components.

Except for the historical information contained herein, the matters set forth in this press release, including statements as to the Company's product roadmap, growing demand for the Company's products, expected introductions of and release and shipment dates for new products and services and their expected features and benefits to consumers, channel expansion strategies, expected benefits of cost reduction and revenue enhancement efforts, expected 2002 revenue and profitability in the second half of 2002, and the Company's future prospects, the Company's revenue expectations for the first quarter and the expected popularity and revenue-generating leadership of the Company's products, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risk and uncertainties that could cause actual results to differ materially, including, but not limited to, the Company's ability to implement its business plan and reduce expenses, the impact of competitive products and pricing and of alternative technological advances, manufacturing difficulties, fluctuations in consumer demand due to economic developments and uncertainties, and other risks detailed from time to time in the SEC reports of SONICblue Incorporated, including its annual report on Form 10-K for the period ended December 31, 2001. These forward-looking statements speak only as of the date hereof. SONICblue disclaims any obligation to update these forward-looking statements.

Note to Editors: SONICblue and Dual-Deck are trademarks of SONICblue Incorporated. ReplayTV, Go-Video and Rio are registered trademarks of SONICblue Incorporated. All other products and brand names as they appear in this release are trademarks or registered trademarks of their respective holders.

                        SONICblue INCORPORATED
            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                (In thousands, except per share data )

                                                Three Months Ended
                                              March 31,     March 31,
                                                 2002         2001
                                              ---------    ---------
                                                     (Unaudited)

Net sales                                    $  65,067    $  49,886

Cost of sales                                   53,231       66,655
                                             ---------    ---------

Gross profit (loss)                             11,836      (16,769)

Operating expenses:
 Research and development                        4,325       10,675
 Selling, marketing and administrative          15,467       24,886
 Restructuring expense                           6,747         --
 Amortization of goodwill,
  intangibles and deferred compensation          4,111       11,124
                                             ---------    ---------
    Total operating expenses                    30,650       46,685
                                             ---------    ---------
Loss from operations                           (18,814)     (63,454)

Gain (loss) on UMC investment                    4,452     (458,038)
Gain (loss) on other investments                  (761)        (732)
Interest expense                                (1,805)      (3,126)
Other income (expense), net                        361           14
                                             ---------    ---------

Income (loss) before income taxes              (16,567)    (525,336)

Income tax expense (benefit)                      --       (189,567)
                                             ---------    ---------

Net income (loss)                            ($ 16,567)   ($335,769)
                                             =========    =========

Earnings (loss) per share amounts
      Basic                                   ($   0.18)   ($   4.16)
      Diluted                                 ($   0.18)   ($   4.16)

Shares used in computing per share amounts:
      Basic                                      94,302       80,720
      Diluted                                    94,302       80,720


                        SONICblue INCORPORATED
                 CONDENSED CONSOLIDATED BALANCE SHEETS
                        (dollars in thousands)


                                              March 31,  December 31,
                                                 2002       2001
                                               --------   --------
                                             (unaudited)

ASSETS

Current assets:

 Cash and other investments                   $ 19,123   $ 22,081
 Investment - UMC                               84,064     75,907
 Accounts receivable, net                       33,607     30,986
 Inventories                                    21,562     20,571
 Prepaid expenses and other                     14,057      8,003
                                              --------   --------
   Total current assets                        172,413    157,548

Property and equipment, net                      6,843      7,218
Investment - UMC                                57,924     86,886
Deferred income taxes                           15,197     15,197
Goodwill and intangible assets                 125,302    128,426
Other assets                                    18,778     18,232
                                              --------   --------
    Total                                     $396,457   $413,507
                                              ========   ========


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

 Accounts payable                             $ 66,930   $ 68,590
 Notes payable                                  10,022     15,826
 Accrued liabilities                            90,542     94,270
 Deferred income taxes                          15,197     15,197
                                              --------   --------
    Total current liabilities                  182,691    193,883

Other liabilities                               25,864     22,764
Convertible subordinated notes                 103,300    103,300
                                              --------   --------

    Total liabilities                          311,855    319,947

Stockholders' equity                            84,602     93,560
                                              --------   --------
    Total                                     $396,457   $413,507
                                              ========   ========

Contact:

     SONICblue
     Tracy Perry, 408/588-8086 (Investor Relations)
     tperry@SONICblue.com
     Heather Stanger, 408/588-8060 (Press)
     hstanger@SONICblue.com