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S3 Underscores Portable Players, Ingredient Technology Licensing And Digital Audio Distribution Throughout The Home And Car

A critical component of S3's relaunch as an Internet appliance company, the strategy builds on Rio's commanding lead in the handheld market, establishes an ingredient technology licensing program and solidifies entrance into a variety of consumer audio markets.

``Symbolizing quality digital audio and brand dominance, Rio is a driving force in the converging consumer and Internet markets,'' said Ken Potashner, chief executive officer and chairman of S3 Incorporated. ``Digital audio is a main focus of our business as we extend the Rio technology and brand into every aspect of consumers' lives.''

The company plans to extend the Rio digital audio experience throughout the home and into the lifestyles of customers. S3 is focusing these efforts on three key initiatives -- the Rio Audio(TM) branding program, home and car audio and a family of third generation portable players.

Rio Audio Ingredient Brand

Looking for other ways to further leverage the explosive growth of the Rio brand and to expand the digital audio market overall, S3 has embarked on plans to license the coveted Rio technology to other companies interested in developing digital audio products. More specifically, the Rio Audio branding program allows a select group of consumer companies to market digital audio devices with varying styles and forms, while still offering the Rio music experience. Based on extensive testing and user feedback, key elements of the Rio music experience include familiar user control and interface, edgy product style, superior sound quality, access to music industry supported formats and compatibility with home-networked audio and software on the PC or Mac.

More information on specific Rio Audio partners and products will be available in the coming weeks.

Home and Car Audio

Consumers listen to music on more than just portable players, but they have not had access to other devices that play and manage digital audio files. Soon, Rio devices will be available for use anywhere in the home or car, adding even more portability and flexibility to personal digital audio selections.

Rio home audio components, such as the Rio Receiver(TM), will make use of home networking software enabling customers to choose various kinds of music in the collection stored on their PC hard drives for distribution throughout the house.

Another home audio component, the Rio Jukebox(TM), eliminates the need for a PC to manage digital music selections by offering a built-in CD drive and sizable on board music storage, coupled with Internet connectivity to simply manage digital music in one place.

The Rio Jukebox and the Rio Receiver can be used as stand-alone audio components, or as an integral part of a larger home stereo system.

Finally, the Rio car component will enable consumers to easily listen to digital audio in the car via a removable hard drive that can be easily installed under a seat or in a trunk. Much like a CD changer, offering significantly more storage, the storage drive can be removed from the car, connected to a personal computer through the USB port and updated with a new music selection in a matter of minutes.

More information on the Rio home and car components will be available in the coming months.

Family of Portable Digital Audio Players

S3 is the first company to build a family of third-generation digital audio players designed to offer choices to different market segments based on cost, style and how they integrate music into their lifestyle. The family, beginning with the Rio 600, will offer specific features, functions, designs and price points attractive to these varying audiences.

``We're building a Rio player for just about everyone,'' said Mike Reed, director of marketing for S3 Incorporated. ``People listen to music in many different ways, as we've learned from our previous two players, so we're making it possible to select a Rio that best matches lifestyle and music use.''

Consumers can count on the high-quality audio Rio has become known for in these new portable players, as well as music label support, access to mainstream content, SDMI compliance and, most of all, ease-of-use. The third generation of Rio players will push the envelope of style and design while incorporating cutting-edge, future-proof features such as a programmable processor to adapt to new and emerging audio file formats.

``We've seen other manufacturers make digital rights management more difficult than it has to be on portable players,'' added Reed.

Other players in the Rio family will become available in the next several months.

About Diamond Multimedia

A division of S3 Incorporated, Diamond has been the leader in communications, digital music players and home networking since its introduction of the HomeFree product line in January 1999, and the introduction of the Rio player in November 1998.

About S3 Incorporated

Following its announcement that it will be transferring its PC graphics assets to a separate 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 the historical information contained herein, the matters set forth in this press release, such as statements as to the expected timing and availability of new Rio Audio products, home and car components, and third generation players of the Rio family, the expected announcements of Rio Audio partners, and expected features of the new products, are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially, including the impact of competitive products and pricing and of alternative technological advances, S3's ability to enter into and work with its strategic partners to accomplish the goals of those relationships, S3's ability to develop and successfully bring to market in a timely manner the products described with the features detailed above, and other risks detailed from time to time in S3's SEC reports, including its annual report on Form 10-K for the year ended December 31, 1999. S3 is a registered trademark of S3 Incorporated. The S3 corporate logo, Rio, Rio Jukebox, Rio Receiver and HomeFree are trademarks of S3 Incorporated. Other marks referenced herein are the property of their respective owners.

Contact:

     Porter Novelli Convergence Group
     Nate Schwalbach, 206/727-2880
     Nate.schwalbach@pnicg.com