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SonicBlue Narrows Q3 Loss

6 Nov, 2002 By: Holly J. Wagner

Video players are a paradox at SonicBlue, which reported today that its dual deck DVD/VCR combo players and single-deck DVD players are selling well but at lower margins than in the past.

"Our Go-Video product line continued to be the primary driver of revenue growth in the third quarter with the combination DVD/VCR being our highest volume product," said CFO Marcus Smith. "We continue to experience downward pricing pressures on our DVD/VCR combination product and single deck DVD player. The decreased average selling prices combined with higher sales volumes of the combination product and single deck DVD player significantly impacted gross margin."

SonicBlue reported a third quarter net loss of $32.4 million or 33 cents per share, compared with a net loss of $55.3 million or 62 cents per share for the third quarter of last year.

The company's pro forma third quarter operating loss was $13.7 million, or 14 cents per share, meeting its revised guidance. That compares with a third quarter 2001 pro forma operating loss of $17.7 million, or 20 cents per share. Pro forma operating results reflect the reported third quarter loss from operations of $25.2 million in 2002 and $34.5 million in 2001, less in-process research and development, restructuring expense and impairment charges and amortization of goodwill, intangibles and non-cash deferred compensation.

After a nearly a year struggling with management issues and wrangling with studios in court over some features of its Replay TV digital video recorders (DVRs), the company reported third quarter net revenue of $78.4 million, representing a year-over-year increase of more than 43 percent.

"We have made decisions this quarter that were critical in our effort to drive towards improving operating results," said Gregory Ballard, chief executive officer, SonicBlue. "We expect the effect of these decisions to create a positive trend beginning in the fourth quarter and continuing beyond."

The company ended the quarter with approximately 120 million shares of UMC, which have a market value of approximately $81.8 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 Sept. 30.

Throughout the third quarter the company expanded its product base, launching several new digital audio products including the Rio 900, Rio S10 and Rio S30. In addition, the company announced the compatibility of Rio players with the latest version of pressplay and Windows Media Audio.

The company licensed its patented Dual-Deck technology to JVC to be incorporated into certain JVC-branded combination products including a DVD/VCR.

Finally. the pricing structure for ReplayTV was expanded to offer both monthly and lifetime subscription options, and the Company announced it was working with Intel to develop a portable Replay device.

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