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SonicBlue Replaces CEO

9 Aug, 2002 By: Holly J. Wagner

After abruptly ousting chairman, president and CEO Kenneth Potashner, SONICblue Inc. has appointed L. Gregory Ballard, the company's recently hired EVP for Marketing and Product Management, to the post of Interim CEO.

Ballard and others at the company would not comment on Potashner's departure Thursday, citing corporate policy.“His termination was not the consequence of certain allegations Mr. Potashner made regarding certain loans to made to board members or members of the executive team, nor was it the result of any question about our financial reports,” Ballard told analysts on a conference call. The board is investigating the issues Potashner raised, Ballard stressed, noting that all the loans were disclosed in filings with the Securities and Exchange Commission.

“The next months and years must be a time for consolidating leadership around the brands we have,” Ballard said.

Analysts questioned whether this is the end of a rough road for management at SonicBlue, which has been a revolving door for executives in recent months.

“I saw the same kind of turmoil in management that investors have seen,” Ballard said. “The only answer I can give you is that this management team, apparently for the first time in a long time, has jelled.”

The compay does not expect further management changes but Ballard said he wouldn't rule it out and that any further changes would be “to improve shareholder value.”

“SONICblue is at an important turning point,” he said. “The company has transitioned from a graphics chip supplier business to an innovative consumer electronics provider. In this next phase, it is imperative that we focus on managing the company to profitability.”

The company's recent pattern of aggressive acquisition has depleted some resources and fragmented its focus, he said.

“The company has been focused on growing its top line, to some extent at the expense of the expense line,” he said, adding he plans to shave operating expenses. “We have exited the phase where we put together the big pieces of that puzzle. Now we have to stitch those pieces together.”

Although he said the company will contnue its vigorous defense in lawsuits aimed at curtailing features of the company's Replay 4000 series of PVRs, Ballard, a former copyright attorney, indicated he will rely on that experience to smooth ruffled feathers at the movie and TV studios that have filed a raft of lawsuits to bar SonicBlue PVRs and other products.

“I'll probably be seeking ways to be a little less controversial on this issue,” he said, adding he hopes to “work with content providers to create better value for consumers.”

Ballard joined SONICblue in April. Prior to joining the electronics maker known for its controversial personal video recorders (PVRs), Ballard served as CEO at 3dfx, where he's credited with growing revenue from $4 million to a run-rate of more than $400 million over a three years; and subsequently served as CEO at MyFamily.com, a subscription-based Internet service. He previously served as CEO and COO for Warner Custom Music, a Division of Time Warner, Inc.

“Greg has our complete confidence and support. We believe he is well suited to lead the company through its next phase,” director James Schraith said on behalf of the board.

The board is not conducting a search for a new CEO and has no plans to, Ballard said, adding, “I hope to prove to the board and the shareholders that I'm the right person to head this company for the next 10 years.”

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