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• S3 Sells Graphics Business and Changes its Name
• Interplay Returns to Operating Profits in Third Quarter

S3 Sells Graphics Business and Changes its Name
(WAVE Report November 1)

S3 has announced that the company and VIA Technologies have completed the requirements of all government agencies for their joint venture transaction. Under the deal, Via will purchase S3's graphics chip business in exchange for returning a 15% stake it had in S3 and assuming other liabilities. The deal is valued at $323 million and is set to close by January.

S3, originally founded as a PC graphics company, used its acquisition of Diamond Multimedia to target Internet appliances, broadband communications, home networking and graphics and audio solutions. Now, renamed SONICblue, the company will change its focus to become a digital media company, with business units surrounding its Rio MP3 music players, Diamond products (Mako, HomeFree and Supra) and Frontpath Internet appliances.

The company's Rio business has begun shipping the Rio Receiver in addition to its portable devices. The receiver connects to a PC and home network to access audio files. Another SONICblue product, Rio Racks, will play MP3 files within the home without a PC. These devices will be priced around $500, with initial shipments late this year for the Christmas season.

The company will also move into the automotive space with its acquisition of MPEG, a company specializing in digital audio devices for automotive markets.

The first Frontpath appliance to be released is the ProGear, a tablet aimed at commercial buyers priced from $1,200 to $1,500. Sales are scheduled for early 2001, after a round of market trials is completed. After an initial release, the tablet will be sold to consumers at a lower price of $500, subsidized by Internet service providers.

The ProGear, couples hardware and software to deliver a wireless, portable, broadband-based product with a 10.4 inch LCD screen. It has touchscreen technology and handwriting recognition and offers email, a personal organizer, custom applications, MP3s, ebooks, and Internet access.
http://www.sonicblue.com

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Interplay Returns to Operating Profits in Third Quarter
(Spectrum Media November 13)

Interplay Entertainment Corp. last week reported results for the third quarter and first nine months of fiscal 2000. For the quarter ended September 30, 2000, the company reported net revenues of $31.6 million, a 34 percent increase over net revenues of $23.6 million for the same period a year ago. Operating income for the quarter was $1.1 million versus an operating loss of $16.1 million in the same quarter a year ago. Gross margins for the quarter improved to 49 percent as compared with 35 percent in the same quarter a year ago resulting from a decrease in returns and allowances and a higher margin product mix. The company reported net income of $113,000, or break even per share, compared with a net loss of $17 million, or $(0.75) per share, in the third quarter of 1999.

According to chairman/CEO Brian Fargo, the revenue growth was due to new title releases in the quarter as well as re-orders of previously released titles. Baldur's Gate II on PC, Star Trek New Worlds on PC, and Caesar's Palace 2000 on Dreamcast were all released this quarter. Icewind Dale on PC as well as Caesar's Palace 2000 on PlayStation, both of which were released last quarter, continue to be strong sellers.