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<<ESS Technology Reports Second Quarter Results

FREMONT, Calif., Jul 24, 2002 /PRNewswire-FirstCall via COMTEX/ -- ESS Technology (ESST) today reported net revenues for the second quarter of 2002 of $86.0 million, up $21.1 million or 32.5% percent from the same period last year, and up $6.9 million or 8.7% compared to revenues of $79.1 million in the first quarter of 2002.

Net income for the second quarter of 2002 was $17.3 million, or $0.36 per diluted share, compared to a net loss of $10.2 million, or ($0.24) per diluted share, in the second quarter of 2001. For the first quarter of 2002, net income was $16.4 million, or $0.34 per diluted share.

Pro forma net income for the second quarter of 2002 was $18.0 million, compared to $4.3 million for the second quarter 2001 and $17.9 million for the first quarter 2002. Pro forma earnings per diluted share were $0.37, compared to pro forma earnings of $0.10 per diluted share in the same period last year and unchanged from the pro forma $0.37 earned in the first quarter of 2002. Pro forma net income and loss excludes the effects of the amortization of intangible assets, the effects of the write-down of investments, the realized losses on the sale of Cisco stock, and the effects of the discontinued operations.

Gross margin for the second quarter of 2002 was 41%, up from 29% for the second quarter of 2001 and down from 43% for the first quarter of 2002.

Robert L. Blair, president and chief executive officer commented, "We are excited about the results of the second quarter for many reasons. The second quarter results were very strong with overall revenue growth of 8.7% sequentially during this normally slow quarter. In addition, ESS expanded geographically with several new design wins from Japan and Korea and we believe we continued to increase our worldwide DVD market share."

Mr. Blair continued, "We were also quite pleased with our performance in the VCD market. During the quarter we grew VCD revenue, improved margins, and increased our share of the VCD market -- all in the face of strong competition.

"We believe we will maintain our leadership position in the areas of new products, features and services through the introduction of our Vibratto II product, an integrated DVD system-on-a-chip, our new Visba3 integrated VCD chip, and our ESS 7010 encoder chip for a sub-$300 priced recordable DVR/DVD, all of which are scheduled for production shipments in the fourth quarter of 2002. With these new product introductions, we believe we can continue to lead the high growth market for digital home entertainment products," Mr. Blair concluded.

Third Quarter 2002 Guidance

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.

As we stated three weeks ago, we expect to grow our DVD unit shipment by 10%-15% in the third quarter of 2002 compared to the second quarter, and expect overall revenues for the third quarter to be $86 -$90 million. We expect earnings per diluted share to be in the range of $0.35 to $0.38.

ESS will provide more guidance on its third quarter and fourth quarter 2002 and overall 2003 outlook during the earnings conference call.

Earnings Conference Call

ESS Technology, Inc. has scheduled a conference call for 5:00 p.m. ET today to discuss its second quarter results. An Internet simulcast and reply will be available at and .>>

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