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<<ESS Technology Revises Revenue and Earnings Guidance for Third Quarter 2002

FREMONT, Calif., Sep 12, 2002 /PRNewswire-FirstCall via COMTEX/ -- ESS Technology, Inc. (ESST), today announced that third quarter revenue and earnings are anticipated to be below the company's previous expectations. The company now expects revenue for the third quarter to be between $60 million and $64 million, down from its earlier estimate of $86 to $90 million. Gross margins are expected to be between 36% and 38% and earnings per diluted share will range between $0.13 and $0.21, down from its previous expectation of $0.35 to $0.38. The company is also revising its guidance for the seasonally slower fourth quarter; it now expects revenue to be between $53 and $57 million with gross margins of 32% to 35%, which results in earnings per diluted share of $0.05 to $0.10.

Robert Blair, president and CEO of ESS Technology commented, "As we go into the Christmas season, we are now finding worldwide demand has slowed down surprisingly in the latter part of the quarter. We are also experiencing increased competition from suppliers who offer an integrated front-end servo and MPEG decoder solution and we are seeing a faster than expected transition to this new integrated solution. This has increased pressure on average selling prices, and we expect fourth quarter prices to fall 10% to 15% from the third quarter. We plan to ship our own integrated solution, the Vibratto II, in the fourth quarter."

Mr. Blair continued, "Although the industry is now facing an overall slowdown, ESS continues to gain design wins in Japan and Korea with our existing full-featured Vibratto family of products. We believe the introduction of our new integrated Vibratto II servo-decoder product family will enable ESS to gain market share and continue its leadership position in the digital entertainment market." >>

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