New Products, Key Alliances Fuel Strong Revenue Growth For Sonic Foundry's Third Quarter

Sonic Foundry, Inc. (Nasdaq: SOFO) today announced that revenues rose 100 percent to $4.2 million for the third fiscal quarter ended June 30, 1999, from $2.1 million reported for the same period last year. Results reflect strong market acceptance for the Company's newer products, including Sonic Foundry's Audio Anywhere[TM], which was featured in the Microsoft[R] Office 2000 promotional campaign.

The Company, as expected, posted a net loss for the 1999 third quarter of $1.3 million, or $0.48 per share, compared with net income of $60,044, or $0.01 per diluted share, for the comparable period last year. The loss was attributable primarily to promotional costs associated with the introduction of Audio Anywhere, the first of Sonic Foundry's products to penetrate the office superstore market.

For the nine months ended June 30, 1999, revenues increased 120 percent to $9.7 million from $4.4 million a year earlier. The net loss for the same period was $4.2 million, or $1.57 per share, compared with a net loss of $646,165, or $0.71 per share, for the comparable period last year.

"We are pleased with the results for our third quarter, reflecting the progress Sonic Foundry is making in developing exciting new products and forming important strategic alliances with some of the world's leading companies, including Microsoft and Hewlett-Packard," said Rimas Buinevicius, Sonic Foundry's Chairman and Chief Executive Officer. "Our new products are expanding the Company's focus to a significantly broader consumer universe and creating opportunities for new and larger distribution channels, such as online sales and office superstores. Moreover, Sonic Foundry is strategically positioned to capitalize on exceptional product and service opportunities that exist within the rapidly emerging Internet space."

The Company's Audio Anywhere product, which was introduced May 3, allows PC users to enhance electronic presentations and Web pages with custom sound and musical accompaniment. Audio Anywhere features the pairing of Sonic Foundry's ACID[TM] Style audio content creation program with its Sound Forge[R] XP 4.5 audio editing tool. It is designed for use with Microsoft PowerPoint[TM] and FrontPage[TM] applications. In July, RealNetworks, a leading provider of streaming media products, selected Audio Anywhere as the preferred music editing and creation tool for its RealSlideshow[TM] product. Expanding beyond its traditional digital audio focus, Buinevicius said the Company also recently introduced a new streaming media authoring tool, Stream Anywhere[TM]. The product will attract both novices and experienced Web developers as it enables them to quickly and easily prepare audio, video, and synchronized metadata for distribution over the Internet.

For the promotion of Vegas[TM] Pro, Sonic Foundry tested a new marketing strategy, offering a beta release of a pro-level product for free via the Internet. With over 10,000 copies of the software downloaded and overwhelmingly positive response from both consumers and industry critics, the Company eliminated extensive marketing costs typically associated with new software introductions. Of the users who downloaded the product, over 75 percent were new customer leads to Sonic Foundry. The Company looks forward to increased revenues from its upcoming launch of Vegas Pro on July 30.

Buinevicius added that Sonic Foundry is completing the development of Boulder, code name for a music jukebox software solution that will allow consumers to transfer their favorite music from audio CDs into a high quality compressed format for use with a wide variety of peripheral playback devices. More importantly, the Company expects Boulder to be embraced by both artists and the music industry as it provides a secure music distribution platform using the Internet.