Sonic Foundry Announces Preliminary Fiscal Second Quarter Results

Sonic Foundry[R] Inc. (NASDAQ: SOFO), a leading developer and marketer of digital media and Internet software tools and services, today announced preliminary second quarter fiscal results. Revenues for the quarter are expected to surpass $7.0 million while losses before the amortization of goodwill are expected to be less than $3.5 million.

For the fiscal quarter ended March 31, 2001, the Company is expected to report the following results:

• Software sales are expected to range from $4.4 to $4.5 million;
• Sonic Foundry Media Services Division sales are expected to range from $2.6 to $2.7 million;
• Pro Forma net loss per share, defined as losses before amortization of goodwill, is expected to range from 15 cents to 16 cents per diluted share, more than a 60% reduction from the prior quarter;
• Losses prior to non-cash amortization and depreciation charges (EBITDA) is expected to range from $2.3M - $2.5M;
• Cash balance is expected to end above $10M.

The Company attributes the better than expected performance to it's previously announced restructuring program coupled with a revamped software sales process. Software sales were bolstered by high margin upgrade sales of the Company's award-winning Sound Forge[R] 5.0 software, a professional digital audio editor, and retail sales of VideoFactory[TM] Deluxe, a digital video editing bundle for the consumer market. Media Services sales were bolstered by continuing video on demand production work.

"Despite the rapid market changes and weakening economic conditions worldwide, we were able to demonstrate tremendous positive operating trends from the previous quarter," stated Rimas P. Buinevicius, chairman and chief executive officer for Sonic Foundry. "We have surpassed our initial projections by streamlining our operating model and reducing ancillary sales and marketing costs dramatically. Additionally, through stringent cost controls and expense management, we have been able to maximize cash balances. All of these accomplishments are a direct reflection of our management's commitment of focusing directly on core businesses and operating efficiency. The staff at Sonic Foundry has been dedicated to providing the highest quality software tools and media services in the industry. We expect to see the continued benefits of this technology advantage manifest itself through greater customer adoption and further market expansion including strategic alliances, while continuing to maintain positive operating trends going forward."

A complete second quarter earnings release is scheduled by May 8, 2001. Following the release, the management will host its quarterly conference call at www.vcall.com.