Sonic Foundry Reports First Quarter 2008 Results

MADISON, WI - Sonic Foundry, Inc. (NASDAQ: SOFO), the recognized market leader for rich media communications
and knowledge management, today announced fiscal first quarter results:

Non-GAAP net loss primarily excludes all non-cash related expenses of stock compensation, depreciation
and amortization. A reconciliation between GAAP and non-GAAP results is provided at the end of this
press release.

At December 31, 2007, an accumulated $3.2 million of unearned revenue was billed and deferred, of
which the company expects to realize $1.4 million in the upcoming quarter. Total gross margins for
the first quarter of fiscal 2008 were 75 percent compared to 78 percent in the previous year.

As reported in January, new product updates currently being released in the fiscal second quarter for the education market coupled with slowing licensed software sales to the corporate market contributed to weaker first quarter results. The company is experiencing a significant transition in its business activity, with education and training applications expected to drive the company's sales activities going forward. Likewise, Sonic Foundry expects that weakening economic conditions will expand market demand for more outsourced services versus licensed sales within both the corporate and education sectors. Over the last two years, the company has made extensive capital and technology investments to advance its services model with comprehensive hosting, content processing and e-commerce capabilities that position Sonic Foundry well to deliver more diversified business services.

By concentrating on markets with the greatest potential, the company was also able to initiate measures that are expected to reduce its operating costs by an estimated $4 million annually. Confirming previous guidance, Sonic Foundry anticipates the newly introduced cost saving measures to advance the pace of achieving profitability during fiscal 2008. In addition, given the expected longer-term impact, greater operating leverage is now expected for fiscal 2009 and beyond.

While higher education accounts historically represented approximately half of the company's sales pipeline activity, the education sales pipeline is now over 60 percent and expected to climb. Sonic Foundry is accelerating its product and service offerings to address accelerating demand from the convergence of technology and education. The company recently unveiled its Mediasite 4.3 release, the first announcement under the company's next-generation education initiative, designed to expand the company's footprint in higher education markets.

The 4.3 release reflects the company's collaboration with Microsoft Corp. to add support for Microsoft Silverlight. Silverlight is a cross-browser, cross-platform plug-in that supports rich media experiences on the web. Its seamless and quick installation provides a consistent Mediasite experience for both Windows and Macintosh users on a variety of browsers including Microsoft Internet Explorer, Firefox and Safari. With this latest release of the company's award-winning and patented webcasting and knowledge management platform, Sonic Foundry has taken the first steps in designing a next generation multimedia solution to simplify and enhance the playing of rich media applications, particularly for the multi-device environment of the modern college campus.

Additional highlights of the first quarter fiscal 2008 include multiple awards for the company and its Mediasite platform including:

• Frost & Sullivan 2007 Global Market Leadership Award with 41 percent share of the world lecture capture and broadcast solutions market
• Datamonitor acknowledgement as "Innovative Vendor" and "Early Market Leader" for lecture capture in higher education
• Bersin & Associates 2007 Learning Leader award for Best Tool in the Vendor Innovation category
• Finalist for reader-nominated Best of 2007 Elearning! Magazine awards for Best Presentation Tool
• Top 10 Best Products and a 4-Star Rating from Training Media Review

"Our continued efforts to build the business for maximum scale and efficiency while targeting the right customer base required us to make some tough decisions in the short term. It was also necessary to establish the proper operating infrastructure to enable a greater mix of products and services that in turn will align our business to education and training applications. Given the current market uptake for our newly introduced product offerings and our constant attention to where market demand lies, we now resume our growth objectives to advance our overall market share," said Rimas Buinevicius, chairman and CEO of Sonic Foundry.

Sonic Foundry will host a corporate webcast today for analysts and investors to discuss its first quarter fiscal
2008 results at 3:30 p.m. CT/4:30 p.m. ET. It will use its patented rich media communications system, Mediasite,
to webcast the presentation for both live and on-demand viewing.

EXPLANATION OF NON-GAAP MEASURES
To supplement our financial results presented on a GAAP basis, we use the measure of non-GAAP net loss in our
financial presentation, which exclude certain non-cash costs. These costs include stock-based compensation which
we believe is helpful in understanding our past financial performance and our future results. Our non-GAAP financial
measure is not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be
read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management
regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business
and make operating decisions. These non-GAAP measures are among the factors management uses in planning for and
forecasting future periods. Our non-GAAP financial measures reflect adjustments based on the following items, as
well as the related income tax effects:

• Stock-based compensation expenses: We adopted FASB Statement
  No. 123R, Share-Based Payments, on October 1, 2005, under the modified prospective
  method. Statement 123R requires us to record non-cash operating expenses associated
  with stock option awards at their estimated fair values. Prior to our Statement
  123R adoption, we were required to record stock-based compensation expenses at intrinsic
  value, which was zero since we only issue stock options at the market price of our
  stock on the date issued. In accordance with the modified prospective method, our
  financial statements for prior periods have not been restated to reflect, and do
  not include, the changes in methodology to expense options at fair values in accordance
  with Statement 123R. Stock-based compensation is a key incentive offered to our
  employees. We believe such compensation contributed to the revenues earned during
  the periods presented and also believe it will contribute to the generation of future
  period revenues. As a result, we continue to evaluate our business performance excluding
  stock-based compensation expenses.
• Depreciation and amortization of intangible and other assets
  expenses: We have excluded the effect of depreciation and amortization of assets
  from our pro-forma net loss. Amortization of intangible assets expense varies in
  amount and frequency and it is significantly affected by the timing and size of
  our acquisitions. Depreciation and amortization of asset costs is a non-cash expense
  that includes the periodic write-off of tooling, product design and other assets
  that contributed to revenues earned during the periods presented and will contribute
  to future period revenues as well. Amortization expenses will recur in future periods.