Sonic Foundry Second Quarter Revenues More Than Double

Sonic Foundry, Inc. (Nasdaq: SOFO) today reported revenue for the quarter ended March 31, 1999, increased 106 percent to $2,760,722 compared with $1,342,291 in the same period one year ago. In addition to strong contributions from its new ACID products, existing programs such as Sound Forge[R] and CD Architect[TM] continued to add significant contributions to top line growth in the quarter.

Aggressive marketing programs in support of the recently-introduced ACID[TM] Music, ACID[TM] DJ, and ACID[TM] Rock led to a second quarter net loss of $1,506,834, or $0.57 per basic and diluted share, compared with a net loss of $382,702, or $0.99 per basic and diluted share, a year earlier. These marketing programs and promotional events, which included print and radio advertising, concert promotions, store demos, and trade show appearances, drove overall selling and marketing expenses higher in the quarter, to $1,970,404 versus $670,158 in the second quarter of 1998. A recently-established sales and marketing office in Delft, Netherlands, also added to selling and marketing expenses as the Company pursues its strategic penetration into Europe.

"We expected to run in negative territory in the second quarter as the aggressive roll-out of our new ACID product line gathered momentum," said Rimas Buinevicius, Chief Executive Officer of Sonic Foundry. "We are excited by the tremendous exposure we received for ACID for our marketing investment dollar. In particular, we believe that these investments are a big reason behind our growing relationship with Microsoft and that company's Windows Media On-Demand Producer (WMODP)."

Microsoft began distribution of the final release of this on-line media content producer, which uses Sonic Foundry's Vegas technology, in February, 1999, as a no-charge addition to the Windows Media tools available on the Microsoft Windows Media Technologies Web site. Commenting on the partnership with Microsoft, Buinevicius noted that Sonic Foundry will derive revenues from Sonic Foundry's Stream Anywhere[TM], the enhanced version of the on-demand producer.

"The real pay-off of this partnership will come in the form of increased exposure and brand awareness for Sonic Foundry as well as access to Microsoft's customers," he said. "This agreement as well as our access to other formats through Stream Anywhere position us rather incisively as a significant participant in the burgeoning streaming media production market."

Looking ahead to the second half of fiscal 1999, Buinevicius is optimistic. "We expect to begin putting some distance between revenue and selling and marketing expenses as product sales accelerate. In addition, the pipeline of new products being introduced remains full and will add to revenues in the second half of the year."