Roxio Reports Second Quarter Results

Napster Launch Set for October 29 Roxio's Toast 6 is Best-Selling Burning Product for Apple Users

Santa Clara, California - (October 22, 2003) - Roxio®, a division of Sonic Solutions® (NASDAQ: SNIC), the leader in digital media software, today reported financial results for its fiscal second quarter ended September 30, 2003. Net revenue for the second quarter of fiscal 2004 was $22.8 million compared to $27.9 million in the second quarter of the prior fiscal year. Roxio's reported net loss for the second quarter was $11.9 million, or $0.43 per basic and diluted share, as compared to a net loss of $1.8 million, or $0.09 per basic and diluted share, in the second quarter of the prior fiscal year. Shares used for computing basic and fully diluted earnings per share were approximately 27.6 million for the second fiscal quarter ended September 30, 2003 and 19.5 million shares for the second quarter of the prior fiscal year.

"The second quarter marked good progress for Roxio's software business and exceptional progress for Napster," said Chris Gorog, Roxio's Chairman and CEO. "Our software business was highlighted by the very successful debut of Toast 6 Titanium, which became the number one selling third-party software for the Macintosh on Amazon.com, and by continued retail leadership for our flagship Creator 6 digital media suite. We remain on track to deliver the next generation of the Suite in the first calendar quarter of next year, which will offer highly integrated, full versions of our Easy CD & DVD Creator, PhotoSuite and VideoWave products and will include Napster 2.0 to provide consumers an unparalleled digital media experience."

"Our beta launch of Napster 2.0 drew significant interest and set the stage for the eagerly awaited consumer launch of the service on October 29th. We unveiled the Samsung-Napster portable digital music player which is available in stores now, as well as the ability for consumers to experience Napster in their living rooms via our partnerships with Microsoft and Gateway. Early reviews of Napster 2.0 have been extremely positive, with many reviewers lauding the user experience and noting that Napster's community features are a great way to discover new music," concluded Mr. Gorog.

For the quarter, Roxio's digital media software division recorded revenues of $21.3 million and a pretax loss of $2.5 million. Revenues for the company's online music division totaled approximately $1.5 million and pretax loss was $9.0 million. Combined pretax loss for the two divisions was approximately $11.5 million before a tax provision of approximately $300,000.

Elliot Carpenter, Roxio's Chief Financial Officer, commented, "We remain focused on the annual release cycle of the digital media suite, which we expect to drive retail growth in our fourth fiscal quarter. Our third quarter results for the software division will reflect the impact of clearing the retail channel in anticipation of this upcoming, fourth quarter release as well as the expected declines in the OEM channel. Based on these factors, we expect software division revenues in the third quarter to be approximately $14 million, followed by a rebound in the fourth quarter to software revenues of approximately $25 million. We expect the software division to record a third quarter loss of $0.47 per share, including $0.13 per share in restructuring charges, and then a return to profitability in the fourth quarter excluding restructuring charges. While we are not providing pre-launch revenue or loss per share guidance for the online music division, we plan to provide a mid-quarter update and then detailed financial guidance for our online music business when we report results for the December quarter."

Recent Corporate Highlights

  • On October 9th, Napster 2.0 began a brief beta test period and will be available to all music fans in America on October 29th. Anyone with a PC will have access to 99-cent downloads and the largest digital music library in the world with over 500,000 songs, as well as a premium service offering unlimited downloads, interactive radio and community features.
  • Napster unveiled the first product of its partnership with Samsung Electronics to develop a family of portable audio devices. The Samsung-Napster player is designed to seamlessly integrate with Napster 2.0. The player is now available at Best Buy stores, and users who purchase the device have early access to the Napster service.
  • Napster announced partnerships with Microsoft and Gateway that allow music fans to experience Napster from the comfort of their living room via Microsoft's Windows XP Media Center software and Gateway Hearth systems. Later this year, Gateway will also ship Napster pre-installed on every consumer desktop PC it sells.
  • In August, Roxio began shipping the latest version of its award-winning CD and DVD burning software for the Macintosh platform, Toast 6 Titanium.
  • In early October, Roxio released version 6.2 of its Easy CD & DVD Creator™ Digital Media Suite, which included advanced DVD compression and backup capabilities.

Earnings Call Information

The Roxio second quarter teleconference and webcast is scheduled to begin at 1:30 p.m., Pacific Time, on Wednesday, October 22, 2003. To participate on the live call, analysts and investors should dial 800-216-6962 at least ten minutes prior to the call and reference conference ID: 3177316. Roxio will also offer a live and archived webcast of the conference call, accessible from the "Investor Relations" section of the company's Web site at http://investor.roxio.com. A telephonic replay of the conference call will also be available for 48 hours by dialing 800-642-1687 and entering the passcode: 3177316.

About Roxio

Roxio, a division of Sonic Solutions, develops and markets the best-selling digital media software in the world. Roxio offers award-winning software products for CD/DVD burning, photo editing and video editing and has an installed base of over 150 million users. Roxio distributes its products globally through strategic partnerships with major hardware manufacturers, through leading retailers, through Internet partnerships and through direct sales at www.roxio.com. Roxio's parent company, Sonic Solutions (NASDAQ: SNIC; http://www.sonic.com) is the leader in digital media software and provides a broad range of software tools and applications for creative professionals, business and home users and technology partners. Sonic's products range from professional DVD authoring systems and interactive content delivery technologies that are used to produce the majority of Hollywood movies released on DVD, to the award-winning Roxio- and Sonic-branded CD and DVD creation, playback and backup applications that have become the premiere solutions for consumers and business users worldwide. Sonic's AuthorScript® is the de facto standard for CD and DVD burning and formatting and has been licensed by major software and hardware manufacturers, including Adobe, Broadcom, Microsoft, Scientific-Atlanta, Sony, and many others. Sonic Solutions is headquartered in Marin County, California.

Safe Harbor Statement

Except for historical information, the matters discussed in this press release, in particular matters related to Roxio's future revenue, net income (loss), cash flow, the re-launch of Napster, OEM relationships, relationships with content providers, and product development, are forward-looking statements that are subject to certain risks and uncertainties such as decreased demand for our products, increased competition, failure to develop new products or improvements to existing products, general economic conditions and third party claims, that could cause actual results to differ materially from those projected. Additional information on these and other factors are contained in Roxio's reports filed with the Securities and Exchange Commission (SEC), including the Company's Quarterly Report on Form 10-Q as filed with the SEC on August 14, 2003, copies of which are available at the website maintained by the SEC at http://www.sec.gov. Roxio assumes no obligation to update the forward-looking statements included in this press release.

Sonic, the Sonic logo, Sonic Solutions, Roxio, MyDVD, CineMagic, Plug & Burn, LiveShare, Roxio Easy Media Creator, and AuthorScript are trademarks or registered trademarks of Sonic Solutions or its subsidiaries in the United States and/or other countries. Dolby is a trademark of Dolby Laboratories. All other company or product names are trademarks of their respective owners and, in some cases, are used by Sonic Solutions under license. Specifications, pricing and delivery schedules are subject to change without notice.