C-Cube Reports Record Fourth Quarter and 1996 Results; Revenue And Net Income at Record Highs.

MILPITAS, Calif.--(BUSINESS WIRE)--Jan. 16, 1997--C-Cube Microsystems Inc. (NASDAQ:CUBE) today announced record financial results for the fourth quarter and year ended Dec. 31, 1996.

Revenues in the fourth quarter were $95.5 million, up 89 percent from the $50.6 million reported in the fourth quarter of 1995 and up 15 percent from the $83.2 million reported in the third quarter of 1996. Revenues for 1996 were $319.8 million, up 157 percent from the $124.6 million reported in 1995.

Net income for the fourth quarter was $17.3 million, or $0.45 per share on 38.6 million shares up 13%, compared with $15.3 million from ongoing operations, or $0.41 per share on 39.6 million shares, in the third quarter of 1996. The acquisition of DiviCom Inc. resulted in a net loss of $118 million for the third quarter of 1996. 1996 net income was $60.0 million from ongoing operations, or $1.62 per share on 37.0 million shares up 109% compared with 1995 net income of $28.7 million from ongoing operations, or $0.83 per share. The company reported a net loss for 1996 of $73.0 million, or $2.15 per share, and net income for 1995 of $24.9 million, or $0.72 per share.

Gross margin in the fourth quarter was 56%. The company's balance sheet also showed improvement compared to the third quarter in liquidity measures and working capital management.

The fourth quarter concludes a record year for C-Cube, marking the sixteenth consecutive quarter of increases in revenues and net income from ongoing operations.

"C-Cube is continuing to grow its leadership position in the digital video market, as demonstrated by a number of strategic initiatives in 1996," said Alex Balkanski, president and chief executive officer of C-Cube Microsystems. "The acquisition of DiviCom substantiates our belief that satellite television and video delivery to the home represent the highest growth areas for C-Cube. The communications market offers strategic significance for us long-term, and to further establish our position in this market we recently introduced a set-top decoder chipset and next generation encoder for the broadcast and content-delivery market. Our results were also favorably affected by the performance of our VideoCD operations, where we maintain a significant market share and expect continued solid contributions in 1997."

C-Cube is the leading provider of digital video semiconductor solutions, which implement international standards for digital video, including MPEG 1 and MPEG 2. C-Cube's Emmy award-winning encoder chips form the heart of digital video networks worldwide. DiviCom Inc. is a wholly owned subsidiary of C-Cube Microsystems and is a leading developer of digital video networking systems for broadcast communications applications.

C-Cube is headquartered in Milpitas, Calif., and has offices in North America, Europe and Asia. The company employs 669 people worldwide. Its stock is traded on the NASDAQ National Market Systems under the symbol CUBE. C-Cube can be reached at 408/944-6300 or on the World Wide Web at http://www.c-cube.com . DiviCom is on the World Wide Web at http://www.divi.com .

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results could differ substantially from those projected in the forward looking statements as a result of certain risk factors, including changes in demand for digital video products, development and deployment of appropriate infrastructure, and price pressures from new or existing competitors. -0-

Note to editors: Two financial tables follow.

The C-Cube logo is a registered trademark of C-Cube Microsystems Inc.

C-Cube is a trademark of C-Cube Microsystems Inc.

All other trademarks are the property of their respective holders. -0-

                      C-CUBE MICROSYSTEMS INC.
                CONDENSED CONSOLIDATED BALANCE SHEETS
               (In thousands, except par value amounts)

                                      Dec. 31,          Dec. 31,
                                        1996              1995

ASSETS
Current assets:
 Cash and equivalents                  $76,241          $133,414
 Short-term investments                  6,005            10,675
 Receivables                            40,706            24,421
 Inventories                            28,056            11,871
 Deferred taxes and other current
  assets                                41,669             5,882
   Total current assets                192,677           186,263
 Property and equipment -- net          22,653             7,222
 Production capacity rights             46,200                --
 Distribution rights -- net              1,812             1,977
 Purchased technology -- net            12,895             3,095
 Other assets                            3,278             4,969
   Total                              $279,515          $203,526

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Notes payable                         $24,500            $1,934
 Accounts payable                       18,320            10,704
 Accrued liabilities                    24,533            13,889
 Current portion of long-term
  obligations                              837             1,159
   Total current liabilities            68,190            27,686
 Long-term obligations                  92,140            88,010
   Total liabilities                   160,330           115,696
 Minority interest in subsidiary           613               295
 Stockholders' equity:
  Common stock                         191,044            87,124
  Deferred stock compensation             (250)             (635)
  Notes receivable from stockholders      (305)             (459)
  Accumulated translation adjustments   (1,238)             (860)
  Unrealized loss on investments           (13)              (14)
  Retained earnings (deficit)          (70,666)            2,379
   Total stockholders' equity          118,572            87,535
   Total                              $279,515          $203,526


                      C-CUBE MICROSYSTEMS INC.
          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
              (In thousands, except per share amounts)

                          Quarter Ended Dec. 31,  Year Ended Dec. 31,
                             1996       1995       1996        1995
                        (Unaudited)  (Unaudited)
Net revenues:
 Product                     $95,520  $50,353    $319,558    $123,190
 Development contracts          --        200         200       1,412
   Total                      95,520   50,553     319,758     124,602
Costs and expenses:
 Cost of product
  revenues                    42,017   24,025     144,985      59,253
 Research and development     15,327    4,991      44,177      14,342
 Selling, general and
  administrative              12,123    6,056      39,002      19,227
 Purchased in-process
  technology                      --    3,800     131,349       3,800
   Total                      69,467   38,872     359,513      96,622
 Income (loss) from
  operations                  26,053   11,681     (39,755)     27,980
 Other income (expense), net    (314)     431        (346)      1,848
 Income (loss) before
  income taxes                25,739   12,112     (40,101)     29,828
 Income tax expense            8,454    2,974      32,944       4,933
 Net income (loss)           $17,285   $9,138    $(73,045)    $24,895
 Net income (loss) per share   $0.45    $0.26      $(2.15)      $0.72
 Shares used in computation   38,648   35,825      33,928      34,651

CONTACT: C-Cube Microsystems

Jim Burke, 408/944-6300

Mary Sharpless-Giani, 408/944-8628 (Media Contact)

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