CORNERSTONE IMAGING REPORTS 1996 FIRST QUARTER RESULTS.

SAN JOSE, Calif.--(BUSINESS WIRE)--April 17, 1996--Cornerstone Imaging, Inc., a provider of hardware and software system building blocks for applications using document images, today released operating results for the quarter ending March 31, 1996. -0-

Summary financial results:
(dollars and shares in millions)
                                   Q1:96(a)    Q4:95      Q1:95

Revenues                         $  17.8      $ 28.8    $ 17.7
Gross margin                        30.2 %      36.0 %    38.8 %
Operating margin                   (20.4) %     10.7 %    10.1 %
Operating income (loss)             (3.6)        3.1       1.8
Net income (loss)                $  (2.5)     $  2.3    $  1.3
EPS                              $ (0.33)     $ 0.30    $ 0.17
Cash and marketable securities   $   8.2      $ 10.4    $ 16.6
Weighted average shares              7.4         7.7       7.4

(a) includes $1.4M restructuring charge

Reported revenues were $17.8 million, a decrease of 38% from Q4 1995 and an increase of 1% from Q1 1995. The reduced revenues contributed to a net loss for the quarter of $2.5 million, or 33 cents per share. The loss included a restructuring charge of $1.4 million, primarily related to the Company's decision to discontinue its print accelerator product line.

Said Thomas T. van Overbeek, President and CEO, "The first quarter was very disappointing, particularly after our record fourth quarter. We believe the reasons for the revenue shortfall are pricing, seasonality, and technology transition issues in the DIP market. We think a number of customers delayed purchasing decisions in Q1 due to issues related to technology transition in the DIP market. Fundamentally, imaging is moving into the mainstream.

"Larger organizations want to deploy imaging across the enterprise via groupware and Intranet technologies. Enterprise-wide imaging is driving the market toward more open component based systems. Although this should be good news for Cornerstone in the longer term, in the short term we believe it has caused uncertainty and delays in purchasing decisions. The recently concluded AIIM imaging trade show should help customers resolve their concerns."

Gross margin for Q1 was 30.2% compared to 36.0% in Q4 1995 and 38.8% in Q1 1995. The lower margin is primarily attributable to price reductions for display products. "We've fundamentally changed our display pricing strategy with recent price reductions. As imaging becomes an enterprise-wide capability, Cornerstone must be more competitive with providers of general purpose display products even though we continue to enjoy clear product advantages for imaging applications," said van Overbeek.

Total expenses for Q1 1996 were $7.6 million, up from $7.3 in Q4 1995, and $5.1 million in Q1 1995. The increase from Q4 to Q1 is primarily attributable to the purchase of software technology which is included in R&D spending. "We discontinued PrintAccel, our print accelerator board, and we are focusing our resources and spending on our core product areas of display, document capture, and software tools," said van Overbeek.

The net loss for Q1 1996 was $2.5 million or 33 cents per share, compared to a profit of $2.3 million, or 30 cents per share in Q4 1995, and a profit of $1.3 million, or 17 cents per share in Q1 1995.

Cash and marketable securities ended the quarter at $8.2 million, compared to $10.4 million at December 31, 1995. Inventory increased to $18 million from $14.1 at December 31, 1995. "We built inventory in anticipation of higher revenues," said van Overbeek. "We expect inventory to come back into line as we go forward." Lower first quarter revenues also contributed to a reduction in accounts receivable from $17.9 million at December 31, 1995, to $11.8 million.

About Cornerstone

Cornerstone Imaging, Inc., headquartered in San Jose, CA, is the technology and market leader in image display products for DIP. The Company's products and services are building blocks that optimize system and user productivity in DIP applications. Cornerstone's subsystems and software products are based on proprietary silicon and software to improve the capture, storage, and display of digitally- stored images, processes critical to DIP user efficiency. Cornerstone Imaging, Inc. is a publicly-held company traded on The Nasdaq National Market under symbol CRNR.

This Press Release contains forward-looking statements that involve risk and uncertainties. The Company's actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in "Risk Factors" in the Company's 1995 Annual Report on Form 10-k. -0-

                 FINANCIAL TABLES FOLLOW
For more information on Cornerstone Imaging, Inc. via fax, dial
1-800-PRO-INFO, code 045.  No cost.

                CORNERSTONE IMAGING, INC.
              STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per share amounts)
                                     Three Months Ended
                                 Mar 31, 1996   Mar 31, 1995

Revenues                          $  17,832      $  17,723
Cost of revenues                     12,454         10,844

Gross profit                          5,378          6,879

Research & development                2,641          1,814
Sales, general & administrative       4,967          3,283
Restructuring charge                  1,404

Operating income (loss)              (3,634)         1,782

Interest income                          88            148
(Provision) benefit for income tax    1,065           (666)

Net income (loss)                 $  (2,481)     $   1,264

Net income (loss) per share       $   (0.33)     $    0.17

Weighted average shares               7,423          7,398

                  CORNERSTONE IMAGING INC.
                     BALANCE SHEETS
                     (in thousands)

                         ASSETS

                                (Unaudited)
                                Mar 31, 1996     Dec 31, 1995

Current assets:
  Cash & marketable securities  $   8,160          $ 10,441
  Accounts receivable              11,794            17,885
  Inventories                      18,038            14,075
  Deferred income taxes             3,311             3,228
  Other current assets              1,763             2,159

       Total current assets        43,066            47,788

  Property & equipment              3,232             3,356
  Deferred taxes and other assets   1,405             1,412

       Total                     $ 47,703          $ 52,556

             LIABILITIES & STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable              $   7,158          $  8,825
  Accrued liabilities               3,629             4,400

       Total current liabilities   10,787            13,225

Stockholders' equity:
  Common stock & paid-in capital   30,223            30,140
  Retained earnings                 6,693             9,191

  Stockholders' equity             36,916            39,331

       Total                     $ 47,703          $ 52,556

CONTACT: Cornerstone Imaging Inc.

John Finegan, 408/435-8900

or

Financial Relations Board, SF

Betsy Truax, 415/986-1591