Cirrus Logic Completes Acquisition of Stream Machine; Adds MPEG-2 Video Recording to Digital Entertainment Focus.

Business Editors and High-Tech Writers

AUSTIN, Texas--(BUSINESS WIRE)--Dec. 10, 2001

Cirrus Logic Inc. (Nasdaq:CRUS), the premier supplier of high-performance analog and DSP semiconductor solutions for consumer entertainment electronics, today completed its acquisition of Stream Machine Company, a leading supplier of MPEG-2 video recording technology.

This acquisition strengthens Cirrus Logic's ability to provide Total Entertainment (Total-E(tm)) solutions for next generation, networked home entertainment applications. Stream Machine's proprietary video compression technology provides high quality video for multiple home entertainment applications, such as DVD recorders, personal video recorders (PVRs), digital camcorders and PC video peripherals.

Cirrus Logic issued approximately 5.4 million shares of its common stock and options for privately held Stream Machine. As a result of this and two previously announced acquisitions that closed in October, Cirrus Logic anticipates that it will have approximately 83 million shares outstanding at the close of the December quarter. Tangible net assets of Stream Machine total approximately $2 million. In the September quarter, Stream Machine's revenue was under $1 million and operating expenses were approximately $4 million. Cirrus estimates it will take a one-time non-cash charge in the December quarter for acquired in-process research and development in the range of $14 million to $20 million related to the acquisition. The remaining purchase price will be allocated primarily to amortizable intangibles and goodwill. Based on current Cirrus Logic forecasts, the acquisition is anticipated to be accretive to pro forma EPS within three quarters following the closing. As previously disclosed, it will have a dilutive effect of $0.00 to $0.02 per share in each of the next two quarters. Revenue from Stream Machine products is expected to grow from around $1 million in the December 2001 quarter to $30 million to $40 million in fiscal 2003, depending on a variety of factors, including continued strong growth in the DVD market and the rate at which consumers adopt digital video recording solutions for home use. Long-term gross margins are expected to be greater than 50 percent.

"Stream Machine's superior digital video recording technologies will play a major role in Cirrus Logic's leadership in the new era in entertainment electronics," said David D. French, president and chief executive officer of Cirrus Logic. "Through this acquisition and those of LuxSonor and ShareWave in October, Cirrus Logic has become the pre-eminent provider of audio, video and networking technologies for digital entertainment devices."

Market research firm Cahners In-Stat predicts that products that use MPEG encoding, such as Personal Video Recorders and DVD Recorders, will grow dramatically in the next few years. It estimates that PVRs will grow from approximately 520,000 units in 2001 to more than 11 million units in 2005, and DVD recorders will grow from 540,000 units this year to more than 17 million units in 2005.

Cahners In-Stat also predicts that the total MPEG-2 encoder chip market will grow 135 percent annually, from under two million units this year to more than 35 million units in 2005, representing a semiconductor market opportunity in excess of $370 million in 2005, up from $38 million this year.

"Stream Machine products are shipping in digital recording systems, which are manufactured by leading companies including Amoisonic, Datavideo and Malata. We are also seeing strong design win momentum throughout Japan, Korea and China," said Michael L. Canning, formerly the CEO of Stream Machine and now general manager of the Video Recording Division of Cirrus Logic. "Cirrus Logic's Whitecap(tm) wireless networking technology, developed by ShareWave, supports MPEG-2 video, which enhances the enjoyment of digital entertainment in the home. In the future, the company's optical storage technology, when combined with Stream Machine's video compression technology, will provide Cirrus with a more comprehensive solution and a superior integration roadmap compared with its competitors."

Mr. Canning, who reports to Mr. French, and 42 U.S.-based employees will relocate from their offices in Milpitas, Calif., to the existing Cirrus Logic facility in Fremont, Calif. Stream Machine will also eventually consolidate its China operations into the existing Cirrus facilities in Shenzhen and Beijing.

Cirrus Logic Inc.

Cirrus Logic is the premier supplier of high-performance analog and DSP chip solutions for consumer entertainment electronics that allow people to see, hear, connect, and enjoy digital entertainment. Building on its global market share leadership in audio integrated circuits and its rich mixed-signal patent portfolio, the company targets mainstream audio, video and Internet entertainment applications in the consumer entertainment market. Cirrus Logic operates from headquarters in Austin, Texas, and major sites located in Fremont and El Dorado Hills, Calif.; Broomfield and Boulder, Colo.; as well as offices in Europe, Japan and Asia. More information about Cirrus Logic is available at www.cirrus.com.

Safe Harbor Provision

Except for historical information contained herein, the matters set forth in this news release are forward-looking statements that are dependent on certain risks and uncertainties including such factors, among others, as the ability of the Company to successfully integrate Stream Machine into its operation and the ability to realize synergies anticipated as a result of this acquisition; and the risk factors listed in the company's Form 10-K for the year ended March 31, 2001, and in other filings with the Securities and Exchange Commission. The foregoing information concerning Cirrus Logic's business outlook represents our outlook as of the date of this news release, and Cirrus Logic undertakes no obligation to update or revise any forward-looking statements, whether as a result of new developments or otherwise.

Cirrus Logic, Total-E and Whitecap are trademarks of Cirrus Logic Inc.