Cornerstone Imaging to report loss in first quarter.

SAN JOSE, Calif--(BUSINESS WIRE)--April 8, 1996--Cornerstone Imaging, Inc. (NASDAQ: CRNR), a provider of hardware and software system components for document image processing (DIP), announced today that, based on preliminary estimates, revenues for the first quarter will not meet the expectations of analysts and that the company will be reporting a loss.

Revenues for the quarter will be approximately $18 million and a loss of between 31 and 35 cents per share will be reported. The loss includes a one-time charge of approximately $1.4 million, or 13 cents per share, 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."

Cornerstone took pricing actions, effective April 1, on its display products with reductions of approximately 25% on controller boards and 10% on monitors.

"We've fundamentally changed our display pricing strategy with this action. As imaging is becoming regarded as an enterprise-wide capability, Cornerstone must be more competitive with the providers of general purpose display controllers even though we continue to enjoy clear product advantages for imaging applications," said van Overbeek.

"We've also taken steps to reduce expenses including discontinuing PrintAccel, our print accelerator board that was introduced in the third quarter of 1995."

Cornerstone will release full first quarter results on April 17.

About Cornerstone

Cornerstone Imaging, Inc., headquartered in San Jose, 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-

Note to Editors: Cornerstone and the Cornerstone logo are trademarks, servicemarks or registered trademarks of Cornerstone Imaging, Inc.

CONTACT: Cornerstone Imaging, Inc., San Jose

John Finegan, 408/435-8900

or

Financial Relations Board SF:

Betsy Truax, 415/986-1591