Cornerstone Reports 1997 Second Quarter Results.

SAN JOSE, Calif.--(BUSINESS WIRE)--July 16, 1997--Cornerstone Imaging Inc., a leading provider of software and display products for electronic document applications today released operating results for the quarter ending June 30, 1997.

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Summary financial results:
(dollars and shares in millions)

                          Q2:97    Q1:97    Q2:96

Revenues:
   Display division      $ 18.3   $ 23.5   $ 20.8
   Software division     $  3.0   $  2.5   $  1.8

   Total company         $ 21.3   $ 26.0   $ 22.6

Gross Margin:
   Display division        28.3%    28.2%    24.8%
   Software division       93.4%    96.7%    95.2%

   Total company           37.5%    34.8%    30.4%

Pretax margin              (0.9)%    6.1%    (2.5)%

Pretax income (loss)      $(0.2)   $ 1.6    $(0.6)

Net income (loss)         $(0.1)   $ 1.1    $(0.4)

EPS                      $(0.02)  $ 0.14   $(0.05)

Cash and marketable
 securities               $ 16.1    $ 22.0  $ 4.0

Weighted average shares      7.3       7.6    7.4

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    Revenues for Q2 1997 of $21.3 million were down 18% from Q1 1997
and 6% from $22.6 million in Q2 1996.  Thomas T. van Overbeek,
Cornerstone's president and chief executive officer, commented, "As
discussed in our press release two weeks ago, we had mixed results
for Q2.  Revenues in our display division were $18.3 million, a
decline of 12% from Q2 1996.
    "We believe this decline was due in large part to slower than
anticipated growth in the market for production document imaging
systems.  On a more encouraging note, our software division reported
record revenues of $3 million.  This is an increase of 65% from Q2
1996 on the strength of InputAccel, our document capture product."
    For Q2 1997, gross margins were 37.5% compared with 34.8% in Q1
1997 and 30.4% in Q2 1996.  The improvement in margins from Q1 1997
is primarily the result of increased revenues in higher margin
software products, which represented 14% of total company revenues in
Q2 1997 compared to 10% in Q1 1997.
    Total operating expenses were $8.1 million, essentially unchanged
from Q1 1997 and up 9% from $7.4 million in Q2 1996.  The increase
from Q2 1996 is primarily attributable to increased sales and support
expenses for the software division.
    The net loss for Q2 1997 was $131,000, or 2 cents per share
compared with a net income of $1.1 million, or 14 cents per share, in
Q1 1997 and a net loss of $387,000, or 5 cents per share, in Q2 1996.
    For the six months ended June 30, 1997 revenues were $47.4
million compared with $40.4 million for the first half of 1996.  Net
income for the current six-month period was $890,000, or 12 cents per
share, compared to a net loss of $2.9 million, or 39 cents per share
for the first half of 1996.
    Cash and marketable securities were $16.1 millionon at year end.
Accounts receivable decreased to $12.3 million at June 30 compared to
$17.2 million at thes part of a program
initiated in February 1997re for electronic
document applications.  Cornfacilitate the scanning and
capture of paper-based information.  Cornerstone is a publicly held
company trlease 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, thosernational sales and
international sources of suor more information on Cornerstone Imaging Inc. via fax,
               dial 800/PRO-INFO, code 045. No cost.


                     CORNERSTONE IMAGING, INC.
        receivable                      12,299
       Total current assets               49,069           50,890

Property and equipment                     2,834            2,859
Deferred taxes and other assets              597            1,094

       Total                     ngs                        8,918            8,02
     STATEMENTS OF
INCOME
               (in thousands, except per share amounts)


                           Three Months Ended     Six Months End      6,865     17,016    12,243
              estructuring charge          --         --         --       1,404

  Operating income (loss)     (130)      (584)       747    (4,218)

 Other income (expense)        (0  $ (2,900)

Net income (loss)  per share

CONTACT: Cornerstone Imaging Inc.

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