Diamond Multimedia Announces Addition of ``HomeFree Phoneline'' to its Line of Home Networking Products for the PC; New, Standards-based Solution Priced at $50 Per Computer.

VANCOUVER, Wash.--(BUSINESS WIRE)--Jan. 5, 1999--Diamond Multimedia Systems Inc. (Nasdaq:DIMD), a leader in multimedia solutions and emerging technologies, today announced the addition of the HomeFree(TM) Phoneline solution to its line of home networking products for PCs.

With pricing at approximately $50 per computer, the Diamond HomeFree Phoneline product uses existing home phonelines to link multiple PCs for the sharing of Internet access, printers and other peripherals, as well as to support networked multi-player gaming. The new product incorporates AMD's PCnet(TM)-Home networking controller, is Home Phoneline Networking Alliance (HomePNA)-certified and carries the HomePNA logo to ensure full compatibility with other standardized phoneline networking products.

Shipments of the Diamond HomeFree Phoneline solution are expected to begin this month. The product is expected to be available at major computer retailers nationwide and direct from Diamond's On-Line Store at http://www.diamondmm.com/where-to-buy/online-store/.

Diamond Multimedia also announced today that Compaq Computer Corporation has selected HomeFree Phoneline as the preferred home networking solution to complement selected new models of home network-ready Presario Internet PCs.

"Almost 20 million homes in North America have two or more PCs," said Jim Cady, vice president and general manager of Diamond Multimedia's Communications Division. "The HomeFree line of home PC networking products enables consumers with multiple-PCs to build high-speed, cost-effective networks," said Jim Cady, vice president and general manager of Diamond Multimedia's Communications Division. "The Homefree Phoneline solution is standards-based and utilizes the existing phonelines within the home to deliver fast, secure network transmissions. This new product is a strong addition to the HomeFree line, which now offers consumers a choice between phoneline and wireless solutions."

"The PCnet-Home controller incorporates the hardware and software functionality required to make cost-effective home networking a reality," said Dr. Laila Razouk, vice president of AMD's Network Products Division. "By utilizing AMD's HomePNA networking controller in the new HomeFree Phoneline product, Diamond Multimedia is well positioned to be one of the first to market with an affordable, high-performance, easy-to-setup networking solution which uses a home's pre-existing phone wiring."

Home PC Networking is Poised for Growth

The advent of sub-$1,000 PCs is expected to continue to drive the growth of multiple-PC homes as consumers purchase second and even third PCs. In fact, some market observers believe multiple-PC homes are growing faster than single-PC homes in North America. Home networking solutions such as Diamond's HomeFree Phoneline product enables consumers to share their PC resources, potentially saving hundreds of dollars per year through sharing PC peripherals and ISP accounts. The deployment of broadband Internet connections to the home, via cable or DSL modems, is expected to further drive home PC networking as consumers seek to share, faster, but more expensive, Internet access.

Voice and Data Share Existing Phonelines

The Diamond HomeFree Phoneline product does not require the use of any new wires. The product is easy to install and simply plugs into a standard RJ-11 telephone jack to leverage the use of existing phonelines. The HomeFree Phoneline product enables the simultaneous operation of telephone service and home networking over the same phonelines system already installed in most North American homes. By using a unique frequency range, the product avoids potential conflicts with telephone calls and other phone services.

Share Internet Access, Peripherals and More

Diamond's HomeFree Phoneline solution includes WinGate Home 3.0 Internet sharing software from Deerfield.com that enables multiple users to simultaneously access the Internet by using a single phoneline and ISP (Internet Service Provider) account.

"WinGate software allows consumers to fully leverage a single connection to the Internet," said Mike Deerfield, CEO of Deerfield.com. "It's a perfect complement to Diamond's HomeFree Phoneline networking card and provides a tremendous value by consolidating Internet resources."

Additionally, HomeFree Phoneline can be used to transfer files and share peripherals such as printers, modems, scanners and Zip(r) drives. Multiple-PC homes are expected to network their PCs over the coming years in order to save money by sharing peripherals and Internet access.

Moreover, in addition to making a return on their investment, Diamond Multimedia's HomeFree Phoneline product, consumers can also enjoy networked multi-player gaming at home. A specialized version of GT Interactive's popular "Unreal" game is bundled with the Desktop Pac version of the product at no additional charge.

Standards-Based Home Networking

The design of Diamond's new HomeFree Phoneline solution is based upon the HomePNA network standard, which stems from Tut System's HomeRun(tm) technology. In the December 1998 issue of Home Office Computing, the HomePNA standard received the coveted "Technology of the Year" award.

"We are pleased to see that Home Office Computing recognizes the merits of standards-based networking," said Cyrus Namazi, chairperson of HomePNA and product marketing manager at AMD. "The receipt of this prestigious award clearly shows that high-speed home phoneline networking technology is rapidly gaining momentum in the marketplace."

The HomeFree Phoneline product delivers fast throughput speeds of up to 1 Mbps at a range of up to 500 feet between computers (which generally covers any home up to 10,000 square feet). Since the product does not use lines outside the home, a level of security and privacy is maintained.

System Requirements 

The system requirements for Diamond Multimedia's HomeFree Phoneline Network include the following: an IBM-compatible computer (486 or higher) operating with Windows 95 or higher, one free PCI slot per PC, a CD-ROM drive and 15 MB of free hard drive space.

Diamond's HomeFree Product Line

The Diamond HomeFree Phoneline solution is PCI-based and requires Microsoft Windows 95 or higher. Product configurations include a "Desktop Pac" solution for a U.S. $99.95 estimated retail price (ERP) that includes two PCI cards, and a "Desktop Card" solution priced at U.S. $49.95 ERP that includes a single PCI card for expanding the home network beyond two computers. Additionally, the Desktop Card can be used to share resources with any HomePNA-networked PC.

Diamond's HomeFree Wireless solution, based on radio wave technology, is available in several configurations. Priced at U.S. $199.95 ERP, the "Desktop Pac" includes a PCI card and an ISA card. The "Combo Pac" carries an ERP of U.S. $229.95 and includes an ISA card and a PCMCIA card for the laptop PC. Additional single-node cards are available with prices of U.S. $99.95 ERP for either the PCI card or the ISA card and $129.95 ERP for the PCMCIA card.

Single-card extensions for the two-card retail pacs are available from Diamond's On-Line Store to support home or small office networks with more than two computers. Diamond Multimedia offers a choice among consumer-friendly home networking solutions based on multiple types of technologies.

Additional Information

For online information about the HomeFree brand, including phoneline and wireless solutions, consumers can visit http://www.diamondmm.com/homefree. Diamond Multimedia is a member of the HomePNA and the Home Radio Frequency Working Group (HRFWG).

About the Home Phoneline Networking Alliance

The Home Phoneline Networking Alliance is an incorporated, non-profit association of industry-leading companies working together to help ensure adoption of a single, unified phoneline networking industry standard and rapidly bring to market a range of interoperable home networking solutions.

About Diamond Multimedia

Diamond Multimedia is a leader in multimedia solutions and emerging technologies for the home and business markets, providing advanced products that enable desktop computer users to create, access and experience compelling new media content from their PCs and through the Internet. Products include the Rio series of Internet audio appliances; the Stealth, Viper(R) and SpeedStar series of video accelerators; the Monster series of 3D gaming accelerators; the Fire series of professional graphics accelerators; the Micronics series of system boards; the Supra(r) series of modems; and the HomeFree line of home networking products. Diamond's common stock is traded on the Nasdaq Stock Market under the symbol DIMD, and its web site address is www.diamondmm.com.

How to Contact Diamond Multimedia

There are many ways to reach Diamond for sales support, technical assistance, driver updates and general information:

Internet Web Site: http://www.diamondmm.com Diamond Multimedia's Headquarters and Multimedia Division:

408-325-7000; Fax: [phone] Communications Division (Supra brand modems) Main Phone Number:

360-604-1400; Fax: [phone] European Division (Germany): [phone]; (UK): [phone];

(France) [phone] Korean Office (Seoul): [phone]; Fax: [phone] Japanese Office (Tokyo): [phone]; Fax: [phone] ASEAN Office (Singapore): [phone]; Fax: [phone] Hong Kong Office: [phone]; Fax: [phone] Australian Office (Sydney): [phone]; Fax [phone] Swedish Office: [phone]; Fax [phone] Latin America Office (Miami): 305-593-8777; Fax: [phone] Mexico Office (Guadalajara):523-110-1144; Fax:[phone] Product Support (Voice), United States: 541-967-2450;

Europe (Germany) [phone]; Europe (UK) [phone];

Europe (France) [phone]; TDD/TTY Support 541-967-2451 Product Support (Fax), United States: 541-967-2401;

Europe (Germany) [phone]; Europe (UK): [phone];

(France) [phone] Pre-sales Information: 1-800-468-5846 24-Hour Fax-On-Demand Service: 1-800-380-0030 Investor Relations: 408-325-7476; 1-888-474-3463 (U.S. and Canada) FTP site: ftp.diamondmm.com BBS: Europe (Germany) BBS at [phone] (to 28.8Kbps) or

[phone] (ISDN); Europe (UK) at [phone] (to 33.6 Kbps)

HomeFree, Monster 3D, Rio, Shotgun, SpeedStar and SupraSonic are either trademarks or registered trademarks of Diamond Multimedia Systems, Inc. Monster(r) is a registered trademark of Monster Cable. Viper(r) is a registered trademark of Directed Electronics, Inc., Used under License. All other trademarks referenced are the service mark, trademark or registered trademark of their respective manufacturers. This announcement relates to products whose introductions are in North America. The product name, contents, prices and availability may differ elsewhere in the world according to local factors and requirements.

Except for historical information contained herein, the matters set forth in this press release, such as statements relating to the Company's ability to successfully exploit technological and market developments, the timing and success of new product introductions by the Company and its competitors, and the Company's ability to invest in new technologies and to enhance its existing systems are forward-looking statements that are subject to risks and uncertainties, including the impact of competitive products and pricing and alternative technological advances, the timely and successful development and market acceptance of new products and upgrades to existing products, and other risks as detailed from time to time in Diamond Multimedia's SEC filings, including its most recent Forms 10-K and 10-Q.