Hello Direct Reports 44 Percent Sales Increase For Fourth Quarter; 40 Percent Increase For Full Year 1996.

SAN JOSE, Calif.--(BUSINESS WIRE)--January 30, 1997--Hello Direct, Inc. (Nasdaq: HELO) today announced net sales for the fourth quarter ended December 31, 1996 increased 44% to $14.0 million from $9.7 million in the fourth quarter of 1995. Net income for the fourth quarter of 1996 totaled $36,000, or $0.01 per share, compared to a net loss of ($253,000), or ($0.05) per share, in the fourth quarter of 1995.

Results for the fourth quarter of 1995 included $1,518,000 in expenses related to the discontinuation of the Company's CellBase product, which was announced in December of 1995. Net income and net income per share for the fourth quarter of 1995 were positively affected by the application of tax loss carryforwards. Assuming a combined 40% federal and state statutory tax rate, 1995 fourth quarter net income, excluding the one-time charge, would have been $95,000, or $0.02 per share.

For the year ended December 31, 1996, Hello Direct reported net sales of $51.6 million, a 40% increase from $36.8 million in 1995. The Company reported net income of $741,000, or $0.15 per share, for 1996 compared with $1,952,000, or $0.43 per share, for 1995. On a fully taxed basis and excluding the one-time charge, net income before extraordinary item for 1995 would have been $1,244,000, or $0.27 per share.

"New products introduced during 1996, plus expanded catalog distribution, continue to drive growth in net sales," said Allen Batts, president and chief executive officer. "As we look to 1997, we expect to see continued top line growth. However, our focus is on improving bottom line performance by lowering operating costs as a percentage of net sales, increasing catalog productivity and strengthening our margins."

"We are being more selective about the products that are included in the catalog. We have discontinued many lower margin products while introducing higher margin branded and proprietary products. We also have action plans in place designed to drive down costs on both proprietary and branded products."

The Company continues to invest in programs to build the business as well as maintain its high level of customer satisfaction. In early January 1997, the Company started mailing its 88 page spring catalog to nearly 7.5 million customers and selected prospects. This is the largest quarterly mailing ever for Hello Direct. This catalog contains over 300 products that are appearing in the catalog for the first time and showcases two recently introduced proprietary products: SuperPro headset amplifier that uses our proprietary CODIT "smartchip" technology, and the Office Rover, a 900 MHZ wireless headset.

During the fourth quarter of 1996, the Company mailed 6.3 million catalogs, a 21% increase over the fourth quarter of 1995. For the full year 1996, Hello Direct mailed a record 23.8 million catalogs, 33% more than 1995. The Company plans to mail approximately 27 million catalogs in 1997.

"In early 1997, Hello Direct moved into its newly constructed facility adjacent to our previous headquarters. The new facility houses our state-of-the-art call center and was designed specifically to meet our needs as a growing company. We believe it will accommodate our growth well into the future and help to create efficiencies that should improve bottom line performance," concluded Mr. Batts.

Hello Direct is a leading direct marketer and developer of innovative telecommunications products to business end-users. Through its distinctive catalog, the Company offers a broad selection of commercial-grade brand name, proprietary and private label products at competitive prices that provide solutions to its customers' evolving telecommunications needs.

This press release contains forward-looking statements, including but not limited to those regarding net sales, operating results, product mix, catalog distribution and the Company's ability to reduce certain expenses and improve operating margins. These forward looking statements involve risks and uncertainties that could cause actual results to differ materially, including the timely development, introduction and acceptance of new products, growth, if any, in the size of the catalog and the number of catalogs mailed, the ability of the Company to continue to increase net sales, the ability of the Company to reduce costs and improve operating margins, the capabilities of the Company's new headquarters facility, the impact of competitive products and pricing, changing market conditions and other risks described in the Company's Annual Report on Form 10-K for the year ended December 31, 1995 and Quarterly Reports on Form 10-Q, which are on file at the Securities and Exchange Commission. -0-

                         Hello Direct, Inc.
                Condensed Statements of Operations
               For the Three and Twelve Months Ended
                    December 31, 1996 and 1995


                      Three Months Ended     Twelve Months Ended
                         December 31,             December 31,
                      1996          1995       1996         1995

Net sales          $14,024,000  $9,736,000  $51,590,000  $36,823,000
Cost of goods sold   7,097,000   4,616,000   25,181,000   16,916,000
   Gross profit      6,927,000   5,120,000   26,409,000   19,907,000
Selling, general
 and administrative
 expenses            6,784,000   4,846,000   24,277,000   17,050,000
Product development
 expenses              210,000     339,000    1,598,000    1,326,000
CellBase expenses         --     1,518,000        --       2,096,000

   Operating income
   (loss)              (67,000) (1,583,000)     534,000     (565,000)
Other income - net     132,000     223,000      700,000      542,000

   Income (loss)
    before income
    taxes               65,000  (1,360,000)   1,234,000      (23,000)

Income taxes
 (credits)(a)           29,000  (1,107,000)     493,000   (2,112,000)

   Income (loss)
    before extra-
    ordinary item       36,000    (253,000)     741,000    2,089,000

Extraordinary item (b)    --          --           --        137,000

   Net income (loss) $  36,000  $ (253,000)    $741,000   $1,952,000

Per share amounts:

   Income (loss) before
    extraordinary item   $0.01      $(0.05)       $0.15        $0.46

   Net income (loss)     $0.01      $(0.05)       $0.15        $0.43

   Weighted average
    shares
    outstanding      5,055,000   4,922,000    5,043,000    4,525,000

    (a) Fiscal 1995 reflects the effect of tax operating loss
carryforwards in accordance with SFAS No. 109.  Fiscal 1996 reflects
a provision for taxes at combined federal and state statutory rates.
    (b) Write off of unamortized costs of the mezzanine financing of
May 1994, retired from proceeds of the April 1995 IPO, net of tax
benefit of $41,000.


                           Hello Direct Inc.
                       Condensed Balance Sheets

                                          Dec. 31,          Dec. 31,
                                            1996              1995
               ASSETS

Current assets:
   Cash and cash equivalents             $2,492,000        $3,487,000
   Short-term investments                 6,007,000         4,322,000
   Trade accounts receivable, less
    allowance for returns and doubtful
    accounts                              4,852,000         3,408,000
   Inventories                            5,287,000         3,914,000
   Deferred tax assets                      628,000           231,000
   Other current assets                   1,339,000         1,004,000
     Total current assets                20,605,000        16,366,000

Long-term investments                         --            6,147,000
Notes receivable                          3,497,000              --
Property and equipment, net               3,792,000         1,280,000
Long-term deferred tax assets             1,072,000         1,923,000
     Total assets                       $28,966,000       $25,716,000

     LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Current portion of capital lease
    obligation                           $   20,000       $    26,000
   Accounts payable                       3,839,000         1,593,000
   Accrued expenses                         464,000           350,000
     Total current liabilities            4,323,000         1,969,000
Long-term portion of capital lease
 obligation                                   --               20,000
     Total liabilities                    4,323,000         1,989,000
Stockholders' equity:
   Common stock                               5,000             5,000
   Additional paid-in capital            27,807,000        27,632,000
   Accumulated deficit                   (2,724,000)       (3,465,000)
   Less treasury stock, at cost            (445,000)         (445,000)
      Total stockholders' equity         24,643,000        23,727,000
      Total liabilities and
       stockholders' equity             $28,966,000       $25,716,000

CONTACT: Hello Direct, Inc.

Raymond E. Nystrom, [phone]

OR

Morgen-Walke Associates, Inc.

John Swenson, David Gennarelli, Doug Sherk

[phone]

Emily Dupree, Joshua Passman, [phone]