Newly Renamed S3 Announces First Move as SONICblue, Acquires empeg; Maker of Popular Handheld Digital Audio Players Steers Course for Automotive Products.

Business Editors/High-Tech Writers

SANTA CLARA, Calif.--(BUSINESS WIRE)--Nov. 6, 2000

S3(R) Incorporated (Nasdaq:SIII), which recently announced its name change to SONICblue(TM), announced that it has completed its acquisition of U.K. digital audio equipment manufacturer, empeg, which will be part of SONICblue's Rio Division. One of the first companies to design and bring to market digital audio players for automobiles, empeg has established itself as the early leader in hard-disk-based digital music products.

The deal will allow Rio to immediately leverage empeg's car and home MP3 player technology to provide an array of automotive solutions. Rio plans to introduce empeg's current product to U.S. consumers, distributing it widely under the Rio brand in coming months, and intends to develop a wider range of future Rio car products using resources in both the U.S. and Europe.

The empeg car player is an in-dash digital music player with a capacity of up to 600 hours of high quality music. The system incorporates extensive music database management capabilities that allow users to effectively manage large collections of music. The player incorporates an Embedded Linux operating system, an auxiliary DSP for enhanced sound quality and special ruggedized hard disk assemblies. It fits into a standard DIN opening and works with standard car amplifiers, head-ends and speakers.

"This move is consistent with our plan to leverage our technology platforms, expanding the reach of our digital audio products," said Ken Potashner, chairman and CEO of SONICblue. "Rio has changed the way in which consumers listen to music. This acquisition demonstrates our intent to expand our Rio product portfolio. Most people listen to music in their car, and having their complete music collection available at the touch of a button is a revolutionary experience."

"We are at a point where the Rio brand is beginning to expand beyond just the portable handheld space," said Mike Reed, vice president of marketing for SONICblue's Rio Division. "empeg has been a long term development partner of ours. By combining their experience and technology with our logistical and marketing expertise, we will rapidly be able to deliver another robust solution for the consumer digital audio experience."

About SONICblue (www.SONICblue.com)

A leader in the converging Internet, digital media and consumer device markets, SONICblue holds significant financial assets, global marketing capabilities and a focused technology portfolio, that includes Rio (TM) digital audio players, HomeFree(TM) home networking solutions, Diamond(TM) Internet access products and frontpath(TM) Information Appliances.

Except for historical information contained herein, the matters set forth in this press release, such as statements regarding plans to introduce empeg's products to U.S. consumers and to develop a wider range of future Rio car products, are forward-looking statements that are subject to risk and uncertainties, including the impact of competitive products and pricing and of alternative technological advances, Rio's ability of to timely introduce products that address market demands, Rio's ability to integrate successfully and in a timely manner empeg's operations, and other risks detailed from time to time in S3 Incorporated's SEC reports, including its quarterly report on Form 10-Q for the quarter ended June 30, 2000. SONICblue, the SONICblue corporate logo, S3 Incorporated, Diamond, , frontpath and HomeFree are trademarks of SONICblue Incorporated. Rio is a trademark of RioPort.com, Inc. and is used under license from RioPort.com, Inc.