S3 Announces TV- and CD-Quality Multimedia Accelerator Chipset that Breaks Through "Affordability Barrier"; S3 and Compaq Team to Accelerate Availability of Mass-Market-Priced Multimedia Systems and Applications.

SANTA CLARA, Calif.--(BUSINESS WIRE)--June 13, 1995--S3 Incorporated (NASDAQ: SIII) today announced a new multimedia chipset based on S3's newly announced Cooperative Accelerator Architecture solution, that breaks through the "affordability barrier" while intending to provide a new norm for multimedia quality on the PC.

S3 also announced that Compaq Computer Corporation has selected the new S3 solution for its consumer PC products, available for the holiday buying season. The S3 solution offers TV-quality video and CD-quality audio for desktop applications for the home and office.

S3's three-chip offering is the first hardware integrated graphics, audio and MPEG (Motion Picture Expert's Group) solution designed for the PC motherboard. MPEG is the major open, international standard for digital compression and decompression on video and audio data. Historically, the integration of a new capability on the motherboard has tended to signal dramatic growth in both acceptance and demand. For example, S3, the pioneer in graphics acceleration, introduced the first graphics acceleration solution for the motherboard in 1992. Within three years, graphics acceleration on the motherboard has become practically ubiquitous.

With strong support from Compaq Computer Corporation (NYSE: CPQ), S3 believes the new chipset provides a basis for changing the face of multimedia much more quickly than had been anticipated by market analysts and other industry watchers. The two companies are coordinating a program to support title development by independent software vendors (ISVs) that includes a developers' conference later this summer or early in the fall.

S3 believes the market for motion video applications on the PC such as computer-based educational games, business training packages, and home entertainment has been constrained by the lack of affordable broadcast-quality images and sound to date. Historically, the "affordability barrier" for multimedia accelerator cards, graphics and video, has been at or below $250. The S3 solution can achieve this price point and includes hardware MPEG decoding, to enable high-quality playback of MPEG titles. This is imperative, as consumers expect audio and video equivalent to that offered by their home stereos, TVs, and other entertainment and productivity products. They also expect the ability to interact smoothly and intuitively with games, reference titles,and other applications.

S3's Cooperative Accelerator Architecture divides the work between dedicated S3 hardware and software executing on the PC CPU to provide enhanced graphics and MPEG-based video and audio performance. The result is TV-quality, full-screen 30 frames-per-second (FPS) live video or MPEG video, and CD-quality audio. The S3 Streams Processor uses parallel processing to provide the broadcast-quality special effects and greatly reduced response times required for graphics-packed interactive games and multimedia titles.

"S3 has developed an outstanding solution at the right price to enable an explosion in consumer demand for desktop motion video applications," said Rod Schrock, vice president, Presario Products, Compaq Computer Corporation. "S3's Cooperative Acceleration Architecture is an essential element to Compaq's plans to deliver the richest multimedia PC offering in the industry. We believe customers will be thrilled by the fantastic multimedia capabilities that we will deliver with S3's help for this holiday buying season."

According to Louise Biggs, an analyst for IDC, "S3 has changed the playing field for video and graphics applications on the PC. We expect the market to expand much more rapidly as a result of their breakthrough in quality and price."

"S3 has always taken a leadership role in acceleration technology," said Terry Holdt, president and CEO of S3 Incorporated. "We are providing fully enabled multimedia with MPEG in an integrated chipset that is designed for and priced for motherboard implementation. We have applied S3's systems knowledge to offer TV-quality video and special effects and CD-quality audio at a price point that opens it to the mass market."

MPEG is to video compression what VHS is to video tapes -- a broad-based standard that makes it easier for software and hardware companies to commit to making video products. The MPEG OM-1 application program interface (API) for PCs allows consumers to interact with the latest multimedia titles while enjoying remarkably smooth and natural TV-quality playback at a full 30 frames per second.

In a related announcement, Creative Multimedia, Portland, Ore.; IVI Publishing, Inc., Minneapolis, Minn.; Knowledge Adventure, Inc., La Crescenta, Calif.; and Microsoft Corporation, Redmond, Wash., announced today that they will provide MPEG titles for bundling in future Compaq systems. Activision, Inc., Los Angeles, Calif., and Starpress Multimedia, Inc., San Francisco, Calif., have announced they will offer titles in Compaq's after-market catalog, Additional software titles to be included in the catalog will be announced at a later date.

"A reliable MPEG standard is an important element in opening the PC market for high-quality interactive games and video applications. S3's solution is a critical contribution to the market's rapid expansion," said Paul Osborne, director of multimedia technology, Personal Systems Division, at Microsoft Corporation. "S3's multimedia accelerator chipset includes Windows 95-specific features such as Plug and Play compatibility and the industry's first MPEG hardware support for the DirectDraw API."

PC owners that already have a graphics accelerator installed on the motherboard will be able to purchase an MPEG upgrade on a daughterboard roughly the size of a credit card for less than $100. The projected add-in board price for full-featured graphics, video and audio support is expected to be around $250, less than half that of most current, less full-featured hardware solutions. Today's low-cost solutions tend to rely upon software, and can leave users to cope with jerky motion in small sized clips with tinny sound.

Compaq Computer Corporation

Compaq Computer Corp. is the world's largest supplier of personal computers, offering desktop PCs, portable PCs, and servers. Founded in 1982, the Company reported 1994 worldwide sales of $10.9 billion.

S3 Incorporated

S3 Incorporated is dedicated to applying acceleration technology to create a natural PC interface. S3 combines silicon and software to accelerate graphics and video for leading PC platforms and operating environments. The Company reported 1994 net sales of $140.3 million. -0-

Note to Editors: A formal press conference was held regarding this material. It can be heard 24 hours a day until 5 p.m. PST, June 20, 1995, by calling 1-800/839-4174.

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CONTACT: S3 Incorporated

Anne Banta, Andrew Logan, 408/980-5400

or

Compaq Computer Corporation

Mike Berman, 713/374-0484

or

Miller Communications for Compaq

Jean Borgman, 617/536-0470