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 SANTA CLARA, Calif., July 21 /PRNewswire/ -- S3 Inc. (NASDAQ: SIII) today reported that net revenues for the second quarter for fiscal 1993, which ended June 30, were $25.0 million, compared to $7.2 million for the second quarter of 1992. Net income for the quarter was $3.5 million, or 36 cents per share, compared to net income for the same quarter last year of $1.0 million, or 15 cents per share.
 Net revenues for the first six months of 1993 were $42.6 million, compared to $10.8 million for the first six months of 1992. Income before an accounting change for the first six months of 1993 was $5.5 million, or 62 cents per share, compared to $1.6 million or 23 cents per share for the first six months of 1992. Year-to-date 1993 net income was $9.0 million, or $1.01 per share, after the favorable impact of $3.5 million, or 39 cents per share, from the cumulative effect of a change in accounting for income taxes resulting from the adoption of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes.
 "S3's strong second quarter results can be attributed to continued robust demand for our products and volume production from both of our foundries," said Terry Holdt, S3 president and chief executive officer.
 During the quarter S3 announced that Nippon Electric Corp. (NEC), Yokohama, Japan, was qualified as a second foundry and began shopping commercial volumes to S3 customers in late June. This supply added to existing production from S3's other foundry, the Corvallis, Ore.-based Hewlett-Packard facility.
 During the second quarter S3 also announced the introduction of the S3 708 GENDAC product, a single chip that integrates a dual-clock generator and a RAMDAC (random access memory/digital to analog converter). This peripheral product, tightly coupled with S3's graphics accelerators and supported in software, provides customers with a more complete solution than was previously available.
 In response to strong market acceptance of the company's common stock following the initial public offering in March 1993, the company's underwriters informed the company that they were commencing a phased early release of the lock-up imposed on all pre IPO shareholders of the company. Of the approximately 6,050,000 shares originally subject to lock-up agreements, one-third of the shares were released on July 13 and an additional third will be released on August 9. The balance of these shares will be released from the lock-up on September 2, the original IPO lock-up expiration date. Certain of these shares are subject to Rule 144 restrictions on resale.
 S3 Inc. is dedicated to apply acceleration technology to create a natural interface for personal computers (PCs). The company combines silicon and software to offer a range of acceleration products supporting the leading PC operating environments. S3 pioneered graphics acceleration in 1991 with the first, single-chip graphics accelerator.
 GENDAC is a trademark of S3 Inc.
 S3 INC.
 (Dollars in thousands)
 June 30, December 31,
 1993 1992
 (Unaudited) (audited)
 Current assets:
 Cash and equivalents $42,872 $ 5,583
 Account receivable 12,855 7,253
 Inventories 1,493 768
 Prepaid expenses 774 364
 Deferred taxes 2,092 -
 Total current assets 60,086 13,968
 Property and equipment-net 3,467 1,602
 Non-current deferred taxes 369 -
 Other assets 37 30
 Total $63,959 $15,600
 Liabilities and stockholders'
 equity (deficiency)
 Current liabilities:
 Accounts payable $10,193 $ 4,621
 Accrued liabilities 4,150 1,874
 Income taxes payable 1,711 136
 Current portion of long-term
 obligations 502 967
 Total current liabilities 16,556 7,598
 Long-term obligations 17 1,179
 Total liabilities 16,573 8,777
 Redeemable convertible preferred
 stock - 16,761
 Stockholders' equity (deficiency)
 Common stock 48,492 182
 Accumulated deficit (1,106) (10,120)
 Total stockholders' equity
 (deficiency) 47,386 (9,938)
 Total $63,959 $15,600
 S3 INC.
 (Dollars in thousands, except per share data; Unaudited)
 Three months ended Six months ended
 June 30, June 30, June 30, June 30,
 1993 1992 1993 1992
 Net sales $25,017 $ 7,170 $42,579 $10,810
 Cost of sales 14,178 3,838 23,916 5,171
 Gross margin 10,839 3,332 18,663 5,639
 Operating expenses:
 Research and development 2,561 859 4,665 1,590
 Selling, general and
 administrative 3,080 1,361 5,782 2,358
 Total operating expenses 5,641 2,220 10,447 3,948
 Income from operations 5,198 1,112 8,216 1,691
 Interest income (expense),
 net 291 (26) 312 (41)
 Income from operations
 before income taxes and
 change in accounting 5,489 1,086 8,528 1,650
 Income taxes 1,980 50 3,014 75
 Income before change in
 accounting 3,509 1,036 5,514 1,575
 Cumulative effect of
 change in accounting
 for income taxes - - 3,500 -
 Net income $ 3,509 $ 1,036 $ 9,014 $ 1,575
 Per share amounts:
 Income before change in
 accounting $ 0.36 $ 0.15 $ 0.62 $ 0.23
 Cumulative effect of
 change in accounting
 for income taxes - - $ 0.39 -
 Net income $ 0.36 $ 0.15 $ 1.01 $ 0.23
 Number of shares used
 in computing per share
 amounts 9,823 7,027 8,935 6,938
 -0- 7/21/93
 /CONTACT: George Hervey, vice president, finance and chief financial officer, or Anne Banta, director of corporate communications, 408-980-5400, both of S3; or Heidi Flannery of in.ves'com, 503-221-2087, for S3/

CO: S3 Inc. ST: California, Oregon IN: CPR SU: ERN

LM-JH -- SE013 -- 4237 07/21/93 19:40 EDT
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Date:Jul 21, 1993

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