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SIERRA ON-LINE REPORTS THIRD QUARTER AND NINE-MONTH RESULTS

 OAKHURST, Calif., Feb. 5 /PRNewswire/ -- Sierra On-Line Inc. (NASDAQ: SIER) today announced results of its fiscal 1993 third quarter and nine-month period ended Dec. 31, 1992.
 For the quarter, revenues increased 12 percent to $18.3 million from $16.3 million for the same period a year ago. Net loss for the period was ($1.3 million), or ($.18) per share, compared to net income of $2.6 million, or $.45 per share, for the comparable period of the previous year. The company had previously reported that it anticipated a loss of approximately ($.10) to ($.20) per share for the current quarter.
 Sierra's games continue to receive excellent market acceptance. During the Christmas season, "King's Quest VI," "Front Page Sports Football," "WWII: 1946!" and "The Island of Dr. Brain" were frequently mentioned in retailer bestseller lists. In the first 90 days, sales of the company's current bestseller, "King's Quest VI," surpassed by 20 percent the comparable sales of any of the company's prior releases. Sierra is a finalist in the 1993 SPA Excellence in Software Awards balloting in four of five entertainment categories. The company is especially gratified that two additional nominations are in the educational categories.
 The company stated that the quarterly and nine-month results were impacted by cautious purchasing by retailers, additional liquidation of older inventories and higher costs associated with product development and advertising. During the fourth quarter, there are several major titles scheduled for release.
 As previously announced in a release dated Dec. 16, 1992, to address the new market conditions, the company accelerated amortization of software development costs for certain titles that have been discontinued or have experienced shortened shelf life; expensed development costs of certain products for new markets and new platforms where market acceptance is less predictable; and amortized new titles over a shorter life. The company currently anticipates that, in fiscal 1993, amortization expense will exceed new capitalization of software development costs.
 Revenues for The Sierra Network, the company's on-line, interactive, multiparty entertainment network, have increased substantially to $750,000 for the quarter, compared to $21,000 for the same period last year. The company released a major update, Imagination(TM), which enhances play. The release has experienced excellent user acceptance. In October, the company initiated aggressive marketing programs which have substantially increased the number of trial members. Since trial members do not generate income, the company believes revenues have become a more meaningful measure of performance. The Sierra Network posted an operating loss of ($1.7 million) for the quarter and a ($3.5 million) loss for the nine-month period.
 Sierra On-Line Inc., along with its wholly owned subsidiaries, Dynamix Inc. and Bright Star Technology Inc., publishes entertainment and educational software for IBM PCs and PC-compatibles, Apple Macintosh and Sega CD players.
 SIERRA ON-LINE INC. AND SUBSIDIARIES
 Consolidated Statements of Earnings
 (Unaudited)
 (In thousands, except per share data)
 Three Months Nine Months
 Ended Dec. 31, Ended Dec. 31,
 1992 1991 1992 1991
 Revenues
 Net sales $18,008 $15,956 $36,494 $32,244
 Other 307 382 1,284 1,092
 Total revenues 18,315 16,338 37,778 33,336
 Cost of sales
 Manufacturing costs 6,444 4,942 12,912 11,042
 Amortization of software
 development costs 4,535 2,422 8,100 4,453
 Royalties 598 566 1,208 1,212
 Total cost of sales 11,577 7,930 22,220 16,707
 Gross profit 6,738 8,408 15,558 16,629
 Operating expenses
 Selling, general and
 administrative 6,221 4,067 15,482 10,181
 Research and
 development 2,573 640 3,812 1,465
 Total operating
 expenses 8,794 4,707 19,294 11,646
 Earnings (loss) from
 operations (2,056) 3,701 (3,736) 4,983
 Non-operating income
 (expenses)
 Interest income (net) 294 71 930 263
 Amortization of goodwill (133) (77) (359) (230)
 Total non-operating income
 (expenses) 161 (6) 571 33
 Earnings (loss) before
 income taxes (1,895) 3,695 (3,165) 5,016
 Provision (benefit) for
 income taxes (563) 1,098 (973) 1,610
 Net income (loss) ($1,332) $2,597 ($2,192) $3,406
 Earnings (loss) per
 common and common
 equivalent share ($0.18) $0.45 ($0.30) $0.60
 Average number of
 outstanding
 common and common
 equivalent shares 7,385,834 5,725,977 7,402,458 5,645,291
 Consolidated Condensed Balance Sheets
 (In thousands, except per share data)
 Dec. 31, March 31,
 1992 1992
 (Unaudited)
 Assets
 Current assets:
 Cash and cash equivalents $5,101 $32,296
 Marketable investment
 securities 23,032 3,353
 Accounts receivable (net) 8,890 5,288
 Refundable income taxes 2,264 1,451
 Inventories 3,938 4,354
 Deferred income tax benefit 1,802 1,802
 Other current assets 2,168 595
 Total current assets 47,195 49,139
 Property, plant &
 equipment (net) 7,005 6,970
 Software development costs 8,783 8,816
 Goodwill 2,946 2,116
 Other assets 477 257
 Total assets $66,406 $67,298
 Liabilities and stockholders'
 equity:
 Current liabilities
 Accounts payable and other
 accrued expenses $5,126 $4,053
 Royalties payable 861 768
 Total current liabilities 5,987 4,821
 Deferred income
 tax liability 4,137 4,131
 Other liabilities --- 6
 Total liabilities 10,124 8,958
 Stockholders' equity 56,282 58,340
 Total liabilities
 and stockholders equity $66,406 $67,298
 -0- 2/5/93
 /CONTACT: Richard Gelhaus, executive VP/finance & operations of Sierra On-Line, 209-683-2598; or Eugene G. Heller of Silverman, Heller Associates, 310-208-2550, for Sierra On-Line/
 (SIER)


CO: Sierra On-Line ST: California IN: CPR SU: ERN

KJ-LS -- LA010 -- 3390 02/05/93 09:02 EST
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