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SMITH MICRO REPORTS SECOND QUARTER FINANCIAL RESULTS

Jul 21, 1998
Company Will Launch Two New Internet Product Suites

ALISO VIEJO, CA -Smith Micro Software, Inc. (Nasdaq:SMSI)) today announced net revenues of $1,656,000 for the second quarter ended June 30, 1998 compared with net revenues of $2,620,000 for the same period in 1997. The company recorded a net loss for the quarter of ($709,000) or ($0.05) per share, compared with a net loss of ($482,000) or ($0.03) per share for the 1997 period.

For the six months ended June 30, 1998, net revenues were $4,922,000 compared with net revenues of $5,278,000 for the same period in 1997. The company recorded a net loss for the six-month period of ($596,000) or ($0.04) per share compared with a net loss of ($1,666,000) or ($0.12) per share for the same period in 1997.

"While we have been successful in controlling our costs and our cash position remains strong, a sharp drop in analog modem sales, particularly to our largest customers, seriously impacted our revenues in the second quarter," said Bill Smith, President and CEO of Smith Micro. "While industry experts and analog modem manufacturers predicted an upturn in 56k modem sales following the industry's adoption of the new v.90 standard in February 1998, 56k modem sales have not increased as predicted."

Smith also reported that within the next six months, the company expects to launch two new product suites that will incorporate both analog and digital communications technologies, including the various digital subscriber lines ("xDSL") and cable technologies. These new product suites are designed to provide for high-speed Internet connectivity, as well as facilitate high-speed communications on various corporate and government networks.

Smith stated that the "the company's financial condition remains strong with working capital of $19 million and no debt. We are well-positioned to invest in the product development and marketing programs required to launch these new product suites."

With headquarters in Aliso Viejo, California, Smith Micro provides communication software for personal computers. The company offers a range of software products for use on the Windows 98, Windows 95, Windows NT, Windows, DOS, and Macintosh operating systems. The company markets its products worldwide through a network of OEMs and retail distributors. Smith Micro may be contacted at 51 Columbia, Aliso Viejo, CA 92656. Phone: (949) 362-5800. The company's Web Site address is http://www.smithmicro.com.

This release may contain forward-looking statements that involve risks and uncertainties. Among the important factors which could cause actual results to differ materially from those in the forward-looking statements are economic, competitive, governmental and technological factors effecting the company's operations, markets, products, services and prices, as well as, other factors detailed in the company's filings with the Securities and Exchange Commission including its recent filings on Forms 10-K and 10-Q.

Smith Micro and the Smith Micro logo are trademarks or registered trademarks of Smith Micro Software, Inc. All other trademarks and product names are the property of their respective companies.

FINANCIAL TABLES FOLLOW
SMITH MICRO SOFTWARE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per-share amounts)

 Second Quarter Ended
June 30
(unaudited)
Nine Months Ended
September 30
(unaudited)
 1998199719981997
Net revenues$1,656$2,620$4,922$5,278
Cost of revenue5818341,4472,080
Gross profit1,0751,7863,4753,198
Operating expenses:
  Selling and marketing7599211,5271,916
  Research and development8398511,6251,733
  General and administrative8409361,6762,472
Total operating expenses2,4382,7084,8286,121
Operating loss(1,363)(922)(1,353)(2,923)
Interest income, net183180363360
Loss before income taxes(1,180)742(990)(2,563)
Income tax expense (benefit)(471)260(394)(897)
Net Loss$(709)$482$(596)$(1,666)
Net loss per basic and diluted share$(0.05)$(0.03)$(0.04)$(0.12)
Weighted average shares outstanding, Basic14,07514,07514,07414,074
Weighted average shares outstanding, Diluted14,07514,07514,07414,074

*Includes the results of Pacific Coast Software for all periods presented. Pacific Coast Software, acquired by Smith Micro in September, 1999, was accounted for as a pooling of interests.
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