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Smith Micro Announces Improved 2000 First Quarter Results and Second Consecutive Quarter of Revenue Gains

Apr 25, 2000

Aliso Viejo, CA -- Smith Micro Software, Inc. (Nasdaq: SMSI), a worldwide developer and marketer of Internet communications software, today announced net revenues of $3.1 million for the first quarter ended March 31, 2000, compared with net revenues of $3.0 million for the first quarter ended March 31, 1999 and net revenues of $2.5 million for the fourth quarter of 1999.

The company recently changed its reporting format to include net revenues from each of the company's three operating divisions. The company reported net revenues of $802,000 in its Internet Solutions Division in the first quarter of 2000, $949,000 in its Macintosh Division and $1.1 million in its Wireless & Broadband Division. This compares to $170,000, $50,000 and $1.9 million, respectively, in the first quarter of 1999 and $588,000, $703,000 and $743,000, respectively, in the fourth quarter of 1999. Revenues from the company's sunset products, which comprises Smith Micro's analog modem products sold to OEM manufacturers, equaled $268,000 in the first quarter of 2000 compared to $870,000 in the first quarter of 1999 and $423,000 in the fourth quarter of 1999.

Operating expenses, as a percentage of net revenues, in the first quarter of 2000 declined 13.9% compared to the fourth quarter of 1999. The percentage reduction resulted mainly from the increased sales volume coupled with a modest increase in expenditures. Operating expenses as a percentage of sales compared to the same quarter a year ago declined by 9.2% with sales being comparable.

Smith Micro recorded a net loss for the 2000 first quarter of $659,000, or a loss of $0.04 per share, compared with a net loss of $675,000, or a loss of $0.05 per share, for the 1999 first quarter and a net loss of $980,000, or a loss of $0.06 per share, for the 1999 fourth quarter. Comparing losses on an after tax basis for the first quarter of 2000 versus the first quarter of 1999 includes a tax loss carry forward that was recognized for the first two quarters of last year. The company reversed the tax asset carried on its balance sheet in the third quarter of 1999 removing the affects of the potential tax savings from the income statement. Comparable results on a pretax basis were a loss of $620,000 for the first quarter of 2000 versus a $1.0 million pretax loss in the first quarter of 1999.

At March 31, 2000, the company had no long-term debt, cash of approximately $8.7 million and working capital of $10.7 million.

"This marks our second consecutive quarter of revenue growth," said William W. Smith, Jr., President and Chief Executive Officer of Smith Micro. "This mirrors our activity of shifting our strategic focus from primarily OEM analog modem products to a more diversified mix of software solutions for the Internet, Macintosh and Wireless and Broadband markets.

"In the first quarter of 2000, Smith Micro reported a more than 25% gain in net revenues from the fourth quarter of 1999 as the result of continuing growth in all divisions. Our continuing business increased by 38% over the fourth quarter of 1999, more than offsetting the continuing decline from sunset products. We will continue to report these sequential comparisons as we build additional momentum in our newly defined operations.

"With a solid and focused infrastructure in place, we believe we are finally in a strong position to capture significant market opportunities," said Mr. Smith. "Our operating divisions possess many synergies that allow us to leverage our expertise in each area to quickly respond to marketplace needs.

"From a macro perspective, we believe that we are heading into the future with several key advantages and competencies that we believe will allow us to accomplish our growth objectives. These include: patented technologies; cross-platform operating system expertise; access to a wide variety of important distribution channels, including the OEM, VAR, e-tail and retail markets; and our ability to leverage strategic relationships and partnerships to penetrate emerging markets for our products and services."

Smith Micro will be holding an investor conference call to discuss the company's results at 4:30 p.m. eastern on April 25, 2000. Investors will have the opportunity to listen to the conference call over the Internet through Vcall at To listen to the live call, please go to the web site at least fifteen minutes early to register, download, and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available shortly after the call.

About Smith Micro Software

Smith Micro Software, headquartered in Aliso Viejo, California, is a developer and marketer of eCommerce and communication software products and services. The company designs integrated, cross-platform, easy-to-use software for personal computing and business solutions around the world. With a focus on the Internet, wireless, and broadband technologies, the company's products enable eCommerce, Internet communications (voice-over-IP), video conferencing, wireless communications and network fax, along with traditional computer telephony.

Smith Micro's complete line of products is available through direct sales, retail stores, value-added resellers (VARs) and original equipment manufacturers (OEMs). Smith Micro's common stock trades on The Nasdaq Stock Market® under the symbol SMSI. For more information, contact Smith Micro at (949) 362-5800.

This release contains forward-looking statements that involve risks and uncertainties and actual results may differ from those suggested by the forward-looking statements. Similarly, while it appears to the company that on-line retailers are expanding their products and services and that offers the company opportunities for growth, if that trend reverses itself or if the company's competition proves more adept at obtaining the benefits of that trend, the anticipated revenue growth will not occur. Among other things, the company's attempt to develop new markets in eCommerce, Mac and wireless markets involves the development of new products for markets where the company has relatively little experience and where competition is keen. Although the company anticipates that these new markets will generate revenue growth compared to prior years, if the company's product line takes longer to develop then currently anticipated and/or if the company's competition develops products that gain market acceptance quicker, that opportunity will be lost or delayed. Other important factors which could cause actual results to differ materially from those in the forward-looking statements are economic, competitive, governmental and technological factors affecting 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.

For more information on Smith Micro Software, Inc., via fax at no charge, please call
1-800-PRO-INFO and enter ticker symbol SMSI.


(in thousands, except share and per-share amounts)

 First Quarter Ended
March 31
Net revenues$3,074$3,036
Cost of revenue613729

Gross profit2,4612,307

Operating expenses:
   Selling and marketing1,3791,618
   Research and development937936
   General and administrative877918

Total operating expenses3,1933,472

Operating loss(732)(1,165)

Interest income, net112134
Loss before income taxes(620)(1,031)
Income tax expense (benefit)39(356)
Net Loss$(659)$(675)

Net loss per basic and diluted share$(0.04)$(0.05)

Weighted average shares outstanding, basic and diluted15,75915,075

*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.