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$SOX down 1.5% on bad news going into Monday morning--ESST warning regards DVD and VCD chips sales.
ESS Technology Updates Third Quarter Guidance
Friday September 24, 7:59 pm ET


FREMONT, Calif., Sept. 24 /PRNewswire-FirstCall/ -- ESS Technology (Nasdaq: ESST - News), today announced updated third quarter guidance. The company now expects revenue for the third quarter to be between $60 million and $62 million, below its earlier guidance of $68 to $72 million. Gross margins and earnings are also expected to be below previous guidance. Gross margins are anticipated to be impacted by charges for excess and obsolete inventory reserves and also for lower of cost or market reserves. Details about these inventory reserve charges will be provided at the company's next conference call scheduled for October 27th of this year. The company also expects operating expenses including R&D and SG&A to be higher than its previous guidance of 26% to 30% due to the reduced sales level and a one-time expense of up to $1 million to settle a contract dispute.

"The September quarter has been impacted by reduced worldwide demand for video products. This lower demand for DVD and VCD player chips is due in part to inventory buildup in the supply chain. Additionally, this lower demand has led to more competition in the marketplace, resulting in inventory writedowns. The DVD, VCD, and DVD recordable markets have been affected by these factors, so we believe this is a worldwide and industry-wide phenomenon. We will provide further information about the inventory charge and additional details regarding this quarter's results at our regularly scheduled conference call in October," said Robert Blair, president and CEO.

The company will report its third quarter results after the market closes on Wednesday, October 27, 2004 and will give additional detail about its results and answer all questions at that time.

About ESS Technology

ESS Technology, Inc., designs and markets high-performance digital video processor and imaging sensor semiconductors for the consumer digital entertainment, camera phones and digital home markets. ESS products include highly integrated chips for DVD players, DVD recorders, VCD players, digital media players, digital audio systems, and camera phones.

ESS, headquartered in Fremont, California, has over 400 employees in North America and over 100 employees in Asia providing R&D, sales, and technical support worldwide. For more information, please visit the company's web site at: http://www.esstech.com .

The matters discussed in this news release include certain forward-looking statements that involve risks and uncertainties, including, but not limited to, the impact of competitive products and pricing, the possible reduction of consumer spending occasioned by general economic conditions, the timely availability and acceptance of ESS's new products, the dependence on continued growth in demand for consumer electronic products, difficulties inherent in integrating acquired businesses with ESS, the possible reduction of consumer spending occasioned by terrorist activity and armed conflict, and the other risks detailed from time to time in the SEC reports of ESS, including the reports on Form 10-K, Form 10-Q and Form 8-K (if any) which we incorporate by reference. Actual results could differ materially from those projected in the forward-looking statements. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise.