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SONICblue Cuts Workforce By 25 Percent

9/16/2002 02:00:00 AM Eastern

SONICblue eliminated 25 percent of its workforce, including several executives, and is consolidating certain business units in its headquarters here.

In an announcement made earlier this month, Roger Hackett, senior sales VP, and Andy Wolf, chief technology officer, were identified as the two executive level victims of the cut. Interim CEO Greg Ballard said all of the company's audio business, based in Tigard, Ore., and part of the Scottsdale, Ariz., operation, would be shifted to facilities here. SONICblue makes the Rio MP3 player and ReplayTV DVR.

"This was a difficult decision for everyone involved, but is an important step in our drive towards improved financial performance. We are eliminating redundancies and recognizing synergies within the organization wherever possible, which we believe will allow us to significantly decrease our cost structure," Ballard said.

This is the company's second restructuring maneuver in less than a month. In early August the company's board fired former CEO Ken Potashner over his call for three board members to resign for the lack of repayment of company loans totaling $600,000. The company has denied his firing had anything to do with the disputed loans.

In a conference call with stock analysts and press the day after the announcement, Ballard said the recent moves were made to "reduce overhead, consolidate business operations and streamline manufacturing operations."

He said that the Rio division has missed shipment dates of new products, which will hurt third quarter performance, since product will now be shipped late this quarter and during the fourth quarter. With SONICblue's Connected Home division, of which ReplayTV is the dominant product, he said the company will be "aggressive in the market."

Ballard noted that it is still "very early in the development of the DVR market" and that no brand preferences among consumers have been set as yet. — Additional reporting by Steve Smith