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NeoMagic Corporation News Release - 20-April-2000

NEOMAGIC® REFOCUSES ON WIRELESS MULTIMEDIA COMMUNICATIONS TECHNOLOGY 

Embedded Memory Leader Targets Innovative Imaging Devices and Internet Appliances 

Santa Clara, Calif., April 20, 2000 - NeoMagic Corporation (Nasdaq: NMGC), the pioneer of embedded memory and logic technology, today announced a new corporate direction, setting its sights on the fast-growing market for Internet appliances, and focusing its research and development efforts into semiconductor products for wireless multimedia communications. The company also announced that it has restructured and resized its operations, and made changes to the management team. 

"NeoMagic will shift its focus to developing 'Wireless Multimedia Communications' technologies, based on our vision to provide semiconductor solutions for mobile Internet appliances and digital imaging products for the Internet," said Prakash Agarwal, president and chief executive officer since NeoMagic's founding in 1993. "We have refined our technology directions, added some new executives to our management team, and made headcount changes to keep expenses down while we implement new products. We are setting ourselves upon the course of developing enabling technologies for the coming wave of handheld Internet appliances." 

New Market Opportunities

"Our PC-centered view of the world has changed," Mr. Agarwal said, adding, "We are now turning our capabilities in a new direction, where we believe there are multiple growth opportunities." In changing its direction the company will shift its new product research and development efforts away from future PC graphics programs. However, the company continues to supply the existing products in its MagicMedia256 family in support of its current notebook PC customers. 

The shift away from PC graphics and into Internet appliances evolved from recognition of major new trends. The company believes that opportunities for independent silicon suppliers in the PC arena are declining as PC costs fall and CPU integration increases. At the same time there is a rapidly expanding demand for Internet access, and a variety of new system types are appearing which combine aspects of the computing, communications, and consumer electronics markets. Portability will be a key aspect of many of these new devices, while access to rich multimedia content over the Internet will continue to be a highly desired capability. 

Three New Technologies Leverage Core Competencies 

According to Agarwal, NeoMagic will focus in three areas of technology development: MPEG-4 video compression/decompression, broadband wireless communications, and Internet system knowledge implemented with System-on-Chip (S-O-C) integration. These technologies will provide the basis for a variety of products, which enable wireless multimedia communications. 

"We believe MPEG-4 will be the technology of choice for video on the Internet, and that MPEG-4 compression will benefit from the processing power of our innovative associative processor array and high-bandwidth embedded DRAM," Mr. Agarwal said. The technology is expected to find applications in Internet cameras, third-generation cellular appliances, PDAs, video conferencing systems, gaming consoles, and security cameras, among others. 

Broadband wireless access will be a key aspect of many Internet appliances, and will find applications in third-generation cellular phones, but also in PDAs, notebooks, wireless video conferencing systems, and multimedia terminals. 

Bringing these technologies together will require knowledge of Internet systems, and the skills to do S-O-C levels of integration. Among the keys to success will be the ability to integrate and reuse Intellectual Property (IP) cores from both internal and external sources. 

NeoMagic will leverage its core competency as the industry's pioneer in embedded DRAM technology, which propelled the company to a leadership position in the mobile PC multimedia market. The company has already made its mark integrating large amounts of memory, analog mixed-signal functions, and logic into single-chip solutions with 30, 40 and even 50 million transistors on a single chip. The company also has demonstrated capabilities in power management and low power design; multimedia 2D and 3D graphics, video and audio, digital image processing and compression; system software drivers and utilities; and high-volume fabless manufacturing.

New Product Efforts

Already underway are development efforts to deliver advanced imaging and compression solutions for Internet video. Based on its highly parallel associative processor array architecture, the company is developing S-O-C products for Internet imaging in its upcoming MagiCAM™ product line. "With MagiCAM our target is to be the best MPEG-4 solution, providing better video at lower bit rates, in a smaller form factor and with lower power," said NeoMagic Corporate Marketing Vice President Mark Singer. MagiCAM is currently in development, with expected introduction in 2001. 

Organizational Changes

As the company turns its focus onto a new vision, the structure of two separate product divisions will be eliminated, and the company will move back to a functional organization with centralized engineering. Concurrent with these changes, and including the recently completed sale of the company's DVD product line to LSI Logic Corporation, the company's headcount has been reduced by more than 35% compared to the end of the prior quarter. 

The company's transitional environment has seen extensive changes in the management team in recent months, including six departures from the executive staff. The company's new direction has also led to the addition of several new members to the company's executive staff. 

As described in a separate release issued this day, new executive officers and their responsibilities include Dr. Sudhir Chandratreya, who joins the company as Vice President of Technology; Dr. Yogendra Shah, as Vice President of Wireless Engineering; and Kenneth C. Biester as Vice President of Human Resources. In addition, Dean Strausl, a consultant with more than 30 years' experience in semiconductor operations management, is serving as interim VP of Manufacturing; and as described in a release issued on March 17, 2000, Douglas E. Gans is serving as interim Chief Financial Officer. 

About NeoMagic

NeoMagic Corporation, based in Santa Clara, California, has pioneered the integration of DRAM, complex logic, and analog circuits into single-chip solutions. The company's proprietary MagicWare™ technology increases performance while reducing power consumption, by eliminating the need to drive signals off-chip to discrete memory. NeoMagic's strategy focuses on applications that benefit from mobility, small form factor, battery life, and performance enhancements, and provide value-added semiconductor solutions for mobilizing digital multimedia content for the Internet Age. NeoMagic may be found on the World Wide Web at www.neomagic.com. 

This release contains forward-looking statements, which reflect NeoMagic's current intentions and expectations. Actual events and results could vary significantly based on a variety of factors, including the risks of unanticipated shifts in emerging markets, the successful development of new technologies, customer acceptance of new products, and the availability and suitability of process technology and manufacturing capacity from third party suppliers. Additional risk factors are listed in the company's Fourth Quarter Form 10Q and Form 10K filings.

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NeoMagic, MagicGraph, and the NeoMagic circle logo are registered trademarks of NeoMagic Corporation.  MagicWare, MagicMedia, and MagicPASS are trademarks of NeoMagic Corporation.  All other trademarks are the property of their respective owners.  NeoMagic disclaims any proprietary interest in the marks and names of others. 

Press Contact:
NeoMagic Corporation
Mark Singer
(408)988-7020
msinger@neomagic.com