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"With the successful completion of the transaction, Napster will emerge as a well-positioned pure-play in the fast-growing digital music sector with a substantially enhanced balance sheet that will support our growth plans."
——Chris Gorog, Roxio Chairman/CEO
ROXIO SELLS SOFTWARE HOLDINGS FOR $80 MILLION
Sale to Sonic Solutions Means Roxio Will Change Its Name to Napster and Focus on Digital Music Market
Where have you gone, Sean Fanning?

Roxio will receive $70 milion in cash and $10 million in stock from Sonic Solutions for its consumer software division.

Roxio plans to focus its business on the digital music market and will change its corporate name to Napster and trade under the ticker "NAPS" on NASDAQ, after the successful completion of this transaction.

The acquisition will provide Sonic with a well-recognized set of consumer software brands; access to long-standing distribution channels; strong product marketing expertise; and key relationships with top-tier retail outlets.

Said Roxio Chairman/CEO Chris Gorog: "With the successful completion of the transaction, Napster will emerge as a well-positioned pure-play in the fast-growing digital music sector with a substantially enhanced balance sheet that will support our growth plans. It better, or we'll all be working for Hummer-Winblad."

Added Sonic President/CEO Bob Doris: "This combination will create an extremely strong provider of digital media creation software. We believe the acquisition of Roxio’s consumer software division increases our reach with a proven brand and a strong retail channel with national retailers such as Best Buy, CompUSA and Fry’s Electronics. We’ll be able to augment our Sonic team with the highly professional and experienced members of the Roxio software organization, resulting in a truly world-class organization in terms of technology development, major OEM delivery and retail distribution. With the growth that we will unlock in the Roxio product line, and the many ways in which the two organizations complement each other, we will be able to drive shareholder value through strong revenue growth and profitability. At least that's why my psychic tells me."

Under the terms of the deal, Sonic will purchase virtually the entire Roxio software operation including Roxio’s CD and DVD recording, authoring, photo and video editing application products like Easy Media Creator, PhotoSuite, VideoWave, Easy DVD Copy and Toast. Sonic expects to retain most of the current employees of the Roxio organization. Sonic intends to continue the Roxio brands, and current distribution and OEM relationships.

Completion of the acquisition, which is expected to close by Q4 of this year, is subject to the approval of Roxio stockholders, expiration or termination of the specified Hart-Scott-Rodino waiting periods, and other regulatory and customary conditions.

At the same time, Roxio announced its own Q1 2005 results.

Net revenue during the quarter increased to $29.9 million compared to $24.2 million in the first quarter of the prior fiscal year. Roxio's net loss for the quarter was $2.6 million, or $0.08 per basic and diluted share, which is substantially better than prior guidance of a net loss of $0.26 per basic and diluted share. This compares to a net loss of $370,000, or $0.02 per basic and diluted share, in the first quarter of the prior fiscal year. Shares used for computing basic and fully diluted earnings per share were approximately 33.7 million for the first fiscal quarter ended June 30, 2004 and approximately 21.9 million for the first quarter of the prior fiscal year.

For the first quarter, Roxio's digital media software division recorded revenues of $22.0 million and GAAP net income of approximately $6.0 million. Revenues for the Company's Napster division totaled $7.9 million and included $1.1 million from hardware sales of MP3 players to partners. Napster's operating loss, before restructuring, amortization and stock based compensation was approximately $8.1 million.

Roxio ended the first quarter with approximately $63.4 million in cash, restricted cash and short-term investments, which is ahead of prior forecasts.

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