The higher net loss for the third quarter was due to increased inventory levels in connection with the Company's nationwide retail launch of its Beamer Phone Video Station. Because the Beamer is a new product that the Company has only recently begun to sell, the Company expenses inventory costs as incurred. This resulted in a charge to product costs of $9.3 million during the quarter ended September 30, 2002, compared to $1.1 million for the second quarter ended June 30, 2002. There was no comparable charge in the third quarter of 2001. The Company believes its inventory levels achieved during the third quarter of 2002 will be sufficient to support its anticipated retail distribution commitments through the upcoming holiday season.

During the quarter ended September 30, 2002 the Company continued its efforts to reduce its operating expenses. As a result, research and development expenses decreased by $1.1 million in the third quarter when compared to the second quarter, and by $2.5 million when compared to the third quarter of 2001. Research and development expense for the nine months ended September 30, 2002 was $11.1 million compared to $15.3 million for the nine months ended September 30, 2001, a decrease of $4.2 million. The Company's general and administrative expenses decreased by $211,000 in the third quarter when compared to the second quarter of 2002, and by $1.2 million when compared to the third quarter of 2001. General and administrative expenses decreased by $2.6 million for the nine months ended September 30, 2002 when compared to the same period in the preceding year. Sales and marketing expenses decreased slightly from $838,000 in the third quarter of fiscal 2001, to $777,000 in the third quarter ended September 30, 2002. Sales and marketing expense for the nine months ended September 30, 2002 was $2.1 million compared to $3.0 million for the same period in the preceding fiscal year.

"Within a relatively short time period, Vialta secured national retail distribution and advertising for Beamer with such well-known consumer electronics chains as Best Buy, Fry's and The WIZ," said Didier Pietri, president and chief executive officer of Vialta. "Beamer has also received critical praise and garnered over 150 product reviews in popular media including The Wall Street Journal, TIME Magazine, 'LIVE with Regis and Kelly' and 'CNN Headline News.'"

Vialta develops, designs and markets unique and innovative home entertainment and communications products for the mainstream consumer. The company was formed in April 1999 and is publicly traded on the OTC Bulletin board under the symbol VLTA. The company is headquartered in Fremont, California with offices in Los Angeles, Toronto and Hong Kong. More information about Vialta can be found at www.vialta.com.

The matters discussed in this news release include certain forward-looking statements that involve risks and uncertainties, including, but not limited to, the possible reduction of consumer spending, the timely availability and acceptance of the Company's new and existing products, the impact of competitive products and pricing, the dependence on continued growth in demand for consumer products, and the other risks detailed from time to time in the SEC reports of Vialta, including the reports on Form 10-K and Form 10-Q. Actual results could differ materially from those projected in the forward-looking statements.

For Q3 financial statements, click here