Hauppauge Digital Reports Fiscal 2011 First Quarter Results

The Company incurred a net loss of $738,220 for the first quarter of fiscal 2011 compared to a net loss of $334,551 for the first quarter of fiscal 2010. Basic and diluted net loss per share was $0.07 for the first quarter of fiscal 2011 and $0.03 the first quarter of fiscal 2010.

DISCUSSION OF RESULTS

Ken Plotkin, Hauppauge’s Chief Executive Officer stated, "Weakened market conditions in Europe, a weaker Euro exchange rate and lower sales to personal computer manufacturers contributed to the sales decline in our first fiscal quarter.

European sales, traditionally our strongest region worldwide, continue to be challenged. For the first time since the onset of the financial crisis in 2008, sales in all areas of Europe were lower in this quarter than they were in the same quarter of the previous fiscal year. Some of the sales decline in Europe was due to poor market conditions, but we have recently restructured our sales organization in Europe to focus our sales efforts on the stronger parts of the European market.

While we experienced a decline in European sales, sales to North America retailers continued to increase. The one weak sales area in North America was sales to PC manufacturers, where declines have had a significant negative impact on our revenues.

Our gross profit margins grew to over 30% in this quarter due to increased sales of our newer, more profitable products plus the decline in the low margin sales to PC manufacturers.

At the CES show in January 2011, we announced the launch of new products which are anticipated to start shipping at some point during the next two quarters. These products are called "Broadway”, "Colossus” and the "WinTV-Aero-m”.

"Colossus" is our next generation high definition video recorder. Colossus can record TV programs in HD from a cable TV or satellite set-top box. It can also record video game play in HD from an Xbox 360 and a PlayStation 3.

"Broadway" extends our product family of live TV products for the Apple iPhone and iPad. Broadway will send live TV to an Apple device via either WiFi or via the Internet. Broadway has similar functions to our WinTV Extend software, but does not require a PC to operate.

Also announced at the show was the launch of our first U.S. mobile digital TV receiver, "WinTV-Aero-m”. WinTV-Aero-m allows laptop or netbook users to watch the new ATSC M/H live over-the-air digital TV programs while they travel. ATSC M/H is a broadcast technology being launched in the United States and promoted by major broadcasters such as NBC and Fox.”