Liberate Announces Financial Results for Fourth Quarter and Fiscal Year Ended May 31, 2004

Liberate Announces Financial Results for Fourth Quarter and
Fiscal Year Ended May 31, 2004
Conference Call July 13, 2004, at 2:00 p.m. Pacific Time 


SAN MATEO, Calif., July 13  /PRNewswire-FirstCall/ -- Liberate Technologies
(Pink Sheets: LBRTQ), a leading provider of software for digital cable systems,
announced financial results for its fourth quarter and fiscal year ended May
31, 2004.

Liberate's revenues for its fourth fiscal quarter were $4.2 million, compared
to $5.1 million for the same quarter of the prior fiscal year. The net loss for
the quarter was $4.8 million, or $0.05 per share, compared to a loss of $92.3
million, or $0.89 per share, for the same quarter of the prior fiscal year. The
revenues for the fourth quarter of fiscal 2004 include recognition of
approximately $2.3 million of revenue that had been deferred pending customer
acceptance of services work and resolution of customer claims and
uncertainties. During the fourth quarter, in conjunction with its Chapter 11
filing, Liberate reviewed existing and potential claims against the Company.
Based on this review, the Company revised previous estimates of liabilities and
accrued expenses related to legal costs, costs to complete customer contracts,
and other items, which resulted in a reduction of liabilities and thereby
decreased cost of revenues and expenses by approximately $3.1 million.

For the year ended May 31, 2004, Liberate's revenues were $8.6 million,
compared to $25.4 million for the prior fiscal year. The net loss for the year
was $33.4 million, or $ 0.32 per share, compared with a net loss of $399.3
million, or $3.82 per share, for the prior fiscal year. The net loss for the
year ended May 31, 2003 included a charge of $209.9 million for the cumulative
effect of a change in accounting principle upon the adoption of SFAS 142
"Goodwill and Other Intangibles" on June 1, 2002.

As of May 31, 2004, Liberate had cash and cash equivalents and restricted cash
of $226.7 million, a decrease of $6.5 million during the quarter.

On April 30, 2004, Liberate filed a voluntary petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code to resolve certain liabilities, reduce
its costs and strengthen its business. During the Chapter 11 proceeding,
Liberate continues to execute on its business plan and service and support its
customers and their cable subscribers. One of Liberate's significant creditors,
the landlord of its former San Carlos headquarters, has filed a motion to
dismiss the case, and the Company has filed an opposition to this motion.

"We are working hard to resolve our outstanding liabilities and lower our costs
through bankruptcy in order to strengthen the company," said David Lockwood,
Chairman and CEO of Liberate. "We are pleased with business developments in the
last quarter, particularly the signing of new license agreements with NTL and
Telewest. We continue to execute on our business plan to develop the best
products for our customers to deliver the next generation of digital television
services."

Conference Call

Liberate has scheduled a conference call on July 13, 2004, at 2:00 p.m. Pacific
Time. The call-in number is 800-732-8451. A replay of the call will be
available until July 20, 2004 on either 402-977-9140 or 800-633-8284,
reservation code 21200665. The conference call can also be accessed via live
webcast at Liberate's website (http://www.liberate.com/) and will remain
available for replay.

About Liberate Technologies

Liberate Technologies is a leading provider of software for digital cable
systems. Based on industry standards, Liberate's software enables cable
operators to run multiple services -- including high-definition television,
video on demand, and personal video recorders -- on multiple platforms.
Headquartered in San Mateo, California, Liberate also has offices in Ontario,
Canada and the United Kingdom.

NOTE:  Liberate and the Liberate design are registered trademarks of Liberate
Technologies. Other product names used in association with these registered
trademarks are trademarks of Liberate Technologies.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995

Those statements above that involve expectations or intentions (such as those
relating to its filing under Chapter 11 of the U.S. Bankruptcy Code, the time
that a Chapter 11 case would take to complete, the result of a Chapter 11 case,
any savings or other effects arising from such a filing, future business or
financial performance, or anticipated corporate or commercial activities) are
forward-looking statements and are not guarantees of future performance. Actual
results may vary materially due to the uncertain market for interactive
television services, dependence on a limited number of cable network operators,
business disruption resulting from Liberate's restatement and related
litigation, necessary adjustments related to recent restructuring, other
uncertainties related to litigation and the Chapter 11 filing, and other risks
outlined in Liberate's filings with the Securities and Exchange Commission.

  Contact:

   Greg Wood
   Chief Financial Officer
   Liberate Technologies
   650-645-4003
   


                             LIBERATE TECHNOLOGIES
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                                (In thousands)
                                  Unaudited

                                                   May 31,        May 31,
                                                    2004           2003

                                    Assets
  Current assets:
    Cash and cash equivalents                     $215,877       $261,689
    Accounts receivable, net                         3,143          3,310
    Prepaid expenses and other current assets        1,817          3,069
    Assets of discontinued operations                   --          6,936
      Total current assets                         220,837        275,004
  Property and equipment, net                        1,851          6,113
  Intangible assets, net                                --             22
  Deferred costs related to warrants                 3,583         14,449
  Restricted cash                                   10,869          9,249
  Other assets                                         268            131
      Total assets                                $237,408       $304,968

                     Liabilities and Stockholders' Equity
  Current liabilities:
    Accounts payable                                $3,102         $1,888
    Accrued liabilities                             16,384         39,442
    Accrued payroll and related expenses               685          1,562
    Payable to bank                                    608             --
    Deferred revenues                                6,137         10,619
    Liabilities of discontinued operations              --          5,375
      Total current liabilities                     26,916         58,886
  Long-term excess facilities charges               19,140         22,330
  Other long-term liabilities                        2,416          2,242
      Total liabilities                             48,472         83,458

  Stockholders' equity:
    Common stock                                     1,055          1,040
    Contributed and paid-in-capital              1,503,113      1,490,125
    Deferred stock-based compensation               (8,453)          (194)
    Accumulated other comprehensive income
     (loss)                                         (2,112)         1,804
    Accumulated deficit                         (1,304,667)    (1,271,265)
      Total stockholders' equity                   188,936        221,510
      Total liabilities and stockholders'
       equity                                     $237,408       $304,968


                          LIBERATE TECHNOLOGIES
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                  (In thousands, except per share data)
                                Unaudited

                                   Three months ended      Years ended
                                    May 31,    May 31,   May 31,   May 31,
                                     2004       2003      2004      2003
  Revenues:
    License and royalty             $1,412       $868     $(263)   $6,501
    Service                          2,765      4,201     8,875    18,893
      Total revenues                 4,177      5,069     8,612    25,394
  Cost of revenues:
    License and royalty                 32        214       597     1,315
    Service                            957      2,798     5,317    24,262
    Total cost of revenues             989      3,012     5,914    25,577
    Gross margin                     3,188      2,057     2,698      (183)
  Operating expenses:
    Research and development         3,989      4,215    16,325    26,080
    Sales and marketing                425      2,696     3,561    18,783
    General and administrative       1,260     30,633    13,587    45,538
    Reversal of bad debt expense      (554)        --      (554)       --
    Amortization of deferred costs
     related to warrants                --      1,049     1,831     3,837
    Restructuring costs               (41)      2,116     1,406     8,586
    Amortization and impairment
     of goodwill and intangible
     assets                              -        137        22     1,670
    Impairment of warrants              --         --     4,969        --
    Amortization of deferred
     stock-based compensation           --        282        10     1,299
    Excess facilities charges
     and related asset impairment    3,429      8,718     4,022    25,094
      Total operating expenses       8,508     49,846    45,179   130,887
      Loss from operations          (5,320)   (47,789)  (42,481) (131,070)
  Interest income, net                 530      1,058     2,224     6,977
  Other income (expense), net         (106)    (4,803)      530  (14,028)
    Loss from continuing
     operations before income
     tax provision                  (4,896)   (51,534)  (39,727) (138,121)
  Income tax provision                 157        517       138     1,560
    Loss from continuing
     operations                     (5,053)   (52,051)  (39,865) (139,681)
  Loss from discontinued
   operations                           --    (40,199)   (3,075)  (50,287)
  Gain on sale of discontinued
   operations                          252         --     9,538        --
  Cumulative effect of a change
   in accounting principle              --         --        --  (209,289)
    Net loss                       $(4,801)  $(92,250)$ (33,402)$(399,257)
  Basic and diluted income
   (loss) per share:
    Continuing operations           $(0.05)    $(0.50)   $(0.38)   $(1.34)
    Discontinued operations            $--     $(0.39)     $0.06   $(0.48)
    Cumulative effect of a
     change in accounting
     principle                         $--        $--       $--    $(2.00)

  Basic and diluted net
   loss per share                   $(0.05)   $ (0.89)   $(0.32)   $(3.82)
  Shares used in computing
   basic net loss per share        105,495    104,006   104,805   104,500


                          LIBERATE TECHNOLOGIES
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                  (In thousands, except per share data)
                                Unaudited

                                             Three months ended
                                May 31, February 29, November 30, August 31,
                                 2004       2004         2003       2003
  Revenues:
    License and royalty         $1,412       $(54)      $(697)      $(924)
    Service                      2,765      1,756       1,885       2,469

      Total revenues             4,177      1,702       1,188       1,545

  Cost of revenues:
    License and royalty             32        206         208         151
    Service                        957      1,549       1,368       1,443

      Total cost of revenues       989      1,755       1,576       1,594

      Gross margin               3,188        (53)       (388)        (49)

  Operating expenses:
    Research and development     3,989      5,022       3,647       3,667
    Sales and marketing            425        703       1,004       1,429
    General and administrative   1,260      3,667       4,479       4,181
    Reversal of bad debt expense  (554)        --          --          --
    Amortization of deferred
     costs related to warrants      --         --       1,027         804
    Restructuring costs            (41)        86         881         480
    Amortization and impairment
     of goodwill and intangible
     assets                         --         --          --          22
     Impairment of warrants         --         --       4,969          --
    Amortization of deferred
     stock-based compensation       --         --          --          10
    Excess facilities charges
     and related asset
     impairment                  3,429         --         593          --

      Total operating expenses   8,508      9,478      16,600      10,593

      Loss from operations      (5,320)    (9,531)    (16,988)    (10,642)
  Interest income, net             530        504         573         617
  Other income (expense), net     (106)     1,184        (173)       (375)

      Loss from continuing
       operations before
       income tax provision     (4,896)    (7,843)    (16,588)    (10,400)
  Income tax provision (benefit)   157       (122)         --         103

      Loss from continuing
       operations               (5,053)    (7,721)    (16,588)    (10,503)
  Loss from discontinued
   operations                       --         --        (992)     (2,083)
  Gain on sale of discontinued
   operations                      252        249       9,037          --
  Cumulative effect of a change
   in accounting principle          --         --          --          --

      Net loss                 $(4,801)   $(7,472)    $(8,543)   $(12,586)

  Basic and diluted income
   (loss) per share:
      Continuing operations     $(0.05)    $(0.07)     $(0.16)     $(0.10)
      Discontinued operations      $--        $--       $0.08      $(0.02)
      Discontinued operations,
       diluted                     $--        $--       $0.07         $--

  Basic and diluted net loss
   per share                    $(0.05)    $(0.07)     $(0.08)     $(0.12)
  Shares used in computing
   basic net loss per share    105,495    105,204     104,515     104,006


DATASOURCE: Liberate Technologies



CONTACT:  Greg Wood, Chief Financial Officer of Liberate Technologies,

[phone], or 



Web site:  http://www.liberate.com/ 

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