Liberate Announces Financial Results for Quarter Ended February 29, 2004

Liberate Announces Financial Results for Quarter Ended February
29, 2004
Company Considering Chapter 11 Filing to Resolve Outstanding Liabilities


SAN MATEO, Calif., April 14  /PRNewswire-FirstCall/ -- Liberate Technologies ,
a leading provider of software for digital cable systems, announced financial
results for its third fiscal quarter ended February 29, 2004.

(Logo:  http://www.newscom.com/cgi-bin/prnh/19990630/LIBERATE )

Liberate's revenues for its third fiscal quarter were $1.7 million, compared to
$5.3 million for the same quarter of the prior fiscal year. Before offsets for
amortization of deferred costs related to warrants, revenues were $2.6 million
for the third quarter and $6.6 million for the same quarter of the prior fiscal
year.  The net loss for the quarter was $7.5 million, or $0.07 per share,
compared to a loss of $26.1 million, or $0.25 per share, for the same quarter
of the prior fiscal year.

As of February 29, 2004, Liberate had cash and short-term investments of $222.3
million, a decrease of $9.0 million during the quarter.  In addition to cash
and short-term investments, the Company had $10.9 million in restricted cash
held as security for office leases.

The Company is considering filing under Chapter 11 of the U.S. Bankruptcy Code
to further strengthen its financial position and significantly reduce its cost
structure, and emerge as a stronger company to deliver products and services to
its customers.  The Company currently has a number of potential liabilities and
exposures, including those arising from leases on excess facilities in San
Carlos, California and in the United Kingdom, claims from former employees,
equipment leases, outstanding contracts with certain vendors and licensees, and
pending shareholder and patent litigations.  The Company is continuing its
efforts to reach consensual resolution of many of these liabilities.  However,
if these liabilities cannot be resolved, the Company is considering seeking the
benefits of filing under Chapter 11 to complete its restructuring.  For
example, the Company believes that a Chapter 11 filing would allow the Company
to reduce substantially its lease obligations on excess office space, as lease
claims in bankruptcy for rejected leases are limited to rent for the greater of
12 months or 15% of the balance of the term not exceeding three years.  The
savings to the company in connection with leases rejected in a Chapter 11
proceeding could total approximately $38.0 million.

In the event the Company determines to move forward with a Chapter 11 filing,
the Company intends to file a proposed Plan of Reorganization that would pay
100% of all valid claims.  The Company plans to seek prompt approval of such
Plan of Reorganization in order to emerge from Chapter 11 within a period of 4
to 6 months.  In a Chapter 11 proceeding, the Company would continue to execute
on its business plan, including continued compliance with active contracts with
customers and vendors, and service and support of its customers and their cable
subscribers.  Given the Company's cash position, coupled with the workforce and
expense reductions implemented last year, the Company expects to have ample
working capital to operate its business in usual course and continue to expand
its business.  At this time, Liberate continues to evaluate restructuring
alternatives, and has not made a final decision on whether to pursue a Chapter
11 reorganization.

"We will continue efforts, as part of our restructuring plan, to resolve our
outstanding liabilities.  However, if we cannot reach an appropriate resolution
in the coming weeks, we believe it may well be in the best interests of our
shareholders, employees and customers to proceed with a Chapter 11 filing,"
said David Lockwood, Chairman and CEO of Liberate. "Regardless of a financial
restructuring to reduce our liabilities, we will continue to execute on our
business plan, investing in the development of our technology platform and
delivering our products and services to existing customers.  In addition, we
will continue to aggressively market to new customers in order to grow
revenues."

Conference Call

Liberate has scheduled a conference call on April 14, 2004, at 2:00 p.m.
Pacific Time.  The call-in number is 888-265-4625. A replay of the call will be
available until April 22, 2004 on either 402-977-9140 or 800-633-8284,
reservation code 21189959. 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 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 possible 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 potential 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

                                             Feb. 29, 2004    May 31, 2003
  Assets
    Current assets:
    Cash and cash equivalents                     $222,299       $261,689
    Accounts receivable, net                         3,835          3,310
    Prepaid expenses and
     other current assets                            2,273          3,069
    Assets of discontinued operations                   --          6,936
      Total current assets                         228,407        275,004
  Property and equipment, net                        4,270          6,113
  Intangible assets, net                                --             22
  Deferred costs related to warrants                 4,479         14,449
  Restricted cash                                   10,876          9,249
  Other assets                                         324            131
      Total assets                                $248,356       $304,968

                     Liabilities and Stockholders' Equity
  Current liabilities:
    Accounts payable                                $1,848         $1,888
    Accrued liabilities                             19,522         39,436
    Accrued payroll and related expenses             1,380          1,568
    Deferred revenues                               10,415         10,619
    Liabilities of discontinued operations              --          5,375
      Total current liabilities                     33,165         58,886
  Long-term excess facilities charges               19,631         22,330
  Other long-term liabilities                        2,373          2,242
      Total liabilities                             55,169         83,458

  Stockholders' equity:
    Common stock                                     1,055          1,040
    Contributed and paid-in-capital              1,501,597      1,490,125
    Deferred stock-based compensation               (7,589)          (194)
    Accumulated other comprehensive
     income (loss)                                  (2,011)         1,804
    Accumulated deficit                         (1,299,865)    (1,271,265)
      Total stockholders' equity                   193,187        221,510
      Total liabilities and
       stockholders' equity                       $248,356       $304,968


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

                                   Three months ended  Nine months ended
                                 Feb. 29    Feb. 28,  Feb. 29,    Feb. 28,
                                    2004       2003      2004        2003
  Revenues:
    License and royalty            $(54)    $2,077   $(1,675)     $5,633
    Service                        1,756     3,250     6,110      14,692

      Total revenues               1,702     5,327     4,435      20,325

  Cost of revenues:
    License and royalty              206       257       565       1,101
    Service                        1,549     4,240     4,360      21,464

      Total cost of revenues       1,755     4,497     4,925      22,565

      Gross margin                   (53)      830      (490)     (2,240)

  Operating expenses:
    Research and
     development                   5,022     5,485    12,336      21,865
    Sales and marketing              703     4,258     3,136      16,087
    General and
     administrative                3,667     5,858    12,327      14,905
    Amortization of
     deferred costs
     related to warrants              --       841     1,831       2,788
    Restructuring costs               86     4,412     1,447       6,470
    Amortization and impairment
     of goodwill and
     intangible assets                --       479        22       1,533
    Impairment of warrants            --        --     4,969          --
    Amortization of deferred
     stock-based compensation         --       254        10       1,017
    Excess facilities charges
     and related asset impairment     --      (127)      593      16,376

      Total operating expenses     9,478    21,460    36,671      81,041

      Loss from operations        (9,531)  (20,630)  (37,161)    (83,281)
  Interest income, net               504     1,441     1,694       5,919
  Other income (expense), net      1,184    (2,657)      636      (9,225)

      Loss from continuing
       operations before
       income tax provision       (7,843)  (21,846)  (34,831)    (86,587)
  Income tax provision              (122)      238       (19)      1,043

  Loss from continuing
   operations                     (7,721)  (22,084)  (34,812)    (87,630)
  Loss from discontinued
   operations                         --    (3,999)   (3,075)    (10,088)
  Gain on sale of discontinued
   operations                        249        --     9,286          --
  Cumulative effect of a
   change in accounting principle     --        --        --    (209,289)

      Net loss                   $(7,472) $(26,083) $(28,601)  $(307,007)

  Basic and diluted income
   (loss) per share:
    Continuing operations         $(0.07)   $(0.21)  $(0.33)     $(0.84)
    Discontinued operations           $--   $(0.04)    $0.06     $(0.10)
  Cumulative effect of a
   change in accounting principle     $--       $--      $--     $(2.00)

  Basic and diluted
   net loss per share             $(0.07)   $(0.25)  $(0.27)     $(2.93)
  Shares used in computing
   basic net loss per share      105,204   104,006   104,573     104,667


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DATASOURCE: Liberate Technologies



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

[phone], or  



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

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