Liberate Announces Financial Results for Quarter Ended August 31, 2004

Liberate Announces Financial Results for Quarter Ended August 31,
2004
Conference Call October 12, 2004, at 2:00 p.m. Pacific Time 


SAN MATEO, Calif., Oct. 12  /PRNewswire-FirstCall/ -- Liberate Technologies
(Pink Sheets: LBRT), a leading provider of software for digital cable systems,
announced financial results for its first fiscal quarter ended August 31, 2004.

Liberate's revenues for its first fiscal quarter were $1.1 million, compared to
$1.5 million for the same quarter of the prior fiscal year.  The net loss for
the quarter was $12.3 million, or $0.12 per share, compared to a loss of $12.6
million, or $0.12 per share, for the same quarter of the prior fiscal year. 
The loss in the current year includes a charge of $4.4 million for excess
facilities related to the Company's former headquarters in San Carlos,
California.

As of August 31, 2004, Liberate had cash and cash equivalents of $210.0
million, a decrease of $5.9 million during the quarter.  In addition to cash
and cash equivalents, the Company had $10.9 million in restricted cash held as
security for office leases.

"We continue to push ahead with our goals of restructuring the Company and
growing revenues," said David Lockwood, Chairman and CEO of Liberate.  "We are
pleased with the commitments to our technology that have been made by Cox, NTL
and Telewest. While we are disappointed with the dismissal of our bankruptcy
case and have appealed the ruling, we are making progress on our restructuring
efforts.  We are delighted that the SEC staff has completed its investigation
into the events that led to the restatement of our financial statements and has
recommended no enforcement action against the Company.  In addition, during the
quarter, we made progress toward resolving the shareholder class-action
litigation."

Condensed Consolidated Financial Statements - Basis of Presentation

Because the Chapter 11 bankruptcy case was still pending as of August 31, 2004,
we have prepared the attached unaudited condensed consolidated financial
statements in accordance with the provisions of Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization under the Bankruptcy Code"
("SOP 90-7"), which does not significantly change the application of accounting
principles generally accepted in the United States.  However, it does require
that the financial statements for periods including and subsequent to filing
the Chapter 11 petition distinguish transactions and events that are directly
associated with the reorganization from the ongoing operations of the business.
 Please see our report on Form 10-Q for the quarter ended August 31, 2004 for
additional information regarding the application of SOP 90-7 to Liberate's
unaudited condensed consolidated financial statements.

Conference Call

Liberate has scheduled a conference call on October 12, 2004, at 2:00 p.m.
Pacific Time.  The call-in number is 800-266-1825. A replay of the call will be
available until October 19, 2004 on either 402-977-9140 or 800-633-8284,
reservation code 21210335. 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
related to the SEC staff's stated intention to recommend no enforcement action
against Liberate, future business or financial performance, the outcome of
pending litigation and the Chapter 11 appeal, or anticipated corporate or
commercial activities) are forward-looking statements and are not guarantees of
future performance.  Factors that could cause actual results to differ
materially from these forward-looking statements include, but are not limited
to, the following:  future decisions by the SEC or other governmental or
regulatory bodies; uncertainty in the market for interactive television
services and 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; and other
uncertainties related to litigation and the Chapter 11 appeal, and other risks
outlined in Liberate's filings with the Securities and Exchange Commission.
Liberate disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.

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


                          LIBERATE TECHNOLOGIES
                          (DEBTOR-IN-POSSESSION)
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                              (In thousands)
                                Unaudited

                                                 August 31,        May 31,
                                                     2004            2004

                                  Assets
  Current assets:
    Cash and cash equivalents                     $209,971       $215,877
    Accounts receivable, net                         3,958          3,143
    Prepaid expenses and other current assets        1,696          1,817
      Total current assets                         215,625        220,837
  Property and equipment, net                        1,776          1,851
  Deferred costs related to warrants                 2,687          3,583
  Restricted cash                                   10,866         10,869
  Other assets                                         147            268
      Total assets                                $231,101       $237,408

                   Liabilities and Stockholders' Equity
  Current liabilities:
    Accounts payable                                $1,649           $686
    Accrued liabilities                              4,459          3,234
    Accrued payroll and related expenses               379            370
    Short-term borrowing from bank                      --            608
    Deferred revenues                                6,489          6,137
      Total current liabilities                     12,976         11,035
  Long-term excess facilities charges                  401            631
    Total liabilities not subject to compromise     13,377         11,666
    Liabilities subject to compromise               40,571         36,806
    Total liabilities                               53,948         48,472
  Stockholders' equity:
    Common stock                                     1,057          1,055
    Contributed and paid-in-capital              1,502,992      1,503,113
    Deferred stock-based compensation               (7,946)        (8,453)
    Accumulated other comprehensive loss            (1,954)        (2,112)
    Accumulated deficit                         (1,316,996)    (1,304,667)
      Total stockholders' equity                   177,153        188,936
      Total liabilities and
       stockholders' equity                       $231,101       $237,408


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

                                                      Three months ended
                                                           August 31,
                                                      2004           2003
  Revenues:
    License and royalty                               $219          $(924)
    Service                                            929          2,469
      Total revenues                                 1,148          1,545
  Cost of revenues:
    License and royalty                                 16            151
    Service                                          1,379          1,443
      Total cost of revenues                         1,395          1,594
      Gross margin                                    (247)           (49)
  Operating expenses:
    Research and development                         3,842          3,667
    Sales and marketing                                601          1,429
    General and administrative                       1,949          4,181
    Amortization of deferred
     costs related to warrants                          --            804
    Restructuring costs                                 --            480
    Amortization and impairment
     of intangible assets                               --             22
    Amortization of deferred
     stock-based compensation                           --             10
    Excess facilities charges
     and related asset impairment                    4,416             --
      Total operating expenses                      10,808         10,593
      Loss from operations                         (11,055)       (10,642)
      Reorganization items, net                     (1,731)            --
  Interest income, net                                 476            617
  Other expense, net                                   (61)          (375)
    Loss from continuing operations
     before income tax provision                   (12,371)       (10,400)
  Income tax provision                                  38            103
    Loss from continuing operations                (12,409)       (10,503)
  Loss from discontinued operations                     --         (2,083)
  Gain on sale of discontinued operations               80             --

    Net loss                                      $(12,329)      $(12,586)

  Basic and diluted loss per share:
    Continuing operations                           $(0.12)        $(0.10)
    Discontinued operations                             --        $(0.02)

  Basic and diluted net loss per share              $(0.12)        $(0.12)
  Shares used in computing
   basic and diluted net loss per share            105,623        104,006


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

                                                Three months ended
                                     Aug. 31,   May 31,  Feb. 29,  Nov. 30,
                                       2004      2004       2004     2003
  Revenues:
    License and royalty                $219    $1,412      $(54)   $(697)
    Service                             929     2,765     1,756    1,885
      Total revenues                  1,148     4,177     1,702    1,188

  Cost of revenues:
    License and royalty                  16        32       206      208
    Service                           1,379       957     1,549    1,368
      Total cost of revenues          1,395       989     1,755    1,576
      Gross margin                     (247)    3,188       (53)    (388)

  Operating expenses:
    Research and development          3,842     3,989     5,022    3,647
    Sales and marketing                 601      (129)      703    1,004
    General and administrative        1,949       939     3,667    4,479
    Amortization of deferred
     costs related to warrants           --        --        --    1,027
    Restructuring costs                  --       (41)       86      881
    Impairment of warrants               --        --        --    4,969
    Excess facilities charges
     and related asset impairment     4,416     3,429        --      593
      Total operating expenses       10,808     8,187     9,478   16,600
      Loss from operations          (11,055)   (4,999)   (9,531) (16,988)
      Reorganization items, net      (1,731)     (304)       --       --
  Interest income, net                  476       513       504      573
  Other income (expense), net           (61)     (106)    1,184     (173)
    Loss from continuing
     operations before income
     tax provision                  (12,371)   (4,896)   (7,843) (16,588)
  Income tax provision (benefit)         38       157      (122)      --
    Loss from continuing
     operations                     (12,409)   (5,053)   (7,721) (16,588)
  Loss from discontinued operations      --        --        --     (992)
  Gain on sale of discontinued
   operations                            80       252       249    9,037

    Net loss                       $(12,329)  $(4,801)  $(7,472) $(8,543)
  Basic and diluted income
   (loss) per share:
    Continuing operations            $(0.12)   $(0.05)  $ (0.07)  $(0.16)
    Discontinued operations, basic      $--       $--       $--    $0.08
    Discontinued operations, diluted    $--       $--       $--    $0.07
  Basic and diluted net
   loss per share                    $(0.12)   $(0.05)  $ (0.07)  $(0.08)

  Shares used in computing
   basic net loss per share         105,623   105,495   105,204  104,515


DATASOURCE: Liberate Technologies



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

[phone], or 



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

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