SonicBlue to File for Chapter 11

<br>SAN JOSE, Calif. (AP) _ SonicBlue Inc., the troubled maker of music players and digital television recorders, said Friday it will file for bankruptcy protection and plans to sell its flagship ReplayTV,

Monday, March 24th 2003, 12:00 am

By: News On 6

SAN JOSE, Calif. (AP) _ SonicBlue Inc., the troubled maker of music players and digital television recorders, said Friday it will file for bankruptcy protection and plans to sell its flagship ReplayTV, Rio and GoVideo units.

The Chapter 11 bankruptcy filing, which follows red ink and declining sales, will allow the product lines to continue while their sale is finalized, said L. Gregory Ballard, SonicBlue's chief executive.

``We believe the proposed sale transactions will offer SonicBlue's current product lines a stable and financially strong base that will enable product development and current services to carry on,'' he said.

It was not immediately clear what would become of SonicBlue or its employees after the units are sold. A spokeswoman did not immediately return calls seeking comment.

SonicBlue said it has signed a nonbinding letter of intent with D&M Holdings Inc., the Japanese parent company of audio equipment brands Denon Ltd. and Marantz Japan Inc., to sell the ReplayTV and Rio business units for $40 million.

SonicBlue also has signed an agreement to sell the assets of its GoVideo unit, which sells advanced video recorders, to Opta Systems LLC, a wholly owned subsidiary of Carmco Investments LLC, for $12.5 million.

The sales must be approved by the bankruptcy court.

The company, which was founded in 1989, is best known for its Rio digital music players that were targeted by a recording industry lawsuit in the late 1990s. At the time, the Rio line was part of Diamond Multimedia, which SonicBlue, then called S3 Inc., acquired in 1999. S3 became SonicBlue in 2000.

The company's ReplayTV, which records television video onto a hard drive rather than a videocassette, was targeted in a lawsuit by television networks, which alleged copyright infringement.

On Wednesday, the company posted a net loss of $33.4 million, or 34 cents per share, compared with a loss of $52.6 million, or 57 cents per share, in the same period last year. Sales declined to $67 million, down from $79.6 million a year ago.

In that report, the company reported debt and liabilities of $305 million. Assets also were listed at $305 million.

In September, SonicBlue announced it was cutting its work force by 25 percent.