S3 and Nike Form Strategic Partnership to Wire Athletes With Rio Audio; Industry Leaders Partner to Create Digital Audio Player Specifically Designed for Athletic Lifestyle

Business Wire, May 10, 2000

Business Editors

VANCOUVER, Wash.--(BUSINESS WIRE)--May 10, 2000

S3(R)'s Diamond Multimedia (Nasdaq:SIII), the company that introduced the world to portable digital audio players, announced today that it has partnered with Nike, Inc. (NYSE:NKE) to develop the new Nike PSA(Play 120 -- the first player featuring Rio Audio(TM) specifically designed for the sports and fitness community.

A significant step in S3's plans to expand the Rio digital music experience to numerous new consumer lifestyles and market segments, the PSA(Play 120 combines Nike's world-class sports and fitness expertise with S3's winning Rio Audio technology to appeal to a highly specialized audience.

"Better than anyone else, Nike knows athletes and Rio knows digital music," said Clare Hamill, vice president, Equipment Division, Nike, Inc. "Together, we are leveraging our leadership positions to create a new digital audio market with sports and fitness consumers."

"With Nike, we've clearly achieved the aim of our Rio branding strategy by establishing a technology partnership that will expose millions of new consumers worldwide to the Rio audio experience," said Ken Potashner, Chief Executive Officer and Chairman of S3 Incorporated. "Working closely with Nike to co-develop, co-market and co-sell the PSA(Play 120, we have taken another step toward the high growth and widespread market penetration goals we have for our Rio business in 2000."

Rio Audio Branding Program

The Nike agreement is a substantial element of S3's Rio Audio branding program that was launched last week with Boston Acoustics, a high-fidelity audio company. The program allows a select group of consumer product-focused companies to market digital audio devices that appeal to various lifestyles and market segments, while still offering a consistent music experience. Based on extensive testing and user feedback, key elements of the Rio music experience include familiar user control and interface, edgy product style, superior sound quality, access to music industry-supported formats, and compatibility with home-networked audio and software on the PC and Mac. Consumers who purchase these co-branded devices will enjoy a consistent experience through a variety of products.

"Sports and fitness is a natural market for the rapid adoption of digital audio," said Mike Reed, director of marketing with S3's Diamond Multimedia. "The Rio-powered Nike PSA(Play 120 is the ideal athletics-focused player for consumers who want a skip-free, music-rich audio experience."

Nike PSA(Play 120

The PSA(Play 120 is designed specifically to meet the needs of the athletic community and includes the following features:

-- Rio Audio -- Built on S3's Rio Audio technology, the PSA(Play

120 will provide consumers with a digital music experience

consistent with S3's market-leading Rio players.

-- Embedded Flash Memory -- 64 MB of built-in memory will provide

120 minutes of Rio Audio-quality digital music.

-- Nike Simplified Logic - The PSA(Play 120 was built with a

refined feature set and ergonomic design for ease of use and

sport utility.

-- Solid-State Design -- No moving parts mean music and spoken

audio does not skip.

-- Remote Control -- A fully functional, wearable remote control

with a dot matrix LCD display improves the player's usability

while streamlining it for comfort.

-- Corresponding Apparel -- Nike is building a line of athletic

apparel to accommodate the PSA(Play 120, including pockets

specifically designed to carry the players.

About Nike

NIKE Inc., headquartered in Beaverton, Ore., markets its products in more than 100 countries and is the world's leading sports and fitness company. Further information can be obtained at www.nikebiz.com.

About S3 Incorporated

Following its acquisition of Diamond Multimedia and the transfer of its graphics chip assets to a joint venture company, S3 has been re-launched as a digital media company focused on creating products and partnerships that help build the digital home. Combining significant financial assets with a strong technology portfolio that includes the Rio family of digital audio players and the HomeFree series of home networking solutions, S3 is uniquely positioned to capitalize on high growth opportunities in the rapidly converging Internet and consumer device markets. Further information can be obtained at www.S3.com.

Except for historical information contained herein, the matters set forth in this press release, including statements as to S3's plans to expand the Rio digital music experience and the growth and market penetration goals for the Rio business, are forward-looking statements that are subject to risk and uncertainties, including the impact of the ability of S3 to enter into relationships with strategic partners to broaden the availability and marketing reach of its Rio business, S3's ability to work with strategic partners to achieve its Rio business goals, the impact of competitive products and pricing and of alternative technological advances, and other risks detailed from time to time in S3's SEC reports, including its annual report on Form 10-K for the year ended December 31, 1999. S3 is a registered trademark of S3 Incorporated. The S3 corporate logo, Diamond Multimedia and HomeFree are trademarks of S3 Incorporated. Rio is a trademark of RioPort.com, Inc. and is used by S3 under license from RioPort.com, Inc. Other marks referenced herein are the property of their respective owners.