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Company Expects 20-25 Percent Revenue Growth by Further Leveraging Its Audio Technologies Across All Business Units

Thomas Yuen, chairman and CEO of SRS Labs, Inc. stated, ``During 2001, the company laid the foundation for growth in 2002 by successfully introducing new technologies, cutting costs, improving operating results, and refocusing its sales efforts on high growth markets and high margin business. We completed the realignment of our three operating units to focus on a 'back to basics' P&L approach. We believe that we are now positioned to benefit from this hard work and the new relationships we established in 2001. Consistent with our new focus and commencing with the fiscal year ended 2001, the company will report financial information corresponding to its three operating units. This reporting breakout of our three operating units will better assist our investors in understanding SRS Labs' various business operations and will enable the investment community to more clearly monitor the progress of each operating unit. Our focus for 2002 includes a new corporate communications campaign, which we have already started to implement to promote our brand name and to increase awareness of the company.''

In 2001, the company operated in three business segments, chips and licensing, product and component sales, and broadcast and Internet business. For fiscal year 2001, the company will realign the reporting of its operating units to correspond with how management will assess the performance of each operating unit. Accordingly, the company will report financial information for its three operating units in the following business segments:

          Operating Units               Business Segment

          SRS Labs, Inc.                Licensing
                                        Products

          ValenceTech Ltd.              Chips
                                        Components

          SRSWOWcast Technologies       Internet and Broadcast

Set forth below is a brief description of each of the company's three operating units: SRS Labs, Inc. and its operating subsidiaries, ValenceTech and SRSWOWcast Technologies and some of the reasons for optimism within each of the respective business segments.

    SRS Labs, Inc.
     Licensing
     The company's strategy for its intellectual property (IP) licensing
     business segment is identifying high growth markets such as home
     entertainment, developing needed features and technologies, and working
     with chip partners to make these technology solutions widely available
     and easy to implement in a variety of advanced analog and DSP platforms.
     In 2001, this strategy has already proven effective as the company
     expects its annual licensing royalty revenue for 2001 to significantly
     increase over 2000.  In 2002, the company expects this trend to continue
     based upon current design-in wins and an increased number of ongoing
     technology evaluations from existing as well as new customers.  The
     company's local presence in key manufacturing markets around the world
     including China, Japan, Korea, India and Europe is an important advantage
     in maintaining this growth trend as the company can provide better
     service and specialized solutions to its global customer base.

     In 2002, industry analysts are projecting continued high growth in
     products such as DVD players, set-top boxes and wireless devices.  In
     addition to its current flagship technologies such as TruSurround XT,
     CircleSurround II and WOW the company intends to expand its licensing
     business with new technologies that address these high growth product
     categories.  The company plans to introduce new technologies to the
     original equipment manufacturing (OEM) community at the Consumer
     Electronics Show (CES) in Las Vegas on January 8-11, 2002.

     Products
     SRS Labs has developed a new line of proprietary, flat panel speakers
     with high quality audio performance, unique features and the strength of
     the SRS brand name.  In connection with the development of these
     speakers, the company is currently exploring various opportunities in the
     $466 million home speaker market*.  The company will preview this new
     speaker design to the retail industry at CES next week and anticipates
     that sales will begin in mid-2002.  Recognizing that this is an extremely
     mature and competitive market, the company has adopted a conservative
     strategy, which includes a plan to outsource the manufacturing of the
     speakers.  In this way, the company will be in a better position to take
     advantage of significant market opportunities while at the same time
     minimizing its cash expenditures.

    ValenceTech Limited
     Chips
     ValenceTech is a leading designer and developer of analog, digital and
     digital signal processor ASIC chips and standard integrated circuits for
     consumer electronics, Internet, wireless communications, gaming and
     computer product manufacturers.  With over 13 years of expertise and a
     large library of intellectual property relating to chip designs,
     ValenceTech will continue to leverage these advantages to address a more
     diverse global client base.  Because manufacturers continue to evaluate
     efficient ASIC solutions to reduce their product costs and remain
     competitive, the company believes that there is solid growth potential in
     this segment.  The company is also encouraged by ValenceTech's pipeline
     of new projects as it begins 2002.  In an effort to further expand its
     revenue beyond its existing customer base, ValenceTech has expanded its
     focus to develop SRS technology imbedded custom chips.  These chips
     address under-served and high growth markets that the current SRS Labs
     chip partner network does not adequately reach.  The company believes
     that these new chips will stimulate new markets and produce further
     opportunities for both the SRS chip partners and ValenceTech.

     Components
     ValenceTech previously has been concentrating on two business segments,
     ASIC chips and component distribution.  In 2001, after a thorough review
     of the performance of these two segments, the company made a strategic
     decision to phase-out the low margin component distribution business in
     favor of the higher margin ASIC design business.  Consistent with the
     company's previously announced strategy, the company expects that
     ValenceTech's component business will be completely phased out by the end
     of 2002.

    SRSWOWcast Technologies
     Internet and Broadcast
     SRSWOWcast markets hardware and software solutions used to broadcast
     audio and video programming over the Internet, radio and traditional
     cable and television networks.  SRSWOWcast is penetrating the Internet
     radio and streaming markets through its WOWCaster Internet radio audio
     processor and SRS APC software products.  In 2002, SRSWOWcast plans to
     penetrate the traditional broadcast market through the introduction of
     advanced analog and digital hardware processors for the enhancement of
     sports and entertainment programming. SRSWOWcast is encouraged by the
     enthusiastic feedback from its mono, stereo and voice technology
     demonstrations to major broadcast networks.  SRSWOWcast also plans to
     further leverage new SRS Labs IP, such as TruSurround XT and Circle
     Surround, to explore the opportunity of video-on-demand and streaming
     surround sound.

In line with the company's objective of increasing revenues and profitability, the company will continue to conduct a more proactive investor relations program to better inform the financial community of its business and operating progress. The company has started to implement a more aggressive public relations campaign with the goal of improving consumer brand name recognition. These efforts include participation in financial conferences and industry tradeshows, outreach to investors and retail brokers, speaking engagements, press tours, trade and consumer advertisements and co-op marketing programs with customers and chip partners.

Yuen concluded: ``Based on the business outlook detailed above, I believe we are in the right markets with the right technologies and the right relationships. I am confident that we can meet and even exceed our business and financial goals. With increased revenue, profitability and an aggressive visibility campaign, 2002 should prove to be a rewarding year for our customers, chip partners, employees and shareholders.''

About SRS Labs

SRS Labs ( http://www.srslabs.com ) is a leading worldwide provider of advanced audio and voice technology solutions to today's leading consumer electronics, telecommunications equipment, game developers, wireless and cellular phone manufacturers and also markets products for semi-pro and professional audio signal processing. The company's Hong Kong-based ASIC design subsidiary, ValenceTech Limited ( http://www.valencetech.com ) is a leading designer and developer of analog and digital signal processor ASIC chips and standard integrated circuits for consumer electronics, Internet, wireless communication, gaming and computer product manufacturers. The company's U. S. based subsidiary, SRSWOWCast Technologies ( http://www.srstechnologies.com ), licenses audio and voice technologies for broadcasting and streaming media applications. The information on the above-referenced websites are not incorporated by reference into this press release. According to eBrain Market Research

Except for historical information contained in this release, statements in this release, including the statements made by Mr. Yuen are forward-looking statements and projections (which include statements concerning plans and objectives of management for future operations) that are based on management's belief, as well as assumptions made by, and information currently available to, management. While the company believes that its expectations are based upon reasonable assumptions, these expectations are subject to risks and uncertainties. Accordingly, there can be no assurances that the company's goals and strategies will be realized. Numerous factors may affect the company's actual results and may cause results to differ materially from those expressed in forward-looking statements made in this release including the statements regarding speaker sales timelines, the delivery of ValenceTech's SRS technology chips, and SRSWOWcast's penetration of traditional broadcast markets, as made in paragraphs 7, 8, and 10, respectively. Some of these factors include the continued growth of the home theater and speaker markets, the market acceptance of new SRS Labs' speaker products and audio technologies, its ability to successfully outsource the manufacturing of its speakers and meet future demands for these products, Valence Tech's timely delivery of SRS technology chips and their ability to competitively promote such chips to the targeted markets, the commercial viability of the company's strategies relating to the broadcast, Internet, radio, and traditional cable and television networks, continued growth trend of its licensing and chip business, the impact of competitive products and pricing, the timely development and release of technologies by the company, the deployment cycle for products which include the company's technologies, the health of the semiconductor and ASIC industry as a whole, general business and economic conditions, especially in Asia, and other risks discussed in the company's Form 10-K and other SEC filings.

For further information, please contact: investors, Tami Yanito, ext. 3093, tami@srslabs.com; or media, Jennifer A. Drescher, ext. 5110, jenniferd@srslabs.com, both of SRS Labs, Inc., +1-949-442-1070.

SOURCE: SRS Labs, Inc.