Thomson's First Quarter 2005 Sales

Thomson's First Quarter 2005 Sales

    Business Editors

    PARIS--(BUSINESS WIRE)--April 21, 2005--Thomson (Euronext Paris:18453) (NYSE:TMS):

--	Strong revenue growth in Thomson's Core business: +14.8%
--	All core divisions reported like-for-like revenue growth
--	First quarter performance supports full year objectives, which are unchanged
--	First quarter growth and strategic initiatives are consistent with the Two-Year Plan objectives

    The Board of Thomson (Euronext Paris:18453) (NYSE:TMS) met on April 19, 2005, under the Chairmanship of Frank Dangeard, to review revenues for the quarter ended March 31, 2005 and the first three months of execution of the Group's Two-Year Plan.
    Thomson's first quarter sales are presented according to the organization structure announced on November 30, 2004 and implemented on January 1, 2005. Group revenues are broken down for analysis purposes between the three Media & Entertainment divisions -- Services, Systems & Equipment and Technology, as well as Corporate activities, which are collectively termed "Thomson Core", and Thomson's Displays and CE Partnerships division. Revenues are presented according to IFRS unless stated. Accordingly, the table below sets out our revenues on a reported basis as well as adjustments for currency. For any adjustment regarding perimeter impacts please refer to later information in this press release.

First quarter unaudited consolidated 2005 sales under IFRS

In million euros and % 1Q 05 1Q 05 at 1Q 04 % change at actual constant IFRS constant currency currency --------------------------- -------- ---------- --------- ------------ Services 549 568 527 7.7 Systems & Equipment 675 698 550 26.9 Technology 119 120 134 (11.0)(1) Others 11 11 5 nm --------------------------- -------- ---------- --------- ------------ THOMSON CORE 1,354 1,396 1,217 14.8% --------------------------- -------- ---------- --------- ------------

--------------------------- -------- ---------- --------- ------------ Displays & CE Partnerships 266 273 668(2) Nm --------------------------- -------- ---------- --------- ------------ THOMSON GROUP 1,620 1,669 1,885 Nm --------------------------- -------- ---------- --------- ------------

(1) Excluding one-off IFRS adjustments, revenues grew by 6% at constant currency

(2) 1Q04 Displays & CEP and Group sales are stated as reported and do not take into account any adjustment for changes in perimeter in this division, notably the deconsolidation of our TV business and the shut-down or discontinuation of other tubes activities which are collectively material. For further information, see later disclosure in the press release.

    Commenting on the first quarter sales, Frank Dangeard, Chairman & CEO of Thomson stated: "The 14.8% increase in our Core business revenues announced today, demonstrates the sound business model on which Thomson has based its Two-Year Plan for profitable growth."

    First quarter 2005 Thomson Core sales highlights

    Sales excluding currency movements grew by 14.8%. Currency movements reduced core business sales during the quarter by 43 million euros. Thomson Core businesses reported net sales for the first quarter 2005 of 1,354 million euros (first quarter 2004, 1,217 million euros). Perimeter effects from acquisitions in Thomson core added 38 million euros to net sales during the quarter (of which 35 million euros in the Services division, and 3 million euros in the Systems & Equipment division). Acquisitions showed good growth over their prior year revenues. All divisions reported like-for-like growth in revenues at constant currency, in particular in DVD services and post-production (Services), set top boxes (Systems & Equipment) and Licensing (Technology).

    Displays and CE partnerships

    The Group continued to press forward with its strategy of partnership for tubes. Its major plant in Anagni, Italy, was transferred to a partner, Videocon, on February 28. The Group is well into the second phase discussions with a number of interested parties concerning partnership of its remaining tubes assets.
    Thomson will announce shortly the creation of a sales force dedicated to its Connectivity business and accordingly TCL and Thomson announce today that Thomson's TV Marketing & Sales activities will be transferred to TTE. Thomson employees with positions related to TV would transfer to TTE under the plan, and employees focused on Thomson's Connectivity Business activities will remain with Thomson. In addition, Thomson and TTE will simplify their current arrangements regarding Thomson's manufacturing facility at Angers. These arrangements are expected to be operationally and financially beneficial to Thomson and TTE.

    Business and strategic initiatives in the first quarter - First three months of execution of the 2-Year Plan

    On November 30, Thomson announced a Two-Year Plan to accelerate growth in its Media & Entertainment businesses and add 1.5 to 2.0 billion euros of revenues to Thomson's Core business revenue base. The first quarter 2005 growth, combined with the other strategic initiatives taken during the quarter support these objectives. These initiatives are around the Group's 4 strategic priorities -- Media & Entertainment Clients, Media Technologies, Electronic Content and IP Devices and Solutions -- and cover new services and products, client initiatives and wins, transversal technology developments and a focus on geographic opportunities, notably in Asia and the Middle East. These growth initiatives are both internal, in order to boost organic growth, and external to accelerate Thomson's access to new products and technologies to leverage with its customer base.
    As part of the Two-Year Plan to double its business with telecoms operators, Thomson announces today the acquisition of French-based company Cirpack. Following the acquisition of Inventel on March 29, Cirpack's softswitch technology expertise further complements Thomson's existing offering to telecoms operators in Internet Protocol (IP) telephony and triple play (voice, video, data). This technology is key in helping telecom operators drive voice, data and video convergence in IP networks, in order to allow effective delivery of innovative communication and entertainment services.
    In summary, the significant progress made during the quarter supports the Two-Year Plan objectives.

    Full Year 2005 outlook

    Based on the performance year-to-date, Thomson is able to confirm its full year objectives announced on March 3, 2005:

--	Total revenue growth for Thomson Core of c.10%, excluding 2005 acquisitions (on baseline 2004 revenues of 5.9 billion euros) and at constant currency
--	Stable IFRS-based margins for Thomson Core

    Divisional review

    Services

    After a decline in the previous quarter, Services returned to growth. First quarter 2005 revenues reached 549 million euros (first quarter 2004, 527 million euros). Currency movements reduced sales during the quarter by 19 million euros. Sales excluding currency movements grew by 7.7% year-on-year, or grew by 4.0% including currency movements. Perimeter effects, with the integration of The Moving Picture Company, Corinthian TV, Madrid Film, International Recording and Command Post, added 35 million euros to net sales during the quarter.

    -- Post-production Services activities had a good quarter of
    organic growth. The integration of the Moving Picture Company
    ("MPC") added further revenues and we identified opportunities
    to expand MPC's services into the US and also to cross-sell
    other post-production services to MPC's client base.

    -- In the area of physical media, Home Entertainment (DVD) and
    Film services, volumes in DVD services grew by 28 million
    units to approximately 312 million units, or +10%
    year-on-year, against a very strong Q104. There were fewer
    major DVD releases in the quarter and lower growth in catalog
    volumes, but the activity showed good revenue growth
    nonetheless. VHS duplication declined, falling 62%
    year-on-year to approximately 19 million units. The split of
    DVD to VHS units replicated by Thomson is now 94%/6% versus
    85%/15% a year ago. In Film Services, footage was flat
    year-on-year at approximately 1.1 billion feet, reflecting a
    strong base for comparison and some movement of titles from Q1
    into Q2.

    -- In Network Operations Services and Electronic Content
    Distribution: Cinema advertising performed well, notably in
    Europe. The playout operations in Japan and London performed
    in line with expectations. A number of key initiatives were
    progressed, particularly in digital cinema and in March, the
    Group announced the launch of the world's largest digital
    distribution network for cinema advertising in the US, to be
    used by its Screenvision joint venture.

    Systems & Equipment

    Systems & Equipment continued to grow strongly in the quarter. First quarter 2005 revenues reached 675 million euros (first quarter 2004, 550 million euros). Currency movements reduced sales during the quarter by 22 million euros. Excluding currency movements, sales increased by 26.9% (or a 22.9% increase including currency movements). Perimeter effects added 3 million euros to net sales during the quarter.

    -- Grass Valley (Broadcast and Networks) revenues benefited from
    robust equipment and systems orders, with clients continuing
    to upgrade their infrastructure for digital and HD. The group
    had a very successful NAB trade show with a number of
    significant orders received.

    -- Access Platforms & Gateways: the Group shipped 3.4 million
    set-top boxes (vs 1.2 million in the first quarter 2004), with
    growth driven by roll-outs amongst its existing customer base,
    as well as new customer wins and market initiatives, such as
    in digital terrestrial television in Europe. The unit also
    confirmed its worldwide leadership in most of AP&G's lines of
    business. Thomson brought innovative products to market with
    the introduction of video-orientated boxes for cable operators
    and telcos and Voice-over-IP Customer Premises Equipment for
    cable operators.

    -- In Connectivity, Home Networking and Telephony grew
    year-on-year whilst revenues from audio and video products,
    which was managed within Connectivity for the first time this
    quarter, decreased. In Home Networking, the Group showcased
    new products enabling video and related content to be
    transferred easily between PC and TV formats, as well as new
    MP3-based mobility and fixed/mobile telephony products. The
    Group continued to align the Connectivity product roadmaps
    with those of AP&G so as to create cross-selling
    opportunities.

    Technology

    First quarter 2005 revenues reached 119 million euros (first quarter 2004 after one-off IFRS adjustments of 24 million euros in Licensing, 134 million euros). Currency movements reduced sales during the quarter by 1 million euros. Excluding currency movements and one-off adjustments for IFRS, sales increased by 6%.

    -- In Licensing: Revenues in 1Q05 were 95 million euros (first
    quarter 2004 as reported under French GAAP, 79 million euros,
    or 103 million euros under IFRS). Excluding IFRS adjustments,
    revenues increased 16% compared to the first quarter of 2004.
    Revenues were above expectations thanks to a strong
    performance in digital programs, notably payments in the
    Digital TV program. Thomson continued during the quarter to
    reinforce its intellectual property and launched several key
    initiatives to monetize its technological expertise.

    -- In Software & Silicon Solutions: Thomson started generating
    external revenues from its IC design activities, one of its
    Two-Year Plan objectives.

    The Group strengthened its intellectual property and technology position in compression, through its proprietary Film Grain Technology, and in content security through investments in Mediasec and ContentGuard.

    Displays & CE partnership

    First quarter 2005 revenues reached 266 million euros. First quarter 2005 revenues are not comparable with the prior year given material perimeter and other changes. These include the impact of the TV deconsolidation completed in August 2004, which accounted for an estimated 328 million euros of net sales for the first quarter 2004 (TV sales and tubes sales), as well as additional sales for marketing and sales services this year, currency effects, plants shut downs and disposal in tubes as well as lower activity.

    Certain statements in this press release, including any discussion of management expectations for future periods, constitute "forward-looking statements" within the meaning of the "safe harbor" of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on management's current expectations and beliefs and are subject to a number of factors and uncertainties that could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements due to changes in global economic and business conditions and regulatory factors. More detailed information on the potential factors that could affect the financial results of Thomson is contained in Thomson's filings with the U.S. Securities and Exchange Commission.

    About Thomson - Partner to the Media & Entertainment Industries

    Thomson (Euronext Paris:18453) (NYSE:TMS) provides services, systems, and technology to help its Media & Entertainment clients -- content creators, content distributors and users of its technology -- realize their business goals and optimize their performance in a rapidly changing technology environment. The Group intends to become the preferred partner to the Media & Entertainment Industries through its Technicolor, Grass Valley, RCA and Thomson brands. For more information: www.thomson.net.

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CONTACT: Thomson Monica Coull, +33 1 41 86 53 10 (Press Relations) monica.coull@thomson.net Severine Camp, +33 1 41 86 57 23 (Investor Relations) severine.camp@thomson.net David Schilansky, +33 1 41 86 52 38 (Investor Relations) david.schilansky@thomson.net or Financial Dynamics Aurelie Gasnier, +33 1 47 03 68 17 (Press Relations) aurelie.gasnier@fd.com

KEYWORD: FRANCE INTERNATIONAL EUROPE INDUSTRY KEYWORD: HARDWARE TELECOMMUNICATIONS SOFTWARE NETWORKING EARNINGS SOURCE: Thomson

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