For Immediate Release

PRLog (Press Release) - Feb 09, 2007 -
SAN FRANCISCO – Feb. 9, 2007 – Executives of HandHeld Entertainment™ (NASDAQ: ZVUE, ZVUEW) reiterated that the company expects to achieve cash flow positive results by the end 2007 and that the Web sites now in its network had more than 13.7 million unique visitors in January 2007.

The disclosures were made during HandHeld Entertainment’s investor conference call, held Wednesday, February 7, which is available for telephonic replay or viewing via the Internet – details of which are below.

Key points made by HandHeld Entertainment executives during Wednesday’s call include the following:

1) Monetize Recent Content Acquisitions
· As a result of four Web site acquisitions made by the company since mid-November and most recently Putfile.com™ on February 5 (Dorks.com™, FunMansion.com™, YourDailyMedia.com™ and PutFile.com – each focused on free user-generated video and other forms of media), HandHeld Entertainment now has a network of Web properties that (in combination with ZVUE.com™) attracted more than 13.7 million unique visitors and 83 million page views in January.
· HandHeld Entertainment expects to be able to increase traffic to its network of Web properties from 17 million to 20 million unique visitors per month by end of 2007.
· Increased traffic to HandHeld Entertainment’s network of Web properties should lead to increased advertising revenue for the company: $0.025 to $0.03 per visitor by the end of 2007 up from the current revenue of $.005 per visitor.
· As a result, the company expects to increase the advertising revenue from its network of Web sites to $500,000 per month by the end of 2007 up from the present $40,000 per month.
· Additionally, the company also plans to continue its efforts to license and acquire compelling portable video content and build one of the largest online libraries in the world of downloadable videos with both free user-generated and premium commercial content.
(All traffic figures and rankings noted in this release were determined by the company by using Google Analytics and Alexa’s traffic ranking system—unless stated otherwise)

2) Continue Operating Plan to be Cash Flow Positive by End of 2007
· The company has reduced its operating expense through dramatic reduction of expenses and personnel to 30 full-time employees/equivalents down from 55.
· Monthly cash burn has been reduced at HandHeld Entertainment to approximately $400,000 from approximately $700,000.

3) Hardware Business with Goal to Break Even
· HandHeld Entertainment’s next generation ZVUE player, the ZVUE 260, will remain value priced at less than $149. The ZVUE 260 is the smallest and lightest ZVUE yet, weighing nearly one ounce less than the video iPod (3.98 ounces versus 4.8 ounces respectively), it features a 2.5-inch active matrix TFT backlit screen and is the first ZVUE to feature a built-in audio speaker.
· The company will continue its strategy for mass-market retail distribution, a strategy anchored by its relationship with Wal-Mart that sees HandHeld currently shipping product into more than 2,200 Wal-Mart stores in the U.S., while looking for opportunities to expand into other distribution outlets.
· HandHeld Entertainment is continuing its plans to outsource future PMP development efforts to leading original equipment manufacturers (OEMs) and Original Design Manufacturers (ODMs), cutting time-to-market to four-to-five months versus the previous12- to 18-month product design cycle.
· The first example of its new OEM/ODM strategy is HandHeld Entertainment’s successful launch of its ZVUE MP3 player in late Fall 2006. Developed in partnership with Sony BMG, the ZVUE MP3 player provided 30 of the top hits of 2006 pre-loaded on the player and was sold through Wal-Mart and InMotion Entertainment stores. Such pre-loaded ZVUE players are characterized by positive cash flow and solid gross margins with tie-ins back to the content sites and HandHeld Entertainment plans to continue such OEM and content partnering efforts in the future.

“In less than three short months we have successfully transformed our company into a world leader in the online video marketplace by creating our network of Web properties, giving us a complete media ecosystem of free and premium content that can be watched online, on our ZVUE players or on smartphones and PDAs,” said Jeff Oscodar, president and chief executive officer of HandHeld Entertainment. “The Web sites now in our network attracted more than 13.7 million unique visitors and more than 83 million page views in January. Those traffic results make us a significant force in this market."