Sale of Gyration to Thomson

Montgomery & Co. Advises Gyration On Its Sale To Thomson

Santa Monica, CA - August 6, 2004 - Montgomery & Co., LLC, an investment banking firm providing strategic advisory, merger and acquisition, and private placement services for emerging-growth companies, announced today that it advised Gyration, Inc. in its sale to Thomson (Euronext Paris: 18453; NYSE: TMS), the world leader in integrated solutions (technologies, equipment and services) for the entertainment and media industries. The acquisition is expected to close in the third quarter of 2004.

Founded in 1989, Gyration is a Silicon Valley-based company with 2003 revenues of $14 million that has developed a line of next-generation user-interface (UI) devices using proprietary technology based on gyroscopes. The technology is currently incorporated in a variety of hand-held UI devices, mainly for personal computers (PCs). The patent-protected "In Air" motion-sensing technology is based on a tiny gyroscope embedded within a hand-held device that can measure the angle and speed of deviation to move a cursor or other indicator between "Point A" and "Point B." This allows users to select content or enable features on a device by simply pointing in the air.

The market for such devices is currently estimated at $200 million in the US alone. Demand is expected to grow with the convergence of PC, set-top boxes, game consoles and television.
Thomson will use Gyration's gyroscope technology within its own business, primarily as remote controls for its set-top box and accessories activities. The group also intends to extend applications of Gyration's technology by licensing it to existing customers as well as to industries such as interactive gaming, hand-held devices, and automotive-related products.

Montgomery & Co. was chosen by Gyration for its strong industry knowledge and senior level access within the media and technology market segments. According to Thomas Quinn, chairman and CEO of Gyration, "Montgomery & Co.'s knowledge of the media technology and convergence space, as well as senior relationships within the industry allowed Gyration to find the ideal merger partner. Thomson's global reach will allow us to accelerate the adoption of our products and technology in the market via extensive retail, OEM and licensing channels."

"We immediately saw the value in Gyration's patented technology and their ability to solve the growing user interface navigation problem for interactive entertainment in the home," said Joaquin Silva, vice president, communications group at Montgomery & Co. "Strategically this is a win-win for both parties and will allow Gyration to leverage Thomson's global infrastructure and distribution channels to rapidly expand the use of Gyration's technology in multiple markets."

About Montgomery & Co.

Founded in 1986, Montgomery & Co. has extensive experience in providing strategic advisory services to emerging-growth industries including media, communications, information technology, healthcare, and defense and homeland security. The firm assembles cross-disciplinary teams with deep industry knowledge, strong M&A and private placement transaction experience, and strategic advisory expertise, to assist its clients. Based in Santa Monica, CA, the firm also has offices in San Diego, San Francisco and Kirkland, WA. Montgomery & Co. is a member of the National Association of Securities Dealers, Inc. (NASD), and its professional associates are registered with the NASD-SIPC. For more information, please visit www.monty.com.

Case Study

"Montgomery & Co.'s knowledge of the media technology and convergence space, as well as senior relationships within the industry allowed Gyration to find the ideal merger partner. Thomson's global reach will allow us to accelerate the adoption of our products and technology in the market via extensive retail, OEM and licensing channels." - Thomas Quinn, Chairman and CEO of Gyration.

Situation:

Gyration, a Silicon Valley-based company, was founded in 1989 and had 2003 revenues of $14 million. The company's line of user-interface (UI) devices used proprietary technology based on gyroscopes. The technology was incorporated in a variety of hand-held UI devices, mainly for personal computers (PCs). The patent-protected "In Air" motion-sensing technology was based on a tiny gyroscope embedded within a hand-held device that measured the angle and speed of deviation to move a cursor or other indicator between "Point A" and "Point B." This allowed users to select content or enable features on a device by simply pointing in the air. In 2004, the market for such devices was estimated at $200 million in the US alone with demand expected to grow with the convergence of PC, set-top boxes, game consoles and television.

Challenge:

After many years of technology and product development, Gyration had completed commercial development of its next generation gyroscope and achieved initial commercial success through retail distribution channels. However, in order to achieve the next step in the evolution of its business model, the Company had to raise significant additional venture capital to expand its retail operations and OEM customer relationships. The Company found, however, that raising additional venture capital would be highly dilutive to the existing shareholders. In addition, existing significant execution risk remained.

Strategic Advise and Positioning:

Montgomery & Co. advised management and the Board of Directors that Gyration's extensive intellectual property and technology could be used by a handful of strategic acquirers to solve the growing user interface challenge in the home. In addition, these strategic acquirers would be able to scale the Company's growth more quickly and would assign a higher valuation than venture investors given the current positioning of the Company.

Diligent Execution:

Montgomery & Co. assisted management in creating an Information Memorandum and Corporate presentation that highlighted the strategic value of the Company's technology and intellectual property to multiple high-volume markets. Montgomery & Co. leveraged its senior relationships at leading strategic acquirers and generated significant M&A interest from a number of companies, including Thomson, a leading global provider of information solutions to businesses and professional customers.

Successful Outcome:

Montgomery & Co successfully negotiated an all-cash transaction with favorable terms that overcame numerous challenges relating to the Company's capitalization and large shareholder base. Gyration was able to find an ideal merger partner that would allow the Company to rapidly accelerate the adoption of its technology in multiple high-volume markets. Management and the vast majority of employees have become full-time employees of Thomson, rapidly expanding their marketing efforts as an operating unit.