VitalStream Outlines 2004 Accomplishments and 2005 Growth Strategy

VitalStream Outlines 2004 Accomplishments and 2005 Growth Strategy

IRVINE, Calif., Jan. 13 /PRNewswire-FirstCall/ -- VitalStream(R) Holdings, Inc. (BULLETIN BOARD: VSTH) , the parent company of VitalStream, Inc., a global provider of integrated content delivery and streaming media services, today outlined its key accomplishments during 2004 and growth strategy for 2005.

Key accomplishments during the 2004 year included:

* Achieving revenue growth by adding new customers and expanding
relationships with existing customers. Through the first nine months
ended September 30, 2004, the Company reported revenues had increased
34 percent over the same period a year ago. The Company estimates
that annual revenue growth for fiscal 2004 over fiscal 2003 will
exceed 40 percent.

* Expanding the customer base, which now includes more than
500 significant customers. Some new clients added during the year
include ABC News, Comcast, New York Times Digital, National
Geographic, Ogilvy & Mather, Target Stores, Unisys, CNET, RadioShack
and Ralph Lauren Polo.

* Continuing product innovation, including the roll-out of the
Macromedia(R) Flash(TM) Video Streaming Service (FVSS) powered by
VitalStream and enhancements to the offering. FVSS powered by
VitalStream enables companies to quickly and easily deliver video
enabled Flash content-including streaming live events, rich media
advertising campaigns and other broadcasts-across VitalStream's high
performance, reliable content delivery network to Macromedia Flash
Player, which is installed on more than 98 percent of Internet-enabled
computers. The Company also announced the rollout of Macromedia FVSS
Lite, which enables companies to add video to their websites quickly
and easily in a cost-effective and powerful rich media streaming
solution.

* Completing a private placement of common stock and warrants with
institutional investors that generated gross proceeds of $11 million.
Major investors in the financing included WaldenVC, Dolphin Equity
Partners, Newlight Associates, Stephens Investment Management and the
RS Orphan Fund. In addition, several non-director members of
VitalStream's management team participated in the transaction. In
conjunction with this transaction, the Company completed a conversion
of a Promissory Note held by a major shareholder and all outstanding
shares of 2003 Series A Preferred Stock into common stock, simplifying
the Company's balance sheet. VitalStream expects to end fiscal 2004
with over $10 million in cash.

* Enhancing financial condition through a new banking relationship with
Comerica Bank that includes both a term line and revolving line of
credit facility totaling $4.0 million at significantly lower borrowing
costs than the Company's previous credit relationships.

* Enhancing the management team and board of directors, including the
naming of Mark Belzowski as chief financial officer. Belzowski was
previously chief financial officer at Universal Electronics, Inc., a
leading developer of wireless technology. The Company also named
Raymond L. Ocampo Jr., a former member of the senior management team
at Oracle Corporation, and Phil Sanderson, a general partner at
WaldenVC, to its board of directors.



"This past year was marked by a number of key milestones for the Company," noted Phillip N. Kaplan, president and chief operating officer. "Our significant revenue growth was driven by both the addition of enterprise customers in the media, advertising and retail sectors and deeper relationships with existing customers as we continued to provide the industry's leading solutions for the broadcast of digital media and communications. We also strengthened our financial condition, management team and board of directors," he continued.

"More importantly, we are well positioned for continued growth in 2005. Broadband use continues to grow rapidly, and in fact, has now surpassed dial-up among Internet users. In addition, the outlook for spending on rich media and online advertising is very encouraging," Kaplan noted.

"Key elements of our growth strategy," he continued, "include leveraging our strong financial position to further develop our product portfolio and expand our sales and marketing efforts, including increasing our presence in international markets. In addition, we will continue to look for strategic partnership and acquisition opportunities that can contribute to our revenues, customer base and technology portfolio. Our search for a new chief executive officer is going well and our plan is to achieve a listing on the Nasdaq SmallCap or another national exchange," he concluded.

VitalStream will release its results for the year ended December 31, 2004 on Thursday, February 10, 2005. The press release will be available on VitalStream's website at www.vitalstream.com.

About VitalStream, Inc.

VitalStream, Inc., a wholly-owned subsidiary of VitalStream Holdings, Inc. (BULLETIN BOARD: VSTH) , is a global provider of integrated content delivery services that enable businesses to broadcast digital media and communications to worldwide audiences via the Internet. The Company provides complete solutions, including audio and video streaming, live event broadcasting, media asset management, integrated web hosting and consulting services, that seamlessly integrate with today's leading streaming media technologies. To ensure a worldwide reach, VitalStream engineered its award-winning content delivery network certified for quality delivery in the United States, Europe and Asia. For more information, call 800-254-7554, or visit http://www.vitalstream.com/.

Forward-Looking Statements

This news release may contain certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may vary materially from the expectations contained in the forward-looking statements. Forward-looking statements may include statements addressing future financial and operating results of the company. The following factors, among others, could cause actual results to differ materially from those described in any forward-looking statements: The risk that the Company's revenue may decrease on a year-over-year basis because of slower than projected growth in the demand for digital broadcast and streaming services; the risks that the Company's existing customers may cease to use the Company's services and/or may not use the Company's services at the projected rate; uncertainties regarding the future demand for the Company's products and services generally even if the Company expands its sales and marketing efforts as planned, or that we may not be able to develop or acquire the technology necessary to keep our products and services competitive; the risk that the Company may not satisfy the minimum bid requirement or other listing requirements for NASDAQ or an exchange or may otherwise be prohibited from listing its common stock; the risk that the Company may not be able to find suitable acquisition or other business combination transactions or, upon completing such transactions, successfully integrate the acquired businesses; the risk that the Company may be unable to obtain additional capital necessary to continue operations and fuel growth or obtain it at favorable rates; and/or uncertainties regarding our ability to pursue our proposed business strategy. More detailed information about these factors and others is set forth in the Company's filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. Such forward-looking statements speak only as of the date of this release. The Company is under no obligation (and expressly disclaims any obligation) to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

VitalStream is a registered trademark of VitalStream, Inc. All other trademarks are property of their respective holders.

For further information, please contact Mark Belzowski at 949-743-2000, or ir@vitalstream.com, or Neal Rosen of Kalt Rosen & Co., 415-397-2686, rosen@krc-ir.com.


Source: VitalStream Holdings, Inc.

CONTACT: Mark Belzowski of VitalStream Holdings, Inc., +1-949-743-2000,
ir@vitalstream.com; or Neal Rosen of Kalt Rosen & Co., for VitalStream
Holdings, Inc., +1-415-397-2686, rosen@krc-ir.com, for VitalStream Holdings,
Inc.

Web site: http://www.vitalstream.com/


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