8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

October 15, 2004

PINNACLE SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

California	000-24784	94-3003809
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

280 North Bernardo Avenue Mountain View, California	94043
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code

(650) 526-1600

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement

On October 19, 2004, Pinnacle Systems, Inc. (“Pinnacle”) announced that Arthur D. Chadwick will resign from his position as Pinnacle’s Senior Vice President, Finance and Administration and Chief Financial Officer, effective October 20, 2004.

In connection with this resignation, on October 15, 2004, Pinnacle and Mr. Chadwick entered into a Separation Agreement and Release (the “Separation Agreement”). The Separation Agreement provides that Pinnacle will pay Mr. Chadwick $275,000, less applicable withholding, within two days following the effective date of the Separation Agreement. Pinnacle will also reimburse Mr. Chadwick for any payments he makes for COBRA coverage for a period of 6 months beginning November 1, 2004 and concluding on April 30, 2005.

The Separation Agreement is filed as Exhibit 10.77 to this Form 8-K and is incorporated by reference.

Item 2.02. Results of Operations and Financial Condition

On October 19, 2004, Pinnacle is issuing a press release and holding a conference call regarding its financial results for the first quarter of fiscal 2005 ended September 30, 2004. A copy of the press release is furnished as Exhibit 99.1 to this Form 8-K and is incorporated by reference.

The information in this Current Report on Form 8-K and the exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of any general incorporation language in such filing.

Pinnacle is making reference to non-GAAP financial information in both the press release and the conference call. A reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures is contained in the attached press release.

Item 5.02. Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers

Item 1.01 is incorporated here by reference.

Pinnacle has appointed Suzy Seandel, age 40, to serve as Interim Chief Financial Officer effective as of October 20, 2004 pending the hiring of a permanent Chief Financial Officer. Since April 2003, Ms. Seandel has served as Pinnacle’s Vice President Finance and Accounting. From April 1999 to April 2003, Ms. Seandel served as Corporate Controller for Extreme Networks, Inc., a network applications and services company. Ms. Seandel received a Bachelor of Science in Commerce, Finance from Santa Clara University and is a certified public accountant in the state of California.

Item 8.01 Other Events

On July 27, 2004, Pinnacle is announcing its financial results for the first quarter of fiscal

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2005 ended September 30, 2004. These financial results are attached hereto as Exhibit 99.2. Exhibit 99.2 shall be deemed “filed” for purposes of Section 18 of the Exchange Act and shall be deemed incorporated by reference in filings under the Securities Act of 1933 or the Exchange Act.

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Item 9.01. Financial Statements and Exhibits

(c) Exhibits.

Exhibit No.	Description
10.77	Separation Agreement and Release dated October 15, 2004 between Pinnacle Systems, Inc. and Arthur D. Chadwick
99.1	Press Release of Pinnacle Systems, Inc. dated October 19, 2004
99.2	Financial Results for the Quarter ended September 30, 2004

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

PINNACLE SYSTEMS, INC.
By:	/s/ Scott E. Martin
	Scott E. Martin
	Senior Vice President, Human Resources and Legal

Date: October 19, 2004

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EXHIBIT INDEX

Exhibit No.	Description
10.77	Separation Agreement and Release dated October 15, 2004 between Pinnacle Systems, Inc. and Arthur D. Chadwick
99.1	Press Release of Pinnacle Systems, Inc. dated October 19, 2004
99.2	Financial Results for the Quarter ended September 30, 2004

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EX-10.77

Exhibit 10.77

SEPARATION AGREEMENT AND RELEASE

RECITALS

This Separation Agreement and Release (“Agreement”) is made by and between Arthur D. Chadwick (“Employee”) and Pinnacle Systems, Inc. (“Company”) (jointly referred to as the “Parties”):

WHEREAS, Employee was employed by the Company as its Senior Vice President, Finance and Administration and Chief Financial Officer;

WHEREAS, the Company and Employee entered into an Employee Proprietary Information Agreement dated August 31, 1994 (the “Confidentiality Agreement”);

WHEREAS, the Company and Employee have entered into certain written stock option agreement(s) to purchase common stock of the Company pursuant to the Company stock option plan (the stock option agreement(s) and stock option plan are collectively referred to as the “Stock Agreements”);

WHEREAS, the Company and Employee entered into an Amended and Restated Change of Control Severance Agreement dated May 11, 2004;

WHEREAS, Employee’s employment with the Company will terminate effective October 20, 2004 (the “Separation Date”); and

WHEREAS, the Parties wish to resolve any and all disputes, claims, complaints, grievances, charges, actions, petitions and demands that the Employee may have against the Company as defined herein, including, but not limited to, any and all claims arising out of, or related to, Employee’s employment with, or separation from, the Company;

NOW THEREFORE, in consideration of the promises made herein, the Parties hereby agree as follows:

COVENANTS

1. Resignation As of the Separation Date, Employee shall resign as an officer or director, as the case may be, of the Company and of all of the Company’s subsidiaries and affiliates.

2. Consideration.

(a) Cash Payment. The Company agrees to pay Employee the sum of two hundred seventy-five thousand dollars ($275,000), less applicable withholdings. The Company shall make this payment to Employee within two (2) days following the Effective Date of this Agreement.

(b) COBRA. Employee’s health insurance benefits will cease on October 31, 2004, subject to Employee’s right to continue his health insurance under COBRA. The Company shall reimburse Employee for the payments he makes for COBRA coverage for a period of six (6)

months beginning November 1, 2004 and concluding on April 30, 2005. Employee’s participation in all other benefits and incidents of employment (including, but not limited to, the accrual of vacation and paid time off, and the vesting of stock options) shall cease on the Separation Date.

3. Stock. The Parties agree that for purposes of determining the number of shares of the Company’s common stock, which Employee is entitled to purchase from the Company, pursuant to the exercise of outstanding options, the Employee will be considered to have vested only up to the Separation Date. Therefore, the stock options shall expire subject to the terms and conditions of the Stock Option Agreements.

4. Confidential Information. Employee shall continue to comply with the terms and conditions of the Confidentiality Agreement, and maintain the confidentiality of all of the Company’s confidential and proprietary information. Employee shall also return to the Company all of the Company’s property, including all confidential and proprietary information, and all documents and information that Employee obtained in connection with his employment with the Company, on or before the Effective Date of this Agreement.

5. Payment of Salary. Employee acknowledges and represents that the Company has paid all salary, wages, bonuses, accrued vacation, housing allowances, relocation costs, interest, severance, stock, stock options, outplacement costs, fees, commissions and any and all other benefits and compensation due to Employee.

6. Release of Claims. Employee agrees that the foregoing consideration represents settlement in full of all outstanding obligations owed to Employee by the Company and its current and former: officers, directors, employees, agents, investors, attorneys, shareholders, administrators, affiliates, divisions, subsidiaries, predecessor and successor corporations and assigns (the “Releasees”). Employee, on his own behalf, and on behalf of his respective heirs, family members, executors, agents, and assigns, hereby fully and forever releases the Company and the other Releasees from, and agrees not to sue concerning, any claim, duty, obligation or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that Employee may possess arising from any omissions, acts or facts that have occurred up until and including the Effective Date of this Agreement including, without limitation:

(a) any and all claims relating to or arising from Employee’s employment with the Company, or the termination of that employment;

(b) any and all claims relating to, or arising from, Employee’s right to purchase, or actual purchase of, shares of Company stock, including, but not limited to, any claims for fraud, misrepresentation, breach of fiduciary duty, breach of duty under applicable state corporate law, and securities fraud under any state or federal law;

(c) any and all claims under the law of any jurisdiction, including, but not limited to, wrongful discharge of employment; constructive discharge from employment; termination in violation of public policy; discrimination; breach of contract, both express and implied; breach of a covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent or intentional infliction of emotional distress; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; unfair business practices; defamation; libel; slander; negligence; personal injury; assault; battery; invasion of privacy; false imprisonment; and conversion;

(d) any and all claims for violation of any federal, state or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967; the Americans with Disabilities Act of 1990; the Fair Labor Standards Act; the Employee Retirement Income Security Act of 1974; the Worker Adjustment and Retraining Notification Act; the Older Workers Benefit Protection Act; the Family and Medical Leave Act; the Fair Credit Reporting Act; the California Family Rights Act; the California Fair Employment and Housing Act; and the California Labor Code;

(e) any and all claims for violation of the federal, or any state, constitution;

(f) any and all claims arising out of any other laws and regulations relating to employment or employment discrimination;

(g) any claim for any loss, cost, damage, or expense arising out of any dispute over the non-withholding or other tax treatment of any of the proceeds received by Employee as a result of this Agreement; and

(h) any and all claims for attorney fees and costs.

The Company and Employee agree that the release set forth in this section shall be and remain in effect in all respects as a complete general release as to the matters released. This release does not extend to any obligations incurred under this Agreement.

7. Release of Claims by the Company. The Company agrees to and does hereby generally release and forever discharge Employee from any claims that the Company may possess against Employee arising from any omissions, acts or facts and agree not to sue concerning, any claim, duty, obligation or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that have occurred up until and including the Effective Date of this Agreement. This release does not extend to any obligations incurred under this Agreement.

8. Acknowledgement of Waiver of Claims Under ADEA. Employee acknowledges that he is waiving and releasing any rights he may have under the Age Discrimination in Employment Act of 1967 (“ADEA”) and that this waiver and release is knowing and voluntary. Employee and the Company agree that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective Date of this Agreement. Employee acknowledges that the consideration given for this waiver and release Agreement is in addition to anything of value to which Employee was already entitled. Employee further acknowledges that he has been advised by this writing that:

(a) he should consult with an attorney prior to executing this Agreement;

(b) he has up to twenty-one (21) days within which to consider this Agreement;

(c) he has seven (7) days following his execution of this Agreement to revoke this Agreement;

(d) this ADEA waiver shall not be effective until the revocation period has expired; and,

(e) nothing in this Agreement prevents or precludes Employee from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs for doing so, unless specifically authorized by federal law.

9. Civil Code Section 1542. Employee represents that he is not aware of any claims against any of the Releasees. Employee acknowledges that he has been advised to consult with legal counsel and is familiar with the provisions of California Civil Code Section 1542, which provide as follows:

A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.

Employee, being aware of this code section, agrees to expressly waive any rights he may have thereunder, as well as under any other statute or common law principles of similar effect.

10. No Pending or Future Lawsuits. Employee represents that he has no lawsuits, claims, or actions pending in his name, or on behalf of any other person or entity, against the Company or any of the other Releasees. Employee also represents that he does not intend to bring any claims on his own behalf or on behalf of any other person or entity against the Company or any of the other Releasees.

11. Application for Employment. Employee understands and agrees that, as a condition of this Agreement, he shall not be entitled to any employment with the Company, its subsidiaries, or any successor, and he hereby waives any alleged right of employment or re-employment with the Company, its subsidiaries or related companies, or any successor.

12. Confidentiality. The Parties acknowledge that Employee’s agreement to keep the terms and conditions of this Agreement confidential was a material factor on which the Company relied in entering into this Agreement. Employee agrees to use his best efforts to maintain in confidence the contents and terms of this Agreement, including the consideration for this Agreement (hereinafter collectively referred to as “Settlement Information”). Employee agrees to take every reasonable precaution to prevent disclosure of any Settlement Information to third parties, and agrees that there will be no publicity concerning any Settlement Information. Employee is permitted to take every precaution to disclose Settlement Information only to those attorneys, accountants, governmental entities, and family members who have a reasonable need to know of such Settlement Information. The Parties agree that if the Company proves that Employee breached this Confidentiality provision, the Company shall be entitled to an award of its costs spent enforcing this provision, including all reasonable attorney fees associated with the enforcement action, without regard to whether the Company can establish actual damages from Employee’s breach.

13. No Cooperation. Employee agrees that he will not act in any manner that might damage the business of the Company. The Parties acknowledge that Employee’s employment with any of the Company’s competitors shall not, in and of itself, constitute a breach of this provision. Employee further agrees that he will not knowingly counsel or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints by any third party against any of the Releasees, unless under a subpoena or other court order to do so. Employee agrees both to immediately notify the Company upon receipt of any such subpoena or court order, and to furnish, within three (3) business days of its receipt, a copy of such subpoena or court order to the Company. If approached by anyone for counsel or assistance in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints against any of the Releasees, Employee shall state no more than that he cannot provide counsel or assistance.

14. Breach. Employee acknowledges and agrees that any breach of Section 7 (“Release of Claims”), Section 9 (“Civil Code Section 1542”), or Section 13 (“No Cooperation”) by Employee shall constitute a material breach of the Agreement and shall entitle the Company immediately to recover the severance payments and benefits provided in Section 2 hereof. This provision is not intended to render, and does not render, any other breach of this Agreement immaterial.

15. Non-Disparagement. Employee agrees to refrain from any defamation, libel or slander of the Company, or tortious interference with the contracts and relationships of the Company. All inquiries by potential future employers of Employee will be directed to the Human Resources. Upon inquiry, the Company will only state the following: Employee’s last position and dates of Employment, and any other information and/or documentation legally required to be disclosed.

16. Non-Solicitation. Employee agrees that for a period of twelve (12) months immediately following the Effective Date of this Agreement, Employee shall not directly or indirectly solicit, induce, recruit or encourage any of the Company’s employees to leave their employment at the Company.

17. No Admission of Liability. The Parties understand and acknowledge that this Agreement constitutes a compromise and settlement of disputed claims. No action taken by the Parties, previously or in connection with this Agreement, shall be construed to be: (a) an admission of the truth or falsity of any claims made, or (b) an admission by either party of any fault or liability whatsoever to the other party or to any third party.

18. Costs. The Parties shall each bear their own costs, expert fees, attorney fees and other fees incurred in connection with the preparation of this Agreement.

19. Alternative Dispute Resolution.

(a) Mediation. The Parties agree that, in the event that any dispute arises out of, or relates to, the terms of this Agreement, their interpretation, and any of the matters herein released, the Parties shall mediate the dispute with a mediator who has been approved by both Parties (the “Mediation”). The Parties must proceed with Mediation within forty-five (45) days following one party’s receipt of a written notice from the other party of the existence of a dispute that arises out of,

or relates to, the Agreement. The Parties shall split the fees of the Mediation. This section will not prevent either party from seeking injunctive relief (or any other provisional remedy) from any court having jurisdiction over the Parties and the subject matter of their dispute relating to Employee’s obligations under this Agreement and the agreements incorporated herein by reference.

(b) Binding Arbitration. The Parties also agree that if they fail to settle their dispute through the mandatory Mediation set forth in Section 19 (a) above, then any and all disputes arising out of, or relating to, the terms of this Agreement, their interpretation, and any of the matters herein released, shall be subject to binding arbitration in Santa Clara County before the American Arbitration Association under its National Rules for the Resolution of Employment Disputes. The Parties agree that the prevailing party in any arbitration shall be entitled to injunctive relief in any court of competent jurisdiction to enforce the arbitration award. The Parties agree that the prevailing party in any arbitration shall be awarded its reasonable attorney fees and costs. The Parties hereby agree to waive their right to have any dispute between them resolved in a court of law by a judge or jury. This section will not prevent either party from seeking injunctive relief (or any other provisional remedy) from any court having jurisdiction over the Parties and the subject matter of their dispute relating to Employee’s obligations under this Agreement and the agreements incorporated herein by reference.

20. No Representations. Each party represents that it has had the opportunity to consult with an attorney, and has carefully read and understands the scope and effect of the provisions of this Agreement. Neither party has relied upon any representations or statements made by the other party hereto which are not specifically set forth in this Agreement.

21. Severability. In the event that any provision in this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable, or void, this Agreement shall continue in full force and effect without said provision so long as the remaining provisions remain intelligible and continue to reflect the original intent of the Parties.

22. Entire Agreement. This Agreement, the Confidentiality Agreement, and the Stock Agreements represent the entire agreement and understanding between the Company and Employee concerning the subject matter of this Agreement and Employee’s relationship with the Company, and supersede and replace any and all prior agreements and understandings between the Parties concerning the subject matter of this Agreement and Employee’s relationship with the Company.

23. No Oral Modification. Any modification or amendment of this Agreement, or additional obligation assumed by either party in connection with this Agreement, shall be effective only if placed in writing and signed by both Parties or their authorized representatives.

24. Governing Law. This Agreement shall be governed by the laws of the State of California, without regard for choice of law provisions.

25. Effective Date. This Agreement is effective after it has been signed by both parties and after eight (8) days have passed following the date Employee signed the Agreement (the “Effective Date”).

26. Counterparts. This Agreement may be executed in counterparts, and each counterpart shall have the same force and effect as an original and shall constitute an effective, binding agreement on the part of each of the undersigned.

27. Voluntary Execution of Agreement. This Agreement is executed voluntarily and with the full intent of releasing all claims, and without any duress or undue influence by any of the Parties. The Parties acknowledge that:

(a) They have read this Agreement;

(b) They have been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of their own choice or that they have voluntarily declined to seek such counsel;

(c) They understand the terms and consequences of this Agreement and of the releases it contains; and

(d) They are fully aware of the legal and binding effect of this Agreement.

IN WITNESS WHEREOF, the Parties have executed this Agreement on the dates set forth below.

Dated: October 15, 2004	By:	/s/ Scott E. Martin
		Scott E. Martin
		Senior Vice President, Human Resources and Legal
Dated: October 15, 2004	By:	/s/ Arthur D. Chadwick
		Arthur D. Chadwick, an individual

EX-99.1

Exhibit 99.1

Pinnacle Systems, Inc.

PRESS RELEASE

	Corporate Office
	280 N. Bernardo Avenue
	Mountain View, CA 94043
	Tel: 650-526-1600
	Fax: 650-526-1601
	www.pinnaclesys.com
Media Contact
Paulien Ruijssenaars
(650) 237-1648
paulien@pinnaclesys.com
Investor Contact
Brooke Deterline
(650) 930-3113
bdeterline@pinnaclesys.com

PINNACLE SYSTEMS REPORTS RESULTS FOR THE

FIRST QUARTER OF FISCAL YEAR 2005

MOUNTAIN VIEW, Calif., October 19th, 2004 - Pinnacle Systems^®, Inc. (NASDAQ: PCLE) today announced financial results for its first quarter of fiscal 2005, ended September 30, 2004.

Net sales for the first quarter of fiscal 2005 were $70.5 million compared to net sales of $69.3 million in the first quarter of fiscal 2004. The GAAP net loss for the first quarter of fiscal 2005 was $9.9 million or $0.14 per share. The pro forma non-GAAP net loss for the first quarter of fiscal 2005 was $6.3 million or $0.09 per share. This pro forma non-GAAP net loss excludes $1.4 million of amortization of acquisition-related intangible assets, $2.4 million in restructuring costs related to the company’s reduction in force and a $0.2 million difference between GAAP and non-GAAP income tax expense. The reconciliation of the GAAP to non-GAAP measurements for net income and earnings per share for the first quarter of fiscal 2005 is set forth below with Pinnacle Systems’ financial statements.

“In the first quarter of fiscal 2005, the Pinnacle Systems’ team executed well on our restructuring activities and delivered a solid quarter,” said Patti S. Hart, Pinnacle Systems’ Chairman of the Board and Chief Executive Officer. “We took a number of actions during the quarter as part of our restructuring activities as we continue to reduce costs and improve operational efficiencies.”

“In addition, our product development teams continued to release feature rich products,” continued Hart. “We introduced Pinnacle Studio Plus well timed for the traditionally strong holiday buying season. We believe Studio Plus is the best Studio product to date, and it has already won a number of awards including PC Magazine’s Editor’s Choice Award. We plan to continue our aggressive product development plans in order to exploit our market opportunities from consumers to broadcasters, further reduce operating expenses in order to improve profitability, and deliver long-term shareholder value.”

In addition, the Company announced that Arthur Chadwick has resigned as Chief Financial Officer of the Corporation, effective October 20, 2004. Mr. Chadwick is leaving to spend time with his family and pursue new challenges.

“Art has been with Pinnacle for more than 15 years and was instrumental in its growth and transformation to its current position as a leader in the video editing market,” said Hart. “We wish him every success with his new challenges.”

The executive search for a new CFO is currently underway. Until a final decision has been made, Suzy Seandel, currently Pinnacle’s Vice President of Finance and Accounting, will act as CFO on an interim basis.

Pinnacle Systems will host an audio web-cast at 2:00 p.m. (Pacific Time) on October 19th, 2004, which can be heard live at www.pinnaclesys.com. Additionally, a replay of the conference call will be available at www.pinnaclesys.com for two weeks following the call. Thereafter, a transcript of the conference call will be available under the “Investor Relations” section of our website at http://www.pinnaclesys.com/aboutus/investorrelation.asp?Langue_ID=7 .

Subsequent to the close of Pinnacle’s first quarter of fiscal 2005, on October 13, the Florida Second District Court of Appeal ruled with respect to Pinnacle Systems’ appeal in its pending lawsuit entitled Athle-Tech Computer Systems, Incorporated v. Montage Group, Ltd. (Montage) and Digital Editing Services, Inc. (DES), wholly owned subsidiaries of Pinnacle Systems. Although the ruling is not final, it may reduce the original judgment of $14.2 million to approximately $7-$7.3 million (plus post-judgment interest of approximately $675 thousand), subject to Athle-Tech’s right to retry a portion of the case. There remain certain issues that make the exact calculation uncertain, and both parties have the right to file a motion for reconsideration by the Court of Appeal. As a result, the final outcome of this lawsuit is still subject to uncertainty. Pinnacle Systems is currently evaluating the opinion and its options in the case.

Use of Non-GAAP Financial Measures

To supplement its consolidated financial statements presented in accordance with GAAP, Pinnacle Systems uses non-GAAP measures of pro forma net loss and pro forma loss per share, which are adjusted from its GAAP results to exclude certain expenses. These non-GAAP adjustments are provided to enhance the reader’s overall understanding of the Company’s current financial performance and its prospects for the future. The Company believes the non-GAAP results provide useful information to both management and

investors by excluding certain expenses that it believes are not indicative of its core operating results. The non-GAAP measures are included to provide investors and management with an alternative method for assessing Pinnacle Systems’ operating results in a manner that is focused on the performance of Pinnacle Systems’ ongoing operations and to provide a more consistent basis for comparison between quarters. Further, these non-GAAP results are one of the primary indicators management uses for planning and forecasting in future periods. In addition, since the Company has historically reported non-GAAP results to the investment community, it believes the inclusion of non-GAAP numbers provides consistency in its financial reporting. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with accounting principles generally accepted in the United States.

About Pinnacle Systems, Inc.

Pinnacle Systems provides broadcasters and consumers with cutting-edge digital media creation, storage, and play-back solutions for use at Home, in the Studio and on the Air. Pinnacle Systems’ award winning digital media solutions are in use around the world for broadcast, video and audio editing, DVD and CDR authoring and on the Internet. A recognized industry leader, the Company has received nine prestigious Emmy Awards for its technical innovations and carries this commitment throughout all of its product lines. Pinnacle Systems may be reached at (650) 526-1600 or at www.pinnaclesys.com.

Safe Harbor Statement

This press release contains forward-looking statements that involve risks and uncertainties within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding Pinnacle Systems’ expectations for reduced costs and improved operational efficiencies, anticipated aggressive product development plans, the exploitation of market opportunities, improved profitability, the delivery of long-term shareholder value and the potential outcome of litigation matters. Forward-looking statements contained in this press release relating to expectations about future events or results are based upon information available to the Company as of the date hereof. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. As a result, Pinnacle Systems’ actual results may differ materially and adversely from those expressed in the forward-looking statements. Factors that may cause such a difference include, but are not limited to, risks related to anticipated cost reduction, operational changes and product development plans, demand for the Company’s current and future products, including Studio Plus, the ability to execute proposed initiatives and risks inherent in the litigation process. Factors that could affect Pinnacle Systems’ business and financial results are detailed in the Company’s periodic reports filed with the Securities and Exchange Commission, including, but not limited to, its Annual Report on Form 10-K for the fiscal year ended June 30, 2004, including, but not limited to, under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which are on file with the Securities and Exchange Commission (the

“SEC”) and available at the SEC’s website at www.sec.gov. All information set forth in this release and its attachments is made as of October 19th, 2004, and Pinnacle Systems undertakes no obligation to revise or update publicly this information for any reason.

# # # #

Pinnacle Systems is a registered trademark of Pinnacle Systems, Inc. All other trademarks and registered trademarks are the

property of their owners. ^© 2004. Pinnacle Systems, Inc. All Rights Reserved.

PINNACLE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share data)

	GAAP						NON-GAAP
	Three Months Ended September 30,						Three Months Ended September 30,
	2004			2003			2004			2003
Net sales	$	70,542		$	69,343		$	70,542		$	69,343
Costs and expenses:
Cost of sales		39,871			38,316			39,871			38,316
Engineering and product development		10,115			10,550			10,115			10,550
Sales, marketing, and service		19,399			22,184			19,399			22,184
General and administrative		7,076			5,979			7,076			5,979
Amortization of other intangible assets		1,381			2,735			—			—
Restructuring costs		2,435			—			—			—
In-process research and development		—			2,193			—			—
Total costs and expenses		80,277			81,957			76,461			77,029
Operating loss		(9,735	)		(12,614	)		(5,919	)		(7,686	)
Interest and other income, net		508			334			508			334
Loss from continuing operations before income taxes		(9,227	)		(12,280	)		(5,411	)		(7,352	)
Income tax expense		704			528			918			918
Loss from continuing operations		(9,931	)		(12,808	)		(6,329	)		(8,270	)
Loss from discontinued operations, net of taxes		—			(172	)		—			—
Net loss	$	(9,931	)	$	(12,980	)	$	(6,329	)	$	(8,270	)
Loss per share from continuing operations:
Basic and Diluted	$	(0.14	)	$	(0.20	)
Loss per share from discontinued operations:
Basic and Diluted	$	—		$	—
Net loss per share:
Basic and Diluted	$	(0.14	)	$	(0.20	)	$	(0.09	)	$	(0.13	)
Shares used to compute net loss per share:
Basic and Diluted		69,043			65,086			69,043			65,086

PINNACLE SYSTEMS, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP TO GAAP

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands)

	Three Months Ended June 30,
	2004			2003
Non-GAAP net loss	$	(6,329	)	$	(8,270	)
Amortization of other intangible assets		(1,381	)		(2,735	)
Restructuring costs		(2,435	)		—
In-process research and development		—			(2,193	)
Loss from discontinued operations		—			(172	)
Income tax effect		214			390
GAAP net loss	$	(9,931	)	$	(12,980	)

PINNACLE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

	September 30, 2004			June 30, 2004
Assets
Current assets:
Cash and cash equivalents	$	46,443		$	61,299
Marketable securities		16,903			10,955
Accounts receivable, net		39,672			42,168
Inventories		44,876			47,162
Prepaid expenses and other current assets		6,374			8,727
Total current assets		154,268			170,311
Restricted cash		16,850			16,850
Property and equipment, net		16,031			17,223
Goodwill		73,612			73,273
Other intangible assets, net		15,029			16,298
Other assets		8,205			7,789
	$	283,995		$	301,744
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	12,562		$	18,283
Accrued and other liabilities		50,849			56,898
Deferred revenue		15,825			13,909
Total current liabilities		79,236			89,090
Deferred income taxes		1,786			1,972
Total liabilities		81,022			91,062
Shareholders’ equity:
Common stock		377,215			375,550
Accumulated deficit		(179,418	)		(169,487	)
Accumulated other comprehensive income		5,176			4,619
Total shareholders’ equity		202,973			210,682
	$	283,995		$	301,744

EX-99.2

Exhibit 99.2

PINNACLE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share data)

	GAAP
	Three Months Ended September, 30,
	2004			2003
Net sales	$	70,542		$	69,343
Costs and expenses:
Cost of sales		39,871			38,316
Engineering and product development		10,115			10,550
Sales, marketing, and service		19,399			22,184
General and administrative		7,076			5,979
Amortization of other intangible assets		1,381			2,735
Restructuring costs		2,435			—
In-process research and development		—			2,193
Total costs and expenses		80,277			81,957
Operating loss		(9,735	)		(12,614	)
Interest and other income, net		508			334
Loss from continuing operations before income taxes		(9,227	)		(12,280	)
Income tax expense		704			528
Loss from continuing operations		(9,931	)		(12,808	)
Loss from discontinued operations, net of taxes		—			(172	)
Net loss	$	(9,931	)	$	(12,980	)
Loss per share from continuing operations:
Basic and Diluted	$	(0.14	)	$	(0.20	)
Loss per share from discontinued operations:
Basic and Diluted	$	—		$	—
Net loss per share:
Basic and Diluted	$	(0.14	)	$	(0.20	)
Shares used to compute net loss per share:
Basic and Diluted		69,043			65,086

PINNACLE SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

	September 30, 2004			June 30, 2004
Assets
Current assets:
Cash and cash equivalents	$	46,443		$	61,299
Marketable securities		16,903			10,955
Accounts receivable, net		39,672			42,168
Inventories		44,876			47,162
Prepaid expenses and other current assets		6,374			8,727
Total current assets		154,268			170,311
Restricted cash		16,850			16,850
Property and equipment, net		16,031			17,223
Goodwill		73,612			73,276
Other intangible assets, net		15,029			16,298
Other assets		8,205			7,789
	$	283,995		$	301,744
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	12,562		$	18,283
Accrued and other liabilities		50,849			56,898
Deferred revenue		15,825			13,909
Total current liabilities		79,236			89,090
Deferred income taxes		1,786			1,972
Total liabilities		81,022			91,062
Shareholders’ equity:
Common stock		377,215			375,550
Accumulated deficit		(179,418	)		(169,487	)
Accumulated other comprehensive income		5,176			4,619
Total shareholders’ equity		202,973			210,682
	$	283,995		$	301,744