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): August 4, 2010

SONIC SOLUTIONS

(Exact name of registrant as specified in its charter)

California	23190	93-0925818
(State or other jurisdiction of organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

7250 Redwood Blvd., Suite 300  Novato, CA	94945
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code:         (415) 893-8000

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 (see General Instruction A.2. below):

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

o 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 2.02.  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On August 4, 2010, Sonic Solutions (“Sonic”) issued a press release regarding its financial results for the first fiscal quarter ended June 30, 2010. The press release and management commentary are attached hereto as Exhibits 99.1 and 99.2, respectively.

The information in this Item 2.02 of Form 8-K and Exhibits 99.1 and 99.2 attached hereto is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Item 2.02 of Form 8-K and Exhibits 99.1 and 99.2 shall not be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.

ADDITIONAL INFORMATION

In connection with the proposed merger of DivX, Inc. (“DivX”) into a wholly owned subsidiary of Sonic, Sonic intends to file a proxy statement and other relevant materials with the Securities and Exchange Commission (“SEC”).  This press release is not a solicitation of a proxy, an offer to purchase nor a solicitation of an offer to sell shares of Sonic, and it is not a substitute for any proxy statement or other filings that may be made with the SEC with respect to the transaction. When such documents are filed with the SEC, investors will be urged to thoroughly review and consider them because they will contain important information. Any such documents, once filed, will be available free of charge at the SEC's website (www.sec.gov).

Sonic and its directors, executive officers and other members of management may be deemed to be soliciting proxies from shareholders in favor of the DivX transaction.  Investors and shareholders may obtain more detailed information regarding the direct and indirect interests in the transaction of persons who may, under the rules of the SEC, be considered participants in the solicitation of these shareholders in connection with the transaction by reading the preliminary and definitive proxy statements regarding the merger, which will be filed with the SEC. Information about the directors and executive officers of Sonic may be found in its definitive proxy statement filed with the SEC on October 1, 2009 and in its Annual Report on Form 10-K for the year ended March 31, 2010 filed with the SEC on June 7, 2010. These documents will be available free of charge once available at the SEC's web site at www.sec.gov or by directing a request to Sonic.

ITEM 8.01.  OTHER EVENTS.

Please see above under Item 2.02.

ITEM 9.01.  FINANCIAL STATEMENTS AND EXHIBITS.

(d)  Exhibits

The following exhibits are furnished with this Current Report on Form 8-K:

Exhibit	Description
99.1	Press Release of Sonic Solutions dated August 4, 2010
99.2	Management's commentary on financial results for the first fiscal quarter ended June 30, 2010.

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.

SONIC SOLUTIONS
By:	/s/ Paul F. Norris
Name:	Paul F. Norris
Title:	Executive Vice President, Chief Financial Officer and General Counsel (Principal Financial Officer)

Date: August 4, 2010

EX-99.1

Exhibit 99.1

Filed pursuant to Rule 425 under the Securities Act of 1933 and deemed filed

pursuant to Rule 14a-12 under the Securities Exchange Act of 1934

Filing Person: Sonic Solutions

Commission File No.: 000-23190

Subject Company: DivX, Inc.

Commission File No.: 001-33029

Sonic Reports First Quarter 2011 Financial Results

Novato, California (August 4, 2010) – Sonic Solutions® (NASDAQ:  SNIC) today reported financial results for its first quarter of fiscal year 2011 ended June 30, 2010.

“Our first quarter financial results were ahead of our expectations and we generated positive Adjusted EBITDA of almost $1.6 million,” said Dave Habiger, president and CEO of Sonic.  “Much of the growth we experienced in the first quarter was from our RoxioNow premium content initiatives as we added major retail storefront partners and leading CE manufacturers that will broaden our platform for distributing movies and television shows through Internet-enabled devices.”

First Quarter Fiscal 2011 GAAP Results

In the first quarter of fiscal 2011, Sonic recognized net revenue of $25.4 million, essentially in-line with the $25.5 million reported for the first quarter of fiscal 2010.  The company’s first quarter revenue target was approximately $25 million.

Sonic’s gross profit for the first quarter of fiscal 2011 was $17.7 million, representing a gross margin of 70%, compared to $17.6 million and a gross margin of 69% in the first quarter of fiscal 2010.

Operating expenses were $19.3 million in the first quarter of fiscal 2011, compared to $19.1 million in the first quarter of fiscal 2010. These GAAP expenses break down as follows: sales and marketing expense was $7.1 million, research and development expense was $5.9 million, general and administration expense was $4.7 million, and expenses associated with the DivX acquisition was $1.6 million.

Net loss for the first quarter of fiscal 2011 was $1.1 million, or $0.03 per share based on 30.7 million weighted average shares, compared to a net loss of $1.8 million in the first quarter of fiscal 2010, or $0.07 per share based on 26.6 million weighted average shares.

First Quarter Fiscal 2011 Non-GAAP Results

Sonic’s non-GAAP net revenue for the first quarter of fiscal 2011 was $25.7 million. The effect of $0.3 million of contra revenue associated with the vesting of a warrant issued during the third quarter of fiscal 2010 was excluded from the calculation of non-GAAP net revenue. There was no such contra revenue for the first quarter of fiscal 2010.

Sonic Solutions Reports First Quarter 2011 Financial Results

Non-GAAP gross profit for the first quarter of fiscal 2011 was $18.1 million, compared to $17.8 million reported for the first quarter of fiscal 2010.  In addition Non-GAAP gross profit does not include acquisition-related intangible asset amortization expense of $0.1 million in both the first quarter of fiscal 2010 and 2011.

Non-GAAP operating expenses were $16.9 million in the first quarter of fiscal 2011, compared to $18.0 million in the first quarter of fiscal 2010.  These expenses for fiscal 2011 exclude share-based compensation expense of $0.8 million and DivX acquisition expense of $1.6 million and for the first quarter of fiscal 2010 exclude share-based compensation expense of $0.6 million and restructuring charges of $0.5 million.

Non-GAAP net income for the first quarter of fiscal 2011 was $0.6 million, or $0.02 per fully diluted share based on 32.9 million weighted average shares.  This compares to non-GAAP net loss for the first quarter of fiscal 2010 of $0.1 million, or $(0.00) per share based on 26.6 million weighted average shares.

Supplemental First Quarter Information

Roxio Consumer Products revenue was $20.4 million in the first quarter of fiscal 2011, compared with $22.4 million earned in the first quarter of fiscal 2010. The decline was primarily due to lower OEM and direct channel revenue, partially offset by higher retail revenue. Premium Content revenue, which includes Professional Products, RoxioNow, Qflix, and consumer electronics licensing, contributed $5.0 million in revenue in the first quarter of fiscal 2011, compared with $3.1 million in the first quarter of fiscal 2010. This reflects higher licensing and RoxioNow revenue, offset by lower Professional Products revenue and $0.3 million in contra revenue associated with the vesting of a warrant issued during the third quarter of fiscal 2010.

Balance Sheet Information

Cash and cash equivalents at June 30, 2010 was $54.9 million, up $0.4 million from the end of the prior quarter. Deferred revenue grew by $1.7 million from $5.9 million at March 31, 2010 to $7.6 million at June 30, 2010.

Financial Projections

For the second quarter of fiscal 2011 ending September 30, 2010 and assuming the merger with DivX does not close before September 30, 2010, the Company anticipates revenues of at least $26 million and Adjusted EBITDA of approximately $0.5 million.

Earnings Conference Call

In conjunction with this earnings press release, the Company has posted management’s commentary to the Investor Relations section of its Web site at http://www.sonic.com. Members of Sonic’s management team will host a life conference call today at 5:15 p.m. EDT (2:15 p.m. PDT), to discuss the financial results.  To participate in the conference call, interested parties may dial-in at 877-293-5493 (domestic) or 914-495-8539 (international) and referencing the ID number: 90517660.

To listen to a live audio broadcast of the conference call via the Internet, visit the Investor Relations section of the Sonic Solutions website at http://www.sonic.com. An archived version of the webcast will also be available through this site.

A telephone replay will also be available shortly following the call on Wednesday, August 4, 2010 through midnight (PDT) on Wednesday, August 11, 2010. The replay can be accessed by dialing (800) 642-1687 (for domestic callers) or (706) 645-9291 (international callers) and entering the passcode: 90517660.

Sonic/DivX Merger Update Conference Call

Immediately following the earnings conference call, members of Sonic Solutions and DivX, Inc. (NASDAQ: DIVX) management teams will host a joint conference call and webcast to update shareholders on the proposed merger. The joint call will take place at 2:30 p.m. PDT (5:30 p.m. EDT).  To participate in the conference call, interested parties may dial-in at 877-293-5493 (domestic) or 914-495-8539 (international) and referencing the ID number: 90811287.

Sonic Solutions Reports First Quarter 2011 Financial Results

To listen to a live audio broadcast of the conference call via the Internet, visit the Investor Relations section of the Sonic Solutions website at http://www.sonic.com. An archived version of the webcast will also be available through this site.

A telephone replay will also be available shortly following the call on Wednesday, August 4, 2010 through midnight (PDT) on Wednesday, August 11, 2010. The replay can be accessed by dialing (800) 642-1687 (for domestic callers) or (706) 645-9291 (for international callers) and entering the passcode: 90811287.

Sonic Solutions Reports First Quarter 2011 Financial Results

Sonic Solutions

Condensed Consolidated Statements of Operations

(in thousands, except per share data - unaudited)

	Three Months Ended
	June 30,
	2010			2009
Net revenue	$	25,400		$	25,527
Cost of revenue		7,673			7,885
Gross profit		17,727			17,642
Operating expenses:
Marketing and sales		7,102			6,754
Research and development		5,933			7,114
General and administrative		4,680			4,752
Restructuring		-			520
DivX acquisition costs		1,618			-
Total operating expenses		19,333			19,140
Operating expense loss		(1,606	)		(1,498	)
Other income (expense), net		(238	)		151
Loss before income taxes		(1,844	)		(1,347	)
Provision for (benefit from ) income taxes		(776	)		484
Net loss	$	(1,068	)	$	(1,831	)
Net loss per share:	$	(0.03	)	$	(0.07	)
Shares used in computing basic and diluted net loss per share:		30,686			26,611

Sonic Solutions Reports First Quarter 2011 Financial Results

Sonic Solutions

Condensed Consolidated Balance Sheets

(in thousands, except share data)

	June 30,			March 31,
	2010			2010
	(unaudited)			(1)
ASSETS
Current assets:
Cash and cash equivalents	$	54,861		$	54,536
Accounts receivable, net of allowances of $1,742 and $2,511 at June 30, 2010 and March 31, 2010, respectively		11,900			11,270
Inventory		2,225			1,941
Prepaid expenses and other current assets		3,271			3,497
Deferred tax benefits		119			-
Total current assets		72,376			71,244
Fixed assets, net		1,590			1,670
Purchased and internally developed software costs, net		159			165
Goodwill		4,628			4,628
Acquired intangibles, net		16,671			16,174
Deferred tax benefit, net of current portion		124			66
Other assets		1,308			1,463
Total assets	$	96,856		$	95,410
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	4,177		$	3,892
Accrued expenses and other current liabilities		20,238			21,916
Deferred revenue, current portion		7,609			5,874
Capital leases		120			123
Total current liabilities		32,144			31,805
Other long term liabilities, net of current portion		1,887			889
Deferred revenue, net of current portion		169			76
Capital leases, net of current portion		6			37
Total liabilities		34,206			32,807
Commitments and contingencies
Shareholders' equity:
Common stock, no par value, 100,000,000 shares authorized; 30,762,590 and 30,610,102 shares issued and outstanding at June 30, 2010 and March 31, 2010, respectively		201,439			200,375
Accumulated deficit		(137,357	)		(136,289	)
Accumulated other comprehensive loss		(1,432	)		(1,483	)
Total shareholders' equity		62,650			62,603
Total liabilities and shareholders' equity	$	96,856		$	95,410

(1)  Derived from audited consolidated financial statements

Sonic Solutions Reports First Quarter 2011 Financial Results

Non-GAAP Measures

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles (“GAAP”), we report the following non-GAAP financial measures in presenting results and giving guidance:  non-GAAP net revenue, non-GAAP cost of revenue, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP net income (loss) and non-GAAP net income (loss) per share.  We also provide information and guidance regarding our earnings before interest, taxes, depreciation and amortization, excluding restructuring expense, acquisition related expense, share-based compensation and contra revenue (“Adjusted EBITDA”).  Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, but should be considered in addition to and in conjunction with results presented in accordance with GAAP.  The non-GAAP financial measures are intended to provide additional insight into our operations that, when viewed with our GAAP results and the accompanying reconciliations to the most directly comparable GAAP financial measures, offer a more complete understanding of factors and trends affecting our business.  Our non-GAAP presentations should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP.

We believe these non-GAAP financial measures are useful to investors because (1) they allow for greater transparency with respect to key metrics we use in our financial and operational decision-making and (2) they are used by some of our investors and the analyst community to help them analyze our operating results and budget planning decisions.  We use these non-GAAP measures internally to plan and forecast future periods, to establish operational goals, to compare with our business plan and individual operating budgets and to allocate resources.  As illustrated by the above table, the effect of calculating these financial measures on a non-GAAP basis is to increase profits, decrease losses and/or change losses to profits.  Material limitations associated with the use of the non-GAAP financial measures versus the comparable GAAP measures and guidance are (a) the non-GAAP measures provide a view of our results that does not take into account certain GAAP expenses that would otherwise reduce our profits or increase our losses for the period in question, and (b) it may be difficult or impossible to meaningfully compare our non-GAAP results with those of other companies that do not present non-GAAP results utilizing similar assumptions.  We compensate for these limitations by providing full disclosure of the effects of our non-GAAP measures and guidance.  Additionally, we present reconciliations between non-GAAP measures and their most directly comparable GAAP measures for non-GAAP historical information and, to the extent available without unreasonable efforts, for non-GAAP forward-looking information, so that investors can use the information to perform their own analysis.

· Contra Revenue.  We have excluded the effect of expenses and contra revenue associated with our issuance and subsequent vesting of a warrant from our calculation of the following:  non-GAAP net revenue, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net income (loss) per share and Adjusted EBITDA.  Because of varying available valuation methodologies, subjective assumptions and the fact that the financial impacts of this warrant issuance do not result in ongoing cash expenditures or otherwise have a material impact on our ongoing business operations, we believe that providing non-GAAP financial measures that exclude contra revenue allows investors and analysts to make meaningful comparisons between our ongoing core business operating results and those of other companies.  Contra revenue associated with the grant of this warrant and subsequent vesting will recur during the term of the contract pursuant to which the warrant was issued.

· Acquisition-Related Intangible Amortization. Under purchase accounting rules, some portion of an acquisition purchase price is generally allocated to intangibles, such as core and developed technology and customer contracts, which are then amortized over various periods of time.  Our GAAP presentations include amortization on certain acquired intangibles from prior consummated transactions.  We have excluded the effect of amortization of acquired intangibles from our calculation of the following:  non-GAAP cost of revenue, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net income (loss) per share and Adjusted EBITDA.  Amortization of acquired intangible assets expense is inconsistent in amount and frequency and is significantly affected by the timing and size of our various acquisitions.  Further, the amortization expense on acquired intangibles does not result in ongoing cash expenditures, and, in our view, does not otherwise have a material impact on our ongoing business operations.  Investors should note that the use of acquired intangible assets contributed to revenues earned during the periods presented and will continue to contribute to future period revenues.  This amortization expense will recur in future periods for GAAP purposes.

Sonic Solutions Reports First Quarter 2011 Financial Results

· Acquisition Related Expense Adjustment.  We have excluded the effect of acquisition expense from our calculation of the following:  non-GAAP operating expense, non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net income (loss) per share and Adjusted EBITDA.  These expenses are primarily attributable to acquisition expenses associated to the proposed DivX acquisition commenced during the fourth quarter of fiscal 2010 and consist of the following: (i) transition and integration costs; (ii) professional service fees.  We do not consider these acquisition-related costs to be related to our ongoing operations of the acquired businesses and are generally not relevant to assessing or estimating the long-term performance of the acquired assets.  By excluding acquisition-related costs and adjustments from our non-GAAP measures, management is better able to evaluate the Company's ability to utilize its existing assets and estimate the long-term value that acquired assets will generate for the Company.  We believe that providing a supplemental non-GAAP measure which excludes these items allows management and investors to consider the ongoing operations of the business both with, and without, such expenses.

· Restructuring Expense Adjustment.  We have excluded the effect of restructuring expense from our calculation of the following:  non-GAAP operating expense, non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net income (loss) per share and Adjusted EBITDA.  These expenses are primarily associated with the restructuring actions commenced in fourth quarter of fiscal 2009.  As these expenses are directly related to such restructurings, we believe that providing non-GAAP financial measures that exclude these expenses allows investors and analysts to make meaningful comparisons of our ongoing core business operating results over different periods of time.

· Share-Based Compensation Expense Adjustment.  We have excluded the effect of share-based compensation expense from our calculation of the following:  non-GAAP operating expense, non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net income (loss) per share and Adjusted EBITDA.  Because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies may use, as well as the impact of non-operational factors such as our share price and events such as tender offers on the magnitude of this expense, we believe that providing non-GAAP financial measures that exclude share-based compensation expense allows investors and analysts to make meaningful comparisons between our ongoing core business operating results and those of other companies.  Share-based compensation expense will recur in future periods for GAAP purposes.

· Adjusted EBITDA.  We provide information and guidance regarding our Adjusted EBITDA.  We believe this performance measure is useful to investors because (a) it corresponds closely to the cash operating income (loss) generated from our core operations by excluding significant non-cash operating expenses that do not arise out of our core ongoing operating activities, and (b) it provides greater insight into management decision-making, as Adjusted EBITDA is one of our primary internal metrics for evaluating the performance of our business.

Sonic Solutions Reports First Quarter 2011 Financial Results

Reconciliation of GAAP to Non-GAAP Measures

As noted above and as reflected in the following reconciliation tables contained in this release, we have provided reconciliations between the historical non-GAAP measures that we have disclosed and the most directly comparable GAAP measures.

· Non-GAAP Net Revenue, Cost of Revenue, Gross Profit & Gross Margin. The following table provides reconciliations relating to net revenue, cost of revenue, gross profit and gross margin (in thousands, except for margin percentages, unaudited):

	Three Months Ended June 30,
	2010			2009
GAAP net revenue	$	25,400		$	25,527
Contra revenue associated with vesting of the warrant		285			-
Non-GAAP net revenue	$	25,685		$	25,527
GAAP cost of revenue	$	7,673		$	7,885
Acquisition-related intangible amortization  expense		(107	)		(113	)
Non-GAAP cost of revenue	$	7,566		$	7,772
GAAP gross profit	$	17,727		$	17,642
GAAP gross margin (1)		70	%		69	%
Non-GAAP gross profit	$	18,119		$	17,755
Non-GAAP gross margin (2)		71	%		70	%
(1) The GAAP gross margin percentage is calculated by dividing GAAP gross profit by GAAP net revenue.
(2)  The Non-GAAP gross margin percentage is calculated by dividing Non-GAAP gross profit by Non-GAAP net revenue.

Sonic Solutions Reports First Quarter 2011 Financial Results

· Operating Expenses. The following table provides reconciliations relating to operating expenses (in thousands, unaudited):

	Three Months Ended June 30,
	2010			2009
GAAP total operating expenses	$	19,333		$	19,140
Share-based compensation expense (1)		(819	)		(580	)
Restructuring expense (2)		-			(520	)
DivX acquisition expense (3)		(1,618	)		-
Non-GAAP total operating expenses	$	16,896		$	18,040
(1) Share-based compensation expense is included in operating expenses on a GAAP basis.
(2) Restructuring expense is included as a separate line item in operating expenses on a GAAP basis.
(3) DivX acquisition expense is included as a separate line item in operating expenses on a GAAP basis.

Sonic Solutions Reports First Quarter 2011 Financial Results

· Non-GAAP Operating Income (Loss), Operating Margin, Net Income (Loss) & Adjusted EBITDA. The following table provides reconciliations relating to operating income (loss), operating margin, net income (loss) and Adjusted EBITDA (in thousands, except for margin percentages, unaudited):

	Three Months Ended June 30.
	2010			2009
GAAP operating loss (1)	$	(1,606	)	$	(1,498	)
Non-GAAP operating income (loss) (2)		1,223			(285	)
GAAP operating margin (3)		(6	%)		(6	%)
Non-GAAP operating margin (4)		5	%		(1	%)
GAAP net loss	$	(1,068	)	$	(1,831	)
Contra revenue associated with vesting of the warrant		285			-
Acquisition-related intangible amortization expense		107			113
Share-based compensation expense		819			580
Restructuring expenses		-			520
DivX acquisition costs		1,618			-
Provision for (benefit from) income taxes		(776	)		484
Tax adjustment by applying an effective tax rate (5)		(394	)		53
Non-GAAP net income (loss)	$	591		$	(81	)
Depreciation		355			546
Other (income) expense		238			(151	)
Tax adjustment by applying an effective tax rate (5)		394			(53	)
Adjusted EBITDA	$	1,578		$	261
(1) The GAAP operating loss is calculated by subtracting GAAP operating expenses from GAAP gross profit.
(2) The Non-GAAP operating income (loss) is calculated by subtracting Non-GAAP operating expenses from Non-GAAP gross profit.
(3) The GAAP operating margin percentage is calculated by dividing GAAP operating income (loss) by GAAP net revenue.
(4) The Non-GAAP operating margin percentage is calculated by dividing Non-GAAP operating income (loss) by Non-GAAP net revenue.
(5) Fiscal 2011 and 2010 are tax adjusted by applying a effective tax rate of 40%.

Sonic Solutions Reports First Quarter 2011 Financial Results

· GAAP and Non-GAAP Net Income (Loss) Per Share. The following table provides net income (loss) per share (in thousands except per share data, unaudited):

	Three Months Ended June 30,
	2010			2009
GAAP net loss per share
Basic	$	(0.03	)	$	(0.07	)
Diluted	$	(0.03	)	$	(0.07	)
Shares used in computing GAAP net loss per share
Basic		30,686			26,611
Diluted		30,686			26,611

	Three Months Ended June 30,
	2010		2009
Non-GAAP net loss per share
Basic	$	0.02	$	(0.00	)
Diluted	$	0.02	$	(0.00	)
Shares used in computing Non-GAAP net loss per share
Basic		30,686		26,611
Diluted		32,876		26,611

About Sonic Solutions

Sonic Solutions® (NASDAQ: SNIC) is powering the digital media ecosystem through its complete range of Hollywood to Home™ applications, services, and technologies.  Sonic’s Roxio products enable consumers to easily manage and enjoy personal media and premium Hollywood entertainment on a broad range of connected devices.  A wide array of leading technology firms, professionals, businesses, and developers rely on Sonic to bring innovative digital media functionality to next-generation devices and platforms.  Sonic Solutions is headquartered in Marin County, California.

As announced on June 2, 2010, Sonic has entered into a definitive merger agreement for Sonic Solutions to acquire DivX, Inc., a leading digital media company, based in San Diego, California (the “DivX Acquisition”).  Under the terms of the agreement, approved by the boards of directors of both companies, Sonic would acquire all the outstanding shares of DivX and merge DivX operations into those of Sonic. DivX stockholders would receive a combination of cash and stock equal to $3.75 in cash and 0.514 shares of Sonic common stock for each share of DivX they hold. The acquisition, which is expected to close in September 2010, is subject to approval of the shareholders of both companies as well as applicable regulatory approvals and customary closing conditions.

Sonic Solutions Reports First Quarter 2011 Financial Results

Forward-Looking Statements

This press release for the first quarter of fiscal year 2011 contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are made as of the date of this press release based upon our current expectations.  All statements, other than statements of historical fact, regarding our strategy, future operations, financial position, estimated revenue, projected costs, projected savings, prospects, plans, opportunities, and objectives constitute “forward-looking statements.”  The words “may,” “will,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “potential” or “continue” and similar types of expressions identify such statements, although not all forward-looking statements contain these identifying words.  These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.  Important factors that could cause such differences include, but are not limited to:

· the continuing negative impact of current macroeconomic conditions on consumers and associated impact on their ability and inclination to spend on leisure and entertainment related activities and related software and electronics;

· our ability to adapt to rapid changes in technology and consumer preferences, and to successfully and cost-effectively develop and introduce new and enhanced products and services;

· competitive pressures on our products and services, both from large established competitors with greater technological and financial resources than we possess, and from smaller companies that are able to compete effectively through low-cost Internet sales of their software products and services;

· changes in operating results, requirements or business models of our OEM or other major customers;

· our ability to successfully introduce and profitably run our RoxioNow initiative, a business with which we have had limited experience, which is dependent on third parties for premium content selection and delivery services, and which may give rise to legal exposure and other business risks;

· expenses and issues associated with qualifying and supporting our products on multiple computer platforms and in developing products and services designed to comply with industry standards;

· issues impacting third parties who supply us with services and operate our web store, as well as retailers, resellers and distributors of our products;

· risks associated with international operations, including risks related to currency fluctuations, as well as our extensive software development work in China;

· changes in our product and service offerings that could cause us to defer the recognition of revenue, thereby harming our operating results;

· our ability to maintain sufficient liquidity and continue to fund our capital needs;

· the loss of key management personnel;

· risks related to the proposed merger with DivX, including (i) the parties may not obtain the requisite shareholder or regulatory approvals for the transaction; (ii) the anticipated benefits of the transaction may not be realized; (iii) the parties may not be able to retain key personnel; (iv) the conditions to the closing of the transaction may not be satisfied or waived; and (v) the impact of general economic conditions on the businesses and results of operations of the two companies;

· risks related to acquisition and integration of acquired business assets, personnel and systems generally;

· costs associated with litigation, patent prosecution, intellectual property and other claims;

· changes in effective tax rates; and

· earthquakes, natural disasters and other unexpected events.

This press release should be read in conjunction with our most recent annual report on Form 10-K filed on June 7, 2010, and our quarterly report on Form 10-Q expected to be filed on August 6, 2010, and our other reports currently on file with the Securities and Exchange Commission (“SEC”), which contain more detailed discussion of risks and uncertainties that may affect future results.  We do not undertake to update any forward-looking statements unless otherwise required by law.

Additional Information

This press release is not a solicitation of a proxy, an offer to purchase nor a solicitation of an offer to sell shares of Sonic Solutions, and it is not a substitute for any proxy statement or other filings that may be made with the SEC with respect to the DivX Acquisition.  When such documents are filed with the SEC, investors will be urged to thoroughly review and consider them because they will contain important information. Any such documents, once filed, will be available free of charge at the SEC's website (www.sec.gov) and from Sonic Solutions through its corporate website (www.sonic.com).

Sonic Solutions Reports First Quarter 2011 Financial Results

Sonic Solutions and its directors, executive officers and other members of management may be deemed to be soliciting proxies from shareholders in favor of the DivX Acquisition.  Investors and shareholders may obtain more detailed information regarding the direct and indirect interests in the merger of persons who may, under the rules of the SEC, be considered participants in the solicitation of these shareholders in connection with the DivX Acquisition by reading the preliminary and definitive proxy statements regarding the merger, which will be filed with the SEC. Information about the directors and executive officers of Sonic Solutions may be found in its preliminary proxy statement filed with the SEC on July 13, 2010 and in its Annual Report on Form 10-K for the year ended March 31, 2010, which was on June 7, 2010. These documents will be available free of charge once available at the SEC's web site at www.sec.gov or by directing a request to Sonic Solutions.

For more information, contact:	For more information, contact:
Sonic Solutions Investor Relations	Sonic Solutions Corporate Communications
Nils Erdmann	Chris Taylor
Phone:  415.893.8000 Fax:  415.893.8008	Phone:  415.893.8000 Fax:  415.893.8008

EX-99.2

Exhibit 99.2

Filed pursuant to Rule 425 under the Securities Act of 1933 and deemed filed

pursuant to Rule 14a-12 under the Securities Exchange Act of 1934

Filing Person: Sonic Solutions

Commission File No.: 000-23190

Subject Company: DivX, Inc.

Commission File No.: 001-33029

Sonic Solutions

Management Commentary on Fiscal 1Q 2011 Earnings

August 4, 2010

Safe Harbor Statement

The following commentary contains forward-looking statements within the meaning of the federal securities laws. All statements, other than those of historical fact, are forward-looking statements, including but not limited to those regarding growth and financial performance, financial outlook, strategic and operational plans.  All forward-looking statements are made as of today based on current information and expectations and are inherently subject to change. We ask that you review these cautionary statements in today’s press release and refer to Sonic's recent filings on Form 10-K and 10-Q for more detailed discussions of the relevant risks and uncertainties that could cause actual results to differ from these forward looking statements. Except as required by law, Sonic undertakes no obligation to review or update any forward-looking statements.

In addition, unless otherwise noted, financial information is presented on a non-GAAP basis. These non-GAAP measures should be considered as supplemental to and not a substitute for or superior to the corresponding measures calculated in accordance with GAAP. While we believe that the non-GAAP measures provide information that is useful to investors, we recommend a careful review of the reconciliations between GAAP and non-GAAP measures provided in today's press release as well as the detailed disclosures related to the purpose of, and limitations on, non-GAAP disclosures. Today’s press release can be found on the Sonic website at www.sonic.com under “About Sonic – Investor Relations.”

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Dave Habiger

We finished the first quarter of fiscal 2011 with non-GAAP revenues of $25.7 million dollars, Adjusted EBITDA of $1.6 million and a cash balance of $55 million. Our results were ahead of expectations and show our continued commitment to profitability while accelerating our expansion on the premium content side of our business. Indeed, many of the gains we experienced during the last quarter were related to RoxioNow, which I will address shortly, however I’d first like to highlight some of the aspects of our Roxio consumer business, which accounts for 80% of our revenues.

Our Roxio-branded consumer business continues to dominate at retail with more than 4x the dollar volume than the next largest competitor according to the latest data from the NPD Group. Looking back over the last 3 years, Roxio has gained 10% market share each year, and as of the end of June, our products held 62% of the market in terms of dollar volume. The June quarter, however, has historically been our lightest quarter, particularly in our PC-OEM channel, and this year was no exception.  Our key PC manufacturer relationships are solid, and several trends suggest that they may strengthen even further based on our upcoming product line.  Many of our product SKUs continue to win OEM bids from our significant customers, and we have high expectations for this upcoming holiday season.  Creator 2011, the next version of our flagship software line, is expected to have broad appeal to consumers and our OEM customers given the added enhancements that we’ve made to our Web services, photo and video editing and online backup solutions. With the powerful new 2D to 3D photo capabilities of C2011, we have secured new merchandising opportunities outside of the traditional software sections of retail stores. We continue to enjoy exclusive category shelf positions at Costco Wholesale, Target, Sams Club and Wal-Mart, and in the case of Best Buy, we have a bundling agreement in place where a light version of certain Roxio products are being shipped on all Best Buy PCs. Creator 2011 ships in late August, and we will be providing more details about its progress on our next earnings call.

Turning now to our premium content business, as I mentioned earlier, we continue to make huge strides with RoxioNow.  In the June quarter, we announced the addition of a major retailer, partnerships with a number of key CE manufacturers, and the unveiling of new initiatives that position Sonic at the forefront of emerging 3D, HD and interactive technologies.  Since our last conference call, we’ve announced partnerships that include:

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Sears, the world’s 3rd largest CE retailer, has licensed the RoxioNow platform to power digital entertainment delivery services on electronic devices sold in both Sears and Kmart.  Sonic and Sears have teamed to embed the services on a growing network of devices including portable media players, Blu-ray Disc players, mobile phones, and high-definition television sets from leading manufacturers. The new services are expected to launch later this year and be broadly promoted at retail stores nationwide;

RealD, announced a strategic alliance with Sonic to develop and release new consumer solutions for the home creation, publishing and playback of personal 3D video content. As part of the collaboration, Sonic is integrating the propriety stereoscopic RealD Format into its RoxioNow premium entertainment platform;

ASUS, ASUSTeK Computer has selected Roxio CinePlayer for worldwide shipment with its next-generation 3D-enabled G-series notebook computers;

DTS, has partnered with Sonic to bring its highly regarded multi-channel audio format to the RoxioNow platform, enable Sonic's retail partners, such as Best Buy and Blockbuster, to significantly enhance the viewing of premium movies, next-day television shows, and independent films with richly immersive 5.1-channel surround sound;

Boxee, has licensed the RoxioNow entertainment platform in order to power premium entertainment storefronts through its Web-to-TV desktop application, as well as upcoming set-top boxes, TVs, and mobile devices running Boxee;

MOD Systems, will integrate RoxioNow into its self-service digital download kiosks. Participating retailers will be able to provide consumers' in-store and connected-device options for purchasing digital film and television titles that can be easily accessed and enjoyed from a wide range of CE devices;

MediaTek, announced the availability of the RoxioNow in its advanced Blu-ray Disc SoC solutions as well as HDTV solutions;

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Panasonic, announced the availability of RoxioNow on its latest System LSI in the UniPhier® series, including next-generation connected HDTVs and Blu-ray Disc players; and

Haier, one of the world's largest home appliances and consumer electronics manufacturers, has licensed our technology to deliver movies and TV shows over the Web to a new line of Haier-branded Blu-ray Disc players and HDTVs.

The concept of a digital locker is becoming increasingly understood by the broader market, and the “buy anywhere, play anywhere” value proposition is soon to get wider promotion from the upcoming launch of Best Buy’s CinemaNow platform.  I’m pleased to report that we are well underway establishing Best Buy’s CinemaNow platform on a broad range of devices that will be sold in their stores with the aim of being on every device available at Best Buy that has a Web connection. These include connected TVs, portable media players, PCs, Blu-ray players, gaming consoles, set-top boxes and mobile phones from every manufacturer. The following are a list of initiatives that are currently underway with Best Buy:

·     Developed a staging area for their stores that is focused on the CinemaNow initiative, and is currently being set up in most stores nationwide;

·     Launched a Movie Mobile Application on June 26, 2010, surrounding the animated feature film, Despicable Me, allowing consumers to download an application and synchronize their mobile device with the movie while viewing it in a theater, and in so doing, users receive a $10 credit towards CinemaNow;

·     Partnered with major OEM’s to preload major studio content on different internet connectable devices; and

·      CinemaNow is currently available on LG BD players, Samsung TV & BD Players, Insignia BD Players and will launch on most Internet connectable devices by the end of 2010.

We’re cooperating closely with Best Buy, and we have every indication from them that they are on schedule for the roll out of these services beginning en-masse for the Holiday shopping rush.  Look for more specific information about the timing and nuances of their rollout in the coming weeks.

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Looking forward at the next two quarters, we'll be moving rapidly to deploy the RoxioNow platform on millions of CE devices, enabling the download or rental of premium content across a broader number of retail storefronts. By the end of calendar 2010, we expect RoxioNow to be enabled on over 20 million CE devices, on our way to achieving the target we’ve set for ourselves of 30 million CE devices by June of 2011.  As of the end of the June quarter, the attach rate – or the percentage of users who activate the RoxioNow service on a device – jumped as high as 6.5% on Blu-ray players where our services were promoted to the consumer.  We expect this metric to increase with increased retailer promotional efforts and the launch of additional retail storefronts such as Best Buy by the end of calendar 2010.  In this same time frame, we expect to be launching version 2 of our software, which provides some terrific enhancements to our service including a powerful recommendation engine, a faster and more user-friendly interface, and an all-round more robust experience for the consumer.

As most of you who follow Sonic know, we’ve been signaling that significant revenue growth will start occurring late in this fiscal year, as the number of CE devices supporting RoxioNow dramatically increases.  I’ve frequently been asked by investors what to look for in the meantime as markers of Sonic’s success.

Basically, I think investors should focus on two things:

First, with each passing month, we will announce more and more partnerships — with studios and content publishers, with CE partners, and with retailer “storefront” partners.  Each partnership will bring added value to the RoxioNow ecosystem, and position us to profit handsomely as consumers begin wholesale adoption of the new content distribution model.

Second, look for evidence of proactive steps taken by studio content publishers to facilitate the transition to digital delivery — to accelerate the paradigm shift.  As we have consistently argued, far from being threatening, the move to digital distribution strengthens the hands of the premium content community for two reasons:  (1) it allows the studios to recapture some or all of the rental gross margin now accruing to the disc rental companies; (2) it brings the studios back into intimate contact with their consumer customers — something the studios haven’t enjoyed since the end of studio owned-and-operated theatres in the 1940s.

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Over the next months and years, we expect to see increasing evidence of an accelerating shift to digital delivery.  We already saw the creation of a 28-day content window that delays the availability of physical rental titles that gives us a 28-day lead to sell and rent movies digitally before physical discs are available via the Netflix mail service.  Not only is this is a boost for our business, but we expect to see further evidence from the studios that support digital distribution.  For example, two weeks ago, The Digital Entertainment Content Ecosystem (DECE), a consortium of studios and digital media technology companies, unveiled its consumer brand called ‘UltraViolet’. The aims of DECE and Sonic are aligned: to allow consumers to watch their digital entertainment across multiple platforms, including connected TVs, PCs, game consoles, smartphones and tablet PCs.  As a founding member of DECE, Sonic has been collaborating with other members to hasten the technological shift toward cloud-based delivery and a digital rights locker.  Our tools and technology are helping to facilitate this transition; within the DECE consortium we aim to be the leader in actual deployment of locker-enabled devices and services.

It’s clear to us that the premium content industry has started a major paradigm shift in how premium content is managed and distributed; with delivery to the consumer becoming virtual rather than physical; with relationships between content creators and consumers becoming more direct and nuanced, rather than distant and rigid.  We intend that Sonic will play an integral part in developing this new infrastructure. We aim to be one of the very few companies that will wholeheartedly embrace this new model, and in doing so, we believe we can create significant value for our partners and for our shareholders.

Paul Norris

For the June quarter, our GAAP net revenue was $25.4 million, above our guidance and analysts’ consensus.

Roxio Consumer revenue was $20.4 million in the quarter, down slightly from $22.1 million last quarter due to normal seasonal factors.  Our Roxio retail performance was particularly strong, and we saw encouraging trends from our PC-OEM partners during what is typically a seasonally weak quarter.

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Our Premium Content Group, which includes our Professional Products, RoxioNow, Qflix, and CE licensing, contributed $5.0 million in revenue during the June quarter, up from $4.3 million in the prior quarter. The increase over the prior quarter was due to greater licensing and services revenue from RoxioNow. Adjusting for contra revenues of $285K relating to the Best Buy warrant, the Premium Content Group’s non-GAAP net revenue was $5.3 million, bringing our total Non-GAAP revenue for the June quarter to $25.7 million

Our gross margin (which, on a non-GAAP basis, excludes $107K in amortization of acquired intangibles) was 71%, consistent with previous quarters.  In the near term we expect that our gross margin will continue to be in this range.

On a GAAP basis, operating expense was $19.3 million for the June quarter, up from $17.4 million last quarter, largely due to $1.6 million of expenses associated with our proposed acquisition of DivX.  GAAP operating expense breaks down as follows:

·     Sales and marketing expense totaled $7.1 million, down 8.1% from the prior quarter;

·     Research and development expense totaled $5.9 million, up 4.6% from the prior quarter; and

·     General and administrative expense totaled $4.7 million, up 17.6% from the prior quarter.

As I indicated, there were also $1.6 million in expenses related to the DivX acquisition, and the GAAP figures include $819K in share-based compensation.

On a non-GAAP basis, our operating expense was $16.9 million, leading to non-GAAP operating income of $1.2 million.

Interest income and other expenses totaled $(238)K for the quarter.

Net Income

Our non-GAAP net income for the quarter was $591K, or $0.02 cent per fully diluted share.  On a GAAP basis, our net loss was $1.1 million or $(0.03) cent per share. Our Adjusted EBITDA, which is comprised of earnings before interest, taxes, depreciation and amortization, excluding the warrant expense and contra revenue, restructuring credit, and share-based compensation, was $1.6 million.  This was substantially better than the “break-even to slightly negative” we estimated in our March earnings release, and shows our continuing commitment to managing costs while working to build our premium content business.

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Balance Sheet

Cash and cash equivalents ended the quarter at $55 million, up $0.4 million from the prior quarter.  Deferred revenue grew by $1.7 million during the quarter, from $5.9 million at March 31st to $7.6 million at June 30th due primarily to new Premium Content Group licensing deals.

Guidance

Our merger with DivX is currently on track to occur in mid- to late-September, perhaps lagging to the early part of October, based on SEC review of our proxy statement.  Thus, we may not complete the September quarter as a separate company.  However, assuming we are still separate from DivX on September 30, our forecast for the second fiscal quarter is for revenues of at least $26 million.  We estimate that operating expenses will be up on a sequential basis as we add some additional headcount to our RoxioNow workforce.  We estimate that our Adjusted EBITDA will be approximately half a million dollars in the September quarter.

Our assumptions continue to take into account seasonal factors that affect the performance of the PC industry as it impacts many areas of our business.  The September quarter has traditionally been a weaker quarter for us, particularly as we enter a refresh cycle for our Creator line of software.

As part of our due diligence for the merger, Sonic and DivX shared certain non-public business and financial information for our respective companies. This information was subsequently disclosed publicly and was detailed in the preliminary proxy filed with the SEC on July 13.  Among the shared information were financial forecasts for Sonic as a stand-alone company for the fiscal years ending March 31, 2011, March 31, 2012 and March 31, 2013. The financial forecasts were prepared and delivered in March 2010 and were based on numerous assumptions made at that time by Sonic’s management, including (i) Sonic’s expectations regarding the number of consumer electronics manufacturers shipping Sonic-powered premium content stores, the number of United States and foreign retail partners offering Sonic-powered premium content stores, consumer “attach rates” reflecting registration to use such stores, and registered customer purchasing behavior, (ii) Sonic’s expected growth in Roxio personal content software based on its offering of additional products and expectations regarding its OEM relationships, and (iii) expected operating expenses, including headcount increases necessary to support ongoing product development and sales and marketing. To the extent that Sonic’s own internal analyses were based on varying ranges of assumptions, Sonic selected the more conservative ends of such ranges in preparing the applicable forecasts, particularly in areas, such as the RoxioNow premium content initiatives, where underlying business models are still subject to evolution and Sonic’s operational experience has been limited.

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The financial forecasts for Sonic’s 2011, 2012 and 2013 fiscal years included revenue projections of $110 million, $183 million and $279 million, respectively; gross profit of $75 million, $97 million and $117 million, respectively; and operating income (loss) of $(4.8) million, $9.4 million and $23.5 million, respectively.

As I mentioned earlier, our current expectation is for the DivX acquisition to close sometime in mid- to late-September, possibly stretching into early October, depending on the progress of our proxy review with the SEC, something we obviously do not have complete control over.  When the merger closes, we will no doubt have to revise our forecasting assumptions to take into account the integration of DivX’s businesses.

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