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Zoom Telephonics Reports Results
For Quarter and Year Ending 12/31/96

Boston, MA, February 20, 1997 - Zoom Telephonics, Inc. (NASDAQ: ZOOM), a leading manufacturer of faxmodems and other personal computer communications products, today reported sales of $25.8 million for its fourth quarter ending December 31, 1996, down 28% from $36.0 million for the fourth quarter of 1995. This drop was primarily due to lower overall modem unit volumes in the fourth quarter of 1996, as increased V.34 shipments did not offset significantly reduced 14.4 Kbps modem shipments. Sales for 1996 grew 3% to $100.2 million from $97.0 million in 1995.

Zoom reported a net loss for the fourth quarter of 1996 of $243 thousand or $.03 per share, versus net income of $2.32 million or $.36 per share fully diluted for the fourth quarter of 1995, as gross profit declined from $8.4 million to $5.0 million on significantly reduced sales, while operating expenses rose from $4.5 million to $5.4 million. Zoom earned $2.48 million or $.35 per share fully diluted in 1996, down from $6.1 million or $.98 per share fully diluted in 1995, as gross profit dropped from $23.6 million to $20.4 million on slightly higher sales, and as operating expenses increased from $13.7 million to $16.8 million.

"The modem business changed significantly during the second quarter of 1996 from a shortage environment with fairly stable prices to a market with rapidly declining prices," said Frank Manning, Zoom's President. "Consequently our price protection expense rose from $2.2 million in 1995 to $3.5 million in 1996, with fourth quarter price protection rising from $350 thousand to $1.2 million. Soon we will be shipping 56 Kbps modems; and we expect to see increased demand and higher average selling prices, and a possible lift in gross margins, later this year. Meanwhile our numbers reflect significant reserves for price protection and for obsolescence of modems with speeds below 33.6 Kbps."

"Zoom's fourth quarter selling expenses of $3.36 million were the highest ever, both in dollars and as a percentage of sales. This was primarily due to increased advertising of Zoom brand products in North America. Our R&D expenses were also at record highs, as Zoom strengthened its engineering team to accelerate new product introductions in the 56K, ISDN, and remote access product areas, and to increase support for international product development."

"The year 1996 was tough, but we approach 1997 with a stronger company than ever, whether you look at financial strength, market channels, internal systems, or personnel. We believe we are well-positioned for growth as people move to speeds of 56K and beyond."

For additional information, please contact Investor Relations, Zoom Telephonics, 207 South Street, Boston, Massachusetts 02111, telephone (617)423-1072, fax (617)338-5015, E-mail address Investor@zoomtel.com Zoom's World Wide Web site is www.zoomtel.com

This press release contains certain forward-looking statements including, without limitation, statements relating to the company's new product introductions and potential future product demand, selling prices, gross margins, and growth. These forward-looking statements involve risks and uncertainties, including that there can be no assurance that the company's new products will be introduced on a timely basis, if at all; that the company's new products if introduced will achieve market acceptance; that overall product demand, selling prices, gross margins, or revenues will improve; and other risks and uncertainties indicated from time to time in Zoom's filings with the Securities and Exchange Commission.

This press release contains certain forward-looking statements including, without limitation, statements relating to Zoom's potential and market share in the analog modem, cable modem, DSL, wireless LAN, and home networking markets, and the company's future performance. These forward-looking statements involve risks and uncertainties, including that there can be no assurance of future opportunities and performance, and other risks and uncertainties indicated from time to time in Zoom's filings with the Securities and Exchange Commission.
 

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