UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2006~~2007

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________.

Commission file number: 000-50730

VIEWSONIC CORPORATION

(Exact name of Registrant as Specified in Its Charter)

	Delaware		95-4120606
	(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

381 Brea Canyon Road

Walnut, California 91789

(909) 444-~~8800~~8888

(Address, including Zip Code, of Registrant's Principal Executive Offices

and Registrant's Telephone Number, including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated file” in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filer o

Accelerated filer o

Non-accelerated filer x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The number of shares of the registrant's common stock outstanding was ~~354~~351,~~594~~677,~~666~~443 shares, ~~the number of shares of Series B preferred stock outstanding was 0 shares,~~ and the number of shares of Series C preferred stock outstanding was 3,300,000 shares, each as of ~~October~~July 31, ~~2006~~2007.

~~VIEWSONIC CORPORATION~~1

~~FORM~~ViewSonic ~~10-Q~~Corporation

~~TABLE~~Form ~~OF CONTENTS~~10-Q

		Page
PART I: FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):	3
	Condensed Consolidated Balance Sheets as of September 30, 2006 and December 31, 2005	3
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2006 and 2005	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2006 and 2005	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	19
PART II: OTHER INFORMATION
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Submission of Matters to a Vote of Securities Holders	27
Item 5.	Other Information	27
Item 6.	Exhibits	28
	Signatures	29

Table of contents

		Page
Part I: financial information

Item 1.	Financial statements (unaudited):	3
	Condensed consolidated balance sheets as of June 30, 2007 and December 31, 2006	3
	Condensed consolidated statements of operations for the three and six months ended June 30, 2007 and 2006	4
	Condensed consolidated statements of cash flows for the six months ended June 30, 2007 and 2006	5
	Notes to condensed consolidated financial statements	6
Item 2.	Management’s discussion and analysis of financial condition and results of operations	13
Item 3.	Quantitative and qualitative disclosure about market risk	20
Item 4.	Controls and procedures	20

Part II: other information
Item 1.	Legal proceedings	20
Item 1A.	Risk factors	21
Item 2.	Unregistered sales of equity securities and use of proceeds	27
Item 3.	Defaults upon senior securities	27
Item 4.	Submission of matters to a vote of securities holders	28
Item 5.	Other information	28
Item 6.	Exhibits	28
	Signatures	29

Table of Contents

~~PART~~Part I~~. FINANCIAL INFORMATION~~

~~ITEM~~ViewSonic 1.Corporation ~~FINANCIAL~~and ~~STATEMENTS~~Subsidiaries

~~VIEWSONIC~~ Condensed ~~CORPORATION~~consolidated balance sheets

~~CONDENSED~~ June ~~CONSOLIDATED~~30, ~~BALANCE~~2007 ~~SHEETS~~and December 31, 2006

SEPTEMBER 30, 2006 AND DECEMBER 31, 2005

(in thousands, except share data and par value)	June 30,			December 31,
	2007			2006
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	72,964		$	69,079
Trade receivables, net		296,537			277,162
Other receivables		18,158			7,213
Inventories		191,640			194,049
Deferred income taxes		6,099			7,734
Prepaids and other current assets		6,727			3,670
Income taxes receivable		79			152
Total current assets		592,204			559,059
Property, plant and equipment, net		21,314			14,445
Long-term investments		118			237
Goodwill		1,347			1,347
Other assets, net		5,134			3,549
Total assets	$	620,117		$	578,637
Liabilites and stockholders' equity
Current liabilities:
Bank borrowings	$	19,012		$	307
Current portion of notes payable - related party		43,000			-
Accounts payable		408,352			388,554
Accrued promotional expenses		22,892			25,852
Accrued warranty expense		22,189			24,455
Other accrued expenses		27,874			32,446
Total current liabilities		543,319			471,614
Subordinated notes payable - related party		-			43,000
Deferred income taxes		4,307			-
Stockholders' equity:
Common stock, $.01 par value 600,000,000 shares authorized; 351,619,666 and 354,594,666 shares issued as of June 30, 2007 and December 31, 2006, respectively		3,516			3,546
Preferred stock, $.001 par value 22,800,000 shares authorized; 3,300,000 shares issued as of June 30, 2007 and December 31, 2006		3			3
Additional paid-in capital		92,645			94,181
Accumulated deficit		(21,964	)		(31,468	)
Accumulated other comprehensive loss		(1,709	)		(2,239	)
Total stockholders' equity		72,491			64,023
Total liabilities and stockholders' equity	$	620,117		$	578,637

(In thousands, except for share data and par value)

(Unaudited)

	September 30, 2006			December 31, 2005
ASSETS
Current assets:
Cash and cash equivalents	$	63,998		$	93,998
Trade receivables, net		241,491			145,982
Other receivables		8,212			7,013
Inventories		153,999			155,389
Deferred income taxes		3,977			3,194
Prepaids and other current assets		3,905			2,931
Income taxes receivable		83			761
Total current		475,665			409,268
Property, plant and equipment, net		14,689			12,929
Long-term investments		609			2,676
Goodwill		1,347			1,347
Other assets, net		1,353			6,505
Total assets	$	493,663		$	432,725
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank borrowings	$	—		$	4,852
Accounts payable		320,127			266,867
Accrued promotional expenses		22,847			22,663
Accrued warranty expense		24,877			21,350
Other accrued expenses		28,743			20,809
Total current liabilities		396,594			336,541
Subordinated notes payable — related party		43,000			43,000
Convertible mandatorily redeemable preferred stock		—			14,952
Stockholders’ equity:
Common stock, $.01 par value 600,000,000 shares authorized; 354,594,666 and 353,974,268 shares issued as of September 30, 2006 and December 31, 2005, respectively		3,546			3,540
Preferred stock, $.001 par value 50,000,000 shares authorized; 3,300,000 and 0 shares issued as of September 30, 2006 and December 31, 2005, respectively		3			—
Additional paid-in capital		94,137			93,716
Accumulated deficit		(40,961	)		(55,611	)
Accumulated other comprehensive loss		(2,656	)		(3,413	)
Total stockholders' equity		54,069			38,232
Total liabilities and stockholders’ equity	$	493,663		$	432,725

The accompanying notes are an integral part of these condensed consolidated financial statements.

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~~VIEWSONIC~~ViewSonic ~~CORPORATION~~Corporation and Subsidiaries

~~CONDENSED~~ Condensed ~~CONSOLIDATED~~consolidated ~~STATEMENTS~~statements OFof ~~OPERATIONS~~operations

SEPTEMBER 30, 2006 AND 2005

(in thousands, except share data)	For the Three Months					For the Six Months
	Ended June 30,					Ended June 30,
	2007			2006		2007			2006
Net sales	$	423,867		$	379,268	$	833,705		$	706,062
Cost of sales		388,510			349,070		765,000			645,648
Gross profit		35,357			30,198		68,705			60,414
Selling, general and administrative expenses		29,418			30,017		58,462			56,924
Income from operations		5,939			181		10,243			3,490
Other income (expense):
Interest (expense) income, net		(735	)		156		(899	)		313
Other income, net		1,532			285		1,706			1,621
Total other income, net		797			441		807			1,934
Income before income taxes		6,736			622		11,050			5,424
Provision for income taxes		792			97		1,136			1,323
Net income		5,944			525		9,914			4,101
Preferred stock accretion		-			-		-			(48	)
Net income available to common shareholders	$	5,944		$	525	$	9,914		$	4,053

Earnings per common share:
Basic	$	0.02		$	-	$	0.03		$	0.01
Diluted	$	0.02		$	-	$	0.03		$	0.01

Weighted averages shares used in per share calculations:
Basic		352,277			354,131		353,429			354,095
Diluted		359,439			360,749		360,209			360,757

(In thousands, except per share data)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
Net sales	$	426,445		$	316,678		$	1,132,507		$	875,208
Cost of sales		383,992			288,482			1,029,640			791,827
Gross profit		42,453			28,196			102,867			83,381
Selling, general and administrative expenses		29,979			25,154			86,903			80,278
Income from operations		12,474			3,042			15,964			3,103
Other income (expense):
Interest income (expense), net		(366	)		125			(53	)		54
Other, net		(651	)		(130	)		970			(3,736	)
Total other income (expense), net		(1,017	)		(5	)		917			(3,682	)
Income (loss) from continuing operations before income taxes		11,457			3,037			16,881			(579	)
Provision for income taxes		860			1,021			2,183			14,217
Income (loss) from continuing operations		10,597			2,016			14,698			(14,796	)
Net (loss) gain on disposal of discontinued operations, net of tax		—			(115	)		—			599
Net income (loss)		10,597			1,901			14,698			(14,197	)
Preferred stock accretion		—			(389	)		(48	)		(1,124	)
Net income (loss) available to common stockholders	$	10,597		$	1,512		$	14,650		$	(15,321	)
Basic earnings (loss) per share:
Continuing operations	$	0.03		$	—		$	0.04		$	(0.04	)
Discontinued operations	$	—		$	—		$	—		$	—
Total basic earnings (loss) per share	$	0.03		$	—		$	0.04		$	(0.04	)
Diluted earnings (loss) per share
Continuing operations	$	0.03		$	—		$	0.04		$	(0.04	)
Discontinued operations	$	—		$	—		$	—		$	—
Total diluted earnings (loss) per share	$	0.03		$	—		$	0.04		$	(0.04	)
Basic weighted average shares outstanding		354,326			353,970			354,173			353,967
Diluted weighted average shares outstanding		357,604			357,183			359,706			353,967

The accompanying notes are an integral part of these condensed consolidated financial statements.

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~~VIEWSONIC~~ViewSonic Corporation ~~CORPORATION~~and Subsidiaries

~~CONDENSED~~ Condensed ~~CONSOLIDATED~~consolidated ~~STATEMENTS~~statements OFof ~~CASH~~cash ~~FLOWS~~flows

SEPTEMBER 30, 2006 AND 2005

	Six months ended
(in thousands)	June 30,
	2007			2006
Cash flows from operating activities
Net income	$	9,914		$	4,101
Adjustments to reconcile net income to net cash used in operating activities:
Noncash gain from litigation settlement		(2,710	)		-
Depreciation and amortization		898			1,418
(Gain) loss on disposal of property, plant and equipment		(5	)		9
Provision for doubtful accounts		233			376
Net loss on sale and impairment of long-term investments		135			1,320
Deferred income taxes		2,631			(21	)
Stock-based compensation expense		134			111
Changes in operating assets and liabilities:
Trade receivables		(18,923	)		(19,764	)
Other receivables		(9,830	)		(808	)
Inventories		3,107			(15,933	)
Prepaids and other current assets		(3,000	)		(1,460	)
Accounts payable		18,352			9,310
Accrued promotional and other expenses		(5,725	)		9,268
Accrued warranty expense		(2,288	)		2,716
Income taxes payable/receivable		(1,893	)		280
Net cash used in operating activities		(8,970	)		(9,077	)
Cash flows from investing activities
Proceeds from sale of property, plant and equipment		9			14
Purchase of property, plant and equipment		(5,418	)		(669	)
Proceeds on sale of long-term investments		-			954
Proceeds on sale of short-term investments		-			7,544
Purchase of short-term investments		-			(15,213	)
Change in other assets		(963	)		-
Net cash used in investing activities		(6,372	)		(7,370	)
Cash flows from financing activities
Net proceeds from bank borrowings		18,645			4,213
Proceeds from issuance of common stock		9			61
Redemption of preferred stock		-			(15,000	)
Net cash provided by (used in) financing activities		18,654			(10,726	)
Effect of exchange rate changes on cash and cash equivalents		573			108
Net increase (decrease) in cash and cash equivalents		3,885			(27,065	)
Cash and cash equivalents at beginning of period		69,079			93,998
Cash and cash equivalents at end of period	$	72,964		$	66,933

Supplemental disclosure of non-cash investing activity:
In 2007, non-cash activity includes the reclassification of a $2.3 million deposit on a building made in 2006 from other assets to property, plant and equipment

(In thousands)

(Unaudited)

	Nine Months Ended September 30,
	2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing operations	$	14,698		$	(14,796	)
Adjustments to reconcile net income (loss) from continuing operations to net cash used in operating activities:
Depreciation and amortization		2,157			2,240
Loss on disposal of property, plant and equipment		4			1
Provision for doubtful accounts		384			475
Net loss on sale and impairment of long-term investments		1,934			21
Deferred income taxes		134			12,696
Stock-based compensation expense		161			1,523
Changes in operating assets and liabilities:
Trade receivables		(95,598	)		9,085
Other receivables		(1,166	)		(1,546	)
Inventories		1,670			20,387
Prepaids and other current assets		(375	)		(140	)
Accounts payable		52,886			(14,822	)
Accrued promotional and other expenses		8,225			(8,037	)
Accrued warranty expense		3,523			4,029
Income taxes payable/receivable		675			1,985
Net cash (used in) provided by operating activities		(10,688	)		13,101
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment		21			—
Purchase of property, plant and equipment		(931	)		(559	)
Proceeds from sale of long-term investments		1,277			376
Proceeds from sale of short-term investments		15,152			28,721
Purchase of short-term investments		(15,213	)		(26,465	)
Net cash provided by investing activities		306			2,073
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on bank borrowings		(4,920	)		(3,507	)
Proceeds from issuance of common stock		236			10
Proceeds from issuance of preferred stock		33			—
Redemption of preferred stock		(15,000	)		—
Net cash used in financing activities		(19,651	)		(3,497	)
CASH FLOW FROM DISCONTINUED OPERATIONS
Cash flow from operating activities		—			(1,116	)
Cash flow from investing activities		—			—
Cash flow from financing activities		—			—
Net cash used in discontinued operations		—			(1,116	)
Effect of exchange rate changes on cash and cash equivalents		33			(400	)
Net (decrease) increase in cash and cash equivalents		(30,000	)		10,161
Cash and cash equivalents at beginning of period		93,998			100,497
Cash and cash equivalents at end of period	$	63,998		$	110,658

The accompanying notes are an integral part of these condensed consolidated financial statements.

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~~VIEWSONIC~~ViewSonic ~~CORPORATION~~Corporation ~~AND~~and ~~SUBSIDIARIES~~Subsidiaries

~~NOTES~~ Notes TOto ~~CONDENSED~~condensed ~~CONSOLIDATED~~consolidated ~~FINANCIAL STATEMENTS~~financial statements

(~~Unaudited~~unaudited)

Note 1 - —Summary of ~~Significant~~significant ~~Accounting~~accounting ~~Policies~~policies

Basis of ~~Presentation~~ presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States for interim condensed consolidated financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X.

InThe ~~the opinion of management, the~~ accompanying unaudited condensed consolidated financial statements for ViewSonic Corporation and its subsidiaries (, or collectively, the “Company”), contain all adjustments, which are normal and recurring, necessary to present fairly the Company’s financial position as of ~~September~~ June 30, ~~2006~~2007 and the Company’s results of operations and cash flows for the three and ~~nine~~six months ended ~~September~~June 30, ~~2006~~ 2007 and ~~2005~~2006. The condensed consolidated balance sheet as of December 31, ~~2005~~ 2006 is derived from the December 31, ~~2005~~2006 audited consolidated financial statements.

The results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2006~~ 2007 are not necessarily indicative of the results to be expected for the full year. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements for the year ended December 31, ~~2005~~2006 and the notes thereto included in the Company’s Form 10-K filed with the Securities and Exchange Commission, (or the “SEC”), on ~~April~~March 316, ~~2006~~2007.

The ~~accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States. The~~ preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and ~~and~~ liabilities. Management bases its estimates on historical experience and other factors believed to be reasonable under the circumstances which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Revenue ~~Recognition~~recognition, ~~Warranty~~warranty and ~~Promotions~~ promotions

Revenues are recognized when ~~products~~the ~~are shipped and~~ risk of loss is transferred, persuasive evidence of an arrangement exists, the price is fixed or readily determinable and collectability ~~collectibility~~ is reasonably assured. The Company extends rights of return to its customers, which are accrued for based on estimated future returns determined by using estimates and historical experience.

The Company provides a variety of warranty programs worldwide, which are based on specific products and geographic locations. Accruals are provided for such estimated future costs at the time the product is sold,. ~~and~~Estimates ~~such~~are ~~amounts~~primarily ~~are~~ based ~~upon~~on historical experience and other available information.

The Company offers promotions such as rebates, price protection and other incentives to customers in the normal course of business. Accruals for these promotions are provided for based on estimates and historical experience. The costs of these promotions are offset against sales.

The Company's primary business practice is to have finished goods delivered from its contract manufacturers directly to the Company's regional warehouses, where they are stored for eventual shipment to its customers. However, the Company occasionally requests that its contract manufacturer ship finished goods directly to its customers. For vendor drop shipment sales, the Company retains title to the shipment from the time it leaves the contract manufacturer's port of choice until it reaches its destination.

Promotional ~~Pricing~~pricing ~~Incentives~~incentives from ~~Vendors~~ vendors

The Company receives promotional pricing incentives from its product vendors. The amount of the pricing incentives is based on various market factors including the volatility of pricing of key product components, market dynamics and the quantity of the Company’'s purchases from such vendors. The pricing incentives do not require the Company to commit to future component purchases from these vendors. The Company records the reimbursement from vendors for these promotional pricing incentives when the Company is released of the legal liability for the payment of the product purchases by the vendors. The benefit from pricing incentives related to products that have not been sold is deferred and recorded as a reduction of inventory cost. The benefit from pricing incentives related to products that have been sold is recorded as a reduction of the cost of sales.

Recent accounting pronouncements

In February 2007, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards, or SFAS, No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of FASB Statement No. 115 , or SFAS 159. SFAS 159 permits, but does not require, companies to report at fair value the majority of recognized financial assets, financial liabilities and firm commitments. Under this standard, unrealized gains and losses on items for which the fair value option is elected are reported in earnings at each subsequent reporting date. The Company is currently assessing the effect SFAS 159 may have, if any, on its financial statements when adopted on January 1, 2008.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, or SFAS 157, which provides guidance for using fair value to measure assets and liabilities. SFAS 157 clarifies that for items that are not actively traded, such as certain kinds of derivatives, fair value should reflect the price in a transaction with a market participant, including an adjustment for risk, not just the company's mark-to-model value. SFAS 157 also requires expanded disclosure of the effect on earnings for items measured using unobservable data and applies whenever other standards require (or permit) assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances. SFAS 157 will be effective for the Company beginning January 1, 2008. The Company is currently assessing the effect SFAS 157 may have, if any, on its financial statements when adopted on January 1, 2008.

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement 109, or FIN 48. It clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. Upon adoption on January 1, 2007, the Company recognized a $0.4 million increase to the January 1, 2007 accumulated deficit balance. In addition, consistent with the provisions of FIN 48, the Company reclassified $3.1 million of income tax liabilities from current to non-current liabilities because payment of cash is not anticipated within one year of the balance sheet date.

Table of Contents

~~Recent~~As ~~Accounting~~of January 1, ~~Pronouncements~~2007, the balance of gross unrecognized tax benefit was $4.4 million. To the extent these unrecognized tax benefits are ultimately recognized, they will impact the effective tax rate in a future period.

InThe ~~September~~Company ~~2006,~~has ~~the~~elected ~~Financial~~to ~~Accounting~~classify ~~Standards~~interest ~~Board~~expense ~~(“FASB”)~~related ~~issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements (“SFAS 157”), which provides guidance for using fair value~~ to ~~measure~~income ~~assets and~~tax liabilities., ~~SFAS~~when ~~157~~applicable, ~~clarifies~~as ~~that~~part ~~for~~of ~~items~~the ~~that~~interest ~~are~~expense ~~not~~in ~~actively~~its ~~traded,~~condensed ~~such~~consolidated asstatements ~~certain kinds~~ of ~~derivatives,~~operations ~~fair~~rather ~~value~~than ~~should~~income ~~reflect~~tax ~~the~~expense. ~~price~~The inCompany ~~a transaction~~will ~~with~~classify aincome ~~market~~tax ~~participant,~~penalties ~~including~~as anpart ~~adjustment~~of ~~for risk~~selling, ~~not just~~ ~~the~~general ~~company’s mark-to-model value. SFAS 157 also requires expanded~~and ~~disclosure~~administrative ofexpense ~~the~~in ~~effect~~its oncondensed ~~earnings~~consolidated ~~for~~statements ~~items~~of ~~measured using unobservable~~operations. ~~data and~~The ~~applies~~Company ~~whenever~~has ~~other~~less ~~standards~~than ~~require~~$0.1 million ~~(or~~of ~~permit)~~penalties ~~assets~~accrued orand ~~liabilities~~an toimmaterial beamount ~~measured~~of atinterest ~~fair~~expense ~~value~~accrued ~~but~~as ~~does not expand the use~~ of ~~fair~~June 30, ~~value~~2007. inNo ~~any new~~amount ~~circumstances.~~of ~~SFAS~~interest ~~157~~or ~~will~~penalties bewas ~~effective~~accrued ~~for~~as ~~the~~of ~~Company beginning~~ January 1, ~~2008. The Company is in the process of determining the effect, if any,~~ ~~this statement will have on its financial statements~~2007.

InThe ~~September~~Company ~~2006,~~operates ~~the~~in ~~Securities~~multiple ~~and~~tax ~~Exchange~~jurisdictions, ~~Commission~~both ~~(“SEC”)~~within ~~issued~~the ~~Staff~~United States ~~Accounting~~and ~~Bulletin~~outside ~~No.~~of ~~108~~the United States, ~~Considering~~and faces audits from various tax authorities regarding transfer pricing, the ~~Effects~~deductibility of ~~Prior~~certain ~~Year~~expenses, ~~Misstatements~~intercompany transactions ~~when~~as ~~Quantifying~~well ~~Misstatements~~as ~~in Current~~other ~~Year~~matters. ~~Financial~~In ~~Statements~~many cases the Company's uncertain ~~(“SAB~~tax ~~108”),~~positions ~~which~~are ~~provides~~related ~~guidance~~to ~~for~~tax ~~quantifying~~years ~~financial~~that ~~statement misstatements.~~remain ~~SAB~~subject ~~108 is~~to ~~effective~~examination ~~for~~ by the relevant ~~Company~~tax ~~beginning in 2006~~authorities. The Company is inno ~~the~~longer ~~process~~subject ofto ~~determining~~income ~~the~~tax examinations ~~effect,~~by iftax ~~any,~~authorities ~~this~~in ~~statement will have~~its onmajor ~~its~~tax ~~financial~~jurisdictions ~~statements.~~as follows:

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), which prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return. Additionally, FIN 48 provides guidance on derecognition, classification, accounting in interim periods and disclosure requirements for uncertain tax positions. FIN 48 will be effective for the Company beginning January 1, 2007. The Company is in the process of determining the effect, if any, this statement will have on its financial statements.


Tax jurisdiction		Tax years no longer subject to audit

United States		2002 and prior
United Kingdom		2004 and prior
Canada		2000 and prior
Germany		2000 and prior
France		2003 and prior
Taiwan		2002 and prior
China		2001 and prior

~~Reclassifications~~The Company's federal and certain non-U.S. income tax returns are currently under various stages of audit by applicable tax authorities and the amounts ultimately paid, if any, upon resolution of the issues raised by the tax authorities may differ materially from the amounts accrued for each year. It is possible that approximately $1.1 million of income tax liabilities related to uncertain intercompany transfer pricing items will be recognized as an income tax benefit in the next twelve months due to the closing of open tax years.

~~Interest~~In ~~expense~~May 2007, ~~and~~the ~~interest~~Financial ~~income~~Accounting ~~have~~Standards ~~been~~Board, ~~shown~~or ~~net~~FASB, ~~for~~issued ~~the~~FASB ~~three~~Staff Position ~~and~~No. ~~nine~~FASB ~~months~~Interpretation No. 48, Definition of Settlement in ~~ended~~FASB ~~September~~Interpretation 30No. 48, ~~2005~~or toFSP ~~conform~~FIN to48-1, ~~the~~which ~~three~~amends FIN 48 and ~~nine~~provides ~~months~~guidance ~~ended~~on ~~September~~how a company should determine whether a tax position ~~30,~~is ~~2006~~effectively ~~presentation~~settled onfor the ~~Condensed~~purpose ~~Consolidated~~of ~~Statements~~recognizing ofpreviously ~~Operations.~~unrecognized ~~Provision~~tax ~~for~~benefits. ~~doubtful~~This ~~accounts,~~FSP ~~proceeds~~clarifies ~~from~~that ~~the~~a ~~sale~~tax ofposition ~~short-term~~could be effectively ~~investments~~settled ~~and~~upon ~~purchase~~examination ofby ~~short-term~~a ~~investments~~taxing ~~have~~authority. ~~been~~In ~~shown~~determining ~~separately~~whether a ~~for~~tax position ~~the~~is ~~nine~~effectively ~~months~~settled, ~~ended~~companies ~~September~~should 30make the assessment on a position-by-position basis, ~~2005~~but toa ~~conform~~company tocould ~~the~~conclude ~~nine~~that ~~months~~all ~~ended~~positions in a particular tax year are effectively settled. The Company adopted ~~September~~the ~~30,~~provisions ~~2006~~of ~~presentation~~FSP FIN 48-1 on ~~the~~January ~~Condensed~~1, ~~Consolidated~~2007. ~~Statements~~The adoption did not have ~~of Cash~~a ~~Flows.~~material impact on the Company’s financial statements.

Note 2 - —Stock-~~Based Compensation~~ based compensation

On January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123(R), Share-Based Payment (“, or SFAS ~~123(R)”)~~ 123R, which revises Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, or (“SFAS 123”), supersedes Accounting Principles Board, (“or APB”), Opinion No. 25, Accounting for Stock Issued to Employees (“, or APB 25”), and amends Statement of Financial Accounting Standards No. 95, Statement of of Cash Flows (“, or SFAS 95”). Under SFAS ~~123(R)~~ 123R, the fair value of stock-based awards to employees must be estimated at the date of grant using an option pricing model and recognized as expense over the requisite service period for those awards that are ultimately expected to vest. Prior to the adoption of SFAS 123(R), the Company accounted for its stock-based awards under the provisions of SFAS 123 beginning in the second quarter of 2005 using the minimum value method to determine the fair value of its stock options. Prior to the second quarter of 2005, the Company accounted for its stock-based awards under the recognition and measurement principles of APB 25 and the disclosure only provisions of SFAS 123.

The Company adopted SFAS 123R ~~123(R)~~ using the prospective method. Under the ~~prospective~~ prospective method, prior periods are not revised for comparative purposes. Non-public companies that previously applied SFAS 123 using the minimum value method would continue to account for unvested stock options outstanding at the date of adoption in the same manner as they had been accounted for prior to ~~adoption.~~ adoption. All awards granted, modified or settled after the date of adoption are ~~accounted~~ accounted for using the measurement, recognition and attribution provisions of ~~SFAS~~ ~~123(R)~~SFAS 123R.

Stock ~~Option~~option ~~Activity~~activity

The Company has two employee stock plans: the 1999 Stock Plan, (or the “1999 Plan”) , and the 2004 Equity Incentive Plan, (or the “2004 EIP”). Upon approval of the 2004 EIP, the 1999 Plan was terminated (except for all options previously granted and outstanding under such plan). The 2004 EIP provides for the granting of stock options to eligible employees and non-employee directors. Options granted under this plan are granted at an exercise price equal to the fair market value of the Company’'s common stock on the date of grant, vest over three or four years and expire ten years after their original date of grant. As the Company’'s common stock is not publicly traded, the fair market value of the Company’'s common stock is approved by the Company’'s Board of Directors based on various information, assumptions and factors. As of ~~September~~June 30, ~~2006~~2007, there were 1811.3 1 million shares available for future grants under the 2004 EIP.

On February 2, 2007, the Compensation Committee of the Board of Directors approved the Long Term Incentive Program Summary of Terms, or the Program. Members of our executive management team and other key members of senior management designated by the Compensation Committee are eligible to participate in the Program. The Compensation Committee established the achievement of revenue and net income targets as the Performance Targets under the Program.

Participants in the Program were each granted non-statutory stock options under the 2004 Equity Incentive Plan at an exercise price of $0.54 per share, the fair market value of the Company’s common stock as determined in good faith by the Compensation Committee on February 2, 2007. A maximum number of 5.4 million shares are eligible for vesting under the Program if both Performance Targets are achieved at the 150% level. The maximum number of shares is referred to as the Maximum Award. The portion of the stock option in which a participant could potentially vest if 100% of the Performance Targets are achieved is referred to as the Target Award.

The Program requires the achievement of at least 100% of the Performance Targets for fiscal year 2007 as a minimum threshold before any of the shares subject to the stock options vest. The vesting of the stock option is contingent upon the participant's continued service though the applicable vesting date and is subject to specified change in control and other conditions. The achievement of the Performance Targets will be at the sole discretion of the Compensation Committee and shall be determined by the Compensation Committee after the completion of the fiscal year 2007 audit, which we refer to as the Determination Date. If the minimum threshold is not achieved, the stock options will be automatically cancelled and forfeited in their entirety. On the Determination Date, the stock option award, known as the Eligible Award, will be determined by multiplying the Target Award by the percentage of achievement of the Performance Targets (a range of between 100% and 150% based on the levels achieved against both the Performance Targets). The Eligible Award will vest 33¹/3% on the Determination Date, 33¹/3% on February 2, 2009 and 33¹/3% on February 2, 2010. The difference between the Maximum Award and the Eligible Award, if any, shall be forfeited and cancelled on the Determination Date.

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~~The~~On ~~table~~July ~~below~~18, ~~summarizes~~2007, the Compensation Committee of the Board of Directors determined to modify the vesting of stock options granted to participants in the Program such that all or a portion of the stock option ~~activity~~subject ~~under~~to the ~~Company’s~~Target ~~1999~~Award ~~Plan~~and Maximum Award will vest as to 33 1/3% on the February 2, 2008, 33 1/3% on February 2, 2009 and 33 1/3% on February 2, 2010.A total of 3.7 million ~~2004~~shares ~~EIP:~~were modified. The performance criteria for the vesting of the remaining 1.7 million of stock options were not changed. The modification is not expected to have a material impact on the Company’s financial statements.

	Number of Shares (in thousands)			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (in years)
Outstanding at December 31, 2005		27,626		$	0.38
Granted		220		$	0.45
Exercised		(621	)	$	0.38
Canceled		(3,172	)	$	0.38
Outstanding at September 30, 2006		24,053		$	0.38		5.53
Exercisable at September 30, 2006		20,287		$	0.38		4.97

The table below summarizes the stock option activity under the Company's 1999 Plan and 2004 EIP:

The total intrinsic value of options exercised during the three and nine months ended September 30, 2006 was $32,000 and $43,000. Total cash received from the exercise of employee stock options was $175,000 and $236,000 for the three and nine months ended September 30, 2006.

						Weighted
						average
				Weighted		remaining
	Number of			average		contractual
	shares			price		term
	(in 000s)			per share		(in years)
Outstanding at December 31, 2006		25,341		$	0.40
Granted		7,260			0.55
Exercised		(25	)		0.38
Cancelled		(1,283	)		0.39
Outstanding at June 30, 2007		31,293		$	0.43		6.37
Exercisable at June 30, 2007		20,272			0.38		4.74

The ~~following~~total intrinsic ~~table~~value ~~summarizes~~of ~~information for~~ options outstanding as of ~~September~~June 30, 2007 was $5.6 million. Total cash received from the exercise of employee stock options was $9,500 for the six months ended June 30, ~~2006:~~2007.

Range of Exercise Prices	Number of Options Outstanding (in thousands)		Weighted- Average Remaining Contractual Term (in years)		Weighted- Average Exercise Price		Options Exercisable (in thousands)
$0.38		23,346		5.42	$	0.38		20,264
$0.45		707		9.21	$	0.45		23

The following table summarizes information for options outstanding as of June 30, 2007:

Valuation and Expense Recognition of Stock-Based Awards under SFAS 123(R)

			Weighted
			average
	Number of		remaining		Weighted		Number of
	options		contractual		average		options
	outstanding		term		exercise		exercisable
Range of exercise prices	(in 000s)		(in years)		per share		(in 000's)
$0.38		21,297		4.88	$	0.38		19,966
$0.45		667		8.47	$	0.45		252
$0.54		7,444		9.57	$	0.54		54
$0.57		1,885		9.87	$	0.57		-

~~For~~Valuation ~~the three~~ and ~~nine months ended September 30, 2006, stock-based compensation~~ expense ~~for~~ ~~employee~~recognition ~~stock~~of ~~options recognized was $50,000 and $161,000, respectively. No income tax benefit related to~~ stock-based ~~compensation~~awards ~~expense was recognized~~under ~~for the three and nine months ended September 30, 2006.~~SFAS 123R

~~The~~For the three and six months ended June 30, 2007, stock-based compensation expense for employee stock options recognized was $74,000 and $134,000, respectively. No income tax benefit related to stock-based compensation expense was recognized for the three and six months ended June 30, 2007. The Company used the Black-Scholes option-pricing model to estimate the fair value of employee stock options. The determination of fair value using the Black-Scholes option-pricing model is affected by the fair market value of the Company’'s common stock as well as the use of certain highly subjective estimates and assumptions including expected stock price volatility, risk-free interest rate, expected dividends and projected employee stock option exercise behaviors.

All option awards were valued as a single award and amortized on a straight-line basis over the requisite service period. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions for the ~~nine~~periods ~~months ended September 30, 2006~~indicated:

Expected volatility		52	%
	Six months ended June 30,
Risk-free interest rate		5.0	%
	2007			2006
Expected dividend yield		0	%
Expected volatility		46.1	%		52.0	%
Expected option life (in years)		6.25
Risk-free interest rate		4.7	%		5.0	%
Weighted average fair value of stock options granted (per share)	$	0.25
Expected dividend yield		0	%		0.0	%
Expected option life (in years)		6.07			6.25
Weighted average fair value of stock options granted per share	$	0.28		$	0.25

Upon adoption of SFAS ~~123(R)~~ 123R, the Company changed its expected volatility ~~calculation~~ calculation to use an average of the expected volatilities of similar entities ~~whose~~ whose shares are publicly traded. In determining similarity of entities, the ~~Company~~ Company considered various factors including the industry, life cycle, size and financial leverage of such entities. The Company believes this method provides a more accurate estimate of stock price volatility over the expected life of the stock option awards. Prior to the adoption of SFAS ~~123(R)~~ 123R, the Company used the minimum value method to estimate the fair value of its stock options. ~~Under~~ ~~the~~Under the minimum value method, expected volatility is omitted ~~and thus fair value calculated under this method is not comparable to one based on fair value~~.

The risk-free interest rate assumption is based on observed interest rates for the expected option life of the Company’'s stock options. The expected dividend yield assumption is based on the Company’'s expectation of future dividend payouts. The Company has never declared or paid any cash dividends on its common stock and currently does not anticipate paying such cash dividends. The Company used the simplified method for its expected option life assumption as allowed by SEC Staff Accounting Bulletin No. 107, Share-Based Payment.

SFAS 123R requires stock-based compensation expense to be recognized only for those stock options that are ultimately expected to vest. An estimate of forfeiture rate must be made and applied at the time of grant and revised in subsequent periods on a cumulative basis in the period of revision. The Company considered various factors including its actual historical experience of pre-vesting option forfeitures bifurcated by employee groups as the basis to arrive at an estimated average annual forfeiture rate of 4.4% for the six months ended June 30, 2007.

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~~SFAS~~As ~~123(R) requires stock-based compensation expense to be recognized only for those stock options that are ultimately expected to vest. An estimate~~ of ~~forfeiture~~ ~~rate~~June ~~must~~30, be2007, ~~made and applied at~~ the ~~time~~remaining ofamount ~~grant and revised in subsequent periods on a cumulative basis in the period~~ of ~~revision.~~unrecognized ~~The~~compensation ~~Company~~cost ~~considered~~related ~~various factors including its actual historical experience of pre-vesting~~to ~~option forfeitures~~employee ~~bifurcated~~stock byoptions ~~employee~~was ~~groups~~$2.3 million, aswhich ~~the~~is ~~basis~~expected to ~~arrive~~be ~~at an estimated~~recognized ~~average~~over ~~annual~~a ~~forfeiture~~weighted ~~rate~~average period of 42.~~7% for the nine months ended September 30, 2006~~9 years.

AsNote 3—Comprehensive of September 30, 2006, the remaining amount of unrecognized compensation cost related to employee stock options was $168,000, which is expected to be recognized over a weighted average period of 2.6 years. income

Accounting for Stock Options for Periods Prior to Fiscal 2006

In the second quarter of 2005, the Company adopted the fair value based method of accounting for stock-based compensation in accordance with the expense recognition provisions of SFAS 123 using the modified prospective method. Stock-based compensation expense for the three and nine months ended September 30, 2005 was $94,000 and $366,000, respectively, and was estimated using the minimum value method as permitted under SFAS 123 to determine the fair value of stock options. There was no share-based compensation expense recognized during the three months ended March 31, 2005 as the Company accounted for its employee stock option plans under the recognition and measurement principles of APB 25 and the disclosure only provisions of SFAS 123. Because the Company has historically granted at-the-money stock options with no intrinsic value on the date of grant, no compensation expense was recognized for stock options prior to the second quarter of 2005.

On May 9, 2005, the Company re-priced all outstanding stock options held by its employees, executive officers and members of the Board of Directors of record on March 2, 2005. As a result, the exercise price of the Company’s outstanding stock options subject to the re-pricing was lowered to $0.38 per share, the estimated fair value on that date, resulting in stock option expense of $1.1 million. The re-pricing was implemented in order to realign the cash and equity components of the Company’s compensation programs for employees, executive officers and directors.

Note 3 - Long-Term Investments

The Company’s long-term investments include both publicly traded and privately held companies. None of the Company’s investments represent ownership of more than 20% of the respective companies. For the Company’s publicly traded investments, the Company follows the provisions of Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities, and accounts for such investments as available-for-sale. Unrealized holding gains or losses are recorded in other comprehensive income/loss, net of tax. The Company accounts for its privately held investments under the cost method. When events dictate, the Company performs an impairment analysis to determine whether the loss, if any, is other than temporary. Impairment on investments totaled $0.5 million and $1.5 million for the three and nine months ended September 30, 2006, respectively. During the three and nine months ended September 30, 2006, the Company reduced its positions in certain long-term investments and recognized realized losses of $0.1 million and $0.4 million, respectively.

Note 4 - Comprehensive Income

Comprehensive income includes foreign currency translation gains and losses and unrealized gains and losses on marketable securities classified as available for sale. The following table sets forth the calculation of comprehensive income for the periods indicated (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	Three Months Ended June 30,								Six Months Ended June 30,
	2006			2005			2006			2005
	2007				2006				2007				2006
Net income (loss)	$	10,597		$	1,901		$	14,698		$	(14,197	)
Net income	$	5,944			$	525			$	9,914			$	4,101
Foreign currency translation		~~(119~~430	)		~~(254~~	)111		82		530	~~(104~~	)		201
Unrealized holding (losses) gains on marketable securities, less realized gains		~~247~~-			~~(634~~	)(163	)	~~675~~		-	~~150~~			428
Net change in other comprehensive (loss) income		128			(888	)		757			46
Total comprehensive income	$	6,374			$	473			$	10,444			$	4,730
Total comprehensive income (loss)	$	10,725		$	1,013		$	15,455		$	(14,151	)

Note 4—Income ~~5 - Income Taxes~~taxes

~~The~~Income ~~Company~~taxes ~~recorded~~are adetermined ~~non-cash~~using ~~charge~~an ofestimated ~~$13.7~~annual ~~million~~effective totax ~~establish~~rate. aThe ~~valuation~~provision ~~of allowance~~for ~~against~~income ~~its~~taxes ~~net~~is ~~deferred~~less than the 35% U.S. ~~based~~federal ~~income~~statutory ~~tax~~rate ~~assets during the~~primarily ~~second~~due to ~~quarter~~lower oftax ~~2005.~~rates Inin ~~addition,~~certain ~~the~~non-U.S. jurisdictions. The Company has valuation ~~allowances~~ allowances against its deferred income taxes in ~~all~~the United States and all foreign jurisdictions other than its foreign ~~subsidiary~~subsidiaries in Taiwan. and China. The valuation allowances have been calculated pursuant to Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, or (“SFAS 109”), which requires an assessment of both positive and negative evidence when measuring the need for a valuation allowance. Such evidence includes the Company’'s past and projected future performance, the market environment in which the Company operates, the utilization of past tax credits and the length of the carry-back and carry-forward periods of net operating losses. The Company intends to maintain a valuation allowance until sufficient positive evidence as contemplated by SFAS 109 exists in future periods.

Pursuant to Accounting Principles Board Opinion No. 23, Accounting for Income Taxes-Special Areas, or APB 23, the Company does not provide for federal income taxes or tax benefits on the undistributed earnings associated with the non-U.S. operations. In the event some or all of the earnings were distributed to the U.S. entity, some portion of the distribution would be subject to both U.S. income taxes and foreign withholding taxes. However, foreign tax credits may become available to reduce or eliminate the U.S. income tax liability.

Deferred taxes have not been provided on the excess book basis of shares of certain foreign subsidiaries in the amount of $38 million as of June 30, 2007 because such basis differences are not expected to reverse in the foreseeable future. These basis differences arose primarily through undistributed book earnings of the Company’s subsidiaries. The basis differences could reverse through a sale of the subsidiaries, the receipt of dividends from the subsidiaries, as well as various other events. It is not practical to calculate the residual income tax which would result if these basis differences reversed due to the complexities of U.S. tax rules and regulations and the hypothetical nature of the calculations.

Note 5—Commitments and contingencies

Lease Commitments

In January 2007, the Company entered into a lease agreement for 298,050 square feet of office space at its existing principal office location in Walnut, California. The term of the lease commences on July 1, 2007 and runs through July 2014, subject to extension at the Company's option under certain circumstances. The future minimum lease payments required under this operating lease are $0.4 million in 2007, $1.5 million in 2008, $1.6 million in 2009, $1.6 million in 2010, $1.7 million in 2011 and $4.6 million thereafter.

In February 2007, the Company entered into a lease agreement for office space in London, United Kingdom. This lease expires in September 2018. The future minimum lease payments required under this operating lease are $0 for the remainder of 2007, $0.9 million in 2008, $1.0 million in 2009, $1.0 million in 2010, $1.0 million in 2011, and $7.6 million thereafter. Rent expense for the three and six months ended June 30, 2007 was $0.1 million and $0.3 million, respectively.

Litigation

The Company is involved in various legal matters in the normal course of its business. While the outcome of these proceedings and claims cannot be predicted with certainty, the Company believes that the ultimate outcome of such matters will not harm its business, financial position, results of operations or cash flows.

On May 19, 2003, Commissariat a L'Energie Atomique, or CEA, filed a patent suit against Chi-Mei Optoelectronics Corporation, or CMO, Dell Computer Corporation, Samsung Electronics Co., Ltd., Samsung Electronics America, Inc., Samsung Electronics Canada, Inc., Samsung International, Inc., Sun Microsystems, Inc., and ViewSonic Corporation in the U.S. District Court, District of Delaware (Case No. CV-03-484 KAJ), alleging infringement of two patents relating to the design and manufacture of LCD modules. The Company believes the allegations against it are based upon its incorporation of certain third-party LCD modules into its products. The Company has filed a motion to stay, which has been granted. While the outcome of this case cannot be predicted with certainty, the Company does not believe that the outcome will harm its business, financial position, results of operations or cash flows.

On May 27, 2004, LG. Philips LCD Co. Ltd., or LPL, filed a patent suit against Tatung Company, Tatung Company of America, Inc., and ViewSonic Corporation in the U.S. District Court, District of Delaware (Case No. CV-04-343 JJF), alleging infringement of two patents relating to the mounting of LCD panels. Trial will not be held before March 8, 2008. While the outcome of this case cannot be predicted with certainty, the Company does not believe that the outcome will harm its business, financial position, results of operations or cash flows.

On July 27, 2006, the jury in the trial of LG. Philips LCD Co. Ltd. v. Tatung Company, Tatung Company of America, Inc., Chunghwa Picture Tubes Ltd., and ViewSonic Corporation, pending in U.S. District Court, District of Delaware, (Case No. 05-292-JJF) delivered a verdict finding that each of the defendants, including the Company, had willfully infringed (through the doctrine of equivalents) a LPL patent relating to electrostatic discharge. The jury awarded monetary damages of $52.5 million against Chunghwa Pictures Tubes Ltd., or CPT, only. LPL has requested that the Court treble the damages based upon the finding of willful infringement, which could result in an additional $105 million in exemplary damages being awarded against CPT if the jury verdict is upheld. Since there is no damage award against the Company, there can be no exemplary damages awarded against the Company. If the jury verdict is upheld, the Court may, in its discretion, award attorneys’ fees to LPL and some portion of the attorneys’ fees may be charged against the Company. LPL also filed a motion seeking a permanent injunction but this motion was taken off calendar by the judge, who indicated he would not request completion of the briefing on that motion until he had ruled on the other post-trial motions challenging various aspects of the jury’s verdict and that are currently under submission. The patent-in-suit expires in July 2008. While the expiration date of the patent may weigh against entry of an injunction when that issue is taken up by the Court, it is still possible that an injunction will be entered. If an injunction is entered, it may require the Company to, among other things, change its sourcing of certain LCD displays or key components. While the outcome of these post-trial proceedings cannot be predicted with certainty, the Company does not believe that the outcome will harm its business, financial position, results of operations or cash flow.

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~~Note~~On 6November 21, 2006, the jury in the trial of LG. Philips LCD Co. Ltd. v. Tatung Company, Tatung Company of America, Inc., and Chunghwa Picture Tubes Ltd. pending in the U.S. District Court, Central District of California, (Case No. CV-02-6775 ~~Commitments~~CBM) delivered a verdict finding that each of the defendants (the Company is not a defendant) had willfully infringed two patents of LPL's relating to the design and ~~Contingencies~~manufacture of LCD modules. The parties to the case have briefed post-trial motions challenging various aspects of the jury's verdict and these motions have been taken under submission by the Court. However, the Company is a defendant in the related case, LPL v. ViewSonic Corporation, also pending in the U.S. District Court, Central District of California (Case No. CV-03-2886 CBM), in which LPL alleges infringement of the same patents asserted in Case No. CV-02-6775 CBM above as a result of the Company’s incorporation of CPT LCD's into its products. The Company’s suit had been consolidated with the CPT case for pre-trial purposes, during which infringement claims directed to four other LPL patents have been dismissed. The dismissals may be overturned on appeal. No trial date has been set in Case No. CV-03-2886 CBM and none is expected to be set as the patent issues have already been heard by the jury in the CPT case (Case No. CV-02-6775 CBM). If an injunction is entered against the CPT LCD panels, the Company may be required to change its sourcing of certain LCD displays. While the outcome of the post-trial proceedings in Case No. CV-02-6775 cannot be predicted with certainty, the Company does not believe that the outcome will harm its business, financial position, results of operations or cash flows.

~~Litigation~~On -December 1, ~~The~~2006, LPL filed a patent suit against CMO, AU Optronics Corporation, or AUO, AU Optronics Corporation America, Tatung Company, isTatung Company ~~involved~~of inAmerica, Inc. ~~various~~and ~~legal~~ViewSonic ~~matters~~Corporation in the ~~normal~~U.S. ~~course~~District Court, District of ~~its~~Delaware, alleging infringement of the same three LPL ~~business~~patents that were found to be valid and infringed in the two cases referenced above, i.e., ~~While~~CV-02-6775 and 05-292 JJF. Presumably, as with the ~~outcome~~other LPL suits identified above, the allegations against the Company are based upon its incorporation of ~~these~~certain ~~proceedings~~third-party LCD modules into its products. The Company has filed a motion for a more definite statement and ~~claims~~motions ~~cannot~~to bedismiss ~~predicted~~and ~~with~~/or strike ~~certainty~~the claims asserted in this case, ~~management~~as ~~believes~~well ~~that~~as a motion to stay the litigation ~~ultimate~~as to the Company. While the outcome of ~~such~~this ~~matters~~case cannot ~~will~~be ~~not~~predicted ~~have~~with acertainty, ~~material~~the ~~adverse~~Company ~~effect~~does onnot believe that the ~~condensed~~outcome will harm ~~consolidated~~its business, financial position, results of operations or cash ~~statements~~flows.

~~Four~~In of2007, the ~~Company’s~~Federal ~~stockholders~~Communications ~~filed a purported derivative action against James Chu~~Commission, or the ~~Company’s Chairman and Chief Executive Officer~~FCC, notified ~~and~~ the Company on ~~April~~that ~~17,~~it ~~2006~~was ininvestigating ~~the~~whether ~~United States District Court for~~ the ~~Central~~Company ~~District of California.~~may ~~The~~have ~~complaint~~violated ~~alleged,~~certain ~~among other things, that Mr. Chu breached~~FCC ~~various~~rules ~~fiduciary~~governing ~~duties~~the byimportation ~~personally~~and ~~investing~~shipment ~~in certain~~ of ~~the~~television ~~Company’s~~receivers lacking ~~suppliers, thereafter directing~~ the ~~Company’s contracts to these suppliers~~ ~~and~~required ~~failing~~digital totelevision ~~disclose~~receiving ~~such actions~~capability. In ~~Plaintiffs~~response ~~sought~~to ~~actual and punitive~~the ~~damages,~~FCC ~~attorneys’ fees~~inquiry, ~~costs,~~the ~~disgorgement~~Company ofhas ~~alleged~~provided ~~profits~~the ~~made~~FCC bywith ~~Mr.~~information regarding ~~Chu, a declaratory judgment against Mr~~this matter. ~~Chu~~While ~~for~~it ~~alleged~~is ~~breaches~~not ofpossible ~~various fiduciary~~to ~~duties~~predict ~~and an injunction prohibiting~~ the ~~award~~outcome ofwith ~~contracts~~certainty, tothe ~~suppliers~~Company indoes ~~which~~not ~~Mr.~~believe ~~Chu~~that orthe ~~his~~outcome ~~relatives~~will ~~have~~harm aits ~~financial~~business, ~~interest. On~~financial ~~October 11~~position, ~~2006,~~results ~~plaintiffs~~of ~~voluntarily~~operations ~~dismissed~~or ~~the~~cash ~~complaint without prejudice~~flows.

~~On July 27~~Laws, ~~2006, the jury in the trial of LG~~ ~~Philips~~Regulations ~~LCD Co. Ltd., (“LPL”) v. Tatung Company, Tatung Company of America, Inc., Chungwa Picture Tubes Ltd. (“CPT”),~~ and ~~ViewSonic~~ Corporation, pending in United States District Court, District of Delaware, (Case No. 05-292-JJF) delivered a verdict finding that each of the defendants, including the Company, had willfully infringed (through the doctrine of equivalents) a patent of LPL’s relating to electrostatic discharge. The jury awarded monetary damages of $52.5 million against CPT only. Although there is no monetary award against the Company, the finding of willful infringement, if upheld, may subject the Company to certain other relief including an award of some portion of LPL’s attorneys fees and/or exemplary damages as well as injunctive relief which may require the Company to, among other things, change its sourcing of certain LCD displays or key components. The Court has not entered judgment in the case. Instead, the Court has entered a briefing schedule for defendants’ motions challenging various aspects of the jury’s verdict. While the outcome of these post-trial proceedings cannot be predicted with certainty, the Company does not believe that the outcome will have a material adverse effect on its condensed consolidated financial statements.Directives

~~Imposition~~The ofCompany ~~Additional~~is ~~Duties~~subject to local laws and ~~Taxes— The~~regulations in the various regions in which the Company operates, including the United States and the European Union, or (EU. In the “United States the Company is subject to rules enforced by the FCC regarding televisions containing high-definition tuners. The FCC has notified the Company that importation declarations indicate that it may have violated certain FCC rules with respect to the transition requirements for selling televisions containing high-definition tuners and may be subject to fines. The Company must also comply with two particular EU”) directives. ~~issued~~The ~~notices~~first ~~stating~~is the Restriction of Certain Hazardous Substances Directive, or RoHS, that ~~effective~~restricts ~~January~~the 18distribution of certain substances, including lead, within the EU. The RoHS directive became effective July 1, 2006. In addition to specifying the elimination and/or reduction in the level of specified hazardous materials from the manufacture of the Company's products, the ~~LCD~~Company ~~monitors~~must take reasonable measures to ensure that it is not being supplied with aproducts ~~digital~~containing ~~video~~the ~~interface~~restricted ~~(“DVI”)~~chemical ~~connector~~substances. The Company worked with suppliers to ensure that it met the July 1, ~~would~~2006 implementation ~~incur~~date and today must continue to work with suppliers to aensure ~~14%~~it ~~import~~meets ~~duty~~its ~~tax~~continuing obligation that products placed on the market from July 1, 2006 are RoHS compliant products. To ~~date~~The second directive is the Waste Electrical and Electronic Equipment Directive, ~~this~~or ~~change~~WEEE, inthat became effective ~~classification~~on ~~has~~August 13, ~~been~~2005, and requires manufacturers or importers to ~~applied~~provide ~~prospectively~~a process of recycling all of its manufactured products or imports into the EU. Certain EU countries adopted WEEE on August 13, 2005. The majority of EU countries into which the Company's ~~believes~~European itregion sells its products have now adopted the legislation. Certain countries have still to implement the WEEE directive. Certain countries, for example the United Kingdom and Spain, qualify the Company as a producer and allow the Company to register as a producer and join a compliance program. Where this is ~~reasonably~~the ~~possible~~case, ~~but~~ViewSonic Europe Limited has registered as a producer and has joined a compliance program thus complying with its obligations under WEEE. In other countries which do not ~~probable~~allow the Company to register or where the Company does not qualify as a producer, the Company has taken steps to ensure that its distributors and resellers, to whom the ~~tariff~~WEEE compliance ~~could~~responsibility befalls, ~~applied~~are ~~retroactively~~in compliance with WEEE. The Company does not believe that the continuing compliance with these directives will have a material effect on the Company’s business; however, failure to comply with its obligations under these directives may have a material effect on the Company’s business.

~~Laws, Regulations and Directives~~ Note 6—Business ~~The~~ Company is subject to local laws and regulations in the various regions in which the Company operates, including the EU. There are two particular EU directives that may have a material impact on the Company’s business. The first is the Restriction of Certain Hazardous Substances Directive (“RoHS”) that restricts the distribution of certain substances, including lead, within the EU and is effective July 1, 2006. In addition to specifying the elimination and/or reduction in the level of specified hazardous materials from the manufacture of the Company’s products, the Company must take reasonable measures to ensure that it is not being supplied with products containing the restricted chemical substances. The Company is working with suppliers to ensure that products placed on the market from July 1, 2006 are RoHS compliant products. The second directive is the Waste Electrical and Electronic Equipment Directive (“WEEE”) that became effective on August 13, 2005, and requires manufacturers or importers to provide a process of recycling all of its manufactured products or imports into the EU. Certain EU countries adopted WEEE on August 13, 2005. The majority of EU countries into which the Company’s European region sells its products have adopted the legislation with the exception of France and the United Kingdom. Many of those countries that adopted WEEE in August 2005 have not published regulations nor issued legislation with respect to a manufacturer or importer’s obligations. The Company is currently unable to assess the impact of these directives on the Company’s operations until more information becomes available, but at this time, the Company does not believe that these regulations will have a material impact on the Company’s business.segments

~~Income~~During ~~Tax~~the ~~Contingencies~~fourth quarter of 2006, the Company realigned its operating segments under a new methodology to allocate certain corporate overhead expenses and corporate benefits associated with its initiative to source LCD panels directly from the manufacturers to its operating segments. In accordance with SFAS No. —131, Disclosures about Segments of an Enterprise and Related ~~The~~Information, the Company has ~~recorded~~determined ait $3has three reportable segments: Americas, EMEA (Europe, Middle-East and Africa) and Asia-Pacific.1 ~~million~~The ~~liability~~Company believes ~~related~~that tothis ~~certain~~segment ~~tax~~information provides useful information for analyzing ~~positions~~the underlying business results. The ~~resolution~~Company ofsells ~~such~~similar ~~income~~products ~~tax~~in ~~contingencies~~its segments, isincluding ~~not~~LCD ~~expected~~displays, CRT displays, projectors, and LCD TVs. toThe type ~~have~~and anclass ~~adverse~~of ~~material~~customers, ~~effect~~primarily ondistributors and resellers, are also similar across the product lines. The Company’'s ~~condensed~~management ~~consolidated~~evaluates the ~~financial~~performance ~~statements~~of and allocates resources to its segments based on net sales and operating income. Assets and liabilities are not allocated by segment for management reporting purposes.

~~Note~~The 7following -segment ~~Business~~financial ~~Segments~~information is for the periods indicated. The following segment information for the three and six months ended June 30, 2006 has been recast to conform to the current year presentation (in thousands):

In accordance with SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, the Company has three reportable segments: Americas, Europe and Asia Pacific. The Company sells similar products in its segments, including CRT displays, LCD displays, projectors, HDTV technology and the latest in mobile products including wireless products. The type and class of customers, primarily distributors and retailers, are also similar across the product lines. The Company’s management evaluates the performance of and allocates resources to its segments based on net sales and operating income. Assets are not segregated by segment for management reporting purposes.

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The following table summarizes segment financial information for the three and nine months ended September 30, 2006 and 2005 (in thousands):

	Three months ended June 30,						Six months ended June 30,
($ in thousands)	2007			2006			2007			2006
Net sales:
Americas	$	186,027		$	187,445		$	378,727		$	340,385
EMEA		70,527			70,414			157,494			143,679
Asia-Pacific		167,313			121,409			297,484			221,998
	$	423,867		$	379,268		$	833,705		$	706,062

Income (loss) from operations⁽¹⁾:
Americas	$	1,632		$	3,364		$	1,642		$	7,131
EMEA		(1,022	)		(3,740	)		49			(7,653	)
Asia-Pacific		5,608			2,660			8,965			6,136
Other ⁽²⁾		(279	)		(2,103	)		(413	)		(2,124	)
	$	5,939		$	181		$	10,243		$	3,490

	Three Months Ended September 30,				Nine Months Ended September 30,
	2006		2005		2006			2005
Net Sales:
Americas	$	192,638	$	138,769	$	533,023		$	393,784
Europe		97,241		77,418		240,920			209,051
Asia Pacific		136,566		100,491		358,564			272,373
Total	$	426,445	$	316,678	$	1,132,507		$	875,208
Income (loss) from operations:
Americas	$	5,468	$	254	$	14,069		$	(8,376	)
Europe		3,390		1,218		(3,877	)		4,377
Asia Pacific		3,616		1,570		5,772			7,102
Total	$	12,474	$	3,042	$	15,964		$	3,103

(1)	2007 includes gains related to the settlement of commercial litigation of $1.8 million, $1.5 million and $0.4 million in our Americas, EMEA and Asia-Pacific region, respectively.

~~Note 8~~(2) -Includes ~~Warranty~~certain ~~Liability~~corporate expenses that were not allocated to a specific segment for management reporting purposes.

~~The Company provides product warranty programs on a worldwide basis that vary in term from 12 to 36~~Note months. The length of the warranty period and the specific warranty coverage are based on the type of product. The Company accrues for estimated warranty costs at the time the product is sold. Estimates are primarily based on historical experience and other available information. The historical data used in estimating the warranty accrual includes the following key factors: net cost of repair (repair costs less reimbursements from suppliers), defect rates and total number of products under warranty.7—Warranty

The ~~following~~Company ~~table~~provides ~~summarizes~~product ~~activity~~warranty programs on a worldwide basis that vary in term from 12 to 36 months. The length of the ~~Company’s~~warranty period and the specific warranty ~~liability~~coverage ~~for~~are based on the type of product. The Company ~~nine~~accrues for ~~months~~estimated ~~ended~~warranty ~~September~~costs ~~30,~~at ~~2006~~the time the product is sold. Estimates are primarily based on historical experience and ~~2005~~other (available information. The historical data used in ~~thousands~~estimating the warranty accrual includes net cost of repair (repair costs less reimbursements from suppliers):, defect rates and total number of products under warranty.

Nine Months Ended September 30,	Beginning Accrued Warranty Liability		Additions Charged to Expenses		Payments for Units Returned			Adjustments(1)			Ending Accrued Warranty Liability
2006	$	21,350	$	15,585	$	(9,765	)	$	(2,293	)	$	24,877
2005	$	17,365	$	12,246	$	(8,833	)	$	595		$	21,373

The following table summarizes activity in the Company's warranty liability for the six months ended June 30, 2007 and 2006 (in thousands):

(1) For the nine months ended September 30, 2006, the adjustment is primarily due to lower defect rates, partially offset by higher cost of repair.

	Beginning										Ending
	accrued		Additions		Payments						accrued
	warranty		charged to		for units						warranty
Six months ended June 30,	liability		expense		returned			Adjustments⁽¹⁾			liability
2007	$	24,455	$	10,057	$	(8,475	)	$	(3,848	)	$	22,189
2006	$	21,350	$	10,520	$	(7,304	)	$	(486	)	$	24,080

~~Note 9~~(1) -The ~~Earnings~~2007 ~~Per~~adjustment ~~Share~~was primarily due to lower defect rates experienced across all operating segments. In addition, lower repair costs and favorable changes in repair pattern have further reduced the Company's estimated liabilities.

~~The~~Note 8—Earnings ~~Company presents both basic and diluted earnings (loss)~~ per ~~common~~ share (“EPS”) amounts. Basic EPS is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted EPS amounts are based upon the weighted-average number of common and potential common shares, including warrants outstanding during the period.

~~Potential~~The Company presents both basic and diluted earnings per common share, or EPS, amounts. Basic EPS is calculated by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted EPS amounts are based upon the weighted-average number of common and potential common shares, including warrants outstanding during the period. Potential common shares are excluded from the computation in periods in which they have an anti-dilutive effect. The Company uses the treasury stock method to calculate the impact of outstanding stock options. Stock options for which the exercise price exceeds the average fair market value over the period have an anti-dilutive effect on EPS and, accordingly, are excluded from the calculation. On January 10, 2006, the Company redeemed all 7.5 million outstanding ~~shares~~ shares of ~~Series~~ Series B Preferred Stock and excluded such shares as it had an ~~insignificant~~ insignificant impact on the Company’'s 2006 earnings per share calculations.

The basic and diluted EPS was calculated in accordance with EITF 03-06, Participating Securities and the Two Class Method under SFAS No. 128 ~~(“EITF 03-06”)~~. The following is a reconciliation of the numerators and denominators of the basic and diluted net income ~~(loss)~~ per common share computations (in thousands, except per share data):

	Three months ended June 30,				Six months ended June 30,
	2007		2006		2007		2006
Net income ⁽¹⁾	$	5,889	$	525	$	9,822	$	4,053

Weighted average number of shares issued		352,277		354,131		353,429		354,095
Stock options ⁽²⁾		7,162		3,391		6,780		3,435
Interest warrants ⁽³⁾		-		3,227		-		3,227
Diluted shares		359,439		360,749		360,209		360,757

Earnings per common share:
Basic	$	0.02	$	-	$	0.03	$	0.01
Diluted	$	0.02	$	-	$	0.03	$	0.01

______________________________________

(1)

In accordance with EITF 03-06, net income includes the accretion for the mandatorily redeemable preferred stock. The EPS calculation reflects the allocation of net income between common stock and preferred stock. Net income of $55,000 and $92,000 were allocated to preferred stock for the three and six months ended June 30, 2007, respectively, and have been excluded from the computation above.

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	Three Months Ended September 30,					Nine Months Ended September 30,
	2006		2005			2006		2005
Basic EPS:
Numerator:
Income (loss) from continuing operations (1)	$	10,507	$	1,627		$	14,608	$	(15,920	)
Income (loss) from discontinued operations	$	—	$	(115	)	$	—	$	599
Denominator - Weighted-average shares outstanding		354,326		353,970			354,173		353,967
Basic EPS:
Continuing operations	$	0.03	$	0.00		$	0.04	$	(0.04	)
Discontinued operations	$	—	$	0.00		$	—	$	0.00
Total Basic EPS	$	0.03	$	0.00		$	0.04	$	(0.04	)
Diluted EPS:
Numerator:
Income (loss) from continuing operations (1)	$	10,507	$	1,627		$	14,608	$	(15,920	)
Income (loss) from discontinued operations	$	—	$	(115	)	$	—	$	599
Denominator:
Weighted-average shares outstanding		354,326		353,970			354,173		353,967
Stock options(2)		3,278		—			3,382		—
Interest warrants(3)		—		3,213			2,151		—
Total shares		357,604		357,183			359,706		353,967
Diluted EPS:
Continuing operations	$	0.03	$	0.00		$	0.04	$	(0.04	)
Discontinued operations	$	—	$	0.00		$	—	$	0.00
Total Diluted EPS	$	0.03	$	0.00		$	0.04	$	(0.04	)

(2) For the three and six months ended June 30, 2007, 8.5 million shares and 7.0 million shares, respectively, were excluded from the diluted earnings per common share calculation because they were anti-dilutive. For the three and six months ended June 30, 2006, 0 shares were excluded from the diluted earnings per common share calculation because they were anti-dilutive.

(13) ~~In accordance with EITF 03-06, income (loss) from continuing operations includes~~ For the ~~accretion~~three ~~for~~and ~~the~~six months ~~mandatorily~~ended ~~redeemable preferred stock. Income from continuing operations of $90~~June 30,~~000~~ ~~and $42~~2007,~~000~~ ~~was~~there ~~allocated~~were tono ~~preferred~~warrants outstanding. ~~stock~~For ~~for~~ the three and ~~nine~~six months ended ~~September~~ June 30, 2006, 7.5 million ~~respectively,~~shares ~~and~~of iscommon ~~excluded~~stock inissuable upon the ~~computation~~exercise ~~above.~~of outstanding ~~The~~warrants ~~EPS~~were ~~calculation~~excluded ~~reflects~~from the ~~allocation~~diluted ofearnings ~~income~~per ~~from~~share calculation ~~continuing~~because ~~operations~~they ~~between~~were ~~common stock and preferred stock~~anti-dilutive.

~~(2)~~Note 9—Related party For the three and nine months ended September 30, 2006, 0.7 million shares and 0.6 million shares, respectively, were excluded from the diluted earnings per common share calculation because they were anti-dilutive. For the three and nine months ended September 30, 2005, all stock options were excluded from the diluted earnings per common share calculation because they were anti-dilutive.transactions

~~(3)~~The Company ~~For~~sells ~~the~~inventory ~~three~~to ~~and~~several ~~nine~~related ~~months ended September 30~~parties, ~~2006,~~which ~~common~~include ~~stock~~a ~~issuable~~company where ~~upon~~an ~~the~~officer ~~exercise~~is ofrelated ~~outstanding~~to ~~warrants~~the ofprincipal 0stockholder.8 ~~million~~Net ~~and~~sales ~~5.2~~to ~~million,~~these related ~~respectively,~~parties were ~~excluded~~approximately ~~from~~$6.4 ~~the~~million ~~diluted~~and ~~earnings per share calculation because they were anti-dilutive~~$13.0 ~~For~~million ~~the~~for the three and ~~nine~~six months ended ~~September~~June 30, ~~2005~~2007, ~~common~~respectively. ~~stock~~The ~~issuable~~Company ~~upon~~had ~~the exercise~~ receivables of approximately ~~outstanding warrants of 7~~$2.58 million and 10$0.84 million, ~~respectively,~~from ~~were~~these ~~excluded~~related ~~from~~parties ~~the~~at June 30, ~~diluted~~2007 ~~earnings~~and ~~per~~December 31, ~~share~~2006, ~~calculation~~respectively, ~~because~~which ~~they~~are ~~were~~included ~~anti-dilutive~~in other receivables.

~~Note~~As 10of June 30, -2007, ~~Convertible~~the ~~Mandatorily~~Company ~~Redeemable~~had ~~Preferred~~subordinated ~~Stock~~notes payable to trusts for the benefit of the children of its principal stockholder and ~~Warrants~~related entities. The subordinated notes payable are not callable until the expiration date, April 12, 2008. The amount outstanding at June 30, 2007 and December 31, 2006 was $43.0 million. The interest rate on the subordinated notes payable was 3.97% for the three and six months ended June 30, 2007. Interest ~~Convertible~~expense ~~Series~~related Cto ~~Preferred~~this ~~Stock~~amount totaled $0.4 million and $0.9 million for the three and six months ended June 30, 2007, respectively. The Company may be required to make payment on the subordinated notes payable due on April 12, 2008. The Company believes that its existing cash balances, credit facilities and anticipated cash flows from operations will be sufficient to meet its obligations.

~~On January~~Note 10~~, 2002, the Company entered into a Series B Preferred Stock~~—Stockholders’ Exchange and Warrant Purchase Agreement (the "Exchange Agreement") with Intel Capital Corporation, a Cayman Islands company (“Intel”). Under the Exchange Agreement, Intel paid an additional $5.0 million, bringing the total cash paid to $15.0 million. The exchange was made for the 3.7 million shares of Series A Preferred Stock originally issued to Intel and related warrants. As consideration for the exchange, the Company issued 7.5 million shares of Series B mandatorily redeemable convertible preferred stock, par value of $.001 per share (the "Series B Stock") to Intel. Each share of Series B Stock was convertible into one share of common stock or redeemable for cash for $2.00 per share on January 10, 2006. In connection with such issuance, the Company granted to Intel 3.3 million Interest Warrants and 7.5 million Valuation Warrants to purchase Series C Preferred Stock (par value of $.001 per share). The Interest Warrants vested on January 10, 2006, have an exercise price of $.01 per share and 3.3 million were exercised on July 7, 2006. The Valuation Warrants were immediately vested, have an exercise price of $2.00 per share and 7.5 million expired on July 10, 2006. On January 10, 2006, the Company redeemed its outstanding Series B Stock for $15.0 million, representing the full redemption price for such Series B Stock. As of September 30, 2006, a total of 18.0 million shares of Series C Preferred Stock were authorized and 3.3 million shares were outstanding.equity

~~The~~On ~~Series~~April 20, C2007, ~~Preferred~~the ~~Stock~~Company isentered ~~convertible~~ into ~~the~~a ~~Company’s~~settlement ~~common~~agreement ~~stock~~with ata ~~any~~former vendor ~~time~~related ~~on a one-~~to~~-one~~ ~~ratio~~litigation ~~based~~over ~~upon~~certain acontractual ~~conversion~~rights ~~price~~and ~~initially~~obligations ~~set at~~related ~~$2.00~~to ~~per~~commercial ~~share~~matters. The ~~conversion~~former ~~ratio~~vendor ~~may~~agreed beto ~~adjusted~~pay ~~upon~~ViewSonic ~~the issuance of additional shares of common stock at an issue price that is less than the initial~~ $2.000 million ~~conversion price of the Series C Preferred Stock, subject to certain exceptions.~~and ~~The~~return ~~Series~~3,000,000 Cshares ~~Preferred~~of ~~Stock~~its ~~shall automatically convert into the Company’s~~ common stock ~~upon~~with ~~the occurrence of certain events including an initial public offering under certain restrictions, or~~ a ~~majority~~fair ~~vote~~value byof ~~the~~$1.7 ~~holders of~~million ~~Series~~in Cconnection ~~Preferred~~with ~~Stock~~the settlement. ~~Each~~During ~~holder of~~ the ~~Series~~three Cmonths ~~Preferred~~ended ~~Stock~~June is30, ~~entitled~~2007, tothe ~~voting~~Company ~~rights~~recognized ~~under~~a ~~applicable law~~$3.7 Inmillion ~~addition,~~gain ~~our certificates~~ of ~~incorporation~~ ~~possess certain protective provisions~~ which ~~require~~$3.0 ~~the~~million ~~consent~~was recorded ofin ~~the~~cost ~~holders~~ of ~~Series~~sales Cand ~~Preferred Stock~~$0.7 ~~The~~million ~~holders~~included ofin ~~Series C Preferred Stock are entitled to receive dividends~~selling, ~~when~~general and ~~if declared by the Board of~~administrative ~~Directors~~expenses. During ~~Such~~the ~~dividends~~three ~~will~~months beended ~~non-cumulative.~~June No30, ~~dividends will be payable~~2007 the ~~on the~~ Company’s ~~common~~received ~~stock unless equal or greater dividends have been declared and paid to~~ the ~~holders~~3,000,000 shares of ~~the~~common ~~Series~~stock, Cwhich ~~Preferred~~were ~~Stock. The Series~~returned Cto ~~Preferred~~authorized ~~Stock~~but ~~has~~unissued astatus, ~~liquidation~~and ~~preference of~~ $21.600 ~~per~~million ~~share,~~in ~~plus~~cash ~~any declared~~ and ~~unpaid~~as ~~dividends.~~of ~~Upon~~June ~~a liquidation~~30, ~~dissolution or winding~~ ~~up of~~2007 ~~the~~has ~~Company,~~recorded ~~the~~$1.0 ~~holders~~million ~~of the Company’s common stock and C Preferred Stock shall participate~~ in ~~the~~other ~~remaining~~receivables ~~assets~~on of the Company’s ~~on a pro rata~~condensed ~~basis~~consolidated balance sheet.

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~~ITEM 2. MANAGEMENT~~Management'Ss discussion ~~DISCUSSION~~and ~~AND~~analysis ~~ANALYSIS~~of ~~OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~financial

~~The~~ condition ~~following discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933~~ and Section 21E of the Securities Exchange Act of 1934, which are subject to the "safe harbor" created by those sections. These forward-looking statements include but are not limited to: statements related to industry trends and future growth in the markets for visual display technology products; our product development efforts; the timing of our introduction of new products; industry and consumer acceptance of our products; and future profitability. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of ~~this document. The “Risk Factors” section, among other things, should be considered in evaluating our prospects and future financial performance.~~operations

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and related notes in Part I, Item 1 of this Quarterly Report on Form 10-Q. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. You should review the Part II, Item 1A. "Risk factors" for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements described in the following discussion and analysis.

In this report, all references to “ViewSonic,” ”we,” “us,” or “our” mean ViewSonic Corporation and our subsidiaries.

Our ~~Company~~ company

ViewSonic Corporation is a leading global provider of visual display ~~technology~~ products. We develop, market and support a broad range of ~~display~~innovative ~~technology~~ products, including liquid crystal display, (“or LCD”), monitors, ~~cathode~~LCD ~~ray tube (“CRT”) monitors~~TVs, projectors, ~~LCD~~digital ~~TVs~~signage displays and other ~~the~~display ~~latest~~products. We were founded in ~~mobile~~1987 ~~products~~and ~~including~~have a 20 year history ~~wireless~~of ~~monitors.~~providing ~~Our~~innovative ~~ViewSonic~~products ~~branded~~with ~~products~~market ~~are~~leading ~~sold~~technologies. ~~through~~We ~~distributors,~~sell ~~retailers~~our products ~~and~~to ~~other~~businesses ~~resellers~~and toconsumers ~~businesses~~through ~~including~~a ~~Fortune~~variety ~~1000~~of ~~companies~~channels, including ~~small~~distributors and ~~medium~~resellers ~~sized~~such ~~businesses~~as ~~and~~solution ~~consumer~~providers, ~~electronics~~value ~~markets.~~added ~~We sell~~resellers, ~~our products~~traditional ~~globally~~retailers and ~~our~~Internet ~~sales~~retailers. We are ~~managed~~a ~~geographically~~Fortune in1000 ~~three regional~~company, ~~segments:~~and our ~~the~~products ~~Americas,~~are ~~Europe~~sold ~~and~~in ~~Asia~~over ~~Pacific.~~100 countries.

~~Recent~~Our ~~Trends~~strategy is to effectively leverage our scale, strong global brand, close supplier and channel relationships and market knowledge to introduce industry leading products and penetrate new markets. We collaborate with a network of world class component suppliers and contract manufacturers to deliver a wide array of display products for use in ~~Our~~a ~~Business~~variety of consumer and commercial applications. We believe our operating model allows us to quickly develop, introduce and ramp new products while maintaining an efficient cost structure.

~~During~~Financial ~~the~~operations third quarter of 2006, the display industry continued to experience competitive pressures in terms of declining average selling prices (“ASPs”) and margin compression. However, unlike the first half of 2006, we began to experience spot shortages of display panels for some LCD sizes. This was primarily due to an increase in demand in excess of LCD panel production capacities. The implementation of key initiatives to improve our supply chain and logistics efficiency, simplify our business processes to maximize operating efficiencies, grow sales in regional markets and expand core product offerings continued to positively impact our margins. While product costs began to increase during the third quarter of 2006, we benefited from lower cost inventories that were purchased during the second quarter of 2006. Our initiative to source LCD panels directly from manufacturers also continued to benefit us resulting in higher margins and profitability. We believe this sourcing initiative has brought us closer to the supply base so that we can keep abreast of recent market trends and supply cycles and has allowed us to consolidate our LCD panel purchasing power. By means of this key component sourcing initiative, we hope to be less vulnerable to the instability that is inherent in the LCD monitor industry. We believe that spot shortages for some LCD sizes will continue through the fourth quarter of 2006.overview

WeIn ~~sold~~the ~~2.2~~second ~~million~~quarter of 2007, the display ~~products~~industry began to experience shortages in certain ~~the~~LCD ~~third~~panel ~~quarter~~sizes ofresulting ~~2006~~in an ~~compared~~increase toin 1panel prices.5 These ~~million~~shortages ~~display~~occurred ~~products~~despite slower than expected end user demand for LCD monitors. This resulted in higher product costs and reduced margins compared to the ~~third~~first quarter of ~~2005~~2007. ~~The~~Despite ~~display~~these ~~industry~~challenges, our operating profits ~~continues~~increased to$5.8 ~~experience~~million over the prior year as a ~~shift~~result ~~from~~of ~~older~~sales ~~technologies~~growth, increased ~~such~~leverage asin ~~CRT~~our selling, togeneral and administrative expenses, and ~~newer~~our ~~technologies,~~initiative ~~such~~to assource LCD, aspanels ~~well~~directly asfrom amanufacturers. ~~broadening~~We ofwere ~~applications~~able to grow ~~from~~sales PCin regional markets by enhancing our core product offerings across ~~monitors~~our todisplay ~~TVs~~portfolios and implementing ~~other~~strategic ~~digital~~pricing strategies. We ~~media~~continue ~~applications~~to look for opportunities to optimize our business processes in order to maximize operating efficiencies. ~~Unit~~We ~~sales~~believe ofour initiative to source LCD ~~displays~~panels directly from manufacturers has brought us closer to the supply base allowing us to more closely monitor market trends and supply cycles, and consolidate our LCD ~~TVs~~panel ~~grew~~purchasing ~~83%~~power. The benefits derived from our sourcing initiative are impacted by market conditions such as periods of oversupply and ~~93%~~rapidly dropping average selling prices, ~~respectively~~or ASPs. For example, in ~~the~~periods ~~third~~of ~~quarter~~oversupply, the benefits of ~~2006~~LCD panel purchases ~~compared~~are greater towhile ~~the~~our ~~third~~ASPs ~~quarter~~generally decrease. In periods of ~~2005~~short supply those benefits decline, ~~while~~but ~~sales~~the ofASPs ~~CRT~~generally ~~monitors~~increase. We ~~declined~~believe ~~35%~~this sourcing initiative will help us to decrease the overall tovolatility ~~0.2~~of ~~million~~our ~~units~~gross inmargins over time, although we are unable to anticipate the ~~third~~degree ~~quarter~~to ofwhich ~~2006~~we ~~from~~will 0realize these benefits.4 ~~million~~While ~~units~~end user demand infor LCD monitors continues to be slow, we believe that panel prices will continue to increase over at least the next several months, resulting in ~~third~~increasingly ~~quarter~~challenging ofmarket ~~2005~~conditions.

~~Our~~Total ~~net sales~~unit shipments increased ~~$109~~22.89% ~~million,~~in orthe ~~34.7%,~~second toquarter ~~$426.4~~of ~~million~~2007 incompared ~~the third~~to ~~quarter~~the ofsecond ~~2006~~quarter ~~from~~of ~~$316~~2006.7 ~~million~~The indisplay ~~the~~industry ~~third~~continues ~~quarter~~to ofexperience ~~2005 despite~~ a ~~3% decline~~shift ~~in average~~from ~~selling~~older ~~prices.~~technologies, ~~Income~~such ~~from~~as ~~operations~~cathode ~~increased~~ray ~~$9.4~~tube, ~~million~~or CRT, to newer ~~$12.5 million~~technologies, insuch ~~the~~as ~~third~~LCD, ~~quarter~~as well as a broadening of ~~2006~~applications from ~~$3.0~~PC monitors ~~million~~to inTVs ~~the~~and ~~third~~other ~~quarter of 2005~~digital media products. ~~The~~Unit ~~increase~~shipments ~~was~~of ~~primarily~~our ~~the~~LCD monitors, ~~result~~LCD ofTVs, ~~higher~~and ~~gross~~projectors ~~margin~~grew of35.4%, 134.1%, and 64.7%, respectively, ~~percentage~~in the ~~points~~second ~~and~~quarter ~~increased~~of ~~leverage~~2007 incompared ~~our~~to ~~selling,~~the ~~general~~second ~~and~~quarter of 2006, while ~~administrative~~shipments ~~expenses~~of ~~which~~our ~~were~~CRT 7monitors declined 47.15% ~~of net sales~~ in the second ~~third~~ quarter of 2007 ~~2006~~ compared to 7the second quarter of 2006.9% The ASPs of ~~net~~our ~~sales~~LCD monitors declined 11.2% in the ~~third~~second quarter of ~~2005~~2007 compared to the second quarter of 2006.

Net sales increased $44.6 million, or 11.8%, to $423.9 million in the second quarter of 2007 from $379.3 million in the second quarter of 2006. The increase was primarily due to an increase in sales in Asia and Latin America and expansion of core product offerings across our LCD monitor and projector product lines. Income from operations increased $5.8 million to $5.9 million in the second quarter of 2007 from $0.2 million in the second quarter of 2006. This increase was due to an increase in net sales, higher gross margins of 8.3% in the second quarter of 2007 compared to 8.0% in the second quarter of 2006 and increased leverage in our selling, general and administrative expenses as a percentage of net sales, which decreased to 6.9% in the second quarter of 2007 compared to 7.9% in the second quarter of 2006.

In April 2007, we entered into a settlement agreement with a former vendor related to commercial litigation. The former vendor agreed to pay us $2.0 million and return 3,000,000 shares of our common stock with a fair value of $1.7 million in connection with the settlement. During the second quarter of 2007, we recognized a $3.7 million gain of which $3.0 million was recorded in cost of sales and $0.7 million was recorded in selling, general and administrative expenses. During the second quarter of 2007, we received the 3,000,000 shares of common stock and $1.0 million in cash and as of June 30, 2007 had recorded $1.0 million in other receivables on our condensed consolidated balance sheet.

Results of operations

Comparison of the three months ended June 30, 2007 and 2006

The following table sets forth our condensed consolidated statements of operations for the periods indicated ($ in thousands):

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RESULTS OF OPERATIONS

	Three months ended June 30,
						Increase (decrease)
	2007			2006			$		%
Net sales	$	423,867		$	379,268	$	44,599		11.8	%
Cost of sales⁽¹⁾		388,510			349,070		39,440		11.3
Gross profit		35,357			30,198		5,159		17.1
Selling, general and administrative expenses⁽¹⁾		29,418			30,017		(599	)	(2.0	)
Income from operations		5,939			181		5,758		3181.2
Other income (expense):
Interest (expense) income, net		(735	)		156		(891	)	*
Other income (expense), net		1,532			285		1,247		437.5
Total other income (expense), net		797			441		356		80.7
Income from continuing operations before income taxes		6,736			622		6,114		983.0
Provision for income taxes		792			97		695		716.5
Net income		5,944			525		5,419		1032.2
Preferred stock accretion		-			-		-		*
Net income available to common stockholders	$	5,944		$	525	$	5,419		1032.2	%

* Percentage not meaningful.

~~The following~~(1) ~~table~~2007 ~~sets~~includes ~~forth~~$3.0 ~~our~~million ~~Condensed~~and ~~Consolidated~~$0.7 ~~Statements~~million of ~~Operations expressed~~gains asin acost ~~percentage~~ of ~~net~~ sales ~~for~~and selling, general and administrative, respectively, related to the ~~periods~~settlement ~~indicated:~~of commercial litigaton.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		90.0			91.1			90.9			90.5
Gross profit		10.0			8.9			9.1			9.5
Selling, general and administrative expenses		7.1			7.9			7.7			9.2
Income (loss) from operations		2.9			1.0			1.4			0.3
Other income (expense):
Interest income (expense), net		(0.1	)		(0.2	)		—			(0.2	)
Other income (expense) net		(0.1	)		0.2			0.1			(0.2	)
Total other income (expense), net		(0.2	)		—			0.1			(0.4	)
Income (loss) from continuing operations before income taxes		2.7			1.0			1.5			(0.1	)
Provision for income taxes		0.2			0.3			0.2			1.6
Income (loss) from continuing operations		2.5			0.7			1.3			(1.7	)
Net gain on disposal of discontinued operations, net of tax		—			—			—			0.1
Net income (loss)		2.5			0.7			1.3			(1.6	)
Preferred stock accretion		—			(0.1	)		—			(0.1	)
Net income (loss) available to common stockholders		2.5	%		0.6	%		1.3	%		(1.7	)%

The following table sets forth our condensed consolidated statements of operations expressed as a percentage of net sales for the periods indicated:

The following table compares net sales and income (loss) from operations by segment for the periods indicated (in thousands):

	Three months ended June 30,⁽¹⁾
	2007			2006
Net sales		100.0	%		100.0	%
Cost of sales		91.7			92.0
Gross profit		8.3			8.0
Selling, general and administrative expenses		6.9			7.9
Income from operations		1.4			-
Other income (expense):
Interest (expense) income, net		(0.2	)		-
Other income (expense), net		0.4			0.1
Total other income (expense), net		0.2			0.1
Income from continuing operations before income taxes		1.6			0.2
Provision for income taxes		0.2			-
Net income		1.4			0.1
Preferred stock accretion		-			-
Net income available to common stockholders		1.4	%		0.1	%

(1) May not total due to rounding differences.

	Three Months Ended September 30,									Nine Months Ended September 30,
					Increase/(Decrease)											Increase/(Decrease)
	2006		2005		$		%			2006			2005			$			%
Net sales:
Americas	$	192,638	$	138,769	$	53,869		38.8	%	$	533,023		$	393,784		$	139,239			35.4	%
Europe		97,241		77,418		19,823		25.6	%		240,920			209,051			31,869			15.2	%
Asia Pacific		136,566		100,491		36,075		35.9	%		358,564			272,373			86,191			31.6	%
Total	$	426,445	$	316,678	$	109,767		34.7	%	$	1,132,507		$	875,208		$	257,299			29.4	%
Income (loss) from operations:
Americas	$	5,468	$	254	$	5,214		2052.8	%	$	14,069		$	(8,376	)	$	22,445			268.0	%
Europe		3,390		1,218		2,172		178.3	%		(3,877	)		4,377			(8,254	)		(188.6	%)
Asia Pacific		3,616		1,570		2,046		130.3	%		5,772			7,102			(1,330	)		(18.7	%)
Total	$	12,474	$	3,042	$	9,432		310.1	%	$	15,964		$	3,103		$	12,861			414.5	%

Net sales

Net ~~Sales~~sales increased $44.6 million, or 11.8%, to $423.9 million in the second quarter of 2007 from $379.3 million in the second quarter of 2006. The increase was primarily due to increases in LCD, LCD TV and projector unit shipments partially offset by lower CRT unit shipments and declines in our ASPs of 9.1% across all product categories in the second quarter of 2007 compared to the second quarter of 2006. The ASPs of our LCD monitors declined 11.2% in the second quarter of 2007 compared to the second quarter of 2006. The decline in ASPs reflects the effects of competition, slow end user demand, and regional and product mix.

~~Our~~Total ~~consolidated~~unit ~~net~~shipments ~~sales~~ increased ~~$109~~22.~~8 million, or 34.7~~9%, toin ~~$426.4 million for~~ the ~~third~~second quarter of ~~2006~~2007 ~~from~~compared ~~$316.7 million for the third quarter of~~to ~~2005. Net sales increased $257.3 million, or 29.4%, to $1,132.5 million for~~the ~~first~~second ~~nine~~quarter ~~months~~ of 2006 ~~from $875~~.~~2 million~~ ~~for the first nine months of 2005.~~ The increase was primarily due to ~~increased~~strong ~~LCD and LCD TV~~ unit ~~sales~~shipments ~~of 83.0%~~in ~~and~~our ~~93.2%,~~Asia-Pacific ~~respectively,~~segment and ~~for~~continued ~~the~~expansion ~~third~~in ~~quarter~~Latin ~~of 2006 compared to~~America, ~~the third quarter of 2005~~Russia, China and ~~81.1%~~other ~~and~~Asian ~~95.1%,~~markets ~~respectively,~~driven ~~for~~by ~~the~~strategic ~~first~~marketing ~~nine~~efforts. ~~months~~Unit shipments of ~~2006~~our ~~compared~~LCD tomonitors, ~~the~~LCD ~~first~~TVs, ~~nine~~and ~~months~~projectors ofgrew ~~2005~~35. ~~In addition~~4%, ~~sales~~34.1%, ~~of our~~and ~~LCD~~64.7%, ~~TVs~~respectively, ~~experienced~~in ~~relatively higher ASPs during~~ the ~~first~~second ~~nine~~quarter ~~months~~ of ~~2006~~ 2007 compared to the ~~first nine months of 2005 due to a shift in mix to larger~~second ~~LCD~~quarter TVof ~~sizes.~~2006, ~~These~~while ~~increases~~shipments ~~were~~of ~~partially~~our ~~offset by lower~~ CRT ~~unit~~monitors ~~sales of 35.4%~~declined ~~and 35~~47.65% ~~for~~in the second ~~third~~ quarter of ~~2006~~2007 compared to the ~~third~~second quarter ~~of 2005~~ ~~and for the first nine months~~ of 2006. ~~compared~~Of to the ~~first nine months~~display ~~of 2005,~~products ~~respectively.~~shipped ~~In addition, we continued to experience declines~~ in ~~ASPs within~~ the ~~LCD~~second ~~and~~quarter ~~CRT~~of ~~product~~2007, ~~categories~~LCD ~~for~~monitors ~~the~~accounted ~~third quarter and first~~for ~~nine~~82.5% ~~months~~and ofall ~~2006~~other ~~compared~~products toaccounted ~~the~~for ~~third~~17.5% ~~quarter~~of ~~and~~units ~~first~~shipped ~~nine~~as ~~months~~compared ~~of 2005.~~to ~~The~~74.9% ~~decline~~and in25.1%, ~~the~~respectively, ~~ASPs~~in ~~reflects~~ the ~~effects~~second quarter of ~~competition and reduced costs associated with advances in visual display technology~~2006.

WeCost ~~sold 2.2 million visual display products in the third quarter~~ of 2006 compared to 1.5 million visual display products in the third quarter of 2005 and 5.7 million visual display products in the first nine months of 2006 compared to 4.3 million visual display products in the first nine months of 2005. The increase in units sold was primarily due to strong unit sales across all of our segments driven by our strategic marketing efforts and continued expansion in China and other Asian markets. Of the visual display product units sold in the third quarter of 2006, LCDs accounted for 80.9%, CRTs accounted for 10.7% and other products accounted for 8.4% as compared to 60.7%, 23.2%, and 16.1%, respectively, in the third quarter of 2005. Of the visual display product units sold in the first nine months of 2006, LCDs accounted for 75.8%, CRTs accounted for 13.8% and other products accounted for 10.4% as compared to 55.0%, 28.4%, and 16.6%, respectively, in the first nine months of 2005.

Cost of sales increased $39.4 million, or 11.3%, to $388.5 million in the second quarter of 2007 from $349.1 million in the second quarter of 2006. As a percentage of net sales, cost of sales decreased to 91.7% in the second quarter of 2007 from 92.0% in the second quarter of 2006. The decrease in cost of sales as a percentage of net sales was primarily due to a $3.0 million gain related to the settlement of commercial litigation, and lower freight and warranty expenses. Product costs as a percentage of net sales were 88.3% in the second quarter of 2007 compared to 88.2% in the second quarter of 2006. Gross margin increased to 8.3% in the second quarter of 2007 from 8.0% in the second quarter of 2006.

Selling, general, and administrative expenses

Selling, general and administrative expenses decreased $0.6 million, or 2.0%, to $29.4 million in the second quarter of 2007 from $30.0 million in the second quarter of 2006. The decrease was primarily due to lower selling and marketing expenses of $1.3 million, lower incentive compensation of $1.3 million, and a $0.7 million gain related to the settlement of commercial litigation, partially offset by an increases in personnel-related costs of $2.1 million due to higher headcount, an increase in account development fund expenses of $0.5 million and an increase in other costs of $0.1 million. As a percentage of net sales, selling, general and administrative expenses decreased to 6.9% in the second quarter of 2007 from 7.9% in the second quarter of 2006 as a result of our continued focus on streamlining our business processes to maximize operating efficiencies.

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~~Americas~~Total -other Inincome ~~our Americas region~~(expense), net sales increased $53.9 million, or 38.8%, to $192.6 million for the third quarter of 2006 from $138.8 million for the third quarter of 2005. Net sales increased $139.2 million, or 35.4%, to $533.0 million for the first nine months of 2006 from $393.8 million for the first nine months of 2005. The increase was primarily due to growth in LCD unit sales of 78.4% and 99.1% in the third quarter and first nine months of 2006 compared to the third quarter and first nine months of 2005, respectively, and an increase in LCD TV and projector unit sales in the third quarter and first nine months of 2006 compared to the third quarter and first nine months of 2005. These increases were partially offset by lower ASPs for our LCD and CRT products.

~~Europe~~Total ~~- In~~other ~~our Europe~~income ~~region~~(expense), net, ~~sales~~ increased $190.84 million, ~~or 25.6%,~~ to $970.28 million in the ~~for the~~second ~~third~~ quarter of ~~2006~~2007 from $770.4 million ~~for~~in the ~~third~~second quarter of ~~2005~~2006. The ~~Net~~increase ~~sales~~was ~~increased~~primarily ~~$31.9~~due ~~million or 15.2%~~ to ~~$240.9~~higher ~~million~~foreign ~~for~~currency ~~the~~translation ~~first~~gains of ~~nine~~$0.5 ~~months~~million ofand ~~2006~~lower ~~from~~impairment ~~$209.1 million~~charges ~~for~~on ~~the~~long-term ~~first~~investments ~~nine months~~ of ~~2005~~$0.9 ~~The~~million, ~~increase was primarily due to growth in our LCD unit sales and LCD TV unit sales,~~ partially offset by ~~a decrease in CRT unit sales and~~ lower ~~ASPs~~interest ~~for our LCD~~income ~~and~~of ~~CRT products~~$0.7 ~~Our~~million ~~Europe~~due ~~region~~to ~~experienced~~lower ~~increased sales in most~~average ~~countries~~cash ~~particularly~~balances inheld ~~Russia,~~during ~~Ukraine, Sweden, Greece, Spain and~~ the ~~Middle East~~ ~~for~~second ~~the third~~ quarter of ~~2006~~2007 compared to ~~the~~2006, ~~third~~higher interest ~~quarter~~expense of ~~2005~~$0. ~~Foreign~~2 ~~currency~~million ~~translation~~as ~~also had~~ a ~~positive~~result ~~impact~~of onhigher ~~our~~average ~~net~~loan ~~sales~~balances ~~due~~outstanding to during the ~~7.4%~~second ~~stronger~~quarter ~~Euro~~of ~~exchange~~2007 ~~rate~~compared ~~relative~~ to the ~~U.S.~~2006, ~~dollar~~and ~~during the~~other ~~first~~net ~~nine~~expenses ~~months~~ of ~~2006~~$0.1 million.

~~Asia~~Provision ~~Pacific - In our Asia Pacific region, net sales increased $36.1 million, or 35.9%, to $136.6 million~~ for ~~the~~income third quarter of 2006 from $100.5 million for the third quarter of 2005. Net sales increased $86.2 million or 31.6% to $358.6 million for the first nine months of 2006 from $272.4 million for the first nine months of 2005. The increase was primarily due to increased sales of our LCD and LCD TV products as a result of our continued growth in the China market and expanded sales efforts in Taiwan, Australia, New Zealand and Southeast Asia, partially offset by the declining CRT market.taxes

~~Cost~~Our provision for income taxes increased $0.7 million to $0.8 million in the second quarter of ~~Sales~~2007 from $0.1 million in the second quarter of 2006. The estimated effective tax rate as a percentage of pre-tax income decreased to 11.8% in the second quarter of 2007 compared to 15.6% in the second quarter of 2006 primarily due to an increase in the proportion of income earned in jurisdictions having lower effective tax rates, particularly in Asia.

~~Cost~~Comparison of ~~sales~~ ~~increased $95.5 million, or 33.1%, to $384.0 million for~~ the ~~third quarter of~~six 2006 from $288.5 million for the third quarter of 2005. As a percentage of net sales, cost of sales decreased to 90.0% for the third quarter of 2006 from 91.1% for the third quarter of 2005. For the first nine months ofended ~~2006,~~June ~~cost of sales increased $237.8 million, or~~ 30~~.0%~~, to2007 $1,029.6 million from $791.8 million for the first nine months of 2005. Cost of sales as a percentage of net sales increased to 90.9% for the first nine months of 2006 from 90.5% for the first nine months of 2005. The decrease in cost of sales as a percentage of net sales for the third quarter of 2006 compared to the third quarter of 2005 was primarily due to the ASP of our products declining at a slower rate than our cost of sales. The increase in cost of sales as a percentage of net sales during the first nine months of 2006 compared to the first nine months of 2005 was primarily due to the ASP of our products declining at a faster rate than our cost of sales. The first nine months of 2006 experienced lower margins primarily in our European region due to oversupply in the Russian market resulting in inventory write-downs of $4.2 million for the first nine months of 2006 compared to $1.5 million for the first nine months of 2005. As a percentage of net sales, product costs decreased to 86.7% for the third quarter of 2006 from 87.2% for the third quarter of 2005. For the first nine months of 2006, product costs as a percentage of net sales increased to 87.1% from 85.9% for the first nine months of 2005. Gross margin improved to 10.0% for the third quarter of 2006 from 8.9% for the third quarter of 2005. For the first nine months of 2006, gross margin declined to 9.1% from 9.5% for the first nine months of 2005. The gross margin increase in the third quarter of 2006 was primarily due to the increase in selling prices as a result of spot shortages experienced for some LCD sizes and ~~the~~ continued benefit from our sourcing of LCD components directly from manufacturers resulting in better pricing, partially offset by higher promotional allowances offered to our customers. The gross margin decrease in the first nine months of 2006 was primarily due to increased product costs as a percentage of net sales, partially offset by better pricing due to our sourcing of LCD components directly from manufacturers and promotional incentives received from our vendors as well as increased efficiencies and reductions in freight and warranty expenses as a percentage of net sales.

~~Selling,~~The ~~General,~~following ~~and~~table ~~Administrative~~sets ~~Expenses~~forth our condensed consolidated statements of operations for the periods indicated ($ in thousands):

Selling, general and administrative expenses increased $4.8 million, or 19.2%, to $30.0 million for the third quarter of 2006 from $25.2 million for the third quarter of 2005. Selling, general and administrative expenses as a percentage of net sales for the third quarter of 2006 decreased to 7.1% compared to 7.9% for the third quarter of 2005. For the first nine months of 2006, selling, general and administrative expenses increased $6.6 million, or 8.3%, to $86.9 million from $80.3 million for the first nine months of 2005. Selling, general and administrative expenses as a percentage of net sales for the first nine months of 2006 decreased to 7.7% compared to 9.2% for the first nine months of 2005. The increase in expenses for the third quarter of 2006 was primarily due to an increase in account development funds expense of $2.0 million, higher personnel-related costs of $1.2 million due to higher headcount, an increase in advertising and marketing expenses of $0.6 million and other costs of $1.0 million. For the first nine months of 2006, the increase in expenses was primarily due to an increase in account development funds expense of $4.8 million, higher incentive compensation of $3.4 million as a result of the increase in sales and profits, an increase in advertising and marketing expenses of $0.9 million and other costs of $0.4 million, partially offset by lower legal fees of $1.8 million related to patent infringement lawsuits and a decrease in stock-based compensation of $1.3 million. We continued to benefit from increasing leverage in our selling, general and administrative expenses as a percentage of net sales as a result of strategic initiatives undertaken to maximize operating efficiencies and enhance our competitiveness.

	Six months ended June 30,
							Increase (decrease)
	2007			2006				$		%
Net sales	$	833,705		$	706,062		$	127,643		18.1	%
Cost of sales⁽¹⁾		765,000			645,648			119,352		18.5
Gross profit		68,705			60,414			8,291		13.7
Selling, general and administrative expenses⁽¹⁾		58,462			56,924			1,538		2.7
Income from operations		10,243			3,490			6,753		193.5
Other income (expense):
Interest (expense) income, net		(899	)		313			(1,212	)	*
Other income (expense), net		1,706			1,621			85		5.2
Total other income (expense), net		807			1,934			(1,127	)	(58.3	)
Income from continuing operations before income taxes		11,050			5,424			5,626		103.7
Provision for income taxes		1,136			1,323			(187	)	(14.1	)
Net income		9,914			4,101			5,813		141.7
Preferred stock accretion		-			(48	)		48		*
Net income available to common stockholders	$	9,914		$	4,053		$	5,861		144.6	%

* Percentage not meaningful.

(1)	2007 includes $3.0 million and $0.7 million of gains in cost of sales and selling, general and administrative, respectively, related to the settlement of commercial litigation.

The following table sets forth our condensed consolidated statements of operations expressed as a percentage of net sales for the periods indicated:

	Six months ended June 30,⁽¹⁾
	2007			2006
Net sales		100.0	%		100.0	%
Cost of sales		91.8			91.4
Gross profit		8.2			8.6
Selling, general and administrative expenses		7.0			8.1
Income from operations		1.2			0.5
Other income (expense):
Interest (expense) income, net		(0.1	)		-
Other income (expense), net		0.2			0.2
Total other income (expense), net		0.1			0.3
Income from continuing operations before income taxes		1.3			0.8
Provision for income taxes		0.1			0.2
Net income		1.2			0.6
Preferred stock accretion		-			-
Net income available to common stockholders		1.2	%		0.6	%

(1) May not total due to rounding differences.

Net sales

Net sales increased $127.6 million, or 18.1%, to $833.7 million in the first six months of 2007 from $706.1 million in the first six months of 2006. The increase was primarily due to increases in LCD, LCD TV and projector unit shipments partially offset by lower CRT unit shipments and declines in our ASPs of 7.4% across all product categories in the first six months of 2007 compared to the first six months of 2006. The ASPs of our LCD monitors declined 15.7% in the first six months of 2007 compared to the first six months of 2006. The decline in ASPs reflects the effects of competition, slow end user demand, and regional and product mix.

Total unit shipments increased 27.5% in the first six months of 2007 compared to the first six months of 2006. The increase was primarily due to strong unit shipments in our Asia-Pacific segment and continued expansion in Latin America, Russia, China and other Asian markets driven by strategic marketing efforts. Unit shipments of our LCD monitors, LCD TVs, and projectors grew 51.0%, 48.7%, and 79.8%, respectively, in the first six months of 2007 compared to the prior year, while shipments of our CRT monitors declined 47.2% in the first six months of 2007 compared to the first six months of 2006. Of the display products shipped in the first six months of 2007, LCDs accounted for 83.0% and all other products accounted for 17.0% of such units shipped as compared to 72.7% and 27.3%, respectively, in the first six months of 2006.

Table of Contents

~~Income~~Cost ~~from~~of ~~Operations~~sales

~~Income~~Cost ~~from~~of sales ~~operations~~ increased $9119.4 million, or ~~310~~18.15%, to $12765.50 million ~~for~~in the first ~~third~~six months ~~quarter~~ of ~~2006~~2007 from $3645.0 6 million ~~for~~in the ~~third~~first ~~quarter~~six months of ~~2005~~2006. ~~For~~As a percentage of net sales, cost of sales increased to 91.8% in the first ~~nine~~six months of 2007 from 91.4% in the first six months of 2006. The increase in cost of sales as a percentage of net sales was primarily due to higher product costs as a percentage of net sales of 88.4% in the first six months of 2007 compared to 87.3% in the prior year, ~~income~~partially ~~from~~offset ~~operations~~by ~~increased~~lower warranty expenses of $123.~~9 million~~8 million due to improvements in our defect rates, lower repair costs and favorable changes in repair patterns of which $163.03 million ~~from~~related to prior periods, a $3.10 million ~~for~~gain related to the ~~first~~settlement ~~nine~~of commercial litigation, and lower freight expenses. Gross margin decreased to 8.2% in the first six months of ~~2005~~2007 from 8.6% in the first six months of 2006.

~~Americas - In our Americas region~~Selling, ~~income from operations increased $5.2 million to~~ ~~$5.5 million for the third quarter of 2006 from $0.3 million for the third quarter of 2005. For the first nine months of 2006~~general, ~~income from operations increased $22.4 million to $14.1 million from a loss of $8.4 million for the first nine months of 2005. The increase was primarily due to a 38.8%~~ and ~~35.4% increase~~ in net sales for the third quarter and first nine months of 2006, respectively, sourcing of LCD panels from manufacturers which resulted in additional benefits and increased leverage in selling, general and administrative expenses. The majority of the benefits related to the sourcing of the LCD panels from manufacturers remained in the Americas during the first nine months of 2006. We do not expect these panel sourcing benefits to remain in the Americas in the fourth quarter of 2006 as the sourcing of LCD panels will move to China during the fourth quarter of 2006.

~~Europe~~Selling, -general Inand ~~our Europe~~administrative ~~region,~~expenses ~~income from operations~~ increased $21.2 5 million, toor $32.47%, to ~~million for the third quarter of 2006 from~~ $158.25 million ~~for~~in the ~~third quarter of 2005. For the~~ first ~~nine~~six months of ~~2006,~~2007 ~~income~~ from ~~operations decreased~~ $856.~~3 million to a $3.~~9 million ~~loss from $4.4 million of income~~in ~~for~~ the first ~~nine~~six months of ~~2005~~2006. The increase ~~in the third quarter of 2006~~ was primarily due to aan ~~25.6%~~ increase in ~~net sales, lower product cost as a~~ ~~percentage~~personnel-related costs of ~~net~~$3.2 ~~sales~~million ~~and~~due ato ~~decrease~~higher inheadcount, ~~warranty~~an ~~costs. The decrease for~~increase ~~the~~in ~~first~~account ~~nine~~development ~~months~~fund expenses of ~~2006~~$0.6 ~~was~~million, ~~primarily~~higher ~~due~~facilities ~~to a decline in gross profit~~expenses ~~margins~~of as$0.4 amillion ~~result~~and ofother ~~higher~~costs ~~product~~of ~~costs~~$0.2 ~~and~~million, ~~higher~~partially ~~inventory~~offset ~~write-down~~by ~~expense~~lower selling ~~resulting~~and ~~from~~marketing anexpenses ~~oversupply~~ of ~~LCD~~$1.1 ~~monitors~~million, inlower ~~Russia~~incentive ~~during~~compensation ~~the~~of ~~first quarter~~$1.1 ~~of 2006~~million, ~~partially~~and ~~offset~~a by$0.7 ~~lower~~million ~~warranty~~gain ~~costs~~related ~~due~~ to ~~lower~~the ~~defect~~settlement ~~rates.~~of commercial ~~Selling,~~litigation. ~~general~~As ~~and administrative expenses increased slightly as~~ a percentage of net sales, inselling, ~~the~~general ~~third quarter~~ and ~~first~~administrative expenses ~~nine~~decreased ~~months~~to of7.0% ~~2006~~in ~~compared to~~ the ~~third~~ ~~quarter and~~ first ~~nine~~six months of ~~2005~~2007 ~~due~~from to8.1% ~~the increase~~ in ~~headcount~~the ~~in 2006,~~first asix ~~stronger~~months ~~Euro~~of ~~exchange~~2006 ~~rate~~as ~~relative~~a toresult ~~the~~of ~~U.S.~~our ~~dollar~~continued ~~and~~focus ~~higher~~on streamlining ~~advertising~~our business ~~and~~processes ~~marketing expenses in order~~ to ~~promote~~maximize ~~sales~~operating ~~in a very competitive environment~~efficiencies.

~~Asia~~Total ~~Pacific -~~other ~~In our Asia Pacific region,~~ income ~~from operations increased $2.0 million to $3.6 million for the third quarter of 2006 from $1.6 million for the third quarter of 2005. For the first nine months of 2006~~(expense), income from operations decreased $1.3 million to $5.8 million from $7.1 million for the first nine months of 2005. The increase in the third quarter of 2006 was primarily due to a 35.9% increase in net sales and lower product costs as a percentage of net sales. The decrease in the first nine months of 2006 was primarily the result of aggressive pricing strategies to promote LCD monitors which resulted in lower gross margins on products sold despite an increase in net sales in the China, Taiwan, Australia, New Zealand, and Southeast Asia markets. In addition, selling, general and administrative expenses were higher as a percent of net sales for the third quarter and first nine months of 2006 compared to the third quarter and first nine months of 2005 due to higher headcount as we continue to build our infrastructure to support our growing sales in the Asia markets.

~~Other~~Total ~~Income~~other income (~~Expense~~expense), net, decreased $1.1 million to $0.8 million in the first six months of 2007 from $1.9 million in the first six months of 2006. The decrease was primarily due to lower foreign currency translation gains of $1.1 million, lower interest income of $0.6 million due to lower average cash balances held during the first six months of 2007 compared to 2006 and higher interest expense of $0.6 million as a result of higher average loan balances outstanding during the first six months of 2007 compared to the first six months of 2006, partially offset by lower impairment charges on long-term ~~Net~~investments of $1.2 million.

~~Other~~Provision ~~income (expense), net decreased to $1.0 million in expense~~ for ~~the third quarter of 2006 from $5,000 in expense for the third quarter of 2005. For the first nine months of 2006, other~~ income (expense), net increased to $0.9 million of other income from $3.7 million in expense for the first nine months of 2005. The decrease for the third quarter of 2006 compared to 2005 was primarily due to $0.6 million of impairment write-downs of investments, $0.2 million of unfavorable foreign currency translation and $0.2 million in higher interest expense. The increase in the first nine months of 2006 compared to 2005 was primarily due to $6.1 million of favorable foreign currency translation and $0.4 million of other income, partially offset by $1.9 million of realized losses on the sale of certain investments and impairment write-downs of investments.taxes

~~Provision~~Our provision for ~~Income~~income ~~Taxes~~taxes decreased $0.2 million to $1.1 million in the first six months of 2007 from $1.3 million in the first six months of 2006. The estimated effective tax rate as a percentage of pre-tax income decreased to 10.3% in the first six months of 2007 compared to 24.4% in the first six months of 2006 primarily due to an increase in the proportion of income earned in jurisdictions having lower effective tax rates, particularly in Asia.

~~The~~Segment provision for income taxes decreased $0.2 million in the third quarter of 2006 compared to the third quarter of 2005. For the first nine months of 2006, the provision for income taxes decreased $12.0 million compared to the first nine months of 2005. The effective tax rate on pre-tax income (i.e., provision) decreased to 7.5% for the third quarter of 2006 from an effective tax rate of 33.6% for the third quarter of 2005. For the first nine months of 2006, the effective tax rate on net income decreased to 12.9% from an effective tax rate of 2455% on losses from continuing operations for the first nine months of 2005. The decrease in the third quarter of 2006 compared to 2005 was primarily due to the fact that no U.S. income taxes were provided for our Americas region due to the utilization of deferred tax assets which were previously subject to a full valuation allowance. The decrease in the first nine months of 2006 compared to 2005 was primarily due to, (1) the recording of a non-cash charge of $13.7 million to establish a valuation allowance against net deferred income tax assets during the second quarter of 2005, and (2) for the first nine months of 2006, we did not provide for U.S. income taxes on pre-tax income of $14.6 million for our Americas region due to the utilization of deferred tax assets which were previously subject to a full valuation allowance. This benefit was partially offset by our European region, where we did not provide tax benefits on operating losses of $2.9 million for the first nine months of 2006 due to the full valuation allowance in Europe. information

We have three reportable segments: Americas, EMEA and Asia-Pacific. We sell similar products in our segments, including LCD and CRT displays, LCD TVs, projectors and other products. The type and class of customers, primarily distributors and resellers, are also similar across the product lines. We have two major products: visual displays (LCD and CRT display monitors) and other products.

Our management evaluates and monitors segment performance primarily through net sales and income (loss) from operations. We do not allocate assets or liabilities by segment for management reporting purposes. During the fourth quarter of 2006, management realigned our operating segments under a new methodology to allocate certain corporate overhead expenses and corporate benefits associated with our initiative to source LCD panels directly from LCD panel manufacturers to our operating segments. Management believes that this segment information provides useful information for analyzing the underlying business results. The following segment information for the three and six months ended June 30, 2006 has been recast to conform to the 2007 presentation.

Comparison of the three months ended June 30, 2007 and 2006

	Three months ended June 30,						Increase (decrease)
($ in thousands)	2007			2006			$			%
Net sales:
Americas	$	186,027		$	187,445		$	(1,418	)	(0.8	)%
EMEA		70,527			70,414			113		0.2
Asia-Pacific		167,313			121,409			45,904		37.8
	$	423,867		$	379,268		$	44,599		11.8

Income (loss) from operations⁽¹⁾:
Americas	$	1,632		$	3,364		$	(1,732	)	(51.5	)
EMEA		(1,022	)		(3,740	)		2,718		72.7
Asia-Pacific		5,608			2,660			2,948		110.8
Other⁽²⁾		(279	)		(2,103	)		1,824		*
	$	5,939		$	181		$	5,758		3181.2	%

(1) 2007 includes gains related to the settlement of commercial litigation of $1.8 million, $1.5 million and $0.4 million in our Americas, EMEA and Asia- Pacific region, respectively.
(2) Includes certain corporate expenses that were not allocated to a specific segment for management reporting purposes.
* Percentage not meaningful.

Table of Contents

~~LIQUIDITY AND CAPITAL RESOURCES~~Americas

	Nine Months Ended September 30,
	2006			2005
	(in thousands)
Net cash (used in) provided by operating activities	$	(10,688	)	$	13,101
Net cash provided by investing activities		306			2,073
Net cash used in financing activities		(19,651	)		(3,497	)
Net cash used in discontinued operations		—			(1,116	)
Effect of exchange rate changes on cash and cash equivalents		33			(400	)
Net (decrease) increase in cash and cash equivalents	$	(30,000	)	$	10,161

Net sales

AsIn ofour ~~September~~Americas 30region, ~~2006,~~net wesales ~~had~~decreased ~~cash and cash equivalents of~~ $641.04 million., ~~Our cash balances~~or ~~are held in numerous locations throughout the world~~0. ~~Most of the amounts held outside the United States can be repatriated to the United States~~8%, ~~but~~ ~~under current law would be subject~~ to U$186.S.0 ~~federal income taxes, less~~million ~~applicable foreign tax credits. In certain countries, foreign exchange~~in ~~limitations limit~~ the ~~amount~~second quarter of ~~cash~~2007 ~~that~~from ~~can be repatriated~~$187.4 Wemillion ~~have~~in ~~accounted for~~ the ~~U.S.~~second ~~federal~~quarter ~~tax~~of ~~liability on these amounts for financial statement purposes except for foreign earnings that are considered indefinitely reinvested outside the United States~~2006. ~~Repatriation could result in additional U.S. federal~~ ~~income~~The ~~tax~~decrease ~~payments~~was inprimarily ~~future~~due ~~years.~~to ~~Where~~lower ~~local~~CRT ~~restrictions~~unit ~~prevent~~shipments ~~an efficient inter-company transfer~~ of ~~funds,~~53.0% ~~our intent is that cash balances would remain in the foreign country~~ and ~~we would meet U.S. liquidity needs~~lower ~~through~~ASPs ~~ongoing~~for ~~cash~~our ~~flows from operations~~LCD, ~~external~~LCD ~~borrowings~~TV, orprojector ~~both. We utilize various tax planning~~ and ~~financing~~CRT ~~strategies~~products. inThis andecrease ~~effort to ensure~~was ~~that~~partially ~~our~~offset ~~worldwide~~by ~~cash~~increased isunit ~~available~~shipments in ~~the~~our ~~locations~~LCD inTV ~~which~~and ~~it is needed.~~projector ~~We have~~products ~~available~~of ~~various~~38.1% ~~credit~~and ~~lines in the Americas~~71.6%, ~~Europe and Asia Pacific to meet expected and unexpected cash flow needs~~respectively.

~~Operating~~Income ~~Activities~~from operations

~~Cash~~In ~~flow~~our ~~used~~Americas inregion, ~~operating~~income ~~activities~~from ~~was~~operations decreased $101.7 million ~~during~~to $1.6 million in the ~~first~~second ~~nine~~quarter ~~months~~ of ~~2006~~ ~~compared~~2007 tofrom ~~cash~~$3.4 ~~flow~~million ~~provided~~in bythe ~~operating~~second ~~activities~~quarter of ~~$13.1 million~~ ~~during~~2006 primarily ~~the~~due ~~first~~to ~~nine~~lower ~~months~~gross ofmargins ~~2005.~~as ~~The~~a ~~use~~result of ~~cash~~higher ~~during~~product ~~the~~costs as ~~first nine~~a ~~months~~percentage of ~~2006~~net ~~was~~sales ~~primarily~~ due to ~~cash~~our ~~used~~ASPs ~~for~~declining ~~working~~at ~~capital~~a ~~requirements~~faster rate than ~~related~~offsetting toproduct ~~timing~~cost ofimprovements. ~~payments~~This ~~for~~decrease ~~our~~was ~~strategic~~partially ~~purchases~~offset by gains related to the settlement of ~~inventory~~commercial ~~with~~litigation, lower warranty ~~favorable~~expenses ~~pricing~~and ~~terms.~~lower ~~This~~selling, ~~increased~~general ~~cash~~and ~~outlay~~administrative ~~was~~expenses ~~partially offset~~primarily bydue to ~~income~~lower ~~from~~advertising ~~continuing~~expenses, ~~operations~~account ~~and~~development ~~less~~fund ~~cash~~expenses, ~~outlay for warranty~~ and ~~accrued~~lower ~~promotional~~incentive ~~and~~compensation ~~other~~as ~~expenses~~a result of lower operating performance.

Trade receivables increased $95.6 million during the first nine months of 2006 compared to a decrease of $9.1 million during the first nine months of 2005. The increase during the first nine months of 2006 was primarily due to increased sales and shift in customer mix. Day sales outstanding slightly increased from 45 days at December 31, 2005 to 46 days at September 30, 2006. Payment terms vary by geographic location and in some cases, a cash discount option is offered in addition to the standard payment terms. EMEA

~~Inventories~~Net decreased $1.7 million during the first nine months of 2006 compared to a decrease of $20.4 million during the first nine months of 2005. The decrease during first nine months of 2006 was primarily due to the selling of our European inventories, which were overstocked due to oversupply in Russia, offset by increased purchases of inventory with favorable pricing terms as a result of the oversupply of display panels in the industry during the first half of 2006. Our inventory turns have remained relatively stable at four turns during the first nine months of 2006 and 2005.sales

~~Accounts~~In ~~payable~~our EMEA region, net sales increased $520.91 million, ~~during~~or ~~the~~0.2%, ~~first~~to ~~nine~~$70.5 ~~months of 2006 compared~~million toin the asecond ~~decrease~~quarter of 2007 from $1470.84 million ~~during~~in the ~~first~~second ~~nine~~quarter ~~months~~ of ~~2005~~2006. The ~~increase~~ ~~during~~increase ~~the~~was ~~first~~primarily ~~nine~~due ~~months~~to ofgrowth ~~2006~~in ~~was~~our ~~primarily~~LCD, ~~due~~LCD toTV ~~increased~~and ~~purchases~~projector unit shipments of 27.5%, 109.9% and 37.4%, respectively. The increase was partially ~~inventory~~offset ~~and~~by ~~timing~~a ofdecrease ~~payments~~in toCRT ~~our~~unit ~~suppliers~~shipments of 51.4% ~~The~~and ~~decrease~~lower ~~during~~ASPs ~~the~~in our ~~first~~LCD, ~~nine~~LCD ~~months~~TV, ofprojector ~~2005~~and ~~was~~CRT ~~primarily~~products. Foreign currency translation had a positive impact on our net sales in the second quarter of 2007 due to an 8% stronger Euro exchange rate against the ~~reduction~~U.S. indollar ~~our~~based ~~inventory~~on ~~balances~~an average rate in the ~~and~~second ~~timing~~quarter of ~~product~~2007 ~~payments~~compared to the prior year.

~~Investing~~Loss from ~~Activities~~operations

~~Cash~~In ~~provided~~our EMEA byregion, ~~investing~~loss ~~activities~~from ~~was~~operations decreased $02.37 million ~~during~~to ~~the~~a ~~first~~loss ~~nine~~of ~~months~~$1.0 million in the second quarter of ~~2006~~2007 ~~compared~~from toa loss of $23.17 million ~~during~~in the second quarter ~~first nine months~~ of ~~2005~~2006. The decrease was primarily due to higher gross ~~increase~~margins driven ~~during~~by ~~the~~lower ~~first~~product ~~nine~~costs ~~months~~as a percentage of ~~2006~~net ~~was~~sales, ~~primarily~~gains related to the ~~result~~settlement of commercial litigation, lower warranty costs ~~cash~~due to ~~proceeds~~lower ~~from~~defect ~~the~~rates ~~sale~~and ofimproved ~~long-term~~operating ~~investments.~~efficiencies ~~The~~and ~~increase~~lower ~~during the~~incentive ~~first nine~~compensation ~~months~~and ofadvertising ~~2005~~expenses. This decrease was ~~primarily~~partially ~~the~~offset by ~~result~~higher ofselling, ~~cash~~general ~~proceeds~~and ~~from~~administrative ~~the~~expenses ~~sale~~primarily due to higher ~~of short~~personnel-~~term~~related ~~investments~~expenses due to an increase in headcount and higher facilities expenses.

Asia-Pacific

Net sales

In our Asia-Pacific region, net sales increased $45.9 million, or 37.8%, to $167.3 million in the second quarter of 2007 from $121.4 million in the second quarter of 2006. The increase was primarily due to an increase in unit shipments of our LCD products of 85.5% as a result of our continued growth in the China market and expanded efforts in Australia, Korea, India and Southeast Asian countries. In addition, foreign currency translation had a positive impact on our net sales in the second quarter of 2007 due to a 4% stronger Chinese Yuan exchange rate against the U.S. dollar based on an average rate in the second quarter of 2007 compared to the second quarter of 2006. The increase was partially offset by a decrease in CRT unit shipments of 45.6% from the second quarter of 2006.

Income from operations

In our Asia-Pacific region, income from operations increased $2.9 million to $5.6 million in the second quarter of 2007 from $2.7 million in the second quarter of 2006. The increase was primarily due to the growth in net sales and higher gross margins as a result of geographic and product mix, lower inventory write-downs, gains related to the settlement of commercial litigation, and lower freight expenses. This increase was partially offset by higher selling, general and administrative expenses driven by an increase in account development fund expenses and personnel-related expenses as we continue to build our infrastructure to support our growing sales in the Asia-Pacific markets.

Comparison of the six months ended June 30, 2007 and 2006

	Six months ended June 30,						Increase (decrease)
($ in thousands)	2007			2006			$			%
Net sales:
Americas	$	378,727		$	340,385		$	38,342		11.3	%
EMEA		157,494			143,679			13,815		9.6
Asia-Pacific		297,484			221,998			75,486		34.0
	$	833,705		$	706,062		$	127,643		18.1

Income (loss) from operations⁽¹⁾:
Americas	$	1,642		$	7,131		$	(5,489	)	(77.0	)
EMEA		49			(7,653	)		7,702		100.6
Asia-Pacific		8,965			6,136			2,829		46.1
Other⁽²⁾		(413	)		(2,124	)		1,711		*
	$	10,243		$	3,490		$	6,753		193.5	%

(1) 2007 includes gains related to the settlement of commercial litigation of $1.8 million, $1.5 million and $0.4 million in our Americas, EMEA and Asia-Pacific region, respectively.
(2) Includes certain corporate expenses that were not allocated to a specific segment for management reporting purposes.
* Percentage not meaningful.

Table of Contents

Cash used in financing activities was $19.7 million during the first nine months of 2006 and $3.5 million during the first nine months of 2005. During the first nine months of 2006, we redeemed all outstanding shares of series B convertible mandatorily redeemable preferred stock for $15.0 million and had net payments on borrowings of $4.9 million. During the first nine months of 2005, we repaid bank loans of $3.5 million.Americas

OnNet July 7, 2006, we issued an aggregate of 3.3 million shares of our Series C Preferred Stock to Intel Capital Corporation pursuant to the exercise of an outstanding warrant, dated January 10, 2002. The warrant had an exercise price of $0.01 per share and Intel paid an aggregate of $33,000 for the shares of Series C Preferred Stock.sales

~~Credit~~In ~~Facilities~~our Americas region, net sales increased $38.3 million, or 11.3%, to $378.7 million in the first six months of 2007 from $340.4 million in the first six months of 2006. The increase was primarily due to unit shipment growth in our LCD, LCD TV and projector products of 30.6%, 45.7% and 88.8%, respectively, driven by pricing strategies designed to gain market share and increase channel diversification. The increase was partially offset by lower CRT unit shipments of 63.6% and lower ASPs in our LCD, LCD TV and projector products compared to the first six months of 2006.

InIncome ~~the United~~from States, we have a $60.0 million credit line that expires in March 2008. Advances bear interest at the prime rate plus 0.50% (8.75% at September 30, 2006) with interest payable monthly. As of September 30, 2006 and December 31, 2005, there was no outstanding balance on the line-of-credit. All advances under the agreement are collateralized by substantially all of the assets of ViewSonic Americas. Under the agreement we are subject to various restrictive covenants, which, among other things, limit dividends (not to exceed $250,000 per year without the consent of the financial institution), capital expenditures and executive compensation and require us to maintain a minimum earnings before interest, taxes, depreciation and amortization amount. We are not required to comply with the restrictive covenants when borrowing capacity exceeds $15.0 million.operations

In ~~Europe~~our Americas region, weincome ~~have~~from a operations decreased $205.05 million ~~line-~~to $1.6 million in the first six months of~~-credit~~ ~~facility~~2007 ~~with~~from a$7.1 ~~financial~~million in the first six months ~~institution.~~of 2006 ~~This~~primarily ~~line-of-credit~~due ~~is secured~~to bylower ~~trade~~gross ~~receivables~~margins ~~and~~as a result of higher product costs ~~inventory~~as a percentage of ~~ViewSonic~~net ~~Europe~~sales ~~Limited.~~due ~~Advances~~to ~~bear~~our ~~interest~~ASPs declining at ~~Libor~~a ~~plus~~faster rate than 2offsetting product cost improvements.~~00%.~~ ~~There~~This ~~were~~decrease nowas ~~outstanding~~partially ~~borrowings~~offset by ~~against~~the increase ~~this~~in ~~facility~~net assales, gains related to the settlement of commercial litigation ~~September~~and ~~30,~~lower ~~2006~~selling, general and ~~December~~administrative 31expenses due to a decrease in account development fund expenses, ~~2005.~~lower advertising expenses, lower incentive compensation as a result of lower operating performance and lower personnel-related costs.

Certain of our other international subsidiaries also have line-of-credit facilities with various financial institutions that are secured by certain of their assets. These credit facilities allow cash advances, letters of credit and bank guarantees. As of September 30, 2006 and December 31, 2005, there were outstanding cash advances of $0 and $4.9 million, respectively. As of September 30, 2006, the aggregate borrowing limit was $23.4 million.EMEA

~~Off-Balance~~Net ~~Sheet Arrangements~~ sales

AsIn ofour ~~September~~EMEA 30region, ~~2006~~net ~~and~~sales ~~December~~increased ~~31,~~$13.8 ~~2005~~million, weor ~~did~~9.6%, ~~not~~to ~~have~~$157.5 ~~any off-balance~~million ~~sheet~~in ~~arrangements~~the orfirst ~~relationships~~six ~~with~~months ~~unconsolidated~~of ~~entities~~2007 orfrom ~~financial~~$143.7 million in the first six months ~~partnerships,~~of 2006. ~~such~~The asincrease ~~entities~~was ~~often~~primarily ~~referred~~due to asgrowth ~~structured~~in ~~finance~~our orLCD, LCD TV and projector ~~variable~~unit ~~interest~~shipments ~~entities~~of 36.2%, ~~which~~125.1% ~~are~~and ~~typically~~68.8%, ~~established~~respectively, ~~for~~driven ~~the~~by ~~purpose~~channel diversification and increased expansion into Russia. The increase was partially offset by a decrease in CRT unit shipments of 51.0% and lower ASPs in our ~~facilitating~~LCD and ~~off-balance~~LCD ~~sheet~~TV ~~arrangements~~products. orForeign ~~other~~currency ~~contractually~~translation ~~narrow~~had a positive impact on orour ~~limited~~net ~~purposes~~sales in the first six months of 2007 due to a 9% stronger Euro exchange rate against the U.S. dollar based on an average rate in the first six months of 2007 compared to the prior year.

~~Seasonality~~Income (loss) from operations

~~The~~In ~~market for~~ our EMEA ~~products~~region, ~~historically~~income ~~has~~from ~~experienced~~operations ~~seasonal~~increased ~~shifts~~$7.7 inmillion ~~demand due~~ to ~~changes~~income of $49,000 in ~~buying~~the ~~patterns~~first bysix ~~our~~months ~~customers.~~of ~~Buying~~2007 ~~patterns~~from ~~vary geographically,~~a ~~and~~loss ~~the~~of ~~impact~~$7.7 onmillion ~~our operating results~~ in athe ~~given period~~first ~~may~~six ~~vary~~months ~~depending~~of on2006. ~~our~~The ~~actual~~increase orwas ~~anticipated~~primarily ~~level~~due ofto ~~activity~~the increase in ~~the~~net ~~relevant~~sales, ~~region.~~higher Wegross ~~generally~~margins driven ~~experience~~by alower ~~decline~~product incosts ~~net~~as ~~sales~~a ~~from~~percentage ~~the~~of ~~first quarter~~net ~~to the~~sales, ~~second~~lower ~~quarter~~inventory ofwrite-downs, ~~each~~lower ~~year~~warranty ~~and~~costs wedue ~~tend~~ to ~~experience~~lower ~~the highest net~~defect ~~sales in~~rates ~~the~~and ~~fourth~~improved ~~quarter~~operating ofefficiencies ~~the~~and ~~year~~gains ~~due~~related to athe ~~strong~~settlement of commercial ~~buying~~litigation. ~~season~~The inincrease ~~the~~was ~~fourth quarter~~partially offset by ~~large~~higher ~~wholesale~~selling, general ~~distribution partners~~ and ~~retailers~~administrative expenses due to ~~the~~higher personnel-related expenses ~~holiday~~as a ~~season~~result inof ~~the~~increased ~~Americas.~~headcount ~~Our~~and ~~seasonality~~higher isaccount ~~moderated~~development ~~through~~fund ~~slightly~~expenses ~~different~~in order ~~seasonal~~to ~~variations~~promote sales in ~~the~~a ~~three~~very ~~regions~~competitive environment.

~~Operating Capital and Capital Expenditure Requirements~~ Asia-Pacific

WeNet believe that our existing cash balances, credit facilities and anticipated cash flows from operations will be sufficient to meet our operating, acquisition and capital requirements for at least the next 12 months. However, there is no assurance that we will not need to raise additional equity or debt financing within this period. We also may require additional capital for other purposes not presently contemplated. If we are unable to obtain sufficient capital, we could be required to curtail capital equipment purchases or research and development expenditures, which could harm our business. Factors that could affect our cash used or generated from operations and, as a result, our need to seek additional borrowings or capital include:sales

·In our Asia-Pacific ~~Decreased~~region, ~~demand~~net ~~and~~sales increased $75.5 million, or 34.0%, to $297.5 million in the first six months of 2007 from $222.0 million in the first six months of 2006. The increase was primarily due to an increase in unit shipments of our LCD products of 88.0% driven by our continued growth in the China market and ~~acceptance~~expanded ~~for~~efforts in Australia, Korea, India and Southeast Asia countries. In addition, foreign currency translation had a positive impact on our net sales in the first six months of 2007 due to a 4% stronger Chinese Yuan exchange rate against the U.S. dollar based on an average rate in the first six months of 2007 compared to the first six months of 2006. The increase was partially offset by a decrease in CRT unit shipments of 41.5% and lower ASPs in our LCD, LCD TV, projector and CRT products;.

·Income from ~~Inability to successfully develop our next generation products;~~operations

·In our Asia-Pacific Anregion, ~~adverse~~income ~~change~~from operations increased $2.8 million to $9.0 million in ~~payment~~the ~~terms~~first ~~with~~six months of 2007 from $6.1 million in the first six months of 2006. The increase was primarily due to the increase in net sales and gains related to the settlement of commercial litigation, partially offset by higher selling, general and administrative expenses as a result of higher account development fund expenses and higher personnel-related expenses as we continue to build our ~~customers~~infrastructure orto support our ~~suppliers;~~growing sales in the Asia-Pacific markets.

~~· Competitive pressures~~ Liquidity and ~~oversupply~~capital ~~in the marketplace resulting in lower than expected ASPs; and~~resources

· New product announcements or product introductions by our competitors.

(in thousands)	Six months ended June 30,
	2007			2006
Net cash used in operating activities	$	(8,970	)	$	(9,077	)
Net cash used in investing activities		(6,372	)		(7,370	)
Net cash provided by (used in) financing activities		18,654			(10,726	)
Effect of exchange rate changes on cash and cash equivalents		573			108
Net increase (decrease) in cash and cash equivalents	$	3,885		$	(27,065	)

~~Critical~~As ~~Accounting~~of June 30, ~~Policies~~2007, we had cash and ~~Estimates~~cash equivalents of $73.0 million. Our cash balances are held in numerous locations throughout the world. Most of the amounts held outside the United States can be repatriated to the United States, but under current law would be subject to U.S. federal income taxes, less applicable foreign tax credits. In certain countries, foreign exchange limitations limit the amount of cash that can be repatriated. Repatriation could result in additional U.S. federal income tax payments in future years. Where local restrictions prevent an efficient inter-company transfer of funds, our intent is that cash balances would remain in the foreign country and we would meet U.S. liquidity needs through ongoing cash flows from operations, external borrowings or equity financing, or a combination of the foregoing. We utilize various tax planning and financing strategies in an effort to help ensure that our worldwide cash is available in the locations in which it is needed. We have available various credit lines in our Americas, EMEA and Asia-Pacific regions that we believe are adequate to meet our cash flow needs.

~~Our~~Operating critical accounting policies reflecting our estimates and judgments are described in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the year ended December 31, 2005, filed with the Securities and Exchange Commission on April 3, 2006. We have not changed those policies since such date other than described below.activities

Cash used in operating activities was $9.0 million in the first six months of 2007 compared to $9.1 million in the first six months of 2006. The decrease in operating cash flow in the first six months of 2007 was primarily due to cash used for our working capital needs. Our cash conversion cycle remained flat at ten days at June 30, 2007 and December 31, 2006. Our days of sales outstanding increased from 41 days at December 31, 2006 to 48 days at June 30, 2007 primarily due to a combination of our continued expansion into emerging markets which typically have longer average accounts receivable terms and a greater proportion of our sales being made in the last month of the second quarter of 2007 compared to the fourth quarter of 2006. Our days in inventory increased from 32 days at December 31, 2006 to 34 days at June 30, 2007. Our days of accounts payable outstanding increased from 63 days at December 31, 2006 to 72 days at June 30, 2007 primarily due to the timing of product purchases and when payments were made.

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~~During~~Our ~~the~~days of ~~second~~sales ~~quarter~~outstanding, ofdays ~~2005, we~~in ~~adopted~~inventory ~~the~~and ~~fair~~days ~~value~~of ~~based~~accounts ~~employee~~payable outstanding ~~stock-based~~include ~~compensation~~the ~~expense~~effects ~~recognition~~of ~~provisions~~product ofcomponent ~~Statement~~revenues ofand costs related to the ~~Financial~~sourcing ~~Accounting~~of ~~Standards~~LCD ~~(“SFAS”)~~components Nodirectly from manufacturers. ~~123,~~We ~~Accounting for~~believe ~~Stock-Based~~this ~~Compensation~~is ~~(“SFAS~~a ~~123”),~~more ~~using~~accurate ~~the~~presentation ~~modified~~of ~~prospective~~our ~~method.~~cash Weconversion ~~previously~~cycle. ~~had~~Product ~~applied the~~component ~~intrinsic~~revenues ~~value~~and ~~based~~costs ~~expense~~are ~~recognition~~presented ~~provisions~~as ~~set~~a ~~forth~~net amount in ~~Accounting Principles~~cost ~~Board~~of ~~(“APB”)~~sales ~~Opinion~~in ~~No. 25, Accounting~~our ~~for~~condensed ~~Stock~~consolidated ~~Issued~~statements toof ~~Employees (“APB 25”)~~operations.

OnInvesting January 1, 2006, we adopted Statement of Financial Accounting Standards No. 123(R), Share-Based Payment (“SFAS 123(R)”), which requires all share-based payments to employees, including grants of employee stock options, to be expensed and recognized over the requisite service period based on the grant date fair value of those awards. Among other differences, SFAS 123(R) includes an estimate of volatility. SFAS 123 does not require the use of volatility for privately held companies in estimating the fair value of stock options and, accordingly, we used the minimum value method afforded by SFAS 123. We adopted SFAS 123(R) using the prospective method and, accordingly, have not restated the consolidated financial statements for prior periods to reflect the impact of SFAS 123(R). Stock-based compensation expense recognized during the third quarter and first nine months of 2006 applies to unvested stock options granted prior to January 1, 2006 based on the grant date minimum value estimated in accordance with the original provisions of SFAS 123. In addition, stock-based compensation expense recognized during the third quarter and first nine months of 2006 has been reduced by estimated forfeitures. SFAS 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The adoption of the prospective method under SFAS 123(R) did not have a material impact on our consolidated financial position, results of operations, cash flows or earnings per share. For the third quarter and first nine months of 2006, stock-based compensation expense was $50,000 and $161,000, respectively. As of September 30, 2006, unrecognized compensation cost related to employee stock options was $168,000, which is expected to be recognized over a weighted-average period of 2.6 years. activities

OnCash ~~May 9,~~used ~~2005,~~in weinvesting ~~re-priced~~activities ~~all~~was ~~outstanding~~$6.4 ~~stock~~million ~~options~~in ~~held~~the byfirst ~~our~~six ~~employees,~~months of 2007 ~~executive~~compared ~~officers~~to ~~and~~$7.4 ~~members~~million ofin the ~~Board~~first ofsix ~~Directors~~months of ~~record on March 2, 2005~~2006. AsThe ause ~~result, the exercise price~~ of ~~our outstanding stock options subject~~cash toin the first ~~re-pricing~~six ~~was~~months ~~lowered~~of to2007 ~~$0.38~~was ~~per~~primarily ~~share,~~due ~~the~~to ~~estimated~~additional ~~fair~~cash ~~value~~outlays for ~~on that~~building ~~date~~improvements, ~~resulting~~while inthe ~~stock~~use ~~option expense~~ of ~~$1.1~~cash ~~million.~~in ~~The~~2006 ~~re-pricing~~ was ~~implemented~~ inprimarily ~~order~~due to ~~realign~~ the sales ~~cash~~ and ~~equity~~purchases ~~components~~ of ~~our compensation~~short-term ~~programs for employees, executive officers and directors~~investments.

~~ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~Financing activities

~~Our~~Cash ~~financial~~provided ~~market~~by ~~risk~~financing ~~arises~~activities ~~from~~was ~~fluctuations~~$18.7 million in ~~foreign~~the ~~currencies.~~first Asix ~~majority~~months of 2007 ~~our~~compared ~~net~~to ~~sales,~~cash ~~expense~~used ~~and~~in ~~capital~~financing ~~purchasing~~ activities ~~are~~of ~~transacted~~$10.7 million in the infirst ~~U.S.~~six ~~Dollars~~months of 2006. ~~However,~~In wethe dofirst ~~enter~~six ~~into~~months ~~these~~of ~~transactions~~2007, inwe ~~other~~had ~~currencies,~~net borrowings ~~primarily the Euro, U~~of $18.K.6 ~~Pound,~~million ~~the~~compared ~~Chinese~~to ~~Yuan~~$4.2 ~~and~~million in the ~~New~~prior ~~Taiwan Dollar, among others~~year. ~~Our~~In ~~net~~addition, ~~sales and purchasing transactions denominated in~~we ~~currencies~~redeemed ~~other~~all ~~than~~outstanding ~~the~~shares ~~U.S.~~of ~~Dollar~~our ~~are~~Series ~~subject~~B toPreferred ~~exchange~~Stock ~~rate~~for ~~fluctuations~~$15.0 ~~and~~million ~~could~~in ~~potentially~~the ~~negatively~~prior ~~impact our financial results~~year.

WeCredit have significant European net sales denominated in the Euro. During the first nine months of 2006, the Euro-to-U.S. Dollar foreign currency exchange rate strengthened against the U.S. Dollar increasing 7.4% compared to the year-end rate of 2005. During the first nine months of 2005, the Euro-to-U.S. Dollar decreased by 13.0% as compared to the 2004 year-end rate. For the third quarter of 2006, the strengthening of the Euro positively impacted our net sales and income from operations by $3.0 million and $1.9 million, respectively, compared to the third quarter of 2005 assuming all other factors remained constant. For the first nine months of 2006, the strengthening of the Euro increased our net sales and income from operations by $5.4 million and $3.6 million, respectively, compared to the first nine months of 2005 assuming all other factors remained constant. We cannot determine the ultimate impact of future changes to these and other currency exchange rates on our 2006 net sales, income from operations, net income, equity, and comprehensive income. facilities

~~ITEM~~In the United 4States, we have a $60.0 million ~~CONTROLS~~credit ~~AND~~line ~~PROCEDURES~~that expires in March 2008. Advances bear interest at the prime rate plus 0.50% (8.75% at June 30, 2007 and December 31, 2006) with interest payable monthly. All advances under the agreement are collateralized by substantially all of the assets of ViewSonic Americas. Under the agreement we are subject to various restrictive covenants, which, among other things, prevent us from declaring or paying dividends except in certain circumstances, limit capital expenditures and executive compensation and require us to maintain a minimum earnings before interest, taxes, depreciation and amortization amount. If James Chu, our Chairman of the Board and Chief Executive Officer, ceases to be actively engaged in our management or he and his affiliates, in the aggregate, do not own at least 51% of our issued and outstanding common stock we will be in default under the credit line. As of June 30, 2007 and December 31, 2006, there were no outstanding balances on the line-of-credit. We may be unable to extend this credit facility or find a replacement facility on substantially similar terms.

~~Evaluation~~In Europe, we have a $20.0 million line-of-credit ~~Disclosure~~facility ~~Controls~~with a financial institution that expires in August 2007. This line-of-credit is secured by trade receivables and ~~Procedures~~inventory of ViewSonic Europe Limited. Advances bear interest at LIBOR plus a margin (7.57% and 7.58% as of June 30, 2007 and December 31, 2006, respectively). We are currently looking into additional credit facilities to meet our current and future working capital needs. Outstanding borrowings against this facility were $11.6 million and $0 as of June 30, 2007 and December 31, 2006, respectively. We may be unable to extend this credit facility or find a replacement facility on substantially similar terms.

WeCertain ~~maintain~~of ~~“disclosure~~our ~~controls~~other ~~and~~Asia-Pacific ~~procedures,”~~subsidiaries asalso ~~such~~have ~~term is defined in Rule 13a~~line-~~15(e)~~ of-credit ~~the Securities Exchange Act of 1934, as amended, or the Exchange~~facilities ~~Act.~~with various ~~Our~~financial ~~management,~~institutions ~~including~~that ~~our~~expire ~~Chief~~through ~~Executive~~March ~~Officer~~2008. ~~and~~These ~~Chief Financial~~credit ~~Officer,~~facilities ~~does~~are ~~not~~secured ~~expect~~by ~~that~~certain ~~our~~of ~~disclosure~~their ~~controls~~assets and ~~procedures~~allow orcash ~~our~~advances, ~~internal~~letters ~~controls~~of ~~will~~credit ~~prevent all error~~ and ~~all~~bank ~~fraud~~guarantees. AThe ~~control~~aggregate ~~system,~~borrowing limit was no$8.7 ~~matter~~million ~~how~~and ~~well~~$23.7 ~~conceived~~million ~~and~~at ~~operated~~June 30, ~~can~~2007 ~~provide~~and ~~only~~December ~~reasonable~~31, ~~not absolute~~2006, ~~assurance that the objectives of the control system are met~~respectively. ~~Further,~~ ~~the~~These ~~design~~lines of acredits ~~control~~had ~~system~~a ~~must~~weighted ~~reflect~~average ~~the~~interest ~~fact~~rate ~~that there are resource constraints, and the benefits~~ of ~~controls~~5.82% ~~must be considered relative to~~and ~~their costs~~7. ~~These inherent limitations include the realities that judgments in~~23% ~~decision-making~~at ~~can~~June ~~be faulty~~30, 2007 and ~~that~~December ~~breakdowns can occur because of a simple error or mistake. Additionally~~31, ~~controls can be circumvented by the individual acts of some persons~~2006, byrespectively. ~~collusion~~We ofare ~~two~~currently ~~or more people, or by management~~looking ~~override~~into ofadditional ~~the~~credit ~~control.~~facilities ~~The~~to ~~design~~meet ofour ~~any~~current ~~system~~and offuture ~~controls also is based~~working incapital ~~part~~needs. ~~upon~~As ~~certain~~of ~~assumptions~~June ~~about~~30, ~~the~~2007 ~~likelihood~~and ofDecember 31, ~~future events~~2006, ~~and~~ there ~~can~~ bewere ~~no assurance that any design will succeed in achieving its stated~~outstanding ~~goals under~~cash ~~all~~advances ~~potential~~of ~~future~~$7.4 ~~conditions;~~million ~~over~~and ~~time~~$0.3 million, ~~controls~~respectively. We may ~~become~~be ~~inadequate~~unable ~~because~~to ofextend ~~changes~~these incredit ~~conditions,~~facilities or ~~the~~find ~~degree~~replacement offacilities ~~compliance with the policies~~on orsubstantially ~~procedures~~similar ~~may deteriorate~~terms.

We have subordinated notes payable to trusts for the benefit of the children of our principal stockholder and related entities. The subordinated notes payable are not callable until the expiration date, April 12, 2008. At June 30, 2007 and December 31, 2006, the amounts outstanding were $43.0 million. The interest rate on the subordinated notes payable was 3.97% as of June 30, 2007 and December 31, 2006. We may be required to make payment on the subordinated notes payable due on April 12, 2008. We believe that our existing cash balances, credit facilities and anticipated cash flows from operations will be sufficient to meet our obligations.

As of June 30, 2007, we were in compliance with the covenants of all our borrowing arrangements.

Off-balance sheet arrangements

During the first six months of 2007 and year ended December 31, 2006, we did not have any off-balance sheet arrangements or relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or variable interest entities, which are typically established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Contractual obligations

Our 2006 Annual Report on Form 10-K contains a table that summarizes our known obligations to make future payments pursuant to certain contracts as of December 31, 2006. Except as discussed below, there has been no material change in our contractual obligations and commitments since December 31, 2006 other than scheduled payments through June 30, 2007.

In January 2007, we entered into a lease agreement for 298,050 square feet of office space at our existing principal office location in Walnut, California. The term of the lease commences on July 1, 2007 and runs through July 2014, subject to extension at our option under certain circumstances. The future minimum lease payments required under this operating lease are $0.4 million in 2007, $1.5 million in 2008, $1.6 million in 2009, $1.6 million in 2010, $1.7 million in 2011, and $4.6 million thereafter.

In February 2007, we entered into a lease agreement for office space in London, United Kingdom. This lease expires in September 2018. The future minimum lease payments required under this operating lease are $0 for the remainder of 2007, $0.9 million in 2008, $1.0 million in 2009, $1.0 million in 2010, $1.0 million in 2011, and $7.6 million thereafter. Rent expense for the three and six months ended June 30, 2007 was $0.1 million and $0.3 million, respectively.

As of June 30, 2007, our total FIN 48 liability for uncertain tax positions was $4.3 million. We are unable to reasonably estimate the timing of future cash flows related to the $4.3 million.

Seasonality

The market for our products historically has experienced seasonal shifts in demand due to changes in buying patterns by our customers. Buying patterns vary geographically, and the impact on our operating results in a given period may vary depending on our actual or anticipated level of activity in the relevant region. For example, we tend to experience higher net sales in the second half of the year due to a strong buying season by large distributors and resellers attributable to the holiday season in the Americas, which trend we expect to increase to the extent we are successful in increasing sales of our LCD TV products. Our seasonality is moderated through slightly different seasonal variations in our three regions.

Operating capital and capital expenditure requirements

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~~Based~~We ~~on their~~believe ~~evaluation~~that asour ofexisting ~~September~~cash 30balances, ~~2006,~~credit ~~our~~facilities ~~Chief Executive Officer~~ and anticipated ~~Chief~~cash ~~Financial~~flows ~~Officer~~from ~~have~~operations ~~concluded~~will ~~that~~be ~~our~~sufficient ~~disclosure~~to ~~controls~~meet ~~and~~our ~~procedures~~operating, acquisition ~~(as~~and ~~defined~~capital inrequirements ~~Rules 13a-15(e)~~for ~~and~~at ~~15d-15(e)~~least ~~under~~ the ~~Exchange~~next ~~Act)~~12 ~~were~~months. However, there is no ~~sufficiently~~assurance ~~effective~~that we will not need to ~~ensure~~raise ~~that~~additional ~~the~~equity ~~information~~or ~~required~~debt tofinancing within bethis ~~disclosed~~time frame. We also may require additional capital for other bypurposes usnot inpresently ~~this~~contemplated. ~~Quarterly~~If ~~Report~~we onare ~~Form~~unable ~~10-Q~~to ~~was~~obtain ~~recorded~~sufficient capital, ~~processed~~we could be required to curtail capital equipment purchases, ~~summarized~~which ~~and~~could ~~reported~~harm ~~within~~our ~~the~~business. ~~time~~Factors ~~periods~~that ~~specified~~could inaffect ~~Securities~~our ~~and~~cash ~~Exchange~~used or generated ~~Commission~~from ~~rules~~operations and, ~~forms.~~ as a result, our need to seek additional borrowings or capital include:

~~Changes in~~· ~~Internal~~Differences ~~Control~~between payment terms for the purchase of key components and the sale of finished products;

There were no changes in our internal control over financial reporting during the three months ended September 30, 2006 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Four of our stockholders filed a purported derivative action against James Chu, our Chairman and Chief Executive Officer, and ViewSonic on April 17, 2006 in the United States District Court for the Central District of California. The complaint alleged, among other things, that Mr. Chu breached various fiduciary duties by personally investing in certain of our suppliers, thereafter directing our contracts to these suppliers and failing to disclose such actions. Plaintiffs sought actual and punitive damages, attorneys’ fees, costs, disgorgement of alleged profits made by Mr. Chu, a declaratory judgment against Mr. Chu for alleged breaches of various fiduciary duties and an injunction prohibiting the award of contracts to suppliers in which Mr. Chu or his relatives have a financial interest. On October 11, 2006, plaintiffs voluntarily dismissed the complaint without prejudice.

On July 27, 2006, the jury in the trial of LG Philips LCD Co. Ltd., (“LPL”) v. Tatung Company, Tatung Company of America, Inc., Chungwa Picture Tubes Ltd. (“CPT”), and ViewSonic Corporation, pending in United States District Court, District of Delaware, (Case No. 05-292-JJF) delivered a verdict finding that each of the defendants, including ViewSonic, had willfully infringed (through the doctrine of equivalents) a patent of LPL’s relating to electrostatic discharge. The jury awarded monetary damages of $52.5 million against CPT only. Although there is no monetary award against ViewSonic, the finding of willful infringement, if upheld, may subject us to certain other relief including an award of some portion of LPL’s attorneys fees and/or exemplary damages as well as injunctive relief which may require us to, among other things, change our sourcing of certain LCD displays or key components. The Court has not entered judgment in the case. Instead, the Court has entered a briefing schedule for defendants’ motions challenging various aspects of the jury’s verdict. While the outcome of these post-trial proceedings cannot be predicted with certainty, we do not believe that the outcome will have a material adverse effect on our condensed consolidated financial statements.

In addition, in the ordinary course of business, we are involved in lawsuits, claims, investigations, proceedings, and threats of litigation consisting of intellectual property, commercial, employment and other matters. In accordance with SFAS No. 5, Accounting for Contingencies, we make a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Litigation is inherently unpredictable. However, we believe that we have valid defenses with respect to the legal matters pending against us, as well as adequate provisions for any probable and estimable losses. While the outcome of these proceedings and claims cannot be predicted with certainty, we do not believe that the outcome of any pending legal matters will have a material adverse effect on our condensed consolidated financial statements.

ITEM 1A. RISK FACTORS

Factors that May Affect Our Business and Financial Results

The risks described below are not exhaustive of the risks that might affect our business. Other risks, including those we currently deem immaterial, may also impact our business. Any of the following risks could materially and adversely affect our business operations, results of operations and financial condition.

Our revenue and profitability can fluctuate from period to period and are often difficult to predict for particular periods due to factors beyond our control.

Our results of operations for any quarter or year are not necessarily indicative of results to be expected in future periods. Our operating results have historically been, and are expected to continue to be, subject to quarterly and yearly fluctuations as a result of a number of factors, including:

· The introduction and market acceptance of new technologies, products and services;

· Variations in product costs and the mix of products sold;

· The size and timing of customer orders, which, in turn, will often depend upon the success of our customers, business or specific products or services;

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· Adverse changes in the conditions in the markets for display products;

· The size and timing of capital expenditures by our customers;

· Inventory practices of our customers;

· Conditions in the broader markets for information technology and communications;

· Adverse changes in the credit quality of our customers and suppliers;

· Adverse changes in the supply of components such as LCD panels, including oversupply and undersupply;

· The impact of acquired businesses and technologies;

· Changes in the pricing policies of, or the introduction of, new products by us or our competitors; and

· Changes in the terms of our contracts with our customers or suppliers.

These trends and factors could harm our business, operating results and financial condition.

Our industry is highly competitive and such price competition may substantially reduce our revenues and profits.

Competitive factors in the display industry include product features, product quality, breadth and reliability, price and performance characteristics, end user support, marketing and channel capability as well as corporate reputation and brand strength. We believe that we compete favorably with respect to all of these factors in the monitor market. However, we are a new entrant to the home entertainment market, and, therefore, we are just beginning to establish our competitive position. Many of our competitors in our markets have significantly greater financial, technical, manufacturing and marketing resources than we have. We believe that competition will have the effect of continually reducing the ASP of our products over time. We expect price competition to increase in future periods and such price competition may substantially reduce our revenues and products in such periods. Our competition includes established consumer electronic companies, personal computer manufacturers and Asian manufacturers interested in building a brand presence for their goods, including Acer Inc., BenQ Corporation, LG Philips LCD Ltd., NEC Display Solutions, and Samsung Electronics.

We believe that over time, this competition will have the effect of reducing the ASP of our products. Some of our competitors have substantially longer operating histories, greater assets, and name recognition, as well as greater financial, marketing, technical and other resources, than we do. These advantages may allow our competitors to, among other things: undertake more extensive marketing initiatives, implement and sustain more aggressive pricing, obtain more favorable pricing, obtain more favorable allocations from suppliers or cross subsidize their display operations from their other operations. Consequently, there is no assurance that our products will remain competitive relative to those of our competitors. To the extent we are unable to effectively compete against our competitors for any of these reasons or otherwise, our business, financial conditions and results of operations would be materially adversely affected.

Changes in the way we do business and volatility in our industry could require us to raise additional capital.

Although we believe that our existing cash balances, credit facilities and anticipated cash flows from operations will be sufficient to meet our operating, acquisition and capital requirements for at least the next 12 months, we may be required to raise additional capital through either equity or debt financing. Factors that could adversely affect our cash used or generated from operations and, as a result, our need to seek additional borrowings or capital include:

· Differences between payment terms for the purchase of key component and the sale of finished products;

Early-pay or pre-pay arrangements to secure lower pricing and capacity of key components or finished products;

Decreased demand and market acceptance for our products;

Inability to successfully develop our next-generation products;

Competitive pressures resulting in lower than expected average selling prices;

An adverse change in payment terms with our customers or our suppliers; or

New product announcements or product introductions by our competitors.

WeCritical ~~also may~~accounting ~~require~~policies additional capital for other purposes not presently contemplated. If we are unable to obtain sufficient capital, we could be required to curtail capital equipment purchases or research and development expenditures, which could harm our business. If we should require capital in excess of our current availability and if we were unable to raise additional capital, our business could be harmed.estimates

~~The~~Our ~~ASP~~critical ofaccounting policies reflecting our ~~products~~estimates ~~typically~~and ~~decreases~~judgments ~~rapidly~~are described ~~over~~in ~~the~~Part ~~life~~II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the ~~product~~year ended December 31, 2006, filed ~~which~~with ~~negatively~~the ~~affects~~Securities ~~our~~and ~~gross~~Exchange ~~margin~~Commission on March 16, 2007. We have not changed those policies since such date.

~~The~~Item ~~market in which we compete is subject to technological advances with yearly new product releases and price competition~~3. AsQuantitative a result, the price at which we can sell our products typically declines over the life of the product. The decline in LCD monitors’ ASP is primarily due to increased production capacity and ~~aggressive~~ ~~pricing~~qualitative bydisclosure ~~the~~about ~~competition. Over the recent years, the decline~~market ~~in ASP for LCD monitors has been faster than the decline in our product-sourcing costs and this has resulted in decreased margins.~~risk

InOur ~~order to~~financial ~~sell~~market ~~products~~risk ~~that~~arises ~~have~~from afluctuations ~~declining~~in ~~ASP~~foreign ~~and~~currencies. ~~still~~A ~~maintain~~majority of our ~~gross~~net ~~margins~~sales, we ~~need~~expense toand ~~continually~~capital ~~reduce~~purchasing ~~our~~activities ~~product~~are ~~costs and manage our inventory.~~transacted Toin ~~manage~~U.S. ~~product-sourcing~~dollars. ~~costs~~However, we ~~must~~do ~~collaborate~~enter ~~with~~into ~~our~~these ~~contract manufacturers~~transactions toin ~~engineer~~other ~~the most cost-effective design for our products.~~currencies, ~~In addition,~~primarily ~~we must carefully manage~~ the ~~price~~Euro, ~~paid~~Chinese ~~for~~Renminbi, ~~components used in our products. We must also successfully manage our freight~~ and ~~inventory~~certain ~~holding costs~~other toAsian ~~reduce overall product costs~~currencies. ~~We also need to continually introduce~~ ~~new~~Our ~~products~~net ~~with more attractive~~ sales ~~prices~~ and ~~gross~~purchasing ~~margins~~transactions denominated in ~~order~~currencies toother than ~~maintain our overall gross margins~~the U.S. Ifdollar we are ~~unable~~subject to ~~manage~~exchange ~~the~~rate ~~cost~~fluctuations ~~of older products~~and orcould ~~successfully introduce new products with higher gross margins,~~potentially ~~our net~~negatively ~~sales~~impact ~~will decrease and~~ our ~~gross~~financial ~~margins will decline~~results.

We have significant European and Asia-Pacific net sales denominated in the Euro and Chinese Renminbi. Product shipping, and selling, general and administrative expenses associated with a portion of these sales are U.S. dollar-denominated. During the second quarter and first six months of 2007, the Euro-to-U.S. dollar foreign currency exchange rate strengthened against the U.S. dollar increasing 8% and 9%, respectively, compared to the average during the second quarter and first six months of 2006. The strengthening of the Euro positively impacted our net sales and income from operations by $1.6 million and $0.9 million, respectively, in the second quarter of 2007 and $4.9 million and $3.0 million, respectively, in the first six months of 2007 over the prior year assuming all other factors remained constant. During the second quarter and first six months of 2007, the Chinese Renminbi-to-U.S. dollar foreign currency exchange rate strengthened against the U.S. dollar increasing 4% compared to the average during the second quarter and first six months of 2006. The strengthening of the Chinese Renminbi positively impacted our net sales and income from operations by $3.7 million and $3.4 million, respectively, in the second quarter of 2007 and $6.2 million and $5.8 million, respectively, in the first six months of 2007 over the prior year assuming all other factors remained constant. As of June 30, 2007, 23% of our accounts receivable balance was denominated in currencies other than the U.S. dollar. Historically, sales of our products have benefited from effects of the weakening U.S. dollar, which make our products more affordable in several markets. We buy a majority of our products from our suppliers in U.S. dollars and sell a significant amount of our products in other foreign currencies. However, in periods of a strengthening U.S. dollar, our revenues measured in U.S. dollars are negatively impacted, while our cost of sales remains fairly constant, resulting in lower gross profit. In addition, we must manage our account receivables and inventory balances in order to limit our foreign currency exposure to a strengthening U.S. dollar. We are currently in the process of evaluating various foreign currency hedging strategies to minimize the effects of foreign currency fluctuations on our operations.

Item 4. Controls and procedures

Evaluation of Disclosure Controls and Procedures

Based on their evaluation as of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer have concluded that, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were effective.

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Controls over Financial Reporting

There were no changes in our internal controls over financial reporting during the quarter ended June 30, 2007 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Part II

Other information

Legal proceedings

On May 19, 2003, Commissariat a L'Energie Atomique, or CEA, filed a patent suit against Chi-Mei Optoelectronics Corporation, or CMO, Dell Computer Corporation, Samsung Electronics Co., Ltd., Samsung Electronics America, Inc., Samsung Electronics Canada, Inc., Samsung International, Inc., Sun Microsystems, Inc., and ViewSonic Corporation in the U.S. District Court, District of Delaware (Case No. CV-03-484 KAJ), alleging infringement of two patents relating to the design and manufacture of LCD modules. We believe the allegations against us are based upon our incorporation of certain third-party LCD modules into our products. We have filed a motion to stay, which has been granted. While the outcome of this case cannot be predicted with certainty, we do not believe that the outcome will harm our business, financial position, results of operations or cash flows.

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On May 27, 2004, LG. Philips LCD Co. Ltd., or LPL, filed a patent suit against Tatung Company, Tatung Company of America, Inc., and ViewSonic Corporation in the U.S. District Court, District of Delaware (Case No. CV-04-343 JJF), alleging infringement of two patents relating to the mounting of LCD panels. Trial will not be held before March 8, 2008. While the outcome of this case cannot be predicted with certainty, we do not believe that the outcome will harm our business, financial position, results of operations or cash flows.

On July 27, 2006, the jury in the trial of LG. Philips LCD Co. Ltd. v. Tatung Company, Tatung Company of America, Inc., Chunghwa Picture Tubes Ltd., and ViewSonic Corporation, pending in U.S. District Court, District of Delaware, (Case No. 05-292-JJF) delivered a verdict finding that each of the defendants, including us, had willfully infringed (through the doctrine of equivalents) a LPL patent relating to electrostatic discharge. The jury awarded monetary damages of $52.5 million against Chunghwa Pictures Tubes Ltd., or CPT, only. LPL has requested that the Court treble the damages based upon the finding of willful infringement, which could result in an additional $105 million in exemplary damages being awarded against CPT if the jury verdict is upheld. Since there is no damage award against us, there can be no exemplary damages awarded against us. If the jury verdict is upheld, the Court may, in its discretion, award attorneys’ fees to LPL and some portion of the attorneys’ fees may be charged against us. LPL also filed a motion seeking a permanent injunction but this motion was taken off calendar by the judge, who indicated he would not request completion of the briefing on that motion until he had ruled on the other post-trial motions challenging various aspects of the jury’s verdict and that are currently under submission. The patent-in-suit expires in July 2008. While the expiration date of the patent may weigh against entry of an injunction when that issue is taken up by the Court, it is still possible that an injunction will be entered. If an injunction is entered, it may require us to, among other things, change our sourcing of certain LCD displays or key components. While the outcome of these post-trial proceedings cannot be predicted with certainty, we do not believe that the outcome will harm our business, financial position, results of operations or cash flow.

On November 21, 2006, the jury in the trial of LG. Philips LCD Co. Ltd. v. Tatung Company, Tatung Company of America, Inc., and Chunghwa Picture Tubes Ltd. pending in the U.S. District Court, Central District of California, (Case No. CV-02-6775 CBM) delivered a verdict finding that each of the defendants (we are not a defendant) had willfully infringed two patents of LPL's relating to the design and manufacture of LCD modules. The parties to the case have briefed post-trial motions challenging various aspects of the jury's verdict and these motions have been taken under submission by the Court. However, we are a defendant in the related case, LPL v. ViewSonic Corporation, also pending in the U.S. District Court, Central District of California (Case No. CV-03-2886 CBM), in which LPL alleges infringement of the same patents asserted in Case No. CV-02-6775 CBM above as a result of our incorporation of CPT LCD's into our products. Our suit had been consolidated with the CPT case for pre-trial purposes, during which infringement claims directed to four other LPL patents have been dismissed. The dismissals may be overturned on appeal. No trial date has been set in Case No. CV-03-2886 CBM and none is expected to be set as the patent issues have already been heard by the jury in the CPT case (Case No. CV-02-6775 CBM). If an injunction is entered against the CPT LCD panels, we may be required to change our sourcing of certain LCD displays. While the outcome of the post-trial proceedings in Case No. CV-02-6775 cannot be predicted with certainty, we do not believe that the outcome will harm our business, financial position, results of operations or cash flows.

On December 1, 2006, LPL filed a patent suit against CMO, AU Optronics Corporation, or AUO, AU Optronics Corporation America, Tatung Company, Tatung Company of America, Inc. and ViewSonic Corporation in the U.S. District Court, District of Delaware, alleging infringement of the same three LPL patents that were found to be valid and infringed in the two cases referenced above, i.e., CV-02-6775 and 05-292 JJF. Presumably, as with the other LPL suits identified above, the allegations against us are based upon our incorporation of certain third-party LCD modules into our products. We have filed a motion for a more definite statement and motions to dismiss and /or strike the claims asserted in this case, as well as a motion to stay the litigation as to ViewSonic. While the outcome of this case cannot be predicted with certainty, we do not believe that the outcome will harm our business, financial position, results of operations or cash flows.

In 2007, the Federal Communications Commission, or the FCC, notified us that it was investigating whether we may have violated certain FCC rules governing the importation and shipment of television receivers lacking the required digital television receiving capability. In response to the FCC inquiry, we have provided the FCC with information regarding this matter. While it is not possible to predict the outcome with certainty, we do not believe that the outcome will harm our business, financial position, results of operations or cash flows.

In the ordinary course of business, we are involved in lawsuits, claims, investigations, proceedings, and threats of litigation consisting of intellectual property, commercial, employment and other matters. While the outcome of these proceedings and claims cannot be predicted with certainty, we believe that the ultimate outcome of such matters will not harm our business, financial position, results of operations or cash flows.

Risk factors

Factors that may affect our business and financial results

Our revenue and profitability are likely to fluctuate from period to period and are often difficult to predict for particular periods due to factors beyond our control. If we are unable to sustain our growth rate or manage any future growth effectively our financial results could suffer and our stock price could decline.

We have experienced significant growth in a short period of time. Our revenues increased from $379.3 million in the second quarter of 2006 to $423.9 million in the second quarter of 2007 and from $706.1 million in the first six months of 2006 to $833.7 million in the first six months of 2007. We may not achieve similar or any growth in future periods. You should not rely on our operating results for any prior quarterly or annual periods as an indication of our future operating performance.

• The introduction and market acceptance of new technologies or products by us or our competitors;

• Variations in product costs and the mix of regional contribution and products sold;

• Adverse changes in the supply of components such as LCD panels, including oversupply and undersupply;

• The size and timing of product orders, which, in turn, will often depend upon the success of our distributors and resellers, business or specific products;

• Changes in our pricing policies or those of our competitors;

• Adverse changes in the conditions in the markets for display products;

• The size and timing of capital expenditures by commercial end user customers;

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We• Our ~~seek to~~inventory ~~mitigate~~practices ~~the risk of declining ASPs by obtaining promotional pricing incentives from several product vendors. A vendor’s willingness to give us a pricing incentive~~ and ~~the~~those ~~amount~~ of ~~the pricing incentive are based on how competitive the market is, the volatility of the price on~~ our ~~key~~distributors ~~product components,~~ and the quantity of historical purchases of these components from vendors. The pricing incentives do not require us to commit to future component purchases from vendors. We record the reimbursement from our vendors for these promotional pricing incentives when we are released of the legal liability for the payment of the product purchases by the vendors. If we are unable to obtain the promotional pricing incentives or if these incentives are unexpectedly discontinued, our gross margins will decline and our business could be harmed.resellers;

We• The ~~order~~level ~~components, materials and tooling in advance~~ of ~~anticipated~~returns ~~customer demand.~~or ~~Therefore,~~price protection we ~~have~~experience ~~limited~~in ~~ability~~a ~~to reduce our inventory purchase~~given ~~commitments quickly in response to any revenue shortfalls.~~ period;

~~Substantially~~• Conditions ~~all~~in ~~of our sales are made on~~ the ~~basis~~broader ofmarkets ~~purchase~~for ~~orders~~information rather than long-term agreements. As a result, we may commit to purchase products without having received advance purchase commitments from customers. Any inability to sell products to which we have devoted significant resources could harm our business. Additionally, because we typically need sufficient lead-time in purchasing our products, we may not be able to reduce our inventory purchase commitments in a timely manner in response to any revenue shortfalls. We could be subject to excess or obsolete inventories and under-utilized tooling and be required to take corresponding inventory write-downs or tooling write-offs if growth slows or if we incorrectly forecast product demand. A reduction in demand could negatively impact our gross margins and financial results.technology;

If• Adverse ~~we do~~changes ~~not~~in ~~effectively~~the ~~manage~~credit ~~our~~quality ~~sales~~of ~~channel~~our ~~inventory~~customers and ~~product mix, we may incur costs associated with excess inventory or lose sales from having too few products or the wrong mix of products.~~suppliers;

If• The weimpact ~~are unable to properly monitor, control and manage our sales channel inventory and maintain an appropriate level and mix~~ of ~~products~~acquired ~~with~~businesses ~~our customers~~ and ~~within our~~ ~~sales~~technologies; ~~channels, we may incur increased~~ and unexpected costs associated with our inventory. We generally allow wholesale distributors and retailers to return a limited amount of our products in exchange for other products. Under our price protection policy, subject to certain conditions, if we reduce the list price of a product, we issue a credit in an amount equal to the reduction for each of the products held in inventory by our wholesale distributors and retailers. If our wholesale distributors and retailers are unable to sell their inventory in a timely manner, we may under our policy lower the price of the products, or these parties may exchange the products for newer products. If we improperly forecast demand for our products we could end up with too many products and be unable to sell the excess inventory in a timely manner, if at all, or, alternatively we could end up with too few products and not be able to satisfy demand. If these events occur, we could incur increased expenses associated with writing off excessive or obsolete inventory or lose sales and therefore suffer declining gross margins.

~~Our~~• Changes ~~failure to anticipate changes~~ in the ~~supply~~terms ~~or pricing~~ of ~~product~~our ~~components or customer~~contracts ~~demand~~with ~~may~~our ~~result~~customers ~~in excess~~ or ~~obsolete inventory that could adversely affect our gross margins~~suppliers.

~~Inventory purchases are based upon future demand forecasts.~~ These ~~forecasts are based~~ ~~upon assumptions~~factors about future demand that might prove to be inaccurate. If there were to be a sudden and significant decrease in demand for our products, or if there were a higher incidence of inventory obsolescence because of rapidly changing prices of product components, rapidly changing technology and customer requirements or an increase in the supply of products in the marketplace, we could beharm ~~required to write-down~~ our ~~inventory~~business and ~~our~~operating ~~gross margins could be adversely affected~~results.

IfWe ~~we are~~derive ~~unable~~a tolarge ~~provide~~percentage of our ~~third-party~~revenue ~~component~~from ~~suppliers~~sales ~~and contract manufacturers with an accurate forecast~~ of ~~our~~LCD ~~component~~monitors and ~~material~~any ~~requirements,~~decline ~~we may experience delays~~ in ~~the~~demand ~~manufacturing~~for ofthese ~~our~~ products ~~and the~~ ~~costs~~could ofharm our ~~products~~ability ~~may~~to ~~increase~~generate revenue.

We ~~provide our third-party component suppliers and contract manufacturers with~~derive a ~~rolling~~ ~~forecast~~large percentage of ~~demand~~our ~~which~~revenue ~~they~~from ~~use~~sales toof ~~determine~~LCD ~~their material and component requirements~~monitors. ~~Lead~~As ~~times~~a ~~for ordering materials and components~~result, ~~vary~~we ~~significantly~~are ~~and~~particularly ~~depend~~vulnerable onto ~~various~~fluctuations ~~factors,~~in ~~such~~demand asfor ~~the~~these ~~specific supplier~~products, ~~contract~~whether ~~terms~~as ~~and demand and supply for~~ a ~~component~~result atof aconsumer ~~given~~preferences, ~~time.~~market ~~Some~~demand, competition, ofproduct ~~our~~obsolescence, ~~components~~technological ~~have long lead times. If our forecasts are less than our actual requirements~~change, ~~our~~budget ~~contract~~constraints ~~manufacturers~~of ~~may~~consumers beor ~~unable to manufacture enough~~other ~~products in a timely manner~~factors. If our ~~forecasts~~revenue ~~are~~derived ~~too~~from ~~high,~~sales ~~our~~of ~~component suppliers~~LCD ~~and~~monitors ~~contract~~were ~~manufacturers may be unable~~ to ~~use the components~~decline ~~they have~~significantly, ~~purchased. The cost of the components used in~~ our ~~products~~business ~~tends to drop rapidly as volumes increase~~ and ~~the~~operating ~~technologies~~results ~~mature.~~would ~~Therefore,~~be ifadversely ~~our~~affected. ~~contract~~Replacement ~~manufacturers~~of ~~are~~older ~~unable~~CRT monitors towith ~~promptly~~LCD monitors ~~use~~has ~~components~~been ~~purchased~~one onof ~~our behalf,~~the ~~our~~factors ~~cost~~driving ofour ~~producing~~sales ~~products may be higher than that~~ of ~~our competitors~~LCD monitors, ~~due~~and toas ansuch ~~over-supply of higher-priced components. Moreover,~~replacement ~~if they~~becomes ~~are~~largely ~~unable~~complete toour ~~use~~sales ~~certain~~could ~~components,~~be ~~we may need to reimburse them for any losses they incur~~harmed.

The market for LCD monitors has historically experienced significant shifts in production capacity and LCD panel pricing caused by suppliers entering or leaving the market or increasing capacity for certain panel sizes. Demand patterns also vary seasonally and geographically based on consumer demand, product pricing and other factors. We are also subject to competition from competing display technologies as well as emerging or future display technologies. The success of competing display technologies could substantially reduce the demand for our LCD monitors.

Our industry is highly competitive and price competition may significantly reduce our revenues and profits.

Competitive factors in the LCD display industry include product features, price, product quality, breadth and reliability, price and performance characteristics, end user support, marketing and channel capability as well as corporate reputation and brand strength. We have substantial experience competing in the LCD monitor market. However, we are a new entrant to the LCD TV market and, therefore, we are just beginning to establish our competitive position. We believe that competition will have the effect of continually reducing the average selling price, or ASP, of our products over time. The average selling price, or ASP, of our LCD monitors declined 11.2% in the second quarter of 2007 compared to the second quarter of 2006 and declined 15.7% in the first six months of 2007 compared to the first six months of 2006. We expect price competition to increase in future periods and such price competition may significantly reduce our revenues and gross margins in future periods.

The display provider industry has low barriers to entry and we expect new competitors to emerge. In the LCD monitor market and other commercial product markets we compete with PC manufacturers and other branded display companies. In the LCD TV market we compete with traditional TV manufacturers and established consumer electronic companies, as well as more recent entrants to the branded LCD TV market. In contrast, in the manufacturing and development portion of the display provider industry, the need to make significant capital equipment and research and development expenditures has caused higher barriers to entry. A significant increase in the number of display providers coupled with a relatively fixed number of suppliers could result in increased supply costs or diminished capacity, both of which could harm our business.

Some of our competitors have substantially longer operating histories, greater assets and name recognition, as well as greater financial, marketing, technical and other resources, than we do. Due to vertical integration and other factors, some of our competitors may have lower operating costs than we do. These advantages may allow our competitors to, among other things: undertake more extensive marketing initiatives, implement and sustain more aggressive pricing, obtain more favorable pricing or allocations from suppliers or cross subsidize their display operations from their other operations. Consequently, our products may not remain competitive relative to those of our competitors. To the extent we are unable to effectively compete against our competitors for any of these reasons or otherwise, our business would be harmed.

The ASP of our products typically decreases over the life of the product, which can negatively affect our gross margin.

The markets in which we compete are subject to technological advances with frequent new product releases and price competition. As a result, the price at which we can sell our products typically declines over the life of the products. The ASPs of our LCD monitors decreased 11.2% in the second quarter of 2007 compared to the second quarter of 2006 and declined 15.7% in the first six months of 2007 compared to the first six months of 2006. These decreases were primarily due to increased production capacities of LCD panel manufacturers, aggressive price competition and product mix. In recent years, the decline in the ASP for LCD monitors has been faster than the decline in our product-sourcing costs and this has resulted in decreased margins. If ASPs continue to decline, our revenue and gross margins could decline.

In order to prevent excessive erosion of our gross margins, we need to continually manage our product costs and our inventory. To manage product costs, we must collaborate with our contract manufacturers to engineer the most cost-effective design for our products. In addition, we must carefully manage the price paid for components used in our products, as well as our freight and inventory holding costs. We also need to continually introduce new products with more attractive sales prices and gross margins in order to maintain our overall gross margins. We may not be able to reduce our product costs when there is a shortage of key components or when component prices otherwise rise. If we are unable to manage the cost of older products or successfully introduce new products with higher gross margins, our net sales will decrease and our gross margins will decline to an even greater degree than we have experienced in the past.

We seek to mitigate the risk of declining ASPs by obtaining promotional pricing incentives from our contract manufacturers. A supplier's willingness to give us a pricing incentive and the amount of the pricing incentive are typically based on the competitiveness of the market, the volatility of the price of our key product components and the quantity of historical purchases of these components from suppliers. Pricing incentives generally do not require us to commit to future component purchases from suppliers. We record the reimbursement from our vendors for these promotional pricing incentives when we are released by the supplier from legal liability for the payment of the product purchases. If we are unable to obtain promotional pricing incentives or if these incentives are discontinued, our gross margins may decline and our business could be harmed.

Our operating expenses are relatively fixed and we may have limited ability to reduce expenses quickly in response to any revenue shortfalls or declines in product demand.

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Our ~~implementation~~operating costs are relatively fixed and we can adjust them downward only over a period of ~~strategic~~several ~~initiatives~~quarters. ~~may~~As ~~strain~~we typically recognize a substantial portion of our ~~operations~~revenues ~~and~~in ~~increase~~the last month of each quarter, we may not be able to adjust our variable operating ~~expense~~expenses in a timely manner in response to any revenue shortfalls. Our inability to reduce operating expenses quickly in response to revenue shortfalls or ~~harm~~declines ~~our~~in ~~net~~product ~~earnings~~demand would negatively impact our financial results.

WeThe ~~have been~~market ~~implementing~~for ~~strategic~~our ~~initiatives~~products ~~designed~~historically tohas ~~focus~~experienced ~~our~~seasonal ~~resources~~shifts onin demand ~~our core~~due ~~products,~~ to ~~improve~~changes ~~supply~~in ~~chain~~buying ~~and~~patterns ~~logistics~~by ~~efficiency, to simplify~~ our ~~business~~ ~~processes~~customers. toBuying ~~maximize~~patterns ~~operating~~vary geographically, ~~efficiencies~~and inthe ~~all~~impact ~~aspects~~on of our ~~business,~~ tooperating ~~grow~~results ~~sales~~ in ~~regional~~a ~~markets~~given ~~and~~period may vary todepending ~~expand~~on ~~core product offerings,~~our ~~among~~actual ~~others.~~or ~~The~~anticipated ~~undertaking~~level of ~~these~~activity ~~initiatives~~in ~~may~~the relevant ~~strain~~region. ~~our~~We ~~existing~~tend ~~management,~~to ~~information~~experience ~~systems,~~higher ~~employee~~net ~~workforce, operational~~sales ~~capability~~in ~~and~~the ~~financial~~second ~~controls.~~half ~~The~~of ~~difficulties associated~~the ~~with~~year ~~implementing~~due ~~these~~to ~~initiatives, procedures and controls may place~~ a ~~significant burden~~strong onbuying ~~our~~season ~~management,~~by ~~operational~~distributors and ~~financial~~resellers ~~resources. If we fail~~attributable to the ~~successfully~~holiday ~~implement~~season ~~these~~in ~~initiatives~~the orAmericas. ~~encounter~~Our ~~unexpected~~seasonality ~~difficulties~~is moderated through slightly ~~during~~different ~~the~~seasonal ~~implementation,~~variations in our ~~business~~three ~~could be harmed~~regions.

If we do ~~not~~are ~~succeed~~unable into ~~executing~~license ~~our~~third-party ~~growth~~technology ~~strategies~~our ~~within~~ability ~~our~~to ~~markets,~~offer ~~our~~competitive ~~revenues~~products ~~may~~could ~~not~~be harmed and our cost of sales could increase.

~~Our~~We ~~strategies~~have no ~~include~~patented ~~further~~technology. ~~expansion~~We rely on third parties to obtain non-exclusive software license rights to technologies that are incorporated into and necessary for the operation and functionality of our ~~business~~products. inWe ~~markets~~also inlicense ~~which~~technology wenecessary to comply with various data compression, broadcast and wireless ~~currently~~standards. ~~operate,~~Because ~~including~~the ~~Brazil,~~intellectual ~~China,~~property ~~India,~~we ~~Russia~~license is available from third parties, ~~Eastern~~barriers to entry for our competitors are lower than if we owned exclusive rights to the technology we license and ~~Western~~use or if we had ~~Europe~~separately developed patented technology. In ~~many~~some cases, the owners of ~~these~~the intellectual ~~markets,~~property that we ~~face~~license ~~barriers~~routinely inlicense the ~~form~~same ~~of long-standing~~intellectual ~~relationships~~property ~~between~~to our ~~potential~~competitors. ~~customers~~If ~~and~~a ~~their~~competitor ~~local~~enters ~~suppliers,~~into an exclusive asarrangement ~~well~~with any of our third-party technology providers, our ability asto develop ~~protective~~and ~~regulations.~~sell Inproducts ~~addition,~~containing ~~pursuing~~that ~~international~~technology ~~growth~~could be severely limited. ~~opportunities~~Our ~~may~~licenses often require usroyalty payments or other consideration to ~~make~~third parties. ~~significant~~Our ~~investments~~success ~~long~~will ~~before~~depend in part on our continued ability to have weaccess ~~realize~~to ~~returns~~these technologies on commercially reasonable terms. If we are unable to license the ~~investments~~necessary technology, ifwe ~~any.~~may ~~Increased~~be ~~investments~~forced ~~may~~to ~~result~~acquire or develop inalternative technologies of lower quality or performance standards. This ~~expenses~~could limit ~~growing~~and atdelay aour ~~faster~~ability ~~rate~~to ~~than~~offer ~~revenues.~~competitive ~~Our~~products ~~overseas~~and ~~investments~~increase our ~~could~~costs beof ~~adversely~~production. ~~affected~~As ~~by:~~a result, our gross margins, market share and operating results could be harmed.

· Reversals or delays in the opening of foreign markets to new participants;

· Exchange controls;

· Restrictions on foreign investment or the repatriation of profits or invested capital;

· Nationalization of local industry;

· Changes in export or import restrictions;

· Changes in the tax system or rate of taxation in the countries where we do business; and

· Economic, social, and political risks.

In addition, difficulties in foreign financial markets, economies and foreign financial institutions, particularly in emerging markets, could adversely affect demand from customers in the affected countries. Because of these factors, we may not succeed in expanding our business in international markets. This could hurt our business growth prospects and results of operations.

Our operating expenses are relatively fixed and we may have limited ability to reduce expenses quickly in response to any revenue shortfalls.

As a percentage of net sales, selling, general and administrative expenses represent 7.1% and 7.9% for the three months ended September 30, 2006 and 2005, respectively, and 7.7% and 9.2% for the nine months ended September 30, 2006 and 2005, respectively. We expect sales, general and administrative expenses to remain relatively fixed or decrease as a percentage of net sales as we continue to improve efficiencies in all aspects of our business. Additionally, because we typically recognize a substantial portion of our revenues in the last month of each quarter, we may not be able to adjust our operating expenses in a timely manner in response to any revenue shortfalls. If we are unable to reduce operating expenses quickly in response to any revenue shortfalls, it would negatively impact our financial results.

We are subject to risks associated with our international operations, which may harm our business.

We generated a majority of our total net sales to customers outside of the United States and other Americas in the first nine months of 2006. Sales to these customers outside of the United States and other Americas subject us to a number of risks associated with conducting business outside of the United States and other Americas, including the following:

· International economic and political conditions;

· Unexpected changes in, or impositions of, legislative or regulatory requirements;

· Increases or decreases in the U.S. dollar as compared to other currencies;

· Inadequate local infrastructure;

· Delays resulting from difficulty in obtaining export licenses for certain technology, tariffs, quotas and other trade barriers and restrictions;

· Transportation delays;

· Longer payment cycles;

· Tax laws (including U.S. taxes on foreign operations);

· Foreign currency exchange rates;

· Imposition of additional taxes and penalties; and

· The burdens of complying with a variety of foreign laws.

Any one of the foregoing factors could cause our business, operating results and financial condition to suffer.

Intellectual property litigation and infringement claims could cause us to incur significant expenses or prevent us from selling our products.

Many of our products are designed to include software or other intellectual property we non-exclusively license from third parties. Competitors' protected technologies may be unavailable to us or be made available to us only on unfavorable terms and conditions. It may be necessary in the future to seek or renew licenses relating to various aspects of our products. We may not be able to obtain or renew from third parties the licenses that we need on commercially reasonable terms, or at all. There are a large number of patents in our field and new patents issue frequently. We do not attempt to determine in advance whether a product or any of its components infringe the patent rights of others.

We frequently receive claims alleging infringement of patents or other intellectual property rights and expect to continue to receive such claims. We are currently involved in several such proceedings. Many cases involve multiple products and multiple providers as defendants. In other cases we may and have been the only defendant. Pursuant to our agreements with our suppliers and manufacturers, we generally seek indemnification in connection with such claims, but such indemnification is not available in all cases and we may only partially recover the costs we incur in defending such claims. In addition, we regularly enter into distribution agreements that include indemnification provisions under which we could be subject to costs and/or damages in the event of an infringement claim against us or an indemnified third party and which could harm our business. Any claim of infringement by a third party, even one without merit, could cause us to incur substantial costs defending against such claim and could distract our management from running our business. Furthermore, a party making such a claim, if successful, could secure a judgment that requires us to pay substantial damages. A judgment could also include a permanent injunction or other court order that would prevent us from offering one or more products. In addition, we might be required to seek a license for the use of such intellectual property, which may not be available on commercially reasonable terms, or at all. Alternatively, we may be required to develop or obtain access to non-infringing technology, which would require significant effort and expense and may ultimately be unsuccessful. Additionally, in recent years individuals and groups have begun purchasing intellectual property assets for the sole purpose of making claims of infringement and attempting to extract settlements from target companies. Any of these events could harm our business.

We order components and tooling in advance of anticipated customer demand. If we are unable to correctly predict fluctuations in component supply and demand, our business will be harmed.

Substantially all of our sales are made on the basis of purchase orders rather than long-term agreements. As a result, we generally commit to purchase products without having received advance purchase commitments from our distributors and resellers. Our inventory purchases are made based upon future demand forecasts. These forecasts are based upon assumptions about future product demand that may prove to be inaccurate. Because we typically need sufficient lead-time in purchasing our products, we may not be able to reduce our purchase commitments in a timely manner in response to any reductions in our forecasts or in the level of purchase orders from distributors or resellers. In addition, the LCD display industry is characterized by rapidly fluctuating supply levels and pricing due to changes in production capacity, seasonality, purchasing levels by large suppliers and other factors. If we are unable to accurately predict or adapt to changes in LCD pricing, supply or demand, we may purchase an excess of materials at a high price or fail to purchase sufficient materials at a low price. If there is a higher incidence of inventory obsolescence of LCD panels or other product components, rapidly changing technology and customer requirements or an increase of the supply of products in the marketplace, we could be subject to excess or obsolete inventories or under-utilized tooling. If any of these events occur, we could be required to take corresponding inventory write-downs or tooling write-offs, which would impair our financial results and our gross margins.

If we do not effectively manage and predict our sales channel inventory and product mix, we may incur inventory write downs or lose sales from having too few products or the wrong mix of products.

If we are unable to properly monitor, control and manage our sales channel inventory and maintain an appropriate level and mix of products with our distributors and resellers and within our sales channels, we may incur increased and unexpected costs associated with our inventory. We must manage inventory held by our distributors and resellers because inventory held by them could result in excessive returns and lower our future revenue and gross margin. Distributors and resellers may increase orders during periods of product shortages in order to ensure adequate allocation, cancel orders if their inventory is too high or delay orders in anticipation of new products. They may also adjust orders based on competitor product introductions and incentives and seasonal buying patterns. Further, our distributors and resellers sell our competitors' products as well as ours and may have an incentive to exercise greater efforts to sell our competitors' products. We generally allow distributors and resellers to return a limited amount of our products in exchange for other products. Under our price protection policy, subject to certain conditions, if we reduce the list price of a product, we issue a credit in an amount equal to the reduction for each of the products held in inventory by our distributors and resellers. If our distributors and resellers are unable to sell their inventory in a timely manner, we may lower the price of the products, or these parties may exchange the products for newer products. If demand for our products falls, we could have excess inventory and be unable to sell such excess inventory in a timely manner and may need to reduce the prices on our products or, alternatively, we could end up with too few products and be unable to satisfy demand. If these events occur, we could incur increased expenses associated with writing off excessive or obsolete inventory or lose sales.

If we are unable to effectively manage our component and material requirements among our third-party component suppliers and contract manufacturers, we may experience delays in the manufacturing of our products and the costs of our products may increase.

We provide our third-party component suppliers and contract manufacturers with a rolling forecast of demand, which they use to determine their material and component requirements. Lead times for ordering materials and components vary significantly and depend on various factors, such as the specific supplier, contract terms and demand and supply for a component at a given time. Although the cost of key components tends to vary inversely with the supply of these components, conditions of over-supply can still be associated with higher costs and conditions of shortage can still be associated with lower costs. Some of our components have long lead times. Regardless of the accuracy of our forecasts, our contract manufacturers may be unable to meet our product timing, volume and price requirements.

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~~Many~~Alternatively, of our ~~products~~contract ~~are~~manufacturers ~~designed to include software or other intellectual property licenses from third parties. Competitors’ protected technology~~ may be ~~unavailable~~ tounable ~~us or be made available~~ to usutilize ~~only~~the oncomponents ~~unfavorable~~they ~~terms and~~have ~~conditions~~purchased. ~~While~~The itcost ~~may~~of ~~be necessary in~~ the ~~future~~components toused ~~seek~~in ~~or renew licenses relating to various aspects of~~ our products, wetends ~~believe~~to ~~that, based upon~~drop ~~past~~rapidly ~~experience~~as ~~and~~volumes ~~standard~~increase ~~industry~~and ~~practice,~~the ~~these~~technologies ~~licenses generally can be obtained on commercially reasonable terms~~mature. ~~There~~Therefore, ~~can~~if beour ~~no assurances, however,~~contract ~~that~~manufacturers weare ~~will~~unable ~~be able~~ to ~~obtain,~~promptly onuse ~~commercially~~components ~~reasonable~~purchased ~~terms~~on orour ~~at all~~behalf, ~~from~~our ~~third~~cost ~~parties~~of ~~the~~producing ~~licenses~~products ~~that~~may webe ~~will~~higher ~~need.~~than ~~Due~~that toof ~~the~~our ~~existence~~competitors, ofdue to ~~a large~~an ~~number~~over-supply of ~~patents~~higher-priced incomponents. ~~our~~If ~~field~~they ~~and~~are ~~the~~unable ~~rapid~~to ~~rate~~use ~~of issuance of new patents,~~certain ~~it is~~components, ~~not~~we ~~practical~~may need to ~~determine~~reimburse inthem ~~advance~~for ~~whether a product or~~ any oflosses ~~its~~they ~~components infringe the patent rights of others~~incur.

WeOur ~~routinely~~implementation ~~receive~~of ~~claims~~strategic ~~regarding~~initiatives patent and other intellectual property matters. Pursuant to our agreements with our suppliers and manufacturers, we generally seek indemnification in connection with such claims. Whether or not these claims have merit, they may ~~require~~strain ~~significant resources to defend. To date, none of these claims has had a material impact on~~ our ~~business.~~operations ~~We are currently involved in several such proceedings, none of which we believe are material to our business. If an infringement claim is successful~~ and ~~we are~~increase ~~unable to obtain the license for the infringed technology or substitute similar non-infringing technology,~~ our ~~business~~operating ~~could be harmed~~expense. ~~In addition, if an infringement claim is successful or costly to defend and we are unable to obtain indemnification from our suppliers, our business could be harmed.~~

IfWe wehave ~~fail~~implemented strategic initiatives designed to ~~maintain~~focus our resources on improving supply chain and~~/or~~ ~~expand~~logistics efficiency, simplifying our business processes to maximize operating efficiencies, growing sales ~~channels~~in regional markets and expanding core product offerings. We will continue to explore additional opportunities to improve operating efficiencies. The undertaking of these initiatives may strain our existing management, information systems, employee workforce, operational capability and financial controls or may adversely affect our ~~revenue~~ability to effectively work with suppliers, contract manufacturers, distributors or resellers. If we fail to successfully implement these initiatives or encounter unexpected difficulties during their implementation, we may not ~~decline~~be successful in reducing costs, or we may adversely impact our ability to increase product offerings and increase revenues, in either case harming our business.

ToWe ~~maintain~~are ~~and~~subject ~~grow~~to ~~our~~risks ~~market~~associated ~~share,~~with ~~net sales and brand, we must maintain and expand~~ our ~~sales~~worldwide ~~channels. We currently sell our products through distributors~~operations, ~~retailers,~~ ~~VARs,~~which ~~system integrators, commercial or enterprise resellers,~~may ~~direct~~harm ~~marketing/e-retailers, and ViewSonic online stores. These entities purchase~~ our ~~products~~ ~~directly from us or through our distributors~~business. We have no minimum purchase commitments or long-term contracts with any of these third parties. Our agreements are generally non-exclusive and generally may be terminated by either party for any reason or no reason with 30 days notice.

~~Retailers~~We ~~have~~generated ~~limited~~68% ~~shelf~~of ~~space~~our ~~and~~total ~~promotional~~consolidated ~~budgets,~~net ~~and~~sales ~~competition~~from iscustomers ~~intense~~outside ~~for~~of the ~~these~~United ~~resources.~~States Ain ~~competitor~~the ~~with~~second ~~more~~quarter ~~extensive~~of ~~product~~2007 ~~lines~~ and ~~stronger brand~~65% ~~identity~~in ~~may~~the ~~have~~first ~~greater~~six ~~bargaining power with these retailers. The~~months ~~competition~~of 2007. ~~for~~Sales ~~retail~~to ~~shelf~~customers ~~space~~outside ~~may~~the ~~increase,~~United ~~which~~States ~~would~~subject ~~require~~ us to a number ~~increase~~of risks ~~our~~associated ~~marketing~~with ~~expenditures~~conducting tobusiness ~~maintain~~internationally ~~current~~including ~~levels of retail~~the ~~shelf space.~~following:

We• International ~~must also~~economic ~~continuously monitor~~ and ~~evaluate~~political emerging sales channels. If we fail to establish a presence in an important developing sales channel, our business could be harmed. If we are unable to establish relationships in emerging sales channels, our sales could decline and we would lose market share.conditions;

We• Changes ~~rely~~in, onor aimpositions ~~limited number~~ of ~~wholesale distribution and national retail customers for most of our sales~~, ~~and~~legislative ~~changes in price~~ or ~~purchasing~~regulatory ~~patterns and failure to maintain or establish new distributor relationships in existing and new sales channels could lower our revenue or gross margins.~~requirements;

~~We sell our products through wholesale distributors such as Ingram Micro~~• Duties, ~~Inc., Tech~~ ~~Data~~tariffs Corporation and Synnex Corporation and national retailers such as CompUSA, Inc. We expect that a majority of our net sales will continue to come from sales to a small number of wholesale distributors and national retailers for the foreseeable future. We have no minimum purchase commitments or ~~long-term contracts~~other ~~with~~barriers ~~any of these customers. The wholesale distributors and retailers could decide at any time~~ to discontinue, decrease or delay their purchases of our products. We must also monitor and evaluate new sales channels in existing markets and in new markets. If we fail to establish a presence in an important developing sales channel or market, our business could be harmed.trade;

In• Delays addition, the prices that wholesale distributors and retailers pay for our products are subject to negotiation and could change frequently. If any of our major wholesale distributors or ~~retailers~~additional ~~change~~costs ~~their~~resulting ~~purchasing~~from ~~patterns or refuse to pay~~ the ~~prices~~need ~~that we set~~ for ~~our~~permits ~~products,~~or ~~our~~export ~~net sales and~~licenses ~~operating results could be negatively impacted. If our wholesale distributors and retailers increase the size of their product orders without sufficient lead-time~~ for ~~us to process the order, our ability to fulfill product demands~~ ~~would~~certain be compromised. In addition, because our accounts receivable are concentrated within a small group of wholesale distributors and retailers, the failure of any of them to pay on a timely basis, or at all, would reduce our cash flow.technology;

We• Exchange ~~depend~~controls ~~on third-party component suppliers and contract manufacturers for the manufacture of our products. If these third parties experience any delay, disruption~~ or ~~quality~~changes ~~control problems~~ in ~~their~~exchange ~~operations,~~rates wewhich could ~~lose market share~~make ~~and revenues, and~~ our ~~reputation~~products ~~may be harmed.~~more expensive;

~~All~~• Tax ~~of our products are manufactured~~laws, ~~assembled,~~regulations ~~tested~~ and ~~packaged by contract manufacturers. We rely on several~~treaties, ~~component~~including ~~suppliers and contract manufacturers to procure components and, in some cases, subcontract engineering work~~U. ~~Some of our products are manufactured by a single contract manufacturer~~S. ~~Our~~ ~~component~~taxes ~~suppliers~~on ~~and~~foreign ~~contract manufacturers are primarily located~~operations ~~in mainland China, Taiwan,~~ and ~~Thailand and may be subject to disruption by~~ ~~earthquakes,~~repatriation ~~typhoons and other natural disasters, epidemics, pandemics, as well as political, social or economic instability. We do not have any long-term contracts with any~~ of these third party component suppliers and contract manufacturers. Product pricing is generally negotiated on an order-by-order basis. All of our contracts with our component suppliers and contract manufacturers, including those contracts containing provisions that may be materially favorable to us, are generally terminable for any reason and by either party with 90 day’s notice. If our component suppliers and contract manufacturers encounter financial or other business difficulties, if their strategic objectives change, or if they perceive us to no longer be an attractive customer, they may no longer assist us in our product development efforts, and our business could be harmed.funds;

• Longer payment cycles for sales in foreign countries and difficulties in collecting accounts receivable; and

• Additional burdens in complying with a variety of foreign laws.

Any one of the foregoing factors could cause our business, operating results and financial condition to suffer.

We have recently implemented an international structure designed to reflect our global operations and address the various tax regimes in which we operate. Future changes in international and U.S. tax laws, regulations and treaties, or the failure of our international structure to operate or be treated as expected, could increase our effective tax rate and result in additional tax liabilities.

Our operating results may be harmed by fluctuations in foreign currency exchange rates.

Historically, sales of our products have benefited from effects of the weakening U.S. dollar, which make our products more affordable in several markets. We buy a majority of our products from our suppliers in U.S. dollars and sell a significant amount of our products in foreign currencies. However, in periods of a strengthening U.S. dollar, our revenues measured in U.S. dollars are negatively impacted, while our cost of sales remains fairly constant, resulting in lower gross profit. In addition, we must manage our account receivables and inventory balances in order to limit our foreign currency exposure to a strengthening U.S. dollar.

Hedging foreign currencies can be difficult, especially if the currency is not freely traded. We do not currently engage in any hedging transactions and we cannot predict the impact of future exchange rate fluctuations on our operating results.

If disruptions in our transportation network occur or our shipping costs substantially increase, our operating expense could increase and our financial results could be negatively impacted.

We are highly dependent upon the transportation systems we use to ship our products, including surface, ocean and airfreight and on the operations of the Port of Los Angeles. Our attempt to closely match our inventory levels to our product demand intensifies the need for our transportation systems to function effectively and without delay. The transportation network is subject to disruption from a variety of causes, including labor disputes or port strikes, acts of war or terrorism and natural disasters. If our delivery times increase unexpectedly due to these or any other reasons, our inability to deliver products on time could result in delayed or lost revenue. In addition, our transportation costs will likely continue to increase due to increased fuel prices. A prolonged transportation disruption or a significant increase in the cost of freight could severely disrupt our business and harm our operating results.

If we do not succeed in executing our growth strategies in our target international markets, our revenues may not increase.

Our strategies include further expansion of our business in international markets in which we currently operate, including Brazil, China, India, Russia and Eastern Europe. In many of these markets, we face barriers in the form of long-standing relationships between our potential customers and their local suppliers, as well as protective regulations. In addition, pursuing international growth opportunities may require us to make significant investments long before we realize returns on the investments, if any. Increased investments may result in expenses growing at a faster rate than revenues. Our overseas investments in current and targeted international markets could be adversely affected by:

• Reversals or delays in the opening of foreign markets to new participants;

• Economic instability, such as higher interest rates and inflation, which could reduce our customers' ability to obtain financing for consumer electronics or which could make our products more expensive in those countries;

• Difficulties hiring and retaining employees;

• Employment and severance issues, including possible employee turnover or labor unrest;

• Restrictions on foreign investment or the repatriation of profits or invested capital;

• Nationalization of local industries;

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~~The~~• Changes ~~loss of~~in ~~the~~export ~~services of any of our primary contract manufacturers~~ or aimport ~~change in material~~restrictions, ~~terms~~duties ~~could cause a significant disruption in operations~~ and ~~delays in product shipments and adverse impact on cash flow. Qualifying a new contract manufacturer and commencing volume production is expensive and time consuming.~~tariffs;

~~Our~~• Transportation ~~reliance~~delays onor ~~third~~interruptions ~~party component suppliers~~ and ~~contract~~other ~~manufacturers~~effects ~~also exposes~~of usless ~~to the following risks over which we have limited~~developed ~~control:~~infrastructures;

·• Potential loss ~~Inability~~of toproprietary ~~procure~~information ~~key~~as ~~required~~a ~~components~~result ~~for~~of ~~our~~piracy, ~~finished~~misappropriation ~~products~~or laws that tomay ~~meet~~be less protective of our ~~customer’s~~intellectual ~~demand~~property rights than those in the United States;

·• Difficulties in ~~Unexpected~~coordinating ~~increases~~the inactivities ~~manufacturing~~of our geographically dispersed and ~~repair~~culturally diverse ~~costs~~operations;

·• Changes in ~~Unexpected~~the ~~reductions~~tax system or rate of taxation in ~~payment~~the ~~terms~~countries where we do business; and

·• Economic, social, ~~Interruptions~~political inand ~~shipments~~perceived ifor ~~one~~actual ofhealth ~~our manufacturers is unable to complete production;~~risks.

·For example, ~~Inability~~in tothe ~~control~~fourth quarter of 2005, Russia, unexpectedly, temporarily prohibited and then delayed the ~~quality~~importation of ~~finished~~LCD ~~products;~~and CRT monitors resulting in lost sales and inventory write-downs.

·In addition, ~~Inability~~difficulties toin ~~control~~international ~~delivery~~financial ~~schedules;~~markets and economies, particularly in emerging markets, could adversely affect demand from customers in the affected countries. Because of these factors, we may not succeed in expanding our business in international markets. This could hurt our business growth prospects and results of operations.

·If we ~~Inability~~fail to ~~obtain~~maintain ~~favorable~~and/or ~~pricing;~~expand our sales channels, our revenue may decline.

·To maintain ~~Unpredictability~~and grow our market share, sales and brand, we must maintain and expand our sales channels. We currently sell our products through distributors and resellers. We have no minimum purchase commitments or long-term contracts with any of ~~manufacturing~~these ~~yields;~~third parties. Our agreements are generally non-exclusive and generally may be terminated by either party, at its discretion, with 30 days notice.

·Retailers have ~~Potential~~limited ~~lack~~shelf ofspace ~~adequate~~and ~~capacity~~promotional budgets, and competition is intense for these resources. A competitor with more extensive product lines and stronger brand identity may have greater bargaining power with these retailers. The competition for retail shelf space is expected to ~~manufacture~~increase, ~~all~~which orwill require us to increase our marketing expenditures to maintain current levels of retail shelf space. As we are a ~~part~~relatively new entrant to the LCD TV market, we must also convince retailers of the ~~products~~value of our offerings for the LCD TV market. If we ~~require~~fail to secure retail shelf space for our LCD TVs we will lose sales of such products to our competitors, as most LCD TVs are sold through this channel.

We ~~rely~~ must also ~~upon~~continuously ~~third~~monitor ~~parties~~and ~~for~~evaluate ~~technology~~emerging ~~that~~sales ischannels. ~~critical~~If we fail to establish ~~our~~a ~~products~~presence in an important developing sales channel, ~~and~~our business if could be harmed. If we are unable to ~~continue~~establish torelationships ~~license~~in ~~this technology and future technology,~~emerging ~~our~~ sales ~~ability~~ channels, toour ~~offer~~sales ~~competitive products~~ could bedecline ~~harmed~~ and ~~our~~we ~~costs~~would ~~of production~~lose ~~could~~market ~~increase~~share.

We rely on ~~third~~a ~~parties~~limited tonumber ~~obtain~~of ~~non-exclusive~~distributors ~~software license rights to technologies that are incorporated into~~ and ~~necessary~~resellers for ~~the~~most ~~operation and functionality~~ of ~~our~~ ~~products. Because the intellectual property we license is available from third parties, barriers to entry for~~ our ~~competitors may be lower than if we~~sales, ~~owned exclusive rights to the technology we license~~ and ~~use.~~changes Onin ~~the other hand~~price, if apurchasing ~~competitor~~or ~~enters~~return ~~into~~patterns anand ~~exclusive~~failure ~~arrangement with any of our third-party technology providers, our ability~~ to ~~develop and sell products containing that~~maintain ~~technology could be severely limited. Our licenses often require royalty~~ or ~~payments~~ establish ornew ~~other~~distributor ~~consideration~~and toreseller ~~third~~relationships ~~parties. Our success will depend~~ in ~~part~~ onexisting ~~our~~and ~~continued ability to have access to these technologies on~~new ~~commercially reasonable terms. If we are unable to license the necessary~~ sales ~~technology,~~ channels wecould ~~may be forced to acquire or develop alternative technology of~~ lower ~~quality or performance standards. This could limit and delay~~ our ~~ability to~~revenue ~~offer~~or ~~competitive products and increase our costs of production. As a result, our~~ gross margins~~, market share, and operating results could be harmed~~.

IfWe we sell ~~fail~~ our toproducts ~~continue~~through todistributors ~~introduce~~such ~~new~~as ~~products~~Ingram ~~that~~Micro Inc., ~~achieve~~Tech ~~broad~~Data Corporation ~~market~~and ~~acceptance on~~SYNNEX aCorporation, ~~timely~~and ~~basis~~resellers, orsuch ~~fail~~as tosolution ~~market~~providers, value oradded ~~sell~~resellers, ~~our~~traditional ~~products~~retailers inand aInternet ~~way~~retailers. ~~that~~We ~~receives~~expect ~~broad~~ that ~~acceptance~~a inmajority ~~the~~of ~~market~~our ~~place,~~net wesales will ~~not~~continue beto ~~able~~come tofrom ~~compete~~sales ~~effectively~~to a ~~and~~ relatively wesmall ~~will~~number beof ~~unable~~customers tofor ~~increase~~the orforeseeable ~~maintain~~future. No single customer represented over 10% of our consolidated net sales ~~and~~in ~~gross~~the ~~margin~~second quarter and first six months of 2007. We have no minimum purchase commitments or long-term contracts with any of our distributors or resellers. Our distributors ~~financial~~ and ~~results~~resellers could bedecide ~~negatively~~at ~~impacted~~any time to discontinue, decrease or delay their purchases of our products.

WeIn ~~operate~~ addition, inthe aprices ~~highly~~that ~~competitive,~~distributors ~~quickly~~and ~~changing~~resellers ~~environment.~~pay Wefor ~~are~~our ~~dependent~~products ~~upon~~ are subject ~~sufficient~~to ~~demand~~negotiation and ~~broad~~change ~~market~~frequently. ~~acceptance~~If any of our major distributors or resellers change their purchasing patterns or refuse to pay the prices that we set for ~~display~~our products, ~~which are~~our ~~branded~~net ~~separately~~sales ~~from~~and ~~the~~operating ~~computing~~results ~~devices~~could ~~(primarily~~be ~~desktop~~negatively impacted. ~~PCs~~If our distributors and resellers increase the size of their product ~~laptops)~~ orders towithout ~~which~~sufficient ~~they~~lead ~~are~~time ~~attached.~~for ~~Our~~us ~~future~~to ~~success~~process ~~depends~~the onorder, our ability to fulfill ~~develop~~product ~~and~~demand ~~introduce~~would ~~new~~be ~~products~~compromised. ~~and~~In ~~product~~addition, ~~enhancements~~because ~~that~~our ~~achieve~~accounts ~~broad~~ receivable ~~market~~are ~~acceptance~~concentrated inwithin ~~the~~a ~~business~~small group of distributors and ~~home~~resellers, the ~~markets.~~failure ~~Our~~of ~~future~~any ~~success will~~of ~~depend~~them into ~~large~~pay ~~part~~on ~~upon~~a ~~our~~timely ~~ability~~basis, ~~to:~~or at all, would reduce our cash flow.

·We generally ~~Identify~~recognize ~~demand~~revenue ~~trends~~to indistributors ~~the~~and ~~business~~resellers ~~and~~when ~~home~~risk ~~display~~of ~~markets~~loss is transferred ~~and~~to ~~quickly~~such ~~develop,~~third ~~manufacture~~party. ~~and~~To ~~sell~~the ~~products~~extent that ~~satisfy~~return ~~these~~rates ~~demands;~~from our customers or price protection exceed historical averages, revenues from future periods will be reduced.

·We depend ~~Manage~~on ~~our~~a ~~cost~~limited ~~structure~~number toof ~~enable~~third-party uscomponent tosuppliers ~~bring~~and ~~new~~contract manufacturers for the manufacture of our products. toIf these third parties experience any delay, disruption or quality control problems in their operations, we could lose market atshare ~~competitive~~and ~~prices;~~revenues, and our reputation may be harmed.

·All of our ~~Respond~~products ~~effectively~~are manufactured, assembled, tested and packaged by contract manufacturers, as we have no manufacturing or testing facilities. We rely on component suppliers and contract manufacturers to ~~new~~procure ~~product~~components ~~announcements~~and, in some ~~from~~cases, subcontract engineering work. There are a limited number of manufacturers of LCD panels, and we do not expect this number to increase significantly. Some of our ~~competitors~~products are manufactured by ~~designing~~a single contract manufacturer. Our component suppliers and contract manufacturers are primarily located in mainland China, ~~competitive~~Taiwan ~~products~~and Thailand and may be subject to disruption by earthquakes, ~~either~~typhoons ~~internally~~and other natural disasters, epidemics, pandemics, as well as political, social or ~~through~~economic ~~the~~instability. ~~use~~We do not have any long-term contracts with any of these third-party ~~parties;~~component suppliers and contract manufacturers. Product pricing is generally negotiated on an order-by-order basis. Our contracts with our component suppliers and contract manufacturers, including those contracts containing provisions that may be materially favorable to us, are generally terminable for any reason and by either party with 90 days notice. If our component suppliers and contract manufacturers encounter financial or other business difficulties, if their strategic objectives change, or if they perceive us to no longer be an attractive customer, they may no longer assist us in our product development efforts, and our business could be harmed.

·The loss of ~~Provide~~the ~~compatibility~~services ~~and~~provided ~~interoperability~~by any of our ~~products~~primary ~~with~~contract ~~products~~manufacturers ~~offered~~or a change byin ~~other~~material ~~vendors~~terms could cause a significant disruption in operations, delays in product shipments and an adverse impact on our cash flow. Qualifying a new ~~technologies~~contract asmanufacturer ~~they~~and ~~emerge;~~commencing volume production is expensive and time consuming.

·Our reliance ~~Manage~~on ~~our~~third-party ~~product~~component ~~offerings~~suppliers ~~either~~and ascontract ~~stand-alone,~~manufacturers inalso exposes ~~combination~~us ~~with~~to ~~other~~the ~~products~~following orrisks ~~services,~~over orwhich inwe ~~some~~have ~~other~~limited ~~manner;~~or ~~and~~no control:

~~· Respond effectively~~ • Inability to ~~unexpected~~procure ~~shifts~~key inrequired ~~market~~components ~~demand~~for ~~towards~~our ~~display~~finished ~~and PC~~ products ~~sold~~to ~~together~~meet ~~under the same brand or away from stand-alone displays.~~customer demand;

In• Loss ~~investigating~~ of ~~and/~~access to capacity from one or ~~litigating~~more apanel ~~stockholder~~manufacturers ~~derivative~~or ~~action,~~increased competition weif ~~may~~such ~~incur~~manufacturers elect to directly provide display devices ~~substantial~~ to distributors, ~~costs~~resellers or in other markets.

We• Unexpected ~~and James~~ increases ~~Chu, our Chairman and Chief Executive Officer, were named as defendants~~ in a ~~purported~~manufacturing derivative action brought by certain of our stockholders. The complaint alleged, among other things, that Mr. Chu had breached various fiduciary duties by personally investing in certain of our suppliers, thereafter directing contracts to these suppliers and ~~failing~~repair to disclose such actions. In October 2006, the plaintiffs voluntarily dismissed the complaint without prejudice. If the plaintiffs refile the complaint or otherwise make proper demand upon our Board of Directors in accordance with Delaware law, in connection with investigating and/or litigating this action, we may incur substantial costs.;

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We• Unexpected ~~depend~~ reductions onin ~~our~~payment ~~officers, and if we are not able to retain them, our business will suffer.~~terms;

~~James~~• Interruptions ~~Chu,~~ in ~~our~~shipments ~~Chairman~~if ofone ~~the Board and Chief Executive Officer and majority stockholder, along with other senior officers~~ of ~~the~~our ~~Company,~~manufacturers ~~possess specialized~~is ~~knowledge~~unable ~~with respect~~ to ~~our~~complete ~~business and our operations.~~production ~~Consequently, the loss of service of any of our officers could adversely affect~~ or ~~our~~ experiences ~~business. We do not carry key man life insurance on our officers.~~delays;

~~Each~~• Inability ~~of our~~ to ~~officers~~control ~~may~~the ~~terminate~~quality ~~their~~of ~~employment~~finished ~~without notice and without cause or good reason. We currently are not aware that any officer is planning to leave or retire.~~ products;

We• Inability ~~may fail~~ to ~~comply~~control ~~with~~delivery ~~the Restriction of Certain Hazardous Substances Directive, or RoHS, and Waste Electrical and Electronic Equipment Directive, or WEEE, which could harm our business.~~schedules;

We• Inability ~~are subject~~ to ~~local~~obtain ~~laws~~favorable and regulations in various regions in which we operate, including the European Union, or the EU. There are two particular EU directives, RoHS and WEEE that may have a material impact on our business. RoHS restricts the distribution of certain substances, including lead, within the EU and is effective July 1, 2006. RoHS requires us to eliminate and/or reduce the level of specified hazardous materials from our products and requires us to maintain and publish a detailed list of all chemical substances in our products. WEEE requires us to take back and recycle all products we manufacture or import into the EU at our own expense and became effective in January 2006. If we fail to comply with the EU directives our business may be harmed. For example,pricing;

·• Unpredictability of Wemanufacturing ~~may~~yields; ~~be unable to procure appropriate RoHS compliant material in sufficient quantity~~ and ~~quality and/or be unable to incorporate it into our product procurement processes without compromising quality and/or harming our cost structure;~~

·• Potential lack Weof ~~may~~adequate ~~not~~capacity ~~be able~~ to ~~sell~~manufacture ~~non-compliant~~all ~~product into the EU~~ or tosome ~~any~~of ~~customer whose end product will be sold into~~ the ~~EU,~~products ~~which may result in reduced sales; or~~we require.

·If our Wenew ~~may~~products ~~face~~fail ~~excess~~to ~~and~~achieve ~~obsolete~~broad ~~inventory~~market ~~risk~~acceptance ~~related~~on toa ~~non-compliant~~timely ~~inventory that~~ basis we will ~~may~~not ~~continue~~be able to ~~hold~~compete ineffectively ~~2006~~and ~~for~~we ~~which~~will ~~there~~be isunable ~~reduced~~to ~~demand~~increase or maintain ~~and~~net wesales ~~may~~and ~~need~~gross ~~to write down~~margins.

IfWe ~~disruptions~~operate in ~~our~~a ~~transportation~~highly ~~network~~competitive, ~~occur~~quickly orchanging ~~our~~environment. ~~shipping~~We ~~costs~~are dependent ~~substantially~~upon ~~increase,~~sufficient ~~our~~demand ~~operating~~and ~~expense~~broad ~~could~~market ~~increase~~acceptance ~~and~~for LCD display products. Our future success depends on our ~~financial~~ability to develop and introduce new products ~~results~~and product ~~could~~enhancements bethat ~~negatively~~achieve ~~impacted~~broad market acceptance in the business and home markets. Our future success will depend in large part upon our ability to:

We• Identify ~~are highly~~ demand ~~dependent~~trends ~~upon~~in the ~~transportation~~business ~~systems we use to ship our products, including surface, ocean~~ and ~~airfreight.~~home ~~Our~~display ~~attempt~~markets ~~to closely match our inventory levels to our product demand intensifies the need for our transportation systems to function effectively~~ and ~~without~~quickly ~~delay. The transportation network is subject to disruption from a variety of causes~~develop, ~~including~~ manufacture ~~labor disputes or port strikes, acts of war or terrorism~~ and ~~natural disasters.~~sell Ifproducts ~~our~~that ~~delivery~~satisfy ~~times increase unexpectedly for~~ these or any other reasons, our ability to deliver products on time could result in delayed or lost revenue. In addition, if the recent increases in fuel prices were to continue, our transportation costs would likely increase. A prolonged transportation disruption or a significant increase in the cost of freight could severely disrupt our business and harm our operating results.demands;

We• Manage ~~may~~ our becost ~~subject~~structure to ~~product~~enable ~~liability~~us ~~claims~~to ~~that~~bring ~~could~~new ~~result~~products into ~~significant direct~~market orat ~~indirect costs to us.~~competitive prices;

~~There~~• Respond ~~is a~~ effectively ~~risk~~to ~~that~~new ~~defects~~product ~~may~~announcements ~~occur~~from in our ~~products~~competitors ~~and services. The occurrence of these defects could make us liable for damages caused~~ by ~~these defects,~~designing ~~including~~ competitive ~~consequential damages. To date~~products, ~~none~~either ofinternally ~~these~~or ~~claims~~through ~~has~~the ~~had~~use ~~a material~~of ~~impact on our business. Negative publicity concerning these problems~~third ~~could also make it more difficult to convince customers to buy our products and services. Both could hurt our business, operating results, and financial condition.~~ parties;

~~Expensing~~• Provide ~~employee~~ compatibility ~~stock~~and ~~options may~~interoperability ~~materially~~of ~~and~~our ~~adversely~~products ~~affect~~with ~~our~~products ~~reported~~offered ~~operating~~ by other ~~results~~vendors and ~~could~~new ~~adversely~~technologies ~~affect~~as ~~our~~they ~~competitive position as well.~~emerge;

~~Since~~• Efficiently ~~inception,~~ access wethe ~~have~~display ~~used~~technology ~~stock~~needed ~~options~~for ~~as a fundamental component of~~ our ~~compensation~~ ~~packages.~~products Weto ~~believe~~have ~~that~~broad ~~these incentives directly motivate our~~market ~~employees~~ acceptance and, ~~through~~respond ~~the~~rapidly ~~use of vesting, encourage our employees~~ to ~~remain with~~shifts us. During the second quarter of 2005, we elected to adopt the fair value based employee stock-based compensation expense recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, or SFAS 123, in ~~connection with an option re-pricing program, using~~ the ~~modified prospective~~display ~~method.~~technology ~~We previously applied the intrinsic value based expense~~towards ~~recognition provisions set forth in Accounting Principles Board Opinion No.~~ new ~~25, Accounting for Stock Issued to Employees. In December 2004, the Financial Accounting Standards Board, issued SFAS No. 123(R), Share-Based Payment,~~ or ~~SFAS 123(R),~~different ~~which~~display requires the measurement and recognition of compensation expense for all stock-based compensation payments. In April 2005, the SEC delayed the effective date of SFAS 123(R), which is now effective for annual periods that begin after June 15, 2005. We adopted SFAS 123(R) effective as of January 1, 2006 using the prospective method. SFAS 123(R) requires that we record compensation expense for stock options using the fair value of those awards. Expensing these incentives in future periods may materially and adversely affect our reported operating results as the stock-based compensation expense is charged directly against our reported earnings.technologies;

• Manage our product offerings either as stand-alone products or in combination with other products or services, or in some other manner; and

• Respond effectively to unexpected shifts in market demand towards display and PC products sold together under the same brand or away from stand-alone displays.

If a different or new display technology other than LCD achieves broad market acceptance and we are unable to shift to this new or different display technology, our business could be harmed.

Most of our revenue is currently derived from the sale of products utilizing LCD display technology. Different technologies are also currently available and these include plasma, Liquid Crystal on Silicon and Organic Light Emitting Diode. New display technologies are under development and may be commercialized in the future. Our success will depend in part on our continued ability to offer products utilizing a display technology that has broad market appeal on commercially reasonable terms. If we are unable to shift or obtain the necessary technology, we may be forced to acquire or develop alternative technology of lower quality or performance standards. This could limit and delay our ability to offer competitive products and increase our costs of production. If a different or new display technology proves to have broad market acceptance and we are unable to access or bring to market products using this new or different display technology, we could lose market share and our revenue, gross margins and operating results could be harmed.

Confidentiality agreements with employees and others may not adequately prevent disclosure of proprietary information.

We generally enter into confidentiality and invention assignment agreements with our employees and contractors, and nondisclosure agreements with our distributors, resellers, suppliers and contract manufacturers to limit access to, and disclosure of, our proprietary information. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover our trade secrets and proprietary information, and in such cases we could not assert any trade secret rights against such party. Costly and time consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.

Our products are complex and may require modifications to resolve undetected errors or unforeseen failures, which could lead to an increase in our warranty claims and costs, a loss of customers, or a decline in market acceptance of our products.

Our products are complex and may contain undetected errors or experience unforeseen failures when first introduced or as new versions are released. These errors could cause us to incur significant warranty and re-engineering costs, divert the attention of our engineering personnel from product development efforts, and cause significant customer relations and business reputation problems. We also have received, and expect to continue to receive, claims alleging the sale by us of defective products. If we deliver products with defects, our credibility and the market acceptance and sales of our future products could be harmed. Defects could also lead to liability for defective products as a result of lawsuits against us or against our distributors and resellers. We also agree to indemnify our distributors and resellers in some circumstances against liability from defects in our products. A successful product liability claim could require us to make significant damages payments.

Changes in the way we do business and volatility in our industry could require us to raise additional capital.

Although we believe that our existing cash balances, credit facilities, and anticipated cash flows from operations will be sufficient to meet our operating and capital requirements for at least the next 12 months, we may be unable to extend or renew our existing credit facilities on substantially similar terms. In addition, we may be required to raise additional capital through either equity or debt financing, which may not be available on favorable terms, or at all. Factors that could adversely affect our cash used or generated from operations and, as a result, our need to seek additional borrowings or capital include:

• Differences between payment terms for the purchase of key components and the sale of finished products;

• Need to enter into early-pay or pre-pay arrangements to secure lower pricing and capacity for key components or finished products;

• Significantly decreased demand for and market acceptance of our products;

• Need to make significant investments in order to successfully develop our next-generation products;

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To• Competitive ~~the extent~~ pressures ~~that~~resulting ~~SFAS 123(R) results~~ in ~~additional~~lower expenses when granting stock options we may elect to incur increased cash compensation costs instead. In addition, actions that we may take to reduce stock-based compensation expense that might be more severe than ~~any~~expected ~~actions~~average ~~our~~selling competitors may implement, could make it difficult to attract, retain and motivate employees, which could adversely affect our competitive position, as well as our business and operating results.prices;

~~ITEM~~• Adverse changes 2.in ~~UNREGISTERED~~component ~~SALES~~pricing OFor ~~EQUITY~~payment ~~SECURITIES~~terms ~~AND~~with ~~USE~~our OFdistributors ~~PROCEEDS~~and resellers or our contract manufacturers and suppliers; or

On• Acquisitions ~~July 7, 2006, ViewSonic issued an aggregate~~ of ~~3,300,000~~businesses ~~shares~~or ofcomplementary ~~our Series C Preferred Stock to Intel Capital Corporation, a Cayman Islands company, pursuant to the exercise of an outstanding warrant, dated January 10, 2002~~technologies. The warrant had an exercise price of $0.01 per share and Intel paid an aggregate of $33,000 for the shares of Series C Preferred Stock. We relied upon Section 4(2) of the Securities Act of 1933, as amended, and Regulation D promulgated thereunder, for the issuance of the Series C Preferred Stock to Intel.

~~ITEM~~We also may 3require additional capital for other purposes not presently contemplated. If we ~~DEFAULTS~~are ~~UPON~~unable ~~SENIOR~~to ~~SECURITIES~~obtain sufficient capital, we could be required to curtail our sales and marketing expenditures, which could harm our business. If we should require capital in excess of our current availability and if we were unable to raise additional capital, our business could be harmed.

If we fail to comply with government regulations, including those promulgated by the Federal Communications Commission, the European Union's Restriction of Certain Hazardous Substances Directive, or RoHS, and Waste Electrical and Electronic Equipment Directive, or WEEE, our business may be harmed.

We are subject to local laws and regulations in various regions in which we operate. We could become subject to liabilities as a result of a failure to comply with applicable laws and incur substantial costs from complying with existing, new, modified or more stringent requirements. For instance, in the United States we are subject to rules enforced by the Federal Communications Commission, or FCC, regarding televisions containing high-definition tuners. The FCC has notified us that importation declarations indicate that we may have violated certain FCC rules with respect to the transition requirements for selling televisions containing high-definition tuners and may be subject to fines.

In the European Union, or EU, there are two particular directives, RoHS and WEEE, which we believe may have a material impact on our business. RoHS restricts the distribution of certain substances, including lead, within the EU and became effective on July 1, 2006. RoHS requires us to eliminate and/or reduce the level of specified hazardous materials from our products and requires us to maintain and publish a detailed list of all chemical substances in our products. WEEE requires us to take back and recycle all products we manufacture or import into the EU at our own expense and became effective in August 2005 for most EU countries and at varying dates thereafter for other EU countries whose implementation of the European WEEE Directive was subsequent to August 2005. The United Kingdom is the most recent country to implement the WEEE Directive and its regulations became effective in January 2007. If we fail to, or do not fully, comply with the EU directives our business may be harmed. For example,

• We may be unable to procure appropriate RoHS compliant material in sufficient quantity and quality and/or be unable to incorporate it into our product procurement processes without compromising product quality and/or harming our cost structure;

• We may not be able to sell non-compliant products into the EU or to any customer whose end products will be sold into the EU, which may result in reduced sales; or

• We may face excess and obsolete inventory risk related to non-compliant inventory that we may continue to hold for which there is reduced demand and we may need to write down such inventory.

We depend on our founder and other executive officers, and if we are not able to retain them, our business will suffer.

James Chu, our founder, Chairman of the Board, Chief Executive Officer and majority stockholder and other executive officers, possess specialized knowledge with respect to our business and our operations. Consequently, the loss of Mr. Chu, in particular, and our other executive officers could harm our business. We do not carry key man life insurance on any of our executive officers.

Any acquisition we make could disrupt our business and harm our financial condition and operations.

We have made strategic acquisitions of businesses, technologies and other assets in the past. While we have no current agreements or commitments with respect to any acquisition, we may in the future acquire businesses, product lines or technologies. In the event of any future acquisition, we may not ultimately strengthen our competitive position or achieve our goals, or they may be viewed negatively by customers, financial markets or investors and we could:

• Issue stock that would dilute our current stockholders' percentage ownership;

• Incur debt and assume other liabilities; and

• Incur amortization expenses related to goodwill and other intangible assets and/or incur large and immediate write-offs.

Acquisitions also involve numerous risks, including:

• Problems integrating the acquired operations, technologies or products with our own;

• Diversion of management's attention from our core business;

• Assumption of unknown liabilities;

• Adverse effects on existing business relationships with suppliers and customers;

• Increased accounting and financial reporting compliance risk;

• Risks associated with entering new markets; and

• Potential loss of key employees.

We may not be able to successfully integrate any businesses, products, technologies or personnel that we might acquire in the future, which could harm our business.

Item 2. Unregistered sales of equity securities and use of proceeds

Not applicable.

~~ITEM 4~~Item 3. ~~SUBMISSION~~Defaults OFupon ~~MATTERS~~senior ~~TO A VOTE OF SECURITIES HOLDERS~~securities

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable

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~~ITEM 6~~Item 4. ~~EXHIBITS~~Submission of matters to a vote of securities holders

~~Exhibit No~~Not applicable. ~~Description of Exhibits~~

31Item 5.1 ~~Certification~~Other ~~of Chief Executive Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.~~information

31Not applicable.~~2 Certification of Chief Financial Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.~~

32Item 6.~~1* Certification of Chief Executive Officer and Chief Financial Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended.~~ Exhibits

Exhibit No.		Description of Exhibits

10.19(1)		Letter Agreement between ViewSonic Europe Limited and Burdale Financial Limited, dated June 22, 2007.

10.24(2)		ViewSonic 2007 Management Incentive Plan.

10.31(3)		Offer Letter by and between ViewSonic Corporation and Theodore R. Sanders, dated June 3, 2007.

31.1		Certification of Chief Executive Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.

31.2		Certification of Chief Financial Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.

32.1*		Certification of Chief Executive Officer and Chief Financial Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended.

(1)		Incorporated by reference to Exhibit 10.19 to ViewSonic Corporation's Current Report on Form 8-K, (000-50730), filed with the Securities and Exchange Commission on June 28, 2007.

(2)		Incorporated by reference to Exhibit 10.24 to ViewSonic Corporation's Current Report on Form 8-K, (000-50730), filed with the Securities and Exchange Commission on May 14, 2007.

(3)		Incorporated by reference to Exhibit 10.31 to ViewSonic Corporation's Current Report on Form 8-K, (000-50730), filed with the Securities and Exchange Commission on June 11, 2007.

The certification attached as Exhibit 32.1 accompanies this Quarterly Report on Form 10-Q, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of ViewSonic Corporation under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-Q, irrespective of any general incorporation language contained in such filing.

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~~SIGNATURES~~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, thereunto duly authorized, on ~~November~~August 1314, ~~2006~~2007.

ViewSonic Corporation By: /s/ ~~James~~Theodore AR. ~~Morlan~~Sanders ~~James~~Theodore AR. ~~Morlan~~Sanders Chief Financial Officer (Principal Financial and Accounting Officer)

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~~EXHIBIT~~Exhibit ~~INDEX~~ index

Exhibit No.	~~Description of Exhibits~~	Description of Exhibits
31.1	Certification of Chief Executive Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
10.19(1)		Letter Agreement between ViewSonic Europe Limited and Burdale Financial Limited, dated June 22, 2007.
31.2	Certification of Chief Financial Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
10.24(2)		ViewSonic 2007 Management Incentive Plan.
32.1*	Certification of Chief Executive Officer and Chief Financial Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended.
10.31(3)		Offer Letter by and between ViewSonic Corporation and Theodore R. Sanders, dated June 3, 2007.
31.1		Certification of Chief Executive Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
31.2		Certification of Chief Financial Officer as required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
32.1*		Certification of Chief Executive Officer and Chief Financial Officer as required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended.

(1)	Incorporated by reference to Exhibit 10.19 to ViewSonic Corporation's Current Report on Form 8-K, (000-50730), filed with the Securities and Exchange Commission on June 28, 2007.

(2)	Incorporated by reference to Exhibit 10.24 to ViewSonic Corporation's Current Report on Form 8-K, (000-50730), filed with the Securities and Exchange Commission on May 14, 2007.

(3)	Incorporated by reference to Exhibit 10.31 to ViewSonic Corporation's Current Report on Form 8-K, (000-50730), filed with the Securities and Exchange Commission on June 11, 2007.

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