Scm Microsystems Announces Sale of Dazzle™ Digital Media and Video Consumer Business

FREMONT, CALIF. – June 30, 2003 – SCM Microsystems, Inc. (Nasdaq: SCMM; Prime Standard: SMY), a leading provider of solutions that open the Digital World, today announced the completion of its strategy to divest its Dazzle Digital Media and Video consumer business and focus on the security market.

SCM has agreed to sell its digital video business to Pinnacle Systems, Inc. (Nasdaq: PCLE) for $21.5 million in Pinnacle Systems common stock, subject to final valuation of assets of the business at closing. The deal is expected to close within 30 days, subject to customary closing conditions.

“We are delighted to round out our award-winning offerings of consumer video editing solutions with Dazzle’s technology and brand,” said J. Kim Fennell, president and chief executive officer of Pinnacle Systems, Inc. “Our goal is to make the blending of our great video editing solutions as smooth and transparent as possible for our mutual customers.”

As part of the divestiture, SCM also is selling its digital media reader consumer business to Zio Corporation, which will focus on supporting and building on the success of the Dazzle brand in the digital reader market. The company will distribute the digital media products, including existing inventories, through established sales channels and will assume certain liabilities and supply arrangements for the planned disposition of reader inventory.

Zio is headed by Andrew Warner, SCM’s chief financial officer, who has also served as executive vice president of the Digital Media and Video division for the past two years. Warner is resigning from SCM effective today (see separate release, “SCM Microsystems Names New CFO” dated June 30, 2003). SCM will retain the division’s core ASIC technology for interface and connectivity. Commented Robert Schneider, chief executive officer, “With the sale of our retail-based Digital Media and Video business, we have cleared the way to execute on our vision to focus on the security market. We can now simplify our business model and concentrate our full attention on developing and supplying premier solutions for secure digital access.” As a security company, SCM will provide secure access solutions based on smart card technology for broadcast decryption, network authentication and personal identification, and physical access.

SCM today also announced the restructuring of its Security business. “We have taken a number of measures to realign our organization around the security market and strengthen our operational efficiency,” explained Schneider. “By consolidating and leveraging resources, we are better positioned to respond more quickly and effectively to the needs of our customers and to weather the challenges of operating in a tough economic environment.”

In association with the sale of its Digital Media and Video consumer business and the restructuring of its Security business, SCM expects to record net charges of between $35 million and $45 million during the remainder of 2003, consisting primarily of the write down of assets.

ABOUT PINNACLE SYSTEMS, INC.

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

ABOUT SCM MICROSYSTEMS

SCM Microsystems is a leading supplier of solutions that open the Digital World by enabling people to conveniently access digital content and services. The company markets and sells its smart card reader technology for network and physical access and conditional access modules for secure digital TV decryption to OEM customers in the government, financial, enterprise and broadcasting markets worldwide. Global headquarters are in Fremont, California, with European headquarters in Ismaning, Germany. For additional information, visit the SCM Microsystems web site at www.scmmicro.com.