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Virage Reports Continued Improvement in Fiscal Q3

SAN MATEO, Calif. - January 16, 2003 - Virage, Inc. [NASDAQ: VRGE], a leading provider of video and rich media communication software, today reported operating results for its third fiscal quarter ended December 31, 2002.

Total revenues for the company's third fiscal quarter increased slightly to just over $3.3 million, versus total revenues of just under $3.3 million in the prior quarter ended September 30, 2002. Net loss in accordance with generally accepted accounting principles (GAAP) was $3.3 million, or $0.16 per share, for the third quarter in comparison to a net loss of $4.7 million, or $0.23 per share, in the prior quarter. Net loss for the third quarter included non-cash, stock-based charges of $305,000. For the nine months ended December 31, 2002, total revenues were $9.8 million and net loss was $13.5 million, or $0.65 per share.

"We've made definite improvements in our business this past quarter," said Paul G. Lego, chairman and CEO of Virage. "I'm pleased with the continued adoption of our software applications by blue-chip corporations, particularly our new webcasting solution. I'm also pleased that we significantly reduced cash usage for the third quarter in a row, especially given a business environment in which our revenues have been relatively flat. We will continue to focus our efforts on both revenue growth and expense control in an effort to close the gap further."

Cash and short-term investments totaled $18.9 million as of December 31, 2002 versus $21.6 million as of September 30, 2002. Accounts receivable totaled $2.0 million, representing 56 days sales outstanding. The company had no debt as of December 31, 2002.

Reduced Facility Costs

In December 2002, the company amended its lease agreement for its headquarters facility. This amendment will result in a significant reduction of cash outflow for rent and overall lease liability in exchange for a warrant to purchase up to 200,000 shares of the company's common stock and the forfeiture of certain deposits and collateral.

New and Repeat Customers

During the third quarter, Virage added 18 new customers worldwide. In the U.S., first-time customers included Electronic Arts, Halliburton Company, Honeywell, Inc., QUALCOMM Incorporated, and Whirlpool Corporation. New international customers in the third quarter included Athens Olympic Broadcasting, Austrian Broadcasting Corporation (ORF), Canadian Broadcasting Corporation, Saint-Gobain, and Yokohama University. Virage also generated repeat business from existing customers including Discovery Communications, Inc., E! Networks, Forrester Research, Kansas State University, and Toshiba Corporation. Additionally, in the third quarter, Virage received a significant order from a classified U.S. government customer.

Other Third Quarter Highlights

The U.S. Senate deployed Virage software to capture, record and stream

Senate proceedings daily for viewing by all Senators and their staffs,

significantly improving on-demand access to the discussions and debates in

the various hearings.

University of Iowa's Information Technology Services implemented Virage

publishing software for two significant streaming video projects designed to

give faculty and students instant access to large video collections from a

web browser.

Public Broadcasting Service (PBS) renewed its application services

contract, under which PBS and Virage will continue to deliver video from

several popular PBS television programs onto the award-winning website,

PBS.org.

The Commissioners Office in Hillsborough County, Florida selected Virage

to digitally record, manage, and distribute all of the Board of County

Commissioners' public meetings.

Virage was ranked as one of the fastest-growing technology companies in

the United States and Canada by Deloitte & Touche. The ranking was based on

a five-year percentage increase in revenues from 1997 to 2001.

Business Outlook

"We aren't yet seeing a significant improvement in the business climate, and thus we expect revenues to remain relatively flat this quarter," said Lego. "Nevertheless, we believe that the early traction of our corporate applications, combined with our continued investment in them, will eventually translate into revenue growth. In the meantime, we will continue to focus on reducing our cash usage through expense controls, including the recently completed restructuring of our facility lease. We believe these efforts position Virage to capitalize on the continued emergence of the rich media communications market."

Virage Third Quarter Webcast

Virage management will host a webcast to discuss third quarter financial performance, operating and strategic developments, lease amendment details, and forward-looking guidance at 3:00 p.m. Pacific Time (6:00 p.m. Eastern Time) today, Thursday, January 16, 2003. The webcast will be available live at http://investor.virage.com and will be available for replay at the same URL through February 28, 2003.

Forward-Looking Statements

This press release contains forward-looking statements, including statements about our future sales growth, expense controls, cash usage and market opportunity. Our forward-looking statements are based on currently available information, which management has assessed, but which is subject to rapid change due to risks and uncertainties that affect our business, including the unpredictability of future revenues due to limited visibility into future demand; the current uncertainty in our marketplace, which may impact expected demand, customer selection criteria and sales cycle; variability in the amount and timing of expenses and cash usage; our ability to execute on service and software deliverables; slower economic growth; increased competition; and other factors beyond our control. Our forward-looking statements should be considered in the context of these and other risk factors disclosed from time to time in the company's filings with the Securities and Exchange Commission, including our annual report on Form 10-K and Form 10-Q filings.

About Virage

Established in 1995, Virage is a leading provider of video and rich media communication software. Virage builds integrated rich media business solutions for corporations, media & entertainment companies, universities and government agencies worldwide. Headquartered in San Mateo, California, Virage has offices throughout the United States and Europe.

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Virage is a registered trademark of Virage, Inc. The Virage logo is a trademark of Virage, Inc. Other company product and service names may be trademarks or service marks of others, and are hereby acknowledged.

For the Earnings press release and financial statements, please go to: http:// investor.virage.com/news.

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Virage Reports Continued Improvement in Fiscal Q3

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