SAN JOSE, Calif., Oct. 15 /PRNewswire/ -- Hello Direct, Inc.
(Nasdaq: HELO) today reported financial results for the third quarter ended
September 30, 1997.
    The quarter's highlights include:

    * Net Sales increased 27.6% compared to net sales in the third quarter
      1996
    * Earnings per share reached $0.10 vs. $0.03 in the third quarter 1996
    * Gross margins improved to 52.7% from 50.7% in third quarter 1996
    * Catalog average order size reached new high of $250
    * New proprietary headset products set performance standards
    * CODiT(TM) technology expands Company's marketing opportunities

    Net sales for the three months ended September 30, 1997 were
$16,727,000, which represents a 27.6%  increase over net sales of
$13,111,000 for the third quarter of 1996.  Net income for the third quarter
1997 increased 252% to $510,000, or $0.10 per share, compared with net income
of $145,000, or $0.03 per share, for the same period in the prior year.
    For the nine months ended September 30, 1997, net sales grew 27.7% to
$47,981,000, from $37,566,000 in the first nine months of 1996.  Net income
for the nine months ended September 30, 1997 reached $1,180,000, or $0.23 per
share, which represents a 67.4% increase over net income of $705,000, or
$0.14 per share, in the same period last year.
    The Company also reported gross margins for the quarter improved to
52.7% of sales, compared with 50.7% in the third quarter of the prior year.
In addition, selling, general and administrative expenses for the quarter
dropped to 46.7% of sales, from 48.0% of sales in the same quarter last year.
    "We continue to benefit from growth in our target market of business
end-users of telecommunications products, which is now estimated at over
$8 billion in size," said Alec Glover, Hello Direct's president.  "More
importantly, the quarter's results demonstrated that the initial steps we took
in the second quarter to eliminate low margin products from our catalog, focus
sales efforts on higher margin products, target mailings to historically
profitable market segments, and reduce costs through process improvements are
strengthening our profitability."

    New Strategic Focus
    Glover also announced a new strategy that includes leveraging Hello
Direct's strong brand franchise by investing more in the development and
marketing of proprietary products.  "The acceptance of the new Helloset
F/X(TM)  headset and our CODiT smartchip interface technology, which greatly
reduces equipment integration problems, further validates our investment in
proprietary product innovation," he said.
    "Going forward, Hello Direct's strategy also includes expansion of our
outbound telemarketing capability directed at corporate accounts.  We are
making a significant investment to increase the size of our outbound sales
force and improve training and marketing support," said Glover.  "This
outbound telemarketing investment will be partly funded by slowing the
increase in our catalog mailings.  While the catalog remains the primary
component of the marketing program, other channels provide significant growth
and profit opportunities."
    "Implementing this new strategy presents a significant management
challenge, but we plan to have it in place and operating by the first quarter
of next year," said Glover.  "As a result of this shift in marketing channel
mix, we expect our short-term revenue growth to be somewhat slower than our
historical rates.  However, we believe growth in profitability will
significantly exceed that of revenue, even during this transition period.  By
pursuing more profitable growth, we will be better positioned to increase our
share of the U.S. market and raise returns to stockholders," he said.
    Glover concluded by pointing out the Company's improved financial
position.  "With approximately $6.6 million in cash and short term
investments, a 3.8:1 current ratio and no long term debt, Hello Direct remains
in good position to undertake the development of new products and market
opportunities."
    Hello Direct, Inc. (http://www.hello-direct.com) is the leading direct
marketer/developer of telephone productivity tools including headsets,
teleconferencing, wireless and related desktop products.  Through its
distinctive catalogs, website and outbound telemarketing programs, the Company
offers a broad selection of commercial-grade brand name, proprietary and
private label products at competitive prices that provide solutions to its
customers' evolving communication needs.
    This release contains forward-looking statements including, but not
limited to statements regarding new product development and introductions,
sales force expansion including plans to finance such expansion, marketing
support improvements, implementation of a new corporate strategy including
market share, profitability and stockholder return gains in connection with
such strategy, the ability to control costs and achieve improvements in net
sales, operating results, operating margins, and product mix.  These
forward-looking statements involve risks and uncertainties that could cause
actual results to differ, and such differences could be material.  Such
factors include, but are not limited to the following: need for continued and
increased market acceptance of existing and new products, the Company's
ability to attract, train and retain qualified sales force personnel, the
Company's ability to develop, introduce and market new product developments
and enhancements, management's ability to successfully implement and execute
such corporate strategy, the ability to control costs and achieve improvements
in margins and profitability, changes in the Company's management team and
fluctuating economic conditions.  There can be no assurance that the Company
will be successful in resolving such issues.  Investors should also refer to
the Company's Annual Report on Form 10-K for the year ended December 31, 1996,
and Quarterly Reports on Form 10-Q, which are on file at the Securities and
Exchange Commission.

                              HELLO DIRECT, INC
                      Condensed Statement of Operations
                     For the Three and Nine Months Ended
                         September 30, 1997 and 1996

                              Three months Ended       Nine Months Ended
                                   September 30,            September 30,
                              1997          1996         1997          1996

    Net Sales          $16,727,000   $13,111,000  $47,981,000   $37,566,000
    Cost of goods sold   7,914,000     6,463,000   23,309,000    18,084,000
      Gross profit       8,813,000     6,648,000   24,672,000    19,482,000
    Selling, general and
     administrative
     expenses            7,816,000     6,297,000   22,080,000    17,493,000
    Product development
     expenses              322,000       313,000    1,103,000     1,388,000
      Operating income     675,000        38,000    1,489,000       601,000
    Other income - net     177,000       197,000      498,000       568,000
      Income before
       income taxes        852,000       235,000    1,987,000     1,169,000
    Income taxes           342,000        90,000      807,000       464,000
      Net income          $510,000      $145,000   $1,180,000      $705,000
    Net income per share     $0.10         $0.03        $0.23         $0.14
    Weighted average
     shares outstanding  5,133,000     5,043,000    5,101,000     5,033,000

                                Hello Direct, Inc.
                             Condensed Balance Sheets

                            September 30,            December 31,
                                     1997                    1996

    ASSETS
    Current assets:
     Cash and cash equivalents $2,851,000              $2,492,000
     Short-term investments     3,718,000               6,007,000
     Trade accounts receivable,
      less allowance for
      returns and doubtful
      accounts                  6,698,000               4,852,000
     Inventories                5,780,000               5,287,000
     Deferred tax assets          559,000                 628,000
     Other current assets       2,023,000               1,339,000
      Total current assets     21,629,000              20,605,000
    Notes receivable            4,653,000               3,497,000
    Property and equipment,
     net                        4,956,000               3,792,000
    Long-term deferred tax
     assets                       523,000               1,072,000
       Total assets           $31,761,000             $28,966,000

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
    Accounts payable           $4,482,000              $3,839,000
    Accrued expenses            1,262,000                 484,000
                                5,744,000               4,323,000
    Stockholders' equity:
     Common stock                   5,000                   5,000
     Additional paid-in
      capital                  28,001,000              27,807,000
     Accumulated deficit       (1,544,000)             (2,724,000)
     Less treasury stock,
      at cost                    (445,000)               (445,000)
     Total stockholders'
      equity                   26,017,000              24,643,000
     Total liabilities and
      stockholders' equity    $31,761,000             $28,966,000

    NOTE:  For more information on Hello Direct via fax, dial 800-PRO-INFO,
code HELO.  No cost

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