"We are extremely pleased that despite the tough economy we were able to achieve our first quarterly net profit since 1996, excluding the profit generated by our sale of MediaBank and InterSep in the third quarter of 1998," said Charles Ying, Chief Executive Officer. "Not only did we increase our net income as compared to the fourth quarter of last year, we also increased it by $690,000 as compared to a loss of $(616,000) for the three months ended September 30, 2002. We also released two new products during 2002, ThunderHawk and Mpower, which we believe will position the Company well for future growth."

Bitstream is composed of three different businesses: (1) its type and technology ("Type") business, which generates revenue primarily from the licensing of font rendering software and fonts to the embedded, set-top box, wireless device and information appliance markets; (2) MyFonts.com, a wholly owned subsidiary that was formed in late 1999 as the first e-commerce site to aggregate fonts from multiple vendors on one easy-to-use Web site ("MyFonts.com"); and (3) Pageflex, a wholly owned subsidiary that was formed in early 1999 to establish the Company as a leader in dynamic page composition technologies ("Pageflex"). The performance of each business segment is discussed in greater detail below.

Type Results
Type revenue for the three months ended December 31, 2002 decreased $417,000 or 26.4% to $1,164,000 from $1,581,000 for the three months ended December 31, 2001. Cost of revenue increased $26,000 or 22.0% to $144,000 for the three months ended December 31, 2002 from $118,000 for the three months ended December 31, 2001. Cost of revenue increased as the revenue generated from royalty bearing type products increased in comparison to non-royalty bearing technology. Consequently, Type gross profit decreased by $443,000 from $1,463,000 for the three months ended December 31, 2001 to $1,020,000 for the three months ended December 31, 2002. Operating expenses for the three months ended December 31, 2002 decreased $176,000 or 15.1% to $986,000 as compared to $1,162,000 for the three months ended December 31, 2001. This decrease was primarily due to decreased sales and marketing and general administrative expenses of $93,000 and $74,000, respectively. Income from operations for the Company's Type business segment was $34,000 for the three months ended December 31, 2002, as compared to $301,000 for the three months ended December 31, 2001, a decrease of $267,000.

"Despite the difficult economy, our Type business returned to profitability in the fourth quarter of 2002, as we increased income from operations $110,000 from an operating loss of $(76,000) for the three months ended September 30, 2002, while using a significant amount of resources for the development and initial launch of ThunderHawk," said Anna M. Chagnon, President and Chief Operating Officer. "During the fourth quarter, we added two new set top box placements, and licensed our font technology to over 28 customers. During the quarter we had 2,025 users download and set up accounts for our end-user version bringing the total to date to 6,355. We also had 207 new subscribers during the fourth quarter bringing the total to date to 435. We also entered into discussions with over 25 new ThunderHawk corporate accounts, bringing the total number of accounts evaluating ThunderHawk as a potential corporate solution to 43. We have learned that many of these accounts have budgets in place for pilot programs in mid to late 2003. We are optimistic that our first sale of the Enterprise Edition of ThunderHawk is forthcoming. To improve the appeal of ThunderHawk to the corporate market, we focused our development efforts on increased device support, a new Enterprise Edition, and increased functionality. We also have plans to bring ThunderHawk to Palm-based devices and cell phones during the coming year. Additionally, we are also participating in two new 3G trials with wireless carriers and we have begun discussions with three new wireless carriers to try to achieve our goal of providing the killer application for the world of 3G wireless technology."

MyFonts.com Results
MyFonts.com revenue for the three months ended December 31, 2002 increased $218,000 or 126% to $391,000 from $173,000 for the three months ended December 31, 2001. Revenue attributable to this segment, before elimination of intercompany royalties due on the resale of Bitstream products, for the three months ended December 31, 2002 increased $230,000 or 98.7% to $463,000 from $233,000 for the three months ended December 31, 2001. Cost of revenue, which primarily represents royalties paid to non-related foundries whose products MyFonts.com resells, for the three months ended December 31, 2002 increased $188,000 or 142.4% to $320,000 from $132,000 for the three months ended December 31, 2001. Operating expenses for the three months ended December 31, 2002 decreased $8,000 or 4.4% to $173,000 from $181,000 for the three months ended December 31, 2001. Loss from operations for the MyFonts.com business decreased $38,000 or 27.1% to $(102,000) for the three months ended December 31, 2002 as compared to $(140,000) for the three months ended December 31, 2001.

MyFonts.com continues to show growth as revenues for the year increased $868,000 or 170%," said John Collins, Vice President and Chief Technology Officer. "During the fourth quarter, MyFonts.com acquired over 14,000 new users bringing the total at year end to 80,000 registered users. During the quarter 32% of orders were placed by users who had previously purchased fonts from MyFonts.com. We regard this as a very strong vote of confidence in MyFonts.com. As of the end of the year, MyFonts.com has over 105 foundries, large and small, participating as partners with MyFonts.com to offer their fonts for sale. This represents an aggregate collection of over 26,000 fonts allowing us to serve the needs of a wide variety of customers, including those who have never purchased a font before."

Pageflex Results
Revenue from the Company's Pageflex business for the three months ended December 31, 2002 increased $118,000 or 19.6% to $719,000 from $601,000 for the three months ended December 31, 2001. Cost of revenue for the three months ended December 31, 2002 decreased $7,000 or 11.5% to $54,000 from $61,000 for the three months ended December 31, 2001. Operating expenses for the three months ended December 31, 2002 decreased $397,000 or 34.3% to $759,000 from $1,156,000 for the three months ended December 31, 2001. The combination of increased revenues and decreased operating expenses resulted in a decrease in the operating loss of $522,000 or 84.7% to $(94,000) for the three months ended December 31, 2002 from $(616,000) for the three months ended December 31, 2001.

"Pageflex's strong customer base has allowed this business segment to continue its focus on increasing revenue and improving profitability while completing exciting new product development that positions Pageflex to be the leader in the growing area of Web-top publishing," said David Frenkel, General Manager of Pageflex. "During the fourth quarter our sales pipeline for Mpower and Mpower increased significantly resulting in two new placements of Mpower and Mpower to large corporations bringing the total number of Pageflex customers to over 75. Thus far in 2003 we have made an additional three sales of Mpower and Mpower as a direct result of the growing sales pipeline. To further expand our sales reach, we signed agreements with three new resellers who are committed to creating a business around sales of our products. Our increasing customer base, new sales channels, and the release of Mpower 2.0 give us significant advantage in the emerging Web-top publishing market."

On Monday, February 24, 2003, at 4:30 p.m. EST, Bitstream will host a conference call with the financial community to discuss its fourth quarter results. Interested participants should call (416) 640-1907 no sooner than ten minutes before the call begins and ask the operator for the Bitstream Inc. earnings release call. An operator will request your name and organization and ask you to wait until the call begins. If you have any difficulty connecting with the conference call number, please call the Liolios Group at (949) 574-3860. There will also be an Internet Simulcast (Windows Media Player needed for simulcast. Simulcast is voice only) at: www.viavid.com/detailpage.asp?sid=1899. A replay of the conference call will be available until March 3, 2003 at: (877) 289-8525, enter the playback pass code (239100) to access the replay. For Internet Simulcast replay see the link above.

This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations. Actual performance and results of operations may differ materially from those projected or suggested in the forward-looking statements due to certain risks and uncertainties, including, without limitation, market acceptance of the Company's products, competition and the timely introduction of new products. Additional information concerning certain risks and uncertainties that would cause actual results to differ materially from those projected or suggested in the forward-looking statements is contained in the Company's filings with the Securities and Exchange Commission, including Bitstream's Annual Report on Form 10-K for the year ended December 31, 2001.

About

Bitstream Inc.
Bitstream Inc. (NASDAQ: BITS) is the leading developer of font technology, digital fonts, and custom font designs. Bitstream licenses its award-winning TrueDoc and Font Fusion technologies to Web and application developers, and to manufacturers of information appliances, wireless and handheld devices, set-top boxes, embedded systems, and printers. Setting the standard for excellence in font technology, Bitstream holds numerous key patents that cover the creation of portable fonts for the Internet. Building on this experience, Bitstream has recently released an end user version of ThunderHawk, a full-featured browser for the wireless Web.

MyFonts.com
MyFonts.com, Inc., a venture funded by Bitstream Inc. and established as a wholly owned subsidiary in 1999, is a showcase of the world's fonts available from one easy-to-use Internet portal. It provides the largest collection of fonts ever assembled for on-line delivery, and offers easy ways to find and purchase fonts on-line, unique typographic resources, and a forum for interacting with font experts. For more information, visit http://www.myfonts.com , the Web site for finding, trying, and buying fonts on line.

Pageflex
Pageflex ( www.pageflexinc.com) is the pioneer of a new direction in composition software: Web-top publishing. Moving beyond desktop publishing, Pageflex Web-top publishing software helps novice users create high-quality printed products using intelligent, flexible templates, without installing or learning any new software. Pageflex templates are intelligent and flexible because professional designers can set rules to define which elements can change, how much they can change, and who can change them. Pageflex products maintain corporate identity and design integrity while enabling sophisticated customization of documents. Pageflex also leads the field in variable-data composition software for both enterprise and desktop.

Pageflex software is used for a wide variety of applications, including on-demand marketing materials, stationery and business cards, advertising, catalogs, and personalized digital printing. Pageflex products are distributed through original equipment manufacturers (OEMs), value added resellers (VARs), application service providers (ASPs), and system integrators. The Pageflex worldwide customer base includes manufacturers, service providers, advertising agencies, commercial printers, graphic design houses, and application service providers (ASPs). Users of Pageflex products include Xerox, IBM, Ford, EFI, Coldwell Banker, Wunderman, Mail-Well, httprint, and Spire.

Bitstream and TrueDoc are registered trademarks and Font Fusion and ThunderHawk are trademarks of Bitstream Inc. Pageflex, Mpower, Mpower and NuDoc are trademarks of Pageflex, a wholly-owned subsidiary of Bitstream Inc. MyFonts.com is a trademark of MyFonts.com, Inc., a wholly-owned subsidiary of Bitstream Inc. All other trademarks mentioned are for identification purposes only and may be trademarks of their respective owners.

                            Bitstream Inc.
                 Consolidated Statements of Operations
                 (In Thousands, Except Per-Share Data)


                                    Three Months Ended 12 Months Ended
                                           Dec. 31,        Dec. 31,
                                         2002    2001    2002    2001
Revenue:
   Software license                   $ 2,042 $ 2,072 $ 7,415 $ 6,859
   Services                               232     283   1,052   1,109
Total revenue                           2,274   2,355   8,467   7,968
Cost of revenue:
   Software license                       444     255   1,682   1,071
   Services                                74      56     372     356
Total cost of revenue                     518     311   2,054   1,427
Gross profit                            1,756   2,044   6,413   6,541
Operating expenses
   Selling and marketing                  530     726   2,229   2,927
   Research and development             1,001   1,260   4,028   5,044
   General and administrative             387     513   1,446   1,857
Total operating expenses                1,918   2,499   7,703   9,828
Loss from operations                     (162)   (455) (1,290) (3,287)
Other income (expense):
   Income (loss) on investment
    in DiamondSoft Inc.                   102     (41)    149    (260)
   Interest income, net                    14      35      74     233
Loss before income taxes                  (46)   (461) (1,067) (3,314)
Provision for (benefit from)
 income taxes                            (120)     28     (45)    167
      Net income (loss)               $    74 $  (489)$(1,022)$(3,481)
Basic and diluted net income (loss)
 per share                            $  0.01 $ (0.06)$ (0.12)$ (0.43)
Basic weighted average shares
 outstanding                            8,349   8,214   8,326   8,069
Diluted weighted average
 shares outstanding                     8,563   8,214   8,326   8,069
 
                            Bitstream Inc.
                      Consolidated Balance Sheets
                            (In Thousands)
                                                            Dec. 31,
ASSETS                                                    2002   2001
Current assets:
   Cash and cash equivalents                            $4,828 $5,716
   Accounts receivable, net                                602    679
   Prepaid expenses and other current assets               112    122
   Income tax receivable                                   134     --
Total current assets                                     5,676  6,517
Property and equipment, net                                271    473
Restricted cash                                            300    300
Goodwill                                                   727    727
Investment in DiamondSoft Inc.                             748    599
Intangible assets                                          236    218
Other assets                                                 6      5
                                                         2,017  1,849
Total assets                                            $7,964 $8,839
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                     $  245 $   93
   Accrued expenses                                      1,046  1,126
   Current portion of deferred revenue                     667    610
Total current liabilities                                1,958  1,829
Long-term deferred revenue                                   6     14
Total liabilities                                        1,964  1,843
Total stockholders' equity                               6,000  6,996
Total liabilities and stockholders' equity              $7,964 $8,839

Contact

Anna Chagnon
President, Chief Operating Officer and Chief Financial Officer
Bitstream Inc.
617.520.8619