**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM 10-Q**




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




**For
      the quarterly period ended September 30, 2005**




**OR**




**o**
            **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**


(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 an accelerated filer (as defined in
      Rule 12b-2 of the Exchange Act).


Yes o No 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
      353,972,268 shares and the number of shares of Series B preferred stock
      outstanding was 7,500,000 shares, each as
      of November
      10, 2005.











**VIEWSONIC
      CORPORATION**


**FORM 10-Q**


**TABLE
      OF CONTENTS**




**Page****PART I:
                  FINANCIAL INFORMATION**Item
                  1.
              Consolidated
                  Condensed Financial Statements
                  (unaudited)
              1Consolidated
                  Condensed Balance Sheets as of September 30, 2005
                  and December 31, 2004
              1Consolidated
                  Condensed Statements of Operations for the three
                  and nine months ended September 30, 2005 and 2004
              2Consolidated
                  Condensed Statements of Cash Flows for the nine
                  months ended September 30, 2005 and 2004
              3Notes
                  to Consolidated Condensed Financial
                  Statements
              4Item
                  2.
              Management’s
                  Discussion and Analysis of Financial Condition and
                  Results of Operations
              11Item
                  3.
              Quantitative
                  and Qualitative Disclosures About Market
                  Risk
              19Item
                  4.
              Controls
                  and Procedures
              28**PART II:
                  OTHER INFORMATION**Item
                  1.
              Legal
                  Proceedings
              29Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of
                  Proceeds
              29Item
                  3.
              Defaults
                  Upon Senior Securities
              29Item
                  4.
              Submission
                  of Matters to a Vote of Securities
                  Holders
              29Item
                  5.
              Other
                  Information
              29Item
                  6.
              Exhibits
              30Signatures
              31
  *Table
            of Contents*




**PART I.
      FINANCIAL INFORMATION**




**ITEM
      1.   CONSOLIDATED CONDENSED FINANCIAL
      STATEMENTS**




**VIEWSONIC
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      CONDENSED BALANCE SHEETS**


**SEPTEMBER
      30, 2005 AND DECEMBER 31, 2004**


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


**(Unaudited)**




**September
                30,**
              **2005**
            
            **December 31,**
              **2004****ASSETS**CURRENT
                ASSETS:Cash
                and cash equivalents
            
            $
            110,658
            
            $
            100,497Short-term
                investments
            
            
            —
            
            
            2,268Trade
                receivables—net
            
            
            143,648
            
            
            153,159Other
                receivables
            
            
            8,842
            
            
            7,296Inventories
            
            
            127,950
            
            
            148,224Deferred
                income taxes
            
            
            167
            
            
            9,665Prepaids
                and other current assets
            
            
            3,459
            
            
            3,095Income
                taxes receivable
            
            
            1,420
            
            
            559Current
                assets of discontinued operations (Note 9)
            
            
            —
            
            
            1,769Total
                current assets
            
            
            396,144
            
            
            426,532PROPERTY,
                PLANT AND EQUIPMENT—Net
            
            
            13,470
            
            
            15,163LONG-TERM
                INVESTMENTS
            
            
            6,941
            
            
            7,072GOODWILL
            
            
            1,347
            
            
            1,347OTHER
                ASSETS—Net
            
            
            5,029
            
            
            8,369NON-CURRENT
                ASSETS OF DISCONTINUED OPERATIONS (Note 9)
            
            
            —
            
            
            40TOTAL
            
            $
            422,931
            
            $
            458,523**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**CURRENT
                LIABILITIES:Bank
                borrowings
            
            $
            —
            
            $
            3,529Accounts
                payable
            
            
            266,706
            
            
            281,609Accrued
                promotional expenses
            
            
            19,763
            
            
            30,267Accrued
                warranty expense
            
            
            21,373
            
            
            17,365Other
                accrued expenses
            
            
            24,246
            
            
            18,702Current
                liabilities of discontinued operations (Note 9)
            
            
            —
            
            
            3,656Total
                current liabilities
            
            
            332,088
            
            
            355,128SUBORDINATED
                NOTES PAYABLE—Related
                party
            
            
            43,000
            
            
            43,000DEFERRED
                INCOME TAXES
            
            
            66CONVERTIBLE
                MANDATORILY REDEEMABLE PREFERRED STOCK
            
            
            14,552
            
            
            13,428STOCKHOLDERS’
                EQUITY:Common
                stock, $.01 par value:Authorized
                600,000,000 shares at September 30, 2005 and December 31, 2004;
                outstanding 353,972,268 and 353,959,176 shares at September 30, 2005
                and December 31, 2004, respectively
            
            
            3,540
            
            
            3,540Additional
                paid-in capital
            
            
            93,682
            
            
            92,149Accumulated
                deficit
            
            
            (61,075
            )
            
            (45,754
            )Accumulated
                other comprehensive loss
            
            
            (2,922
            )
            
            (2,968
            )Total
                stockholders’ equity
            
            
            33,225
            
            
            46,967TOTAL
            
            $
            422,931
            
            $
            458,523




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





1
 *Table
            of Contents*





**VIEWSONIC
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      CONDENSED STATEMENTS OF OPERATIONS**


**SEPTEMBER
      30, 2005 AND 2004**


**(In
      thousands, except per share data)**


**(Unaudited)**




**Three Months Ended**
              **September
                30,**
            
            **Nine
                months Ended**
              **September
                30,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Net
                sales
            
            $
            316,678
            
            $
            249,020
            
            $
            875,208
            
            $
            802,436Cost
                of sales
            
            
            288,482
            
            
            250,475
            
            
            791,827
            
            
            731,632Gross
                profit
            
            
            28,196
            
            
            (1,455
            )
            
            83,381
            
            
            70,804Selling,
                general and administrative expenses
            
            
            25,154
            
            
            29,667
            
            
            80,278
            
            
            88,661Income
                (loss) from operations
            
            
            3,042
            
            
            (31,122
            )
            
            3,103
            
            
            (17,857
            )Other
                (expense) income - net:Interest
                expense
            
            
            (541
            )
            
            (622
            )
            
            (1,588
            )
            
            (1,793
            )Other
                - net
            
            
            536
            
            
            304
            
            
            (2,094
            )
            
            1,164Other
                (expense) income - net
            
            
            (5
            )
            
            (318
            )
            
            (3,682
            )
            
            (629
            )Income
                (loss) from continuing operations before income taxes
            
            
            3,037
            
            
            (31,440
            )
            
            (579
            )
            
            (18,486
            )Provision
                (benefit) for income taxes
            
            
            1,021
            
            
            (7,757
            )
            
            14,217
            
            
            (4,480
            )Income
                (loss) from continuing operations
            
            
            2,016
            
            
            (23,683
            )
            
            (14,796
            )
            
            (14,006
            )(Loss)
                income from discontinued operations (Note 9)
            
            
            (115
            )
            
            3,061
            
            
            599
            
            
            742Net
                income (loss)
            
            
            1,901
            
            
            (20,622
            )
            
            (14,197
            )
            
            (13,264
            )Preferred
                stock accretion
            
            
            (389
            )
            
            (349
            )
            
            (1,124
            )
            
            (1,013
            )Net
                income (loss) available to common stockholders
            
            $
            1,512
            
            $
            (20,971
            )
            $
            (15,321
            )
            $
            (14,277
            )Basic
                earnings (loss) per shareContinuing
                operations
            
            $
            0.00
            
            $
            (0.07
            )
            $
            (0.04
            )
            $
            (0.04
            )Discontinued
                operations (Note 9)
            
            $
            0.00
            
            $
            0.01
            
            $
            0.00
            
            $
            0.00Total
                basic earnings (loss) per share
            
            $
            0.00
            
            $
            (0.06
            )
            $
            (0.04
            )
            $
            (0.04
            )Diluted
                earnings (loss) per shareContinuing
                operations
            
            $
            0.00
            
            $
            (0.07
            )
            $
            (0.04
            )
            $
            (0.04
            )Discontinued
                operations(Note
                9)
            
            $
            0.00
            
            $
            0.01
            
            $
            0.00
            
            $
            0.00Total
                diluted earnings (loss) per share
            
            $
            0.00
            
            $
            (0.06
            )
            $
            (0.04
            )
            $
            (0.04
            )Basic
                weighted average shares outstanding
            
            
            353,970
            
            
            353,929
            
            
            353,967
            
            
            353,920Diluted
                weighted average shares outstanding
            
            
            357,183
            
            
            353,929
            
            
            353,967
            
            
            353,920




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





2
 *Table
            of Contents*





**VIEWSONIC
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      CONDENSED STATEMENTS OF CASH FLOWS**


**SEPTEMBER
      30, 2005 AND 2004**


**(In
      thousands)**


**(Unaudited)**




**Nine
                months ended**
              **September
                30,****2005**
            
            **2004**CASH
                FLOWS FROM OPERATING ACTIVITIES:Loss
                from continuing operations
            
            $
            (14,796
            )
            $
            (14,006
            )Adjustments
                to reconcile net loss from continuing operations to net cash provided
                by
                (used in) operating activities:Depreciation
                and amortization
            
            
            2,240
            
            
            2,739Loss
                on disposal of property, plant and equipment
            
            
            1
            
            
            72Net
                loss (gain) on sale of long-term investments
            
            
            21
            
            
            (5,195
            )Stock-based
                compensation expense
            
            
            1,523
            
            
            —Deferred
                income taxes
            
            
            12,696
            
            
            (4,014
            )Changes
                in operating assets and liabilities:Trade
                receivables—net
            
            
            9,560
            
            
            1,619Other
                receivables
            
            
            (1,546
            )
            
            116Inventories
            
            
            20,387
            
            
            19,771Prepaids
                and other current assets
            
            
            (140
            )
            
            (1,059
            )Accounts
                payable
            
            
            (14,822
            )
            
            (76,914
            )Accrued
                promotional and other expenses
            
            
            (8,037
            )
            
            10,872Accrued
                warranty expense
            
            
            4,029
            
            
            907Income
                taxes payable/receivable
            
            
            1,985
            
            
            (2,505
            )Net
                cash provided by (used in) operating activities
            
            
            13,101
            
            
            (67,597
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Purchase
                of property, plant and equipment
            
            
            (559
            )
            
            (2,742
            )Proceeds
                on sale of long-term investments
            
            
            376
            
            
            2,033Proceeds
                on sales of short-term investments—net
            
            
            2,256
            
            
            3,687Net
                cash provided by investing activities
            
            
            2,073
            
            
            2,978CASH
                FLOWS FROM FINANCING ACTIVITIES:Proceeds
                from bank borrowings
            
            
            483
            
            
            15,416Payments
                on bank borrowings
            
            
            (3,990
            )
            
            (1,475
            )Proceeds
                from issuance of common stock
            
            
            10
            
            
            38Net
                cash (used in) provided by financing activities
            
            
            (3,497
            )
            
            13,979CASH
                FLOW FROM DISCONTINUED OPERATIONSCash
                flow from operating activities
            
            
            (1,116
            )
            
            1,113Cash
                flow from investing activities
            
            
            —
            
            
            11,482Cash
                flow from financing activities
            
            
            —
            
            
            (4,499
            )Net
                cash (used in) discontinued operations
            
            
            (1,116
            )
            
            8,096NET
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
            
            
            10,561
            
            
            (42,544
            )CASH
                AND CASH EQUIVALENTS—Beginning of year
            
            
            100,497
            
            
            86,828EFFECT
                OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
            
            
            (400
            )
            
            372CASH
                AND CASH EQUIVALENTS—End of period
            
            $
            110,658
            
            $
            44,656




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





3
 *Table
            of Contents*





**VIEWSONIC
      CORPORATION AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**


**(Unaudited)**






**Note
      1 - Summary of Significant Accounting Policies**




*Basis
      of Presentation*




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





In
      the
      opinion of management, the accompanying unaudited consolidated condensed
      financial statements for ViewSonic Corporation and its subsidiaries
      (collectively, the “Company”) contain all adjustments, consisting only of normal
      recurring adjustments, necessary to present fairly the Company’s financial
      position as of September 30, 2005, and the Company’s results of operations for
      the three and nine months ended September 30, 2005 and 2004, and cash flows
      for
      the nine months ended September 30, 2005 and 2004. The consolidated condensed
      balance sheet as of December 31, 2004 is derived from the Company’s December 31,
      2004 audited financial statements.





The
      results of operations for the three and nine months ended September 30, 2005
      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, 2004 and notes thereto included in the Company’s Form 10-K
      filed with the Securities and Exchange Commission (the “SEC”) on March 29,
      2005.





The
      accompanying unaudited consolidated condensed financial statements have been
      prepared in accordance with accounting principles generally accepted 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, revenue and expenses and related disclosure of contingent assets
      and liabilities. Management bases its estimates on historical experience and
      on
      various other assumptions that are believed to be reasonable under the
      circumstances, the results of 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 and Promotional Expense*




Revenues
      are recognized when products are shipped and risk of loss is transferred,
      persuasive evidence of an arrangement exists, the price is fixed or readily
      determinable, and collectability 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 records estimated reductions to revenue for customer promotional
      programs and incentive offerings, including price protection, rebates,
      promotions, other volume-based incentives and expected returns. Future market
      conditions and product transitions may require the Company to take actions
      to
      increase customer incentive offerings, possibly resulting in an incremental
      reduction of revenue at the time the incentive is offered. Additionally, certain
      incentive programs require the Company to estimate, based on historical
      experience, the number of customers who will actually redeem the
      incentive.





4
 *Table
            of Contents*





*Promotional
      Pricing Incentives from Vendors*





The
      Company receives promotional pricing incentives from several product vendors.
      The amount of the pricing incentives is based on the volatility of the price
      of
      the Company’s key product components and the quantity of historical purchases of
      these components 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. Promotional pricing incentives from the
      Company’s vendors were $436,000 and $0 for the three months ended September 30,
      2005 and 2004, respectively, and $5.8 million and $0 for the nine months ended
      September 30, 2005 and 2004, respectively.




*Expense
      Classifications*




In
      2005,
      warehouse and storage related expenses have been reclassified from selling,
      general and administrative expenses to cost of sales. Classification of these
      expenses as a component of cost of sales is a practice that is consistent with
      others within the Company’s industry. The reclassified warehouse and storage
      related expense was $2.2 million for the three months ended September 30, 2004,
      and $6.4 million for the nine months ended September 30, 2004.





*Derivatives*





The
      Company entered into a foreign currency option contract on June 2, 2005 to
      minimize the impact of foreign currency fluctuations on its business in Europe.
      The foreign currency option contract allows the Company to sell 2.0 million
      Euros per month for an eight to twelve month term ending on June 28, 2006 at
      specific rates based on the spot rate in the market. This contract is not
      accounted for as a hedge under the Statement of Financial Accounting Standards
      No. 133, *Accounting
      for Derivative Instruments and Hedging Activities* (“SFAS
      133”). The fair value of the contract at September 30, 2005 is $240,129, which
      is included in other receivables. The gain is recorded in other (expense)
      income-net.








**Note
      2 - Stock-Based Compensation**




On
      May 9,
      2005, the Company re-priced all outstanding stock options held by the Company’s
      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,
      resulting in stock option expenses of $1.1 million. There was no change in
      the
      number of shares subject to each re-priced stock option, vesting or other terms.
      The repricing was implemented in order to realign the cash and equity components
      of the Company’s compensation programs for employees, executive officers and
      directors.





In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      123(R), *Share-Based
      Payment* (“SFAS
      No. 123(R)”), which revises SFAS 123, *Accounting
      for Stock-Based Compensation* ,
      and
      supersedes APB Opinion No. 25, *Accounting
      for Stock Issued to Employees* .
      SFAS
      123(R) requires fair value recognition of stock option grants in the income
      statement as an expense and will become effective beginning January 1, 2006.
      The
      Company is in the process of evaluating the impact of this pronouncement on
      the
      financial statements and how it may change the way the Company provides
      incentive compensation to its employees in the future.





During
      the second quarter of 2005, the Company elected to adopt the fair value based
      employee stock-based compensation expense recognition provisions of Statement
      of
      Financial Accounting Standards No. 123, *Accounting
      for Stock-Based Compensation* (“SFAS
      123”), using the modified prospective method. The Company previously applied the
      intrinsic value based expense recognition provisions set forth in Accounting
      Principles Board (“APB”) Opinion No. 25, *Accounting
      for Stock Issued to Employees* (“APB
      25”). Had the Company not adopted SFAS 123, the stock options that were
      re-priced would have been subject to variable accounting with changes in the
      fair value of the stock options being recorded in the Statements of Operations.
      The Company elected not to early adopt SFAS 123(R). Among other differences,
      SFAS 123(R) includes an estimate of volatility in calculating the stock option
      re-pricing expense. SFAS 123 does not require the use of volatility for
      privately held companies in estimating the fair value of stock options.
      Management believes that use of the fair value based method to record employee
      stock-based compensation expense is consistent with the accounting for all
      other
      forms of compensation. The adoption of the fair value based recognition
      provision decreased net income by $94,000 and $366,000 for the three-month
      and
      the nine-month periods ended September 30, 2005, respectively.





5
 *Table
            of Contents*





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: ****





**Three
                Months Ended September 30**
            
            **Nine
                months Ended September 30****2005**
            
            **2005**Dividend
                yield
            
            
            0
            %
            
            0
            %Expected
                volatility
            
            
            0
            %
            
            0
            %Risk-free
                interest rates
            
            
            3.90
            %
            
            3.90
            %Expected
                life
            
            
            4
                years
            
            
            4
                years








**Note
      3** **-**  **Comprehensive
      Income (Loss)**





Comprehensive
      income (loss) includes foreign currency translation gains and losses and
      unrealized gains and losses on marketable securities available for sale that
      are
      reflected in stockholders’ equity instead of net (loss) income.  The
      following table sets forth the calculation of comprehensive (loss) income for
      the periods indicated (in thousands):








**Three
                Months Ended**
              **September
                30,**
            
            **Nine
                months Ended**
              **September
                30,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Net
                income (loss)
            
            $
            1,901
            
            $
            (20,622
            )
            $
            (14,197
            )
            $
            (13,264
            )Foreign
                currency translation
            
            
            (254
            )
            
            21
            
            
            (104
            )
            
            188Unrealized
                holding (losses) gains on marketable securities-less realized
                gains
            
            
            (634
            )
            
            (2,208
            )
            
            150
            
            
            (3,121
            )Net
                change in other comprehensive (loss) income
            
            
            (888
            )
            
            (2,187
            )
            
            46
            
            
            (2,933
            )Total
                comprehensive income (loss)
            
            $
            1,013
            
            $
            (22,809
            )
            $
            (14,151
            )
            $
            (16,197
            )








**Note
      4 -**  **Income
      Taxes**





The
      Company recorded a non-cash charge of $13.7 million to establish a valuation
      of
      allowance against its net deferred income tax assets during the second quarter
      ended June 30, 2005. The valuation allowance has been calculated pursuant to
      SFAS No. 109, *Accounting
      for Income Taxes* (“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. In determining
      that a valuation allowance is required, the Company placed added weight on
      the
      operating results of the past two years and the projected results for 2005.
      The
      Company intends to maintain a valuation allowance until sufficient positive
      evidence, as contemplated by SFAS No. 109, exists in future
      periods.




On
      October 22, 2004, the President of the United States signed the American Jobs
      Creation Act of 2004 (the “Act”). The Act creates a temporary incentive for U.S.
      corporations to repatriate accumulated income earned abroad by providing an
      85
      percent dividends received deduction for certain dividends from controlled
      foreign corporations. The deduction is subject to a number of limitations and,
      as of today, uncertainty remains as to how to interpret numerous provisions
      of
      the Act.  As such, the Company is not in a position to decide whether, and
      to what extent, it might repatriate foreign earnings that have not yet been
      remitted to the United States. The Company is currently conducting an evaluation
      of the effects of the repatriation provisions of the Act and expects to complete
      this evaluation by December 31, 2005. The Company does not expect the Act to
      have a material impact on the Company’s financial position or results of
      operations.





6
 *Table
            of Contents*





**Note
      5 - Commitments and Contingencies**





***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, management does not believe that the outcome of any pending
      legal matters will have a material adverse effect on our consolidated condensed
      balance sheets, although statements of operations or cash flows could be
      affected in a particular period.





***Imposition
      of Additional Duties and Taxes*** — ****** The
      European Union countries have issued notices stating that effective October
      1,
      2004, LCD monitors with DVI connectors will incur a 14% import duty tax. Thus
      far, this change in classification has been applied prospectively. However,
      the
      Company believes it is probable that the tariff will be applied
      retroactively.  It is anticipated that the European Union countries will
      have a final decision on this matter in December 2005. The Company will continue
      to monitor this situation and will work to change its business processes to
      minimize the negative impacts of this new tariff. As of September 30, 2005,
      the
      Company has accrued $3.4 million of expense related to this potential liability.





***Laws,
      Regulations and Directives*** — ****** We
      are
      subject to local laws and regulations in the various regions in which we
      operate, including the European Union, or EU.  There are two particular EU
      directives that may have a material impact on our business.  The first is
      the Restriction of Certain Hazardous Substances Directive, or RoHS, that
      restricts the distribution of certain substances, including lead, within the
      EU
      and is effective July 1, 2006.  In addition to eliminating and/or reducing
      the level of specified hazardous materials from our products, we will also
      be
      required to maintain and publish a detailed list of all chemical substances
      in our products. We are starting to receive requests from our customers,
      including some of our major customers, for RoHS-compliant products. We are
      in
      the process of compiling RoHS-compliant information on our products as well
      as
      procuring RoHS-compliant material and information from our suppliers. The second
      directive is the Waste Electrical and Electronic Equipment Directive, or WEEE
      that becomes effective January 2006, and requires manufacturers or importers
      to
      take back and recycle all products it manufactures or imports into the EU at
      its
      own expense. Certain EU countries decided to adopt WEEE on August 13, 2005;
      however, the majority of EU countries into which our European region sells
      our
      products, intend to adopt the legislation in January 2006. Many of those
      countries adopting WEEE in August 2005 have not published regulations or issued
      legislation with respect to producers’ obligations. We are currently unable to
      assess the impact of these directives on our operations until more information
      becomes available.








**Note
      6 - Business Segments**




In
      accordance with SFAS No. 131, *Disclosures
      about Segments of an Enterprise and Related Information* (“SFAS
      No. 131”), the Company has three reportable segments: Americas, Europe and Asia
      Pacific. The Company sells similar products in the local markets, including
      CRT
      displays, LCD displays, projectors, plasma displays, HDTV technology and the
      latest in mobile products including wireless monitors. The types and class
      of
      customers, primarily distributors and retailers, are also similar across the
      product lines. The
      following segment financial information is for the periods indicated (in
      thousands):





7
 *Table
            of Contents*




**Three Months Ended**
              **September
                30,**
            
            **Nine
                months Ended**
              **September
                30,****2005**
            
            **2004**
            
            **2005**
            
            **2004****Net
                Sales:**Americas
            
            $
            138,769
            
            $
            145,718
            
            $
            393,784
            
            $
            459,000Europe
            
            
            77,418
            
            
            49,639
            
            
            209,051
            
            
            159,216Asia
                Pacific
            
            
            100,491
            
            
            53,663
            
            
            272,373
            
            
            184,220**Total**
            
            $
            316,678
            
            $
            249,020
            
            $
            875,208
            
            $
            802,436**Income
                (loss) from operations:**Americas
            
            $
            254
            
            $
            (13,848
            )
            $
            (8,376
            )
            $
            (6,361
            )Europe
            
            
            1,218
            
            
            (7,275
            )
            
            4,377
            
            
            (2,093
            )Asia
                Pacific
            
            
            1,570
            
            
            (9,999
            )
            
            7,102
            
            
            (9,403
            )**Total**
            
            $
            3,042
            
            $
            (31,122
            )
            $
            3,103
            
            $
            (17,857
            )







**Note
      7 - Warranty**





The
      Company provides product warranty programs on a worldwide basis that vary in
      term from 12 to 36 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, and such amounts
      are based upon historical experience. The historical data that determines the
      warranty accrual and the overall estimate of the warranty reserve includes
      the
      following key factors: net cost of repair (repair costs less reimbursements
      from
      suppliers), defect rates and total number of products under warranty. The
      following table summarizes the Company’s activity in the warranty liability for
      the periods indicated (in thousands):








**Nine
                months Ended September 30**
            
            **Beginning
                Accrued Warranty Liability**
            
            **Payment
                for Units Returned**
            
            **Additional
                Warranty Expense for Units Sold**
            
            **Warranty
                Reserve Adjustments**
            
            **Ending
                Accrued Warranty Liability**2004
            
            $
            14,567
            
            $
            (8,729
            )
            $
            8,790
            
            $
            846
            
            $
            15,4742005
            
            $
            17,365
            
            $
            (8,833
            )
            $
            12,246
            
            $
            595
            
            $
            21,373








**Note
      8 - Earnings Per Share**





The
      Company presents both basic and diluted earnings (loss) per 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
      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 market price over the period have an anti-dilutive
      effect on EPS and, accordingly, are excluded from the calculation. For
      the
      three months ended September 30, 2005, the exercise price of all stock options
      was equal to their estimated fair value, and as a result, the outstanding
      options did not result in an increase of the weighted average shares outstanding
      during the period. For the three months ended September 30, 2004, 29,105,000
      shares were excluded from the diluted earnings per common share calculation
      because they were anti-dilutive. For the nine months ended September
      30, 2005 and 2004, options for 28,819,000 and 29,105,000 shares, respectively
      were excluded from the diluted earnings per common share calculation because
      they were anti-dilutive. For
      the
      three months and nine months ended September 30, 2005 and 2004, warrants for
      7,500,000 and 10,800,000 shares, respectively, were excluded from the diluted
      earnings per common share calculation because they were anti-dilutive.





8
 *Table
            of Contents*





The
      basic
      and diluted EPS was calculated using the 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 (loss) income per share computations. Amounts
      are for the periods indicated (amounts in thousands, except per share
      information).




**Three Months Ended**
              **September
                30,**
            
            **Nine
                months Ended**
              **September
                30,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Basic
                EPS:Numerator:Income
                (loss) from continuing operations (1)
            
            $
            1,627
            
            $
            (24,032
            )
            $
            (15,920
            )
            $
            (15,019
            )(Loss)
                income from discontinued operations
            
            $
            (115
            )
            $
            3,061
            
            $
            599
            
            $
            742Denominator-weighted-average
                shares outstanding
            
            
            353,970
            
            
            353,929
            
            
            353,967
            
            
            353,920Basic
                EPS:Continuing
                operations
            
            $
            0.00
            
            $
            (0.07
            )
            $
            (0.04
            )
            $
            (0.04
            )Discontinued
                operations
            
            $
            0.00
            
            $
            0.01
            
            $
            0.00
            
            $
            0.00Total
                Basic EPS
            
            $
            0.00
            
            $
            (0.06
            )
            $
            (0.04
            )
            $
            (0.04
            )Diluted
                EPS:Numerator:Income
                (loss) from continuing operations (1)
            
            $
            1,627
            
            $
            (24,032
            )
            $
            (15,920
            )
            $
            (15,019
            )(Loss)
                income from discontinued operations
            
            $
            (115
            )
            $
            3,061
            
            $
            599
            
            $
            742Denominator:Weighted-average
                shares outstanding
            
            
            353,970
            
            
            353,929
            
            
            353,967
            
            
            353,920Stock
                options(2)Interest
                warrants(3)
            
            
            3,213Total
                shares
            
            
            357,183
            
            
            353,929
            
            
            353,967
            
            
            353,920Diluted
                EPS:Continuing
                operations
            
            $
            0.00
            
            $
            (0.07
            )
            $
            (0.04
            )
            $
            (0.04
            )Discontinued
                operations
            
            $
            0.00
            
            $
            0.01
            
            $
            0.00
            
            $
            0.00Total
                Diluted EPS
            
            $
            0.00
            
            $
            (0.06
            )
            $
            (0.04
            )
            $
            (0.04
            )





(1)
            In
                accordance with EITF 03-06, income (loss) from continuing operations
                includes the accretion for the mandatorily redeemable preferred stock.
                The
                EPS calculation allocated income (loss) from continuing operations
                between
                common stock and the convertible mandatorily redeemable preferred
                stock.





(2)
            For
                  the three months ended September 30, 2005, the exercise price of
                  all stock
                  options was equal to their estimated fair value, and as a result,
                  the
                  outstanding options did not result in an increase of the weighted
                  average
                  shares outstanding during the period. For the three months ended
                  September
                  30, 2004, 29,105,000 shares were excluded from the diluted earnings
                  per
                  common share calculation because they were anti-dilutive. For the
                  nine
                  months ended September 30, 2005 and 2004, options for 28,819,000
                  and
                  29,105,000 shares, respectively, were excluded from the diluted
                  earnings
                  per common share calculation because they were anti-dilutive.





(3)
            For
                all periods provided, common stock issuable upon the exercise of
                outstanding valuation warrants of 7,500,000 were excluded from the
                diluted
                earnings per share calculation because they were anti-dilutive. For
                the
                three months ended September 30, 2004 and the nine months ended September
                30, 2005 and 2004, 3,300,000 of interest warrants were excluded from
                the
                diluted earnings per common share calculation because they were
                anti-dilutive.





9
 *Table
            of Contents*





**Note
      9 -** **Discontinued
      Operations**





On
      July
      30, 2004, the Company completed the sale of Advance Digital Optics, Inc.
      (“ADO”), a majority-owned subsidiary and recorded a $3.3 million gain, net of
      tax expense of $1.1 million. The cost basis of its investment in ADO was $4.1
      million. The Company also incurred $0.3 million of expenses associated with
      the
      sale. Ten percent of the gross proceeds payable to the Company, as well as
      ten
      percent payable to certain other principal shareholders of ADO, remained in
      escrow through July 30, 2005 to afford the buyer recourse in the event of a
      breach of representations and warranties under the merger agreement. In August,
      2005, the Company received its entire portion of the amounts held in escrow
      without any deduction or offset.





During
      the fourth quarter of 2004, the Company made the decision to dispose of
      VisionBank, one of its majority-owned subsidiaries. As of September 30, 2005,
      there were no assets or liabilities on the Company’s consolidated condensed
      financial statements related to VisionBank. The gain (loss) from discontinued
      operations was $(115,000) and $599,000 for the three and nine months ended
      September 30, 2005.





In
      accordance with SFAS No. 144, *Accounting
      for the Impairment or Disposal of Long-Lived Assets* ,
      the
      results of operations of these businesses are reported as discontinued
      operations for the periods indicated (in thousands):




**Discontinued
                    Operations**
                
                **Three Months Ended**
                  **September
                    30,**
                
                **Nine
                    months Ended**
                  **September
                    30,****2005**
                
                **2004**
                
                **2005**
                
                **2004**Net
                    Sales
                
                
                0
                
                
                2,556
                
                
                107
                
                
                8,915(Loss)
                    income from discontinued operations (no tax benefit)
                
                
                (115
                )
                
                3,061
                
                
                599
                
                
                742




**Dec.
                31,**
              **2004**Current
                assets
            
            $
            1,769Other
                assets
            
            
            40Total
                assets
            
            
            1,809Accounts
                payable and accrued expenses
            
            
            3,656Net
                liabilities of discontinued operations
            
            $
            (1,847
            )


10
 *Table
            of Contents*
  **ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
      RESULTS OF OPERATIONS**





*The
      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 “Factors That May
      Affect Our Business and Financial Results” section, among other things, should
      be considered in evaluating our prospects and future financial
      performance.*





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





***Our
      Company***





ViewSonic
      Corporation is a leading global provider of visual display technology products.
      We develop, market and support a broad range of display technology products,
      including liquid crystal displays, or LCD, monitors, cathode ray tube, or CRT,
      monitors, projectors, LCD TVs, plasma displays and the latest in mobile products
      including wireless monitors.





Our
      ViewSonic branded products are sold through distributors, retailers and other
      resellers to businesses, including Fortune 1000 companies, small and medium
      sized businesses and consumer electronics markets. We sell our products globally
      and our sales are managed geographically in three regional segments: the
      Americas, Europe and Asia Pacific.





***Recent
      Trends in Our Business***





We
      recorded $2.0 million of income from continuing operations in the third quarter
      of 2005 as compared with $23.7 million of loss from continuing operations in
      the
      third quarter of 2004 mainly due to net sales growth of 27% for the same period,
      increased operating efficiencies, higher inventory turnover and relative
      stability in average selling prices, or (“ASPs”). Unlike the third quarter of
      2004 in which rapidly declining ASPs caused the Company to incur significant
      inventory write-downs, the third quarter of 2005 was characterized by relative
      stability in ASPs and reduced inventory write-downs. Also, our profitability
      has
      been positively impacted by the implementation of key initiatives that improve
      supply chain and logistics efficiency, simplify our business processes to
      maximize operating efficiencies in all aspects of our business, grow sales
      in
      regional markets and expand core product offerings, among others. We believe
      that the successful implementation of these initiatives will position us to
      compete favorably. However, our profit margin continues to be negatively
      impacted by intense competition, volatility of supply, ASPs, and product
      costs.





The
      ASP
      of our LCD monitors decreased approximately 29.4% and 35.5% for the three and
      nine months ended September 30, 2005 when compared to the three and nine months
      ended September 30, 2004, respectively. The decline in the LCD monitor’s ASP was
      primarily due to increased production capacity and aggressive price competition.
      We expect the excess capacity situation and price declines to continue in the
      short term until anticipated market demand growth is realized and consumes
      the
      increased supply.





We
      sold
      approximately 1.5 million display products in the third quarter of 2005 compared
      to approximately 1.1 million display products in the third quarter of 2004.
      In
      terms of LCD displays, unit sales grew 123.3% in the third quarter of 2005
      compared to the third quarter of 2004. As a result, our net sales increased
      to
      $316.7 million in the third quarter of 2005 from $249.0 million in the third
      quarter of 2004 despite a 29.4% decline in average selling prices in the third
      quarter of 2005 compared to the third quarter of 2004.





11
 *Table
            of Contents*





The
      European Union countries have issued notices stating that effective October
      1,
      2004, certain LCD monitors with DVI connectors would incur a 14% import duty
      tax. Thus far, this change in classification has been applied prospectively.
      However, we believe it is probable that the tariff will be applied
      retroactively. We will continue to monitor this situation and will work to
      change our business processes to minimize the negative impacts of this new
      tariff. It is anticipated that the European Union countries will have a final
      decision on the classification in December 2005. As of September 30, 2005,
      we
      have accrued $3.4 million of expense related to this potential
      liability.





We
      are
      subject to local laws and regulations in the various regions in which we
      operate, including the European Union, or EU.  There are two particular EU
      directives that may have a material impact on our business.  The first is
      the Restriction of Certain Hazardous Substances Directive, or RoHS, that
      restricts the distribution of certain substances, including lead, within the
      EU
      and is effective July 1, 2006.  In addition to eliminating and/or reducing
      the level of specified hazardous materials from our products, we will also
      be
      required to maintain and publish a detailed list of all chemical substances
      in our products. We are starting to receive requests from our customers,
      including some of our major customers, for RoHS-compliant products. We are
      in
      the process of compiling RoHS-compliant information on our products as well
      as
      procuring RoHS-compliant material and information from our suppliers. The second
      directive is the Waste Electrical and Electronic Equipment Directive, or WEEE
      that becomes effective January 2006, and requires manufacturers or importers
      to
      take back and recycle all products it manufactures or imports into the EU at
      its
      own expense. Certain EU countries decided to adopt WEEE on August 13, 2005;
      however, the majority of EU countries into which our European region sells
      our
      products, intend to adopt the legislation in January 2006. Many of those
      countries adopting WEEE in August 2005 have not published regulations or issued
      legislation with respect to producers’ obligations. We are currently unable to
      assess the impact of these directives on our operations until more information
      becomes available.





**Results
      of Operation** **s**




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




**Three Months Ended**
                **September
                  30,**
              
              **Nine
                  months Ended**
                **September
                  30,****2005**
              
              **2004**
              
              **2005**
              
              **2004**Net
                  sales
              
              
              100.0
              %
              
              100.0
              %
              
              100.0
              %
              
              100.0
              %Cost
                  of sales
              
              
              91.1
              
              
              100.6
              
              
              90.5
              
              
              91.2Gross
                  profit
              
              
              8.9
              
              
              (0.6
              )
              
              9.5
              
              
              8.8Selling,
                  general and administrative expenses
              
              
              7.9
              
              
              11.9
              
              
              9.2
              
              
              11.0Income
                  (loss) from operations
              
              
              1.0
              
              
              (12.5
              )
              
              0.3
              
              
              (2.2
              )Other
                  (expense) income - net:Interest
                  expense
              
              
              (0.2
              )
              
              (0.2
              )
              
              (0.2
              )
              
              (0.2
              )Other
                  - net
              
              
              0.2
              
              
              0.1
              
              
              (0.2
              )
              
              0.1Other
                  (expense) income - net
              
              
              0.0
              
              
              (0.1
              )
              
              (0.4
              )
              
              (0.1
              )Income
                  (loss) from continuing operations before income taxes
              
              
              1.0
              
              
              (12.6
              )
              
              (0.1
              )
              
              (2.3
              )Provision
                  (benefit) for income taxes
              
              
              0.3
              
              
              (3.1
              )
              
              1.6
              
              
              (0.6
              )Income
                  (loss) from continuing operations
              
              
              0.7
              
              
              (9.5
              )
              
              (1.7
              )
              
              (1.7
              )(Loss)
                  income from discontinued operations
              
              
              0.0
              
              
              1.2
              
              
              0.1
              
              
              0.1Net
                  income (loss)
              
              
              0.7
              
              
              (8.3
              )
              
              (1.6
              )
              
              (1.6
              )Preferred
                  stock accretion
              
              
              (0.1
              )
              
              (0.1
              )
              
              (0.1
              )
              
              (0.1
              )Net
                  Income (loss) available to common stockholders
              
              
              0.6
              %
              
              (8.4
              )%
              
              (1.7
              )%
              
              (1.7
              )%


12
 *Table
            of Contents*




**Three Months Ended September
                  30,**
              
              **Nine
                  months Ended September 30,****2005**
              
              **Percentage**
                **Increases/**
                **(Decreases)**
              
              **2004**
              
              **2005**
              
              **Percentage**
                **Increases/**
                **(Decreases)**
              
              **2004****(in thousands)****Net
                  sales:**Americas
              
              $
              138,769
              
              
              (4.8
              )%
              $
              145,718
              
              $
              393,784
              
              
              (14.2
              )%
              $
              459,000Europe
              
              
              77,418
              
              
              56.0
              %
              
              49,639
              
              
              209,051
              
              
              31.3
              %
              
              159,216Asia
                  Pacific
              
              
              100,491
              
              
              87.3
              %
              
              53,663
              
              
              272,373
              
              
              47.9
              %
              
              184,220**Total**
              
              $
              316,678
              
              
              27.2
              %
              $
              249,020
              
              $
              875,208
              
              
              9.1
              %
              $
              802,436**Income
                  (loss) from operations:**Americas
              
              $
              254
              
              
              101.8
              %
              $
              (13,848
              )
              $
              (8,376
              )
              
              31.7
              %
              $
              (6,361
              )Europe
              
              
              1,218
              
              
              116.7
              %
              
              (7,275
              )
              
              4,377
              
              
              309.1
              %
              
              (2,093
              )Asia
                  Pacific
              
              
              1,570
              
              
              115.7
              %
              
              (9,999
              )
              
              7,102
              
              
              175.5
              %
              
              (9,403
              )**Total**
              
              $
              3,042
              
              
              109.8
              %
              $
              (31,122
              )
              $
              3,103
              
              
              117.4
              %
              $
              (17,857
              )




**Consolidated
      Results of Operations—Three Months and Nine months Ended September 30, 2005 and
      September 30, 200** **4**




***Net
      Sales***




Our consolidated net
      sales increased $67.7 million, or 27.2%, to $316.7 million for the three
      months ended September 30, 2005 compared to $249.0 million for the three months
      ended September 30, 2004. Consolidated net sales increased $72.8 million, or
      9.1%, to $875.2 million for the nine months ended September 30, 2005
      compared to $802.4 million for the nine months ended September 30, 2004. Net
      sales
      outside of the Americas region accounted for 56.2% and 41.5% of total net sales
      for the three months ended September 30, 2005 and 2004, and 55.0% and 42.8%
      of
      total net sales for the nine months ended September 30, 2005 and 2004,
      respectively. The growth in net sales outside of the Americas was predominantly
      driven by higher net sales in China, Russia, the Middle East and Taiwan due
      to a
      shift in demand from CRT to LCD and a shift in demand to larger screen sizes. The increase
      in unit volume was offset by a decline in the ASP per unit of 29.4% and 35.5%
      for the three and nine months ended September 30, 2005 compared to the three
      and
      nine months ended September 30, 2004 for our LCD monitors. We
      reduced the number and magnitude of sales allowance programs offered worldwide,
      which resulted in a reduction of sales allowances in the third quarter of 2005
      as compared to the third quarter of 2004. In addition, we worked with our
      customers to minimize stock rotations. Returns and sales incentive allowances
      charged against gross sales were $19.7 million and $43.2 million for the three
      months ended September 30, 2005 and 2004, and $73.8 million and $89.2 million
      for the nine months ended September 30, 2005 and 2004,
      respectively.




We
      sold
      approximately 1.5 million display products for the three months ended September
      30, 2005 compared to approximately 1.1 million display products for the three
      months ended September 30, 2004. Of the total product units sold for the three
      months ended September 30, 2005, LCD monitors accounted for 60.7%, CRT monitors
      accounted for 23.2%, and other products accounted for 16.1% as compared to
      37.7%, 45.9%, and 16.4%, respectively, for the three months ended September
      30,
      2004. The increase in units sold was primarily due to continued expansion in
      China and other areas of Asia as well as stronger unit sales in
      Europe.




We
      sold
      approximately 4.3 million display products for the nine months ended September
      30, 2005 compared to approximately 3.2 million display products for the nine
      months ended September 30, 2004. Of the display product units sold for the
      nine
      months ended September 30, 2005, LCD monitors accounted for 55.0%, CRT monitors
      accounted for 28.4%, and other products accounted for 16.6% as compared to
      36.7%, 49.8%, and 13.5%, respectively, for the nine months ended September
      30,
      2004. The increase in units sold was primarily due to continued expansion in
      China and other areas of Asia as well as stronger unit sales in
      Europe.




*Americas* *—* In
      our
      Americas region, net sales decreased $6.9 million, or 4.7%, to $138.8 million
      for the three months ended September 30, 2005 compared to $145.7 million for
      the
      three months ended September 30, 2004. Net sales decreased $65.2 million, or
      14.2%, to $393.8 million for the nine months ended September 30, 2005 compared
      to $459.0 million for the nine months ended September 30, 2004. The decrease
      in
      net sales was primarily due to rapidly declining ASPs as a result of intense
      competition and was partially offset by higher LCD unit sales due to the shift
      in the ratio of sales from CRT to LCD products as well as
      LCD TV sales growth .
      LCD TV
      contributed $16.3 million and $39.6 million of net sales for the three months
      and nine months ended September 30, 2005, representing a growth of 131.9% and
      179.6% over the same periods in 2004, respectively.




13
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            of Contents*





*Europe* *—* In
      our
      Europe region, net sales increased $27.8 million, or 56.0%, to
      $77.4 million for the three months ended September 30, 2005 compared to
      $49.6 million for the three months ended September 30, 2004. Net sales
      increased $49.8 million, or 31.3%, to $209.1 million for the nine months ended
      September 30, 2005 compared to $159.2 million for the nine months ended
      September 30, 2004. The increase in net sales was primarily due to the region’s
      continued expansion in Russia, Germany, and the Middle East. Net sales also
      increased due to the shift in the ratio of sales from CRT to LCD products
      a s
      well as
      a shift to larger screen sizes.




*Asia
      Pacific* *—* In
      our
      Asia Pacific region, net sales increased $46.8 million, or 87.3%, to
      $100.5 million for the three months ended September 30, 2005 compared to
      $53.7 million for the three months ended September 30, 2004. Net sales
      increased $88.2 million, or 47.9%, to $272.4 million for the nine months ended
      September 30, 2005 compared to $184.2 million for the nine months ended
      September 30, 2004. The primary reason for the increase in net sales was due
      to
      our continued growth in the China market, largely as a result of increased
      unit
      shipments of LCD and CRT products a s
      well as
      a shift to larger screen sizes .
      In
      addition, net sales also increased due to higher unit sales in existing markets
      such as India, Taiwan, and Australia and the shift in the ratio of sales from
      CRT to LCD products a s
      well as
      a shift to larger screen sizes




***Cost
      of Sales***




Our
      cost
      of sales increased $38.0 million, or 15.2%, to $288.5 million for the three
      months ended September 30, 2005 compared to $250.5 million for the three months
      ended September 30, 2004. Cost of sales increased $60.2 million, or 8.2%, to
      $791.8 million for the nine months ended September 30, 2005 compared to $731.6
      million for the nine months ended September 30, 2004. As
      a
      percentage of net sales, cost of sales decreased to 91.1% for the three months
      ended September 30, 2005 from 100.6% for the three months ended September 30,
      2004. For the nine months ended September 30, 2005 cost of sales decreased
      to
      90.5% as a percentage of net sales from 91.2% for the nine months ended
      September 30, 2004. The decrease in cost of sales as a percentage of our net
      sales is primarily due to the reduction of inventory write-downs due to the
      volatile LCD market in the third quarter of 2004 and higher inventory turnover
      in the third quarter of 2005 as compared with that of the third quarter in
      2004.
      Efficiencies in the inventory management also helped reduce the inventory
      write-offs, revaluation, warehousing and freight expenses. Offsetting these
      reductions slightly are increases in warranty costs in Europe and Asia. Overall,
      gross margin increased to 8.9% for the three months ended September 30, 2005
      compared to a loss of 0.6% for the three months ended September 30, 2004. Gross
      margin also increased to 9.5% for the nine months ended September 30, 2005
      compared to 8.8% for the nine months ended September 30, 2004.




***Selling,
      General and Administrative Expenses***




Selling,
      general and administrative expenses decreased $4.5 million, or 15.2%, to
      $25.2 million for the three months ended September 30, 2005 compared to $29.7
      million for the three months ended September 30, 2004. Selling, general and
      administrative expenses decreased $8.4 million, or 9.5%, to $80.3 million
      for the nine months ended September 30, 2005 compared to $88.7 million for
      the nine months ended September 30, 2004. The dollar decrease was mainly
      attributable to strategic initiatives undertaken to maximize operating
      efficiencies and enhance our competitiveness. Some of these initiatives resulted
      in lower advertising and marketing expenses of $1.9 million and $5.8 million
      for
      the three and nine months ended September 30, 2005 as a result of utilizing
      more
      efficient advertising and marketing campaigns, as well as lower
      personnel-related expenses of $1.9 million and $1.2 million for the three and
      nine months ended September 30, 2005 due to headcount reductions. As a
      percentage of net sales, selling, general and administrative expenses decreased
      to 7.9% for the three months ended September 30, 2005 from 11.9% for the three
      months ended September 30, 2004. As a percentage of net sales, our selling,
      general and administrative expenses decreased to 9.2% for the nine months ended
      September 30, 2005 from 11.0% for the nine months ended September 30,
      2004.




14
 *Table
            of Contents*





***Income
      (Loss) from Operations***




Income
      from operations increased $34.1 million, or 109.6%, to $3.0 million for the
      three months ended September 30, 2005 compared to a loss of $31.1 million for
      the three months ended September 30, 2004. Income from operations increased
      $21.0 million, or 117.3%, to $3.1 million for the nine months ended September
      30, 2005 compared to a loss of $17.9 million for the nine months ended September
      30, 2004. As a percentage of net sales, income from operations increased to
      1.0%
      for the three months ended September 30, 2005 compared to (12.5)% for the three
      months ended September 30, 2004. As a percentage of net sales, income from
      operations increased to 0.3% for the nine months ended September 30, 2005
      compared to (2.2)% for the nine months ended September 30, 2004. The increase
      for the three and nine months ended September 30, 2005 compared to the three
      and
      nine months ended September 30, 2004 was primarily due to increased net sales
      in
      the Europe and Asia regions and the relative stability of the LCD market as
      compared to 2004. We also initiated inventory management programs reducing
      inventory handling and warehousing. General administrative expenses have also
      decreased through the reduction of advertising, legal and personnel
      expenses.




*Americas* —
In
      our
      Americas region, income from operations increased $14.1 million, or 102.2%,
      to
      $254,000 for the three months ended September 30, 2005 compared to an operating
      loss of $13.8 million for the three months ended September 30, 2004. Loss from
      operations increased $2.0 million, or 31.3%, to a loss of $8.4 million for
      the
      nine months ended September 30, 2005 compared to an operating loss of $6.4
      million for the nine months ended September 30, 2004. The increase in income
      for
      the three months ended September 30, 2005 as compared to the three months ended
      September 30, 2004 was mainly due to inventory management programs, reductions
      in selling,
      general and administrative expenses and the relative stability of the LCD market
      as compared to 2004 .
      The
      increase in the loss for the nine months ended September 30, 2005 compared
      to
      the nine months ended September 30, 2004 was mainly due to the ASP falling
      faster than the product costs.




*Europe* *—* In
      our
      European region, income from operations was $1.2 million for the three months
      ended September 30, 2005 compared to an operating loss of $7.3 million for
      the
      three months ended September 30, 2004. Income from operations was $4.4 million
      for the nine months ended September 30, 2005 compared to a $2.1 million
      operating loss for the nine months ended September 30, 2004. The gain in income
      for the three
      and nine months ending September 30, 2005 as compared to the three and nine
      months ended September 30, 2004, was primarily due to growth in the Russian
      and
      Middle East regions, and the relative stability of the LCD market as compared
      to
      2004. Although
      selling, general and administrative expenses increased in dollar terms during
      the three and nine months ended September 30, 2005 in comparison to the same
      period ended September 30, 2004, as a percentage of net sales, the expense
      decreased to 8.8% and 12.0% from 10.1% and 12.1% respectively, for the three
      and
      nine month period ended September 30, 2005.




*Asia
      Pacific* —
In
      our
      Asia Pacific region, income from operations was $1.6 million for the three
      months ended September 30, 2005 compared to an operating loss of $10.0 million
      for the three months ended September 30, 2004. Income from operations was $7.1
      million for the nine months ended September 30, 2005 compared to an operating
      loss of $9.4 million for the nine months ended September 30, 2004. The increase
      in income from operations for the three and nine months was due to an increase
      in net sales in the China and Southern Asia markets and the relative stability
      of the LCD market compared to 2004.




***Other
      (Expense) Income, Net***




Other
      (expense) income, net decreased to a net expense of $5,000 for the three months
      ended September 30, 2005 compared to a net expense of $318,000 for the three
      months ended September 30, 2004. Other (expense) income increased to a net
      expense of $3.7 million for the nine months ended September 30, 2005 compared
      to
      a net expense of $629,000 for the nine months ended September 30, 2004. The
      decrease was mainly related to foreign currency exchange losses, which totaled
      $215,000 and $3.9 million for the three and nine months ended September 30,
      2005
      compared to a foreign currency exchange gain of $189,000 and loss of $204,000
      for the three and nine months ended September 30, 2004.




***Provision*** ***(Benefit)
      for Income Taxes***




The
      provision for income taxes was $1.0 million, or 33.6%, on income from continuing
      operations for the three months ended September 30, 2005 as compared to a
      benefit of $7.8 million, or 24.7%, on losses from continuing operations for
      the
      three months ended September 30, 2004.




15
 *Table
            of Contents*





The
      provision for income taxes was $14.2 million on loss from continuing
      operations for the nine months ended September 30, 2005 as compared to a benefit
      of $4.5 million, on loss from continuing operations for the nine months ended
      September 30, 2004. Income tax expense for the nine months ended September
      30,
      2005 included a non-cash charge of $13.7 million to establish a valuation of
      allowance against our net deferred income tax assets, which was recorded during
      the second quarter ended June 30, 2005. The valuation allowance has been
      calculated pursuant to SFAS 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 include our past
      and
      projected future performance, the market environment in which we operate, the
      utilization of past tax credits and the length of the carryback and carryforward
      periods of net operating losses. In determining that a valuation allowance
      is
      required, we place added weight on the operating results of the past two years
      and the projected results for 2005. We intend to maintain a valuation allowance
      until sufficient positive evidence, as contemplated by SFAS No. 109, exists
      in
      future periods.




**Liquidity
      and Capital Resources**




**Nine
                months Ended**
              **September
                30,****2005**
            
            **2004****(in
                thousands)**Net
                cash provided by (used in) operating activities
            
            $
            13,101
            
            $
            (67,597
            )Net
                cash provided by investing activities
            
            
            2,073
            
            
            2,978Net
                cash (used in) provided by financing activities
            
            
            (3,497
            )
            
            13,979Net
                cash (used in) provided by operating activities of discontinued
                operations
            
            
            (1,116
            )
            
            8,096Net
                increase (decrease) in cash and cash equivalents
            
            $
            10,561
            
            $
            (42,544
            )







As
      of
      September 30, 2005, we had cash, cash equivalents and short-term investments
      of
      $110.7 million. Our cash balances are held in numerous locations throughout
      the
      world. Most of the amounts held outside the United States could 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. We have
      accounted for the U.S. federal tax liability on these amounts for financial
      statement purposes except for foreign earnings that are considered indefinitely
      reinvested outside the United States. 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 countries, and that we would meet U. S.
      liquidity needs through ongoing cash flows from operations, external borrowings,
      or both. We utilize a variety of tax planning and financing strategies in an
      effort to ensure that our worldwide cash is available in the locations in which
      it is needed. We expect to meet our forecasted cash flow needs by accessing
      our
      credit lines in the Americas, Europe and Asia Pacific.




In
      October 2004, the “American Jobs Creation Act of 2004” was passed.  We are
      currently assessing the impact of this law on our operations and expect this
      assessment to be completed by December 31, 2005. We do not expect this act
      to
      have a material impact on our financial position or results of
      operations.







*Operating
      Activities*




Cash
      flow
      provided by operating activities was $13.1 million during the nine months ended
      September 30, 2005 compared to cash flow used in operating activities of $67.6
      million during the nine months ended September 30, 2004. The increase between
      the nine months ended September 30, 2005 and September 30, 2004 was primarily
      due to faster accounts receivable collections and the timing of product
      payments.




Accounts
      receivable decreased by $9.6 million to $143.6 million at September
      30, 2005 from $153.2 million at December 31, 2004 primarily due to the
      offering of cash discount programs to more customers. Sales outstanding
      decreased to 41 days for September 30, 2005 compared to 47 days for the three
      months ended September 30, 2004. As of September 30, 2005, we had no major
      collection or billing problems that had not already been accounted for in our
      allowance for doubtful accounts. We have not materially changed our payment
      terms or delinquency policies between 2004 and 2005.




Inventories
      decreased by $20.2 million to $128.0 million at September 30, 2005 compared
      to
      $148.2 million at December 31, 2004. Our inventory turns is stable at
      6 times for the 9 months ended September 30, 2005 as compared with 6 times
      for
      the 9 months ended September 30, 2004.




Accounts
      payable decreased $14.8 million during the nine months ended September 30,
      2005, compared to a decrease of $76.9 million during the nine months ended
      September 30, 2004. The decrease for both periods was largely due to the
      reduction in our inventory balances and timing of product payments.




16
 *Table
            of Contents*





*Investing
      Activities*




Cash
      flow
      provided by investing activities was $2.1 million during the nine months ended
      September 30, 2005 compared to $3.0 million during the nine months ended
      September 30, 2004. The primary reason for the difference between periods was
      that we sold more long-term investments in 2004 than in 2005. ****




*Financing
      Activities*




Cash
      flow
      used in financing activities was $3.5 million during the nine months ended
      September 30, 2005 compared to $14.0 million provided by the financing
      activities during the nine months ended September 30, 2004. The primary reason
      for the variance was the net decrease of bank borrowings during the nine months
      ended September 30, 2005 compared to a net increase of bank borrowings during
      the nine months ended September 30, 2004 to fund operations in our Asia Pacific
      region.




*Operating
      Activities of Discontinued Operations*




Cash
      flow
      used in operating activities of discontinued operations was $1.1 million
      during the nine months ended September 30, 2005 compared to $8.1 million
      cash provided during the nine
      months ended September 30, 2004.




**Contractual
      Obligations and Commitments** ****




As
      of
      September 30, 2005, we had contractual obligations and commercial commitments
      of
      $67.0 million as shown in the table below. The table below excludes obligations
      related to accounts payable and accrued liabilities incurred in the ordinary
      course of business.




**Payments due by period****Contractual Obligations**
              
              **Total**
              
              **Less than**
                **1 year**
              
              **1-3 years**
              
              **3-5 years**
              
              **More than**
                **5 years****(in thousands)**Operating
                  lease obligations
              
              $
              3,494
              
              $
              981
              
              $
              2,513
              
              $
              
              
              $
              —Subordinated
                  notes payable (1)
              
              
              48,556
              
              
              430
              
              
              48,126
              
              
              —
              
              
              —Preferred
                  stock mandatory redemption
              
              
              15,000
              
              
              15,000
              
              
              0
              
              
              —
              
              
              —Total
              
              $
              67,050
              
              $
              16,411
              
              $
              50,639
              
              $
              —
              
              $
              —




(1)
            Includes
                interest payable of $430,000 and $5.1 million for the respective
                periods
                presented above.




**Credit
      Facilities** ****




Effective
      as of March 16, 2005, we renewed our $50.0 million line of credit with CIT
      Group/Business Credit, Inc. with a new $60.0 million credit line that expires
      in
      March 2008. Advances bear interest at the prime rate plus 0.75% (5.9% at
      December 31, 2004) with interest payable monthly. ViewSonic Europe Limited
      entered into a $20.0 million line of credit facility with Burdale
      Financial Limited. This line of credit is secured by trade receivables and
      inventory of ViewSonic Europe Limited. Advances bear interest at Libor plus
      a
      margin.  The maximum amount that we may draw down, at any given time, under
      our outstanding credit facilities is subject to a number of terms and conditions
      with our lenders, including our outstanding accounts receivables and inventory
      levels. Some of our other international subsidiaries also have separate lines
      of
      credit, which are secured by certain of their assets. As of September 30, 2005,
      there were no borrowings against these lines of credit.




**Off-Balance
      Sheet Arrangements**




As
      of
      September 30, 2005 and 2004, 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.





17
 *Table
            of Contents*





**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. We generally experience a decline in net sales from the first quarter
      to
      the third quarter of each year and we tend to experience the highest net sales
      in the fourth quarter of the year due to a strong buying season in the fourth
      quarter by large wholesale distribution partners and retailers due to the
      holiday season in the Americas and Europe. Our seasonality is moderated through
      slightly different seasonal variations in the three regions.





**Operating
      Capital and Capital Expenditure Requirements**




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. 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 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:





·
            Decreased
                demand for and market acceptance of our
                products;





·
            Inability
                to successfully develop our next generation
                products;





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





·
            Competitive
                pressures resulting in lower than expected ASPs;
                and





·
            New
                product announcements or product introductions by our
                competitors.





**Critical
      Accounting Policies and Estimates**





Our
      critical accounting policies reflecting our estimates and judgments are
      described in Item 2 Financial Information of our Annual Report on Form 10-K
      for the year ended December 31, 2004, filed with the Securities and
      Exchange Commission on March 29, 2005.





On
      May 9,
      2005, we re-priced all outstanding stock options held by our employees,
      executive officers and members of the Board of Directors of record on March
      2,
      2005. As a result, the exercise prices of all our outstanding stock options
      subject to the re-pricing were lowered to $0.38 per share resulting in stock
      option expense of $1.1 million which was recorded during the third quarter
      of
      2005. There was no change in the number of shares subject to each re-priced
      stock option, vesting or other terms. The repricing was implemented in order
      to
      realign the cash and equity components of our compensation programs for
      employees, executive officers and directors.





During
      the third quarter of 2005, we elected to adopt the fair value based employee
      stock-based compensation expense recognition provisions of Statement of
      Financial Accounting Standards No. 123, *Accounting
      for Stock-Based Compensation,* or SFAS
      123, using the modified prospective method. We previously applied the intrinsic
      value based expense recognition provisions set forth in Accounting Principles
      Board Opinion No. 25, *Accounting
      for Stock Issued to Employees* .
      Had we
      not adapted SFAS 123, the stock options that were re-priced would have been
      subject to variable accounting with changes in the fair value of the stock
      options being recorded in the Statements of Operations. SFAS 123 states that
      the
      adoption of the fair value based method is a change to a preferable method
      of
      accounting. We elected not to early adapt SFAS 123(R) as it would have been
      required to include an estimate of volatility in calculating the stock option
      re-pricing expense. SFAS 123 does not require the use of volatility in
      estimating the fair value of stock options. Management believes that use of
      the
      fair value based method to record employee stock-based compensation expense
      is
      consistent with the accounting for all other forms of compensation. The adoption
      of the fair value based recognition provision decreased net income by $94,000
      and $366,000 for the three-months and the nine-months ended September 30, 2005,
      respectively.





18
 *Table
            of Contents*





**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**





Our
      financial market risk arises from fluctuations in foreign currencies. A majority
      of our net sales, expense and capital purchasing activities are transacted
      in
      U.S. Dollars. However, we do transact these activities in other currencies,
      primarily the Euro, Great British Pound, the Chinese Yuan and the New Taiwan
      dollar, among others. Our net sales and purchasing transactions denominated
      in
      currencies other than the U.S. Dollar are subject to exchange rate fluctuations
      and could potentially negatively impact our financial results.





We
      have
      significant European net sales denominated in the Euro. Product shipping, and
      selling, general and administrative costs associated with a portion of these
      net
      sales are U.S. Dollar-denominated. During the nine months ended September 30,
      2005, the Euro-to-U.S. Dollar foreign currency exchange rate weakened against
      the U.S. Dollar by 13.0% compared to the year-end rate of 2004. During the
      nine
      months ended September 30, 2004, the Euro weakened against the U.S. Dollar
      by
      2.0% compared to the year-end rate of 2003. Effective June 7, 2005, our European
      region entered into a foreign currency option contract to minimize the impact
      of
      foreign currency fluctuations on our business in Europe. The foreign currency
      option contract allows us to sell 2.0 million Euros per month for an eight
      to
      twelve month term at specific rates based on the spot rate in the market. We
      cannot determine the ultimate impact of future changes to these and other
      currency exchange rates on our 2005 net sales, income from operations, net
      income, equity and comprehensive income.





We
      have a
      portfolio of investments that includes marketable securities classified as
      available-for-sale long-term investments. To the extent that these investments
      continue to have strategic value, we typically do not attempt to reduce or
      eliminate our market exposure. For those securities that are no longer
      considered strategic, management will evaluate market and economic factors
      in
      its decision on the timing of disposal. Our investments are generally in
      companies in the high-technology industry.





**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
      revenues 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;





·
            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;





19
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            of Contents*





·
            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, 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 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 profits in such periods. Our competitors include:





·
            Established
                consumer electronic companies such as Mitsubishi, Matsushita Electric
                Industrial Co., Ltd., Royal Philips Electronics of the Netherlands,
                Samsung Electronics Co., Ltd., Sharp Corporation and Sony
                Corporation;





·
            Personal
                computer manufacturers such as Dell Inc., Gateway and Hewlett-Packard
                Company; and





·
            Other
                Asian manufacturers interested in building a U.S. brand presence
                for their
                goods, such as Acer, BenQ, Daewoo International Corporation, LG-Philips,
                Sampo Group, Taiwan Kolin Co. (using the Syntax brand) and Chi-Mei
                Group
                (using the Westinghouse brand).





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, name recognition as well as 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.





*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 affect our cash used or generated from operations and, as a result, our
      need to seek additional borrowings or capital include:





·
            Decreased
                demand and market acceptance for our products;





20
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            of Contents*





·
            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;
                and





·
            New
                product announcements or product introductions by our
                competitors.





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.





*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
      7.9% and 11.9% for the three months ended September 30, 2005 and 2004,
      respectively. As a percentage of net sales, selling, general and administrative
      expenses represent 9.2% and 11.0% for the nine months ended September 30, 2005
      and 2004, 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
      may fail to comply with the Restriction of Certain Hazardous Substances
      Directive, or RoHS, and Waste Electrical and Electronic Equipment Directive,
      or
      WEEE, which could harm our business.*




We
      are
      subject to local laws 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, 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, that becomes effective January 2006, requires us to take
      back and recycle all products we manufacture or import into the EU at our own
      expense. If we fail to 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 able to incorporate it into our product
                procurement processes without compromising quality and/or harming
                our cost
                structure;





·
            We
                may not be able to sell non-compliant product into the EU or to any
                customer whose end product 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 in 2006 for which there is
                reduced
                demand and we may need to write
                down.





*Our
      failure to anticipate changes in the supply or pricing of product components
      or
      customer demand may result in excess or obsolete inventory that could adversely
      affect our gross margins.*





Inventory
      purchases are based upon future demand forecasts. These forecasts are based
      upon
      assumptions 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 be required to write-down our inventory and our gross margins could be
      adversely affected.





21
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            of Contents*





*We
      order materials and tooling in advance of anticipated customer demand.
      Therefore, we have limited ability to reduce our inventory purchase commitments
      quickly in response to any revenue shortfalls.*




Substantially
      all of our sales are made on the basis of purchase orders 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.





*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. Sales to these customers outside of the United States
      and other Americas subjects 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.




*If
      we
      fail to maintain and/or expand our sales channels, our revenue may
      decline.*





To
      maintain and grow our market share, net sales and brand, we must maintain and
      expand our sales channels. We currently sell our products through distributors,
      retailers, VARs, system integrators, commercial or enterprise resellers, direct
      marketing/e-retailers, and ViewSonic online stores. These entities purchase
      our
      products directly from us or through our distributors. 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.





22
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            of Contents*





Retailers
      have limited shelf space and 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 may increase, which would require us to
      increase our marketing expenditures to maintain current levels of retail shelf
      space.





We
      must
      also continuously monitor and evaluate 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.





*We
      rely on a limited number of wholesale distributors and national retailers for
      most of our sales, and changes in price or purchasing patterns and failure
      to
      maintain or establish new distributor relationships in existing and new sales
      channels could lower our revenue or gross margins.*





We
      sell
      our products through wholesale distributors such as Ingram Micro, Tech Data
      Corporation and Synnex Corporation and national retailers such as Comp
      USA, 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 with 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.





In
      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 change their purchasing patterns
      or
      refuse to pay the prices that we set for our products, our net sales and
      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 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.





*If
      we
      do not effectively manage our sales channel inventory 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.*





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 customers and within
      our sales 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.





*The
      ASP of our products typically decreases rapidly over the life of the product,
      which negatively affects our gross margins.*





The
      market in which we compete is subject to technological advances with yearly
      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 product. The decline
      in LCD monitors’ ASP is primarily due to increased production capacity and
      aggressive pricing by the competition. Over the recent years, the decline in
      ASP
      for LCD monitors has been faster than the decline in our product-sourcing costs
      and this has resulted in decreased margins.





23
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            of Contents*





In
      order
      to sell products that have a declining ASP and still maintain our gross margins,
      we need to continually reduce our product costs and manage our inventory. To
      manage product-sourcing 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. We must also successfully manage our freight and inventory holding
      costs to reduce overall product 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. 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.





*Our
      implementation of strategic initiatives may strain our operations and increase
      our operating expense or harm our net earnings.*





We
      have
      been implementing strategic initiatives designed to focus our resources on
      our
      core products, to improve supply chain and logistics efficiency, to simplify
      our
      business processes to maximize operating efficiencies in all aspects of our
      business, to grow sales in regional markets and to expand core
      product **** offerings,
      among others. The undertaking of these initiatives may strain our existing
      management, information systems, employee workforce, operational capability
      and
      financial controls. The difficulties associated with implementing these
      initiatives, procedures and controls may place a significant burden on our
      management, operational and financial resources. If we fail to successfully
      implement these initiatives or encounter unexpected difficulties during the
      implementation, our business could be harmed.





*We
      depend on third-party contract manufacturers to manufacture our products. If
      these contract manufacturers experience any delay, disruption or quality control
      problems in their operations, we could lose market share and revenues, and
      our
      reputation may be harmed.*





All
      of
      our products are manufactured, assembled, tested and packaged by contract
      manufacturers. We rely on several contract manufacturers to procure components
      and, in some cases, subcontract engineering work. Some of our products are
      manufactured by a single contract manufacturer. Our contract manufacturers
      are
      primarily located in mainland China, Taiwan, and Thailand and may be subject
      to
      disruption by earthquakes, 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 our third-party contract manufacturers.
      Product pricing is generally negotiated on an order by order basis. All of
      our
      contracts, including those containing provisions which may be materially
      favorable to the Company, with our contract manufacturers are terminable by
      either party with 90 days notice for any reason or no reason. Our four
      largest contract manufacturers for the three and nine months ended September
      30,
      2005 were: Techview International Technology Inc., Delta Electronics, Inc,
      Jean Co. Ltd., and Innolux Display Corporation. The loss of the services of
      any
      of our primary contract manufacturers or a change in material terms 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.





Our
      reliance on contract manufacturers also exposes us to the following risks over
      which we have limited control:





·
            Inability
                to procure key required components for our finished products to meet
                our
                customer’s demand;





·
            Unexpected
                increases in manufacturing and repair
                costs;





·
            Unexpected
                reductions in payment terms;





·
            Interruptions
                in shipments if one of our manufacturers is unable to complete
                production;





·
            Inability
                to control the quality of finished
                products;





·
            Inability
                to control delivery schedules;





·
            Unpredictability
                of manufacturing yields; and




24
 *Table
            of Contents*




·
              Potential
                  lack of adequate capacity to manufacture all or a part of the products
                  we
                  require.


*We
      rely upon third parties for technology that is critical to our products, and
      if
      we are unable to continue to license this technology and future technology,
      our
      ability to offer competitive products could be harmed and our costs of
      production could increase.*





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 products. Because the intellectual property we license is available from
      third parties, barriers to entry for our competitors may be lower than if we
      owned exclusive rights to the technology we license and use. On the other hand,
      if a competitor enters into an exclusive arrangement with any of our third-party
      technology providers, our ability to develop and sell products containing that
      technology could be severely limited. Our licenses often require royalty
      payments or other consideration to third parties. Our success will depend in
      part on our continued ability to have access to these technologies on
      commercially reasonable terms. If we are unable to license 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. As a result,
      our gross margins, market share, and operating results could be
      harmed.





*If
      we
      are unable to provide our third-party contract manufacturers with an accurate
      forecast of our component and material requirements, we may experience delays
      in
      the manufacturing of our products and the costs of our products may
      increase.*





We
      provide our third-party 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. Some of our components have long lead
      times. If our forecasts are less than our actual requirements, our contract
      manufacturers may be unable to manufacture enough products in a timely manner.
      If our forecasts are too high, our contract manufacturers may be unable to
      use
      the components they have purchased. The cost of the components used in our
      products tends to drop rapidly as volumes increase and the technologies mature.
      Therefore, if our contract manufacturers are unable to promptly use components
      purchased on our behalf, our cost of producing products may be higher than
      our
      competitors due to an over-supply of higher-priced components. Moreover, if
      they
      are unable to use certain components, we may need to reimburse them for any
      losses they incur.





*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 air freight. 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 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.





*If
      we
      fail to continue to introduce new products that achieve broad market acceptance
      on a timely basis, or fail to market or sell our products in a way that receives
      broad acceptance in the market place, we will not be able to compete effectively
      and we will be unable to increase or maintain net sales and gross
      margins.*





We
      operate in a highly competitive, quickly changing environment, and our future
      success depends on our ability to develop and introduce new products and product
      enhancements that achieve broad market acceptance in the business and home
      markets. Our future success will depend in large part upon our ability
      to:


·
              Identify
                  demand trends in the business and home display markets and quickly
                  develop, manufacture and sell products that satisfy these
                  demands;


25
 *Table
            of Contents*




·
            Manage
                our cost structure to enable us to bring new products to market at
                competitive prices;





·
            Respond
                effectively to new product announcements by our competitors by designing,
                either internally or through third parties, competitive
                products;





·
            Provide
                compatibility and interoperability of our products with products
                offered
                by other vendors and new technologies as they emerge;
                and





·
            Manage
                our product offerings either as stand-alone, in combination with
                other
                products or services, or in some other
                manner.





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





We
      are
      highly dependent on James Chu, our Chairman of the Board and Chief Executive
      Officer and majority stockholder, and other officers. Due to the specialized
      knowledge each of our officers possesses with respect to our business and our
      operations, the loss of service of any of our officers could adversely affect
      our business. We do not carry key man life insurance on our
      officers.





Each
      of
      our officers may terminate their employment without notice and without cause
      or
      good reason. We currently are not aware that any officer is planning to leave
      or
      retire.





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





Our
      strategies include further expansion of our business in markets in which we
      currently operate, including China, Russia, Eastern and Western 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 could be adversely affected
      by:





·
            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.





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





26
 *Table
            of Contents*





Many
      of
      our products are designed to include software or other intellectual property
      licenses from third parties. Competitors’ protected technology may be
      unavailable to us or be made available to us only on unfavorable terms and
      conditions. While it may be necessary in the future to seek or renew licenses
      relating to various aspects of our products, we believe that, based upon past
      experience and standard industry practice, these licenses generally can be
      obtained on commercially reasonable terms. There can be no assurances, however,
      that we will be able to obtain, on commercially reasonable terms or at all,
      from
      third parties the licenses that we will need. Due to the existence of a large
      number of patents in our field and the rapid rate of issuance of new patents,
      it
      is not practical to determine in advance whether a product or any of its
      components infringe the patent rights of others.





We
      routinely receive claims regarding patent and other intellectual property
      matters. Pursuant to our agreements with our suppliers, we generally seek
      indemnification from our suppliers in connection with such claims. Whether
      or
      not these claims have merit, they may require significant resources to defend.
      To date, none of these claims has had a material impact on our business. 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
      unable to obtain the license for the infringed technology or substitute similar
      non-infringing technology, our business could be harmed. Also, 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.





*We
      may be subject to product liability claims that could result in significant
      direct or indirect costs to us.*





There
      is
      a risk that defects may occur in our products and services. The occurrence
      of
      these defects could make us liable for damages caused by these defects,
      including consequential damages. To date, none of these claims has had a
      material impact on our business. Negative publicity concerning these problems
      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.





*We
      rely on our contract manufacturers for assistance in new product development,
      and our new product introduction efforts could be harmed by any adverse change
      in these relationships.*





We
      work
      with our contract manufacturers to develop and/or incorporate new technologies
      and products. Our contract manufacturers design the electronic and mechanical
      systems of a display product around our choice of major components and our
      specific industrial design. Aside from these major specifications mandated
      by
      us, the contract manufacturers choose electronic and mechanical solutions of
      standard design to reduce the development time, engineering cost and procurement
      risk associated with more customized designs. Our relationships with these
      contract manufacturers generally do not include a long-term commitment on behalf
      of either party. If our 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. Our business could be harmed if we were unable
      to
      continue one or more of our contract manufacturing relationships.




*Impairment
      of our investment portfolio could harm our net earnings.*





We
      have
      an investment portfolio that includes a variety of investments. In most cases,
      we do not attempt to reduce or eliminate our market exposure on these
      investments. We could incur losses related to the impairment of these
      investments, which could result in charges to net earnings. Some of our
      investments are in public and privately-held companies that are still in the
      start-up or development stage, which have inherent risks because the
      technologies or products they have under development are typically in the early
      stages and may never become successful. Furthermore, the values of our
      investments in publicly-traded companies are subject to significant market
      price
      volatility. We often couple our investments in technology companies with a
      strategic commercial relationship. Our commercial agreements with these
      companies may not be sufficient to allow us to obtain and integrate such
      products and services into our offerings or otherwise benefit from the
      relationship, and third parties, including competitors, may subsequently acquire
      these companies. Economic weakness could further impact our investment
      portfolio.





27
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            of Contents*





**ITEM** **4.  CONTROLS AND PROCEDURES**





*Evaluation
      of Disclosure Controls and Procedures*




We
      maintain “disclosure controls and procedures,” as such term is defined in Rule
      13a-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.





Based
      on
      their evaluation as of September 30, 2005, 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 Exchange Act) were
      sufficiently effective to ensure that the information required to be disclosed
      by us in this Quarterly Report on Form 10-Q was recorded, processed, summarized
      and reported within the time periods specified in Securities and Exchange
      Commission rules and forms. ****





*Changes
      in Internal Control over Financial Reporting*





There
      were no changes in our internal control over financial reporting during the
      three months ended September 30, 2005 that have materially affected, or are
      reasonably likely to materially affect, our internal control over financial
      reporting.





28
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            of Contents*





**PART
      II - OTHER INFORMATION**




**ITEM
      1** **.
      LEGAL PROCEEDINGS**





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, management does not believe that the outcome
      of any pending legal matters will have a material adverse effect on our
      consolidated condensed balance sheets, although statements of operations or
      cash
      flows could be affected in a particular period.








**ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**





Not
      applicable.








**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**





Not
      applicable.








**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES
      HOLDERS**





Not
      applicable.







**ITEM
      5. OTHER INFORMATION**





Not
      applicable.





29
 *Table
            of Contents*





**ITEM
      6. EXHIBITS**





(a)  Exhibits





10.11*†
            Facility
                Agreement between ViewSonic Europe Limited and Burdale Financial
                Limited,
                dated June 24, 2004.





10.12**†
            Deed
                of Debenture among ViewSonic Europe Limited, others as Chargors and
                Burdale Financial Limited, dated June 24,
                2004.





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.





______________________





†
            Confidential
                treatment has been requested for portions of this exhibit. These
                portions
                have been omitted from this registration statement and have been
                filled
                separately with the Securities and Exchange
                Commission.





*
            Incorporated
                by reference to Exhibit 10.10 to ViewSonic Corporation’s Quarterly Report
                on Form 10-Q, (000-50730), filed with the Securities and Exchange
                Commission on August 16, 2004.





**
            Incorporated
                by reference to Exhibit 10.11 to ViewSonic Corporation’s Quarterly Report
                on Form 10-Q, (000-50730), filed with the Securities and Exchange
                Commission on August 16, 2004.





***
            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.


30
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            of Contents*





**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 ____, 2005.





**VIEWSONIC
                CORPORATION**By:
            /s/
                James A. MorlanJamesA.
                MorlanChiefFinancialOfficer(Principal
                Financial and Accounting Officer)


31
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            of Contents*




**EXHIBIT
      INDEX**





Exhibit
                No.
            
            Description
                of Exhibits10.11*†
            
            Facility
                Agreement between ViewSonic Europe Limited and Burdale Financial
                Limited,
                dated June 24, 2004.10.12**†
            
            Deed
                of Debenture among ViewSonic Europe Limited, others as Chargors and
                Burdale Financial Limited, dated June 24, 2004.31.1
            
            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.





______________________





†
            Confidential
                treatment has been requested for portions of this exhibit. These
                portions
                have been omitted from this registration statement and have been
                filled
                separately with the Securities and Exchange
                Commission.





*
            Incorporated
                by reference to Exhibit 10.10 to ViewSonic Corporation’s Quarterly Report
                on Form 10-Q, (000-50730), filed with the Securities and Exchange
                Commission on August 16, 2004.





**
            Incorporated
                by reference to Exhibit 10.11 to ViewSonic Corporation’s Quarterly Report
                on Form 10-Q, (000-50730), filed with the Securities and Exchange
                Commission on August 16, 2004.





***
            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.