**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 March 31, 2007**





**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. YesxNoo





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated file” in Rule 12b-2 of the Exchange Act (check
      one):





Large
                accelerated filer o
            
            Accelerated
                filer o
            
            Non-accelerated
                filer 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 common stock outstanding was 351,619,666 shares and the
      number of shares of Series C preferred stock outstanding was 3,300,000 shares,
      each as of April 30, 2007.







1





**VIEWSONIC
      CORPORATION**


**FORM
      10-Q**


**TABLE
      OF CONTENTS**




**Page****PART
                I. FINANCIAL
                INFORMATION**Item
                  1.
            Financial
                  Statements (unaudited):
            3Condensed
                  Consolidated Balance Sheets as of March 31, 2007 and
                  December 31, 2006
            3Condensed
                  Consolidated Statements of Operations for the three months ended
                  March 31,
                  2007 and 2006
            4Condensed
                  Consolidated Statements of Cash Flows for the three months ended
                  March 31,
                  2007 and 2006
            5Notes
                  to
                  Condensed Consolidated Financial
                  Statements
            6Item
                  2.
            Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
            14Item
                  3.
            Quantitative
                  and
                  Qualitative Disclosures About Market Risk
            20Item
                  4.
            Controls
                  and
                  Procedures
            20**PART
                  II. OTHER
                  INFORMATION**Item
                  1.
            Legal
                  Proceedings
            21Item
                  1A.
            Risk
                  Factors
            21Item
                  2.
            Unregistered
                  Sales
                  of Equity Securities and Use of Proceeds
            28Item
                  3.
            Defaults
                  Upon
                  Senior Securities
            28Item
                  4.
            Submission
                  of
                  Matters to a Vote of Securities Holders
            28Item
                  5.
            Other
                  Information
            28Item
                  6.
            Exhibits
            28Signatures
            30




2
 *Table
            of Contents*





**PART
      I. FINANCIAL INFORMATION**





**ITEM
      1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**VIEWSONIC
      CORPORATION AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


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


**(Unaudited)**





**ASSETS**
            
            **March
                31,**
              **2007**
            
            
            **December
                31,**
              **2006**Current
                assets:Cash
                and cash equivalents
            
            $
            33,906
            
            
            $
            69,079Trade
                receivables, net
            
            
            307,960
            
            
            
            277,162Other
                receivables
            
            
            11,160
            
            
            
            7,213Inventories
            
            
            182,982
            
            
            
            194,049Deferred
                income taxes
            
            
            8,326
            
            
            
            7,734Prepaids
                and other current assets
            
            
            3,668
            
            
            
            3,670Income
                taxes receivable
            
            
            92
            
            
            
            152Total
                current assets
            
            
            548,094
            
            
            
            559,059Property,
                plant and equipment, net
            
            
            17,642
            
            
            
            14,445Long-term
                investments
            
            
            235
            
            
            
            237Goodwill
            
            
            1,347
            
            
            
            1,347Other
                assets, net
            
            
            2,297
            
            
            
            3,549Total
                assets
            
            $
            569,615
            
            
            $
            578,637**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                liabilities:Bank
                borrowings
            
            $
            15,161
            
            
            $
            307Accounts
                payable
            
            
            357,837
            
            
            
            388,554Accrued
                promotional expenses
            
            
            27,579
            
            
            
            25,852Accrued
                warranty expense
            
            
            23,849
            
            
            
            24,455Other
                accrued expenses
            
            
            30,094
            
            
            
            32,446Total
                current liabilities
            
            
            454,520
            
            
            
            471,614Subordinated
                notes payable - related party
            
            
            43,000
            
            
            
            43,000Deferred
                income taxes
            
            
            4,352
            
            
            
            -Stockholders'
                equity:Common
                stock, $.01 par value 600,000,000 shares authorized; 354,594,666
                shares
                issued as of March 31, 2007 and December 31, 2006
            
            
            3,546
            
            
            
            3,546Preferred
                stock, $.001 par value 22,800,000 shares authorized; 3,300,000 shares
                issued as of March 31, 2007 and December 31, 2006
            
            
            3
            
            
            
            3Additional
                paid-in capital
            
            
            94,241
            
            
            
            94,181Accumulated
                deficit
            
            
            (27,908
            )
            
            
            (31,468
            )Accumulated
                other comprehensive loss
            
            
            (2,139
            )
            
            
            (2,239
            )Total
                stockholders' equity
            
            
            67,743
            
            
            
            64,023Total
                liabilities and stockholders' equity
            
            $
            569,615
            
            
            $
            578,637





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





3
 *Table
            of Contents*





**VIEWSONIC
      CORPORATION AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


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


**(Unaudited)**





**For
                the Three Months**
              **Ended
                March 31,****2007**
            
            
            **2006**Net
                sales
            
            $
            409,838
            
            
            $
            326,794Cost
                of sales
            
            
            376,490
            
            
            
            296,578Gross
                profit
            
            
            33,348
            
            
            
            30,216Selling,
                general and administrative expenses
            
            
            29,044
            
            
            
            26,907Income
                from operations
            
            
            4,304
            
            
            
            3,309Other
                income (expense):Interest
                income (expense), net
            
            
            (164
            )
            
            
            157Other
                income (expense), net
            
            
            174
            
            
            
            1,336Total
                other income (expense), net
            
            
            10
            
            
            
            1,493Income
                from continuing operations before income taxes
            
            
            4,314
            
            
            
            4,802Provision
                for income taxes
            
            
            344
            
            
            
            1,226Net
                income
            
            
            3,970
            
            
            
            3,576Preferred
                stock accretion
            
            
            -
            
            
            
            (48
            )Net
                income available to common shareholders
            
            $
            3,970
            
            
            $
            3,528Earnings
                per common share:Basic
            
            $
            0.01
            
            
            $
            0.01Diluted
            
            $
            0.01
            
            
            $
            0.01Weighted
                averages shares used in per share calculations:Basic
            
            
            354,595
            
            
            
            354,059Diluted
            
            
            360,993
            
            
            
            360,764





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





4
 *Table
            of Contents*





**VIEWSONIC
      CORPORATION AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(In
      thousands)**


**(Unaudited)**





**Three
                Months Ended**
              **March
                31,****2007**
            
            
            **2006****CASH
                FLOWS FROM OPERATING ACTIVITIES**Net
                income
            
            $
            3,970
            
            
            $
            3,576Adjustments
                to reconcile net income (loss) from continuing operations to net
                cash
                (used in) provided by operating activities:Depreciation
                and amortization
            
            
            564
            
            
            
            755Provision
                for doubtful accounts
            
            
            234
            
            
            
            81Net
                loss on sale and impairment of long-term investments
            
            
            -
            
            
            
            366Deferred
                income taxes
            
            
            2,705
            
            
            
            324Stock-based
                compensation expense
            
            
            60
            
            
            
            47Changes
                in operating assets and liabilities:Trade
                receivables
            
            
            (31,166
            )
            
            
            (13,284
            )Other
                receivables
            
            
            (3,968
            )
            
            
            (1,105
            )Inventories
            
            
            10,985
            
            
            
            4,440Prepaids
                and other current assets
            
            
            29
            
            
            
            (413
            )Accounts
                payable
            
            
            (30,476
            )
            
            
            (19,569
            )Accrued
                promotional and other expenses
            
            
            749
            
            
            
            9,259Accrued
                warranty expense
            
            
            (599
            )
            
            
            883Income
                taxes payable/receivable
            
            
            (1,285
            )
            
            
            1,168Net
                cash used in operating activities
            
            
            (48,198
            )
            
            
            (13,472
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES**Purchase
                of property, plant and equipment
            
            
            (1,542
            )
            
            
            (157
            )Proceeds
                from sales of short-term investments
            
            
            -
            
            
            
            4,123Purchase
                of short-term investments
            
            
            -
            
            
            
            (7,439
            )Change
                in other assets
            
            
            (438
            )
            
            
            -Net
                cash used in investing activities
            
            
            (1,980
            )
            
            
            (3,473
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES**Net
                proceeds from bank borrowings
            
            
            14,879
            
            
            
            11,221Proceeds
                from issuance of common stock
            
            
            -
            
            
            
            57Redemption
                of preferred stock
            
            
            -
            
            
            
            (15,000
            )Net
                cash provided by (used in) financing activities
            
            
            14,879
            
            
            
            (3,722
            )Effect
                of exchange rate changes on cash and cash equivalents
            
            
            126
            
            
            
            62Net
                decrease in cash and cash equivalents
            
            
            (35,173
            )
            
            
            (20,605
            )Cash
                and cash equivalents at beginning of period
            
            
            69,079
            
            
            
            93,998Cash
                and cash equivalents at end of period
            
            $
            33,906
            
            
            $
            73,393**Supplemental
                disclosure of non-cash investing activity:**In
                2007, non-cash activity included the reclassification of a $2.3 million
                deposit on a building made in 2006 from other assets to property,
                plant
                and equipment.




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





5
 *Table
            of Contents*





**VIEWSONIC
      CORPORATION AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Unaudited)**





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





***Basis
      of Presentation***




The
      accompanying unaudited condensed consolidated financial statements have been
      prepared in accordance with generally accepted accounting principles in the
      United States for interim condensed consolidated 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 condensed consolidated
      financial statements for ViewSonic Corporation and its subsidiaries, or
      collectively, the Company, contain all adjustments, which are normal and
      recurring, necessary to present fairly the Company’s financial position as of
      March 31, 2007 and the Company’s results of operations and cash flows for the
      three months ended March 31, 2007 and 2006. The condensed consolidated
      balance sheet as of December 31, 2006 is derived from the December 31, 2006
      audited consolidated financial statements.





The
      results of operations for the three months ended March 31, 2007 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, 2006 and the notes thereto included in the Company’s
      Form 10-K filed with the Securities and Exchange Commission, or the SEC, on
      March 16, 2007.





The
      preparation of these financial statements requires management to make estimates
      and assumptions that affect the reported amounts of assets, liabilities,
      revenues and expenses, and related disclosures of contingent assets and
      liabilities. Management bases its estimates on historical experience and other
      factors believed to be reasonable under the circumstances 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, Warranty and Promotions***





Revenues
      are recognized when the risk of loss is transferred, persuasive evidence of
      an
      arrangement exists, the price is fixed or readily determinable and
      collectibility 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 provides a variety of warranty programs worldwide, which are based
      on
      specific products and geographic locations. Accruals are provided for such
      estimated future costs at the time the product is sold, and such amounts are
      based upon historical experience.





The
      Company offers promotions such as rebates, price protection and other incentives
      to customers in the normal course of business. Accruals for these promotions
      are
      provided for based on estimates and historical experience. The costs of these
      promotions are offset against sales.





The
      Company's primary business practice is to have finished goods delivered from
      its
      contract manufacturers directly to the Company's regional warehouses, where
      they
      are stored for eventual shipment to its customers. However, the Company
      occasionally requests that its contract manufacturer ship finished goods
      directly to its customers. For vendor drop shipment sales, the Company retains
      title to the shipment from the time it leaves the contract manufacturer's port
      of choice until it reaches its destination.





***Promotional
      Pricing Incentives from Vendors***





The
      Company receives promotional pricing incentives from its product vendors. The
      amount of the pricing incentives is based on various market factors including
      the volatility of pricing of key product components, market dynamics and the
      quantity of the Company’s purchases 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. The benefit
      from pricing incentives related to products that have not been sold is deferred
      and recorded as a reduction of inventory cost. The benefit from pricing
      incentives related to products that have been sold is recorded as a reduction
      of
      the cost of sales.





6
 *Table
            of Contents*





***Recent
      Accounting Pronouncements***





In
      February 2007, the Financial Accounting Standards Board, or FASB, issued
      Statement of Financial Accounting Standards, or SFAS, No. 159, *The Fair
      Value Option for Financial Assets and Financial Liabilities - Including an
      Amendment of FASB Statement No. 115*, or SFAS 159. SFAS 159 permits, but
      does not require, companies to report at fair value the majority of recognized
      financial assets, financial liabilities and firm commitments. Under this
      standard, unrealized gains and losses on items for which the fair value option
      is elected are reported in earnings at each subsequent reporting date. The
      Company is currently assessing the effect SFAS 159 may have, if any, on its
      financial statements when adopted on January 1, 2008.





In
      September 2006, the FASB issued SFAS No. 157, *Fair Value
      Measurements*,**or SFAS 157, which provides guidance for using
      fair value to measure assets and liabilities. SFAS 157 clarifies that for items
      that are not actively traded, such as certain kinds of derivatives, fair value
      should reflect the price in a transaction with a market participant, including
      an adjustment for risk, not just the company’s mark-to-model value. SFAS 157
      also requires expanded disclosure of the effect on earnings for items measured
      using unobservable data and applies whenever other standards require (or permit)
      assets or liabilities to be measured at fair value but does not expand the
      use
      of fair value in any new circumstances. SFAS 157 will be effective for the
      Company beginning January 1, 2008. The Company is in the process of determining
      the effect, if any, this statement will have on its financial
      statements.




In
      July
      2006, the FASB issued FASB Interpretation No. 48, *Accounting for Uncertainty
      in Income Taxes – an interpretation of FASB Statement 109*, or FIN 48. It
      clarifies the accounting for income taxes by prescribing a minimum recognition
      threshold a tax position is required to meet before being recognized in the
      financial statements. FIN 48 also provides guidance on derecognition,
      measurement, classification, interest and penalties, accounting in interim
      periods, disclosure and transition. Upon adoption on January 1, 2007, the
      Company recognized a $0.4 million increase to the January 1, 2007 accumulated
      deficit balance. In addition, consistent with the provisions of FIN 48, the
      Company reclassified $3.1 million of income tax liabilities from current to
      non-current liabilities because payment of cash is not anticipated within one
      year of the balance sheet date.




As
      of
      January 1, 2007, the balance of gross unrecognized tax benefit was $4.4 million.
      To the extent these unrecognized tax benefits are ultimately recognized, they
      will impact the effective tax rate in a future period.




The
      Company has elected to classify interest expense related to income tax
      liabilities, when applicable, as part of the interest expense in its condensed
      consolidated statements of operations rather than income tax expense. The
      Company will classify income tax penalties as part of selling, general and
      administrative expense in its condensed consolidated statements of
      operations.  The Company has less than $0.1 million of penalties
      accrued and an immaterial amount of interest expense accrued as of March 31,
      2007. No amount of interest or penalties was accrued as of January 1,
      2007.




The
      Company operates in multiple tax jurisdictions, both within the United States
      and outside of the United States, and faces audits from various tax authorities
      regarding transfer pricing, the deductibility of certain expenses, intercompany
      transactions as well as other matters. In many cases the Company’s uncertain tax
      positions are related to tax years that remain subject to examination by the
      relevant tax authorities. The Company is no longer subject to income tax
      examinations by tax authorities in its major tax jurisdictions as
      follows:




Tax
                Jurisdiction
            Tax
                Years No Longer Subject to AuditUnited
                States
            2002
                and priorUnited
                Kingdom
            2004
                and priorCanada
            2000
                and priorGermany
            2000
                and priorFrance
            2003
                and priorTaiwan
            2002
                and priorChina
            2001
                and prior





The
      Company’s federal and certain non-U.S. income tax returns are currently under
      various stages of audit by applicable tax authorities and the amounts ultimately
      paid, if any, upon resolution of the issues raised by the tax authorities may
      differ materially from the amounts accrued for each year. It is possible that
      approximately $1.1 million of income tax liabilities related to uncertain
      intercompany transfer pricing items will be recognized as an income tax benefit
      in the next twelve months due to the closing of open tax years.





**Note
      2 –** **Stock-Based Compensation**





On
      January 1, 2006, the Company adopted the provisions of Statement of
      Financial Accounting Standards No. 123(R), *Share-Based Payment*, or SFAS
      123R, which revises Statement of Financial Accounting Standards No. 123,
*Accounting for Stock-Based*Compensation, or SFAS 123, supersedes
      Accounting Principles Board, or APB, Opinion No. 25, *Accounting for Stock
      Issued to Employees*, or APB 25, and amends Statement of Financial
      Accounting Standards No. 95, *Statement of Cash Flows*,
      or**SFAS 95. Under SFAS 123R, the fair value of stock-based awards
      to employees must be estimated at the date of grant using an option pricing
      model and recognized as expense over the requisite service period for those
      awards that are ultimately expected to vest.





7
 *Table
            of Contents*





The
      Company adopted SFAS 123R using the prospective method. Under the prospective
      method, prior periods are not revised for comparative purposes. Non-public
      companies that previously applied SFAS 123 using the minimum value method would
      continue to account for unvested stock options outstanding at the date of
      adoption in the same manner as they had been accounted for prior to adoption.
      All awards granted, modified or settled after the date of adoption are accounted
      for using the measurement, recognition and attribution provisions of SFAS
      123R.




***Stock
      Option Activity***





The
      Company has two employee stock plans: the 1999 Stock Plan, or the 1999 Plan,
      and
      the 2004 Equity Incentive Plan, or the 2004 EIP. Upon approval of the 2004
      EIP,
      the 1999 Plan was terminated (except for all options previously granted and
      outstanding under such plan). The 2004 EIP provides for the granting of stock
      options to eligible employees and non-employee directors. Options granted under
      this plan are granted at an exercise price equal to the fair market value of
      the
      Company’s common stock on the date of grant, vest over three or four years and
      expire ten years after their original date of grant. As the Company’s common
      stock is not publicly traded, the fair market value of the Company’s common
      stock is approved by the Company’s Board of Directors based on various
      information, assumptions and factors. As of March 31, 2007, there were 12.3
      million shares available for future grants under the 2004 EIP.




On
        February 2, 2007, the Compensation Committee of the Board of Directors approved
        the Long Term Incentive Program Summary of Terms, or the Program. Members
        of our
        executive management team and other key members of senior management designated
        by the Compensation Committee are eligible to participate in the Program.
        The
        Compensation Committee established the achievement of revenue and net income
        targets as the Performance Targets under the Program.
 
 Participants
        in the Program were each granted non-statutory stock options under our 2004
        Equity Incentive Plan at an exercise price of $0.54 per share, the fair market
        value of our common stock as determined in good faith by the Compensation
        Committee on February 2, 2007. A maximum number of 5.4 million shares are
        eligible for vesting under the Program if both Performance Targets are achieved
        at the 150% level. The maximum number of shares is referred to as the Maximum
        Award. The portion of the stock option in which a participant could potentially
        vest if 100% of the Performance Targets are achieved is referred to as the
        Target Award.
 
 The
        Program requires the achievement of at least 100% of the Performance Targets
        for
        fiscal year 2007 as a minimum threshold before any of the shares subject
        to the
        stock options vest. The vesting of the stock option is contingent upon the
        participant’s continued service though the applicable vesting date and is
        subject to specified change in control and other conditions. The achievement
        of
        the Performance Targets will be at the sole discretion of the Compensation
        Committee and shall be determined by the Compensation Committee after the
        completion of the fiscal year 2007 audit, which we refer to as the Determination
        Date. If the minimum threshold is not achieved, the stock options will be
        automatically cancelled and forfeited in their entirety. On the Determination
        Date, the stock option award, known as the Eligible Award, will be determined
        by
        multiplying the Target Award by the percentage of achievement of the Performance
        Targets (a range of between 100% to 150% based on the levels achieved against
        both the Performance Targets). The Eligible Award will vest 33 1/3% on the
        Determination Date, 33 1/3% on February 2, 2009 and 33 1/3% on February 2,
        2010.
        The difference between the Maximum Award and the Eligible Award, if any,
        shall
        be forfeited and cancelled on the Determination Date.




The
      table
      below summarizes the stock option activity under the Company’s 1999 Plan and
      2004 EIP:





**Number
                of Shares**
              **(in
                000's)**
            
            
            **Weighted
                Average Price Per Share**
            
            
            **Weighted
                Average Remaining Contractual Term**
              **(in
                years)**Outstanding
                at December 31, 2006
            
            
            25,341
            
            
            $
            0.40Granted
            
            
            5,350
            
            
            
            0.54Exercised
            
            
            -
            
            
            N\ACancelled
            
            
            (649
            )
            
            
            0.38Outstanding
                at March 31, 2007
            
            
            30,042
            
            
            $
            0.42
            
            
            
            6.31Exercisable
                at March 31, 2007
            
            
            19,806
            
            
            
            0.38
            
            
            
            4.73





The
      total
      intrinsic value of options outstanding as of March 31, 2007 was $3.6 million.
      There were no options exercised during the three months ended March 31,
      2007.





The
      following table summarizes information for options outstanding as of March
      31,
      2007:





**Range
                of Exercise Prices**
            
            
            **Number
                of Options Outstanding**
              **(in
                000's)**
            
            
            **Weighted
                Average Remaining Contractual Term**
              **(in
                years)**
            
            
            **Weighted
                Average Exercise Per Share**
            
            
            **Number
                of Options Exercisable (in 000's)**$
            0.38
            
            
            
            21,913
            
            
            
            5.04
            
            
            $
            0.38
            
            
            
            19,638$
            0.45
            
            
            
            685
            
            
            
            8.62
            
            
            $
            0.45
            
            
            
            168$
            0.54
            
            
            
            7,444
            
            
            
            9.82
            
            
            $
            0.54
            
            
            
            -





***Valuation
      and Expense Recognition of Stock-Based Awards under SFAS
      123R***





For
      the
      three months ended March 31, 2007, stock-based compensation expense for employee
      stock options recognized was $60,000. No income tax benefit related to
      stock-based compensation expense was recognized for the three months ended
      March
      31, 2007.





The
      Company used the Black-Scholes option-pricing model to estimate the fair value
      of employee stock options. The determination of fair value using the
      Black-Scholes option-pricing model is affected by the fair market value of
      the
      Company’s common stock as well as the use of certain highly subjective estimates
      and assumptions including expected stock price volatility, risk-free interest
      rate, expected dividends and projected employee stock option exercise
      behaviors.





8
 *Table
            of Contents*





All
      option awards were valued as a single award and amortized on a straight-line
      basis over the requisite service period. 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 for the three months ended March 31,
      2007:




Expected
                  volatility
            
            
            47.8
            %Risk-free
                  interest rate
            
            
            4.7
            %Expected
                  dividend yield
            
            
            0
            %Expected
                  option life (in years)
            
            
            6.00Weighted
                  average fair value of stock options granted per
                  share
            
            $
            0.28





Upon
      adoption of SFAS 123R, the Company changed its expected volatility calculation
      to use an average of the expected volatilities of similar entities whose shares
      are publicly traded. In determining similarity of entities, the Company
      considered various factors including the industry, life cycle, size and
      financial leverage of such entities. The Company believes this method provides
      a
      more accurate estimate of stock price volatility over the expected life of
      the
      stock option awards. Prior to the adoption of SFAS 123R, the Company used the
      minimum value method to estimate the fair value of its stock options. Under
      the
      minimum value method, expected volatility is omitted.




The
      risk-free interest rate assumption is based on observed interest rates for
      the
      expected option life of the Company’s stock options. The expected dividend yield
      assumption is based on the Company’s expectation of future dividend payouts. The
      Company has never declared or paid any cash dividends on its common stock and
      currently does not anticipate paying such cash dividends. The Company used
      the
      simplified method for its expected option life assumption as allowed by SEC
      Staff Accounting Bulletin No. 107, *Share-Based Payment*.





SFAS
      123R
      requires stock-based compensation expense to be recognized only for those stock
      options that are ultimately expected to vest. An estimate of forfeiture rate
      must be made and applied at the time of grant and revised in subsequent periods
      on a cumulative basis in the period of revision. The Company considered various
      factors including its actual historical experience of pre-vesting option
      forfeitures bifurcated by employee groups as the basis to arrive at an estimated
      average annual forfeiture rate of 4.5% for the three months ended March 31,
      2007.





As
      of
      March 31, 2007, the remaining amount of unrecognized compensation cost related
      to employee stock options was $2.0 million, which is expected to be recognized
      over a weighted average period of 2.9 years.





**Note
      3 - Comprehensive Income**





Comprehensive
      income includes foreign currency translation gains and losses and unrealized
      gains and losses on marketable securities classified as available for
      sale. The following table sets forth the calculation of comprehensive
      income for the periods indicated (in thousands):





**Three
                Months Ended**
              **March
                31,****2007**
            
            
            **2006**Net
                income
            
            $
            3,970
            
            
            $
            3,576Foreign
                currency translation
            
            
            100
            
            
            
            90Unrealized
                holding gains on marketable securities-less realized gains
            
            
            0
            
            
            
            591Total
                comprehensive income
            
            $
            4,070
            
            
            $
            4,257





**Note
      4 – Income Taxes**





Income
      taxes are determined using an estimated annual effective tax rate. The provision
      for income taxes is less than the 35% U.S. federal statutory rate primarily
      due
      to lower tax rates in certain non-U.S. jurisdictions. The Company has
      valuation allowances against its deferred income taxes in the United States
      and
      all foreign jurisdictions other than its foreign subsidiaries in Taiwan and
      China. The valuation allowances have been calculated pursuant to Statement
      of
      Financial Accounting Standards 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 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. The Company
      intends to maintain a valuation allowance until sufficient positive evidence
      as
      contemplated by SFAS 109 exists in future periods.





9
 *Table
            of Contents*





Pursuant
      to Accounting Principles Board Opinion No. 23, *Accounting for Income
      Taxes-Special Areas*, or APB 23, we do not provide for federal income taxes
      or tax benefits on the undistributed earnings associated with the non-U.S.
      operations. In the event some or all of the earnings were distributed to the
      U.S. entity, some portion of the distribution would be subject to both U.S.
      income taxes and foreign withholding taxes. However, foreign tax credits may
      become available to reduce or eliminate the U.S. income tax
      liability.





**Note
      5 – Commitments and Contingencies**





***Lease
      Commitments***– On January 19, 2007, the Company entered into a lease
      agreement for 298,050 square feet of office space at its existing principal
      office location. The term of the lease commences on July 1, 2007 and runs
      through July 2014, subject to extension at the Company’s option under certain
      circumstances. The future minimum lease payments required under this operating
      lease are $0.4 million in 2007, $1.5 million in 2008, $1.6 million in 2009,
      $1.6
      million in 2010, $1.7 million in 2011 and $4.6 million thereafter.





***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, the Company believes that the ultimate outcome of such matters
      will not harm
      its
      business, financial position, results of operations or cash
      flows.





Four
      of
      the Company’s stockholders filed a purported derivative action against James
      Chu, the Company’s Chairman and Chief Executive Officer, and the Company on
      April 17, 2006 in the U.S. District Court for the Central District of
      California. The complaint alleged, among other things, that Mr. Chu breached
      various fiduciary duties by personally investing in certain of the Company’s
      suppliers, thereafter directing the Company’s contracts to these suppliers
      and failing to disclose such actions. Plaintiffs sought actual and punitive
      damages, attorneys’ fees, costs, disgorgement of alleged profits made by Mr.
      Chu, a declaratory judgment against Mr. Chu for alleged breaches of various
      fiduciary duties and an injunction prohibiting the award of contracts to
      suppliers in which Mr. Chu or his relatives have a financial interest. On
      October 11, 2006, plaintiffs voluntarily dismissed the complaint without
      prejudice. The same parties thereafter filed substantially the same action
      in
      California state court in which they make essentially the same allegations
      and
      assert the same claims. After retaining independent counsel, the Company filed
      a
      motion to dismiss the complaint under California procedure for, among other
      things, failing to make a pre-lawsuit demand. On April 17, 2007, the Court
      granted the Company’s motion in its entirety, dismissing the complaint without
      leave to amend.





On
      July
      27, 2006, the jury in the trial of LG Philips LCD Co. Ltd., or LPL, v. Tatung
      Company, Tatung Company of America, Inc., Chunghwa Picture Tubes Ltd., or CPT,
      and ViewSonic Corporation, pending in U.S. District Court, District of Delaware,
      (Case No. 05-292-JJF) delivered a verdict finding that each of the defendants,
      including the Company, had willfully infringed (through the doctrine of
      equivalents) a patent of LPL’s relating to electrostatic discharge. The jury
      awarded monetary damages of $52.5 million against CPT only. Although there
      is no
      monetary award against the Company, the finding of willful infringement, if
      upheld, may subject the Company to certain other relief including an award
      of
      some portion of LPL’s attorneys fees and/or exemplary damages as well as
      injunctive relief which may require the Company to, among other things, change
      its sourcing of certain LCD displays or key components. As of April 24, 2007,
      the Court has not yet entered judgment in the case. Instead, the Court has
      under
      submission the parties’ motions challenging various aspects of the jury’s
      verdict. While the outcome of these post-trial proceedings cannot be predicted
      with certainty, the Company does not believe that the outcome will harm
      its
      business, financial position, results of operations or cash
      flows.





On
      November 21, 2006, the jury in the trial of LPL v. Tatung Company, Tatung
      Company of America, Inc., and CPT pending in the U.S. District Court, Central
      District of California, (Case No. CV-02-6775 CBM) delivered a verdict finding
      that each of the defendants (the Company is not a defendant) had willfully
      infringed two patents of LPL’s relating to the design and manufacture of liquid
      crystal display modules, or LCDs. As of April 24, 2007, the Court has not yet
      entered judgment in the case. The parties to the case have briefed post-trial
      motions challenging various aspects of the jury’s verdict and these motions have
      been taken under submission by the Court.  However, the Company is a
      defendant in the related case, LPL v. ViewSonic Corporation, also pending in
      the
      U.S. District Court, Central District of California (Case No. CV-03-2886 CBM),
      in which LPL alleges infringement of the same patents asserted in Case No.
      CV-02-6775 CBM above as a result of ViewSonic’s incorporation of CPT LCD’s into
      its products. The ViewSonic suit had been consolidated with the CPT case for
      pre-trial purposes. No trial date has been set and none is expected to be set
      as
      the patent issues have already been heard by the jury in the CPT case (Case
      No.
      CV-02-6775 CBM). If an injunction is entered against the CPT LCD panels, the
      Company may be required to change its sourcing of certain LCD displays. While
      the outcome of the post-trial proceedings in Case No. CV-02-6775 cannot be
      predicted with certainty, the Company does not believe that the outcome will
      harm
      its
      business, financial position, results of operations or cash
      flows.





On
      December 1, 2006, LPL filed a patent suit against Chi-Mei Optoelectronics
      Corporation, or CMO, AU Optronics Corporation, or AUO, AU Optronics Corporation
      America, Tatung Company, Tatung Company of America, Inc. and ViewSonic
      Corporation in the U.S. District Court, District of Delaware, alleging
      infringement of the same three LPL patents that were found to be valid and
      infringed in the two cases referenced above, i.e., CV-02-6775 and 05-292 JJF.
      Presumably, as with the other LPL suits identified above, the allegations
      against ViewSonic are based upon ViewSonic’s incorporation of certain
      third-party LCDs into its products. ViewSonic has filed motions to stay,
      dismiss, and/or for a more definite statement of the claims asserted in this
      case. While the outcome of this case cannot be predicted with certainty, the
      Company does not believe that the outcome will harm
      its
      business, financial position, results of operations or cash
      flows.





10
 *Table
            of Contents*





***Imposition
      of Additional Duties and Taxes***—******The
      European Union, or the EU, issued notices stating that effective January 18,
      2006, LCD monitors with DVI connectors would incur a 14% import duty
      tax. This change in tariff classification has made it more difficult
      for the Company to compete in the EU and may result in a negative impact on
      the Company’s gross margins. To date, this change in classification has
      been applied prospectively.





***Laws,
      Regulations and Directives***— The Company is subject to local laws
      and regulations in the various regions in which the Company operates, including
      the EU. There are two particular EU directives that may have a material
      impact on the Company’s 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 specifying the elimination and/or reduction in the
      level of specified hazardous materials from the manufacture of the Company’s
      products, the Company must take reasonable measures to ensure that it is not
      being supplied with products containing the restricted chemical substances.
      The
      Company is working with suppliers to ensure that products placed on the market
      from July 1, 2006 are RoHS compliant products. The second directive is the
      Waste
      Electrical and Electronic Equipment Directive, or WEEE, which became effective
      on August 13, 2005, and requires manufacturers or importers to provide a process
      of recycling all of its manufactured products or imports into the EU. Certain
      EU
      countries adopted WEEE on August 13, 2005. The majority of EU countries into
      which the Company’s European region sells its products have adopted the
      legislation. Certain countries, for example the United Kingdom and Spain, allow
      the Company to register as a producer and join a compliance program. Where
      this
      is the case, the Company has registered as a producer and has joined a
      compliance program in order to comply with the obligations under WEEE. In other
      countries which do not allow the Company to register or where the Company does
      not qualify as a producer, the Company has taken steps to ensure that its
      distributors and resellers, to whom the WEEE compliance responsibility falls,
      are in compliance with WEEE. The Company is currently unable to assess the
      impact of these directives on the Company’s operations until more information
      becomes available, but at this time, the Company does not believe that these
      regulations will harm
      its
      business, financial position, results of operations or cash
      flows.





**Note
      6 – Business Segments**





During
      the fourth quarter of 2006, the Company realigned its operating segments under
      a
      new methodology to allocate certain corporate overhead expenses and corporate
      benefits associated with its initiative to source LCD panels directly from
      the
      manufacturers to its operating segments. In accordance with SFAS No. 131,
*Disclosures about Segments of an Enterprise and**Related
      Information*, the Company has determined it has three reportable segments:
      Americas, EMEA (Europe, Middle-East and Africa) and Asia-Pacific. The Company
      believes that this segment information provides useful information for analyzing
      the underlying business results. The Company sells similar products in its
      segments, including CRT displays, LCD displays, projectors, HDTV technology
      and
      other products. The type and class of customers, primarily distributors and
      retailers, are also similar across the product lines. The Company’s management
      evaluates the performance of and allocates resources to its segments based
      on
      net sales and operating income. Assets and liabilities are not allocated by
      segment for management reporting purposes.





The
      following segment financial information is for the periods indicated. The
      following segment information for the three months ended March 31, 2006 has
      been
      recast to conform to the current year presentation (in thousands):





**Three
                Months Ended March 31,****($
                in thousands)**
            
            **2007**
            
            
            **2006**Net
                sales:Americas
            
            $
            192,700
            
            
            $
            152,940EMEA
            
            
            86,967
            
            
            
            73,265Asia-Pacific
            
            
            130,171
            
            
            
            100,589$
            409,838
            
            
            $
            326,794Income
                (loss) from operations:Americas
            
            $
            10
            
            
            $
            3,767EMEA
            
            
            1,071
            
            
            
            (3,913
            )Asia-Pacific
            
            
            3,357
            
            
            
            3,476Other
                (1)
            
            
            (134
            )
            
            
            (21
            )$
            4,304
            
            
            $
            3,309




(1)
            Includes
                certain corporate
                expenses that were not allocated toa specific
                segment for
                management reporting
                purposes.





11
 *Table
            of Contents*





**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. Estimates are
      primarily based on historical experience and other available information. The
      historical data used in estimating the warranty accrual includes net cost of
      repair (repair costs less reimbursements from suppliers), defect rates and
      total
      number of products under warranty.





The
      following table summarizes activity in the Company’s warranty liability for the
      three months ended March 31, 2007 and 2006 (in thousands):





**Three
                Months Ended March 31,**
            
            **Beginning
                Accrued Warranty Liability**
            
            
            **Additions
                Charged to Expense**
            
            
            **Payments
                for Units Returned**
            
            
            **Adjustments(1)**
            
            
            **Ending
                Accrued Warranty Liability****2007**
            
            $
            24,455
            
            
            $
            5,794
            
            
            $
            (2,996
            )
            
            $
            (3,404
            )
            
            $
            23,849**2006**
            
            $
            21,350
            
            
            $
            4,947
            
            
            $
            (4,166
            )
            
            $
            113
            
            
            $
            22,244




(1)
            The2007
                adjustment was primarily due
                to lower defect rates and lower cost of
                repair.





**Note
      8 – Earnings Per Share**





The
      Company presents both basic and diluted earnings (loss) per common share, or
      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 fair market value over the period have an
      anti-dilutive effect on EPS and, accordingly, are excluded from the calculation.
      On January 10, 2006, the Company redeemed all 7.5 million outstanding shares
      of
      Series B Preferred Stock and excluded such shares as it had an insignificant
      impact on the Company’s 2006 earnings per share calculations.





The
      basic
      and diluted EPS was calculated in accordance with EITF 03-06, *Participating
      Securities and the Two Class Method under SFAS No. 128*, or EITF
      03-06*.* The following is a reconciliation of the numerators and
      denominators of the basic and diluted net income per common share computations
      (in thousands, except per share data):





**Three
                Months Ended March 31,****2007**
            
            
            **2006**Net
                income (1)
            
            $
            3,933
            
            
            $
            3,528Weighted
                average number of shares issued
            
            
            354,595
            
            
            
            354,059Stock
                options (2)
            
            
            6,398
            
            
            
            3,478Interest
                warrants (3)
            
            
            -
            
            
            
            3,227Diluted
                shares
            
            
            360,993
            
            
            
            360,764Earnings
                per common share:Basic
            
            $
            0.01
            
            
            $
            0.01Diluted
            
            $
            0.01
            
            
            $
            0.01




(1)
            In
                accordance with EITF 03-06,
                net income includes the accretion for the mandatorily redeemable
                preferred
                stock. Net income of $37,000 was allocated to preferred stock for
                the
                three months ended March 31, 2007 and is excluded from the computation
                above. The EPS calculation reflects the allocation of net income
                between
                common stock and preferred
                stock.





(2)
            For
                the three months ended March
                31, 2007, 5.5 million shares were excluded from the diluted earnings
                per
                common share calculation because they were
                anti-dilutive.





(3)
            For
                the three months ended March
                31, 2006, 7.5 million shares of common stock issuable upon the exercise
                of
                outstandingwarrants
                were excluded from the diluted earnings per share calculation because
                they
                were anti-dilutive.





12
 *Table
            of Contents*





**Note
      9 – Subsequent Event**





On
      April
      20, 2007, the Company entered into a settlement agreement with a former vendor
      related to litigation over certain contractual rights and obligations related
      to
      commercial matters. The former vendor paid ViewSonic $2.0 million and returned
      3,000,000 shares of the Company’s common stock with a value of $1.7 million in
      connection with the settlement.





13
 *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 “Risk Factors”
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 display products. We develop, market
      and support a broad range of award winning products including liquid crystal
      display, or LCD, monitors, LCD TVs, projectors, digital signage and cathode
      ray
      tube, or CRT, monitors. According to a fourth quarter of 2006 research report
      by
      DisplaySearch, we ranked sixth in worldwide LCD monitor shipments in
      2006.





We
      have a
      customer-driven business model. Our strategy is to effectively leverage industry
      leading technologies into products marketed under the ViewSonic brands. We
      collaborate with a network of world class component suppliers and contract
      manufacturers to deliver a wide array of products to meet the needs of our
      customers. We believe our business model enables us to quickly scale our
      business, shorten new product time to market, reduce costs to our business,
      introduce innovative products and offer price/performance levels to meet
      customer needs.





Our
      products are sold through a variety of channels, including distributors,
      solution providers, value added resellers and retailers to Fortune 1000
      companies, small and medium sized businesses, and consumers. We sell our
      products globally and are managed in three geographic segments: the Americas,
      EMEA (Europe, Middle-East and Africa) and Asia-Pacific.





***Recent
      Trends in Our Business***





In
      the
      first quarter of 2007, the display industry continued to experience an
      oversupply situation as a result of increased LCD panel production capacities
      and slower than expected market demand. This resulted in rapidly declining
      average selling prices, or ASPs, and increased margin compression. Despite
      this
      downward trend in ASPs, we were able to grow sales in regional markets by
      enhancing our core product offerings across our display portfolios and increase
      our profits as a result of improvements made to our supply chain and logistics
      processes. We continue to look for opportunities to simplify our business
      processes in order to maximize operating efficiencies. This has resulted in
      increased leverage in our overall cost structure allowing us to be more
      competitive in the display market. In addition, we believe our initiative to
      source LCD panels directly from manufacturers has brought us closer to the
      supply base allowing us to more closely monitor market trends and supply cycles,
      and consolidate our LCD panel purchasing power. This has resulted in effectively
      lowering our product costs in the first quarter of 2007. The benefits
      derived from our sourcing initiative are dependent on market conditions such
      as
      periods of oversupply and rapidly dropping ASPs.  In periods of
      oversupply, the benefits of LCD panel purchases are greater while our ASP's
      generally decrease.  In periods of short supply those benefits decline,
      however the ASP's generally increase.  This sourcing
      initiative helps the company to decrease the overall volatility of the
      Company's gross margin, although we are unable to anticipate the amount of
      benefits that will be realized for the rest of 2007. While end user demand
      for
      LCD monitors continues to be slow, we are starting to see increases in panel
      prices and we expect pricing strategies to adjust
      accordingly.




Total
      unit shipments increased 43.5% in the first quarter of 2007 compared to the
      first quarter of 2006. The display industry continued to experience a shift
      from
      older technologies, such as CRT, to newer technologies, such as LCD, as well
      as
      a broadening of applications from PC monitors to TVs and other digital media
      products during the first quarter of 2007. Unit shipments of our LCD monitors,
      LCD TVs, and projectors grew 72.1%, 61.2%, and 115.9%, respectively, in the
      first quarter of 2007 compared to the first quarter of 2006, while shipments
      of
      our CRT monitors declined 47.2% in the first quarter of 2007 compared to the
      first quarter of 2006.





Net
      sales
      increased $83.0 million, or 25.4%, to $409.8 million in the first quarter of
      2007 from $326.8 million in the first quarter of 2006. The increase was
      primarily due to our ability to grow sales in emerging markets and expand core
      product offerings across our LCD monitor, LCD TV and projector product lines.
      Income from operations increased 30.0% to $4.3 million in the first quarter
      of
      2007 compared to $3.3 million in the first quarter of 2006. This increase was
      primarily due to sales growth and increased leverage in our selling, general
      and
      administrative expenses as a percentage of net sales, which decreased to 7.1%
      in
      the first quarter of 2007 compared to 8.2% in the first quarter of 2006,
      partially offset by lower gross margins of 8.1% in the first quarter of 2007
      compared to 9.2% in the first quarter of 2006.





14
 *Table
            of Contents*





**RESULTS
      OF OPERATIONS**





The
      following table sets forth our condensed consolidated statements of operations
      for the periods indicated ($ in thousands):





**Three
                Months Ended March 31,**
            
            
            **Increase
                (Decrease)****2007**
            
            
            **2006**
            
            
            
            **$**
            
            
            **%**Net
                sales
            
            $
            409,838
            
            
            $
            326,794
            
            
            $
            83,044
            
            
            
            25.4
            %Cost
                of sales
            
            
            376,490
            
            
            
            296,578
            
            
            
            79,912
            
            
            
            26.9
            %Gross
                profit
            
            
            33,348
            
            
            
            30,216
            
            
            
            3,132
            
            
            
            10.4
            %Selling,
                general and administrative expenses
            
            
            29,044
            
            
            
            26,907
            
            
            
            2,137
            
            
            
            7.9
            %Income
                from operations
            
            
            4,304
            
            
            
            3,309
            
            
            
            995
            
            
            
            30.1
            %Other
                income (expense):Interest
                (expense) income, net
            
            
            (164
            )
            
            
            157
            
            
            
            (321
            )Other
                income (expense), net
            
            
            174
            
            
            
            1,336
            
            
            
            (1,162
            )Total
                other income (expense), net
            
            
            10
            
            
            
            1,493
            
            
            
            (1,483
            )Income
                from continuing operations before income taxes
            
            
            4,314
            
            
            
            4,802
            
            
            
            (488
            )
            
            
            (10.2
            )%Provision
                for income taxes
            
            
            344
            
            
            
            1,226
            
            
            
            (882
            )
            
            
            (71.9
            )%Net
                income
            
            
            3,970
            
            
            
            3,576
            
            
            
            394
            
            
            
            11.0
            %Preferred
                stock accretion
            
            
            -
            
            
            
            (48
            )
            
            
            48Net
                income available to common stockholders
            
            $
            3,970
            
            
            $
            3,528
            
            
            $
            442
            
            
            
            12.5
            %





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





**Three
                Months Ended March 31,**
            (1)**2007**
            
            
            **2006**Net
                sales
            
            
            100.0
            %
            
            
            100.0
            %Cost
                of sales
            
            
            91.9
            
            
            
            90.8Gross
                profit
            
            
            8.1
            
            
            
            9.2Selling,
                general and administrative expenses
            
            
            7.1
            
            
            
            8.2Income
                from operations
            
            
            1.1
            
            
            
            1.0Other
                income (expense):Interest
                (expense) income, net
            
            
            -
            
            
            
            0.1Other
                income (expense), net
            
            
            -
            
            
            
            0.4Total
                other income (expense), net
            
            
            -
            
            
            
            0.5Income
                from continuing operations before income taxes
            
            
            1.1
            
            
            
            1.5Provision
                for income taxes
            
            
            0.1
            
            
            
            0.4Net
                income
            
            
            1.0
            
            
            
            1.1Preferred
                stock accretion
            
            
            -
            
            
            
            -Net
                income available to common stockholders
            
            
            1.0
            %
            
            
            1.1
            %





(1)
      May
      not total due to rounding differences.




***Net
      Sales***





Net
      sales
      increased $83.0 million, or 25.4%, to $409.8 million in the first quarter of
      2007 from $326.8 million in the first quarter of 2006. The increase was
      primarily due to an increase in LCD, LCD TV and projector unit shipments
      partially offset by lower CRT unit shipments and declines in ASPs across all
      product categories in the first quarter of 2007 compared to the prior year.
      The
      decline in ASPs reflects the continuing effects of increased production
      capacities, aggressive competition, reduced costs associated with advances
      in
      display technology, and regional and product mix.





Total
      unit shipments increased 43.5% in the first quarter of 2007 compared to the
      first quarter of 2006. The increase was due to strong unit shipments across
      all
      of our segments driven by our strategic marketing efforts and continued
      expansion in Latin America, Russia, China and other Asian markets. Unit
      shipments of our LCD monitors, LCD TVs, and projectors grew 72.1%, 61.2%, and
      115.9%, respectively, in the first quarter of 2007 compared to prior year,
      while
      shipments of our CRT monitors declined 47.2% in the first quarter of 2007
      compared to the prior year. Of the display products shipped in the first quarter
      of 2007, LCDs accounted for 83.5% and all other products accounted for 16.5%
      of
      such units shipped as compared to 69.6% and 30.4%, respectively, in the first
      quarter of 2006.





15
 *Table
            of Contents*





***Cost
      of Sales***





Cost
      of
      sales increased $79.9 million, or 26.9%, to $376.5 million in the first quarter
      of 2007 from $296.6 million in the first quarter of 2006. As a percentage of
      net
      sales, cost of sales increased to 91.9% in the first quarter of 2007 from 90.8%
      in the first quarter of 2006. The increase in cost of sales as a percentage
      of
      net sales was primarily due to the ASPs of our products declining at a faster
      rate than offsetting product cost improvements. Product costs as a percentage
      of
      net sales increased to 88.6% in the first quarter of 2007 from 86.3% in the
      prior year. Gross margin declined to 8.1% in the first quarter of 2007 from
      9.2%
      in the prior year primarily due to increased product costs as a percentage
      of
      net sales, partially offset by better pricing due to our sourcing of LCD
      components directly from manufacturers and reductions in freight and warranty
      expenses as a percentage of net sales.





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





Selling,
      general and administrative expenses increased $2.1 million, or 7.9%, to
      $29.0 million in the first quarter of 2007 from $26.9 million in the
      first quarter of 2006. The increase was primarily due to an increase in
      personnel-related costs of $1.0 million due to higher headcount, higher selling
      and marketing expenses of $0.2 million, higher professional fees of $0.2 million
      related to web development costs, and other costs of $0.7 million. As a
      percentage of net sales, selling, general and administrative expenses decreased
      to 7.1% in the first quarter of 2007 from 8.2% in the first quarter of 2006
      as a
      result of our continued focus on streamlining our business processes to maximize
      operating efficiencies and enhance our competitiveness.





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





Other
      income (expense), net, decreased $1.5 million to $10,000 in the first quarter
      of
      2007 from $1.5 million in the first quarter of 2006. The decrease was primarily
      due to lower foreign currency translation gains of $1.6 million and higher
      interest expense of $0.3 million as a result of higher average loan balances
      outstanding during the first quarter of 2007 compared to the first quarter
      of
      2006. In addition, the first quarter of 2006 included impairment charges of
      $0.4
      million related to long-term investments.





***Provision
      for Income Taxes***





Our
      provision for income taxes decreased $0.9 million to $0.3 million in the first
      quarter of 2007 from $1.2 million in the first quarter of 2006. The estimated
      effective tax rate as a percentage of pre-tax income decreased to 8.0% in the
      first quarter of 2007 compared to 25.5% in the first quarter of 2006. The
      decrease in the effective tax rate was primarily due to an increase in the
      proportion of income earned in jurisdictions having a lower effective tax rate
      than the United States.





**Segment
      Information**





Our
      management evaluates and monitors segment performance primarily through net
      sales and income from operations. We do not allocate assets or liabilities
      by
      segment for management reporting purposes. During the fourth quarter of 2006,
      management realigned our operating segments under a new methodology to allocate
      certain corporate overhead expenses and corporate benefits associated with
      our
      initiative to source LCD panels directly from LCD panel manufacturers to our
      operating segments. Management believes that this segment information provides
      useful information for analyzing the underlying business results. The following
      segment information for the first quarter of 2006 has been recast to conform
      to
      the first quarter of 2007 presentation.





16
 *Table
            of Contents*




**Three
                  Months Ended March 31,**
              
              
              **Increase
                  (Decrease)****($
                  in thousands)**
              
              **2007**
              
              
              **2006**
              
              
              
              **$**
              
              
              **%**Net
                  sales:Americas
              
              $
              192,700
              
              
              $
              152,940
              
              
              $
              39,760
              
              
              
              26.0
              %EMEA
              
              
              86,967
              
              
              
              73,265
              
              
              
              13,702
              
              
              
              18.7
              %Asia-Pacific
              
              
              130,171
              
              
              
              100,589
              
              
              
              29,582
              
              
              
              29.4
              %$
              409,838
              
              
              $
              326,794
              
              
              $
              83,044
              
              
              
              25.4
              %Income
                  (loss) from operations:Americas
              
              $
              10
              
              
              $
              3,767
              
              
              $
              (3,757
              )
              
              
              (99.7
              )%EMEA
              
              
              1,071
              
              
              
              (3,913
              )
              
              
              4,984
              
              
              
              127.4
              %Asia-Pacific
              
              
              3,357
              
              
              
              3,476
              
              
              
              (119
              )
              
              
              (3.4
              )%Other
                  (1)
              
              
              (134
              )
              
              
              (21
              )
              
              
              (113
              )$
              4,304
              
              
              $
              3,309
              
              
              $
              995
              
              
              
              30.1
              %




(1)
            Includes
                certain corporate
                expenses that were not allocated to a specific segment for management
                reporting purposes.





**Americas**





***Net
      Sales***





In
      our
      Americas region, net sales increased $39.8 million, or 26.0%, to $192.7 million
      in the first quarter of 2007 from $152.9 million in the first quarter of 2006.
      The increase was primarily due to unit shipment growth in our LCD, LCD TV and
      projector products of 70.9%, 41.3% and 120.7%, respectively, driven by pricing
      strategies designed to gain market share and increase channel diversification.
      The increase was partially offset by lower CRT unit shipments of 72.4% and
      lower
      ASPs for our LCD, LCD TV and projector products.





***Income
      from Operations***





In
      our
      Americas region, income from operations decreased $3.8 million primarily due
      to
      lower gross margins as a result of higher product costs as a percentage of
      net
      sales due to our ASPs declining at a faster rate than offsetting product cost
      improvements. This decrease was partially offset by the increase in net sales
      and lower selling, general and administrative expenses primarily due to lower
      account development funds expense, lower incentive compensation as a result
      of
      lower operating performance and lower personnel-related costs.





**EMEA**





***Net
      Sales***





In
      our
      EMEA region, net sales increased $13.7 million, or 18.7%, to $87.0 million
      in
      the first quarter of 2007 from $73.3 million in the first quarter of 2006.
      The
      increase was primarily due to growth in our LCD and projector unit shipments
      of
      45.3% and 181.8%, respectively, driven by channel diversification and increased
      expansion into Russia. The increase was partially offset by a decrease in CRT
      unit shipments of 50.7% and lower ASPs for our LCD, LCD TV, projector and CRT
      products. Foreign currency translation had a positive impact on our net sales
      in
      the first quarter of 2007 due to a 10% stronger Euro exchange rate against
      the
      U.S. dollar based on an average quarterly rate in the first quarter of 2007
      compared to the prior year.





***Income
      from Operations***





In
      our
      EMEA region, income from operations increased $5.0 million to $1.1 million
      in
      the first quarter of 2007 from a $3.9 million loss in the first quarter of
      2006.
      The increase was primarily due to the increase in net sales and higher gross
      margins  driven by lower product costs as a percentage of net sales,
      lower inventory write-downs, and lower warranty costs due to lower defect rates
      and improved operating efficiencies. The increase was partially offset by higher
      selling, general and administrative expenses primarily due to higher
      personnel-related expenses due to an increase in headcount, higher account
      development funds expense in order to promote sales in a very competitive
      environment and higher incentive compensation due to improved operating
      performance.





17
 *Table
            of Contents*





**Asia-Pacific**





***Net
      Sales***





In
      our
      Asia-Pacific region, net sales increased $29.6 million, or 29.4%, to $130.2
      million in the first quarter of 2007 from $100.6 million in the first quarter
      of
      2006. The increase was primarily due to an increase in unit shipments of our
      LCD
      products of 91.4% as a result of our continued growth in the China market and
      expanded efforts in Australia, Korea, India and other Southeast Asian countries.
      In addition, foreign currency translation had a positive impact on our net
      sales
      in the first quarter of 2007 due to a 4% stronger Chinese Yuan exchange rate
      against the U.S. dollar based on an average quarterly rate in the first quarter
      of 2007 compared to the prior year. The increase was partially offset by a
      decrease in CRT unit shipments of 35.7%.





***Income
      from Operations***





In
      our
      Asia-Pacific region, income from operations decreased $0.1 million, or 3.4%,
      to
      $3.4 million in the first quarter of 2007 from $3.5 million in the first quarter
      of 2006. The decrease was primarily due to lower gross margins as a result
      of
      higher product costs as a percentage of net sales and higher selling, general
      and administrative expenses primarily driven by an increase in personnel-related
      expenses as we continue to build our infrastructure to support our growing
      sales
      in the Asia-Pacific markets.




**LIQUIDITY
      AND CAPITAL RESOURCES**





**Three
                Months Ended March 31,****2007**
            
            
            **2006****(in
                thousands)**Net
                cash used in operating activities
            
            $
            (48,198
            )
            
            $
            (13,472
            )Net
                cash used in investing activities
            
            
            (1,980
            )
            
            
            (3,473
            )Net
                cash provided by (used in) financing activities
            
            
            14,879
            
            
            
            (3,722
            )Effect
                of exchange rate changes on cash and cash equivalents
            
            
            126
            
            
            
            62Net
                decrease in cash and cash equivalents
            
            $
            (35,173
            )
            
            $
            (20,605
            )








As
      of
      March 31, 2007, we had cash and cash equivalents of $33.9 million. Our
      cash balances are held in numerous locations throughout the world. Most of
      the
      amounts held outside the United States can 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. 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 country and we
      would meet U.S. liquidity needs through ongoing cash flows from operations,
      external borrowings, or both. We utilize various 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 have available various credit lines in
      our
      Americas, EMEA and Asia-Pacific regions to meet expected and unexpected cash
      flow needs.





***Operating
      Activities***





Cash
      used
      in operating activities was $48.2 million in the first quarter of 2007 compared
      to $13.5 million in the first quarter of 2006. The decrease in operating cash
      flow in the first quarter of 2007 was primarily due to the lengthening of our
      cash conversion cycle as a result of increased working capital requirements
      to
      meet our business needs. Our cash conversion cycle increased nine days at
      March 31, 2007 compared to December 31, 2006. The increase was due to a nine
      day
      increase in days of sales outstanding from 41 days at December 31, 2006 to
      50
      days at March 31, 2007 primarily due to a combination of changes in customer
      mix
      with longer average accounts receivable terms and a greater proportion of our
      sales being made in the last month of the first quarter of 2007 compared to
      the
      fourth quarter of 2006. Days of accounts payable outstanding increased one
      day
      from 63 days at December 31, 2006 to 64 days at March 31, 2007 primarily due
      to
      the timing of product purchases and when payments were made. Days in inventory
      increased one day from 32 days at December 31, 2006 to 33 days at March 31,
      2007.





Our
      days
      of sales outstanding and days of accounts payable outstanding include the
      effects of product component revenues and costs related to the sourcing of
      LCD
      components directly from manufacturers. We believe this is a more accurate
      presentation of our cash conversion cycle. Product component revenues and costs
      are presented as a net amount as part of cost of sales in our condensed
      consolidated statements of operations.





***Investing
      Activities***





Cash
      used
      in investing activities was $2.0 million in the first quarter of 2007 compared
      to $3.5 million in the first quarter of 2006. The use of cash in the first
      quarter of 2007 was primarily due to additional cash outlays for building
      improvements, while the use of cash in 2006 was primarily due to the sales
      and
      purchases of short-term investments.





18
 *Table
            of Contents*





***Financing
      Activities***





Cash
      provided by financing activities was $14.9 million in the first quarter of
      2007
      compared to cash used in financing activities of $3.7 million in the first
      quarter of 2006. In the first quarter of 2007, we had net borrowings of $14.9
      million compared to $11.2 million in the prior year. In addition, we redeemed
      all outstanding shares of our Series B Preferred Stock for $15.0 million in
      the
      prior year.





**Credit
      Facilities**





In
      the
      United States, we have a $60.0 million credit line that expires in March 2008.
      Advances bear interest at the prime rate plus 0.50% (8.75% at March 31, 2007
      and
      December 31, 2006) with interest payable monthly. As of March 31, 2007 and
      December 31, 2006, there were no outstanding balances on the line-of-credit.
      All
      advances under the agreement are collateralized by substantially all of the
      assets of ViewSonic Americas. Under the agreement we are subject to various
      restrictive covenants, which, among other things, limit dividends (not to exceed
      $250,000 per year without the consent of the financial institution), capital
      expenditures and executive compensation and require us to maintain a minimum
      earnings before interest, taxes, depreciation and amortization amount. We are
      not required to comply with the restrictive covenants when borrowing capacity
      exceeds $15.0 million.





In
      Europe, we have a $20.0 million line-of-credit facility with a financial
      institution that expires in June 2007. This line-of-credit is secured by
      trade receivables and inventory of ViewSonic Europe Limited. Advances bear
      interest at LIBOR plus a margin (7.57% and 7.58% as of March 31, 2007 and
      December 31, 2006, respectively). Outstanding borrowings against this facility
      were $10.4 million and $0 as of March 31, 2007 and December 31, 2006,
      respectively. We may be unable to extend this credit facility or find a
      replacement facility on substantially similar terms.





Certain
      of our other Asia-Pacific subsidiaries also have line-of-credit facilities
      with
      various financial institutions that expire through September 2007. These credit
      facilities are secured by certain of their assets and allow cash advances,
      letters of credit and bank guarantees. The aggregate borrowing limit was $23.5
      million and $23.7 million at March 31, 2007 and December 31, 2006, respectively.
      These lines of credits had a weighted average interest rate of 7.22% and 7.23%
      at March 31, 2007 and December 31, 2006, respectively. As of March 31, 2007
      and
      December 31, 2006, there were outstanding cash advances of $4.8 million and
      $0.3 million, respectively. We may be unable to extend these credit facilities
      or find replacement facilities on substantially similar terms.




We
        have
        subordinated notes payable to our principal stockholder and related
        entities.  The subordinated notes payable are not callable until the
        expiration date, April 12, 2008.  At March 31, 2007 and December 31,
        2006, the amounts outstanding were $43.0 million.  The interest rate
        on the subordinated notes payable was 3.97% as of March 31, 2007 and December
        31, 2006.


As
      of
      March 31, 2007, we were in compliance with the covenants of all our borrowing
      arrangements.





**Off-Balance
      Sheet Arrangements**





During
      the first quarter of 2007 and year ended December 31, 2006, 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.





**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. The market generally experiences a decline in net sales from the first
      quarter to the second quarter of each year, and tends to experience the highest
      net sales in the fourth quarter of the year due to a strong buying season by
      large wholesale distribution partners and retailers attributable to the holiday
      season in the Americas. 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 time frame. 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, 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:




·
            Differences
                between payment terms
                for the purchase of key components and the sale of finished
                products;


·
            Early-pay
                or pre-pay arrangements
                to secure lower pricing and capacity of key components or finished
                products;


·
            Decreased
                demand and market
                acceptance for our products;


·
            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;
                or


·
            New
                product announcements or
                product introductions by our
                competitors.





19
 *Table
            of Contents*





**Critical
      Accounting Policies and Estimates**




Our
      critical accounting policies reflecting our estimates and judgments are
      described in Part II, Item 7, *Management’s Discussion and Analysis of
      Financial Condition and Results of Operations*, in our Annual Report on
      Form 10-K for the year ended December 31, 2006, filed with the
      Securities and Exchange Commission on March 16, 2007. We have not changed those
      policies since such date.





**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 enter into these transactions in other currencies,
      primarily the Euro, Chinese Renminbi, and certain other Asian currencies. 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 and Asia-Pacific net sales denominated in the Euro and
      Chinese Renminbi. Product shipping, and selling, general and administrative
      costs associated with a portion of these sales are U.S. dollar-denominated.
      During the first quarter of 2007, the Euro-to-U.S. dollar foreign currency
      exchange rate strengthened against the U.S. dollar increasing 10% on an average
      quarterly basis compared to the average during the first quarter of 2006. The
      strengthening of the Euro positively impacted our net sales and income from
      operations by $3.3 million and $2.1 million, respectively, in the
      first quarter of 2007 over the prior year assuming all other factors remained
      constant. During the first quarter of 2007, the Chinese Renminbi-to-U.S. dollar
      foreign currency exchange rate strengthened against the U.S. dollar increasing
      4% on an average quarterly basis compared to the average during the first
      quarter of 2006. The strengthening of the Chinese Renminbi positively impacted
      our net sales and income from operations by $2.5 million and
      $2.4 million, respectively, in the first quarter of 2007 over the prior
      year assuming all other factors remained constant. Historically, sales of our
      products have benefited from effects of the weakening U.S. dollar, which make
      our products more affordable in several markets. However, in periods of a
      strengthening U.S. dollar, our revenues measured in U.S. dollars are negatively
      impacted, while our cost of sales remains fairly constant, resulting in lower
      gross profit. In addition, we must manage our account receivables and inventory
      balances in order to limit our foreign currency exposure to a strengthening
      U.S.
      dollar. We are currently in the process of evaluating various foreign currency
      hedging strategies to minimize the effects of foreign currency fluctuations
      on
      our operations.





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




***Evaluation
      of Disclosure Controls and Procedures***




Based
      on
      their evaluation as of the end of the period covered by this report, 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 Securities Exchange Act of 1934, as amended) were
      effective.





We
      maintain “disclosure controls and procedures,” as such term is defined in Rule
      13a-15(e) and 15d-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.





***Changes
      in Internal Controls over Financial Reporting***





There
      were no changes in our internal controls over financial reporting during the
      three months ended March 31, 2007 that have materially affected, or are
      reasonably likely to materially affect our internal controls over financial
      reporting.





20
 *Table
            of Contents*





**PART
      II. OTHER INFORMATION**





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




Four
      of our stockholders filed a purported derivative action against James Chu,
      our Chairman and Chief Executive Officer, and us on April 17, 2006 in the U.S.
      District Court for the Central District of California. The complaint alleged,
      among other things, that Mr. Chu breached various fiduciary duties by personally
      investing in certain of our suppliers, thereafter directing our contracts
      to these suppliers and failing to disclose such actions. Plaintiffs sought
      actual and punitive damages, attorneys’ fees, costs, disgorgement of alleged
      profits made by Mr. Chu, a declaratory judgment against Mr. Chu for alleged
      breaches of various fiduciary duties and an injunction prohibiting the award
      of
      contracts to suppliers in which Mr. Chu or his relatives have a financial
      interest. On October 11, 2006, plaintiffs voluntarily dismissed the complaint
      without prejudice. The same parties thereafter filed substantially the same
      action in California state court in which they make essentially the same
      allegations and assert the same claims. After retaining independent counsel,
      we
      filed a motion to dismiss the complaint under California procedure for, among
      other things, failing to make a pre-lawsuit demand. On April 17, 2007, the
      Court
      granted our motion in its entirety, dismissing the complaint without leave
      to
      amend.





On
      July
      27, 2006, the jury in the trial of LG Philips LCD Co. Ltd., or LPL, v. Tatung
      Company, Tatung Company of America, Inc., Chunghwa Picture Tubes Ltd., or CPT,
      and ViewSonic Corporation, pending in U.S. District Court, District of Delaware,
      (Case No. 05-292-JJF) delivered a verdict finding that each of the defendants,
      including us, had willfully infringed (through the doctrine of equivalents)
      a
      patent of LPL’s relating to electrostatic discharge. The jury awarded monetary
      damages of $52.5 million against CPT only. Although there is no monetary award
      against us, the finding of willful infringement, if upheld, may subject us
      to
      certain other relief including an award of some portion of LPL’s attorneys’ fees
      and/or exemplary damages as well as injunctive relief which may require us
      to,
      among other things, change our sourcing of certain LCD displays or key
      components. As of April 24, 2007, the Court has not yet entered judgment in
      the
      case. Instead, the Court has under submission the parties’ motions challenging
      various aspects of the jury’s verdict. While the outcome of these post-trial
      proceedings cannot be predicted with certainty, we do not believe that the
      outcome will harm
      our
      business, financial position, results of operations or cash
      flows.





On
      November 21, 2006, the jury in the trial of LPL v. Tatung Company, Tatung
      Company of America, Inc., and CPT pending in the U.S. District Court, Central
      District of California, (Case No. CV-02-6775 CBM) delivered a verdict finding
      that each of the defendants (we are not a defendant) had willfully infringed
      two
      patents of LPL’s relating to the design and manufacture of liquid crystal
      display modules, or LCDs. As of April 24, 2007, the Court has not yet entered
      judgment in the case. The parties to the case have briefed post-trial motions
      challenging various aspects of the jury’s verdict and these motions have been
      taken under submission by the Court. However, we are a defendant in the related
      case, LPL v. ViewSonic Corporation, also pending in the U.S. District Court,
      Central District of California (Case No. CV-03-2886 CBM), in which LPL alleges
      infringement of the same patents asserted in Case No. CV-02-6775 CBM above
      as a
      result of our incorporation of CPT LCD’s into our products. Our suit had been
      consolidated with the CPT case for pre-trial purposes. No trial date has been
      set and none is expected to be set as the patent issues have already been heard
      by the jury in the CPT case (Case No. CV-02-6775 CBM). If an injunction is
      entered against the CPT LCD panels, we may be required to change our sourcing
      of
      certain LCD displays. While the outcome of the post-trial proceedings in Case
      No. CV-02-6775 cannot be predicted with certainty, we do not believe that the
      outcome will harm
      our
      business, financial position, results of operations or cash
      flows.





On
      December 1, 2006, LPL filed a patent suit against Chi-Mei Optoelectronics
      Corporation, or CMO, AU Optronics Corporation, or AUO, AU Optronics Corporation
      America, Tatung Company, Tatung Company of America, Inc. and ViewSonic
      Corporation in the U.S. District Court, District of Delaware, alleging
      infringement of the same three LPL patents that were found to be valid and
      infringed in the two cases referenced above, i.e., CV-02-6775 and 05-292 JJF.
      Presumably, as with the other LPL suits identified above, the allegations
      against us are based upon our incorporation of certain third-party LCDs into
      our
      products. We have filed motions to stay, dismiss, and/or for a more definite
      statement of the claims asserted in this case. While the outcome of this case
      cannot be predicted with certainty, we do not believe that the outcome will
      harm
      our
      business, financial position, results of operations or cash
      flows.




On
        April
        20, 2007, we entered into a settlement agreement with a former vendor related
        to
        litigation over certain contractual rights and obligations related to commercial
        matters.  The former vendor paid us $2.0 million and returned
        3,000,000 shares or our common stock with a value of $1.7 million in connection
        with the settlement.


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. While the
      outcome of these proceedings and claims cannot be predicted with certainty,
      we
      believe that the ultimate outcome of such matters will not harm
      our
      business, financial position, results of operations or cash
      flows.





**ITEM
                1A.**
            **RISK
                FACTORS**





*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.*





21
 *Table
            of Contents*





**Factors
      that May Affect Our Business and Financial Results**





*Our
      revenue 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;


·
            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 and operating results.





*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, 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. The ASP of our LCD monitors declined
      approximately 20.2% from the first quarter of 2006 to the first quarter of
      2007.
      We expect price competition to increase in future periods and such price
      competition may substantially reduce our revenues and products in such
      periods.





Our
      industry has low barriers to entry and we expect new competitors to
      emerge.  Our competition includes established consumer electronic
      companies, personal computer manufacturers and Asian manufacturers interested
      in
      building a brand presence for their goods, including Acer Inc., BenQ
      Corporation, LG Philips LCD Ltd., NEC Display Solutions, Samsung Electronics
      as
      well as more recent entrants like Syntax-Brillian and Vizio.





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, and name recognition, as well as greater financial,
      marketing, technical and other resources, than we do. Some of our competitors
      may have lower operating costs 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.





*If
      we
      need additional capital in the future, it may not be available to us on
      favorable terms, or at all.*





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 need to raise
      additional capital through either equity or debt financing. Factors that could
      adversely affect our cash used or generated from operations and, as a result,
      our need to seek additional borrowings or capital include:





·
            Differences
                between payment terms
                for the purchase of key components and the sale of finished
                products;


·
            Early-pay
                or pre-pay arrangements
                to secure lower pricing and capacity of key components or finished
                products;


·
            Decreased
                demand and market
                acceptance for our products;


·
            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;


·
            New
                product announcements or
                product introductions by our competitors;
                or ·
            Expiration
              of existing credit facilities.





22
 *Table
            of Contents*





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. If we should require capital in excess of our current
      availability and if we were unable to raise additional capital on favorable
      terms or at all, our business could be harmed.





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





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 but can also be the result of decreased
      product demand. 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.





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.  We may not be able to reduce our
      product costs when there is a shortage of key components or when component
      prices otherwise rise.  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.





We
      seek
      to mitigate the risk of declining ASPs by obtaining promotional pricing
      incentives from several product vendors. A vendor’s willingness to give us a
      pricing incentive and the amount of the pricing incentive are based on how
      competitive the market is, the volatility of the price on our key product
      components, and the quantity of historical purchases of these components from
      vendors. The pricing incentives do not require us to commit to future component
      purchases from vendors. We record the reimbursement from our vendors for these
      promotional pricing incentives when we are released of the legal liability
      for the payment of the product purchases by the vendors. If we are unable to
      obtain the promotional pricing incentives or if these incentives are
      unexpectedly discontinued, our gross margins will decline and our business
      could
      be harmed.





*We
      order components, 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 or declines in product
      demand.*





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 our customers. Our inventory
      purchases are made based upon future demand forecasts. These forecasts are
      based
      upon assumptions about future product demand that may prove to be inaccurate.
      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 or decline in product demand. If our
      revenue growth slows or if there were a higher incidence of inventory
      obsolescence due to rapidly changing prices of product components, rapidly
      changing technology and customer requirements or an increase of the supply
      of
      products in the marketplace, we could be subject to excess or obsolete
      inventories or under-utilized tooling. If any of these events occur, we could
      be
      required to take corresponding inventory write-downs or write-offs or tooling
      write-offs, which would impair our financial results and our gross
      margin.





*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 demand for our products
      falls, we could end up with too many products and be unable to sell the excess
      inventory in a timely manner and may need to reduce the prices on our products
      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,
      which
      would harm our revenue and gross margins.





23
 *Table
            of Contents*





*If
      we
      are unable to effectively manage our component and material requirements amongst
      our third-party component suppliers and contract manufacturers, we may
      experience delays in the manufacturing of our products and the costs of our
      products may increase.*





We
      provide our third-party component suppliers and 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. Although
      the cost of key components tend to vary inversely with the supply of these
      components, conditions of over-supply can still be associated with higher costs
      and conditions of shortage can still be associated with lower
      costs.   Some of our components have long lead times. Regardless
      of the accuracy of our forecasts, our contract manufacturers may be unable
      to
      meet our product timing, volume and price requirements. Alternatively, our
      component suppliers and contract manufacturers may be unable to utilize 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
      that
      of our competitors, due to an over-supply of higher-priced components. If they
      are unable to use certain components, we may need to reimburse them for any
      losses they incur.




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





We
      have
      implemented 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. We will continue to explore additional
      opportunities in order to improve operating efficiencies. 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.





*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 Brazil, China, India, Russia, and Eastern 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.





*Our
      operating expenses are relatively fixed and we may have limited ability to
      reduce expenses quickly in response to any revenue shortfalls or declines in
      product demand.*





As
      a
      percentage of net sales, selling, general and administrative expenses
      represented 7.1% and 8.2% for the quarters ended March 31, 2007 and 2006,
      respectively. We expect selling, general and administrative expenses as a
      percentage of net sales to remain relatively fixed or decrease 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 or declines
      in
      product demand, it would negatively impact our financial results.





*We
      are subject to risks associated with our worldwide  operations, which
      may harm our business.*





24
 *Table
            of Contents*





We
      generated a majority of our total net sales from customers outside of the United
      States in the first quarter of 2007. Sales to these customers outside of the
      United States subject us to a number of risks associated with conducting
      business internationally including the following:





·
            International
                economic and
                political conditions;


·
            Changes
                in, or impositions of,
                legislative or regulatory
                requirements;


·
            Unfavorable
                increases or
                decreases in the U.S. dollar as compared to other
                currencies;


·
            Duties,
                tariffs or other barriers
                to trade;


·
            Delays
                or additional costs resulting from the need for permits, export licenses
                for certain technology;


·
            Tax
                laws (including U.S. taxes on
                foreign operations); and


·
            Additional
                burdens in complying
                with a variety of foreign
                laws.




Any
      one
      of the foregoing factors could cause our business, operating results and
      financial condition to suffer.




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





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 and manufacturers, we
      generally seek indemnification in connection with such claims. Whether or not
      these claims have merit, they may require significant resources to defend.
      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. In addition, 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.





*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, and
      direct marketing/e-retailers. 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.





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 distribution and retail customers for
      most
      of our sales, and changes in price or purchasing patterns and failure to
      maintain or establish new distribution and retail  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, Inc., Tech
      Data Corporation and Synnex Corporation as well as retailers such as Costco
      Wholesale, solution providers, and value added resellers. We expect that a
      majority of our net sales will continue to come from sales to a small number
      of
      customers for the foreseeable future. We have no minimum purchase commitments
      or
      long-term contracts with any of these customers. Our customers could decide
      at
      any time to discontinue, decrease or delay their purchases of our products.
      If
      we fail to maintain or establish a distribution and retail presence in an
      existing or 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.





25
 *Table
            of Contents*





*We
      depend on third-party component suppliers and contract manufacturers for the
      manufacture of our products. If these third parties 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 component suppliers and contract manufacturers
      to procure components and, in some cases, subcontract engineering work. Some
      of
      our products are manufactured by a single contract manufacturer. Our component
      suppliers and 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
      these third party component suppliers and contract manufacturers. Product
      pricing is generally negotiated on an order-by-order basis. All of our contracts
      with our component suppliers and contract manufacturers, including those
      contracts containing provisions that may be materially favorable to us, are
      generally terminable for any reason and by either party with 90 day’s notice. If
      our component suppliers and 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, and our business could be harmed.





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 third party component suppliers and 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;


·
            Inability
                to obtain favorable
                pricing;


·
            Unpredictability
                of manufacturing
                yields; and


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




*Currently,
      our choice of display technology for most of our products is Liquid Crystal
      Display, or LCD. If a different or new display technology proves to have broader
      market acceptance or we are unable to obtain or shift to this new or different
      display technology, our business could be harmed.*





Most
      of our revenue is currently
      derived from the sale of products utilizing LCD display technology. Different
      technologies are also currently available and these include plasma, Liquid
      Crystal on Silicon and Organic Light Emitting Diode.  New display
      technologies are under development and may be commercialized in the future.
      Our
      success will depend in part on our continued ability to offer products utilizing
      a display technology that has broad market appeal on commercially reasonable
      terms. If we are unable to shift to or access 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. If a different or
      new
      display technology proves to have broad market acceptance and we are unable
      to
      access or bring to market products using this new or different display
      technology, we could lose market share and our revenue, gross margins and our
      operating results could be harmed.




*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 hardware and software license rights
      to
      technologies that are incorporated into and necessary for the operation and
      functionality of our products as well as the ability of our products to connect
      to other devices, primarily personal computers. 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 or a new technology
      emerges which cannot readily access, our ability to develop and sell products
      containing or utilizing 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.





26
 *Table
            of Contents*





*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 margin and
      our
      financial results could be negatively impacted.*





We
      operate in a highly competitive, quickly changing environment. We are dependent
      upon sufficient demand and broad market acceptance for display products, which
      are now based primarily upon liquid crystal display, or LCD, technology. 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;


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


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


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


·
            Access
                efficiently the display
                technology needed for our products to have broad market acceptance
                and
                respond rapidly to shifts in the display technology towards new or
                different display
                technologies;


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


·
            Respond
                effectively to unexpected
                shifts in market demand towards display and PC products sold together
                under the same brand or away from stand-alone
                displays.




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





James
      Chu, our Chairman and Chief Executive Officer and majority stockholder, along
      with other senior officers of the Company, possess specialized knowledge with
      respect to our business and our operations. Consequently, 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. On March 21, 2007, ViewSonic Corporation and James A. Morlan,
      our
      Chief Financial Officer, entered into a Separation Agreement effective March
      29,
      2007. Under the Separation Agreement, Mr. Morlan will resign as our Chief
      Financial Officer as of June 8, 2007, unless extended by mutual agreement to
      the
      date a new chief financial officer is retained. Mr. Morlan also agreed that
      he
      would resign as Chief Financial Officer at an earlier date if requested by
      a new
      chief financial officer. We have commenced an executive search for Mr. Morlan’s
      successor; however, there can be no assurance that we will be able to fill
      this
      position in a timely manner.





*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, which 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. RoHS 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
      requires us to take back and recycle all products we manufacture or import
      into
      the EU at our own expense and became effective in August 2005 for most EU
      countries and at varying dates thereafter for other EU countries whose
      implementation of the European WEEE Directive was subsequent to August 2005.
      The
      United Kingdom is the most recent country to implement the WEEE Directive and
      its regulations became effective in January 2007. If we fail to, or do not
      fully, 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 unable 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 2007 for which there is reduced demand and we may need to
                write
                down such inventory.





27
 *Table
            of Contents*





*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 airfreight. 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.





*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.





**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**





Our
      2007
      Annual Meeting was held on January 31, 2007. The following matter was voted
      upon
      at the meeting, and the final votes on the proposal were recorded as
      follows:





1.
            To
                elect directors to hold office
                until the next Annual Meeting of Stockholders and until their successors
                are duly elected and
                qualified:





**Name
                of Individual**
            
            **Votes
                For**
            
            **Votes
                Withheld**James
                Chu
            
            318,728,917
            
            0Matthew
                Massengill
            
            318,728,917
            
            0William
                J. Miller
            
            318,728,917
            
            0Bruce
                L. Stein
            
            318,728,917
            
            0Luc
                H. Vanhal
            
            318,728,917
            
            0




**ITEM
                5.**
            **OTHER
                INFORMATION**





Not
      applicable.





**ITEM
                6.**
            **EXHIBITS**





**Exhibit
                No.**
            **Description
                of
                Exhibits**





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.





28
 *Table
            of Contents*





*
            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.





29
 *Table
            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 May 14, 2007.




**ViewSonic
                Corporation**By:
            /s/
                James A. MorlanJames
                A. MorlanChief
                Financial Officer(*Principal
                Financial and Accounting
                Officer*)




30
 *Table
            of Contents*




**EXHIBIT
      INDEX**




**Exhibit
                No.**
            **Description
                of Exhibits**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.




*
            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.






31