**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 June 30, 2005**





**OR**





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





**For
      the transition period from
                     
to
                     .**





**Commission
      file number: 000-50730**




**VIEWSONIC
                  CORPORATION****(**Exact
                  name of Registrant as Specified in Its Charter**)**




**Delaware**
            **95-4120606**(State
                or Other Jurisdiction of Incorporation or Organization)
            (I.R.S.
                Employer Identification No.)**381
                Brea Canyon Road**
              **Walnut,
                California 91789**
              **(909) 444-8800**(Address,
                including Zip Code, of Registrant’s Principal Executive Officesand
                Registrant’s Telephone Number, including Area
                Code)








Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
      during the preceding 12 months (or for such shorter period that the registrant
      was required to file such reports) and (2) has been subject to such filing
      requirements for the past 90 days. Yes x No o





Indicate
      by check mark whether the registrant is an accelerated filer (as defined in
      Rule 12b-2 of the Exchange Act). Yes o No x




The
      number of shares of the registrant's common stock outstanding was
      353,968,596 shares and the number of shares of Series B preferred stock
      outstanding was 7,500,000 shares, each as
      of July
      30,
      2005.





**VIEWSONIC
      CORPORATION**


**FORM 10-Q**


**TABLE
      OF CONTENTS**





**Page****PART I:
                FINANCIAL INFORMATION**Item
                1.
            Consolidated
                Condensed Financial Statements
                (unaudited)
            3Consolidated
                Condensed Balance Sheets as of June 30, 2005 and December 31,
                2004
            3Consolidated
                Condensed Statements of Operations for the three and six months ended
                June 30, 2005 and 2004
            4Consolidated
                Condensed Statements of Cash Flows for the six months ended June 30,
                2005 and 2004
            5Notes
                to Consolidated Condensed 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
            22Item
                4.
            Controls
                and Procedures
            31**PART II:
                OTHER INFORMATION**Item
                1.
            Legal
                Proceedings
            32Item
                2.
            Unregistered
                Sales of Equity Securities and Use of
                Proceeds
            32Item
                3.
            Defaults
                Upon Senior Securities
            32Item
                4.
            Submission
                of Matters to a Vote of Securities
                Holders
            32Item
                5.
            Other
                Information
            32Item
                6.
            Exhibits
            33Signatures
            34




2
 Table
          of Contents





**PART I.
      FINANCIAL INFORMATION**





**ITEM
      1. CONSOLIDATED CONDENSED FINANCIAL
      STATEMENTS**





**VIEWSONIC
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      CONDENSED BALANCE SHEETS**


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


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


**(Unaudited)**





**June 30,****2005**
            
            **December 31,****2004****ASSETS**CURRENT
                ASSETS:Cash
                and cash equivalents
            
            $
            75,729
            
            $
            100,497Short-term
                investments
            
            
            9,102
            
            
            2,268Trade
                receivables—net
            
            
            136,910
            
            
            153,159Other
                receivables
            
            
            6,788
            
            
            7,296Inventories
            
            
            102,227
            
            
            148,224Deferred
                income taxes
            
            
            1,034
            
            
            9,665Prepaids
                and other current assets
            
            
            3,293
            
            
            3,095Income
                taxes receivable
            
            
            1,752
            
            
            559Current
                assets of discontinued operations (Note 9)
            
            
            —
            
            
            1,769Total
                current assets
            
            
            336,835
            
            
            426,532PROPERTY,
                PLANT AND EQUIPMENT—Net
            
            
            14,235
            
            
            15,163LONG-TERM
                INVESTMENTS
            
            
            8,205
            
            
            7,072GOODWILL
            
            
            1,347
            
            
            1,347OTHER
                ASSETS—Net
            
            
            4,577
            
            
            8,369NON-CURRENT
                ASSETS OF DISCONTINUED OPERATIONS (Note 9)
            
            
            —
            
            
            40TOTAL
            
            $
            365,199
            
            $
            458,523**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**CURRENT
                LIABILITIES:Bank
                borrowings
            
            $
            —
            
            $
            3,529Accounts
                payable
            
            
            209,195
            
            
            281,609Accrued
                promotional expenses
            
            
            20,997
            
            
            30,267Accrued
                warranty expense
            
            
            19,439
            
            
            17,365Other
                accrued expenses
            
            
            25,411
            
            
            18,702Current
                liabilities of discontinued operations (Note 9)
            
            
            —
            
            
            3,656Total
                current liabilities
            
            
            275,042
            
            
            355,128SUBORDINATED
                NOTES PAYABLE—Related
                party
            
            
            43,000
            
            
            43,000DEFERRED
                INCOME TAXES
            
            
            488CONVERTIBLE
                MANDATORILY REDEEMABLE PREFERRED STOCK
            
            
            14,163
            
            
            13,428STOCKHOLDERS’
                EQUITY:Common
                stock, $.01 par value:Authorized
                600,000,000 shares at June 30, 2005 and December 31, 2004;
                outstanding 353,968,596 and 353,959,176 shares at July 30, 2005 and
                December 31, 2004, respectively
            
            
            3,540
            
            
            3,540Additional
                paid-in capital
            
            
            93,587
            
            
            92,149Accumulated
                deficit
            
            
            (62,587
            )
            
            (45,754
            )Accumulated
                other comprehensive loss
            
            
            (2,034
            )
            
            (2,968
            )Total
                stockholders’ equity
            
            
            32,506
            
            
            46,967TOTAL
            
            $
            365,199
            
            $
            458,523




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




3
 Table
          of Contents




**VIEWSONIC
      CORPORATION AND
      SUBSIDIARIES**


**CONSOLIDATED
      CONDENSED STATEMENTS OF OPERATIONS**


**JUNE
      30, 2005 AND 2004**


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


**(Unaudited)**




**Three Months Ended****June 30,**
            
            **Six Months Ended****June 30,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Net
                sales
            
            $
            284,617
            
            $
            260,812
            
            $
            558,528
            
            $
            553,416Cost
                of sales
            
            
            257,502
            
            
            231,061
            
            
            503,345
            
            
            481,156Gross
                profit
            
            
            27,115
            
            
            29,751
            
            
            55,183
            
            
            72,260Selling,
                general and administrative expenses
            
            
            27,812
            
            
            29,873
            
            
            55,124
            
            
            58,994(Loss)
                income from operations
            
            
            (697
            )
            
            (122
            )
            
            59
            
            
            13,266Other
                income (expense) - net:Interest
                expense
            
            
            (523
            )
            
            (564
            )
            
            (1,047
            )
            
            (1,170
            )Other-net
            
            
            (1,677
            )
            
            (398
            )
            
            (2,628
            )
            
            866Other
                (expense) income-net
            
            
            (2,200
            )
            
            (962
            )
            
            (3,675
            )
            
            (304
            )(Loss)
                income from continuing operations before income taxes
            
            
            (2,897
            )
            
            (1,084
            )
            
            (3,616
            )
            
            12,962Provision
                (benefit) for income taxes (Note 4)
            
            
            13,396
            
            
            (92
            )
            
            13,195
            
            
            3,277(Loss)
                income from continuing operations
            
            
            (16,293
            )
            
            (992
            )
            
            (16,811
            )
            
            9,685Income
                (loss) from discontinued operations (Note 9)
            
            
            780
            
            
            (1,295
            )
            
            714
            
            
            (2,327
            )Net
                (loss) income
            
            
            (15,513
            )
            
            (2,287
            )
            
            (16,097
            )
            
            7,358Preferred
                stock accretion
            
            
            (375
            )
            
            (337
            )
            
            (735
            )
            
            (664
            )Net
                (loss) income available to common stockholders
            
            $
            (15,888
            )
            $
            (2,624
            )
            $
            (16,832
            )
            $
            6,694Basic
                (loss) earnings per shareContinuing
                operations
            
            $
            (0.05
            )
            $
            0.00
            
            $
            (0.05
            )
            $
            0.03Discontinued
                operations (Note 9)
            
            $
            0.00
            
            $
            0.00
            
            $
            0.00
            
            $
            (0.01
            )Total
                basic (loss) earnings per share
            
            $
            (0.05
            )
            $
            0.00
            
            $
            (0.05
            )
            $
            0.02Diluted
                (loss) earnings per shareContinuing
                operations
            
            $
            (0.05
            )
            $
            0.00
            
            $
            (0.05
            )
            $
            0.03Discontinued
                operations(Note
                9)
            
            $
            0.00
            
            $
            0.00
            
            $
            0.00
            
            $
            (0.01
            )Total
                diluted (loss) earnings per share
            
            $
            (0.05
            )
            $
            0.00
            
            $
            (0.05
            )
            $
            0.02Basic
                weighted average shares outstanding
            
            
            353,969
            
            
            353,921
            
            
            353,965
            
            
            353,913Diluted
                weighted average shares outstanding
            
            
            353,969
            
            
            353,921
            
            
            353,965
            
            
            359,192




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


4
 Table
          of Contents





**VIEWSONIC
      CORPORATION AND SUBSIDIARIES**


**CONSOLIDATED
      CONDENSED STATEMENTS OF CASH FLOWS**


**JUNE
      30, 2005 AND 2004**


**(In
      thousands)**


**(Unaudited)**





**Six months ended****June 30,****2005**
            
            **2004**CASH
                FLOWS FROM OPERATING ACTIVITIES:(Loss)
                income from continuing operations
            
            $
            (16,811
            )
            $
            9,685Adjustments
                to reconcile net (loss) income from continuing operations to net
                cash
                (used in) provided by operating activities:Depreciation
                and amortization
            
            
            1,513
            
            
            1,891Loss
                on disposal of property, plant and equipment
            
            
            10
            
            
            49Net
                gain on sale of long-term investments
            
            
            (31
            )
            
            (861
            )Stock
                based compensation expense
            
            
            1,429
            
            
            —Deferred
                income taxes
            
            
            8,631
            
            
            (1,097
            )Changes
                in operating assets and liabilities:Trade
                receivables—net
            
            
            16,266
            
            
            13,307Other
                receivables
            
            
            508
            
            
            (1,050
            )Inventories
            
            
            46,048
            
            
            (49,437
            )Prepaids
                and other current assets
            
            
            3,561
            
            
            815Accounts
                payable
            
            
            (72,336
            )
            
            28,798Accrued
                promotional and other expenses
            
            
            (5,184
            )
            
            196Accrued
                warranty expense
            
            
            2,075
            
            
            374Income
                taxes payable/receivable
            
            
            1,276
            
            
            1,341Net
                cash (used in) provided by operating activities
            
            
            (13,045
            )
            
            4,011CASH
                FLOWS FROM INVESTING ACTIVITIES:Purchase
                of property, plant and equipment
            
            
            (606
            )
            
            (2,211
            )Proceeds
                on sale of long-term investments
            
            
            221
            
            
            1,308Purchases
                of short-term investments—net
            
            
            (6,827
            )
            
            (842
            )Net
                cash used in investing activities
            
            
            (7,212
            )
            
            (1,745
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Proceeds
                from bank borrowings
            
            
            483
            
            
            4,093Payments
                on bank borrowings
            
            
            (4,008
            )
            
            (5,568
            )Proceeds
                from issuance of common stock
            
            
            9
            
            
            38Net
                cash used in financing activities
            
            
            (3,516
            )
            
            (1,437
            )NET
                CASH USED IN OPERATING ACTIVITIES OF DISCONTINUED OPERATIONS
            
            
            (1,001
            )
            
            (3,608
            )NET
                DECREASE IN CASH AND CASH EQUIVALENTS
            
            
            (24,774
            )
            
            (2,779
            )CASH
                AND CASH EQUIVALENTS—Beginning
                of year
            
            
            100,497
            
            
            86,828EFFECT
                OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
            
            
            6
            
            
            (51
            )CASH
                AND CASH EQUIVALENTS—End
                of period
            
            $
            75,729
            
            $
            83,998




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




5
 Table
          of Contents





**VIEWSONIC
      CORPORATION AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**


**(Unaudited)**




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





*Basis
      of Presentation*





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





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





The
      results of operations for the three and six months ended June 30, 2005 are
      not
      necessarily indicative of the results to be expected for the full year. The
      information included in this Quarterly Report on Form 10-Q should be read in
      conjunction with the audited consolidated financial statements for the year
      ended December 31, 2004 and notes thereto included in the Company’s Form 10-K
      filed with the Securities and Exchange Commission (the “SEC”) on March 29,
      2005.





The
      accompanying unaudited consolidated condensed financial statements have been
      prepared in accordance with accounting principles generally accepted in the
      United States. The preparation of these financial statements requires management
      to make estimates and assumptions that affect the reported amounts of assets,
      liabilities, revenue and expenses and related disclosure of contingent assets
      and liabilities. Management bases its estimates on historical experience and
      on
      various other assumptions that are believed to be reasonable under the
      circumstances, the results of which form the basis for making judgments about
      the carrying values of assets and liabilities that are not readily apparent
      from
      other sources. Actual results may differ from these estimates under different
      assumptions or conditions.





*Revenue
      Recognition and Promotional Expense*





Revenues
      are recognized when products are shipped and risk of loss is transferred,
      evidence of an arrangement exists, the price is fixed or readily determinable,
      and collectability is probable. The Company extends rights of return to its
      customers, which are accrued for based on estimated future returns determined
      by
      using estimates and historical experience.





The
      Company records estimated reductions to revenue for customer and distributor
      programs and incentive offerings, including price protection, rebates,
      promotions, other volume-based incentives and expected returns. Future market
      conditions and product transitions may require the Company to take actions
      to
      increase customer incentive offerings, possibly resulting in an incremental
      reduction of revenue at the time the incentive is offered. Additionally, certain
      incentive programs require the Company to estimate, based on historical
      experience, the number of customers who will actually redeem the
      incentive.


6
 Table
          of Contents




Promotional Pricing Incentives from Vendors





The
      Company receives promotional pricing incentives from several product vendors.
      The amount of the pricing incentives is based on the volatility of the price
      of
      the Company’s key product components and the quantity of historical purchases of
      these components from such vendors. The pricing incentives have no impact on
      future component purchases from these vendors. The Company records the
      reimbursement from vendors for these promotional pricing incentives when the
      Company is released of the legal liability for the payment of the product
      purchases by the vendors. Promotional pricing incentives from the Company’s
      vendors totaled $130,000 and $0 for the three months ended June 30, 2005 and
      2004, respectively, and $5.4 million and $0 for the six months ended June 30,
      2005 and 2004, respectively.





*Expense
      Classifications*





In
      2005,
      warehouse and storage related expenses have been reclassified from selling,
      general and administrative expenses to cost of sales. Classification of these
      expenses as a component of cost of sales is a practice that is consistent with
      others within the Company’s industry. The reclassified warehouse and storage
      related expenses were $1.8 million and $2.0 million for the three months ended
      June 30, 2005 and 2004, respectively, and $4.2 million and $4.3 million for
      the
      six months ended June 30, 2005 and 2004, respectively.





*Derivatives*





Our
      European region entered into a foreign currency option contract to minimize
      the
      impact of foreign currency fluctuations on our business in Europe. The foreign
      currency option contract allows us to sell 2.0 million Euros per month for
      an
      eight to twelve month term at specific rates based on the spot rate in the
      market. This contract is not accounted for as a hedge under the Statement of
      Financial Accounting Standards No. 133, *Accounting
      for Derivative Instruments and Hedging Activities* (“SFAS
      133”) *.*






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




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





In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      123(R), *Share-Based
      Payment* (“SFAS
      No. 123(R)”), which revises SFAS 123, *Accounting
      for Stock-Based Compensation* ,
      and
      supersedes APB Opinion No. 25, *Accounting
      for Stock Issued to Employees* .
      SFAS
      123(R) requires fair value recognition of stock option grants in the income
      statement as an expense and is effective for the first interim and annual
      reporting period that begins January 1, 2006. This pronouncement will become
      effective for the Company as of the first quarter of 2006 and may have a
      material impact on the Company operating results.  Among other changes,
      SFAS 123(R) will require the Company to include the impact of estimated
      volatility in determining fair value. The Company is in the process of
      evaluating the impact of this pronouncement on the financial statements and
      how
      it may change the way the Company provides incentive compensation to its
      employees in the future.





During
      the second quarter of 2005, the Company elected to adopt the fair value based
      employee stock-based compensation expense recognition provisions of Statement
      of
      Financial Accounting Standards No. 123, *Accounting
      for Stock-Based Compensation* (“SFAS
      123”), using the modified prospective method. The Company previously applied the
      intrinsic value based expense recognition provisions set forth in Accounting
      Principles Board (“APB”) Opinion No. 25, *Accounting
      for Stock Issued to Employees* (“APB
      25”). Had the Company not adopted SFAS 123, the stock options that were
      re-priced would have been subject to variable accounting with changes in the
      fair value of the stock options being recorded in the statements of operations.
      SFAS 123 states that the adoption of the fair value based method is a change
      to
      a preferable method of accounting. Management believes that use of the fair
      value based method to record employee stock-based compensation expense is
      consistent with the accounting for all other forms of compensation. The adoption
      of the fair value based recognition provision decreased net income by $213,000
      and $272,000 for the three-month and the six-month periods ended June 30, 2005,
      respectively. The $272,000 related to the adoption of SFAS 123 was recognized
      during the three months ended June 30, 2005.




7
 Table
          of Contents





The
      effects of the adoption of the change on income from continuing operations,
      net
      income, and earnings per share for the three-month and six-month periods ended
      June 30, 2005 are as follows (in thousands, except per share data):






**Three
                  Months ended**
              
              **Three
                  Months ended**
              
              **Six
                  Months****ended**
              
              **Six
                  Months****ended****June
                  30, 2005**
              
              **June
                  30, 2004**
              
              **June
                  30, 2005**
              
              **June
                  30, 2004**(Loss)
                  income from continuing operations
              
              $
              (16,293
              )
              $
              (992
              )
              $
              (16,811
              )
              $
              9,685Net
                  (loss) income
              
              
              (15,513
              )
              
              (2,287
              )
              
              (16,097
              )
              
              7,358Earnings
                  (loss) per share
              
              
              (0.05
              )
              
              (0.00
              )
              
              (0.05
              )
              
              0.02Pro
                  forma for adoption of SFAS 123:(Loss)
                  income from continuing operations
              
              
              (16,293
              )
              
              (1,036
              )
              
              (16,811
              )
              
              9,576Net
                  (loss) income
              
              
              (15,513
              )
              
              (2,331
              )
              
              16,097
              
              
              7,249Earnings
                  (loss) per share
              
              $
              (0.05
              )
              $
              (0.01
              )
              $
              (0.05
              )
              $
              0.02








The
      fair
      value of each option grant was estimated on the date of grant using the
      Black-Scholes option-pricing model with the following assumptions: ****








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




8
 Table
          of Contents





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





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








**Three
                Months Ended****June
                30,**
            
            **Six
                Months Ended****June
                30,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Net
              (loss) income
            
            $
            (15,513
            )
            $
            (2,287
            )
            $
            (16,097
            )
            $
            7,358Foreign
                currency translation
            
            
            61
            
            
            (415
            )
            
            150
            
            
            167Unrealized
                holding gains (losses) on marketable securities-less realized
                gains
            
            
            209
            
            
            (1,646
            )
            
            784
            
            
            (913
            )Net
                change in other comprehensive (loss) income
            
            
            270
            
            
            (2,061
            )
            
            934
            
            
            (746
            )Total
                comprehensive (loss) income
            
            $
            (15,243
            )
            $
            (4,348
            )
            $
            (15,163
            )
            $
            6,612






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




The
      Company recorded a non-cash charge of $13.7 million to establish a
      valuation allowance against its net deferred income tax asset during the
      second quarter ended June 30, 2005. The valuation allowance has been calculated
      pursuant to SFAS No. 109, “Accounting for Income Taxes,” 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 carryback and carryforward
      periods of net operating losses. In determining that a valuation allowance
      is
      required, the Company placed added weight on the operating results of the past
      two years and the projected results for 2005. The Company intends to maintain
      a
      valuation allowance against its deferred income tax assets until
      sufficient positive evidence, as contemplated by SFAS No. 109, exists to
      support its reversal.  The Company does not intend to recognize any
      domestic tax benefit in future periods until an appropriate level of
      profitability is achieved.





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








**Note
                5 -**
            **Commitments
                and Contingencies**





***Litigation*** —  The
      Company is involved in various legal matters in the normal course of its
      business. Management believes that the ultimate outcome of such matters will
      not
      have a material adverse effect on the accompanying consolidated condensed
      financial statements. However, if an infringement claim is successful and the
      Company is unable to obtain the license for the infringed technology or
      substitute similar non-infringing technology, the Company’s business could be
      harmed.




9
 Table
          of Contents





***Imposition
      of Additional Duties and Taxes*** — ****** The
      European Union countries have issued notices stating that effective October
      1,
      2004, LCD monitors with DVI connectors will incur a 14% import duty
      tax. Thus far, this change in classification has been applied
      prospectively. However, the Company believes it is probable that the tariff
      will
      be applied retroactively.  The Company will continue to monitor this
      situation and will work to change its business processes to minimize the
      negative impacts of this new tariff. As of June 30, 2005, the Company has
      accrued $3.5 million of expense related to this potential liability.





***Services
      Agreements*** — The
      Company entered into services agreements with logistics suppliers in the United
      States and Europe in 1999 and 2002, respectively. These agreements provide
      for
      warehousing, shipping and freight services. The amount to be paid is based
      on
      the level of services provided as defined in the agreements. The expense was $2.2
      million and $1.6 million for the three months ended June 30, 2005 and 2004,
      respectively, and $4.8 million and $3.8 million for the six months ended June
      30, 2005 and 2004, respectively.






**Note
                6 -**
            **Business
                Segments**





In
      accordance with SFAS No. 131, *Disclosures
      about Segments of an Enterprise and Related Information* (“SFAS
      No. 131”), the Company has three reportable segments: Americas, Europe and Asia
      Pacific. The Company believes these segments do not meet the economically
      similar criteria requirements of SFAS No. 131, and, therefore, are separate
      reportable segments. The Company sells similar products in the local markets,
      including CRT displays, LCD displays, projectors, plasma displays, HDTV
      technology and the latest in mobile products including wireless monitors. The
      types and class of customers, primarily distributors and retailers, are also
      similar across the product lines. The Company has two core products—visual
      displays (CRT and LCD computer monitors) and other products. Both products
      are
      sold in all of its markets. The
      following segment financial information is for the periods indicated (in
      thousands):






**Three Months Ended****June 30,**
            
            **Six Months Ended****June 30,****2005**
            
            **2004**
            
            **2005**
            
            **2004****Net
                Sales:**Americas
            
            $
            134,375
            
            $
            153,615
            
            $
            255,015
            
            $
            313,284Europe
            
            
            55,411
            
            
            42,804
            
            
            131,632
            
            
            109,578Asia
                Pacific
            
            
            94,831
            
            
            64,393
            
            
            171,881
            
            
            130,554**Total**
            
            $
            284,617
            
            $
            260,812
            
            $
            558,528
            
            $
            553,416**(Loss)
                income from operations:**Americas
            
            $
            (1,957
            )
            $
            1,549
            
            $
            (8,628
            )
            $
            7,491Europe
            
            
            (1,260
            )
            
            (587
            )
            
            3,157
            
            
            5,183Asia
                Pacific
            
            
            2,520
            
            
            (1,084
            )
            
            5,530
            
            
            592**Total**
            
            $
            (697
            )
            $
            (122
            )
            $
            59
            
            $
            13,266








**Note
                7 -**
            **Warranty**





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


10
 Table
          of Contents





**Six
                Months Ended June 30**
            
            **Beginning
                Accrued Warranty Liability**
            
            **Payment
                for Units Returned**
            
            **Additional
                Warranty Expense for Units Sold**
            
            **Ending
                Accrued Warranty Liability**2004
            
            $
            14,567
            
            $
            (6,105
            )
            $
            6,479
            
            $
            14,9412005
            
            $
            17,365
            
            $
            (6,083
            )
            $
            8,157
            
            $
            19,439








**Note
                8 -**
            **Earnings
                Per Share**





The
      Company presents both basic and diluted earnings (loss) per share (“EPS”)
      amounts. Basic EPS is calculated by dividing net income (loss) by the
      weighted-average number of common shares outstanding during the period. Diluted
      EPS amounts are based upon the weighted-average number of common and potential
      common shares, including warrants outstanding during the period.





Potential
      common shares are excluded from the computation in periods in which they have
      an
      anti-dilutive effect. The Company uses the treasury stock method to calculate
      the impact of outstanding stock options. Stock options for which the exercise
      price exceeds the average market price over the period have an anti-dilutive
      effect on EPS and, accordingly, are excluded from the calculation. For
      the
      three months ended June 30, 2005 and 2004, options for 32,825,000 and 6,659,000 shares, respectively, were excluded from the diluted earnings per
      common share calculation because they were anti-dilutive. For the six months
      ended June 30, 2005 and 2004, options for 32,825,000 and 4,650,000 shares, respectively, were excluded from the diluted earnings per
      common share calculation because they were anti-dilutive.





The
      basic
      and diluted EPS was calculated using the EITF 03-06 Participating Securities
      and
      the Two Class Method under SFAS No. 128. The following is a reconciliation
      of
      the numerators and denominators of the basic and diluted net (loss) income
      per
      share computations. Amounts are for the periods indicated (amounts in thousands,
      except per share information).




11
 Table
          of Contents





**Three
                Months Ended****June
                30,**
            
            **Six
                Months Ended****June
                30,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Basic
                EPS:Numerator:(Loss)
                income from continuing operations (1)
            
            $
            (16,668
            )
            $
            (1,329
            )
            $
            (17,546
            )
            $
            9,021Income
                (loss) from discontinued operations
            
            $
            780
            
            $
            (1,295
            )
            $
            714
            
            $
            (2,327
            )Denominator
                weighted-average shares outstanding
            
            
            353,978
            
            
            353,921
            
            
            353,975
            
            
            353,913Basic
                EPS:Continuing
                operations
            
            $
            (0.05
            )
            $
            0.00
            
            $
            (0.05
            )
            $
            0.03Discontinued
                operations
            
            $
            0.00
            
            $
            0.00
            
            $
            0.00
            
            $
            (0.01
            )Total
                Basic EPS
            
            $
            (0.05
            )
            $
            0.00
            
            $
            (0.05
            )
            $
            0.02Diluted
                EPS:Numerator:(Loss)
                income from continuing operations (1)
            
            $
            (16,668
            )
            $
            (1,329
            )
            $
            (17,546
            )
            $
            9,021Income
                (loss) from discontinued operations
            
            $
            780
            
            $
            (1,295
            )
            $
            714
            
            $
            (2,327
            )Denominator
                weighted-average shares outstanding
            
            
            353,978
            
            
            353,921
            
            
            353,975
            
            
            353,913Stock
                options(2)
            
            
            
            
            
            
            
            
            
            
            
            2,009Interest
                warrants(3)
            
            
            
            
            
            
            
            
            
            
            
            3,270Total
                shares
            
            
            353,978
            
            
            353,921
            
            
            353,975
            
            
            359,192Diluted
                EPS:Continuing
                operations
            
            $
            (0.05
            )
            $
            0.00
            
            $
            (0.05
            )
            $
            0.03Discontinued
                operations
            
            $
            0.00
            
            $
            0.00
            
            $
            0.00
            
            $
            (0.01
            )Total
                Diluted EPS
            
            $
            (0.05
            )
            $
            0.00
            
            $
            (0.05
            )
            $
            0.02





(1)
            Prepared
                in accordance with EITF 03-06*Participating
                Securities and the Two Class Method under SFAS No. 128.*(Loss) Income from continuing operations includes the accretion for
                the
                mandatorily redeemable preferred stock. The EPS calculation allocated
                (loss) income from continuing operations between common stock and
                the
                convertible mandatorily redeemable preferred stock.





(2)
            For
                the three months ended June 30, 2005 and 2004, options for 32,895,000
                and
                6,659,000 shares, respectively, were excluded from the diluted earnings
                per common share calculation because they were anti-dilutive.For
                the six months ended June 30, 2005 and 2004, options for 32,895,000
                and
                4,650,000 shares, respectively, were excluded from the diluted earnings
                per common share calculation because they were anti-dilutive.





(3)
            For
                the three months and six months ended June 30, 2005, common stock
                issuable
                upon the exercise of outstanding warrants of 3,275,000 and 3,275,000,
                respectively, were excluded from the diluted earnings per share
                calculation because they were
                anti-dilutive.






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





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




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 Table
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During
      the fourth quarter of 2004, the Company made the decision to dispose of
      VisionBank, one of its majority-owned subsidiaries. As of June 30, 2005, there
      were no assets or liabilities. The gain recorded from discontinued operations
      was $780,000 and $714,000 for the three and six months ended June 30,
      2005.





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





**Discontinued
                Operations**
            
            **Three Months Ended****June 30,**
            
            **Six Months Ended****June 30,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Net
                Sales
            
            $
            67
            
            $
            4,727
            
            $
            108
            
            $
            6,360Income
                (loss) from discontinued operations (no tax effect)
            
            $
            780
            
            $
            (1,295
            )
            $
            714
            
            $
            (2,327
            )






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




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 "Business Risks"
      section, among other things, should be considered in evaluating our prospects
      and future financial performance.*





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





***Our
      Company***





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





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





***Recent
      Trends in Our Business***





In
      the
      second quarter of 2005, we continued to experience the challenges observed
      in
      the first quarter of 2005. Despite the revenue and unit sales growth in the
      second quarter of 2005 as compared to the second quarter of 2004, our
      profitability was negatively impacted by continued intense competition,
      volatility of supply and declining average selling prices (“ASPs”), and product
      costs.





The
      ASP
      of our LCD monitors decreased approximately 39.7% and 37.9% for the three and
      six months ended June 30, 2005 when compared to the three and six months ended
      June 30, 2004, respectively. The decline in LCD monitor’s average selling price
      was primarily due to increased production capacity and aggressive price
      competition. According to a March 2005 iSuppli report, larger size LCD panel
      prices are expected to stabilize while the LCD TV panel prices will continue
      to
      decline due to competition from plasma and microdisplay-based rear-projector
      products. Overall, we expect the excess capacity situation and price declines
      to
      continue in the short term until anticipated market demand growth is realized
      and consumes the increased supply.





In
      order
      to mitigate these challenges, we have continued to implement 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 believe that the successful implementation of these initiatives
      will position us to compete favorably.





We
      sold
      approximately 1.4 million display products in the second quarter of 2005
      compared to approximately 1.0 million display products in the second quarter
      of
      2004. In terms of LCD displays, unit sales grew 106.3% in the second quarter
      of
      2005 compared to the second quarter of 2004. As a result, our net sales
      increased to $284.6 million in the second quarter of 2005 from $260.8
      million in the second quarter of 2004 despite a 22% decline in average selling
      prices in the second quarter of 2005 compared to the second quarter of 2004.
      In
      addition, our profitability has been positively impacted by the implementation
      of some key initiatives to maximize operating efficiencies in order to adjust
      our cost structure to compete favorably in an intensely competitive display
      industry.




14
 Table
          of Contents





The
      European Union countries have issued notices stating that effective October
      1,
      2004, LCD monitors with DVI connectors would incur a 14% import duty
      tax. Thus far, this change in classification has been applied
      prospectively. However, we believe it is probable that the tariff will be
      applied retroactively.  We will continue to monitor this situation
      and will work to change our business processes to minimize the
      negative impacts of this new tariff.




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





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





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





**Three
                Months Ended****June 30,**
            
            **Six
                Months Ended****June 30,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Net
                sales
            
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %
            
            100.0
            %Cost
                of sales
            
            
            90.5
            
            
            88.6
            
            
            90.1
            
            
            87.0Gross
                profit
            
            
            9.5
            
            
            11.4
            
            
            9.9
            
            
            13.0Selling,
                general and administrative expenses
            
            
            9.8
            
            
            11.5
            
            
            9.9
            
            
            10.7(Loss)
                income from operations
            
            
            (0.3
            )
            
            (0.1
            )
            
            0.0
            
            
            2.3Other
                (expense) income - net:Interest
                expense
            
            
            (0.2
            )
            
            (0.2
            )
            
            (0.2
            )
            
            (0.2
            )Other
                - net
            
            
            (0.6
            )
            
            (0.2
            )
            
            (0.5
            )
            
            0.2Other
                (expense) income - net
            
            
            (0.8
            )
            
            (0.4
            )
            
            (0.7
            )
            
            (0.0
            )(Loss)
                income from continuing operations before income taxes
            
            
            (1.1
            )
            
            (0.5
            )
            
            (0.7
            )
            
            2.3(Benefit)
                provision for income taxes
            
            
            4.7
            
            
            0.0
            
            
            2.4
            
            
            0.6(Loss)
                income from continuing operations
            
            
            (5.8
            )
            
            (0.5
            )
            
            (3.1
            )
            
            1.7Income
                (loss) from discontinued operations
            
            
            0.3
            
            
            (0.5
            )
            
            0.1
            
            
            (0.4
            )Net
                (loss) income
            
            
            (5.5
            )
            
            (1.0
            )
            
            (3.0
            )
            
            1.3Preferred
                stock accretion
            
            
            (0.1
            )
            
            (0.1
            )
            
            (0.1
            )
            
            (0.1
            )Net
                (loss) income available to common stockholders
            
            
            (5.6
            )%
            
            (1.1
            )%
            
            (3.1
            )%
            
            1.2
            %




15
 Table
          of Contents




**Three Months Ended June 30,**
            
            **Six Months Ended June 30,****2005**
            
            **Percentage**
              **Increases/**
              **(Decreases)**
            
            **2004**
            
            **2005**
            
            **Percentage**
              **Increases/**
              **(Decreases)**
            
            **2004****(in thousands)****Net
                sales:**Americas
            
            $
            134,375
            
            
            (12.5
            )%
            $
            153,615
            
            $
            255,015
            
            
            (18.6
            )%
            $
            313,284Europe
            
            
            55,411
            
            
            29.5
            %
            
            42,804
            
            
            131,632
            
            
            20.1
            %
            
            109,578Asia
                Pacific
            
            
            94,831
            
            
            47.2
            %
            
            64,393
            
            
            171,881
            
            
            31.7
            %
            
            130,554**Total**
            
            $
            284,617
            
            
            9.1
            %
            $
            260,812
            
            $
            558,528
            
            
            0.9
            %
            $
            553,416**(Loss)
                income from operations:**Americas
            
            $
            (1,957
            )
            
            (226.3
            )%
            $
            1,549
            
            $
            (8,628
            )
            
            (215.2
            )%
            $
            7,491Europe
            
            
            (1,260
            )
            
            (114.8
            )%
            
            (587
            )
            
            3,157
            
            
            (39.1
            )%
            
            5,183Asia
                Pacific
            
            
            2,520
            
            
            332.6
            %
            
            (1,084
            )
            
            5,530
            
            
            834.1
            %
            
            592**Total**
            
            $
            (697
            )
            
            (471.3
            )%
            $
            (122
            )
            $
            59
            
            
            (99.6
            )%
            $
            13,266






**Consolidated
      Results of Operations—Three Months and Six Months Ended June 30, 2005 and
      June 30, 200** **4**





***Net
      Sales***





Our consolidated net
      sales increased $23.8 million, or 9.1%, to $284.6 million for the three
      months ended June 30, 2005 compared to $260.8 million for the three months
      ended June 30, 2004. Consolidated net sales increased $5.1 million, or
      0.9%, to $558.5 million for the six months ended June 30, 2005
      compared to $553.4 million for the six months ended June 30, 2004. Net
      sales
      outside of the Americas region accounted for 52.8% and 41.1% of total net sales
      for the three months ended June 30, 2005 and 2004, and 54.3% and 43.4% of
      total net sales for the six months ended June 30, 2005 and 2004,
      respectively. The growth in net sales outside of the Americas was predominantly
      driven by higher net sales in China, Russia, the Middle East and Taiwan due
      to a
      shift in demand from CRT to LCD and a shift in demand to larger screen
      sizes. The increase
      in unit volume was offset by a decline in the ASP per unit of 22.4% and 22.2%
      for the three and six months ended June 30, 2005 compared to the three and
      six months ended June 30, 2004. Additionally,
      due to the LCD supply volatility that occurred in the second quarter of 2005,
      we
      reduced the number of sales allowance programs offered worldwide, which resulted
      in a reduction of sales allowances in the second quarter of 2005 as compared
      to
      the second quarter of 2004. Returns and sales incentive allowances charged
      against gross sales were $19.8 million and $25.0 million for the three months
      ended June 30, 2005 and 2004, and $54.1 million and $46.0 million for the
      six months ended June 30, 2005 and 2004, respectively.





We
      sold
      approximately 1.4 million display products for the three months ended June
      30,
      2005 compared to approximately 1.0 million display products for the three months
      ended June 30, 2004. Of the total product units sold for the three months
      ended June 30, 2005, LCD monitors accounted for 50.8%, CRT monitors
      accounted for 32.0%, and other products accounted for 17.2% as compared to
      34.6%, 52.2%, and 13.1%, respectively, for the three months ended June 30,
      2004. The increase in units sold was primarily due to continued expansion in
      China and other areas of Asia as well as stronger unit sales in
      Europe.





We
      sold
      approximately 2.7 million display products for the six months ended
      June 30, 2005 compared to approximately 2.1 million display products for
      the six months ended June 30, 2004. Of the display product units sold for
      the six months ended June 30, 2005, LCD monitors accounted for 51.8%, CRT
      monitors accounted for 31.3%, and other products accounted for 16.9% as compared
      to 36.1%, 51.8%, and 12.1%, respectively, for the six months ended June 30,
      2004. The increase in units sold was primarily due to continued expansion in
      China and other areas of Asia as well as stronger unit sales in
      Europe.





*Americas* *—* In
      our
      Americas region, net sales decreased $19.2 million, or (12.5)%, to $134.4
      million for the three months ended June 30, 2005 compared to $153.6 million
      for
      the three months ended June 30, 2004. Net sales decreased $58.3 million, or
      (18.6)%, to $255.0 million for the six months ended June 30, 2005 compared
      to
      $313.3 million for the six months ended June 30, 2004. The decrease in net
      sales was primarily due to rapidly declining ASPs as a result of intense
      competition and was partially offset by higher LCD unit sales due to the shift
      in the ratio of sales from CRT to LCD products as well as
      a shift to larger screen sizes .





*Europe* *—* In
      our
      Europe region, net sales increased $12.6 million, or 29.5%, to
      $55.4 million for the three months ended June 30, 2005 compared to
      $42.8 million for the three months ended June 30, 2004. Net sales
      increased $22.1 million, or 20.1%, to $131.6 million for the six months ended
      June 30, 2005 compared to $109.6 million for the six months ended
      June 30, 2004. The increase in net sales was primarily due to the region’s
      continued expansion in Russia, the Middle East and the United Kingdom. Net
      sales
      also increased due to the shift in the ratio of sales from CRT to LCD products
      a s
      well as
      a shift to larger screen sizes.




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*Asia
      Pacific* *—* In
      our
      Asia Pacific region, net sales increased $30.4 million, or 47.2%, to
      $94.8 million for the three months ended June 30, 2005 compared to
      $64.4 million for the three months ended June 30, 2004. Net sales
      increased $41.3 million, or 31.7%, to $171.9 million for the six months ended
      June 30, 2005 compared to $130.6 million for the six months ended
      June 30, 2004. The primary reason for the increase in net sales was due to
      our continued growth in the China market, largely as a result of increased
      unit
      shipments of LCD and CRT products a s
      well as
      a shift to larger screen sizes .
      In
      addition, net sales also increased due to higher unit sales in existing markets
      such as Taiwan, Australia, New Zealand and Southeast Asia as a result of
      expanding our customer base.





***Cost
      of Sales***





Our consolidated cost of
      sales increased $26.4 million, or 11.4%, to $257.5 million for the three
      months ended June 30, 2005 compared to $231.1 million for the three months
      ended
      June 30, 2004. Consolidated cost of sales increased $22.2 million, or
      4.6%, to $503.3 million for the six months ended June 30, 2005 compared to
      $481.2 million for the six months ended June 30, 2004. As
      a
      percentage of net sales, cost of sales increased to 90.5% for the three months
      ended June 30, 2005 from 88.6% for the three months ended June 30, 2004.
      For the six months ended June 30, 2005 cost of sales increased to 90.1% as
      a
      percentage of net sales from 87.0% for the six months ended June 30, 2004.
      The
      increase in cost of sales as a percentage of our net sales is primarily due
      to
      the ASP per unit declining at a faster rate than our cost of sales declined.
      Additionally, the increase in cost of sales was also due to higher warranty
      costs of $733,000 and $1.7 million for the three and six months ended June
      30,
      2005 compared to the three and six months ended June 30, 2004. The increased
      warranty costs were primarily related to the increased unit shipments in our
      Europe and Asia Pacific regions. Overall, gross margin declined to 9.5% for
      the
      three months ended June 30, 2005 compared to 11.4% for the three months ended
      June 30, 2004. Gross margin also declined to 9.9% for the six months ended
      June 30, 2005 compared to 13.0% for the six months ended June 30,
      2004.





***Selling,
      General and Administrative***





Selling,
      general and administrative expenses decreased $2.1 million, or (6.9)%, to
      $27.8 million for the three months ended June 30, 2005 compared to $29.9 million
      for the three months ended June 30, 2004. Selling, general and
      administrative expenses decreased $3.9 million, or 6.6%, to $55.1 million
      for the six months ended June 30, 2005 compared to $59.0 million for the
      six months ended June 30, 2004. The dollar decrease was mainly attributable
      to
      strategic initiatives undertaken by us to maximize operating efficiencies and
      reduce our operating expenses. Some of these initiatives resulted in lower
      advertising and marketing expenses of $2.5 million and $3.9 million for the
      three and six months ending June 30, 2005 as a result of utilizing more
      efficient mediums for advertising and marketing, lower personnel related
      expenses of $564,000 and $645,000 for the three and six months ended June 30,
      2005 due to headcount reductions, lower IT related expenses of $361,000 and
      $556,000 for the three and six months ending June 30, 2005, lower travel
      expenses of $216,000 and $381,000 for the three and six months ending June
      30,
      2005 partially offset by a $1.4 million of compensation expense related to
      our
      initiative to re-price our stock
      options, and the adoption of SFAS 123. As a perce ntage
      of
      net sales, selling, general and administrative expenses decreased to 9.8% for
      the three months ended June 30, 2005 from 11.5% for the three months ended
      June
      30, 2004. As a percentage of net sales, selling, general and administrative
      expenses decreased to 9.9% for the six months ended June 30, 2005 from 10.7%
      for
      the six months ended June 30, 2004.





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




Loss
      from
      operations increased $575,000 to a loss of $697,000 for the three months ended
      June 30, 2005 when compared to a loss of $122,000 for the three months ended
      June 30, 2004. Income from operations decreased $13.1 million to $59,000 for
      the
      six months ended June 30, 2005 when compared to $13.3 million for the six months
      ended June 30, 2004. As a percentage of net sales, income from operations
      decreased to 0.2% for the three months ended June 30, 2005 when compared to
      0.0%
      for the three months ended June 30, 2004. As a percentage of net sales, income
      from operations decreased to 0.0% for the six months ended June 30, 2005 when
      compared to 2.4% for the six months ended June 30, 2004. The decrease for the
      three and six months ended June 30, 2005 when compared to the three and six
      months ended June 30, 2004 was primarily due to a decline
      in the ASP per unit as a result of intense competition, higher
      warranty costs and the stock option re-pricing expense partially offset by
      lower
      advertising and marketing expenses.




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*Americas* —
In
      our
      Americas region, loss from operations increased $3.5 million to a loss of
      $2.0 million for the three months ended June 30, 2005 when compared to a
      previous income of $1.5 million for the three months ended June 30, 2004. Loss
      from operations increased $16.1 million to a loss of $8.6 million for the six
      months ended June 30, 2005, when compared to a previous income of $7.5 million
      for the six months ended June 30, 2004. The increased loss for the three and
      six
      months ended June 30, 2005 when compared to the three and six months ended
      June
      30, 2004 was mainly due to a decline
      in the ASP per unit as a result of intense competition and lower
      net
      sales partially offset by lower selling,
      general and administrative expenses .





*Europe* *—* In
      our
      European region, loss from operations increased $674,000 to a loss of $1.3
      million for the three months ended June 30, 2005 when compared to a loss of
      $587,000 for the three months ended June 30, 2004. Income from operations
      decreased $2.0 million, or 39.1%, to $3.2 million for the six months ended
      June
      30, 2005 when compared to $5.2 million for the six months ended June 30, 2004. Despite
      solid growth in the region’s net sales in the three and six months ending June
      30, 2005 as compared to the three and six months ending June 30, 2004, the
      decrease in income from operations was primarily due to aggressive pricing
      resulting from intense competition and the weakening of the Euro compared to
      the
      US dollar. Additionally, income from
      operations was negatively impacted by higher warranty costs and higher selling,
      general and administrative expenses related to supporting the region’s increased
      sales volume in existing markets. Although selling, general and administrative
      expenses increased in dollar terms during the three and six months ended June
      30, 2005 in comparison to the same period ended June 30, 2004, as a percentage
      of net sales, the expense decreased to 13.2% and 10.9% from 14.9% and 12.1%
      respectively, for the three and six month period ended June 30,
      2005.





*Asia
      Pacific* —
In
      our
      Asia Pacific region, income from operations increased $3.6 million to $2.5
      million for the three months ended June 30, 2005 when compared to a loss of
      $1.1
      million for the three months ended June 30, 2004. Income from operations
      increased $4.9 million to $5.5 million for the six months ended June 30, 2005
      when compared to $592,000 for the six months ended June 30, 2004. The increase
      in income from operations for the three and six months was due to an increase
      in
      net sales in the China and Southern Asia markets offset by higher selling,
      general and administrative expenses related to supporting our continued
      expansion in China.





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





Other
      (expense) income, net decreased $1.2 million to a loss of $2.2 million for
      the
      three months ended June 30, 2005 compared to a net expense of $1.0 million
      for the three months ended June 30, 2004. Net other (expense) income also
      decreased $3.4 million to a loss of $3.7 million for the six months ended
      June 30, 2005 compared to a net expense of $304,000 for the six months
      ended June 30, 2004. The decrease was mainly related to foreign currency
      exchange losses, which totaled $900,000 and $3.3 million for the three and
      six
      months ended June 30, 2005 compared to a foreign currency exchange loss of
      $1.2 million and $400,000 for the three and six months ended June 30, 2004.
      Additionally, the decrease was partially attributable to the fact that we had
      zero investment gains (losses) for the three and six months ended June 30,
      2005
      as compared to investment gains of $553,000 and $861,000 the three and six
      months ended June 30, 2004.





***Provision
      for Income Taxes***





The
      provision (benefit) for income taxes was $13.4 million or 462% on loss from
      continuing operations for the three months ended June 30, 2005 as compared
      to $(92,000), or (9)% on loss from continuing operations for the three months
      ended June 30, 2004.




The
      provision for income taxes was $13.2 million, or 365%, on losses from
      continuing operations for the six months ended June 30, 2005 as compared to
      $3.3 million, or 25%, on income from continuing operations for the six months
      ended June 30, 2004. The effective tax rate increased from 25.0% for the
      six months ended June 30, 2004 to 365.0% for the six months ended
      June 30, 2005 primarily due to the recording of a non-cash charge of $13.7
      million to establish a valuation allowance against its net deferred income
      tax assets, during the second quarter ended June 30, 2005. The valuation
      allowance has been calculated pursuant to SFAS No. 109, “Accounting for Income
      Taxes,” 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
      carryback and carryforward periods of net operating losses. In determining
      that
      a valuation allowance is required, the Company placed added weight on the
      operating results of the past two years and the projected results for 2005.
      The
      Company intends to maintain a valuation allowance against its deferred income
      tax assets until sufficient positive evidence, as contemplated by SFAS No.
      109,
      exists to support its reversal.  The Company does not intend to recognize
      any domestic tax benefit in the future periods until an appropriate level of
      profitability is achieved.




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**Liquidity
      and Capital Resources**




**Six Months Ended****June 30,****2005**
              
              **2004****(in
                  thousands)**Net
                  cash (used in) provided by operating activities
              
              $
              (13,045
              )
              $
              4,011Net
                  cash used in investing activities
              
              
              (7,212
              )
              
              (1,745
              )Net
                  cash used in financing activities
              
              
              (3,516
              )
              
              (1,437
              )Net
                  cash used in operating activities of discontinued
                  operations
              
              
              (1,001
              )
              
              (3,608
              )Net
                  decrease in cash and cash equivalents
              
              $
              (24,774
              )
              $
              (2,779
              )





As
      of
      June 30, 2005, we had cash, cash equivalents and short-term investments of
      $84.8 million. Our cash balances are held in numerous locations throughout
      the
      world. Most of the amounts held outside the United States could be repatriated
      to the United States, but, under current law, would be subject to U.S. federal
      income taxes, less applicable foreign tax credits. In certain countries, foreign
      exchange limitations limit the amount of cash that can be repatriated. We have
      accounted for the U.S. federal tax liability on these amounts for financial
      statement purposes except for foreign earnings that are considered indefinitely
      reinvested outside the United States. Repatriation could result in additional
      US. 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 United States
      liquidity needs through ongoing cash flows from operations, external borrowings,
      or both. We utilize a variety of tax planning and financing strategies in an
      effort to ensure that our worldwide cash is available in the locations in which
      it is needed. We expect to meet expected and unexpected cash flow needs by
      accessing our credit lines in the Americas, Europe and Asia
      Pacific.





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





*Operating
      Activities*





Cash
      flow
      used in operating activities was $13.0 million during the six months ended
      June
      30, 2005 compared to cash flow provided by operating activities of $4.0 million
      during the six months ended June 30, 2004. The decrease between the six months
      ended June 30, 2005 and June 30, 2004 was primarily due to the
      decrease in income from continuing operations, decline in accounts payable
      and
      partially offset by a decrease in inventory and accounts
      receivable.





Accounts
      receivable decreased by $16.2 million to $136.9 million at
      June 30, 2005 from $153.2 million at December 31, 2004 primarily
      due to the timing of sales. Day’s sales outstanding increased slightly to
      47 days at June 30, 2005 compared to 41 days at June 30,
      2004 primarily due to a shift in sales to regions that traditionally
      have longer A/R terms. As of June 30, 2005, we had no major collection
      or billing problems that had not already been accounted for in our allowance
      for
      doubtful accounts. We have not materially changed our payment terms or
      delinquency policies between 2004 and 2005.





Inventories
      decreased by $46.0 million to $102.2 million at June 30, 2005 compared
      to $148.2 million at December 31, 2004. Our inventory turns increased
      to four times for the six months ended June 30, 2005 as compared to three times
      for the six months ended June 30, 2004.


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Accounts
      payable decreased approximately $72.4 million to $209.2 million at
      June 30, 2005 compared to $281.6 million at December 31, 2004.
      The decrease was largely due to the decrease in our inventory balances and
      timing of product payments.





*Investing
      Activities*





Cash
      flow
      used in investing activities was $7.2 million during the six months ended
      June 30, 2005 compared to cash flow used in investing activities of
      $1.7 million during the six months ended June 30, 2004. The primary
      reason for the variance between periods was the sale of long-term investments
      in
      2004 and the purchase of short-term investments in 2005.





*Financing
      Activities*





Cash
      flow
      used in financing activities was $3.5 million during the six months ended
      June 30, 2005 compared to cash flow used in financing activities of
      $1.4 million during the six months ended June 30, 2004. The primary
      reason for the variance was the net decrease of bank borrowings during the
      six
      months ended June 30, 2005 compared to a net increase of bank borrowings
      during the six months ended June 30, 2004 to fund operations in our Asia
      Pacific region.





*Operating
      Activities of Discontinued Operations*





Cash
      flow
      used in operating activities of discontinued operations was $1.0 million
      during the six months ended June 30, 2005 compared to cash flow used in
      operating activities of discontinued operations of $3.6 million during the six
      months ended June 30, 2004.





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





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




**Payments due by period****Contractual Obligations**
              
              **Total**
              
              **Less than**
                **1 year**
              
              **1-3 years**
              
              **3-5 years**
              
              **More than**
                **5 years****(in thousands)**Operating
                  lease obligations
              
              $
              3,775
              
              $
              1,372
              
              $
              2,403
              
              $
              
              
              $
              —Subordinated
                  notes payable (1)
              
              
              48,987
              
              
              861
              
              
              48,126
              
              
              —
              
              
              —Preferred
                  stock mandatory redemption
              
              
              15,000
              
              
              15,000
              
              
              0
              
              
              —
              
              
              —Total
              
              $
              67,762
              
              $
              17,233
              
              $
              50,529
              
              $
              —
              
              $
              —





(1)
            Includes
                interest payable of $861,000 and $5.1 million for the respective
                periods
                presented above.





**Credit
      Facilities** ****





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


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 Table
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**Off-Balance
      Sheet Arrangements**




As
      of
      June 30, 2005 and 2004, we did not have any off-balance sheet arrangements
      or
      relationships with unconsolidated entities or financial partnerships, such
      as
      entities often referred to as structured finance or variable interest entities,
      which are typically established for the purpose of facilitating off-balance
      sheet arrangements or other contractually narrow or limited purposes.





**Seasonality**




The
      market for our products historically has experienced seasonal shifts in demand
      due to changes in buying patterns by our customers. Buying patterns vary
      geographically, and the impact on our operating results in a given period may
      vary depending on our actual or anticipated level of activity in the relevant
      region. We generally experience a decline in net sales from the first quarter
      to
      the second quarter of each year and we tend to experience the highest net sales
      in the fourth quarter of the year due to a strong buying season in the fourth
      quarter by large wholesale distribution partners and retailers due to the
      holiday season in the Americas. Our seasonality is moderated through slightly
      different seasonal variations in the three regions.





**Operating
      Capital and Capital Expenditure Requirements**




We
      believe that our existing cash balances, credit facilities and anticipated
      cash
      flows from operations will be sufficient to meet our operating, acquisition
      and
      capital requirements for at least the next 12 months. However, there is no
      assurance that we will not need to raise additional equity or debt financing
      within this period. We also may require additional capital for other purposes
      not presently contemplated. If we are unable to obtain sufficient capital,
      we
      could be required to curtail capital equipment purchases or research and
      development expenditures, which could harm our business. Factors that could
      affect our cash used or generated from operations and, as a result, our need
      to
      seek additional borrowings or capital include:





·
            Decreased
                demand and market acceptance for our
                products;





·
            Inability
                to successfully develop our next generation
                products;





·
            Competitive
                pressures resulting in lower than expected average selling prices;
                and





·
            New
                product announcements or product introductions by our
                competitors.





**Critical
      Accounting Policies and Estimates**





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





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





During
      the second quarter of 2005, the Company elected to adopt the fair value based
      employee stock-based compensation expense recognition provisions of Statement
      of
      Financial Accounting Standards No. 123, *Accounting
      for Stock-Based Compensation* (“SFAS
      123”), using the modified prospective method. The Company previously applied the
      intrinsic value based expense recognition provisions set forth in Accounting
      Principles Board (“APB”) Opinion No. 25, *Accounting
      for Stock Issued to Employees* (“APB
      25”). Had the Company not adapted SFAS 123, the stock options that were
      re-priced would have been subject to variable accounting with changes in the
      fair value of the stock options being recorded in the Statements of Operations.
      SFAS 123 states that the adoption of the fair value based method is a change
      to
      a preferable method of accounting. The Company elected not to early adapt SFAS
      123(R) as it would have been required to include an estimate of volatility
      in
      calculating the stock option re-pricing expense. SFAS 123 does not require
      the
      use of volatility in estimating the fair value of stock options. Management
      believes that use of the fair value based method to record employee stock-based
      compensation expense is consistent with the accounting for all other forms
      of
      compensation. The adoption of the fair value based recognition provision
      decreased net income by $213,000 and $272,000 for the three-month and the
      six-month periods ended June 30, 2005, respectively. The $272,000 related to
      the
      adoption of SFAS 123 was recognized during the three months ended June 30,
      2005.




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





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





We
      have
      significant European net sales denominated in the Euro. Product shipping, and
      selling, general and administrative costs associated with a portion of these
      net
      sales are U.S. Dollar-denominated. During the six months ended June 30, 2005,
      the Euro-to-U.S. Dollar foreign currency exchange rate weakened against the
      U.S.
      Dollar decreasing 11.0% compared to the year-end rate of 2004. During the six
      months ended June 30, 2004, the Euro-to-U.S. Dollar increased by 2.3% compared
      to the year-end rate of 2003. The weakening of the Euro negatively impacted
      the
      three months ended June 30, 2005 net sales and income from operations by $1.3
      million and $870,000, respectively, assuming all other factors remain constant.
      It also negatively impacted the six months ended June 30, 2005 net sales and
      income from operations by $1.3 million and $870,000, respectively, assuming
      all
      other factors remain constant. We currently estimate that a 1% change in value
      of the Euro-to-U.S. Dollar exchange rates could impact net sales by
      approximately $300,000 per quarter. Effective June 7, 2005, our European region
      entered into a foreign currency option contract to minimize the impact of
      foreign currency fluctuations on our business in Europe. The foreign currency
      option contract allows us to sell 2.0 million Euros per month for an eight
      to
      twelve month term at specific rates based on the spot rate in the market. We
      cannot determine the ultimate impact of future changes to these and other
      currency exchange rates on our 2005 net sales, income from operations, net
      income, equity and comprehensive income.





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





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





*The
      risks described below are not exhaustive of the risks that might affect our
      business. Other risks, including those we currently deem immaterial, may also
      impact our business. Any of the following risks could materially and adversely
      affect our business operations, results of operations and financial condition.*





*Our
      revenues and profitability can fluctuate from period to period and are often
      difficult to predict for particular periods due to factors beyond our
      control.*





Our
      results of operations for any quarter or year are not necessarily indicative
      of
      results to be expected in future periods. Our operating results have
      historically been, and are expected to continue to be, subject to quarterly
      and
      yearly fluctuations as a result of a number of factors, including:





·
            The
                introduction and market acceptance of new technologies, products,
                and
                services;





·
            Variations
                in product costs and the mix of products
                sold;




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·
            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, operating results and financial
      condition.





*Our
      industry is highly competitive and such price competition may substantially
      reduce our revenues and profits.*





Competitive
      factors in the display industry include product features, price, product
      quality, breadth and reliability, price/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 average selling prices of our products over time. We expect price
      competition to increase in future periods and such price competition may
      substantially reduce our revenues and profits in such periods. Our competitors
      include:





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





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





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





We
      believe that over time, this competition will have the effect of reducing the
      ASP of our products. Some of our competitors have substantially longer operating
      histories, greater assets, name recognition as well as financial, marketing,
      technical and other resources than we do. These advantages may allow our
      competitors to, among other things, undertake more extensive marketing
      initiatives, implement and sustain more aggressive pricing, or obtain more
      favorable pricing or allocations from suppliers. 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.




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*Volatility
      in our industry could require us to raise additional capital.*





Although
      we believe that our existing cash balances, credit facilities and anticipated
      cash flows from operations will be sufficient to meet our operating, acquisition
      and capital requirements for at least the next 12 months, we may be required
      to
      raise additional capital through either equity or debt financing. Factors that
      could affect our cash used or generated from operations and, as a result, our
      need to seek additional borrowings or capital include:





·
            Decreased
                demand and market acceptance for our products;





·
            Inability
                to successfully develop our next-generation products;





·
            Competitive
                pressures resulting in lower than expected average selling prices;
                and





·
            New
                product announcements or product introductions by our
                competitors.





We
      also
      may require additional capital for other purposes not presently contemplated.
      If
      we are unable to obtain sufficient capital, we could be required to curtail
      capital equipment purchases or research and development expenditures, which
      could harm our business.





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





As
      a
      percentage of net sales, selling, general and administrative expenses represent
      9.8% and 11.5% for the three months ended June 30, 2005 and 2004, respectively.
      As a percentage of net sales, selling, general and administrative expenses
      represent 9.9% and 10.7% for the six months ended June 30, 2005 and 2004,
      respectively. We expect sales, general and administrative expenses to remain
      relatively fixed or decrease as a percentage of net sales as we continue to
      improve efficiencies in all aspects of our business. Additionally, because
      we
      typically recognize a substantial portion of our revenues in the last month
      of
      each quarter, we may not be able to adjust our operating expenses in a timely
      manner in response to any revenue shortfalls. If we are unable to reduce
      operating expenses quickly in response to any revenue shortfalls, it would
      negatively impact our financial results.





*We
      may fail to comply with the Restriction of Certain Hazardous Substances
      Directive, or RoHS, and Waste Electrical and Electronic Equipment Directive,
      or
      WEEE, which could harm our business.*





We
      are
      subject to local laws and regulations in various regions in which we operate,
      including the European Union, or the EU.  There are two particular EU
      directives, RoHS and WEEE, that may have a material impact on our
      business.  RoHS restricts the distribution of certain substances, including
      lead, within the EU and is effective July 1, 2006, requires us to eliminate
      and/or reduce the level of specified hazardous materials from our products
      and requires us to maintain and publish a detailed list of all chemical
      substances in our products.  WEEE, which is effective January 2006,
      requires us to take back and recycle all products we manufacture or import
      into
      the EU at our own expense. If we fail to comply with the EU directives, our
      business may be harmed. For example,





·
            We
                may be unable to procure appropriate RoHS compliant material in sufficient
                quantity and quality and/or be able to incorporate it into our product
                procurement processes without compromising quality and/or harming
                our cost
                structure;





·
            We
                may not be able to sell non-compliant product into the EU or to any
                customer whose end product will be sold into the EU, which may result
                in
                reduced sales; or





·
            We
                may face excess and obsolete inventory risk related to non-compliant
                inventory that we may continue to hold in 2006 for which there is
                reduced
                demand and we may need to write
                down.





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





Inventory
      purchases are based upon future demand forecasts. These forecasts are based
      upon
      assumptions about future demand that might prove to be inaccurate. If there
      were
      to be a sudden and significant decrease in demand for our products, or if there
      were a higher incidence of inventory obsolescence because of rapidly changing
      prices of product components, rapidly changing technology and customer
      requirements or an increase in the supply of products in the marketplace, we
      could be required to write-down our inventory and our gross margins could be
      adversely affected.





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




Substantially
      all of our sales are made on the basis of purchase orders rather than long-term
      agreements. As a result, we may commit to purchase products without having
      received advance purchase commitments from customers. Any inability to sell
      products to which we have devoted significant resources could harm our business.
      Additionally, because we typically need sufficient lead-time in purchasing
      our
      products, we may not be able to reduce our inventory purchase commitments in
      a
      timely manner in response to any revenue shortfalls. We could be subject to
      excess or obsolete inventories and be required to take corresponding inventory
      write-downs if growth slows or if we incorrectly forecast product demand. A
      reduction in demand could negatively impact our gross margins and financial
      results.





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





We
      generated 52.8% and 54.3% of our total net sales to customers outside of the
      United States and other Americas in the three and six months ended June 30,
      2005, respectively. Sales to these customers outside of the United States and
      other Americas subjects us to a number of risks associated with conducting
      business outside of the United States and other Americas, including the
      following:





·
            International
                economic and political conditions;





·
            Unexpected
                changes in, or impositions of, legislative or regulatory requirements;





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





·
            Inadequate
                local infrastructure;





·
            Delays
                resulting from difficulty in obtaining export licenses for certain
                technology, tariffs, quotas and other trade barriers and restrictions;





·
            Transportation
                delays;





·
            Longer
                payment cycles;





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





·
            Foreign
                currency exchange rates;





·
            Imposition
                of additional taxes and penalties;
                and





·
            The
                burdens of complying with a variety of foreign
                laws.





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


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





To
      maintain and grow our market share, net sales and brand, we must maintain and
      expand our sales channels. We currently sell our products through distributors,
      retailers, VARs, system integrators, commercial or enterprise resellers, direct
      marketing/e-retailers, and ViewSonic online stores. These entities purchase
      our
      products directly from us or through our distributors. We have no minimum
      purchase commitments or long-term contracts with any of these third parties.
      Our
      agreements are generally non-exclusive and generally may be terminated by either
      party for any reason or no reason with 30 days notice.





Retailers
      have limited shelf space and promotional budgets, and competition is intense
      for
      these resources. A competitor with more extensive product lines and stronger
      brand identity may have greater bargaining power with these retailers. The
      competition for retail shelf space may increase, which would require us to
      increase our marketing expenditures to maintain current levels of retail shelf
      space.





We
      must
      also continuously monitor and evaluate emerging sales channels. If we fail
      to
      establish a presence in an important developing sales channel, our business
      could be harmed. If we are unable to establish relationships in emerging sales
      channels, our sales could decline and we would lose market share.





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





We
      sell
      our products through wholesale distributors such as Ingram Micro, Tech Data
      Corporation and Synnex Corporation and national retailers such as Comp
      USA, Inc. We expect that a majority of our net sales will continue to come
      from sales to a small number of wholesale distributors and national retailers
      for the foreseeable future. We have no minimum purchase commitments or long-term
      contracts with any of these customers. The wholesale distributors and retailers
      could decide at any time to discontinue, decrease or delay their purchases
      of
      our products. We must also monitor and evaluate new sales channels in existing
      markets and in new markets. If we fail to establish a presence in an important
      developing sales channel or market, our business could be harmed.





In
      addition, the prices that wholesale distributors and retailers pay for our
      products are subject to negotiation and could change frequently. If any of
      our
      major wholesale distributors or retailers change their purchasing patterns
      or
      refuse to pay the prices that we set for our products, our net sales and
      operating results could be negatively impacted. If our wholesale distributors
      and retailers increase the size of their product orders without sufficient
      lead-time for us to process the order, our ability to fulfill product demands
      would be compromised. In addition, because our accounts receivable are
      concentrated within a small group of wholesale distributors and retailers,
      the
      failure of any of them to pay on a timely basis, or at all, would reduce our
      cash flow.





*If
      we
      do not effectively manage our sales channel inventory and product mix, we may
      incur costs associated with excess inventory or lose sales from having too
      few
      products or the wrong mix of products.*





If
      we are
      unable to properly monitor, control and manage our sales channel inventory
      and
      maintain an appropriate level and mix of products with our customers and within
      our sales channels, we may incur increased and unexpected costs associated
      with
      our inventory. We generally allow wholesale distributors and retailers to return
      a limited amount of our products in exchange for other products. Under our
      price
      protection policy, subject to certain conditions, if we reduce the list price
      of
      a product, we issue a credit in an amount equal to the reduction for each of
      the
      products held in inventory by our wholesale distributors and retailers. If
      our
      wholesale distributors and retailers are unable to sell their inventory in
      a
      timely manner, we may under our policy lower the price of the products, or
      these
      parties may exchange the products for newer products. If we improperly forecast
      demand for our products we could end up with too many products and be unable
      to
      sell the excess inventory in a timely manner, if at all, or, alternatively
      we
      could end up with too few products and not be able to satisfy demand. If these
      events occur, we could incur increased expenses associated with writing off
      excessive or obsolete inventory or lose sales and therefore suffer declining
      gross margins.


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





The
      market in which we compete is subject to technological advances with yearly
      new
      product releases and price competition. As a result, the price at which we
      can
      sell our products typically declines over the life of the product. The price
      at
      which a product may be sold is generally referred to as the average selling
      price. For example, the average selling price of our CRT monitors declined
      approximately 19.2% and 15.8% for the three and six months ended June 30, 2005,
      when compared to the three and six months ended June 30, 2004, respectively.
      The
      average selling price of our LCD monitors decreased approximately 39.7% and
      37.9% for the three and six months ended June 30, 2005 when compared to the
      three and six months ended June 30, 2004, respectively. The decline in LCD
      monitor’s average selling price was primarily due to increased production
      capacity and aggressive pricing competition. Of the total product units sold
      in
      the three months ended June 30, 2005, CRT monitors accounted for 32%, LCD
      monitors accounted for 50.8%, and other products accounted for 17.2% as compared
      to 52.2%, 34.7%, and 13.1%, respectively, for three months ended June 30, 2004.
      Of the total product units sold in the six months ended June 30, 2005, CRT
      monitors accounted for 31.3%, LCD monitors accounted for 51.8%, and other
      products accounted for 16.9% as compared to 51.8%, 36.2%, and 12.0%,
      respectively, for six months ended June 30, 2004.





In
      order
      to sell products that have a declining average selling price and still maintain
      our gross margins, we need to continually reduce our product costs. 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
      higher sales prices and gross margins in order to maintain our overall gross
      margins. If we are unable to manage the cost of older products or successfully
      introduce new products with higher gross margins, our net sales will decrease
      and our gross margins will decline.





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





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





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





All
      of
      our products are manufactured, assembled, tested and packaged by contract
      manufacturers. We rely on several contract manufacturers to procure components
      and, in some cases, subcontract engineering work. Some of our products are
      manufactured by a single contract manufacturer. Our contract manufacturers
      are
      primarily located in mainland China, Taiwan, and Thailand and may be subject
      to
      disruption by earthquakes, typhoons and other natural disasters, as well as
      political, social or economic instability. We do not have any long-term
      contracts with any of our third-party contract manufacturers. All of our
      contracts with our contract manufacturers are terminable by either party with
      90 days notice for any reason or no reason. Our four largest contract
      manufacturers for the three and six months ended June 30, 2005 were Techview
      International Technology Inc., Delta Electronics, Inc, Jean Co. Ltd. and
      Coretronic Corporation. The loss of the services of any of our primary contract
      manufacturers could cause a significant disruption in operations and delays
      in
      product shipments. Qualifying a new contract manufacturer and commencing volume
      production is expensive and time consuming.


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





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





·
            Unexpected
                increases in manufacturing and repair
                costs;





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





·
            Inability
                to control the quality of finished
                products;





·
            Inability
                to control delivery schedules;





·
            Unpredictability
                of manufacturing yields; and





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








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





We
      rely
      on third parties to obtain non-exclusive software license rights to technologies
      that are incorporated into and necessary for the operation and functionality
      of
      our products. Because the intellectual property we license is available from
      third parties, barriers to entry for our competitors may be lower than if we
      owned exclusive rights to the technology we license and use. On the other hand,
      if a competitor enters into an exclusive arrangement with any of our third-party
      technology providers, our ability to develop and sell products containing that
      technology could be severely limited. Our licenses often require royalty
      payments or other consideration to third parties. Our success will depend in
      part on our continued ability to have access to these technologies on
      commercially reasonable terms. If we are unable to license the necessary
      technology, we may be forced to acquire or develop alternative technology of
      lower quality or performance standards. This could limit and delay our ability
      to offer competitive products and increase our costs of production. As a result,
      our gross margins, market share, and operating results could be
      harmed.





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





We
      provide our third-party contract manufacturers with a rolling forecast of demand
      which they use to determine their material and component requirements. Lead
      times for ordering materials and components vary significantly and depend on
      various factors, such as the specific supplier, contract terms and demand and
      supply for a component at a given time. Some of our components have long lead
      times. If our forecasts are less than our actual requirements, our contract
      manufacturers may be unable to manufacture products in a timely manner. If
      our
      forecasts are too high, our contract manufacturers will be unable to use the
      components they have purchased. The cost of the components used in our products
      tends to drop rapidly as volumes increase and the technologies mature.
      Therefore, if our contract manufacturers are unable to promptly use components
      purchased on our behalf, our cost of producing products may be higher than
      our
      competitors due to an over-supply of higher-priced components. Moreover, if
      they
      are unable to use certain components, we may need to reimburse them for any
      losses they incur.





*If
      disruptions in our transportation network occur or our shipping costs
      substantially increase, our operating expense could increase and our financial
      results could be negatively impacted.*





We
      are
      highly dependent upon the transportation systems we use to ship our products,
      including surface, ocean and air freight. Our attempt to closely match our
      inventory levels to our product demand intensifies the need for our
      transportation systems to function effectively and without delay. The
      transportation network is subject to disruption from a variety of causes,
      including labor disputes or port strikes, acts of war or terrorism and natural
      disasters. If our delivery times increase unexpectedly for these or any other
      reasons, our ability to deliver products on time could result in delayed or
      lost
      revenue. In addition, if the recent increases in fuel prices were to continue,
      our transportation costs would likely increase. A prolonged transportation
      disruption or a significant increase in the cost of freight could severely
      disrupt our business and harm our operating results.




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





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





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





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





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





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





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





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





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





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





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





Our
      strategies include further expanding our business in markets in which we
      currently operate, including China, Russia, Eastern and Western Europe. In
      many
      of these markets, we face barriers in the form of long-standing relationships
      between our potential customers and their local suppliers, as well as protective
      regulations. In addition, pursuing international growth opportunities may
      require us to make significant investments long before we realize returns on
      the
      investments, if any. Increased investments may result in expenses growing at
      a
      faster rate than revenues. Our overseas investments could be adversely affected
      by:





·
            Reversals
                or delays in the opening of foreign markets to new
                participants;





·
            Exchange
                controls;





·
            Restrictions
                on foreign investment or the repatriation of profits or invested
                capital;





·
            Nationalization
                of local industry;





·
            Changes
                in export or import restrictions;




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·
              Changes
                  in the tax system or rate of taxation in the countries where we
                  do
                  business; and
 
 ·
              Economic,
                  social, and political risks.


In
      addition, difficulties in foreign financial markets, economies and foreign
      financial institutions, particularly in emerging markets, could adversely affect
      demand from customers in the affected countries. Because of these factors,
      we
      may not succeed in expanding our business in international markets. This could
      hurt our business growth prospects and results of operations.





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





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





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





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





There
      is
      a risk that defects may occur in our products and services. The occurrence
      of
      these defects could make us liable for damages caused by these defects,
      including consequential damages. To date, none of these claims has had a
      material impact on our business. Negative publicity concerning these problems
      could also make it more difficult to convince customers to buy our products
      and
      services. Both could hurt our business, operating results, and financial
      condition.





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





We
      work
      with our contract manufacturers to develop and/or incorporate new technologies
      and products. Our contract manufacturers design the electronic and mechanical
      systems of a display product around our choice of major components and our
      specific industrial design. Aside from these major specifications mandated
      by
      us, the contract manufacturers choose electronic and mechanical solutions of
      standard design to reduce the development time, engineering cost and procurement
      risk associated with more customized designs. Our relationships with these
      contract manufacturers generally do not include a long-term commitment on behalf
      of either party. If our contract manufacturers encounter financial or other
      business difficulties, if their strategic objectives change, or if they perceive
      us to no longer be an attractive customer, they may no longer assist us in
      our
      product development efforts. Our business could be harmed if we were unable
      to
      continue one or more of our contract manufacturing relationships.




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





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




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





*Evaluation
      of Disclosure Controls and Procedures*




We
      maintain “disclosure controls and procedures,” as such term is defined in Rule
      13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange
      Act”). Our management, including our Chief Executive Officer and Chief Financial
      Officer, does not expect that our disclosure controls and procedures or our
      internal controls will prevent all error and all fraud. A control system, no
      matter how well conceived and operated, can provide only reasonable, not
      absolute, assurance that the objectives of the control system are met. Further,
      the design of a control system must reflect the fact that there are resource
      constraints, and the benefits of controls must be considered relative to their
      costs. These inherent limitations include the realities that judgments in
      decision-making can be faulty, and that breakdowns can occur because of a simple
      error or mistake. Additionally, controls can be circumvented by the individual
      acts of some persons, by collusion of two or more people, or by management
      override of the control. The design of any system of controls also is based
      in
      part upon certain assumptions about the likelihood of future events, and there
      can be no assurance that any design will succeed in achieving its stated goals
      under all potential future conditions; over time, controls may become inadequate
      because of changes in conditions, or the degree of compliance with the policies
      or procedures may deteriorate.





Based
      on
      their evaluation as of June 30, 2005, our Chief Executive Officer and Chief
      Financial Officer have concluded that, our disclosure controls and procedures
      (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were
      sufficiently effective to ensure that the information required to be disclosed
      by us in this Quarterly Report on Form 10-Q was recorded, processed, summarized
      and reported within the time periods specified in Securities and Exchange
      Commission rules and forms. ****





*Changes
      in Internal Control over Financial Reporting*





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


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**PART
      II - OTHER INFORMATION**




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





In
      the
      ordinary course of business, we are involved in lawsuits, claims,
      investigations, proceedings, and threats of litigation consisting of
      intellectual property, commercial, employment and other matters. In accordance
      with SFAS No. 5, *Accounting
      for Contingencies,* we make
      a provision for a liability when it is both probable that a liability has been
      incurred and the amount of the loss can be reasonably estimated. These
      provisions are reviewed at least quarterly and adjusted to reflect the impacts
      of negotiations, settlements, rulings, advice of legal counsel and other
      information and events pertaining to a particular case. Litigation is inherently
      unpredictable. However, we believe that we have valid defenses with respect
      to
      the legal matters pending against us, as well as adequate provisions for any
      probable and estimable losses. While the outcome of these proceedings and claims
      cannot be predicted with certainty, management does not believe that the outcome
      of any pending legal matters will have a material adverse effect on our
      consolidated condensed balance sheets, although statements of operations or
      cash
      flows could be affected in a particular period.








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





Not
      applicable.








**ITEM
                3.**
            **DEFAULTS
                UPON SENIOR SECURITIES**





Not
      applicable.








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





Not
      applicable.






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





Not
      applicable.




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**ITEM
      6. EXHIBITS**




(a)Exhibits10.18
            Separation
                Agreement by and between ViewSonic Corporation and Christopher M.
                Franey,
                dated May 10, 2005.31.1
            Certification
                of Chief Executive Officer as required by Rule 13a-14(a) of the Securities
                Exchange Act of 1934, as amended31.2
            Certification
                of Chief Financial Officer as required by Rule 13a-14(a) of the Securities
                Exchange Act of 1934, as amended32.1*
            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.





(1)  
      Incorporated by reference to Exhibit 10.18 to ViewSonic Corporation’s Current
      Report on Form 8-K (000-50730) dated May 18, 2005, filed with the Securities
      and
      Exchange Commission on May 23, 2005.





*
            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.




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 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 August ____, 2005.




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






34


**EXHIBIT
        INDEX**
  Exhibit
                  No.
              Description
                  of Exhibits10.18
              Separation
                  Agreement by and between ViewSonic Corporation and Christopher
                  M. Franey,
                  dated May 10, 2005.31.1
              Certification
                  of Chief Executive Officer as required by Rule 13a-14(a) of the
                  Securities
                  Exchange Act of 1934, as amended31.2
              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.
 
 (1)
        Incorporated by reference to Exhibit 10.18 to ViewSonic Corporation’s Current
        Report on Form 8-K (000-50730) dated May 18, 2005, filed with the Securities
        and
        Exchange Commission on May 23, 2005.
 
 *
              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.




35