**UNITED
        STATES**
 **SECURITIES
          AND EXCHANGE COMMISSION**
 **Washington,
          D.C. 20549**
 ________________
 **FORM
          10-Q**
 
 x
                **QUARTERLY
                    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                    ACT OF
                    1934**
 
 **For
          the quarterly period ended March 31, 2006**
 
 **OR**
 
 o
                **TRANSITION
                    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                    ACT OF
                    1934**
 
 
 **For
          the transition period from ____________ to ____________.**
  Commission
          file number:
          000-50730
  **VIEWSONIC
            CORPORATION**
 **(** *Exact
            name of Registrant as Specified in Its Charter* **)**
 **Delaware**
              **95-4120606***(State
                  or Other Jurisdiction of Incorporation or
                  Organization)*
              *(I.R.S.
                  Employer Identification No.)*
 
 **381
        Brea Canyon Road**
 **Walnut,
        California 91789**
 **(909)
        444-8800**
 *(Address,
        including Zip Code, of Registrant's Principal Executive
        Offices*
 *and
        Registrant's Telephone Number, including Area Code)*
 
 
 Indicate
        by check mark whether the registrant (1) has filed all reports required to
        be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
        the
        preceding 12 months (or for such shorter period that the registrant was required
        to file such reports) and (2) has been subject to such filing requirements
        for
        the past 90 days. Yes x No
o
 
 Indicate
        by check mark whether the registrant is a large accelerated filer, an
        accelerated filer, or a non-accelerated filer. See definition of “accelerated
        filer and large accelerated file” in Rule 12b-2 of the Exchange Act (check
        one):
 
 Large
        accelerated filer o Accelerated
        filer o Non-accelerated
        filer x
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act). Yes o No x
 
 The
        number of shares of the registrant's common stock outstanding was 354,124,268
        shares and the number of shares of Series B preferred stock outstanding was
        0
        shares, each as of April 30, 2006.
  
 
 **VIEWSONIC
        CORPORATION**
 **FORM
        10-Q**
 **TABLE
        OF CONTENTS**
  **Page****PART
                  I: FINANCIAL INFORMATION**Item
                  1.
              Consolidated
                  Condensed Financial Statements
                  (unaudited)
              1Consolidated
                  Condensed Balance Sheets as of March 31, 2006 and December 31,
                  2005
              2Consolidated
                  Condensed Statements of Operations for the three months ended March
                  31,
                  2006 and 2005
              3Consolidated
                  Condensed Statements of Cash Flows for the three months ended March
                  31,
                  2006 and 2005
              4Notes
                  to Consolidated Condensed Financial
                  Statements
              4Item
                  2.
              Management’s
                  Discussion and Analysis of Financial Condition
                  and Results of Operations
              10Item
                  3.
              Quantitative
                  and Qualitative Disclosures About Market
                  Risk
              16Item
                  4.
              Controls
                  and Procedures
              16**PART
                  II: OTHER INFORMATION**Item
                  1.
              Legal
                  Proceedings
              17Item
                  1A.
              Risk
                  Factors
              17Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of
                  Proceeds
              24Item
                  3.
              Defaults
                  Upon Senior Securities
              24Item
                  4.
              Submission
                  of Matters to a Vote of Securities
                  Holders
              24Item
                  5.
              Other
                  Information
              24Item
                  6.
              Exhibits
              25Signatures
              26
  *Table
              of Contents*
 
 **PART
        I. FINANCIAL INFORMATION**
 
 **ITEM
        1. CONSOLIDATED CONDENSED FINANCIAL
        STATEMENTS**
 
 **VIEWSONIC
        CORPORATION AND SUBSIDIARIES**
 **CONSOLIDATED
        CONDENSED BALANCE
        SHEETS**
 **MARCH
        31, 2006 AND DECEMBER 31, 2005**
 **(In
        thousands, except for share data and par value)**
 **(Unaudited)**
  **March
                  31,**
                **2006**
              
              **December
                  31,**
                **2005****ASSETS**CURRENT
                  ASSETS:Cash
                  and cash equivalents
              
              $
              73,393
              
              $
              93,998Short-term
                  investments
              
              
              3,302
              
              
              —Trade
                  receivables—net
              
              
              159,633
              
              
              145,982Other
                  receivables
              
              
              8,154
              
              
              7,013Inventories
              
              
              151,259
              
              
              155,389Deferred
                  income taxes
              
              
              3,203
              
              
              3,194Prepaids
                  and other current assets
              
              
              3,347
              
              
              2,931Income
                  taxes receivable
              
              
              166
              
              
              761Total
                  current assets
              
              
              402,457
              
              
              409,268PROPERTY,
                  PLANT AND EQUIPMENT—Net
              
              
              15,432
              
              
              12,929LONG-TERM
                  INVESTMENTS
              
              
              3,283
              
              
              2,676GOODWILL
              
              
              1,347
              
              
              1,347OTHER
                  ASSETS—Net
              
              
              2,783
              
              
              6,505TOTAL
              
              $
              425,302
              
              $
              432,725**LIABILITIES
                  AND STOCKHOLDERS' EQUITY**CURRENT
                  LIABILITIES:Bank
                  borrowings
              
              $
              16,160
              
              $
              4,852Accounts
                  payable
              
              
              247,987
              
              
              266,867Accrued
                  promotional expenses
              
              
              27,972
              
              
              22,663Accrued
                  warranty expense
              
              
              22,244
              
              
              21,350Other
                  accrued expenses
              
              
              25,394
              
              
              20,809Total
                  current liabilities
              
              
              339,757
              
              
              336,541SUBORDINATED
                  NOTES PAYABLE—Related party
              
              
              43,000
              
              
              43,000CONVERTIBLE
                  MANDATORILY REDEEMABLE PREFERRED STOCK
              
              
              —
              
              
              14,952STOCKHOLDERS'
                  EQUITY:Common
                  stock, $.01 par value:Authorized—600,000,000
                  shares at March 31, 2006 and December 31, 2005Outstanding—
                  354,124,268 and 353,974,268 shares at March 31, 2006 and December31,
                  2005,
                  respectively.
              
              
              3,541
              
              
              3,540Additional
                  paid-in capital
              
              
              93,818
              
              
              93,716Accumulated
                  deficit
              
              
              (52,082
              )
              
              (55,611
              )Accumulated
                  other comprehensive loss
              
              
              (2,732
              )
              
              (3,413
              )Total
                  stockholders' equity
              
              
              42,545
              
              
              38,232TOTAL
              
              $
              425,302
              
              $
              432,725
 
 The
        accompanying notes are an integral part of these consolidated condensed
        financial statements.
 
 1
 *Table
              of Contents*
 
 **VIEWSONIC
        CORPORATION AND SUBSIDIARIES**
 **CONSOLIDATED
        CONDENSED STATEMENTS OF
        OPERATIONS**
 **MARCH
        31, 2006 AND 2005**
 **(In
        thousands, except per share data)**
 **(Unaudited)**
  **Three
                  Months Ended March 31,****2006**
              
              **2005**Net
                  sales
              
              $
              326,794
              
              $
              273,912Cost
                  of sales
              
              
              296,578
              
              
              245,843Gross
                  profit
              
              
              30,216
              
              
              28,069Selling,
                  general and administrative expenses
              
              
              26,907
              
              
              27,312Income
                  from operations
              
              
              3,309
              
              
              757Other
                  income (expense)—net:Interest
                  income (expense)—net
              
              
              157
              
              
              (52
              )Other
                  income (expense)—net
              
              
              1,336
              
              
              (1,419
              )Other
                  income (expense)—net
              
              
              1,493
              
              
              (1,471
              )Income
                  (loss) from continuing operations before income taxes
              
              
              4,802
              
              
              (714
              )Provision
                  (benefit) for income taxes
              
              
              1,226
              
              
              (200
              )Income
                  (loss) from continuing operations
              
              
              3,576
              
              
              (514
              )Net
                  loss on disposal of discontinued operations, net of tax
              
              
              —
              
              
              (70
              )Net
                  income (loss)
              
              
              3,576
              
              
              (584
              )Preferred
                  stock accretion
              
              
              (48
              )
              
              (361
              )Net
                  income (loss) available to common stockholders
              
              $
              3,528
              
              $
              (945
              )Basic
                  earnings (loss) per share:Continuing
                  operations
              
              $
              0.01
              
              $
              (0.00
              )Discontinued
                  operations
              
              
              0.00
              
              
              (0.00
              )Total
                  basic earnings (loss) per share
              
              $
              0.01
              
              $
              (0.00
              )Diluted
                  earnings (loss) per shareContinuing
                  operations
              
              $
              0.01
              
              $
              (0.00
              )Discontinued
                  operations
              
              
              0.00
              
              
              (0.00
              )Total
                  diluted earnings (loss) per share
              
              $
              0.01
              
              $
              (0.00
              )Basic
                  weighted average shares outstanding
              
              
              354,059
              
              
              353,962Diluted
                  weighted average shares outstanding
              
              
              360,764
              
              
              353,962
 
 The
        accompanying notes are an integral part of these consolidated condensed
        financial statements.
 
 2
 *Table
              of Contents*
 
 **VIEWSONIC
        CORPORATION AND SUBSIDIARIES**
 **CONSOLIDATED
        CONDENSED STATEMENTS OF CASH
        FLOWS**
 **MARCH
        31, 2006 AND 2005**
 **(In
        thousands)**
 **(Unaudited)**
 
 **Three
                  Months Ended March 31,****2006**
              
              **2005**
                **(Revised)****CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Income
                  (loss) from continuing operations
              
              $
              3,576
              
              $
              (514
              )Adjustments
                  to reconcile net income (loss) from continuing operations to net
                  cash used
                  in operating activities:Depreciation
                  and amortization
              
              
              748
              
              
              765Loss
                  (gain) on disposal of property, plant and equipment
              
              
              7
              
              
              (3
              )Provision
                  for doubtful accounts
              
              
              81
              
              
              (25
              )Net
                  loss (gain) on sale and impairment of long-term
                  investments
              
              
              366
              
              
              (46
              )Deferred
                  income taxes
              
              
              324
              
              
              244Stock-based
                  compensation expense
              
              
              47
              
              
              —Changes
                  in operating assets and liabilities:Trade
                  receivables
              
              
              (13,284
              )
              
              24,713Other
                  receivables
              
              
              (1,105
              )
              
              966Inventories
              
              
              4,440
              
              
              33,560Prepaids
                  and other current assets
              
              
              (413
              )
              
              178Accounts
                  payable
              
              
              (19,569
              )
              
              (85,158
              )Accrued
                  promotional and other expenses
              
              
              9,259
              
              
              (1,050
              )Accrued
                  warranty expense
              
              
              883
              
              
              1,396Income
                  taxes payable/receivable
              
              
              1,168
              
              
              446Net
                  cash used in operating activities
              
              
              (13,472
              )
              
              (24,528
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES:**Purchases
                  of property, plant and equipment
              
              
              (157
              )
              
              (141
              )Proceeds
                  on sale of long-term investments
              
              
              —
              
              
              90Sales
                  of short-term investments
              
              
              4,123
              
              
              2,268Purchases
                  of short-term investments
              
              
              (7,439
              )
              
              —Net
                  cash (used in) provided by investing activities
              
              
              (3,473
              )
              
              2,217**CASH
                  FLOWS FROM FINANCING ACTIVITIES:**Net
                  proceeds from bank borrowings
              
              
              11,221
              
              
              (3,529
              )Proceeds
                  from issuance of common stock
              
              
              57
              
              
              9Redemption
                  of preferred stock
              
              
              (15,000
              )
              
              —Net
                  cash used in financing activities
              
              
              (3,722
              )
              
              (3,520
              )**CASH
                  FLOW FROM DISCONTINUED OPERATIONS**Cash
                  flow from operating activities
              
              
              —
              
              
              (1,052
              )Cash
                  flow from investing activities
              
              
              —
              
              
              40Cash
                  flow from financing activities
              
              
              —
              
              
              —Net
                  cash used in discontinued operations
              
              
              —
              
              
              (1,012
              )NET
                  DECREASE IN CASH AND CASH EQUIVALENTS
              
              
              (20,667
              )
              
              (26,843
              )CASH
                  AND CASH EQUIVALENTS—Beginning of year
              
              
              93,998
              
              
              100,497EFFECT
                  OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
              
              
              62
              
              
              26**CASH
                  AND CASH EQUIVALENTS—End of period**
              
              $
              73,393
              
              $
              73,680
 
 The
        accompanying notes are an integral part of these consolidated condensed
        financial statements.
 
 3
 *Table
              of Contents*
 
 **VIEWSONIC
        CORPORATION AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED CONDENSED FINANCIAL
        STATEMENTS**
 **(Unaudited)**
  **Note
        1 - Summary of Significant Accounting Policies**
 
 ***Basis
        of Presentation***
  The
        accompanying unaudited consolidated condensed financial statements have been
        prepared in accordance with 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 and its subsidiaries
        (collectively, the “Company”) contain all adjustments, consisting only of normal
        recurring adjustments, necessary to present fairly the Company’s financial
        position as of March 31, 2006, and the Company’s results of operations and
        cash flows for the three months ended March 31, 2006 and 2005. The
        consolidated condensed balance sheet as of December 31, 2005 is derived
        from the December 31, 2005 audited consolidated financial statements.
 
 The
        results of operations for the three months ended March 31, 2006 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, 2005 and notes thereto included in the Company’s
        Form 10-K filed with the Securities and Exchange Commission, (the “SEC”) on
        April 3, 2006.
 
 The
        accompanying unaudited consolidated condensed financial statements have been
        prepared in accordance with generally accepted accounting principles 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, Warranty and Promotions***
 
 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 provides a variety of warranty programs worldwide, and each program
        is
        based on the specific products and geographic locations. Accruals are provided
        for such estimated future costs at the time the product is sold, and such
        amounts are based upon historical experience.
 
 The
        Company offers promotions such as rebates, price protection and other incentives
        to customers in the normal course of business. Accruals for these promotions
        are
        provided for based on estimates and historical experience. The costs of these
        promotions are offset against sales.
 
 The
        Company occasionally requests that its contract manufacturers ship finished
        goods directly to its customers. However, the Company's primary business
        practice is to have finished goods delivered from its contract manufacturers
        directly to the Company's regional warehouses, where it is stored for eventual
        shipment to its customers. For vendor drop shipment sales, the Company retains
        title to the shipment from the time it leaves the contract manufacturer's
        port
        of choice, until the time title passes to the customer.
 
 
 ***Promotional
        Pricing Incentives from Vendors***
 
 The
        Company receives promotional pricing incentives from its product vendors.
        The
        amount of the pricing incentives is based on various factors including the
        volatility of pricing of key product components, market dynamics and the
        quantity of the Company’s purchases from such vendors. The pricing incentives do
        not require the Company to commit to future component purchases from these
        vendors. The Company records the reimbursement from vendors for these
        promotional pricing incentives when the Company is released of the legal
        liability for the payment of the product purchases by the vendors. The benefit
        from pricing incentives related to products that have not been sold is deferred
        and recorded as a reduction of inventory cost. The benefit from pricing
        incentives related to products that have been sold is recorded as a reduction
        of
        the cost of sales.
 
 4
 *Table
              of Contents*
 
 ***Statements
        of Cash Flows***
 
 As
        of
        December 31, 2005, the management of the Company determined that the cash
        flows
        associated with discontinued operations should not have been presented as
        a
        single line item in the Consolidated Statement of Cash Flows. As a result,
        the
        Company revised the presentation of cash flows for the period ended March
        31,
        2005 to present separate disclosure of cash flows from discontinued operations
        from operating, investing, and financing activities.
 
 
 ***Reclassifications***
 
 Interest
        expense and interest income have been shown net in the first quarter of 2005
        to
        conform to the first quarter of 2006 presentation.
 
 
 **Note
        2 -**  **Stock-Based
        Compensation**
 
 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 (“SFAS”) No. 123, *Accounting
        for Stock-Based Compensation* (“SFAS
        No. 123”), using the modified prospective method. The Company previously had
        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 adopted SFAS No. 123, the Company’s net
        income would be decreased by $19,000 during the first quarter of
        2005.
 
 On
        January 1, 2006, the Company adopted Statement of Financial Accounting Standards
        No. 123(R), *Share-Based
        Payment* (“SFAS
        No. 123(R)”), which requires all share-based payments to employees, including
        grants of employee stock options, to be expensed and recognized over the
        requisite service period based on the grant date fair value of those awards.
        Among other differences, SFAS No. 123(R) includes an estimate of volatility.
        SFAS No. 123 does not require the use of volatility for privately held companies
        in estimating the fair value of stock options and accordingly, the Company
        used
        the minimum value method afforded by SFAS No. 123.
 
 The
        Company adopted SFAS No. 123(R) using the prospective method and accordingly,
        the consolidated financial statements for prior periods have not been restated
        to reflect the impact of SFAS No. 123(R). Stock-based compensation expense
        recognized during the first quarter of 2006 applies to unvested stock options
        granted prior to December 31, 2005 based on the grant date minimum value
        estimated in accordance with the original provisions of SFAS No. 123.
        Additionally, stock-based compensation expense recognized during the first
        quarter of 2006 has been reduced by estimated forfeitures. SFAS No. 123(R)
        requires forfeitures to be estimated at the time of grant and revised, if
        necessary, in subsequent periods if actual forfeitures differ from those
        estimates. The adoption of the prospective application of SFAS No. 123(R)
        did
        not have a material impact on the Company’s consolidated financial positions,
        results of operations, cash flows, or earnings per share. The cumulative
        effect
        upon adoption of SFAS No. 123(R) was $11,000.
 
 During
        the first quarter of 2006, stock-based compensation expense was $47,000.
        There
        were no grants of stock options or other share-based payments during the
        first
        quarter of 2006. As of March 31, 2006, there was unrecognized compensation
        expense of $223,000 related to unvested stock options. The unrecognized
        compensation expense is expected to be recognized over a weighted-average
        period
        of 2.1 years.
 
 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****March
                  31, 2005**Dividend
                  yield
              
              
              0
              %Expected
                  volatility
              
              
              0
              %Risk-free
                  interest rates
              
              
              3.90
              %Expected
                  lives
              
              
              4
                  yearsWeighted-average
                  fair value of options granted
              
              $
              0.05
  The
        following table is a summary of stock option activity under the Plan as of
        March
        31, 2006, and changes during the three months ended March 31, 2006.
 
 5
 *Table
              of Contents*
  **Options**
              
              **Weighted**
                **Average**
                **Exercise
                  Price**
                **Per
                  Share**
              
              **Weighted**
                **Average**
                **Remaining**
                **Contractual
                  Term**
              
              **Aggregate**
                **Intrinsic
                  Value**Outstanding
                  at December 31, 2005
              
              
              27,625,596
              
              $
              0.38Granted
              
              
              —
              
              $
              —Exercised
              
              
              150,000
              
              $
              0.38Canceled
              
              
              1,523,101
              
              $
              0.38Outstanding
                  at March 31, 2006
              
              
              25,952,495
              
              $
              0.38
              
              
              5.97
              
              $
              1,773,310Exercisable
                  at March 31, 2006
              
              
              19,904,532
              
              $
              0.38
              
              
              5.16
              
              $
              1,386,098
 
 The
        weighted-average grant-date fair value of the options granted during the
        three
        months ended March 31, 2005 was $0.05 per option. The total intrinsic value
        of
        options exercised during the three months ended March 31, 2006 and 2005 was
        $10,500 and $0, respectively. The intrinsic value of options is the amount
        by
        which the fair value of the underlying stock exceeds the exercise price of
        an
        option.
 
 
 The
        following table summarizes information for options outstanding at March 31,
        2006:
 
 **Range
                  of Prices**
              
              **Option
                  Outstanding**
              
              **Weighted-**
                **Average**
                **Remaining
                  Life**
                **(Years)**
              
              **Weighted-**
                **Average
                  Exercise**
                **Price**
              
              **Options**
                **Exercisable**$0.38
              
              
              25,445,495
              
              
              5.87
              
              $
              0.38
              
              
              19,904,532$0.45
              
              
              507,000
              
              
              9.58
              
              $
              0.45
              
              
              —
 
  **Note
        3 - Comprehensive 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 income.  The following table sets
        forth the calculation of comprehensive income for the periods indicated (in
        thousands):
 
 **Three
                  Months Ended March 31,****2006**
              
              **2005**Net
                  income (loss)
              
              $
              3,576
              
              $
              (584
              )Foreign
                  currency translation
              
              
              90
              
              
              88Unrealized
                  holding gains on marketable securities-less realized gains
              
              
              591
              
              
              576Net
                  change in other comprehensive income
              
              
              681
              
              
              664Total
                  comprehensive income
              
              $
              4,257
              
              $
              80
 
 
 **Note
        4 - Income Taxes**
 
 The
        Company recorded a non-cash charge of $13.7 million to establish a valuation
        of
        allowance against its net deferred U.S. based income tax assets during the
        second quarter ended June 30, 2005. In addition, the Company has valuation
        allowances against its deferred income taxes in all foreign jurisdictions
        other
        than its foreign subsidiary in Taiwan. The valuation allowances have been
        calculated pursuant to SFAS No. 109, *Accounting
        for Income Taxes* (“SFAS
        No. 109”), which requires an assessment of both positive and negative evidence
        when measuring the need for a valuation allowance. Such evidence includes
        the
        Company’s past and projected future performance, the market environment in which
        the Company operates, the utilization of past tax credits and the length
        of the
        carry-back and carry-forward periods of net operating losses. As of March
        31,
        2006, the total valuation allowance was $15.5 million against domestic net
        deferred income tax assets and $1.8 million against foreign net deferred
        tax
        assets. The Company intends to maintain a valuation allowance until sufficient
        positive evidence, as contemplated by SFAS No. 109, exists in future
        periods.
 
 6
 *Table
              of Contents*
 
 **Note
        5 - Commitments and Contingencies**
 
 ***Litigation*** —
The
        Company is involved in various legal matters in the normal course of its
        business. Management believes that the ultimate outcome of such matters will
        not
        have a material adverse effect on the consolidated condensed financial
        statements.
 
 ***Imposition
        of Additional Duties and Taxes*** — ****** The
        European Union, (the “EU”), issued notices stating that effective January 18,
        2006, LCD monitors with a digital video interface (“DVI”) connector, would incur
        a 14% import duty tax.  To date, this change in classification has been
        applied prospectively.  The Company believes it is reasonably possible, but
        not probable that the tariff could be applied retroactively; however, the
        Company will continue to monitor this situation and work to change the Company’s
        business processes to minimize any negative impact resulting from this new
        tariff.
 
 ***Laws,
        Regulations and Directives*** —
The
        Company is subject to local laws and regulations in the various regions in
        which
        the Company operates, including the EU.  There are two particular EU
        directives that may have a material impact on the Company’s business.  The
        first is the Restriction of Certain Hazardous Substances Directive (“RoHS”) that
        restricts the distribution of certain substances, including lead, within
        the EU
        and is effective July 1, 2006.  In addition to specifying the elimination
        and/or reduction in the level of specified hazardous materials from the
        manufacture of the Company’s products, the Company must take reasonable measures
        to ensure that it is not being supplied with products containing the restricted
        chemical substances. The Company is starting to receive requests from its
        customers for RoHS-compliant products. The Company is in the process of
        compiling RoHS-compliant information on the Company’s products as well as
        procuring RoHS-compliant material and information from the Company’s suppliers.
        The second directive is the Waste Electrical and Electronic Equipment Directive
        (“WEEE”) that became effective on August 13, 2005, and requires manufacturers or
        importers to provide a process of recycling all of its
        manufactured products or imports into the EU. Certain EU countries adopted
        WEEE
        on August 13, 2005. The majority of EU countries into which the Company’s
        European region sells its products, have adopted the legislation with the
        exception of France and the United Kingdom. Many of those countries, which
        adopted WEEE in August 2005, have not published regulations nor have issued
        legislation with respect to a manufacturer or importer’s obligations. The
        Company is currently unable to assess the impact of these directives on the
        Company’s operations until more information becomes available, but at this time,
        the Company does not believe that these regulations will have a material
        impact
        on the Company’s business.
 
 ***Income
        Tax Contingencies***  — The
        Company has recorded a $3.1 million liability related to certain tax
        positions.  The resolution of such income tax contingencies is not expected
        to have an adverse material effect on the consolidated financial
        statements.
 
 
 **Note
        6 - Business Segments**
 
 In
        accordance with SFAS No. 131, *Disclosures
        about Segments of an Enterprise and Related Information* (“SFAS
        No. 131”), the Company has three reportable segments: Americas, Europe and Asia
        Pacific. The Company sells similar products in the local markets, including
        CRT
        displays, LCD displays, projectors, plasma displays, HDTV technology and
        the
        latest in mobile products including wireless monitors. The types and class
        of
        customers, primarily distributors and retailers, are also similar across
        the
        product lines. The following segment financial information is for the periods
        indicated (in thousands):
 
 **Three
                  Months Ended March 31,****2006**
              
              **2005****Net
                  sales:**Americas
              
              $
              152,941
              
              $
              120,639Europe
              
              
              73,264
              
              
              76,221Asia
                  Pacific
              
              
              100,589
              
              
              77,052**Total**
              
              $
              326,794
              
              $
              273,912**Income
                  (loss) from operations:**Americas
              
              $
              5,423
              
              $
              (6,670
              )Europe
              
              
              (5,318
              )
              
              4,417Asia
                  Pacific
              
              
              3,204
              
              
              3,010**Total**
              
              $
              3,309
              
              $
              757
 
 7
 *Table
              of Contents*
 
 **Note
        7 - Warranty**
 
 The
        Company provides product warranty programs on a worldwide basis that vary
        in
        term from 12 to 36 months. The length of the warranty period and the
        specific warranty coverage are based on the type of product. The Company
        accrues
        for estimated warranty costs at the time the product is sold, 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):
 **Three
                    Months Ended March 31,**
                
                **Beginning**
                  **Accrued**
                  **Warranty**
                  **Liability**
                
                **Payments**
                  **for
                    Units**
                  **Returned**
                
                **Additional**
                  **Warranty**
                  **Expense**
                  **for
                    Units**
                  **Sold**
                
                **Adjustments**
                
                **Ending**
                  **Accrued**
                  **Warranty**
                  **Liability****2006**
                
                $
                21,350
                
                $
                (4,166
                )
                $
                4,947
                
                $
                113
                
                $
                22,244**2005**
                
                $
                17,365
                
                $
                (3,110
                )
                $
                3,533
                
                $
                974
                
                $
                18,762
 
 **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 fair market value over the period have an
        anti-dilutive effect on EPS and, accordingly, are excluded from the calculation.
        For the three months ended March 31, 2006 and 2005, options for 507,000 and
        29,379,365 shares, respectively, were excluded from the diluted earnings
        per
        common share calculation because they were anti-dilutive. For the three months
        ended March 31, 2006 and 2005, warrants for 7,500,000 and 10,800,000,
        respectively, were excluded from the diluted earnings per common share
        calculation because they were anti-dilutive. On January 10, 2006, the Company
        redeemed all 7,500,000 outstanding shares of Series B Preferred Stock and
        therefore such shares had an insignificant impact on the Company’s EPS
        calculations.
 
 The
        basic
        and diluted EPS was calculated using the EITF 03-06 *Participating
        Securities and the Two Class Method under SFAS No. 128* (“EITF
        03-06”) *.* The
        following is a reconciliation of the numerators and denominators of the basic
        and diluted net income (loss) per share computations. Amounts are for the
        periods indicated (amounts in thousands, except per share information).
 
 **Three
                  Months Ended March 31,****2006**
              
              **2005**Basic
                  EPS:Numerator:Income
                  (loss) from continuing operations (1)
              
              $
              3,528
              
              $
              (875
              )(Loss)
                  from discontinued operations
              
              $
              —
              
              $
              (70
              )Denominator—weighted-average
                  shares outstanding
              
              
              354,059
              
              
              353,962Basic
                  EPS:Continuing
                  operations
              
              $
              0.01
              
              $
              (0.00
              )Discontinued
                  operations
              
              $
              0.00
              
              $
              (0.00
              )Total
                  Basic EPS
              
              $
              0.01
              
              $
              (0.00
              )Diluted
                  EPS:Numerator:Income
                  (loss) from continuing operations (1)
              
              $
              3,528
              
              $
              (875
              )(Loss)
                  from discontinued operations
              
              $
              —
              
              $
              (70
              )Denominator:Weighted-average
                  shares outstanding
              
              
              354,059
              
              
              353,962Stock
                  options(2)
              
              
              3,478
              
              
              —Interest
                  warrants(3)
              
              
              3,227
              
              
              —Total
                  shares
              
              
              360,764
              
              
              353,962Diluted
                  EPS:Continuing
                  operations
              
              $
              0.01
              
              $
              (0.00
              )Discontinued
                  operations
              
              $
              0.00
              
              $
              (0.00
              )Total
                  Diluted EPS
              
              $
              0.01
              
              $
              (0.00
              )
  8
 *Table
              of Contents*
 
 (1)
              In
                  accordance with EITF 03-06, income (loss) from continuing operations
                  includes the accretion for the mandatorily redeemable preferred
                  stock. The
                  EPS calculation allocated income from continuing operations between
                  common
                  stock and the convertible mandatorily redeemable preferred stock.
 
 (2)
              For
                  the three months ended March 31, 2005, all stock options were excluded
                  from the diluted earnings per common share calculation because
                  they were
                  anti-dilutive due to the Company’s net
                  loss.
 
 (3)
              For
                  the three months ended March 31, 2006 and 2005, common stock issuable
                  upon
                  the exercise of outstanding warrants of 7,500,000 and 10,800,000,
                  respectively, were excluded from the diluted earnings per share
                  calculation because they were anti-dilutive.
 
 
 **Note
        9 - Convertible Mandatorily Redeemable Preferred Stock and Warrants for Series
        C
        Preferred Stock**
 
 On
        January 10, 2002, the Company entered into a Series B Preferred Stock
        Exchange and Warrant Purchase Agreement (the "Exchange Agreement") with the
        investor. Under the Exchange Agreement, the investor paid an additional
        $5,000,000, bringing the total cash paid to $15,000,000. The exchange was
        made
        for the 3,676,471 shares of Series A Stock originally issued and related
        warrants. As consideration for the exchange, the Company issued to the investor
        7,500,000 shares of Series B convertible mandatorily redeemable convertible
        preferred stock, par value of $.001 per share (the "Series B Stock"). Each
        share of Series B Stock was convertible into one share of common stock or
        redeemable for cash for $2.00 per share on January 10, 2006. In connection
        with such issuance, the Company granted to the investor 3,300,000 Interest
        Warrants and 7,500,000 Valuation Warrants to purchase Series C
        non-redeemable convertible preferred stock (par value of $.001 per share).
        The
        Interest Warrants vested on January 10, 2006, have an exercise price of
        $.01 per share and expire on July 10, 2006. The Valuation Warrants were
        immediately vested, have an exercise price of $2.00 per share, and expire
        on
        July 10, 2006.
 
 As
        of
        March 31, 2006, a total of 18,000,000 shares of Series C preferred stock
        were authorized, and no shares were issued or outstanding. On January 10,
        2006,
        the Company redeemed its outstanding Series B Stock for $15 million,
        representing the full redemption price for such Series B Stock.
 
 
 **Note
        10 - Subsequent Event**
 
 Four
        of
        the Company’s stockholders filed a purported derivative action against James
        Chu, the Company’s Chairman and Chief Executive Officer, and the Company on
        April 17, 2006 in the United States District Court for the Central District
        of
        California. The complaint alleges, among other things, that Mr. Chu has breached
        various fiduciary duties by personally investing in certain of the Company’s
        suppliers, thereafter directing the Company’s contracts to these suppliers and
        failing to disclose such actions. Plaintiffs are seeking actual and punitive
        damages, attorneys’ fees, costs, disgorgement of alleged profits made by Mr.
        Chu, a declaratory judgment against Mr. Chu for alleged breaches of various
        fiduciary duties and an injunction prohibiting the award of contracts to
        suppliers in which Mr. Chu or his relatives have a financial interest. The
        Company believes that the claims against Mr. Chu and the Company are not
        an
        appropriate derivative action and are in the process of defending against
        them
        on such grounds.
 
 
 **ITEM2.**
              **MANAGEMENT'S
                  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                  OPERATIONS**
 
 *The
        following discussion contains forward-looking statements within the meaning
        of
        Section 27A of the Securities Act of 1933 and Section 21E of the Securities
        Exchange Act of 1934, which are subject to the "safe harbor" created by those
        sections. These forward-looking statements include but are not limited to:
        statements related to industry trends and future growth in the markets for
        visual display technology products; our product development efforts; the
        timing
        of our introduction of new products; industry and consumer acceptance of
        our
        products; and future profitability. These forward-looking statements involve
        risks and uncertainties that could cause our actual results to differ materially
        from those in the forward-looking statements. We undertake no obligation
        to
        publicly release any revisions to the forward-looking statements or reflect
        events or circumstances after the date of this document. The “Risk Factors”
section, among other things, should be considered in evaluating our prospects
        and future financial performance.*
 
 *In
        this report, all references to “ViewSonic,” ”we,” “us,” or “our” mean ViewSonic
        Corporation and our subsidiaries.*
 
 9
 *Table
              of Contents*
 
 ***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***
 
 Income
        from continuing operations was $3.6 million in the first quarter of 2006,
        as
        compared to a $0.5 million loss in the first quarter of 2005. During 2005,
        we
        began to implement key initiatives to improve supply chain and logistics
        efficiency, simplify our business processes to maximize operating efficiencies,
        grow sales in regional markets and expand core product offerings, among others.
        In addition, we started to source a key component of LCD monitors directly
        from
        manufacturers in December 2005. We believe this sourcing initiative brings
        us
        closer to the supply base so that we can keep abreast of recent market trends
        and supply cycles. This initiative also allows us to consolidate our LCD
        panel
        purchasing power. We expect that both advantages should enable us to secure
        better pricing and better allocation of the LCD key component. By means of
        this
        key component sourcing initiative, we hope to be less vulnerable to the
        instability that is inherent in the LCD monitor industry. As was demonstrated
        by
        our first quarter operating results, we believe that the implementation of
        these
        key initiatives will position us to successfully compete. However, our profit
        margin continues to be negatively impacted by intense competition, volatility
        of
        supply, declining average selling prices, or ASPs, and fluctuating product
        costs.
 
 The
        ASP
        of our LCD monitors decreased 11.6% in the first quarter of 2006 compared
        to the
        first quarter of 2005. This decline was primarily due to increased production
        capacity and aggressive price competition. We expect the excess capacity
        situation and ASP declines to continue in the short run until anticipated
        market
        demand growth is realized and consumes the increased supply.
 
 We
        sold
        approximately 1.5 million visual display products in the first quarter of
        2006
        compared to approximately 1.3 million visual display products in the first
        quarter of 2005, representing 15.4% growth. The display industry continues
        to
        experience a shift from older technologies, such as CRT, to newer technologies,
        such as LCD, as well as a broadening of applications from PC monitors to
        TVs and
        other digital media applications. Our sales of LCD monitors grew 57.1% to
        1.1
        million units in the first quarter of 2006 from 0.7 million units in the
        first
        quarter of 2005, while sales of CRT monitors declined 25.0% to 0.3 million
        units
        in the first quarter of 2006 from 0.4 million units in the first quarter
        of
        2005. Also, unit sales of LCD TVs grew 152.9% to 43,000 units in the first
        quarter of 2006 from 17,000 units in the first quarter of 2005.
 
 Our
        net
        sales increased to $326.8 million in the first quarter of 2006 from $273.9
        million in the first quarter of 2005, an increase of 19.3%. We also demonstrated
        selling, general and administrative expenses leverage improvement from 10.0%
        of
        net sales in the first quarter of 2005 to 8.2% of net sales in the first
        quarter
        of 2006. In addition, we recorded an exchange gain of $1.7 million in the
        first
        quarter of 2006 as compared to an exchange loss of $1.5 million in the first
        quarter of 2005. As a result, we recorded a $4.1 million improvement in income
        from continuing operations from the first quarter of 2005 to the first quarter
        of 2006.
  
 **Results
        of Operations**
 
 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 March 31,****2006**
              
              **2005**Net
                  sales
              
              
              100.0
              %
              
              100.0
              %Cost
                  of sales
              
              
              90.8
              
              
              89.8Gross
                  profit
              
              
              9.2
              
              
              10.2Selling,
                  general and administrative expenses
              
              
              8.2
              
              
              10.0Income
                  from operations
              
              
              1.0
              
              
              0.2Other
                  income (expense) - net:Interest
                  income (expense) - net
              
              
              0.1
              
              
              (0.0
              )Other
                  income (expense) - net
              
              
              0.4
              
              
              (0.5
              )Other
                  income (expense)- net
              
              
              0.5
              
              
              (0.5
              )Income
                  (loss) from continuing operations before income taxes
              
              
              1.5
              
              
              (0.3
              )Provision
                  (benefit) for income taxes
              
              
              0.4
              
              
              (0.1
              )Income
                  (loss) from continuing operations
              
              
              1.1
              
              
              (0.2
              )Net
                  loss on disposal of discontinued operations, net of tax
              
              
              0.0
              
              
              (0.0
              )Net
                  income (loss)
              
              
              1.1
              
              
              (0.2
              )Preferred
                  stock accretion
              
              
              (0.0
              )
              
              (0.1
              )Net
                  income (loss) available to common stockholders
              
              
              1.1
              %
              
              (0.3
              )%
  10
 *Table
              of Contents*
  **Three
                  Months Ended March 31,**
              
              **Dollar**
                **Increase/**
              
              **Percentage**
                **Increase/****2006**
              
              **2005**
              
              **(Decrease)**
              
              **(Decrease)****(in
                  thousands)****Net
                  Sales**Americas
              
              $
              152,941
              
              $
              120,639
              
              $
              32,302
              
              
              26.8
              %Europe
              
              
              73,264
              
              
              76,221
              
              
              (2,957
              )
              
              (3.9
              )Asia
                  Pacific
              
              
              100,589
              
              
              77,052
              
              
              23,537
              
              
              30.5**Total**
              
              $
              326,794
              
              $
              273,912
              
              $
              52,882
              
              
              19.3
              %**Income
                  (loss) from operations:**Americas
              
              $
              5,423
              
              $
              (6,670
              )
              $
              12,093
              
              
              181.3
              %Europe
              
              
              (5,318
              )
              
              4,417
              
              
              (9,735
              )
              
              (220.4
              )Asia
                  Pacific
              
              
              3,204
              
              
              3,010
              
              
              194
              
              
              6.4**Total**
              
              $
              3,309
              
              $
              757
              
              $
              2,552
              
              
              337.1
              %
 
 **Consolidated
        Results of Operations—March 31, 2006 Compared to March 31,
        2005**
 
 
 ***Net
        Sales***
 
 Our
        consolidated net sales increased $52.9 million, or 19.3% to $326.8 million
        in
        the first quarter of 2006 from $273.9 million in the first quarter of 2005.
        The increase was primarily due to an increase in LCD unit sales and increasing
        LCD TV sales with relatively higher ASPs, partially offset by a decline in
        the
        ASPs within the LCD and CRT product categories. The decline in the ASPs reflects
        the effects of competition, our pricing initiatives to compensate for the
        industry’s oversupply of LCD products **** and
        reduced costs associated with advances in visual display technology.
 
 We
        sold
        approximately 1.5 million visual display products in the first quarter of
        2006 compared to approximately 1.3 million visual display products in the
        first quarter of 2005. The increase in units sold was mainly due to strong
        unit
        sales in Americas and continued expansion in China and other Asian markets.
        Of
        the visual display products sold in the first quarter of 2006, CRTs accounted
        for 16.9%, LCDs accounted for 69.6%, and other products accounted for 13.5%
        as
        compared to 30.6%, 53.0%, and 16.4%, respectively, in the first quarter of
        2005.
 
 *Americas* - In our
        Americas region, net sales increased $32.3 million, or 26.8%, to $152.9 million
        in the first quarter of 2006 from $120.6 million in the first quarter of
        2005. The increase in net sales was primarily due to 71.6% increase in LCD
        unit
        sales even though LCD ASPs dropped 15.2% for the same period and increasing
        LCD
        TV unit sales and their higher ASPs relative to LCDs and CRTs. LCD TV units
        accounted for $18.3 million in net sales for the first quarter of 2006,
        representing growth of 161.4% over the first quarter of 2005.
 
 *Europe
        -* In our
        Europe region, net sales decreased $3.0 million, or 3.9%, to $73.3 million
        in
        the first quarter of 2006 from $76.2 million in the first quarter of 2005.
        The decrease in net sales was primarily due to a decrease of $11.6 million
        in
        net sales to Russia during the first quarter of 2006 as compared to the first
        quarter of 2005. This decrease in sales was caused by the oversupply in the
        Russian market as well as increased import duties on display products entering
        Russia. However, our Europe region experienced increased sales in Sweden,
        Saudi
        Arabia, Germany, and Israel compared to the first quarter of 2005. The 2.8%
        stronger Euro exchange rate during the first quarter of 2006 relative to
        the
        U.S. dollar also had a positive impact on our net sales in the first quarter
        of
        2006.
 
 *Asia
        Pacific -* In our
        Asia Pacific region, net sales increased $23.5 million, or 30.5%, to $100.6
        million in the first quarter of 2006 from $77.1 million in the first
        quarter of 2005. The increase was due to our continued growth in the China
        market and expanded sales efforts in Taiwan, Australia, New Zealand and
        Southeast Asia.
 
 11
 *Table
              of Contents*
 
 ***Cost
        of Sales***
 
 Cost
        of
        sales increased $50.7 million, or 20.6%, to $296.6 million in the first quarter
        of 2006 from $245.8 million in the first quarter of 2005.  As a percentage
        of net sales, cost of sales increased to 90.8% in the first quarter of 2006
        from
        89.8% in the first quarter of 2005. The increase in cost of sales as a
        percentage of net sales is due to the ASP of our products declining at a
        faster
        rate than our cost of sales declined. Lower margins occurred primarily in
        our
        European region due to oversupply in the Russian market and increased import
        duties into Russia resulting in an inventory write-down of $2.2 million in
        the
        first quarter of 2006 compared to $1.1 million in the first quarter of 2005,
        which was partially offset by our sourcing of LCD components directly from
        manufacturers resulting in better pricing. As a percentage of net sales,
        product
        costs increased to 86.3% in the first quarter of 2006 from 84.0% in the first
        quarter of 2005. The decrease in gross margin was partially offset by $8.3
        million of promotional pricing incentives received from our vendors during
        the
        first quarter of 2006 as well as increased efficiencies and reductions in
        freight and warranty expenses. Overall, gross margin declined to 9.2% in
        the
        first quarter of 2006 from 10.2% in the first quarter of 2005 mainly due
        to
        increased promotional allowances offered to the customers. We believe this
        reduction in gross margin percentage enabled us to offer competitive prices
        in
        many markets leading to the increases in net sales and gross
        profits.
 
 
 ***Selling,
        General, and Administrative Expenses***
 
 Selling,
        general and administrative expenses decreased $0.4 million, or 1.5%, to
        $26.9 million in the first quarter of 2006 from $27.3 million in the
        first quarter of 2005. Selling, general and administrative expenses as a
        percentage of net sales for the first quarter of 2006 decreased to 8.2% compared
        to 10.0% in the first quarter of 2005. The decrease in expenses was mainly
        attributable to lower legal fees related to patent infringement lawsuits
        of $0.8
        million and strategic initiatives undertaken to maximize operating efficiencies
        and enhance our competitiveness. Some of these initiatives resulted in lower
        advertising and marketing expenses of $0.4 million, as well as lower
        personnel-related expenses of $0.4 million due to lower headcount and $0.3
        million for product development as we moved into second generation products.
        Offsetting these decreases is an increase in account development funds expense
        of $1.5 million due to the increase in net sales.
 
 
 ***Income
        from Operations***
 
 Income
        from operations increased $2.6 million, or 337.1%, to $3.3 million in the
        first quarter of 2006 from $0.8 million in the first quarter of 2005. As a
        percentage of net sales, income from operations increased to 1.0% in the
        first
        quarter of 2006 from 0.2% in the first quarter of 2005.
 
 *Americas* - In our
        Americas region, income from operations increased $12.1 million, or 181.3%,
        to $5.4 million in the first quarter of 2006 from a loss of
        $6.7 million in the first quarter of 2005. The increase was mainly due to
        aggressive pricing strategies resulting in a 26.8% increase in net sales,
        effective inventory management by lowering inventory revaluation and
        write-downs, as well as sourcing of LCD components from manufacturers which
        resulted in reduced costs, and a decrease in expenses for general,
        administrative, and sales operations.
 
 *Europe* - In our
        Europe region, income from operations decreased $9.7 million, or 220.4%, to
        a $ 5.3 million loss in the first quarter of 2006 from $4.4 million of
        income in the first quarter of 2005. Despite solid growth in Sweden, Saudi
        Arabia, Germany and Israel, an oversupply of LCD monitors in Russia and
        increased import duties resulted in higher inventory write-down expense.
        Selling, general and administrative expenses increased slightly in the first
        quarter of 2006 due to higher advertising and marketing expense in order
        to
        promote sales in a very competitive environment.
 
 *Asia
        Pacific* - In our
        Asia Pacific region, income from operations increased $0.2 million, or
        6.4%, to $3.2 million in the first quarter of 2006 from $3.0 million
        of income in the first quarter of 2005. The increase was mainly due to the
        increase in net sales in the China, Taiwan, Australia, New Zealand, and
        Southeast Asia markets combined with stable gross margins and lower selling,
        general and administrative expenses as a percent of net sales.
 
 ***Other
        Income (Expense) - Net***
 
 Other
        income (expense), net increased to $1.5 million of other income in the first
        quarter of 2006 from $1.5 million in expense in the first quarter of 2005.
        The
        increase was mainly due to foreign exchange gains during the first quarter
        of
        2006 compared to foreign exchange losses during the first quarter of 2005
        and
        higher interest income. The increase was partially offset by a $0.4 million
        investment impairment during the first quarter of 2006.
 
 ***Provision
        (Benefit) for Income Taxes***
 
 The
        provision for income taxes increased $1.4 million in the first quarter of
        2006
        to a $1.2 million provision from a benefit of $0.2 million in the first quarter
        of 2005. The effective tax rate on net income (i.e., provision) increased
        to
        25.5% for the first quarter of 2006 from an effective tax rate on the net
        losses
        of (28.0)% for the first quarter of 2005. During 2006, in part, because of
        the
        full valuation allowance against deferred tax assets in the U.S., we did
        not
        provide for federal income taxes on Americas pre-tax income of $5.4 million.
        However, this benefit was substantially offset by our European region, where
        we
        did not provide tax benefits for our operating losses of $5.3 million due
        to the
        full valuation allowance in Europe. Prior to the quarter ended June 30. 2005,
        we
        did not have a valuation allowance against our Americas income. As a result,
        during the first quarter of 2005, benefit was provided for our Americas losses
        of approximately $6.7 million.
 
 12
 *Table
              of Contents*
 
 ***Liquidity
        and Capital Resources***
  **Three
                  Monthss Ended March 31,****2006**
              
              **2005****(in
                  thousands)**Net
                  cash used in operating activities
              
              $
              (13,472
              )
              $
              (24,528
              )Net
                  cash (used in) provided by investing activities
              
              
              (3,473
              )
              
              2,217Net
                  cash used in financing activities
              
              
              (3,722
              )
              
              (3,520
              )Net
                  cash used in discontinued operations
              
              
              —
              
              
              (1,012
              )Net
                  decrease in cash and cash equivalents
              
              $
              (20,667
              )
              $
              (26,843
              )
 
 As
        of
        March 31, 2006, we had cash and cash equivalents of $73.4 million. Our cash
        balances are held in numerous locations throughout the world. Most of the
        amounts held outside the United States can be repatriated to the United States,
        but, under current law, would be subject to U.S. federal income taxes, less
        applicable foreign tax credits. In certain countries, foreign exchange
        limitations limit the amount of cash that can be repatriated. We have accounted
        for the U.S. federal tax liability on these amounts for financial statement
        purposes except for foreign earnings that are considered indefinitely reinvested
        outside the United States. Repatriation could result in additional U.S. federal
        income tax payments in future years. Where local restrictions prevent an
        efficient inter-company transfer of funds, our intent is that cash balances
        would remain in the foreign country and we would meet U.S. liquidity needs
        through ongoing cash flows from operations, external borrowings, or both.
        We
        utilize a variety of tax planning and financing strategies in an effort to
        ensure that our worldwide cash is available in the locations in which it
        is
        needed. We expect to meet expected and unexpected cash flow needs by accessing
        our credit lines in the Americas, Europe and Asia Pacific.
 
 
 ***Operating
        Activities***
 
 Cash
        flow
        used in operating activities was $13.5 million during the first quarter of
        2006
        compared to cash flow used in operating activities of $24.5 million during
        the
        first quarter of 2005. The reduced cash outlay during the first quarter of
        2006
        compared to the first quarter of 2005 was primarily due to $65.6 million
        and
        $10.3 million less cash outlay in accounts payable and accrued promotional
        and
        other expenses, respectively, during the first quarter of 2006 compared to
        the
        first quarter of 2005. This reduced cash outlay was partially offset by a
        $38.0
        million and $29.1 million more cash outlay for trade receivables and
        inventories, respectively, during the first quarter of 2006 compared to the
        first quarter of 2005.
 
 Trade
        receivables increased $13.3 million during the first quarter of 2006 due
        to
        increased sales. Day sales outstanding decreased from 45 days at December
        31,
        2005 to 42 days at March 31, 2006. Payment terms vary by geographic location
        and, in some cases, a cash discount option is offered in addition to the
        standard payment terms. We have not materially changed our payment terms
        or
        delinquency policies between 2005 and 2006.
 
 Inventories
        decreased $4.4 million during the first quarter of 2006. The reduction in
        inventories resulted from selling of European inventories, which were
        overstocked due to oversupply in Russia and increased import duties on LCD
        monitors entering Russia. Our inventory turns have remained relatively stable
        at
        two turns during the first quarter of 2006 and the first quarter of
        2005.
 
 Accounts
        payable decreased $19.6 million during the first quarter of 2006. The decrease
        was primarily due to slightly lower accounts payable turn days and the timing
        of
        payments to our suppliers.
 
 
 ***Investing
        Activities***
 
 Cash
        used
        in investing activities was $3.5 million during the first quarter of 2006
        mainly
        due to the purchase of short-term investments. Cash provided by investing
        activities of $2.2 million during the first quarter of 2005 was primarily
        from
        the proceeds of the sale of short-term investments.
 
 
 ***Financing
        Activities***
 
 Cash
        used
        in financing activities was $3.7 million during the first quarter of 2006
        and
        $3.5 million during the first quarter of 2005. During the first quarter of
        2006,
        we redeemed all outstanding shares of series B convertible mandatorily
        redeemable preferred stock for $15.0 million and had net borrowings of $11.2
        million. During the first quarter of 2005, we repaid bank loans of $3.5
        million.
 
 13
 *Table
              of Contents*
 
 **Contractual
        Obligations and Commitments**
 
 As
        of
        March 31, 2006, we had contractual obligations and commercial commitments
        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
              
              $
              2,561
              
              $
              1,956
              
              $
              605
              
              $
              —
              
              $
              —Subordinated
                  notes payable (1)
              
              
              46,470
              
              
              1,707
              
              
              44,763
              
              
              —
              
              
              —Total
              
              $
              49,031
              
              $
              3,663
              
              $
              45,368
              
              $
              —
              
              $
              —
  (1)
              Includes
                  interest payable of $1.7 million and $1.8 million for the respective
                  periods presented above.
 
 
 **Credit
        Facilities**
 
 We
        have a
        $60.0 million credit line that expires in March 2008. Advances bear interest
        at
        the prime rate plus 0.50% (8.25% at March 31, 2006) with interest payable
        monthly. As of March 31, 2006 and December 31, 2005, there was no outstanding
        balance on the line-of-credit. All advances under the agreement are
        collateralized by substantially all of the assets of ViewSonic Americas.
        Under
        the agreement we are subject to various restrictive covenants, which, among
        other things, limit dividends (not to exceed $250,000 per year without the
        consent of the financial institution), capital expenditures and executive
        compensation and require us to maintain a minimum earnings before interest,
        taxes, depreciation and amortization amount. We are not required to comply
        with
        the restrictive covenants when borrowing capacity exceeds $15.0
        million.
 
 In
        June
        2004, ViewSonic Europe Limited entered into a $20.0 million line-of-credit
        facility with a financial institution. This line-of-credit is secured by
        trade receivables and inventory of ViewSonic Europe Limited. Advances bear
        interest at Libor plus a margin. Borrowings against this facility were $16.2
        million and $0 as of March 31, 2006, and December 31, 2005, respectively.
 
 Certain
        of our other international subsidiaries also have line-of-credit facilities
        with
        various financial institutions that are secured by certain of their assets.
        These credit facilities allow cash advances, letters of credit and bank
        guarantees. As of March 31, 2006 and December 31, 2005, there were
        outstanding cash advances of $0 and $4.9 million, respectively. As of
        March 31, 2006, the borrowing limit was $23.7 million.
 
 As
        of
        March 31, 2006, we were in compliance with the covenants of all our various
        borrowing arrangements.
 
 
 **Off-Balance
        Sheet Arrangements**
 
 As
        of
        March 31, 2006 and 2005, 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:
 
 14
 *Table
              of Contents*
 
 ·
              Decreased
                  demand and market acceptance for our
                  products;
 ·
              Inability
                  to successfully develop our next generation
                  products;
 ·
              An
                  adverse change in payment terms with our customers or our
                  suppliers;
 ·
              Competitive
                  pressures resulting in lower than expected ASPs;
                  and
 ·
              New
                  product announcements or product introductions by our
                  competitors.
 
 
 **Critical
        Accounting Policies and Estimates**
 
 Our
        critical accounting policies reflecting our estimates and judgments are
        described in Part II, Item 7, *Management’s
        Discussion and Analysis of Financial Condition and Results of
        Operations* ,
        in our
        Annual Report on Form 10-K for the year ended December 31, 2005, filed
        with the Securities and Exchange Commission on April 3, 2006. We have not
        changed those policies since such date other than described below.
 
 During
        the second quarter of 2005, we elected to adopt the fair value based
        employee stock-based compensation expense recognition provisions of Statement
        of
        Financial Accounting Standards (“SFAS”) No. 123, *Accounting
        for Stock-Based Compensation* (“SFAS
        No. 123”), using the modified prospective method. We previously had 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 we adopted SFAS No. 123, the Company’s net income
        would be decreased by $19,000 during the first quarter of 2005.
 
 On
        January 1, 2006, we adopted Statement of Financial Accounting Standards No.
        123(R), *Share-Based
        Payment* (“SFAS
        No. 123(R)”), which requires all share-based payments to employees, including
        grants of employee stock options, to be expensed and recognized over the
        requisite service period based on the grant date fair value of those awards.
        Among other differences, SFAS No. 123(R) includes an estimate of volatility.
        SFAS No. 123 does not require the use of volatility for privately held companies
        in estimating the fair value of stock options and accordingly, we used the
        minimum value method afforded by SFAS No. 123.
 
 We
        adopted SFAS No. 123(R) using the prospective method and accordingly, the
        consolidated financial statements for prior periods have not been restated
        to
        reflect the impact of SFAS No. 123(R). Stock-based compensation expense
        recognized during the first quarter of 2006 applies to unvested stock options
        granted prior to December 31, 2005 based on the grant date minimum value
        estimated in accordance with the original provisions of SFAS No. 123.
        Additionally, stock-based compensation expense recognized during the first
        quarter of 2006 has been reduced by estimated forfeitures. SFAS No. 123(R)
        requires forfeitures to be estimated at the time of grant and revised, if
        necessary, in subsequent periods if actual forfeitures differ from those
        estimates. The adoption of the prospective application of SFAS No. 123(R)
        did
        not have a material impact on our consolidated financial positions, results
        of
        operations, cash flows, or earnings per share. The cumulative effect upon
        adoption of SFAS No. 123(R) was $11,000.
 
 During
        the first quarter of 2006, stock-based compensation expense was $47,000.
        There
        were no grants of stock options or other share-based payments during the
        first
        quarter of 2006. As of March 31, 2006, there was an unrecognized compensation
        expense of $223,000 related to unvested stock options. The unrecognized
        compensation expense is expected to be recognized over a weighted-average
        period
        of 2.1 years.
 
 
 **ITEM
                  3.**
              **QUANTITATIVE
                  AND QUALITATIVE DISCLOSURES ABOUT MARKET
                  RISK**
 
 Our
        financial market risk arises from fluctuations in foreign currencies. A majority
        of our net sales, expense and capital purchasing activities are transacted
        in
        U.S. Dollars. However, we do enter into these transactions in other currencies,
        primarily the Euro, Great British Pound, the Chinese Yuan and the New Taiwan
        Dollar, among others.  Our net sales and purchasing transactions
        denominated in currencies other than the U.S. Dollar are subject to exchange
        rate fluctuations and could potentially negatively impact our financial results.
 
 We
        have
        significant European net sales denominated in the Euro. During the first
        quarter
        of 2006, the Euro-to-U.S. Dollar foreign currency exchange rate strengthened
        against the U.S. Dollar increasing 2.8% compared to the year-end rate of
        2005.
        During the first quarter of 2005, the Euro-to-U.S. Dollar decreased by 0.3%
        as
        compared to the 2004 year-end rate. The strengthening of the Euro positively
        impacted our first quarter 2006 net sales and income from operations by $496,000
        and $448,000, respectively, assuming all other factors remain constant. We
        cannot determine the ultimate impact of future changes to these and other
        currency exchange rates on our 2006 net sales, income from operations, net
        income, equity, and comprehensive income.
 
 15
 *Table
              of Contents*
 
 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.
 
 
 **ITEM
                  4.**
              **CONTROLS
                  AND PROCEDURES**
  *Evaluation
        of Disclosure Controls and Procedures*
  We
        maintain “disclosure controls and procedures,” as such term is defined in Rule
        13a-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange
        Act. Our management, including our Chief Executive Officer and Chief Financial
        Officer, does not expect that our disclosure controls and procedures or our
        internal controls will prevent all error and all fraud. A control system,
        no
        matter how well conceived and operated, can provide only reasonable, not
        absolute, assurance that the objectives of the control system are met. Further,
        the design of a control system must reflect the fact that there are resource
        constraints, and the benefits of controls must be considered relative to
        their
        costs. These inherent limitations include the realities that judgments in
        decision-making can be faulty, and that breakdowns can occur because of a
        simple
        error or mistake. Additionally, controls can be circumvented by the individual
        acts of some persons, by collusion of two or more people, or by management
        override of the control. The design of any system of controls also is based
        in
        part upon certain assumptions about the likelihood of future events, and
        there
        can be no assurance that any design will succeed in achieving its stated
        goals
        under all potential future conditions; over time, controls may become inadequate
        because of changes in conditions, or the degree of compliance with the policies
        or procedures may deteriorate.
 
 Based
        on
        their evaluation as of March 31, 2006, 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*
 
 There
        were no changes in our internal control over financial reporting during the
        three months ended March 31, 2006 that have materially affected, or are
        reasonably likely to materially affect, our internal control over financial
        reporting.
 
 16
 *Table
              of Contents*
 
 **PART
        II- OTHER INFORMATION**
 **ITEM
                    1.**
                **LEGAL
                    PROCEEDINGS**
  Four
        of
        our stockholders filed a purported derivative action against James Chu, our
        Chairman and Chief Executive Officer, and ViewSonic on April 17, 2006 in
        the
        United States District Court for the Central District of California. The
        complaint alleges, among other things, that Mr. Chu has breached various
        fiduciary duties by personally investing in certain of our suppliers, thereafter
        directing our contracts to these suppliers and failing to disclose such
        actions. Plaintiffs are seeking actual and punitive damages, attorneys fees,
        costs, disgorgement of alleged profits made by Mr. Chu, a declaratory judgment
        against Mr. Chu for alleged breaches of various fiduciary duties and an
        injunction prohibiting the award of contracts to suppliers in which Mr. Chu
        or
        his relatives have a financial interest. We believe that the claims against
        Mr.
        Chu and ViewSonic are not an appropriate derivative action and are in the
        process of defending against them on such grounds.
 
 In
        addition, 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
                    1A.**
                **RISK
                    FACTORS**
  **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
        revenue and profitability can fluctuate from period to period and are often
        difficult to predict for particular periods due to factors beyond our
        control.*
 
 Our
        results of operations for any quarter or year are not necessarily indicative
        of
        results to be expected in future periods. Our operating results have
        historically been, and are expected to continue to be, subject to quarterly
        and
        yearly fluctuations as a result of a number of factors, including:
 
 ·
              The
                  introduction and market acceptance of new technologies, products
                  and
                  services;
 ·
              Variations
                  in product costs and the mix of products
                  sold;
 ·
              The
                  size and timing of customer orders, which, in turn, will often
                  depend upon
                  the success of our customers, business or specific products or
                  services;
 ·
              Adverse
                  changes in the conditions in the markets for display
                  products;
 ·
              The
                  size and timing of capital expenditures by our
                  customers;
 ·
              Inventory
                  practices of our customers;
 ·
              Conditions
                  in the broader markets for information technology and
                  communications;
 ·
              Adverse
                  changes in the credit quality of our customers and
                  suppliers;
 ·
              Adverse
                  changes in the supply of components such as LCD panels, including
                  oversupply and undersupply;
 ·
              The
                  impact of acquired businesses and
                  technologies;
 ·
              Changes
                  in the pricing policies of, or the introduction of, new products
                  by us or
                  our competitors; and
 ·
              Changes
                  in the terms of our contracts with our customers or
                  suppliers.
 
 These
        trends and factors could harm our business, 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, product quality,
        breadth and reliability, price and performance characteristics, end user
        support, marketing and channel capability as well as corporate reputation
        and
        brand strength. We believe that we compete favorably with respect to all
        of
        these factors in the monitor market. However, we are a new entrant to the
        home
        entertainment market, and, therefore, we are just beginning to establish
        our
        competitive position. Many of our competitors in our markets have significantly
        greater financial, technical, manufacturing and marketing resources than
        we
        have. We believe that competition will have the effect of continually reducing
        the ASP of our products over time. We expect price competition to increase
        in
        future periods and such price competition may substantially reduce our revenues
        and products in such periods. Our competition includes established consumer
        electronic companies, personal computer manufacturers and Asian manufacturers
        interested in building a brand presence for their goods, including Acer Inc.,
        BenQ Corporation, LG Philips LCD Ltd., NEC Display Solutions, and Samsung
        Electronics.
 
 17
 *Table
              of Contents*
 
 We
        believe that over time, this competition will have the effect of reducing
        the
        ASP of our products. Some of our competitors have substantially longer operating
        histories, greater assets, and name recognition, as well as greater financial,
        marketing, technical and other resources, than we do. These advantages may
        allow
        our competitors to, among other things: undertake more extensive marketing
        initiatives, implement and sustain more aggressive pricing, obtain more
        favorable pricing, obtain more favorable allocations from suppliers or cross
        subsidize their display operations from their other operations. Consequently,
        there is no assurance that our products will remain competitive relative
        to
        those of our competitors. To the extent we are unable to effectively compete
        against our competitors for any of these reasons or otherwise, our business,
        financial conditions and results of operations would be materially adversely
        affected.
 
 *Volatility
        in our industry could require us to raise additional capital.*
 
 Although
        we believe that our existing cash balances, credit facilities and anticipated
        cash flows from operations will be sufficient to meet our operating, acquisition
        and capital requirements for at least the next 12 months, we may be required
        to
        raise additional capital through either equity or debt financing. Factors
        that
        could affect our cash used or generated from operations and, as a result,
        our
        need to seek additional borrowings or capital include:
 
 ·
              Decreased
                  demand and market acceptance for our products;
 ·
              Inability
                  to successfully develop our next-generation products;
 ·
              Competitive
                  pressures resulting in lower than expected average selling prices;
 ·
              An
                  adverse change in payment terms with our customers or our suppliers;
                  or
 ·
              New
                  product announcements or product introductions by our
                  competitors.
 
 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
        8.2% and 10.0% for the three months ended March 31, 2006 and 2005, 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. RoHS requires us to eliminate and/or reduce the level
        of
        specified hazardous materials from our products and requires us to maintain
        and
        publish a detailed list of all chemical substances in our products. WEEE,
        requires us to take back and recycle all products we manufacture or import
        into
        the EU at our own expense and became effective in January 2006. 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 unable to incorporate it into our
                  product
                  procurement processes without compromising quality and/or harming
                  our cost
                  structure;
 ·
              We
                  may not be able to sell non-compliant product into the EU or to
                  any
                  customer whose end product will be sold into the EU, which may
                  result in
                  reduced sales; or
 ·
              We
                  may face excess and obsolete inventory risk related to non-compliant
                  inventory that we may continue to hold in 2006 for which there
                  is reduced
                  demand and we may need to write
                  down.
 
 18
 *Table
              of Contents*
 
 *Our
        failure to anticipate changes in the supply or pricing of product components
        or
        customer demand may result in excess or obsolete inventory that could adversely
        affect our gross margins.*
 
 Inventory
        purchases are based upon future demand forecasts. These forecasts are based
        upon
        assumptions about future demand that might prove to be inaccurate. If there
        were
        to be a sudden and significant decrease in demand for our products, or if
        there
        were a higher incidence of inventory obsolescence because of rapidly changing
        prices of product components, rapidly changing technology and customer
        requirements or an increase in the supply of products in the marketplace,
        we
        could be required to write-down our inventory and our gross margins could
        be
        adversely affected.
 
 *We
        order components, materials and tooling in advance of anticipated customer
        demand. Therefore, we have limited ability to reduce our inventory purchase
        commitments quickly in response to any revenue shortfalls.*
  Substantially
        all of our sales are made on the basis of purchase orders rather than long-term
        agreements. As a result, we may commit to purchase products without having
        received advance purchase commitments from customers. Any inability to sell
        products to which we have devoted significant resources could harm our business.
        Additionally, because we typically need sufficient lead-time in purchasing
        our
        products, we may not be able to reduce our inventory purchase commitments
        in a
        timely manner in response to any revenue shortfalls. We could be subject
        to
        excess or obsolete inventories and under-utilized tooling and be required
        to
        take corresponding inventory write-downs or tooling write-offs if growth
        slows
        or if we incorrectly forecast product demand. A reduction in demand could
        negatively impact our gross margins and financial results.
 
 *We
        are subject to risks associated with our international operations, which
        may
        harm our business.*
 
 We
        generated a majority of our total net sales to customers outside of the United
        States and other Americas in
        the
        first quarter of 2006. Sales to
        these customers outside of the United States and other Americas subjects
        us to a
        number of risks
        associated with conducting business outside of the United States and other
        Americas, including the following:
 
 ·
              International
                  economic and political conditions;
 ·
              Unexpected
                  changes in, or impositions of, legislative or regulatory requirements;
 ·
              Increases
                  or decreases in the U.S. dollar as compared to other
                  currencies;
 ·
              Inadequate
                  local infrastructure;
 ·
              Delays
                  resulting from difficulty in obtaining export licenses for certain
                  technology, tariffs, quotas and other trade barriers and restrictions;
 ·
              Transportation
                  delays;
 ·
              Longer
                  payment cycles;
 ·
              Tax
                  laws (including U.S. taxes on foreign
                  operations);
 ·
              Foreign
                  currency exchange rates;
 ·
              Imposition
                  of additional taxes and penalties;
                  and
 ·
              The
                  burdens of complying with a variety of foreign
                  laws.
 
 Any
        one
        of the foregoing factors could cause our business, operating results and
        financial condition to suffer.
  *If
        we
        fail to maintain and/or expand our sales channels, our revenue may
        decline.*
 
 To
        maintain and grow our market share, net sales and brand, we must maintain
        and
        expand our sales channels. We currently sell our products through distributors,
        retailers, VARs, system integrators, commercial or enterprise resellers,
        direct
        marketing/e-retailers, and ViewSonic online stores. These entities purchase
        our
        products directly from us or through our distributors. We have no minimum
        purchase commitments or long-term contracts with any of these third parties.
        Our
        agreements are generally non-exclusive and generally may be terminated by
        either
        party for any reason or no reason with 30 days notice.
 
 Retailers
        have limited shelf space and promotional budgets, and competition is intense
        for
        these resources. A competitor with more extensive product lines and stronger
        brand identity may have greater bargaining power with these retailers. The
        competition for retail shelf space may increase, which would require us to
        increase our marketing expenditures to maintain current levels of retail
        shelf
        space.
 
 We
        must
        also continuously monitor and evaluate emerging sales channels. If we fail
        to
        establish a presence in an important developing sales channel, our business
        could be harmed. If we are unable to establish relationships in emerging
        sales
        channels, our sales could decline and we would lose market share.
 
 *We
        rely on a limited number of wholesale distribution and national retail customers
        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.*
 
 19
 *Table
              of Contents*
 
 We
        sell
        our products through wholesale distributors such as Ingram Micro, Inc., Tech
        Data Corporation and Synnex Corporation and national retailers such as CompUSA,
        Inc. We expect that a majority of our net sales will continue to come from
        sales
        to a small number of wholesale distributors and national retailers for the
        foreseeable future. We have no minimum purchase commitments or long-term
        contracts with any of these customers. The wholesale distributors and retailers
        could decide at any time to discontinue, decrease or delay their purchases
        of
        our products. We must also monitor and evaluate new sales channels in existing
        markets and in new markets. If we fail to establish a presence in an important
        developing sales channel or market, our business could be harmed.
 
 In
        addition, the prices that wholesale distributors and retailers pay for our
        products are subject to negotiation and could change frequently. If any of
        our
        major wholesale distributors or retailers change their purchasing patterns
        or
        refuse to pay the prices that we set for our products, our net sales and
        operating results could be negatively impacted. If our wholesale distributors
        and retailers increase the size of their product orders without sufficient
        lead-time for us to process the order, our ability to fulfill product demands
        would be compromised. In addition, because our accounts receivable are
        concentrated within a small group of wholesale distributors and retailers,
        the
        failure of any of them to pay on a timely basis, or at all, would reduce
        our
        cash flow.
 
 *If
        we
        do not effectively manage our sales channel inventory and product mix, we
        may
        incur costs associated with excess inventory or lose sales from having too
        few
        products or the wrong mix of products.*
 
 If
        we are
        unable to properly monitor, control and manage our sales channel inventory
        and
        maintain an appropriate level and mix of products with our customers and
        within
        our sales channels, we may incur increased and unexpected costs associated
        with
        our inventory. We generally allow wholesale distributors and retailers to
        return
        a limited amount of our products in exchange for other products. Under our
        price
        protection policy, subject to certain conditions, if we reduce the list price
        of
        a product, we issue a credit in an amount equal to the reduction for each
        of the
        products held in inventory by our wholesale distributors and retailers. If
        our
        wholesale distributors and retailers are unable to sell their inventory in
        a
        timely manner, we may under our policy lower the price of the products, or
        these
        parties may exchange the products for newer products. If we improperly forecast
        demand for our products we could end up with too many products and be unable
        to
        sell the excess inventory in a timely manner, if at all, or, alternatively
        we
        could end up with too few products and not be able to satisfy demand. If
        these
        events occur, we could incur increased expenses associated with writing off
        excessive or obsolete inventory or lose sales and therefore suffer declining
        gross margins.
 
 *The
        ASP of our products typically decreases rapidly over the life of the product,
        which negatively affects our gross margin.*
 
 The
        market in which we compete is subject to technological advances with yearly
        new
        product releases and price competition. As a result, the price at which we
        can
        sell our products typically declines over the life of the product. The decline
        in LCD monitors’ ASP is primarily due to increased production capacity and
        aggressive pricing by the competition. Over the recent years, the decline
        in ASP
        for LCD monitors has been faster than the decline in our product-sourcing
        costs
        and this has resulted in decreased margins.
 
 In
        order
        to sell products that have a declining ASP and still maintain our gross margins,
        we need to continually reduce our product costs and manage our inventory.
        To
        manage product-sourcing costs, we must collaborate with our contract
        manufacturers to engineer the most cost-effective design for our products.
        In
        addition, we must carefully manage the price paid for components used in
        our
        products. We must also successfully manage our freight and inventory holding
        costs to reduce overall product costs. We also need to continually introduce
        new
        products with more attractive sales prices and gross margins in order to
        maintain our overall gross margins. If we are unable to manage the cost of
        older
        products or successfully introduce new products with higher gross margins,
        our
        net sales will decrease and our gross margins will decline.
 
 We
        seek
        to mitigate the risk of declining ASPs by obtaining promotional pricing
        incentives from several product vendors. A vendor’s willingness to give us a
        pricing incentive and the amount of the pricing incentive are based on how
        competitive the market is, the volatility of the price on our key product
        components, and the quantity of historical purchases of these components
        from
        vendors. The pricing incentives do not require us to commit to future component
        purchases from vendors. We record the reimbursement from our vendors for
        these
        promotional pricing incentives when we are released of the legal liability
        for the payment of the product purchases by the vendors. If we are unable
        to
        obtain the promotional pricing incentives or if these incentives are
        unexpectedly discontinued, our gross margins will decline and our business
        could
        be harmed.
 
 *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.
 
 20
 *Table
              of Contents*
 
 *We
        depend on third-party component suppliers and contract manufacturers for
        the
        manufacture of our products. If these third parties experience any delay,
        disruption or quality control problems in their operations, we could lose
        market
        share and revenues, and our reputation may be harmed.*
 
 All
        of
        our products are manufactured, assembled, tested and packaged by contract
        manufacturers. We rely on several, component suppliers and contract
        manufacturers to procure components and, in some cases, subcontract engineering
        work. Some of our products are manufactured by a single contract manufacturer.
        Our component suppliers and contract manufacturers are primarily located
        in
        mainland China, Taiwan, and Thailand and may be subject to disruption by
        earthquakes, typhoons and other natural disasters, epidemics, pandemics,
        as well
        as political, social or economic instability. We do not have any long-term
        contracts with any of these third party component suppliers and contract
        manufacturers. Product pricing is generally negotiated on an order-by-order
        basis. All of our contracts with our component suppliers and contract
        manufacturers, including those contracts containing provisions that may be
        materially favorable to us, are generally terminable for any reason and by
        either party with 90 day’s notice. If our component suppliers and contract
        manufacturers encounter financial or other business difficulties, if their
        strategic objectives change, or if they perceive us to no longer be an
        attractive customer, they may no longer assist us in our product development
        efforts, and our business could be harmed.
 
 The
        loss
        of the services of any of our primary contract manufacturers or a change
        in
        material terms could cause a significant disruption in operations and delays
        in
        product shipments and adverse impact on cash flow. Qualifying a new contract
        manufacturer and commencing volume production is expensive and time
        consuming.
 
 Our
        reliance on third party component suppliers and contract manufacturers also
        exposes us to the following risks over which we have limited
        control:
 
 ·
              Inability
                  to procure key required components for our finished products to
                  meet our
                  customer’s demand;
 ·
              Unexpected
                  increases in manufacturing and repair
                  costs;
 ·
              Unexpected
                  reductions in payment terms;
 ·
              Interruptions
                  in shipments if one of our manufacturers is unable to complete
                  production;
 ·
              Inability
                  to control the quality of finished
                  products;
 ·
              Inability
                  to control delivery schedules;
 ·
              Inability
                  to obtain favorable pricing;
 ·
              Unpredictability
                  of manufacturing yields; and
 ·
              Potential
                  lack of adequate capacity to manufacture all or a part of the products
                  we
                  require.
  *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 component suppliers and 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 component suppliers and contract manufacturers with
        a
        rolling forecast of demand which they use to determine their material and
        component requirements. Lead times for ordering materials and components
        vary
        significantly and depend on various factors, such as the specific supplier,
        contract terms and demand and supply for a component at a given time. Some
        of
        our components have long lead times. If our forecasts are less than our actual
        requirements, our contract manufacturers may be unable to manufacture enough
        products in a timely manner. If our forecasts are too high, our component
        suppliers and contract manufacturers may be unable to use the components
        they
        have purchased. The cost of the components used in our products tends to
        drop
        rapidly as volumes increase and the technologies mature. Therefore, if our
        contract manufacturers are unable to promptly use components purchased on
        our
        behalf, our cost of producing products may be higher than that of 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.
 
 21
 *Table
              of Contents*
 
 *If
        disruptions in our transportation network occur or our shipping costs
        substantially increase, our operating expense could increase and our financial
        results could be negatively impacted.*
 
 We
        are
        highly dependent upon the transportation systems we use to ship our products,
        including surface, ocean and airfreight. Our attempt to closely match our
        inventory levels to our product demand intensifies the need for our
        transportation systems to function effectively and without delay. The
        transportation network is subject to disruption from a variety of causes,
        including labor disputes or port strikes, acts of war or terrorism and natural
        disasters. If our delivery times increase unexpectedly for these or any other
        reasons, our ability to deliver products on time could result in delayed
        or lost
        revenue. In addition, if the recent increases in fuel prices were to continue,
        our transportation costs would likely increase. A prolonged transportation
        disruption or a significant increase in the cost of freight could severely
        disrupt our business and harm our operating results.
 
 *If
        we
        fail to continue to introduce new products that achieve broad market acceptance
        on a timely basis, or fail to market or sell our products in a way that receives
        broad acceptance in the market place, we will not be able to compete effectively
        and we will be unable to increase or maintain net sales and gross margin
        and our
        financial results could be negatively impacted.*
 
 We
        operate in a highly competitive, quickly changing environment. We are dependent
        upon sufficient demand and broad market acceptance for display products,
        which
        are branded separately from the computing devices (primarily desktop PCs
        and
        laptops) to which they are attached. Our future success depends on our ability
        to develop and introduce new products and product enhancements that achieve
        broad market acceptance in the business and home markets. Our future success
        will depend in large part upon our ability to:
 
 ·
              Identify
                  demand trends in the business and home display markets and quickly
                  develop, manufacture and sell products that satisfy these
                  demands;
 ·
              Manage
                  our cost structure to enable us to bring new products to market
                  at
                  competitive prices;
 ·
              Respond
                  effectively to new product announcements from our competitors by
                  designing, competitive products, either internally or through the
                  use of
                  third parties;
 ·
              Provide
                  compatibility and interoperability of our products with products
                  offered
                  by other vendors and new technologies as they
                  emerge;
 ·
              Manage
                  our product offerings either as stand-alone, in combination with
                  other
                  products or services, or in some other manner;
                  and
 ·
              Respond
                  effectively to unexpected shifts in market demand towards display
                  and PC
                  products sold together under the same brand or away from stand-alone
                  displays.
 
 *In
        investigating and/or litigating a stockholder derivative action, we may incur
        substantial costs*
 
 We
        and
        James Chu, our Chairman and Chief Executive Officer, are named as defendants
        in
        a purported derivative action brought by certain of our stockholders. The
        complaint alleges, among other things, that Mr. Chu has breached various
        fiduciary duties by personally investing in certain of our suppliers, thereafter
        directing contracts to these suppliers and failing to disclose such actions.
        In
        connection with investigating and/or litigating this action, we may incur
        substantial costs.
 
 *We
        depend on our officers, and if we are not able to retain them, our business
        will
        suffer.*
 
 We
        are
        highly dependent on James Chu, our Chairman of the Board and Chief Executive
        Officer and majority stockholder, and other officers. Due to the specialized
        knowledge each of our officers possesses with respect to our business and
        our
        operations, the loss of service of any of our officers could adversely affect
        our business. We do not carry key man life insurance on our
        officers.
 
 Each
        of
        our officers may terminate their employment without notice and without cause
        or
        good reason. We currently are not aware that any officer is planning to leave
        or
        retire.
 
 *If
        we
        do not succeed in executing our growth strategies within our markets, our
        revenues may not increase.*
 
 Our
        strategies include further expansion of our business in markets in which
        we
        currently operate, including Brazil, China, India, 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;
 
 22
 *Table
              of Contents*
 
 ·
              Changes
                  in export or import restrictions;
 ·
              Changes
                  in the tax system or rate of taxation in the countries where we
                  do
                  business; and
 ·
              Economic,
                  social, and political risks.
 
 In
        addition, difficulties in foreign financial markets, economies and foreign
        financial institutions, particularly in emerging markets, could adversely
        affect
        demand from customers in the affected countries. Because of these factors,
        we
        may not succeed in expanding our business in international markets. This
        could
        hurt our business growth prospects and results of operations.
 
 *Intellectual
        property litigation and infringement claims could cause us to incur significant
        expenses or prevent us from selling our products.*
 
 Many
        of
        our products are designed to include software or other intellectual property
        licenses from third parties. Competitors’ protected technology may be
        unavailable to us or be made available to us only on unfavorable terms and
        conditions. While it may be necessary in the future to seek or renew licenses
        relating to various aspects of our products, we believe that, based upon
        past
        experience and standard industry practice, these licenses generally can be
        obtained on commercially reasonable terms. There can be no assurances, however,
        that we will be able to obtain, on commercially reasonable terms or at all,
        from
        third parties the licenses that we will need. Due to the existence of a large
        number of patents in our field and the rapid rate of issuance of new patents,
        it
        is not practical to determine in advance whether a product or any of its
        components infringe the patent rights of others.
 
 We
        routinely receive claims regarding patent and other intellectual property
        matters. Pursuant to our agreements with our suppliers and manufacturers,
        we
        generally seek indemnification in connection with such claims. Whether or
        not
        these claims have merit, they may require significant resources to defend.
        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. In addition, if
        an
        infringement claim is successful or costly to defend and we are unable to
        obtain
        indemnification from our suppliers, our business could be harmed.
 
 *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.
 
 *Expensing
        employee stock options* ** *may* *m* *aterially
        and adversely affect our reported operating results and could adversely affect* *our
        competitive position as well.*
 
 Since
        inception, we have used stock options as a fundamental component of our
        compensation packages. We believe that these incentives directly motivate
        our
        employees and, through the use of vesting, encourage our employees to remain
        with us. During
        the second quarter of 2005, we elected to adopt the fair value based employee
        stock-based compensation expense recognition provisions of SFAS No. 123, *Accounting
        for Stock-Based Compensation* ,
        or SFAS
        No. 123, in connection with an option re-pricing program, using the modified
        prospective method. We previously applied the intrinsic value based expense
        recognition provisions set forth in Accounting Principles Board Opinion No.
        25, *Accounting
        for Stock Issued to Employees* . In
        December 2004, the Financial Accounting Standards Board, issued SFAS No.
        123(R), *Share-Based
        Payment* ,
        or SFAS
        No. 123(R), which requires the measurement and recognition of compensation
        expense for all stock-based compensation payments. In April 2005, the SEC
        delayed the effective date of SFAS No. 123(R), which is now effective for
        annual
        periods that begin after June 15, 2005. We
        adopted SFAS No. 123(R) effective as of January 1, 2006 using the modified
        prospective method.  SFAS
        No.
        123(R) requires that we record compensation expense for stock options using
        the
        fair value of those awards.  Expensing
        these incentives in future periods may materially and adversely affect our reported operating results as the
        stock-based compensation expense is charged directly against our reported
        earnings.
 
 To
        the
        extent that SFAS No. 123(R) results
        in additional expenses when granting stock
        options we may elect to incur
        increased cash compensation costs instead .
        In
        addition, actions that we may take to reduce stock-based compensation expense
        that might be more severe than any actions our competitors may implement,
        could
        make it difficult to attract, retain and motivate employees, which could
        adversely affect our competitive position ,
        as well
        as our
        business and operating results.
 
 *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. Our investments in privately held companies were valued at $0.1
        million as of March 31, 2006 and December 31, 2005. For the three months
        ended
        March 31, 2006 and 2005, we recorded impairments on our public and private-
        securities investments of $0.4 million and $0.0 million , respectively.
 
 23
 *Table
              of Contents*
 
 **ITEM
                  2.**
              **UNREGISTERED
                  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**
  **ISSUER
        PURCHASES OF EQUITY SECURITIES**
  Period
              (a)
                  Total Number of
                Shares
                  (or Units)
                Purchased
              (b)
                  Average Price Paid
                per
                  Share (or Unit)(2)
              (c)
                  Total Number of Shares
                (or
                  Units) Purchased as Part
                of
                  Publicly Announced Plans
                or
                  Programs
              (d)
                  Maximum Number (or
                Approximate
                  Dollar Value)
                of
                  Shares (or Units) that May
                Yet
                  Be Purchased Under the
                Plans
                  or ProgramsJanuary
                  1, 2006
                through
                  January 31,
                2006(1)
              7,500,000
              $2.00
              --
              --February
                  1, 2006
                through
                  February
                28,
                  2006
              --
              --
              --
              --March
                  1, 2006
                through
                  March 31,
                2006
              --
              --
              --
              --Total
              7,500,000
              $2.00
              --
              --
 
  (1)
        On
        January 5, 2006, Intel Corporation notified us, pursuant to Article IV(D)(8)(a)
        of our Certificate of Incorporation, that it had elected, as the sole
        stockholder of our Series B Preferred Stock, to cause us to redeem all
        outstanding shares of Series B Preferred Stock. On January 10, 2006, the
        redemption date set forth in the Certificate of Incorporation, we redeemed
        all
        7,500,000 outstanding shares of Series B Preferred Stock held by Intel
        Corporation for aggregate cash consideration of $15,000,000, representing
        the
        full redemption price of the Series B Preferred Stock.
 
 (2)
        Represents the price paid for the redemption of the Series B Preferred
        Stock.
  
 **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**
 
 See
        Item
        9B of our Annual Report for the year ended December 31, 2005 on Form 10-K
        filed
        with the SEC on April 3, 2006, which is incorporated by reference herein
        in its
        entirety.
 
 24
 *Table
              of Contents*
  **ITEM
                    6.**
                **EXHIBITS**
 
 **Exhibit
                  No.**
              **Description
                  of Exhibits**
 
 10.18
                  (1)
              Director’s
                  Service Agreement, by and between Jan Jensen and ViewSonic Netherlands,
                  dated January 10, 2006.
 
 10.19
                  (2)
              Director’s
                  Service Agreement, by and between Jan Jensen and ViewSonic Europe
                  Limited,
                  dated January 10, 2006.
 
 10.20(3)
              Director’s
                  Service Agreement, by and between Jan Jensen and ViewSonic SARL,
                  dated
                  January 10, 2006.
 
 31.1
              Certification
                  of Chief Executive Officer as required by Rule 13a-14(a) of the
                  Securities
                  Exchange Act of 1934, as amended.
 
 31.2
              Certification
                  of Chief Financial Officer as required by Rule 13a-14(a) of the
                  Securities
                  Exchange Act of 1934, as amended.
 
 32.1*
              Certification
                  of Chief Executive Officer and Chief Financial Officer as required
                  by Rule
                  13a-14(b) of the Securities Exchange Act of 1934, as
                  amended.
  (1)
              Incorporated
                  by reference to Exhibit 10.18 to ViewSonic Corporation’s Annual Report on
                  Form 10-K, (000-50730) filed with the Securities and Exchange Commission
                  on April 3, 2006.
 (2)
              Incorporated
                  by reference to Exhibit 10.19 to ViewSonic Corporation’s Annual Report on
                  Form 10-K, (000-50730) filed with the Securities and Exchange Commission
                  on April 3, 2006.
 (3)
              Incorporated
                  by reference to Exhibit 10.20 to ViewSonic Corporation’s Annual Report on
                  Form 10-K, (000-50730) filed with the Securities and Exchange Commission
                  on April 3, 2006.
 *
                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.
  25
 *Table
              of Contents*
  **SIGNATURES**
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, the registrant
        has
        duly caused this report to be signed on its behalf by the undersigned, thereunto
        duly authorized, on May 15, 2006.
  **ViewSonic
                  Corporation**By:
              /s/
                  James A. MorlanJames
                  A. MorlanChief
                  Financial Officer(Principal
                  Financial and Accounting Officer)
  
 26
 *Table
              of Contents*
 
 **EXHIBIT
        INDEX**
  **Exhibit
                  No.**
              **Description
                  of Exhibits**
   10.18
                  (1)
              Director’s
                  Service Agreement, by and between Jan Jensen and ViewSonic Netherlands,
                  dated January 10, 2006.
 
 10.19
                  (2)
              Director’s
                  Service Agreement, by and between Jan Jensen and ViewSonic Europe
                  Limited,
                  dated January 10, 2006.
 
 10.20(3)
              Director’s
                  Service Agreement, by and between Jan Jensen and ViewSonic SARL,
                  dated
                  January 10, 2006.
 
 31.1
              Certification
                  of Chief Executive Officer as required by Rule 13a-14(a) of the
                  Securities
                  Exchange Act of 1934, as amended.
  31.2
              Certification
                  of Chief Financial Officer as required by Rule 13a-14(a) of the
                  Securities
                  Exchange Act of 1934, as amended.
 
 32.1*
              Certification
                  of Chief Executive Officer and Chief Financial Officer as required
                  by Rule
                  13a-14(b) of the Securities Exchange Act of 1934, as
                  amended.
  (1)
              Incorporated
                  by reference to Exhibit 10.18 to ViewSonic Corporation’s Annual Report on
                  Form 10-K, (000-50730) filed with the Securities and Exchange Commission
                  on April 3, 2006.
 (2)
              Incorporated
                  by reference to Exhibit 10.19 to ViewSonic Corporation’s Annual Report on
                  Form 10-K, (000-50730) filed with the Securities and Exchange Commission
                  on April 3, 2006.
 (3)
              Incorporated
                  by reference to Exhibit 10.20 to ViewSonic Corporation’s Annual Report on
                  Form 10-K, (000-50730) filed with the Securities and Exchange Commission
                  on April 3, 2006.
 *
                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.
   27