HandHeld Entertainment (NASDAQ:ZVUE)(NASDAQ:ZVUEW) today announced that it unveiled a prototype of its next generation, entry-level personal media player - the ZVUE 260 - to journalists and targeted buyers from major retailers at last week's Consumer Electronics Show.

At 4.16- X 2.4- X 0.5-inches and 3.93 ounces, the ZVUE 260 PMP is comparable to the video iPod in thickness (6/100ths of an inch longer and 7/100ths of an inch thicker), yet weighs close to an ounce less (3.98 ounces versus 4.8 ounces, respectively). The ZVUE 260 is also the smallest and lightest ZVUE yet.

The ZVUE 260 features a 2.5-inch active matrix TFT backlit screen and supports videos running at up to 30 frames per second (fps) at resolutions of up to 320X240 pixels. The ZVUE 260 is also the first ZVUE player to feature a built-in audio speaker.

"We wanted to build a portable media player that is not only as sexy and useful as any player on the market, but is affordable as well," said Jeff Oscodar, president and chief executive officer of HandHeld Entertainment. "We think we have accomplished these goals by creating the ZVUE 260.

"The top tech journalists in the world who attended the Showstoppers media reception during CES saw the debut of the ZVUE 260. Last Tuesday afternoon the ZVUE 260 was featured on CNN by Jim Louderback, editor-in-chief of PC Magazine, and CNN anchor, Renay San Miguel, both of whom commented on the player's value/price proposition. (See http://www.zvue.com/free/index.php) The ZVUE 260 was also featured on last Wednesday's online broadcast of DL.TV (Digital Life Television) (see Episode #129 at http://www.dl.tv), and we look forward to more coverage and interest in the ZVUE 260 in the weeks and months ahead."

As with earlier ZVUE models, HandHeld Entertainment will continue its practice of using secure digital (SD) memory as the storage media for the ZVUE 260. The ZVUE 260 will be available initially with at least two different SD memory configurations (depending on SD pricing at the time of launch). Entry level configurations should have a $99 suggested retail price, although actual retail prices and configurations will be determined by retailers when the product becomes available. The ZVUE 260 is expected to be available in mid-2007.

"We think consumers should be able to take advantage of the decline in the price of memory," Oscodar said. "As a result, we ship our players with low-cost SD cards and allow consumers to add more storage capacity later as prices decline. That's not possible with hard drive-based players."

Featuring a rechargeable lithium-ion battery, the ZVUE 260 will also be compatible with Windows Media Player 10 with Microsoft's secure Digital Rights Management (DRM) and support both Windows Media Video (WMV) and Windows Media Audio (WMA) formats, as well as other video, audio and image formats.

Held early each year, the 2007 edition of CES (http://www.cesweb.org) was held January 8-11 and attracted more than 140,000 attendees from around the world to multiple exhibiting locations throughout Las Vegas, Nevada, the annual home to the largest technology tradeshow in North America.

The ZVUE 260 and other ZVUE models are supported by HandHeld Entertainment's network of Web sites that contain a total of nearly 12,000 videos. These include premium music videos, anime features, television shows, movies, cartoons, independent films, documentaries, news, entertainment and sports programs from companies ranging from Sony BMG to IMG Media and from Canadian Broadcast Corp. to Fun Little Movies, as well as free user-generated and user-submitted video selections and other forms of media. Customers can also select from millions of songs that can be played on a ZVUE through HandHeld Entertainment's relationships with eMusic and Rhapsody (see http://www.zvue.com/html/music.php).

About HandHeld Entertainment, Inc.

HandHeld Entertainment is a digital-media-to-go company with a family of mass-market portable media players priced at mass-market prices as well as its own online video content store. Its ZVUE portable media players are available for purchase online and in retail locations across the U.S., while portable video lovers can visit HandHeld Entertainment's premium video content store at http://www.zvue.com to buy pay-per-download videos. Customers can also download free user-generated videos and other media from the Free STUFF! section of ZVUE.com, as well as from Dorks.com, FunMansion.com and YourDailyMedia.com, wholly owned subsidiaries of HandHeld Entertainment. HandHeld Entertainment's common stock and warrants are traded on the NASDAQ Capital Market (ZVUE, ZVUEW) and Boston Stock Market (HDE, HDEW). For more information, visit http://www.hheld.com/ir or call 415-495-6470.

HandHeld Entertainment, ZVUE, ZVUE.com, Dorks.com, FunMansion.com and YourDailyMedia.com are trademarks of HandHeld Entertainment. All other trademarks are property of their respective owners.

"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995

This announcement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those projected in the forward-looking statements as a result of various factors including the ability of the company to successfully commercialize its new technologies as well as risk factors set forth from time to time in HandHeld Entertainment's filings with the United States Securities and Exchange Commission, including Annual Reports on Form 10-KSB, Quarterly Reports on Form 10-QSB and Current Reports on Form 8-K and other reports filed by the company with the SEC. The company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. As a result, investors should not place undue reliance on these forward-looking statements.