Financial Update: TurboLinux Closes Funding Round. Unisys Reports Financial Results. Intel Rival AMD Tops Estimates.

October 13, 2000

SHORT TAKES

TURBOLINUX CLOSES $30 MILLION FUNDING ROUND

San Francisco, CALIF. — TurboLinux, Inc., the high-performance Linux company, announced it has closed $30 million in a third round of funding with global computing giants including FUJITSU LIMITED, Hitachi, Ltd., IBM, SGI and SOFTBANK E-COMMERCE CORP. making their first-ever investments in the company. Details of the financing round were not disclosed. More than 15 corporate and venture investors participated in the round, including investment firms Deutsche Banc Securities and H&Q Asia Pacific. Previous investors in TurboLinux who also participated in the most recent round include August Capital, Dell Ventures and Intel Capital. “TurboLinux has made great progress this year in delivering breakthrough products for Linux Internet infrastructure solutions and we’ve announced a series of major technology partnerships and customer reference wins around the world,” said T. Paul Thomas, president and CEO of TurboLinux. “We are pleased to see our hard work and success recognized by investments from some of the world’s leading technology companies and venture capital firms.”

“Customers around the world are looking to IBM for our leadership in delivering Linux solutions across all of our hardware, software and services offerings,” said Dick Sullivan, vice president, Integrated Solutions, IBM Software. “Our investment in TurboLinux is just the latest example of our commitment to Linux and Open Source.” “TurboLinux has established itself as a key player in the exploding Linux market and that attracted our investment,” said Jedi Chan, Vice President, Hambrecht & Quist Asia Pacific. “We are confident that our participation in this funding round will help TurboLinux broaden its presence in Asia and globally.” “TurboLinux has pioneered an open-source business model,” said Andy Rappaport, general partner of August Capital, which has made several major investments in Open Source companies. “We believe TurboLinux is positioned to become one of the major players in the next wave of enterprise software companies.”

UNISYS REPORTS FINANCIAL RESULTS

Blue Bell, PA. — Unisys Corporation reported third-quarter 2000 net income of $42.9 million, or 14 cents per diluted common share, compared to third-quarter 1999 net income of $138.4 million, or 43 cents per diluted share. Excluding a one-time tax benefit and an extraordinary charge for the repurchase of debt, diluted earnings in the year-ago period were 40 cents per share. Third-quarter 2000 revenue declined 9% to $1.7 billion from $1.9 billion in the year-ago period. Without the negative impact of foreign currency translation, revenue in the quarter declined 6% from a year ago. These results were in line with the company’s previously announced outlook for the quarter. Unisys also said that it has completed its strategic business review aimed at focusing the company on e-business. As a result of this review, Unisys plans to implement a series of actions during the fourth quarter to build its revenue base in new high-growth markets; focus its research and development resources on high-potential new markets; de-emphasize non-strategic, low-growth and low-margin businesses and products; and reduce its cost structure in line with its new, more focused business model.

“As expected, this was a transitional quarter as we continued to evolve our portfolio and skills mix to meet the new requirements of the e-business market,” said Unisys Chairman and Chief Executive Officer Lawrence A. Weinbach. “Continued weakness in services revenue, primarily in systems integration and repeatable solutions, is reflective of the slow order activity in the first half of the year. Our technology business also declined in the quarter as strong growth in our new ES7000 server line was offset by seasonally lower sales of ClearPath systems. These factors, in addition to the impact of unfavorable currency translation in our European business, affected the results for the quarter. There were, however, a number of encouraging signs during the quarter. In services, we experienced strong double-digit revenue growth in network services, and we saw a sharp pickup in orders for outsourcing and network services projects. In technology, ClearPath sales rebounded in September and we saw very strong order demand for our new ES7000 Intel-based server line, based on our groundbreaking Cellular MultiProcessing (CMP) architecture. Orders for CMP-based servers have accelerated from both direct and indirect sales channels. We were also pleased during the quarter to add Hewlett-Packard to our growing list of OEM partners for our CMP-based servers.”

INTEL RIVAL AMD TOPS ESTIMATES

San Francisco, CALIF. — Chip maker Advanced Micro Devices posted its first calendar year in the black since 1995, reporting it shattered quarterly sales records as it made significant inroads against arch-rival Intel Corp. in the high-end processor market. Confirming speculation customers are flocking to its new Athlon high-performance and Duron value-end processors, AMD said it doubled sales of those chips from the previous quarter to 3.6 million units in the three-month period ended Oct. 1. The company projected its worldwide market share would grow to about 20 percent by year’s end. Net income for the quarter was $408.6 million, or $1.18 a share, compared with a net loss of $105.5 million, or 36 cents per share, in the year-ago quarter.

Excluding a one-time gain of $336.9 million from the sale of its voice communications business, AMD reported third-quarter income of $219.3 million, or 64 cents a share. Wall Street anticipated earnings of 62 cents a share, according to a survey of analysts by First Call/Thomson Financial. Sales jumped 82 percent in the year-over-year period to $1.21 billion from $662.2 million. The Sunnyvale, Calif.-based company’s stock finished the regular trading session down 94 cents at $21.81 a share on the Nasdaq Stock Market, well off its 52-week stock split-adjusted high of $48.50 in June. In after-hours trading, AMD’s stock rose $1.81, or 8 percent, to $23.63 a share.

SILICON GRAPHICS ISSUES WARNING

Palo Alto, CALIF. — In what has become a familiar pattern, Silicon Graphics warned its first-quarter results would fall short of expectations, and unveiled a new strategy to improve its future performance. The company said it expects to post a loss of 28-30 cents a share, including a gain of about $50 million from the sale of select assets, for the quarter ended Sept. 30. Revenues were projected to total $420 million. Analysts on average expected the company to post a loss of 14 cents a share, according to First Call/Thomson Financial. SGI, which makes powerful supercomputers with advanced design capabilities, also said its revenue would total about $420 million, compared with earlier projections of around $500 million.

This quarter, SGI said that it saw strong demand for many of its computers, but was not always able to complete shipments, especially of higher-end machines, because of the parts shortage. “We believe this situation will improve somewhat and we are hopeful it will not be a major problem in the second half,” SGI Chief Executive Bob Bishop said during a conference call. “We are also implementing plans to improve our internal efficiency.” The company said that a program to cut costs should save it about $100 million over the balance of its fiscal year. It said it expects to generate about $400 million to $450 million over the same period from the sale of certain assets. Also, SGI announced a stock buyback program for up to 50 million shares. “Today SGI is focused on growth segments where we are the market leader and can provide technical and creative users with solutions that deliver competitive advantages in their core business,” Bishop said in a statement.

XEROX CUTS DIVIDENDS BY 75 PERCENT

Xerox slashed its quarterly dividend by 75 percent to 5 cents per share, citing its recent financial troubles. Last week, the company warned it would post a third-quarter loss of between 15 cents and 20 cents per share. Analysts had been expecting earnings of about 12 cents per share. The company’s recent problems – part of a yearlong struggle – have analysts speculating that the world’s largest copier company is a likely takeover target. The company’s board of directors said the reduced dividend – down from 20 cents per share in the second quarter – is part of a broader management plan to restore long-term value to shareholders and bondholders.

“This decision helps to provide Xerox with additional financial flexibility required to implement our plans to realign our cost base and business structure to a stronger and more profitable business model,” Chairman Paul Allaire said in a prepared statement. “At the same time, it pays a dividend to our shareholders consistent with our current performance,” he said. Allaire and Anne Mulcahy, president and chief operating officer, had previously announced a plan to improve the company’s profitability and cash flow that includes the sale of certain assets and major cost reductions. The company said last week that it also was reviewing its dividend level.

MOTOROLA REPORTS PROFIT INCREASE

San Diego, CALIF. — Motorola Inc., the big telecommunications and semiconductor company, said that its third-quarter profit rose 66 percent, in line with Wall Street estimates, on strong sales of broadband equipment and computer chips. The company, based in Schaumburg, Ill., said profit from operations rose to $598 million, or 26 cents a share, compared with $361 million, or 16 cents a share, in the quarter a year earlier. Sales increased to $9.5 billion from $8.1 billion but were less than the $10 billion Wall Street analysts had been expecting, according to First Call/Thomson Financial. Including charges and gains, net income totaled $531 million, or 23 cents a share, compared with $114 million, or 5 cents a share, in the period a year earlier.

The most-recent quarter’s charges totaled $95 million, or 3 cents a share. Motorola said it incurred most of these charges by discontinuing older wireless products, closing two semiconductor wafer fabrication plants and departing from unprofitable businesses. The charges also included a lawsuit settlement. Motorola added that the charges were “largely offset” by the sale of securities. Net income in the quarter a year earlier included charges related to Motorola’s investment in the Iridium satellite system and gains from the sale of businesses. Before Motorola announced its results, its shares fell 38 cents, to $26.63. After hours, they slipped to $26.25. In the most recent quarter, Motorola said its broadband communications and semiconductor products segments reported strong sales growth compared with figures in the period a year earlier. But its closely watched wireless handset segment reported sales growth of just 4 percent as the company continued to pull back from Europe, where it had been in a money-losing battle for market share with Nokia. Motorola also reported that its operating margin on wireless telephones had increased to 6 percent of sales from 4 percent in the second quarter and 2 percent in the first quarter. Earlier, Motorola had told analysts it hoped to achieve a 10 percent margin on handsets by the end of this year.

SEAGATE ANNOUNCES FIRST QUARTER 2001 RESULTS

Scotts Valley, CALIF. — Seagate Technology, Inc. reported revenue of $1.748 billion, pro forma net income of $62 million and pro forma diluted net income per share of $0.26 for its quarter ended September 29, 2000. For the same period, on a GAAP basis, Seagate reported net income of $75 million and diluted net income per share of $0.31. The primary items included in GAAP net income but excluded from pro forma results were gains on sales of certain investments in equity securities including SanDisk Corporation and Veeco Instruments, Inc., all items related to the Company’s investment in Veritas Software Corporation (“Veritas”), and restructuring charges. For the quarter ended October 1, 1999, pro forma diluted net income per share, which excluded restructuring charges and all items related to the Company’s investment in Veritas, was $0.07. For the same period, on a GAAP basis, revenue, net income and diluted net income per share were $1.682 billion, $2 million and $0.01, respectively.

For the immediately preceding quarter ended June 30, 2000, pro forma diluted net income per share, which excluded the gains on exchange of certain equity investments and sales of investments in equity securities, all items related to the Company’s investment in Veritas, compensation expense related to employee separation costs, restructuring charges and unusual items, was $0.22. For the same period, on a GAAP basis, revenue, net income and diluted net income per share were $1.548 billion, $231 million and $0.96, respectively. On March 29, 2000, Seagate announced the proposed transaction with Veritas and an investor group led by Silver Lake Partners (“Silver Lake”) which, if consummated, would result in Seagate’s stockholders receiving shares of Veritas common stock and cash for their shares of Seagate common stock. We believe that while this transaction is pending, the value of Seagate common stock will depend primarily on the value of Veritas common stock. Seagate can be found around the globe and at http://www.seagate.com .

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