Financial Update: NEC Sales Surge. EMC Reports Growth In Storage Revenue. Compaq Looks To Fuel Comeback.

October 27, 2000

SHORT TAKES

NEC BACK IN BLACK AS SALES SURGE

Tokyo, JAPAN — Japan’s NEC Corp, the world’s second-biggest chipmaker, said it returned to profit in the past half-year, helped by robust sales of chips on strong global demand for personal computers and cell phones. It posted a group net profit of 20.53 billion yen ($190 million) in the April-September period, against a 51.18 billion yen net loss in the same period a year earlier. “Stability in chip prices over the six months and our efforts to cut costs such as job reduction have helped us to return to the black,” NEC President Koji Nishigaki told a news conference. NEC also lifted its full-year profit estimates, forecasting a record group operating profit of 250 billion yen for this business year to March 31, up 19 percent from its May projection. The half-year result was in line with its August forecast of 20 billion yen, which in turn was double its initial estimate. “It’s not a just bounce back, it’s a spectacular result. Conditions are very good, revenues and profits are both growing,” said Tsubasa Securities analyst Yoshihide Otake. Group sales for the six months totaled 2.48 trillion yen, up 9.3 percent from 2.27 trillion yen in the previous first half.

A sharp profit recovery in its electronic device operations and buoyant sales of personal computers and cell phone handsets in Japan had offset weak demand for color liquid crystal displays and a system integration services, it said. NEC, also Japan’s biggest personal computer maker, raised its annual dividend forecast to 11 yen from six yen while boosting its full year group net profit estimate to 90 billion yen with earnings per share (EPS) of 55.15 yen, against its May forecast of 46.05 yen per share and the previous year’s profit of 6.4 yen. Before the announcement, its EPS was estimated at 55.08 yen by First Call/Thomson Financial, a researcher tracking broker forecasts. “We expect dynamic random access memory (DRAM) prices to fall drastically in the January-March period due to seasonal factors, but that has been factored into our latest estimate,” NEC’s Nishigaki said. “If demand is weak, we will deal with our capital expenditure plans appropriately,” he added, suggesting that spending on plant and equipment could be put on hold. NEC has raised its group capital spending plans for the current business year to 350 billion yen from a May estimate of 320 billion yen.

The company also said it plans to appoint five new outside directors, changing its board so that one third would be made up of non-company executives – a move aimed at strengthening corporate governance in an increasingly competitive world. “This is part of efforts to smooth our planned listing on the New York Stock Exchange (NYSE),” Nishigaki said. NEC said in July it hopes to list its shares on the NYSE by March 2003. After the announcement, shares in NEC recovered slightly from a plunge in the morning caused by Wednesday’s slide in the U.S. Nasdaq index. Its shares closed at 2,115 yen, down 5.37 percent. The price has fallen 13 percent so far this year and 39 percent since a lifetime peak of 3,450 yen in early July, giving up its gains from earlier this year due to investor concern about weakening global chip demand next year, fuelled by a revenue estimate cut at the world’s top chip maker Intel Corp. But Tsubasa’s Otake said NEC would not have to worry about slackening chip demand until at least the end of this business year. “The difference between Japan’s chipmakers and Intel is that they depend less on chips for personal computers. A drop in PC sales hits Intel, but in Japan the chips are being used for other products such as cars and digital cameras.”

EMC REPORTS 47% GROWTH IN STORAGE REVENUE

New York, N.Y. — EMC Corporation, a world leader in information storage, reported sharply accelerated revenue growth and a 55% increase in net income for the third quarter of 2000, as organizations around the world continue to build their information foundations with networked storage solutions based on the EMC E-Infostructure. Total storage revenue for the third quarter grew 47% compared with the third quarter of 1999 to $2.14 billion, marking EMC’s highest rate of storage revenue growth in more than five years. This accelerated growth was achieved by strong performance across all major product areas, including 61% year-to-year growth in enterprise storage software revenue, 43% year-to-year growth in enterprise storage systems revenue, and 40% year-to-year growth in midrange storage revenue. Storage-related revenue represented 94% of EMC’s total consolidated revenue during the third quarter.

Total consolidated results, which include both EMC’s storage business and its Data General server division (formed after the acquisition of Data General Corp. during the fourth quarter of 1999), represented all-time record quarterly performance for EMC. Net income for the third quarter was $458 million, up 55% compared with the third quarter of 1999. On a diluted basis, earnings per share were $0.20 in the quarter, 54% higher than the third quarter of 1999 (adjusted for a 2-for-1 stock split effective June 2, 2000). Total consolidated revenue for the third quarter was $2.28 billion, 34% higher than the third quarter of 1999. Mike Ruettgers, EMC’s Chief Executive Officer, said, “We continue to achieve the accelerated growth in revenue and profitability that comes with providing customers with the most advanced, complete set of networked information infrastructure technologies available. There is no business or economic trend that is more constant than the growth of information – not only its sheer volume but its increasing importance to an organization’s success. We saw excellent growth in all major geographies, led by the Asia Pacific region, where storage revenues grew 130% year-over-year. Storage revenues grew 62% year- to-year in Latin America, 41% in North America, and 39% in EMEA (Europe, Middle East and Africa). We undoubtedly gained market share again during the quarter, not only in the overall market for storage but also in each of the market segments we have identified as EMC priorities.” The networking of storage continued to be a major growth driver during the quarter. EMC is the leader in designing and deploying networked storage solutions and the only company able to provide integrated SAN and NAS implementations. Information about EMC’s products and services can be found at http://www.emc.com .

COMPAQ LOOKS TO FUEL COMEBACK WITH EARNINGS REPORT

San Diego, CALIF. — Compaq Computer is expected to return to double-digit revenue growth for the first time in several quarters, another milestone in the company’s comeback efforts. The Houston-based PC maker is expected to report earnings per share of 29 cents for the third quarter, according to a First Call/Thomson Financial survey of analysts’ estimates. Revenue, meanwhile, will likely be above $10.1 billion, according to many analysts, or more than 10 percent higher than the $9.2 billion in the third quarter last year. Compaq hasn’t reported double-digit revenue growth, excluding currency issues, since the second quarter of 1999. Results like this will likely reinforce confidence in CEO Michael Capellas. The former college linebacker has been running Compaq the way he played football: focusing on short-term objectives to achieve long-term goals. That management style, which contrasts sharply with the aim-high approach of former Compaq CEO Eckhard Pfeiffer, is reviving the struggling computer maker.

“The most important thing that’s really happening over at Compaq the last few quarters is Michael Capellas is setting goals he is achieving or attaining ahead of time,” said Technology Business Research analyst Lindy Lesperance, who complimented what she called the “let’s be reasonable” management style. Case in point: Compaq’s commercial PC division, which returned to profitability during the second quarter, ahead of schedule. “My feeling is it’s going to be a strong quarter for Compaq,” Lesperance said. “The commercial business is going to remain profitable, potentially even improving as they continue to push the direct model.” Although the results will bring back confidence, Compaq, like other companies, has not managed to dodge the PC flu. Sequential growth will be slower than in normal years, and consumer sales remain a major question mark. Analyst projections on revenue growth vary widely, anywhere from around 9 percent to more than 16 percent. This contrasts starkly to the second quarter, when a somewhat reinvigorated Compaq saw revenue go up 8 percent year over year on $10.1 billion in sales.

NSTOR REPORTS THIRD QUARTER RESULTS

Lake Mary, FLA. — nStor Technologies announced results for the third quarter and nine months ended September 30, 2000. Revenues for the third quarter totaled $9.5 million, compared with revenues of $17.5 million in the same period a year ago. Net loss available to common stock for the quarter was $4.2 million, or $(0.12) per share, compared with a net loss of $2.4 million, or $(0.10) per share, reported for 1999’s third quarter. Commenting on the results, Larry Hemmerich, Chief Executive Officer of nStor, said, “Third quarter sales of nStor’s older technology products slowed as we transitioned our efforts to higher-margin, state-of-the-art solutions centered on our new NexStor 2U (3.5″ high) storage enclosures and RAID systems. Additionally, unanticipated supplier issues for all products contributed to lower than expected shipments during the quarter. While we believe these issues are behind us, our sales target has been pushed back by approximately one quarter. In the meantime, acceptance of our new NexStor solutions has been excellent and shipments have begun to rise.”

Mr. Hemmerich continued, “Last week, we broadened our solution set by introducing the NexStor 1202F and the NexStor 3250, 12-bay, 2U Fibre Channel systems that enable users to enhance their performance and capacity options. This gives us the most complete set of compact storage offerings available, provides even more appeal for both the end-user and OEM markets, and puts us in an excellent position as we move into 2001.” We are also well on the way to restructuring our domestic sales team to be totally focused on the end-user, SAN solution arena. We are making inroads in this market and have forged new relationships with companies like GX Technologies and Litton PRC. “At the same time, our indirect sales team that works with OEMs and a wide range of international channel partners is making excellent progress. One of the first fruits of our international push was announced today with the first NexStor 3150-based SAN installation in Australia at Color Solutions in Melbourne. We expect additional results from this team before year end.” Hemmerich concluded, “All of these actions come at the end of a year of real change for nStor. We have invested in bringing on the right management staff, creating and developing excellent new products and restructuring and refocusing the sales force. We are now positioned to realize the potential of these changes.”

ADAPTEC REPORTS SECOND QUARTER PROFITS

Milpitas, CALIF. — Adaptec, Inc., a global leader in innovative storage solutions, announced financial results for its second quarter of fiscal year 2001, which ended September 30, 2000. Pro forma operating results for the second fiscal quarter 2001 and comparative quarters were: Net revenues of $185 million, up 1% sequentially from net revenues of $183 million in the first quarter of fiscal year 2001 and down 5% from net revenues of $194 million in the second quarter of fiscal year 2000. There was a net income of $32 million, down 9% sequentially from net income of $35 million in the first quarter of fiscal year 2001 and down 37% from net income of $50 million in the second quarter of fiscal year 2000.

“Overall, demand is strong for our products,” said Bob Stephens, President and CEO. “During the quarter, we introduced three new Ultra160 RAID products and have already shipped 15,000 units. Additionally, our Fibre Channel shipments were stronger than anticipated. The continued motherboard shortages that affected the distribution channel during the September quarter are easing as we move into the December quarter. We expect our sales to be favorably impacted, as VARs can now configure servers and ship through to end users.” The business activities in Q2 were highlighted by several key announcements including filing the IPO registration statement of our Software Products Group spin-off, Roxio, and two key product introductions. In addition to filing the IPO registration statement, the Software Products Group announced the hiring of Christopher Gorog as president and CEO of the Roxio subsidiary. Gorog’s experience includes senior management positions with Universal Studios and Disney. The group also announced Easy CD Creator orders from NEC and Compaq. Adaptec’s Direct Attached Storage group extended its leadership position in the channel RAID market with the introduction of a new line of microprocessor-based Ultra160 SCSI RAID controllers, built on Adaptec’s Trident II Ultra160 SCSI chip design. Early interest in the product has been strong, including an OEM design win from Compaq. Also on the RAID front, Adaptec introduced a new initiative called “RAID Everywhere” that will enable Adaptec to drive RAID technology into the PC-server marketplace, by leveraging Adaptec’s channel strengths, global support infrastructure, and ability to make complex technologies easy-to-use.

INTERPHASE ANNOUNCES 3RD QUARTER 2000 RESULTS

Dallas, TEXAS — Interphase Corporation, an international supplier of next generation networking technologies, reported financial results for its third quarter 2000. Revenues for the third quarter were $13.3 million versus $20.5 million in the prior year’s quarter. Net income was $373,000, or $.06 per share, versus $1,278,000, or $.20 per share in the prior year. For the nine months ended September 30, 2000, net profits are up from the prior year. Interphase recorded revenues of $40.2 million, compared with revenues of $55.3 million during the first nine months of 1999. The company reported net income of $2,363,000 or $.38 per share for the nine-month period during 2000, compared with net income of $2,222,000, or $.37 per share, for the first nine months of 1999. “While net income and earnings per share have increased over 1999 results, our revenue is down from the prior year’s third quarter,” said Steve Kovac, Interphase Chief Financial Officer. “The third quarter of 1999 was a historical high for Interphase, when a single customer accounted for over 50% of the Company’s revenues. In 2000, the revenue and customer base has been diversified, thus reducing our dependence on a single customer. Revenues from other customers grew 31% from the 1999 third quarter.”

The company’s gross margin increased to 53% from 48% in the third quarter of the prior year. Operating expenses were $6.4 million versus $7.1 million, a 10% decrease from the third quarter of 1999. The cash and marketable securities position at the end of the quarter was at an all time high of $20.8 million. “In the third quarter we began shipping our new family of Fibre Channel HBA products, and landed our first major new OEM account. In addition, key equipment providers designing next generation Internet and wireless communication systems have embraced our Broadband telecommunication controllers with overwhelming enthusiasm. We have delivered our twelfth straight profitable quarter while continuing to build the foundation of our future,” said Greg Kalush, Interphase president and CEO. Additional information about Interphase and its products is available through the company’s web site at http://www.iphase.com .

EMULEX REPORTS RECORD FIRST-QUARTER RESULTS

Costa Mesa, CALIF. — Emulex Corp., the world’s largest supplier of fibre channel adapters, Thursday announced results for its first fiscal quarter ended Oct. 1, 2000. Revenues expanded to a record $55.5 million, up 92% from the $28.9 million reported for the same quarter a year ago. Net income for the first quarter of fiscal 2001 rose to a record $12.9 million, or $0.33 per diluted share, compared with net income of $6.8 million, or $0.18 per diluted share, for the same quarter a year ago. Net income for the first quarter of the prior fiscal year benefited from a lower effective tax rate of 10%, while the recorded effective tax rate for the first quarter of fiscal 2001 amounted to 38%. Assuming a 38% tax rate for both fiscal years, net income for the first quarter of fiscal 2001 expanded over 174% from net income of $4.7 million, or $0.12 per diluted share, for the same quarter a year ago. Per-share figures exclude the effect of the company’s proposed two-for-one stock split, which will be submitted for shareholder approval on Nov. 16, 2000.

Fibre Channel order momentum accelerated during the quarter, generating a 30% sequential increase in Fibre Channel host bus adapter (HBA) revenues, while total Fibre Channel backlog shippable within six months grew 81% sequentially. Paul F. Folino, president and chief executive officer, stated, “Our top three OEMs – Compaq, EMC and IBM – also represent the three largest suppliers of storage systems in the world, according to IDC, and each continued to deploy increasingly large quantities of Emulex HBAs as part of their Fibre Channel-enabled storage networking solutions during the summer quarter. “We believe end users are continuing to accelerate their deployment of Fibre Channel-based networked storage solutions, including both storage area networks, or SANs, and network attached storage, or NAS, in order to solve critical storage management challenges that are severely taxing corporate IT resources.” According to IDC, the requirement for stored data is growing at 80% per year, while the availability of IT managers is growing only 5% a year, necessitating the implementation of new networked storage architectures to more efficiently manage escalating data storage. News releases and other information about Emulex are available via the Internet at http://www.emulex.com .

GADZOOX REPORTS SECOND QUARTER EARNINGS

San Jose, CALIF. — Gadzoox Networks, Inc., a provider of SAN (storage area network) products, reported financial results for its second quarter of fiscal 2001. The Company reported net revenues of $7.2 million for the second fiscal quarter ended September 30, 2000, compared with net revenues of $9.0 million for the quarter ended June 30, 2000. The Company reported a net loss of $23.9, or $0.86 per share for the second fiscal quarter of 2001, compared to a net loss of $14.2 million, or $0.52 per share for its first fiscal quarter of 2001. The results were in line with the Company’s September announcement of anticipated revenue and earnings. As previously reported, revenues in the September quarter of fiscal 2001 were lower due to slower than anticipated sales of the Company’s Capellix line of SAN switch products. Additionally a one-time charge against earnings of $9.1 million was taken to account for production cancellation penalties as well as excess inventory manufactured on the basis of initially higher sales forecasts.

“We are transitioning the Company, and the second quarter results clearly reflect that,” said Gadzoox Networks’ President and CEO Michael Parides. “What the results don’t reflect is the progress we’re making towards a more focused approach to products, strategic direction and how the company will function operationally.” The Company’s second fiscal quarter 2001 was marked by a number of positive developments, including: The creation of a new executive management team, starting with the appointment of Michael Parides as President and CEO. Others include the addition of Clark Foy (Vice President of Marketing), Ron von Trapp (Vice President of Sales) and several additions at the director level. “We’ve made substantial progress in repositioning ourselves for success,” Parides said. “We’re very excited at the upside potential of this company, and the foundation we now have in place to execute consistently.”

SGI ANNOUNCES FIRST QUARTER RESULTS

Mountain View, CALIF. — SGI announced financial results for its first quarter of fiscal 2001 ended September 30, 2000. For the quarter, the Company posted revenue of $426 million compared with $514 million one year ago. The Company reported a net loss of $49 million for the quarter or $.26 per share compared with a net loss of $225 million or $1.24 for the same quarter one year ago. The company stated that component shortages accounted for the revenue shortfall. Even with material shortages, the company generated orders in the first quarter of $376 million. This equates to a book-to-bill ratio of approximately 1.23 and 14% growth on a year over year basis. Order backlog as of September 30, 2000 was $367 million, which is $69 million higher than june 30, 2000 and approximately $120 million above the desired level.

Order momentum for the company was led by its new line of high-end systems, the Origin 3000 and onyx 3000, which were launched earlier this summer and utilize SGI’s unique scalable and modular numaflex architecture. “Our data shows a significant opportunity for scalable architectures, particularly those which are built around the concept of modularity,” said Debra Goldfarb, Group Vice President, IDC, an industry leading market research firm. “According to feedback we’ve received from end-users, the Numaflex modular architecture strongly positions SGI to take advantage of this important trend and is prompting customers to re-engage with the company.” The company also generated strong orders for its new Octane 2 desktop graphics workstation. “We continue to be encouraged by the positive response our products are receiving from customers, in particular their outstanding benchmark performance, and the order momentum we are experiencing,” said Bob Bishop, Chairman and CEO of SGI. “While there is no short-term resolution to this industry-wide component shortage, we are making every effort to lessen its impact on our business.” Earlier this month, the Company announced a new company-wide operating model designed to improve overall efficiency and operating profit. That model includes, among other things, a new global enterprise resource planning (ERP) system, supply chain and order administration streamlining, and the sale of selected assets. The plan is under the stewardship of the Company’s new Executive Vice President and Chief Financial Officer, Hal Covert. Covert joined the Company at the end of July and has a successful track record of increasing shareholder value, most notably at Adobe Systems, Inc.

MATHSOFT REPORTS RECORD THIRD QUARTER REVENUES

Cambridge, MASS. — MathSoft, Inc. reported net revenues of $7.6 million for its third quarter ending September 30, 2000. This compares to net revenues of $7.0 million in the third quarter of 1999, an increase of 9%. The revenue performance set a new third quarter record for the Company’s continuing operations. The Data Analysis Products Division posted record quarterly net revenues of $4.2 million, up 32% from the same period last year. The StudyWorks product line grew 71% from 3Q99 assisting the Engineering and Education Products Division to expand its year-to-date third quarter net revenues over the same period last year. As previously reported, the Company discontinued the operations of FreeScholarships.com. In connection with this, the Company has recorded a third quarter loss from discontinued operations of $4.1 million. This loss includes an estimate of $1.9 million to cover the expenses associated with the closure of the division and its Web site. The Company reported a $3.5 million net loss for the third quarter of 2000, or $.33 loss per share, compared to net income of $.2 million, or $.02 per share, for the third quarter of 1999.

Founded in 1984, MathSoft is the provider of a broad line of technical calculation and analytical software for business and academia. The company has two million users of its Mathcad, StudyWorks!, S-PLUS, StatServer and Axum software worldwide. Users include professionals at more than 90% of the Fortune 1,000 companies and over 500 government installations, and students and faculty at over 2,000 colleges and universities.

NCR REPORTS INCREASE IN OPERATING INCOME

Dayton, OHIO — NCR Corporation announced net income of $54 million, or $0.55 per diluted share, for the third quarter ended September 30, 2000. Excluding the impact of special items, which include charges related to the October 1999 restructuring and write-down of acquisition-related in-process research and development, net income was $58 million, or $0.59 per diluted share, compared to $40 million, or $0.40 per diluted share, before special items in the prior year period. Overall revenues were $1.46 billion compared to $1.53 billion in the year-ago period. Data Warehousing revenues increased 28 percent to $230 million compared to $180 million in the third quarter of 1999. As anticipated, revenues from solutions that have been de-emphasized or exited decreased by 30 percent to $146 million, a $64 million reduction. Currency effects, largely driven by weakness in the euro, negatively impacted revenues by $45 million, or 3 percent.

NCR Chairman and CEO Lars Nyberg said, “NCR had a solid quarter in terms of operating income and cash flow generation, despite the effects of currency fluctuations. Gross margin improvement was excellent; and our Teradata Data Warehousing business delivered another outstanding performance, achieving 28 percent revenue growth over last year’s third quarter.” He added, “Our continual improvement in operating income validates our strategy to exit commodity hardware businesses in favor of differentiated software and service-related solutions. Overall, I am proud of our ability to execute this quarter despite some challenges, primarily in Europe. I look forward to the fourth quarter and 2001 as we begin to grow revenues and continue to progressively improve the profitability of the company.” Overall revenues were down 4 percent, primarily a result of the anticipated declines in de-emphasized solutions, negative currency impact and the previously announced product availability issue in Retail Store Automation. On a local currency basis, revenues were down 1 percent. Data Warehousing saw continued growth momentum as revenues increased 28 percent over the third quarter of 1999, leading to year-to-date growth of 36 percent. Data Warehousing revenue growth continues to be broad-based across all regions. More importantly, new customer wins were more than double the prior year and were spread across several industries including the financial, retail, telecom, transportation, government, e-commerce, airline, manufacturing and supply industries.

INTERPHASE ANNOUNCES 3RD QUARTER 2000 RESULTS

Dallas, TEXAS — Interphase Corporation, an international supplier of next generation networking technologies, today reported financial results for its third quarter 2000. Revenues for the third quarter were $13.3 million versus $20.5 million in the prior year’s quarter. Net income was $373,000, or $.06 per share, versus $1,278,000, or $.20 per share in the prior year. For the nine months ended September 30, 2000, net profits are up from the prior year. Interphase recorded revenues of $40.2 million, compared with revenues of $55.3 million during the first nine months of 1999. The company reported net income of $2,363,000 or $.38 per share for the nine-month period during 2000, compared with net income of $2,222,000, or $.37 per share, for the first nine months of 1999.

The company’s gross margin increased to 53% from 48% in the third quarter of the prior year. Operating expenses were $6.4 million versus $7.1 million, a 10% decrease from the third quarter of 1999. The cash and marketable securities position at the end of the quarter was at an all time high of $20.8 million. “In the third quarter we began shipping our new family of fibre channel hba products, and landed our first major new oem account. In addition, key equipment providers designing next generation internet and wireless communication systems have embraced our broadband telecommunication controllers with overwhelming enthusiasm. We have delivered our twelfth straight profitable quarter while continuing to build the foundation of our future,” said Greg Kalush, Interphase president and CEO.

QUANTUM PLANS TO FORM A SEPARATE COMPANY

Milpitas, CALIF. — Quantum Corporation’s DLT and Storage Systems Group announced plans to form two distinct companies from its DSS businesses by making its server appliances subsidiary an independent, publicly-traded company called Snap Appliances, Inc. In a separate news release, Snap Appliances announced that it intends to file a registration statement with the Securities and Exchange Commission (SEC) for the initial public offering (IPO) of its common stock. Quantum will conduct an initial public offering for less than 20 percent of Snap Appliance shares. Approximately six months following the IPO, Quantum intends to distribute the balance of the shares to Quantum DSS stockholders subject to receiving a favorable IRS ruling and board approval.

Quantum DSS will be comprised of two business groups: Enterprise Solutions and DLTtape. The Enterprise Solutions Group, building on the Quantum/ATL brand, will grow the company’s current position beyond leadership in tape automation systems, into storage solutions supported by direct sales and service capability. The DLTtape Group, the world’s largest tape drive business, will continue to expand its leadership position in storage devices and media. “With Quantum DSS as a separate company, we will have greater market focus on data protection for enterprise markets, backed by industry leading tape automation, tape drives and media,” said Michael Brown, Quantum chairman and CEO. “The growth in e-business, particularly among Internet service providers, application service providers and dot.com companies is creating strong demand for sophisticated tape automation solutions for backup and archival of mission-critical data.”

The company’s Enterprise Solutions Group, comprised of ATL tape automation systems, is focused on sustaining growth in the market for mid-range and high-end library systems. The business is a leading provider of DLTtape libraries covering a full spectrum of workgroup, departmental, mid-range and enterprise-class applications. Providing the industry’s most comprehensive product family ranging from desktop to data center, ATL library systems provide high-performance, proven reliability, cost-effectiveness and scalability for organizations requiring backup, archival and recovery of business-critical computer data. The Enterprise Solutions Group also has an established partnership with Network Appliance to deliver complete fibre channel and gigabit Ethernet (GbE) storage solutions. The Group will continue to work with other industry leaders, as it has with Network Appliance, Cisco, Veritas and others in the Open Storage Networking (OSN) initiative to deliver integrated solutions which realize the promise of reliability and openness for shared data in a networked environment.

SCO REPORTS FISCAL FOURTH QUARTER RESULTS

Santa Cruz, CALIF. — The Santa Cruz Operation, Inc. announced fiscal fourth quarter and year end financial results for the period ending September 30, 2000. For the fourth fiscal quarter, revenues increased 22% to $32,797,000, compared with $26,931,000 for the third fiscal quarter of 2000. Excluding one-time charges for restructuring and the reduction of deferred tax assets, the net loss for the fourth fiscal quarter was $10,162,000, or $0.28 per fully diluted share, compared with a net loss of $19,240,000, or $0.54 per fully diluted share reported for the third fiscal quarter. The net loss for the fourth quarter, including non-recurring charges, was $20,779,000, or $0.56 per fully diluted share. For the fiscal year, the company reported revenues of $148,923,000. Excluding one-time charges, the net loss for the year is $40,449,000, or $1.13 per fully diluted share. For the fiscal year ended September 30, 1999, SCO reported revenues of $223,624,000, and net income of $16,858,000, or $0.46 per fully diluted share. The net loss for the fiscal year, including non-recurring charges, was $56,953,000, or $1.59 per fully diluted share.

The one-time restructuring charge of $4,796,000 for the fourth quarter is related to the recently announced reduction in the SCO worldwide workforce, in anticipation of the upcoming sale of the Server Software and Professional Services divisions to Caldera Systems, Inc. In addition, a $5,821,000 charge for a one-time reduction in deferred tax assets was taken. This was based on management’s assessment of SCO’s historical business performance, using the guidance in Financial Accounting Standards Board (FASB) Statement number 109 “Accounting for Income Taxes,” which is used to determine the appropriate treatment of net deferred tax assets. Fourth fiscal quarter revenues for the Tarantella Division increased 71% to $4,316,000 from the $2,528,000 reported in fiscal Q3. The net loss for the division was $5,960,000, down from the net loss of $8,537,000 reported in the third fiscal quarter. Tarantella’s customer base continued to grow with significant customer wins during the quarter including BankOne and three other large banks, Northwest Airlines, Pepsico Snacks, two major European telecom providers, and several others. The division also recently announced the latest version of its flagship product, Tarantella Enterprise 3 web-enabling software, which features enhanced scalability and an extended range of supported application types, servers, and clients.

UNIGRAPHICS REPORTS THIRD QUARTER NET INCOME

St. Louis, MO. — Unigraphics Solutions Inc., a leading provider of collaborative product development software and services, announces financial results for the third quarter and nine months ended September 30, 2000. Unless otherwise noted, all financial figures in this press release are before acquisition related goodwill amortization costs and other non-operating items. Third quarter revenue, excluding a 61% decline in hardware, grew 10% over the 1999 comparable period. Software revenue increased 9%, or 12% when adjusted for unfavorable exchange rates, during the quarter. Net income was $13.1 million or $0.36 per share for the third quarter, as compared to $12.4 million or $0.34 per share for the same period in 1999. When including goodwill and other non-operating items, net income increased by $3.5 million to $10.8 million and earnings per share was $0.30, as compared to $0.20 for the third quarter of 1999.

Software revenue advanced 17% during the nine months ended September 30, 2000, as compared to the same period in 1999. Total revenues increased 12%, or 18% excluding the 61% decline in hardware revenues, for the first nine months of 2000, as compared to the same period in 1999. Net income was $38.4 million or $1.05 per share for January through September, as compared to $36.3 million or $1.00 per share for the same period in 1999. When including goodwill and other non-operating items, net income for January through September 2000 was $33.1 million, an increase of $7.5 million or 29% over $25.6 million for the same period last year. Earnings per share for the first nine months was $0.90, as compared to $0.70 in 1999. “We are quite pleased with the quarter and year-to-date performance,” says Tony Affuso, president and CEO of Unigraphics Solutions. “Excluding exchange rate impact, software revenue grew 20% during the first nine months of 2000. In addition, we continue to sign significant new business contracts that have yet to be announced. Among these transactions is a multi-year corporate license agreement with Delphi Automotive that makes UG, iMAN and ProductVision the global standard for collaborative product development among Delphi, its supply chain and its customers. Through September, we have closed 63 major deals with a total contract value in excess of $270 million. “The quarter was also highlighted by several strategic and technological initiatives. The acquisition of Engineering Animation represents a major step in achieving our collaborative commerce vision and capturing the higher growth rates that are being projected by the B2B industry. In addition, we have just released enhanced versions of Unigraphics, Solid Edge and Parasolid.”

BORLAND ANNOUNCES THIRD QUARTER 2000 RESULTS

Scotts Valley, CALIF. — Inprise Corporation, referred to herein as Borland, announced financial results for its third quarter of fiscal year 2000. For the third quarter, revenues were $47.6 million, up from $45.7 million in the same period a year ago. The Company recorded net income of $8.5 million (excluding approximately $3 million in non-recurring income), or $0.12 per fully diluted share. This compares to a loss of ($1.4) million or $(.03) per fully diluted share in the prior year. For more details on Borland’s reported results, see the financial tables accompanying this release. “I am very pleased with our financial performance during this quarter, which reflects continuing support for the great technology and solutions that the Company provides, and our commitment to operating excellence,” said Dale L. Fuller, president and CEO. “As we move forward into Q4 and fiscal 2001 you will see continuing investment in technologies and markets that enable our customers to improve time to market as they develop and deploy applications on and for the Internet.”

Cash, cash equivalents and short-term investments increased by $53.0 million to $250.7 million at September 30, 2000, up from $197.7 million at December 31, 1999, and up $6.8 million from $243.9 million at June 30, 2000. Among the highlights for Borland during the third quarter of fiscal year 2000: 1. Revenues from our Java and Enterprise product groups were up more than 250% and 50% respectively, from the comparable quarter a year ago. 2. Further strengthening of the management team with promotions for Kevin Cornell to Vice President and General Manager for the Americas, Nigel Brown to Vice President and General Manager of Europe, Middle East and Africa and the appointment of Frank Slootman to Vice President and General Manager of Software Products. 3. The successful release of JBuilder 4, the award-winning visual development environment for building Pure Java applications, applets, JSP/Servlets, JavaBeans, Enterprise JavaBeans and distributed J2EE applications for the Java 2 Platform.

MAXTOR CORPORATION REPORTS THIRD QUARTER RESULTS

Milpitas, CALIF. — Maxtor Corporation announced its financial results for the third quarter of fiscal 2000 ended September 30, 2000. Revenue for the quarter was $619.3 million, compared with $589.3 million in the third quarter of 1999. The company reported a net loss of $14.0 million, or $(0.12) per share, in the third fiscal quarter of 2000. This compares with a net loss of $40.3 million, or $(0.38) per share, in the third quarter of fiscal 1999, which included a $22 million non-recurring gain from the sale of stock and $7.6 million in expenses associated with an acquisition. “As we expected, the third quarter was a challenge for the industry,” said Mike Cannon, president and CEO. “The quarter began with a supply/demand imbalance, which was further aggravated by the typical seasonal sales pattern skewed towards September. Component shortages, which materialized later in the quarter, further adversely affected the industry’s ability to fully meet the demand in September. These challenges required flexibility, responsiveness and a keen focus on execution. Although business conditions were difficult, Maxtor performed well. We managed our build plans and inventory judiciously throughout the third quarter, shipping 6.5 million drives, maintaining inventory turns at approximately 22 turns, and posting a gross profit margin of 10.2%.”

“We also continued to make excellent progress on the product side,” Mr. Cannon said. “Once again, we were both the time-to-market and time-to-volume leaders on the 15 GB 7200 rpm product offering, as well as the 20 GB 5400 rpm offering. These products have been qualified at virtually all of the major PC OEMs and are shipping in volume today. We are especially pleased with the growth of the 7200 rpm offering, which represented approximately 40% of total revenue in the quarter. “Our MaxAttach line of network attached storage servers generated $4.9 million in revenue in the third quarter, a significant increase over the prior quarter. We are especially pleased with the progress of our 1U rack- mounted MaxAttach 4000, which has met with strong demand and represented approximately 60% of our NAS volume. “Finally, we continued our successful expansion into the consumer electronics market. We signed an agreement with ReplayTV to be the initial sole provider of hard drives for its new 3060 digital video recorder. We also recently introduced a 1394 External Storage solution, an external hard drive that allows consumers to quickly and easily install up to 80 GB of additional storage to their personal computers for video editing, digital music, digital photos and games.”

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