Financial Update: Compaq, Intel Infuse $115M Into Stratus Tech. Broadcom To Buy Serworks For $1B.

January 12, 2001

SHORT TAKES

STRATUS TECH RECEIVES $115M INVESTMENT FROM COMPAQ, INTEL, OTHER

Luxembourg, Maynard, MA, and New York, NY — Stratus Technologies and its majority shareholder, Investcorp, a global investment company, today announced that DB Capital Partners, Compaq Computer Corp. (NYSE: CPQ), and Intel Capital will make a combined investment of $115 million in Stratus, of which DB Capital will invest $50 million. The transaction is expected to close on February 1, 2001, subject to satisfactory completion of all closing conditions and regulatory approvals.

Also announced today were complementary technology collaboration agreements with Compaq and Intel Corporation. Compaq will work with Stratus to advance the highest levels of availability for industry-standard computing platforms.

“With this investment in Stratus, Compaq will build on our leadership in providing the highest levels of availability to address the needs of customers deploying mission-critical applications in Windows 2000 environments,” said Vince Gayman, director, ProLiant High Availability, Compaq Industry Standard Server Group.

Mike Fister, vice president and general manager of Intel’s Enterprise Platforms Group, said, “Intel will work with Stratus to help bring enterprise fault-tolerant capability to Intel Architecture-based solutions.” Stratus will continue its focus on delivering highly available systems built around Intel processors, including the IntelÆ Itanium? processor and IntelÆ PentiumÆ III Xeon? processor, and key technologies such as InfiniBand?.

“The financial and strategic investments by these international business leaders come at a very opportune time in the evolution of the market,” said Stephen C. Kiely, president and CEO of Stratus. “By most accounts, one of the largest and fastest growing segments of our industry is high-availability computing, particularly on industry-standard platforms. Stratus has developed innovative technology and expertise to provide true fault tolerance quickly on cost-effective servers that are simple to deploy, manage and maintain. We believe we are well positioned in the marketplace, perhaps more so than at any other time in our 21-year history.”

Stratus Technologies, parent company of the Stratus Group of companies, is a premier supplier of computer systems, services, and technology for mission-critical applications that must not fail, generally known as fault-tolerant computing. Stratus serves the banking, securities, e-commerce, manufacturing, and other industries where the cost of computer-related downtime can be very high.

The investment in Stratus Technologies by DB Capital, Compaq, and Intel Capital will be in the form of a preferred stock purchase. The shares will be acquired from affiliates of Investcorp. Goldman Sachs and Salomon Smith Barney are serving as advisors to both Stratus and Investcorp on this transaction.

At the conclusion of the transaction Stratus management and Investcorp will retain majority interest and voting control of the company.

Christopher J. Stadler, a member of Investcorp’s Management Committee, said, “Our continuing partnership with the management team and employees of Stratus has already exceeded our goals. In less than two years, Stratus has convincingly achieved its strategic objectives and established a strong record as an independent company.”

The original company was founded in 1980. Ascend Communications acquired Stratus in 1998 and subsequently sold back the enterprise computing segment of the business to Stratus management and Investcorp in 1999. Now a privately held company, Stratus Technologies is about to commence shipments of the StratusÆ ftServer? line, the company’s own family of Intel Architecture-based servers with 99.999% availability for MicrosoftÆ WindowsÆ 2000 environments. In June 1999, Stratus announced the formation of its 24-7 Technology Division to license its advanced technology to other leading technology companies.

According to Robert G. Sharp, a managing director at DB Capital, “Our investment in Stratus is well aligned with DB Capital’s portfolio strategy to invest in high-growth technology companies that have a highly experienced management team, successful operating track record and solid customer traction.”

For more information, visit http://www.stratus.com .

BROADCOM TO BUY SERVERWORKS FOR $1.03B

Los Angeles, CA — High-speed communications chip maker Broadcom Corp. (BRCM.O) says it will buy privately held ServerWorks Inc. in a stock deal valued at about $1.03 billion, allowing Broadcom to extend its reach to servers that power the Internet and corporate networks. Broadcom Chief Executive Henry Nicholas said the acquisition gives his company a stake in the fast-growing market for servers, and allows it to help build capacity for them to better handle the increased data that Broadcom’s chipsets are helping sending through the Internet.

“ServerWorks’ impressive customer base, coupled with its aggressive technology roadmap and proven track record, will enable Broadcom to enhance the entire Internet and Intranet infrastructure,” he said Monday in a statement. Shares of Irvine, Calif.-based Broadcom rose on the deal, in which Broadcom issues 11 million shares for all of ServerWorks’ shares outstanding, making the deal worth $1.03 billion based on Broadcom’s closing share price of $93-7/16, a 7 percent rise.

Among the terms of the deal, ServerWorks, a maker of integrated circuits, will receive as much as an additional 9 million shares if it meets certain performance goals. “This denotes Broadcom’s entry into the server market, a very important market as the Internet evolves and needs to handle greater volumes of voice, data and video,” Nicholas said in an interview.

Broadcom said the purchase would add from 2 to 3 cents a share to its earnings in each quarter of 2001. It told analysts in a conference call it expected revenues for 2000 of $190 million and of $300 million in 2001, with gross margins of almost 50 percent and operating margins about 20 percent.

The deal gives Broadcom access to ServerWorks’ alliances, with Intel Corp. (INTC.O), Compaq Computer Corp. (CPQ.N) and Microsoft Corp. (MSFT.O) among others. Intel has a strategic investment of 5 percent in ServerWorks, he said, noting Intel would again be a strategic investor in Broadcom. Intel was an early investor in Broadcom, but the two rivals have recently been embroiled in court battles, charging each other with stealing company secrets. As part of the deal ServerWorks’ chief executive Raju Vegesna will become vice president and general manager of Broadcom’s ServerWorks Business Unit, which will operate as a wholly-owned Broadcom subsidiary based in Santa Clara, Calif.

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