RadiSys Delivers 42% Revenue and 92% Earnings Growthfor Third Quarter 2000.

Business Editors, High-Tech Writers

HILLSBORO, Ore.--(BUSINESS WIRE)--Oct. 18, 2000

RadiSys Corporation (Nasdaq:RSYS), a leading global designer and manufacturer of building blocks enabling next-generation Internet and communications systems, today reported record revenues of

Net income for the quarter was $9.2 million, or $0.50 per share (diluted), which represented 92% earnings per share growth, compared to $4.4 million or $0.26 per share (diluted) for the quarter ended September 30, 1999. The $0.26 per share for the quarter ended September 30, 1999 excludes non-recurring items previously reported.

Net income for the current quarter includes a gain of $492 thousand, net of tax, which is the result of a recovery on a previously written off asset received in connection with a prior divestiture. In addition, this quarter's effective tax rate was 18.7%, which is lower than the tax rate of 29.9% for the previous two quarters. The lower tax rate was the result of additional research and development tax credits realized. Excluding the gain from the prior divestiture and normalizing the rate to 29.9%, net income for the quarter was $7.5 million, or $0.41 per share.

Cash earnings per share for the current quarter, excluding the gain from the prior divestiture and normalizing the tax rate to 29.9%, was $0.46 per share (diluted). The company defines cash earnings per share as net income excluding goodwill and intangible amortization.

Q3 Highlights

"In addition to delivering record revenues for the quarter, and raising $120 million from the sale of convertible notes to fuel growth and future acquisitions, we had a record quarter in bringing new technology to our marketplace and leveraging our close relationship with Intel," said Dr. Glen Myers, Chairman and CEO. "For instance, at the Intel Developer Forum, we demonstrated in cooperation with Nortel Networks a RadiSys CompactPCI virtual router running Nortel's OpenIP on Intel's IXP1200 network processor."

A significant number of communications building blocks were introduced during the quarter, such as the Spirit-6022 DSP media processor, a PCI building block using eight Texas Instruments C6203 DSPs and with a full suite of voice coders and telephony algorithms. Two other PCI building blocks introduced were the Artic-2107 SS7 controller and the Artic 2000 communications controller for ATM, SONET, and voice/data convergence protocols. RadiSys also introduced the ENP-3510 CompactPCI packet processor, the first CompactPCI module on the market using Intel's IXP1200 network processor, and the CP30, a low-profile CompactPCI system chassis.

A significant number of partnering relationships were also announced in the quarter. A major one was a development agreement with Intel for products and technology relating to Intel's IX (Internet Exchange) architecture. RadiSys, Intel, and three other companies also created a forum for high-availability solutions on Intel architecture. RadiSys cohosted three web seminars, two cosponsored by Intel and the third by Intel subsidiary Trillium Digital Systems. Partnerships in Linux and high availability were also formed with MontaVista, LynuxWorks, and GoAhead Software.

Design Wins

RadiSys achieved 16 new design wins in the quarter. RadiSys characterizes a design win as a project estimated to produce more than $500,000 in revenue per year when in production. Seven of the wins are significantly larger, estimated to produce more than $2 million in revenue per year once in full production. Eight of the 16 wins were in communications-equipment applications, three in test and measurement equipment, two in semiconductor fab equipment, and three in other areas. Design wins ramp into production volume at varying rates; typically the ramp begins 6-12 months after the win occurs. A variety of risks can adversely affect a design win before the start of production, such as schedule delays, cancellations and changes in customer markets.

Executive Changes

RadiSys' Board of Directors announced two executive promotions. Ron Dilbeck has been appointed to the newly created position of Chief Operating Officer. Previously Dilbeck had been Vice President and General Manager of the Computer Platforms Division. The product divisions, along with the manufacturing and sales organizations will report to Mr. Dilbeck.

Arif Kareem, who held the position of Vice President and General Manager of the Telecommunications Division, will retain his current responsibilities but with the title of Senior Vice President.

Business Outlook

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.

Commenting on the outlook for the fourth quarter and 2001, Myers said, "We have seen increased uncertainty and conservatism in our customers' forecasts and order rates this month. This has primarily been in certain types of legacy telecom equipment, such as enterprise equipment, voice mail systems, and products associated with circuit-switched networks. As a result, we are revising some of our near-term guidance."

"Specifically," he added, "our outlook for the fourth quarter is that revenues and earnings will be approximately equal to those of the third quarter. However, this should still equate to a 20-25% revenue growth over the fourth quarter a year ago. For 2001, our outlook is very positive. We see earlier design wins in new network architectures such as voice over packet networks, optical networks, SS7, unified messaging, GPRS wireless, and 3G wireless as fueling substantial growth in 2001. We project core growth in 2001, without the effects of any future acquisitions, to be 25% to 35% in revenue and earnings. We couldn't feel more strongly that our strategy of creating building blocks that enable next-generation Internet and communications systems is right on target to maximize value for both our customers and our shareholders."

More details about financial guidance will be given in today's conference call, scheduled for 5 PM Eastern Time. The public is invited to participate in the conference call by either calling 415/228-4637, password is RadiSys, or listening via live audio webcast on the RadiSys web-site at www.radisys.com. Replays of the call will be available at 402/998-0932 or via audio webcast at www.radisys.com.

RadiSys (Nasdaq:RSYS) designs and manufactures building blocks for next-generation Internet, communications, industrial automation, medical equipment, and transaction terminal applications. As a leading independent provider to OEMs, RadiSys delivers a time-to-market advantage in a tight "virtual division" relationship with its customers. The building blocks include

Intel-based embedded computers, DSP modules and algorithms, network interfaces and protocols, systems platforms, embedded software, systems engineering and integration services. RadiSys' highly differentiated position in the market is a result of its intense focus on Intel-based technology, having the broadest array of building blocks, and having a "perfect fit" product development strategy using its intellectual property to design customer subsystems.

RadiSys is a registered trademark. All other products are trademarks or registered trademarks of their respective companies.

Except for the historical information contained herein, the matters discussed in this press release, including the statements regarding future development and business activities, expectations of future orders and estimated revenues and earnings from design wins, are forward-looking statements that involve risks and uncertainties. The following are among the factors that could cause actual results to differ materially: dependence on the relationship with Intel Corporation and its products; lower than expected or delayed sales in the communications market; lower than expected design wins with key OEMs; failure of leading OEMs to incorporate RadiSys' solutions in successful products; deliveries of products containing errors, defects and bugs; dependence on a limited number of suppliers or, in some cases, one supplier for components and equipment used to manufacture products; difficulties in integrating acquired businesses and assets; competition in the embedded computer market, which may lead to pricing pressures; political, economic and regulatory risks associated with international operations; technological developments; the inability to protect RadiSys' intellectual property or successfully to defend against infringement claims by others; availability of qualified personnel; business conditions in the general economy and in the markets RadiSys serves, particularly the communications market; technological difficulties and resource constraints encountered in developing new products; and difficulty or inability to meet obligations to repay indebtedness. The forward-looking statements should be considered in light of these factors.

For more information, contact RadiSys at investor.relations@radisys.com or call the RadiSys Investor Line at 503/615-RSYS.

For more information, press only: Eric Stebel, Public Relations Manager, RadiSys, 713/541-8200

To receive these releases via email, visit our web page at www.radisys.com and subscribe to our electronic mailing list.

                          RadiSys Corporation
                 Consolidated Statement of Operations
               (in thousands, except per share amounts)


                       Three Months Ended      Nine Months Ended
                           (unaudited)            (unaudited)
                      Sept. 30,   Sept. 30,  Sept. 30,  Sept. 30,
                        2000        1999       2000        1999
                      ---------  ---------   ---------  ---------
Revenues             $  90,719  $  64,096   $ 258,183  $ 178,145
Cost of goods sold      59,338     40,724     167,409    113,023
                     ---------  ---------   ---------  ---------

Gross profit            31,381     23,372      90,774     65,122

Research and
 development             9,542      7,438      27,828     21,973
Selling, general
 and administrative      9,716      9,385      28,965     26,991
Goodwill and
 intangibles
 amortization            1,557        722       5,008      1,733
Combination costs         --        5,971        --        5,971
                     ---------  ---------   ---------  ---------

Income from
 operations             10,566       (144)     28,973      8,454

Interest
 income, net               403        229         606        936
Other income, net          333      2,007         939      2,007
                     ---------  ---------   ---------  ---------

Income before
 income tax
 provision              11,302      2,092      30,518     11,397
Income tax
 provision /
 (benefit)               2,115      1,147       7,854     (1,807)
                     ---------  ---------   ---------  ---------

Net income           $   9,187  $     945   $  22,664  $  13,204
                     =========  =========   =========  =========

Net income
 per share
 (basic)             $    0.54  $    0.06   $    1.34  $    0.82
                     =========  =========   =========  =========

Net income
 per share
 (diluted)           $    0.50  $    0.06   $    1.24  $    0.79
                     =========  =========   =========  =========

Weighted Average
 Shares (basic)         17,144     16,212      16,907     16,082
                     =========  =========   =========  =========

Weighted Average
 Shares (diluted)       18,475     17,170      18,291     16,756
                     =========  =========   =========  =========



                          RadiSys Corporation
                      Consolidated Balance Sheet
                            (in thousands)

                                ASSETS


                                    Sept. 30,       Dec. 31,
                                      2000            1999
                                   (unaudited)
                                    --------        --------
Current assets
    Cash and cash equivalents       $ 86,147        $ 15,708
    Short term investments            66,481              --
    Accounts receivable, net          67,711          58,619
    Inventories, net                  50,730          41,374
    Other current assets               2,678           1,747
    Deferred income taxes              4,873           4,723
                                    --------        --------

        Total current assets         278,620         122,171

    Equipment, net                    25,653          21,211
    Goodwill and intangible
     assets, net                      31,525          34,177
    Other assets                      14,144          10,004

        Total assets                $349,942        $187,563



                 LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
    Accounts payable                $ 33,108        $ 19,878
    Short term borrowings                 --          13,931
    Income taxes payable               5,999           3,527
    Accrued wages and bonuses          8,276           6,706
    Other accrued liabilities          9,187           9,266
                                    --------        --------

        Total current liabilities     56,570          53,308
                                    --------        --------

Convertible subordinated notes       116,475              --
                                    --------        --------

        Total liabilities            173,045         53,308
                                    --------        --------

Shareholders' equity
    Common stock, 100,000 shares
     authorized, 17,293 and
     16,489 shares issued and
     outstanding                     160,510        141,030
    Accumulated other comprehensive
     income/(loss):
        Cumulative translation
         adjustment                   (1,558)        (1,546)
        Unrealized gain/(loss) on
         securities available for
         sale                            161           (349)
    Accumulated earnings/(deficit)    17,784         (4,880)
                                    --------        --------

        Total shareholder's equity   176,897         134,255
                                    --------        --------

        Total liabilities and
         shareholders' equity        349,942         187,563
                                    ========        ========