Wind River Reports Fourth Quarter Revenues of $28Million; Fiscal 1998 Revenues Up 44%.

ALAMEDA, Calif.--(BUSINESS WIRE)--Feb. 26, 1998--Wind River Systems Inc. (NASDAQ:WIND), the leading provider of real-time operating systems, integrated software development tools and engineering services for embedded applications, reported operating results for the fourth quarter ended January

Revenues for the fourth quarter were $28,000,000, an increase of 41% from the $19,800,000 reported in the fourth quarter of the previous year. During the quarter, the company took a one-time pre-tax charge of $15,159,000 ($13,353,000 after-tax) resulting from the previously announced technology license from Network Computer Inc. and the cash purchase of Objective Software Technology Ltd.

Including these charges for in-process technology, a net loss for the quarter of $7,160,000 was reported. Excluding the one-time charges for in-process technology, net income for the quarter was $6,193,000, up from $4,260,000, or a 45% increase from the corresponding quarter of the previous year.

Diluted net loss per share for the fourth quarter was $0.28. Excluding the one-time charges, diluted earnings per share for the fourth quarter was $0.22, an increase of 47% over the $0.15 diluted earnings per share recorded in the prior year. Weighted average shares outstanding, used in the computation of pro-forma diluted earnings per share for the current and previous years, were 28,080,000 and 28,176,000, respectively.

Total revenues for the year ended January 31, 1998, of $92,400,000 represent a 44% increase from revenues of $64,000,000 in the previous year. Net income for the year ended January 31, 1998 was $4,870,000. Excluding the one-time charges for in-process technology in the fourth quarter, pro-forma net income for the year was $18,223,000 compared to $11,280,000 last year, an increase of 62%. Pro-forma diluted net income per share increased from $0.43 to $0.65 per share.

"Allowing for our strategic purchases of NCI graphics and browser technology and the acquisition of OST in Scotland, Wind River has for the sixteenth consecutive quarter exceeded market expectations for both revenues and net earnings," said Ron Abelmann, president and chief executive officer of Wind River.

"This accomplishment, and our significant gains in market share, validates the Wind River strategy of investing heavily in technology, customer support, and quality," Abelmann continued.

Significant Events of the Quarter

During the quarter, Wind River Systems and Network Computer Inc. entered into a partnership, with Wind River acquiring the rights to graphics technology developed by the NCI/Navio engineering team. The investment will bring robust and scalable graphics to a full range of interactive embedded applications.

Wind River also announced the signing of a definitive agreement to acquire Objective Software Technologies, underscoring the company's strategy to deliver the best object-oriented visualization technology to Wind River's customer base and expanding Wind River's global engineering workforce.

Wind River Systems also announced during the quarter that it had attained International Standards Organization (ISO) 9001:1994 registration of Alameda-based operations including its real-time operating system and application development environment, engineering services, customer support and customer training.

This registration represents Wind River's achievement of a level of excellence in accordance with internationally recognized standards for product engineering, manufacturing and service of the highest quality. Wind River's Tornado for Java product also passed Sun Microsystems' Java compatibility tests.

Cisco Systems, the worldwide leader in networking for the Internet, licensed Wind River's Tornado development environment this quarter to be incorporated into Cisco's overall cable modem software. The cable modem software package, which will enable the delivery of a variety of advanced multimedia services to the home, is in turn being licensed to Cisco cable partners.

Verifone this quarter chose Tornado as one of the elements in the development of its new generation of point-of-sale products. The selection was based on Verifone's rigorous reliability requirements, coupled with the Tornado tools suite's time-to-market advantage.

Also this quarter, Wind River strengthened its leadership in the digital imaging market. Flashpoint Technology Inc. turned to the Tornado development environment and VxWorks operating system to serve as the foundation for Digita, the industry's first operating environment designed specifically for digital cameras and imaging peripherals.

During the past year, there have been over 80 I2O design starts utilizing Tornado for I2O. Intel I/O processor shipments began in the fourth quarter of 1997.

Wind River Systems Inc.

Wind River Systems Inc., an ISO 9001 registered company, is the leading provider of integrated software development tools for real-time embedded applications in the Internet, telecommunications, data communications, office automation, networking, computer peripherals, medical, automotive, industrial, aerospace and multimedia markets.

Through the industry's most comprehensive product line and customer support, Wind River enables customers to develop and reuse application software across a variety of products and platforms, shortening development cycles and improving time-to-market.

Incorporated in 1983, Wind River is headquartered in Alameda, Calif., with operations in the United Kingdom, France, Germany, Sweden, Italy, Israel, Japan and Korea, and representation world wide. MCL-PR-Q498-98-02 -0-

Except for the historical information contained herein, this news release contains forward-looking statements that involve risks and uncertainties, including but not limited to timely development, acceptance and pricing of new products, the impact of competitive products and pricing, and other risks detailed in the company's most recent SEC Form 10-K. Actual results may vary materially from those projected. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Tornado, VxWorks, Wind River Systems and the Wind River Systems logo are trademarks or registered trademarks of Wind River Systems, Inc. All other names mentioned are trademarks, registered trademarks or service marks of their respective companies. -0-

                        Wind River Systems Inc.
              Condensed Consolidated Statements of Income
               (In thousands, except per share amounts)
                              (Unaudited)

                          Three months ended          Year ended
                              January 31              January 31
                           1998        1997        1998        1997
Revenues:
 Products                $ 20,995    $ 14,826    $ 67,110    $ 46,354
 Services                   7,005       4,974      25,290      17,646
   Total revenues          28,000      19,800      92,400      64,000

Cost of revenues:
 Products                   1,674       1,119       6,245       4,580
 Services                   2,669       1,979       9,633       6,960
   Total cost of revenues   4,343       3,098      15,878      11,540

     Gross profit          23,657      16,702      76,522      52,460

Operating expenses:
 Selling and marketing      9,312       6,861      33,066      23,900
 Product development and
  engineering               3,654       2,331      11,970       7,722
 General and administrative 1,628       1,646       6,261       5,021
 In-process research and
  development              15,159        --        15,159        --
    Total costs
     and expenses          29,753      10,838      66,456      36,643

Operating income (loss)    (6,096)      5,864      10,066      15,817

Other income (expense):
 Interest income            2,757       1,150       7,599       2,465
 Interest expense          (1,979)       --        (4,213)       --
 Minority interest in
  consolidated subsidiary
  company                    (116)       (230)        (88)       (325)
   Total other income         662         920       3,298       2,140
Income (loss) before
 income taxes              (5,434)      6,784      13,364      17,957
Provision for income taxes  1,726       2,524       8,494       6,677
    Net income (loss)    $ (7,160)   $  4,260    $  4,870    $ 11,280
Net income (loss)
 per share(a)
  Basic                  $  (0.28)   $   0.17    $   0.19    $   0.49
  Diluted                $  (0.28)   $   0.15    $   0.17    $   0.43
Weighted average common
 and common equivalent
 shares(a)
  Basic                    25,597      25,184      25,456      23,142
  Diluted                  25,597      28,176      28,153      26,129
Pro forma diluted income
 per share (b)           $   0.22                $   0.65
Weighted average common
 shares used in pro forma
 diluted income per share
 calculation               28,080                  28,153

(a)  In February 1997, the Financial Accounting Standards Board issued
     SFAS 128, "Earnings Per Share". All earnings (loss) per share
     data presented herein have been restated to comply with this
     Statement.

(b)  Pro forma diluted net income per share excludes the effect of the
     one-time write-off of $15,159 ($13,353 after-tax) which resulted
     from the acquisition of in-process technologies from Network
     Computer Inc. and Objective Software Technology, Ltd. during the
     quarter ended January 31, 1998.


                        Wind River Systems Inc.
                 Condensed Consolidated Balance Sheets
                (In thousands, except per share amount)
                              (Unaudited)

                                               January 31,
                                           1998          1997
ASSETS
Current assets:
 Cash and cash equivalents               $ 100,633    $   9,848
 Short-term investments                     61,107       46,895
 Accounts receivable, net of
  allowances of $1,460 and $1,204           18,076       13,296
 Prepaid and other current assets            5,210        4,780
   Total current assets                    185,026       74,819

Investments                                 60,329       43,004
Land and equipment, net of
 accumulated depreciation
 of $10,962 and $7,328                      24,496        8,426
Deposits and other assets                   17,957        2,412
   Total assets                          $ 287,808    $ 128,661

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable                        $   1,976    $   1,340
 Accrued liabilities                        11,563        5,657
 Accrued compensation                        5,441        4,391
 Income taxes payable                        1,415        1,941
 Deferred revenue                           15,027        6,271
   Total current liabilities                35,422       19,600
Long-term debt                             140,000         --
   Total liabilities                       175,422       19,600
Minority interest in
 consolidated subsidiary                       400          312

Stockholders' equity:
 Common stock, par value
  $.001, 75,000 shares
  authorized, 26,166 and
  25,382 shares issued,
  and 25,689 and 25,269
  shares outstanding                            26           25
 Additional paid in capital                101,154       89,890
 Cumulative translation adjustments         (1,700)        (310)
 Unrealized gain (loss) on securities          503         (353)
 Retained earnings                          27,488       22,618
 Treasury stock, 477 and
  113 shares, at cost                      (15,485)      (3,121)
     Total stockholders' equity            111,986      108,749
        Total liabilities and
         stockholders' equity            $ 287,808    $ 128,661

CONTACT: Wind River Systems Inc.

Richard Kraber, 510/749-2396

dickk@wrs.com

http://www.wrs.com