Applied Microsystems Announces Expense Reductions.

Business Editors, High-Tech Writers

REDMOND, Wash.--(BUSINESS WIRE)--May 1, 2002

Applied Microsystems Corporation (Nasdaq:APMC) today announced plans to reduce expenses through a reduction in personnel and realignment of business objectives.

As was reported earlier in April, the Company's first-quarter 2002 revenues were essentially flat in comparison to the third and fourth quarters of 2001. Despite cost-control efforts previously implemented, the Company reported a net loss in the first quarter of $1.2 million on revenues of $4.9 million.

"Market conditions remain uncertain; however, we expect continued near-term weakness in the networking space and are taking action to size our business accordingly," stated Stephen J. Verleye, President and CEO of Applied. Applied's cost reductions will consist primarily of a reduction of approximately 45 full-time employees worldwide. After the staff reduction, Applied will employ a total of approximately 85 personnel. "We are focusing our resources on products and services we believe have the greatest long-term potential for success, including targeted areas within our embedded development tools markets as well as pursuing the intellectual property proposed to be acquired from REBA Technologies."

The Company announced on April 22, 2002 that it had entered into a non-binding letter of intent to acquire REBA Technologies, Inc -- a start-up company focused on developing technology to enhance the operation of server farms for enterprises, Application Server Providers and Network Service Providers. Applied would not acquire any personnel in the transaction, and the proposed transaction remains subject to the completion of due diligence and definitive documentation. The Company plans to provide further information on its plans for the REBA intellectual property following execution of definitive agreements.

About Applied Microsystems

Applied Microsystems has a 23-year track record as a leading developer of tools and technology for embedded systems. Increasingly, embedded systems technology is at the core of new capabilities in the commercial communications and computing markets -- in applications such as storage area networks, networking appliances, and communications and networking equipment. While Applied has historically been a developer of tools for use by embedded systems developers, the proposed REBA acquisition would represent an expansion into development of hardware and software products aimed at end-user markets -- specifically, corporate data centers.

The company can be reached at P.O. Box 97002, Redmond, Wash. 98073-9702; by phone at 800/426-3925; or by e-mail at [e-mail]. Visit Applied on the Web at www.amc.com.

Forward-looking statements in this press release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated or stated or implied by such forward-looking statements. These factors include, without limitation, the ability of the Company to maintain its current revenue levels in light of the reduction in force, the ability of the Company to complete the proposed acquisition of REBA Technologies on negotiated terms favorable to the Company, the ability of the Company to integrate the technology of REBA into its development plans, the ability of the Company to successfully develop hardware and software to be used in markets such as enterprise server farms and internetworking equipment using intellectual property acquired in the proposed transaction, market acceptance for planned products and services, relationships with third parties, sufficient availability and retention of qualified personnel, ability of the Company to maintain/improve gross margins and operating margins on its existing products and service while shifting its research and development focus to include hardware and software aimed at end-user markets, the overall economic climate of the businesses and geographies in which the Company operates, availability of sufficient resources, and other risks and uncertainties detailed in the Company's filings with the Securities and Exchange Commission.