Bay Networks and NetSpeak Corporation Sign OEM and Joint Development Agreement to Deliver Voice- and Fax-Over-IP Solutions.

SANTA CLARA, Calif. and BOCA RATON, Fla.--(BUSINESS WIRE)--Jan. 6, 1998--

--Bay Networks Announces First Application Service

in its IP Services Strategy with Equity

Investment of $37.6 Million in NetSpeak--

Bay Networks, Inc. (NYSE:BAY) and NetSpeak Corporation (NASDAQ:NSPK), a leading developer and marketer of IP telephony technology, today announced that the two companies have signed an OEM and joint development agreement to provide sophisticated, system-oriented voice- and fax-over-IP solutions to enterprise and service provider customers. This agreement signifies the delivery of the first phase of Application Services, a key component of Bay Networks' Adaptive Networking IP Services strategy, with the roll out of a complete voice- and fax-over-IP solution. The Bay Networks/NetSpeak solution gives customers the value proposition of cost-savings for long distance voice communications on IP, while also enabling value-added applications that combine voice, video and data.

Under the terms of the agreement, Bay Networks will integrate NetSpeak's voice and fax technologies into its BayStack, remote access and router platforms to deliver next-generation gateway devices which convert voice and fax signals into IP traffic. Additionally, Bay Networks will resell NetSpeak's scaleable suite of IP telephony server software, which supports an array of value-added services. NetSpeak will also provide resources within Bay Networks' 7x24 support infrastructure.

"Initially, our customers will see tremendous cost-savings and opportunity as they transition to IP for long distance voice calls, but in the future, voice- and fax-over-IP technology will enable customers to create innovative business solutions with the consolidation of voice, video and data," said Dave House, Chairman, CEO and President of Bay Networks. "The integration of NetSpeak's leading technology with Bay Networks' flexible access platforms and IP Services, such as directory services and industry-leading quality of service, will enable the delivery of innovative IP-based business applications and provide the most complete and scaleable solution for both service provider and enterprise customers."

"NetSpeak is extremely pleased to enter into this relationship with Bay Networks, an established leader in the network equipment industry. This partnership further endorses NetSpeak's strategy to deliver scaleable, carrier-grade products and systems," commented Stephen R. Cohen, Chairman and CEO of NetSpeak Corporation. "We are excited about the opportunity to leverage Bay's extensive worldwide distribution capabilities and we believe this partnership will have a significant effect on increasing the adoption of our technology which offers substantial benefits to end users."

Adaptive Networking and Voice/Fax-over-IP

As part of its Adaptive Networking strategy, Bay Networks announced in October the IP Services cornerstone. IP Services is a new category of products and technologies that move beyond IP as a protocol and allow customers to optimize business applications and innovate. Focusing on three areas of current and future technologies, services and solutions, Bay Networks' IP Services encompasses: Application Services, Enabling Services and Interworking Services. Application Services include Mission Critical Business Applications, Voice/Fax-over-IP, Multimedia, Provisioning and Administration, and IP Value Added Applications.

As a major category in Bay Networks' IP Services, Application Services provide the capabilities necessary to optimize IP applications, or enable applications that are not IP optimized to benefit from IP-based networks. Taking advantage of Enabling Services such as directory/policy services, progressive traffic management and security, the application itself is able to negotiate explicit service levels from the IP network instead of depending on "best effort" associated with the Internet. This is critical to providing the guaranteed bandwidth and prioritization necessary to successfully deploy applications such as voice-over-IP, and hence the logic behind Bay Networks' strategy to place an explicit focus on applications.

"Many of our customers are seriously considering deploying voice-over-IP in the next year or two," said Bill Hawe, Vice President of Architecture for Bay Networks. "Some need technology that calls for voice emulation, to take advantage of the cost-savings of long distance voice communications on IP. Others want to develop new services that integrate voice/video and data to innovate in their businesses. Uniquely, we now have the solution set to address both constituencies."

The Future of Voice-Over-IP

Initially, organizations will directly benefit from voice-over-IP (VOIP) with substantial cost-savings over traditional telephone services for long distance calls. However, the future benefits of VOIP to business lie in its ability to solve business problems that are not addressed efficiently or effectively in a world where voice and data are served by separate infrastructures. Although the range of applications is extensive (i.e. Web-based call centers and unified messaging), the ultimate benefit to businesses is measured in terms of increased productivity and cost savings. VOIP can leverage the IP advantages of geographic independence, platform independence, and multiple simultaneous (e.g. voice, data, video) connections to create virtual `local' environments.

Details of the Bay Networks/NetSpeak Agreement

As part of the relationship, Bay Networks will purchase 1,334,171 newly issued shares of NetSpeak's common stock for approximately $37.6 million, representing a nine percent stake in NetSpeak, on a fully diluted basis. Bay Networks will have the right, in certain circumstances, to purchase additional shares so as to maintain its percentage ownership in NetSpeak. Consummation of the investment is subject to the receipt of regulatory approval and certain other conditions, which is expected later this month.

About NetSpeak Corporation

NetSpeak Corporation (NASDAQ:NSPK), based in Boca Raton, Fla., develops, markets, licenses and supports a suite of intelligent software modules which provide business solutions for concurrent, real-time interactive voice, video and data communications over packetized data networks such as the Internet and Local Area Networks (LANs) and Wide Area Networks (WANs). NetSpeak's products allow organizations to build new voice and video-enabled communications networks, or to add these communications capabilities to their existing enterprise. For additional information visit NetSpeak's World Wide Web address at HYPERLINK http://www.netspeak.com or call 1-888-NETSPEAK.

About Bay Networks, Inc.

Bay Networks, Inc. (NYSE:BAY) -- where information flows -- is a leader in the worldwide networking market, providing a complete line of products that serve corporate enterprises, service providers and telecommunications carriers. The company offers frame and ATM switches, routers, shared media, remote and Internet access solutions, IP services and network management applications, all integrated by Bay Networks Adaptive Networking strategy. With headquarters in Santa Clara, California, Bay Networks markets its products and services around the world, providing 7x24 support coverage.

For additional information visit the company's World Wide Web site at http://www.baynetworks.com or call 800-8-BAYNET.

This release, other than historical financial information, may consist of forward-looking statements that involve risks and uncertainties. These statements may differ materially from actual future events or results. For instance, factors which could cause results to differ from future events include the rate of adoption of new technology, competitive pricing actions and marketing programs, among others. Readers are referred to the documents filed by Bay Networks and NetSpeak with the S.E.C., specifically Bay Networks' recent reports on forms 10-K and 10-Q and NetSpeak's Form S-1 registration statement and 10-Q, which identify important risk factors which could cause actual results to differ from those contained in the forward-looking statements. -0-

NOTE TO EDITORS: Bay Networks is a registered trademark of Bay Networks, Inc. BayStack is a trademark of Bay Networks. NetSpeak is a registered trademark of NetSpeak Corporation. Other brand and product names are registered trademarks or trademarks of their respective holders.

CONTACT: Bay Networks, Inc.

Jeff Ferry, 408/495-2419

[e-mail]

or

Bay Networks, Inc.

Matt Burke, 978/916-1320

[e-mail]

or

NetSpeak Corporation

John Staten, 561/998-8700

[e-mail]