Cortina Systems Purchases Intel's Optical Network Components Business; Acquisition Gives Cortina Leadership Position in Routing, Transport, and Enterprise Communications Components.

SUNNYVALE, Calif. -- Cortina Systems announced that it has acquired the assets of Intel's optical network components business for $115 million, which consists of a minority investment position and an undisclosed amount of cash. Cortina also announced the completion of a new $132 million funding round led by new investor Institutional Venture Partners (IVP) as well as existing investors Canaan Partners and Morgenthaler Ventures. Additional investors providing funding include new investors Alloy Ventures, Bridgescale Partners, Doll Capital Management, and Sofinnova Ventures, and along with all of Cortina's existing venture investors. The transaction closed on September 8, 2006.

"Cortina has all the attributes we look for in a semiconductor investment: it's an expansion-stage private company with an industry-leading technical team and strong customer relationships with the leading systems vendors," said Norm Fogelsong, general partner at IVP. "We are happy to have led this funding round, which will create the next major semiconductor supplier in the networking space."

The acquisition is a major step forward in Cortina's strategy of becoming the new leader in components for the infrastructure routing, transport, and enterprise markets, making it the top provider of Ethernet Framers, Ethernet PHYs, Optical Transport FEC framers, Ethernet over SONET service framers, and T1/E1 Line Interface Units. As part of the acquisition, Cortina will add key Intel employees in engineering, product testing/validation, operations, marketing and application engineering as well as new facilities in Folsom, California, Raleigh, North Carolina, and Asia.

"As the market for 10 gigabit communications becomes mainstream, makers of switches, routers, and other infrastructure gear need better and more cost-effective ways to deliver a higher level of throughput," says Drew Lanza, general partner at Morgenthaler Ventures, one of Cortina's founding investors in 2001. "At the time we invested, we predicted the need to marry high-speed network interfaces, low-layer processing and high speed interfaces on a single chip. Cortina's success in achieving this has made it one of the stars of our portfolio."

This acquisition continues Cortina's strategy of expanding its technology and market capabilities by adding highly complementary technologies that have an existing customer base.

"Cortina has been very smart about acquiring complementary technologies that extend its product line and enlarge its footprint in the communications semiconductor market," said Eric Young, co-founder and general partner at Canaan Partners. "This acquisition puts them on the fast track to dominance among pure-play transport IC makers."

Cortina has been a leader in components for the IP routing and transport markets, while Intel has primarily focused TDM and optical components. This acquisition brings together a broad range of solutions for IP, optical, TDM, and enterprise applications. Cortina and Intel have closely collaborated to ensure that the transfer of these product lines will not disrupt supplies to customers.

"There is tremendous product and customer synergy between our existing business and the products and teams we have acquired," said Amir Nayyerhabibi, CEO of Cortina. "Cortina is an established leader in advanced communications semiconductors, and this acquisition expands our optical and TDM product lines to make us a leader in those markets as well. We also have a reputation for superior quality and customer support, and this acquisition will expand our infrastructure to strengthen our position."

About Cortina Systems

Cortina Systems is driving the evolution of multi-service carrier and enterprise networks with advanced analog and digital communications ICs. Founded in 2001, Cortina is funded by Morgenthaler Ventures, Canaan Partners, Institutional Venture Partners, Alloy Ventures, Bridgescale Partners, Doll Capital Management, El Dorado Ventures, Kodiak Venture Partners, INVESCO Private Capital, Redpoint Ventures, and Sofinnova Ventures and is based in Sunnyvale, California. For more information, please visit www.cortina-systems.com