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SRI International Marks Another Year of Spin-off Strategy Success; Companies Celebrate a Year of Innovation and Market Success.

MENLO PARK, Calif. -- SRI International, a leading independent, nonprofit research institute well known for its pioneering innovations, notes another year of its successful spin-off strategy and the milestones of several of its spin-off companies. A key component of SRI's business strategy is to spin-off new ventures each year to capitalize on the groundbreaking technology developed at SRI and move it into the marketplace. To date, SRI and its subsidiary Sarnoff Corporation have spun off more than two-dozen new ventures.

"A measure of SRI's contribution to technology and economic growth is its success in transferring technology to spin-off companies," said Yogen Dalal, managing director at Mayfield. "The institute's long and well-known history is predicated on its collaborative research programs and its ability to work with industry to develop advanced and important technologies. Many more of us in the venture capital community are taking note of SRI's successful spin-off strategy and ability to leverage its R&D success."

Commenting on the achievements, SRI Vice President of Ventures and Strategic Programs, Norman Winarsky said, "This year, our spin-off companies have continued to bring some of SRI's most important technologies to market while delivering tremendous value to their customers. These companies are clearly contributing to the advancement of many of today's important science and technology innovations. We thank our VC partners for the significant contributions, guidance and commitment to SRI and our ventures."

The following summaries offer insight into the impact of these high-value ventures:

--Artificial Muscle Secures $7.5M in Funding

In 2004, SRI formed Artificial Muscle Incorporated (AMI, www.artificialmuscle.com), a company that develops and markets components made of EPAM (Electroactive Polymer Artificial Muscle). The smart material was developed and patented by SRI researchers.

--Intuitive Surgical Secures Record Number of Customers and Revenue

Intuitive Surgical, Inc. (Nasdaq:ISRG)(www.intuitivesurgical.com), the industry leader in surgical robotics, reported record revenue in 2004. In its third quarter, the company reported a run rate of $140M driven by continued recurring revenue growth and higher da Vinci(R) Surgical System shipments.

-- Nuance Celebrates 10 Years

In October, Nuance (Nasdaq:NUAN)(www.nuance.com) celebrated 10 years of innovation in the speech and voice automation industry. From its 1994 beginnings in SRI's Speech Technology and Research (STAR) Laboratory, Nuance has led the speech market with products that enable today's generation of advanced voice systems. In 1996, Nuance developed and deployed the industry's first large-scale commercial speech application. Today, Nuance is the recognized North American market share leader, with more than 1,000 customers worldwide.

-- PacketHop Secures $10M in Series B Financing

PacketHop (www.packethop.com) develops mobile broadband networking products that deliver high network availability, enhanced coverage, security, quality of service, efficient cost performance, and real-time peer-to-peer communications to serve a wide range of markets. PacketHop's secure mobile mesh networking software loads easily onto virtually all standard IP radio-equipped devices like laptops, PDAs and tablets enabling a mobile broadband network to be created instantly. The company is currently preparing for a commercial product launch in early 2005 and has secured key strategic partnerships with Nortel Networks, Itronix, and Xybernaut, among others.

-- PolyFuel Announces New Family of Fuel Cell Membranes

PolyFuel (www.polyfuel.com), a leader in engineered membranes for fuel cells, announced a breakthrough in technology that could ultimately make hydrogen fuel cell-powered automobiles a commercial reality. At the heart of the breakthrough is a new family of membranes -- the crucial component of a fuel cell -- that exhibit a set of performance characteristics never before simultaneously achieved in hydrogen-based fuel cells.

PolyFuel has already introduced the highest-performing membranes available for the compact, portable, methanol-based fuel cells that are being developed to replace batteries in portable electronic devices such as notebook computers and cell phones. PolyFuel has been named a 2005 Technology Pioneer by the World Economic Forum, received a grant from the US Department of Energy, which chose PolyFuel to work on a portable fuel cell application alongside Intel Corporation, and Frost & Sullivan named PolyFuel's technology "Enabling Technology of the Year for 2004 for Power Supplies and Batteries."

Venture Funding Details:

Artificial Muscle: Artificial Muscle Inc. was spun off from SRI in 2004. To date, AMI has secured $2.5 million in Series A venture funding from Vanguard Ventures, ARCH Venture Partners and NGEN Partners.

Intuitive Surgical: Intuitive Surgical was spun off from SRI in 1995. Prior to its public offering, the company received venture funding from Morgan Stanley Dean Witter, Mayfield, and Sierra Ventures.

Nuance: Nuance was spun off from SRI in 1994. Prior to its public offering in 2000, the company received venture funding from Alloy Ventures, Goldman, Sachs and Company, Mayfield, Morganthaler Ventures, Motorola, US Venture Partners and Visa International.

PacketHop: PacketHop was spun off from SRI in 2003. To date, PacketHop has secured $15M in venture funding including a $10M Series B financing round led by ComVentures with participation from existing investors US Venture Partners and Mayfield.

PolyFuel: PolyFuel was spun off from SRI in 2002. The company has secured venture funding from Vancouver-based Ventures West, Chrysalix Energy LP, Intel Capital, Mayfield, and Technology Partners.

About SRI International

Silicon Valley-based SRI International (www.sri.com) is one of the world's leading independent research and technology development organizations. Founded as Stanford Research Institute in 1946, SRI has been meeting the strategic needs of clients for almost 60 years. The nonprofit research institute performs contract research and development for government agencies, commercial businesses and nonprofit foundations. In addition to conducting contract R&D, SRI licenses its technologies, forms strategic partnerships and creates spin-off companies.
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Date:Dec 14, 2004
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