Tera Announces Fourth Quarter and 1998 Results.

SEATTLE--(BUSINESS WIRE)--Feb. 3, 1999--Tera Computer Company (Nasdaq:TERA), the Seattle-based high performance computer company, today announced results for the fiscal year and fourth quarter ended December 31, 1998.

The company reported a net loss for fiscal 1998 of $19.8 million, or ($1.70) per share, compared with a net loss of $15.8 million, or ($2.13) per share, for fiscal 1997. For the fourth quarter of 1998, the net loss was $6.3 million, or ($0.47) per share, compared with a net loss of $4.2 million, or ($0.39) per share, in the third quarter of 1998 and of $5.5 million, or ($0.69) per share, in the fourth quarter of 1997.

Net operating expenses in 1998 were $20.0 million, of which research and development costs accounted for approximately 82 percent. For the fourth quarter, net operating expenses totaled $6.3 million, of which approximately 83 percent was for research and development. Approximately $3.1 million of the 1998 R&D expenses pertained to future system development and $5.2 million pertained to pre-production costs and expense related to adjustments in inventory valuation and reserves. During the fourth quarter, approximately $1.5 million and $1.8 million were spent on these respective items.

"This was an important year for Tera, during which we made significant progress on all major fronts," said Jim Rottsolk, Tera's president and chief executive officer. "First and foremost, we are pleased that our sale of the world's first multithreaded architecture (MTA) system has been followed by its excellent performance. We build the world's only commercially available multithreaded computer, which we believe will compete very successfully with traditional monothreaded computers built with conventional microprocessors.

"In December 1998, we doubled the size of the MTA system when we installed a four-resource module MTA system at the San Diego Supercomputer Center, which was formally accepted by SDSC earlier this week," said Rottsolk. "During the testing and acceptance process, we twice set world records on two versions of the NASA NAS Integer Sort benchmark, a key indicator of the MTA system's promise on a wide range of computationally difficult problems."

"During the fourth quarter, we also moved into our new facilities in Seattle's historic Pioneer Square. We now have excellent office and manufacturing space, with more than 8,000 square feet of clean room. This facility will enable us to expand all aspects of our operations as our business grows," said Rottsolk.

"We filed fifteen software and hardware patent applications in November and December. These patents, when issued, will help us maintain our competitive edge by further protecting the core elements of our technology," added Rottsolk.

"Going forward, our goal is to build larger systems that will allow users to achieve results previously unattainable on some of the world's most difficult high-performance computing problems. First, we plan this year to build an eight-resource module system, followed by a system with 16 resource modules, and possibly more. We are very pleased with the performance of our smaller systems, which are benchmarking well against systems with greater numbers of processors. We are confident that the performance of our larger systems will provide a compelling story to industrial customers as well as to scientific and governmental high-performance users," said Rottsolk.

About Tera Computer Company

Tera Computer Company designs, builds and sells high performance general-purpose parallel computer systems. Tera believes its Multithreaded Architecture system represents the next wave in supercomputer technology because of its unique ability to provide high performance, broad applicability and ease of programming in a single system. For more information about Tera and its MTA systems, contact Tera at 411 First Avenue South, Suite 600, Seattle, WA 98104-2860. Phone: [phone]. Fax: [phone]. E-mail: [e-mail], or http://www.tera.com.

This press release contains forward-looking statements regarding, among other things, Tera's plans to build and deliver larger multi-resource module systems to the San Diego Supercomputer Center and sell MTA multi-resource modules systems to other parties. There are certain factors that could cause Tera's execution plans to differ materially from those anticipated by the statements made above. Among such factors are risks associated with integration of numerous modules into commercially configured systems, necessary modifications to hardware components, software and the integrated systems, timely availability of technology and components from third party suppliers and availability of adequate financial resources. For a discussion of such risks, and other risks that could affect Tera's future performance, please see "Risk Factors" in Tera's most recent SEC Form 10-K/A. -0-

                         TERA COMPUTER COMPANY
                        STATEMENT OF OPERATIONS
                              (unaudited)


                        Three Months Ended       Twelve Months Ended
                             December 31,              December 31,
                           1997        1998          1997         1998

REVENUE               $  73,531   $ 208,783     $  73,531   $1,987,993

OPERATING EXPENSES:
  Cost of sales         (51,891)   (161,141)      (51,891)  (1,815,539)
  Research and
   development       (4,562,767) (5,226,698)  (13,546,785) (16,445,820)
  Marketing and sales  (484,206)   (561,903)   (1,119,431)  (1,830,457)
  General and
   administrative      (495,069)   (634,711)   (1,561,145)  (2,131,261)
                     (5,520,402) (6,375,670)  (16,205,721) (20,235,084)

RESEARCH FUNDING            238      72,121       349,407      253,469
  Net operating
   expense           (5,520,164) (6,303,549)  (15,856,314) (19,981,615)

OTHER INCOME
 (EXPENSE)               21,667      13,730       101,085      177,377
NET LOSS             (5,498,497) (6,289,819)  (15,755,229) (19,804,238)

PREFERRED STOCK
 DIVIDEND               (37,750)   (102,046)      (89,964)    (467,657)
AMORTIZATION OF
 PREFERRED
 STOCK DISCOUNT      (1,980,021)               (2,827,242)    (464,733)
                   ===============   =============   ===============
==============

LOSS FOR COMMON
 STOCK              $(7,516,268)$(6,391,865) $(18,672,435)$(20,736,628)

LOSS PER COMMON
 SHARE                   $(0.69)     $(0.47)       $(2.13)      $(1.70)

WEIGHTED AVERAGE
 SHARES
 OUTSTANDING         10,921,505  13,476,563     8,784,943   12,211,875


                         TERA COMPUTER COMPANY
                       CONDENSED BALANCE SHEETS

                                     December 31,       December 31,
                                        1997                1998
                                                        (unaudited)
                          (unaudited)
ASSETS
   Cash and cash equivalents         $13,329,115          3,161,867
   Accounts receivable                   467,704            685,752
   Inventory                           4,290,873         10,246,029
   Property and equipment, net         1,914,925          4,501,613
   Other assets                          856,768          1,692,976
      Total                          $20,859,385         20,288,237

LIABILITIES AND SHAREHOLDERS' EQUITY
   Loan payable
   Current liabilities                 4,481,493          7,825,896
   Non-current liabilities               532,321            573,054
   Redeemable Securities               9,477,709                  0
   Shareholders' equity                6,367,862         11,889,287
      TOTAL                          $20,859,385         20,288,237