Terayon Acquires Internet Telecom Assets for Broadband Voice over IP; Expands Terayon's Broadband Telephony Systems Portfolio.

Business Editors/High Tech Writers

SANTA CLARA, Calif.--(BUSINESS WIRE)--March 13, 2000

Terayon Communication Systems, Inc. (Nasdaq:TERN), a leading supplier of broadband network systems, today announced a definitive agreement to acquire certain assets of Internet Telecom, a privately held supplier of sophisticated PacketCable and other standards-based, voice-over-IP (Internet Protocol) systems and technologies. The assets of Internet Telecom complement Terayon's current broadband circuit-switched voice products, and the company expects this to expedite delivery of voice-over-IP systems later this year.

Terayon CEO Zaki Rakib stated, "We are very excited about the acquisition of Internet Telecom, which provides the voice technology we need to deliver advanced voice-over-IP systems. Internet Telecom's impressive voice technology complements the robust broadband voice systems we are shipping today, providing not only a path to highly efficient voice-over-IP systems for cable and DSL, but also a key addition to Terayon's growing systems-on-silicon portfolio."

Dmitry Goroshevesky, CEO and co-founder of Internet Telecom, stated, "We are proud to join the growing Terayon team, with its visionary approach to broadband. We look forward to implementing Internet Telecom's voice-over-IP solutions with Terayon's major customers throughout the world."

Daniel Oleiski, Vice President and General Manager of Terayon's Broadband Voice group, added, "The addition of Internet Telecom's technologies further extends Terayon's broadband voice product line to encompass systems based on both circuit switch and voice-over-IP. I look forward to working closely with the Internet Telecom team to ensure a smooth migration to the next generation of broadband voice systems."

Adoram Gaash, Senior Vice President and General Manager of Terayon's Integrated DSL group, stated, "The acquisition of Internet Telecom complements our current IPTL xDSL platform. This will allow us to build these key voice-over-IP capabilities into our growing DSL product line."

The acquisition of these assets from Internet Telecom is a key step in Terayon's strategy to assemble complementary solutions for delivery of broadband voice, data, and video over a variety of media--cable, DSL, and satellite. Internet Telecom's voice-over-IP product strength complements Terayon's current broadband voice product line, which includes sophisticated circuit-switched broadband voice systems in service by cable operators today.

Internet Telecom has assembled a sophisticated suite of voice-over-IP technologies and systems. Key among these are voice compression algorithms, digital signal processing code, signaling protocols for the major worldwide telephony standards, gateways to relay voice data and signaling information, software systems to enable communication over IP networks, and the company's Hierarchical Internet Telephony (HIT) server to perform software-based switching functions. The systems from Internet Telecom are planned to adhere to PacketCable and other major industry standards for system interoperability.

Under terms of the agreement, Terayon will acquire the assets of Internet Telecom in exchange for shares of its common stock worth approximately $40 million. The acquisition will be accounted for as an acquisition of assets and is expected to close in the second quarter of 2000. This acquisition has been approved by Terayon's board of directors and is subject to various closing conditions.

Internet Telecom is a leading provider of voice-over-IP core enabling technologies to the communications equipment manufacturers, facing the challenge of the convergence of voice and data networks. The company, based in Israel, provides its customers with fully customized or open standards solutions that integrate voice and data over packet. Internet Telecom provides the technological implementation of IP solutions into any kind of existing telecom or datacom equipment - PABX, Central Office, Telecom and Datacom Switch, Local Loop, Wireless Local Loop, Router and Broadband equipment. Internet Telecom's algorithms, protocols, signaling software, design skills and other technology provide high carrier-grade quality and performance.

Terayon Communication Systems provides innovative broadband networking solutions for advanced broadband voice, data and video services. The company's cable data access systems, digital video systems, and broadband telephony systems are deployed by leading cable operators worldwide. The company's xDSL access systems deliver innovative telephony and data solutions for the growing SOHO business market. Terayon, based in Santa Clara, California, USA, has sales and support offices worldwide, and is traded on the Nasdaq under the symbol TERN. Terayon can be found on the web at www.terayon.com.

"Safe Harbor" Statements under the Private Securities Litigation Reform Act of 1995: Except for the historical information contained herein, this news release contains forward-looking statements, estimates, and assumptions by the Company and other parties that involve risks and uncertainties, including the Company's ability to gain new business, the ability of the Company to successfully integrate acquisitions, the expansion of operations by the Company's customers and the deployment of the Company's products in specific markets, as well as the other risks detailed from time to time in the Company's filings with the SEC.

Note: Terayon, the Terayon logo, TeraPro, TeraLink, and TeraComm are registered trademarks of Terayon Communication Systems, Inc. TeraView and CherryPicker are trademarks of Terayon Communication Systems, Inc. All other trademarks are property of their respective owners.