RESEARCH TRIANGLE PARK, N.C. and SUNNYVALE, CA — Red Hat, Inc., the market leader in open source solutions, and privately-held Cygnus Solutions, a strong player in embedded software, today announced that the signing of a definitive merger agreement whereby Red Hat will acquire Cygnus in a transaction valued at $674 million. The proposed merger will make Red Hat the largest company in the world dedicated to providing open source technology, information and services — covering the full spectrum from enterprise deployments, to handheld platforms, to embedded.

“Cygnus has enormous experience and technology leadership in software development and embedded platforms,” said Matthew Szulik, president of Red Hat, Inc. “The merger will create a single, worldwide source that lets developers rapidly create Linux applications for servers and small devices — accelerating the adoption of open source technologies in enterprises worldwide.”

Red Hat, Inc. is the market leader in open source solutions, offering a wide-array of consulting, training and support solutions for both its award-winning Red Hat Linux operating systems (OS) software and popular open source applications used by enterprises worldwide. Cygnus is an open source software technology leader with software development tools and engineering services and developer support for a variety of desktops, client/server systems, real-time operating systems (RTOS) and embedded, post-PC centric platforms. The combined entity will remain committed to serving the customers of each company.

“This merger will create a software company for the 21st century, spanning powerful servers, Internet infrastructure and pervasive, post PC centric computing platforms,” said Alex Daly, president and CEO of Sunnyvale, Calif.-based Cygnus Solutions. “Both Red Hat and Cygnus have vast engineering and development expertise, successful and growing service offerings and two of the most trusted and respected open source brands in the world.”

International Data Corp. (IDC) research states that Linux was the fastest-growing server operating environment in 1998, growing more than 190 percent in that year alone and capturing more than 15.8 percent of the 4.4 million revenue shipment server operating systems market segment. IDC also states that Red Hat Linux is by far the most popular distribution, preferred by 68.7 percent of U.S. Linux users. Finally, IDC predicts that by 2002, there will be more than 55 million handheld and notebook-style information appliance devices and that by 2005, shipments of these appliances will exceed shipments of PCs.

About Cygnus Solutions (www.cygnus.com)

Cygnus Solutions, a leader in open source software and an innovating force in Internet software infrastructure, offers software development platforms based on an open source model. Cygnus' award-winning products, custom engineering services, and developer support services enable customers to bring products to market faster at reduced system development costs. Cygnus development tools cover more than 125 host-target combinations for embedded microprocessors and are supported by one of the most experienced teams of engineers delivering custom-engineering services and developer support to top companies worldwide. Founded in 1989, Cygnus pioneered the commercialization of open source software. Cygnus has been ranked on the Software Magazine's list of top 500 software companies since 1997. The company has headquarters in Sunnyvale, California and sales and engineering offices throughout North America, Japan, and the United Kingdom.

About Red Hat, Inc. (www.redhat.com)

Founded in 1994, Red Hat (NASDAQ:RHAT) is the market leader in open source operating system (OS) software, services and information. Along with its award-winning open source Red Hat Linux OS, Red Hat offers a full line of services, including telephone support, on-site consulting, developer training, certification programs and priority access updates, making Red Hat a leading resource for knowledgeable, innovative, mission-critical open source solutions. Red Hat shares all of its software innovations freely with the open source community under the GNU General Public License (GPL). The Official Red Hat Linux OS and related services are available directly from the company and through its partner, distributor and reseller programs, which include top PC and server manufacturers such as Compaq, Dell, Gateway, IBM, Hewlett-Packard and Silicon Graphics. Red Hat is based in Research Triangle Park, N.C. and has offices worldwide.

 
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