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Nov. 21, 2003

In-Q-Tel Joins Exising Investors in New Funding Round of Industry Leading Packet Processing Company; Bay Expands Board of Directors

Bay Microsystems, a leader in high performance packet processing and traffic management solutions, today announced it has closed $10 million in an over-subscribed Series C financing round, bringing the total investment in the company to more than $30 million. Investors in this financing round include a new institutional investor, In-Q-Tel, as well as participation from existing institutional investors: Selby Venture Partners, Needham Capital, Thomas Weisel Venture Partners, and Alliance Venture Management.

In-Q-Tel, founded in 1999, is a private, independent enterprise funded by the Central Intelligence Agency. In-Q-Tel’s mission is to identify and invest in companies developing cutting-edge information technologies that serve U.S. national security interests.

Bay Microsystems also announced the expansion of its board of directors with three new independent members: C. Nicholas Keating, Jr., Michael Phillips and Dr. Paul G. Kaminski. They join Bob Marshall (Managing Partner, Selby Venture Partners), Rick Bleszynski, and Chuck Gershman (President and CEO, Bay Microsystems).

Nick Keating is President and CEO of IP Infusion, Inc. and currently serves on the board of directors of Foundry Networks and Mike Phillips is the former Vice President, Business Development and General Counsel of JDS Uniphase Corporation, and is currently a senior partner in the law firm of Morrison & Foerster. Dr. Kaminski is the former Under Secretary of Defense and currently serves as a director with several companies in addition to Bay, including General Dynamics, RAND, Anteon Corporation, and as Chairman and CEO of Technovation, Inc.

“The addition of In-Q-Tel and the renewing commitment of our existing investors speaks well for the progress Bay Microsystems has achieved during a very difficult economic time,” said Gershman. “We are thrilled with the market acceptance of our products which has lead to meeting our revenue targets in 2003 and we anticipate significant growth leading to profitability next year.”

About Bay Microsystems
Bay Microsystems is a privately held, fabless communications IC company delivering a family of programmable packet processing and traffic management solutions. Bay’s Internetworking Processorâ„¢ (InP) Family is scalable, intelligent, and ultra-high performance, suited for the full range of carrier class products from “Access to Long-Haul.” The InP Family includes the industry’s first OC192c/10G processor capable of classification, policing, segmentation and reassembly, and traffic management at wire rate.

Bay’s InP products are already in use within broadband networks developed by the US Government and commercial providers serving the metro-edge, metro-core, regional and long-haul markets. Bay’s seasoned management and world-class engineering teams have three generations of proven expertise in architecture, implementation, deployment, marketing and management of network processors. For more information visit the website at