Press Release: August 2, 2000

WR Hambrecht + Co Issues Open Source Industry Report

Cobalt Networks and VA Linux Systems well positioned for storage boom

San Francisco, CA, August 2, 2000—WR Hambrecht + Co today issued a comprehensive report on the rapidly growing storage market. The report focuses on two major players in this industry: Cobalt Networks (COBT) and VA Linux Systems (LNUX). WR Hambrecht + Co Open Source and Pervasive Computing analyst Prakesh Patel believes that as the use of computer applications and databases to store valuable customer and product data explodes, the need for corporations to store their data across networks will be critical. The Storage Boom: Cobalt Networks and VA Linux Systems Ride the Wave can be found at www.wrhambrecht.com.

“We believe that the winners in the storage boom will be companies that offer ‘plug and play’ server and storage systems for service providers,” Patel said. “The current evolution of the storage industry should result in the continued sales of high-end storage solutions from companies such as Sun Microsystems, EMC Corporation, Compaq, Hewlett-Packard, IBM, and Network Appliance. However, the largest growth in the storage market should be in turn-key server appliances and storage systems driven by demand from service providers Ð ISPs, ASPs, and SSPs.”

Patel believes Cobalt Networks and VA Linux Systems are well positioned for this boom because of the demand for storage because:

• Internet collaboration and communication are storage intensive applications: The report states that from Open Source software development projects to e-mail attachments, Internet collaboration and communication places increasing strain on the storage capacities of businesses. Patel believes companies that do not adequately fulfill the storage demands of their projects and communications will face reduced productivity or barriers to growth.
• High availability and redundancy demand increased storage capacity: The report concludes that in an information-centric economy, businesses require guaranteed access to data and rely on the uptime of their website and databases to generate revenue. Because of this, storage systems, servers and networks are needed to ensure that websites are up and running and that storage data is available.
• Small and medium-sized businesses will outsource storage: Patel anticipates that scarce technical expertise and limited IT budgets will drive small and medium-sized businesses to seek simple, low-cost outsourced solutions.