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ATCA/Standard Servers

Radisys Reports Q4

HILLSBORO, Ore. -- RadiSys(R) Corporation (NASDAQ:RSYS) , a leading global provider of advanced embedded solutions, today announced revenues of $60.7 million for the quarter ended December 31, 2006 and a net loss of $5.5 million or $0.25 per share. Non-GAAP net loss for the fourth quarter was $40 thousand or $0.00 per share. The GAAP and non-GAAP fourth quarter results per share exceeded the Company's previously issued fourth quarter guidance due to an improved gross margin rate, reduced operating expenses and a higher tax benefit relative to guidance. Non-GAAP results excluded a loss of approximately $0.25 per share, primarily attributable to the impact of acquisition-related expenses, stock-based compensation expense and restructuring charges.

The Company reported 2006 full year revenues of $292.5 million, an increase of 12% compared to 2005 revenues of $260.2 million. Net loss in 2006 was $13.0 million or $0.62 per share, compared to net income of $16.0 million or $0.68 per diluted share in 2005. Non-GAAP net income in 2006 was $12.0 million or $0.50 per diluted share, compared to non-GAAP net income of $14.7M or $0.62 per diluted share in 2005. The Company's inventory increased in the fourth quarter by $13.9 million mainly related to transitioning out of the Company's contract manufacturing partner in North America. The Company expects the inventory increase to be temporary and the balance to decrease throughout the year.

Commenting on the financial results for the quarter, Scott Grout, President and CEO stated, "I am pleased that the fourth quarter results were better than expected. We ended the year with revenue growth of 12% over 2005 with most of the growth in our strategically targeted markets. Our wireless and medical equipment revenues both increased 21% over last year. From a global perspective, our Europe and Asia Pacific revenues increased 14% from 2005." Scott Grout continued to say, "We made significant progress on our strategies in 2006. We were awarded record levels of future standard product business in both our communications and commercial markets in applications such as 3G wireless infrastructure, IP security, wireless billing, IPTV, XML routing servers, IP media processing, test and measurement and medical imaging. We also successfully completed the acquisition of Convedia(R) Corporation, the leading provider of media processing platforms. We believe this acquisition will accelerate our strategy of offering higher-value, application-ready platforms."

In the second half of 2006, the Company's new Promentum(TM) SYS-6010, the industry's first ATCA 10Gigabit managed platform, began shipping to customers for their development programs. In the fourth quarter, the Company also introduced the ATCA-7200, a high performance Gigabit Ethernet Line card equipped with up to four Cavium processors and the new AMC-7211, which provides power efficient packet and security processing for customers. Both products have been well received in the market and evaluation units are expected to ship in the second quarter. Finally, the Company's new Procelerant(TM) RMS420-5000XI, a 4U high performance embedded server with two dual-core processors, and the new Procelerant CE945GM dual-core COM-Express Module are both expected to begin shipping in the first quarter.

First Quarter 2007 Outlook

The following statements are based on current expectations as of the date of this press release. These statements are forward-looking, and actual results may differ materially. The Company assumes no obligation to update these statements.

Commenting on the outlook, Scott Grout stated, "We currently expect first quarter revenues to increase sequentially to between $62 and $68 million driven by projected increases in our wireless market. We expect first quarter results to be a loss in the range of $0.33 to $0.27 per share, and our non- GAAP results to be between a loss of $0.03 per share to income of $0.03 per diluted share. Our projected non-GAAP results exclude a loss of approximately $0.30 per share primarily attributable to the impact of acquisition-related expenses, stock-based compensation expense and restructuring charges. For the year, we currently expect revenue and earnings to grow modestly over 2006. We believe that the drivers for more meaningful growth will be determined by the timing of our customers' next generation system deployments."

In closing, Mr. Grout stated, "I'm pleased with the Company's progress in 2006 on furthering our strategy to be the leading provider of embedded solutions across our targeted markets. We continue to make significant investments in our Promentum, Convedia and Procelerant product lines and these investments are resulting in a strong level of design awards for future business. We believe that the market acceptance and enthusiasm around our new products is strong and that our solutions will enable our customers to bring better products to market faster and at a lower total cost."

Radisys Corp. (Nasdaq: RSYS)

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