YOKNEAM, Israel -- Comment on Recent Market Report

Eli Fruchter, CEO of EZchip, commented on a recent report implying that Juniper Networks will use in-house ASICs in new line cards:

“As we have always said, in-house designs at our tier-1 customers are our biggest competition. Our chips are incorporated in customers’ strategic products, and we expect that they will want to maintain in-house chip development to provide options for alternative solutions. The analyst report suggests that Juniper will be announcing new line cards fairly soon, using in-house solution for these line cards. This is obviously disappointing, but as noted we do not expect that our customers will cease in-house ASIC designs. Occasionally, it is possible that some customers will develop new generation products using in-house solutions, and in later generations they may return to use EZchip’s NPUs.”

“On the subject of Juniper, I want to provide an update to our first quarter 2009 release, which spoke of an expected drop in sales to Juniper in the second quarter of 2009. I am pleased that shipments of our NP-2 to Juniper returned to previous levels in June 2009, and are forecast to grow further in the second half of the year.”

“We believe that customers who purchase our network processors enjoy significant time-to-market and performance advantages, which will become even more pronounced with the introduction of 80-Gigabit and then 200-Gigabit line cards. We are currently seeing successful designs of 40-Gigabit line-cards with four NP-2/3 chips per card already in production and 80-Gigabit line-cards with eight NP-3 chips per card are expected to hit the market soon. Next generation line cards will advance from 40G and 80G line cards to 200G line cards. We believe that with NP-4 we are well ahead of in-house ASIC designs for these 200-Gigabit line cards, and that customers who select our NP-4 will be ahead of the market. NP-4 will offer a higher level of integration, better power consumption and lower cost. Although current in-house designs may compete with the NP-3, we do not believe that they can compete with the NP-4. Our NP-4 will sample towards the end of the year and has already been selected by several tier-1 vendors.”

“Overall, our market position is continuously strengthening, existing design wins are moving to production and new designs are being won. We believe that the use of network processors will continue to grow and win market share, and they will eventually be used strategically by all system vendors. Up until a few years ago, system vendors exclusively used in-house developed chips for their routers, but today merchant network processors are widely used by these vendors. We believe that this trend will continue and as long as we continue to maintain our two-year technology lead we will further our market penetration.”

EZchip Technologies Ltd. (Nasdaq: EZCH)