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ATCA/Standard Servers

RadiSys Reports Q1

HILLSBORO, Ore. -- RadiSys Corporation (NASDAQ:RSYS) , a leading supplier of advanced embedded systems, reported revenues of $57.5 million for the quarter ended March 31, 2005, a 6% decrease from the same period last year. Revenues for the first quarter of last year included a $3.1 million end of life component inventory sale to one of our major customers. Net income for the quarter was $2.6 million, or $.12 per diluted share, versus net income of $2.8 million, or $.13 per diluted share, a year ago.

"We had approximately $1.7 million of product that was scheduled to ship on the last day of the first quarter but was delayed in shipping until after midnight, due to logistical challenges arising out of our Asia-Pacific operations," stated Scott Grout, CEO. "As we continue with our outsourcing initiative, we will aggressively work to improve our processes to mitigate our risks around execution moving forward. Other than the one-day shipment delay, the results for the first quarter were in line with our previously announced expectations."

The Company delivered Promentum-6000 ATCA systems to four customers on an evaluation basis during the first quarter. The Company is receiving positive feedback from these customers and is planning to deliver additional evaluation units to customers over the next several quarters. Also during the first quarter, the Company announced its new Procelerant line of modular computing solutions for Commercial applications. These new modular products will provide a family of high density, flexible solutions that will enable Commercial customers to achieve faster time to market with very cost effective designs.

Business Outlook

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. The Company assumes no obligation to update these statements.

Commenting on the current business outlook, Scott Grout, CEO, said, "As we mentioned in our last call, we are encouraged by our strong and growing position with leading customers across our end markets. We currently expect our combined addressable markets to experience mid to high single digit growth rates in 2005. We continue to believe that we will grow at a faster rate than these markets for the remainder of the year. For the second quarter, we are currently seeing strengthening demand from our Service Provider and Enterprise markets, specifically the Wireless and IP-PBX sub-markets, and expect to see revenues in the range of $64 to $66 million."

The Company currently expects to incur restructuring charges over the next four quarters totaling $1 million to $1.5 million. The restructuring charges will consist of severance and related expenses for about 100 employees primarily within the Company's manufacturing operations. These employee positions will be eliminated over the next four quarters in conjunction with continued outsourcing of production to the Company's primary manufacturing partners -- Celestica and Foxconn.

The Company currently expects diluted earnings per share in the range of $.14 to $.16 for the second quarter. The diluted earnings per share guidance does not include any restructuring charges as the Company is still determining the timing of these charges.

The Company's Board of Directors has authorized the repurchase of the remaining $9 million of its subordinated convertible notes and up to $5 million of common stock. The Company will consider the purchase of notes and common stock on the open market or through privately negotiated transactions from time to time subject to market conditions.

In closing, Mr. Grout stated, "I'm encouraged by the strengthening in demand we are currently seeing in our end markets. We continue to make progress on our new platforms and modular products and are receiving positive feedback from our customers. We believe this feedback, coupled with our sales and marketing efforts, will translate into a growing sales funnel of opportunities over the coming quarters."

RadiSys Corp.

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