Workday 60 Report

May 8th, 2006
I am pleased to be writing you this report from our new HQ office located at 2350 Mission College Boulevard, Santa Clara, CA.

May 5, 2006 marked the 60th workday for Blade Network Technologies (BLADE) – the industry’s #1 supplier of Ethernet, IP, and Application Switches for blade server systems.

The pace of activity and progress continues to accelerate!

Following is progress report since I last wrote you:

• For our fiscal quarter two, which ended on April 30, 2006, our shipments were well ahead of plan. I am also very pleased to report that our company generated cash from continuing operations for this fiscal period. This was a major accomplishment and I want to take this opportunity to thank our customers, employees, and business partners for helping us get off to a good start.
  
• Our employee strength as of the date of this report is 75 (up from 42 on Feb 11, 2006). Approximately 53% of our employees are in the Engineering function (Hardware, Software, and Test), emphasizing our focus on innovation and building world-class networking solutions for the rapidly growing blade server market. Ardene Fullerton, our Director of HR has done a brilliant job of helping BLADE with its recruitment effort, and in helping the new employees settle into their new work environment.
  
• We have successfully achieved RoHS compliance across our entire portfolio of products. Solectron’s Charlotte facility was the world’s first electronic manufacturing facility to be RoHS certified and BLADE’s products were the amongst the first RoHS products to ship from this facility. We’re very proud of the achievements of our Supply Chain Operations Team under Bob Murden’s stewardship. I also want to acknowledge the excellent support we have received from Nortel’s Supply Chain Operations team, Solectron, and Alpha Networks.
  
• We have successfully added two new contract manufacturing facilities to support the growing requirements of our customers – in Malaysia andTaiwan. Solectron, Charlotte continues to remain our premier contract manufacturing site.
  
• In the first calendar quarter of 2006, we added over 70 new enterprises to the rapidly growing list of end customers who use our switches in conjunction with their HP and IBM blade server systems. Our Sales Network Architects, under Shailesh Naik’s leadership, have received very encouraging and positive feedback from customers on their handling of sales situations amidst the transition of business from Nortel.
  
• As of March 31, 2006 (end of calendar Q1, 2006), our life-to-date Unit Shipments stood at 58,643 switches (1,298,690 Gigabit Ethernet ports), clearly making us the industry’s #1 supplier of blade server switches!! We are very grateful for the support we have received from HP, IBM, and their customers to help us achieve this position.
  
• Our website now features a brand new FLASH animation that articulates BLADE’s value proposition. Please visit us at http://www.bladenetwork.net/ and click on “Why Choose Blade Switches” to view our message.
  
• Our new labs in Santa Clara and Ottawa will soon be ready for occupancy. All Air Conditioning, Electrical, Fire Protection, and Tiling work has been completed. We are now in the process of installing racks and pulling data communications cables through the labs.
  
  
• Our Customer Executive Briefing Center is under construction and very soon we will be able to showcase our products to customers and partners who visit our HQ facility.
  
• Every employee at BLADE has undergone a Standards of Business Conduct Training to help ensure that BLADE conducts business in a manner that is consistent with our core values and our customer’s expectations.
  
• BLADE’s new customer support system and processes were recently put to test by a major corporation. Here is what their CIO had to say – “I want to personally thank BLADE for your professionalism in handling the escalation. You had a very short time to resolve this critical issue that was preventing the production rollout of blade servers in our new datacenter. We were very pleased with your excellent response and resolution! Thanks again to your team for a job well done.”
  
• And here is what our customer (server OEM) had to say “I appreciate how you are representing us and our blade servers to our customers. It means a lot to have a partner that will stand up beside us and work these issues head on and professionally.”
  
  CUSTOMER SATISFACTION IS BLADE’s #1 CORE VALUE AND THE ABOVE IS AN IMPORTANT DEMONSTRATION OF HOW WE STRIVE TO LIVE BY OUR CORE VALUES IN EVERY ACTION WE TAKE EVERY DAY.
  
• Our voice and data infrastructure is up and running at our HQ facilities. We are a proud user of Nortel VoIP technology; and our desktop computers, laptops, printers, servers, storage, flat panel displays, and projectors are supplied by HP and IBM. Our mission critical applications run on blade servers and we make extensive use of our Blade Server Switches and their superior functionality to enhance the Performance, Scalability, Security, and High Availability of our data center infrastructure. We are proud to be an enterprise that uses blades to run our entire business. Our blade server switches are used to provide connectivity to both our LAN (Local Area Network) and SAN (Storage Area Network).
  
• We have completed the procurement of our own development tools and very soon we shall have weaned off the development infrastructure that our parent, Nortel, has so graciously allowed us to use since our inception.
  
• After extensive research we have selected our Product Lifecycle Management (PLM) tool. Over the coming few weeks we will be transferring the Bill-of-Materials (BOM) and other relevant engineering data for all of our products from the Nortel Product Data Management system to the BLADE PLM System. This is a very critical exercise and one that we are monitoring very carefully.
  
  
• Fiscal discipline is something we’ve been very focused on from our very first day. Our Finance & Accounting Team under Jim Sladek’s leadership has put in place very robust processes to ensure that we run a tight ship. We successfully closed our books on or before workday five (5) for the months of February, March, and April as well as for the quarter that ended on April 30th, 2006. Our financial systems are fully operational and accurately reflect all on-going business transactions and activity in accordance with GAAP requirements.
  
• In my workday 30 report I talked about instituting a new and very rigorous commitment process to help us become a better supplier and business partner to our customers. We’ve taken a significant next step in this effort. We have embraced a time tested Japanese methodology, “Kaizen” (Kai = Change; Zen = For the Better). A rigorous methodology that requires meticulous tracking of Key Performance Indicators, extreme discipline in planning, and flawless execution, “Kaizen” will help BLADE serve its customers better. Next time you’re in Santa Clara, please pay us a visit and see how we’re implementing “Kaizen” at BLADE and the impact it is having on our day-to-day operations. We’ve had some extremely encouraging results very early in the process!
  
  Please visit our new on-line picture gallery at http://www.bladenetwork.net/pages/about_us_photos.html to meet some members of BLADE team and see the progress we’re making in our effort to become a successful enterprise and the most trusted name in blade server networking.