March 2007: NO BARRIERS; ONLY SOLUTIONS

On February 11th, 2007 Blade Network Technologies, Inc. (BLADE in short) completed 12 months as a standalone company.

It has been a tremendous twelve months and we’ve come an incredibly long way, in a very short period of time.

We’ve achieved many important milestones in our first year of business –

• Market share leader for Ethernet and IP blade server switches. Our share is 44% vs. 29% for our closest competitor; In calendar 2006 we took an astonishing 7.5% points in market share from our competition;
• First to bring 10GE (uplink) connectivity to a blade server chassis;
  # First to deliver 10GE connectivity to every server blade and, from a chassis to the outside world;
• Over 100,000 switches (2.1 million+ ports) in production deployment across 26 different industry segments, making BLADE’s switch operating system the most popular and widely installed in the industry. Approximately 50% of these switches were shipped in the last twelve months;
• Industry record for the highest performance and lowest latency Ethernet switch for blade server applications; http://www.tolly.com/DocDetail.aspx?DocNumber=206168;
• Delivered a staggering 15x better price performance compared to the Cisco Catalyst 6500; http://www.tolly.com/DocDetail.aspx?DocNumber=206168;
• Named Top 10 Networking Company for 2007 by InfoSecurity Products Guide; http://www.infosecurityproductsguide.com/hot2007/index.html
• Set a new time-to-market record of under 3 months from concept to revenue. When we started life as an operating division of Nortel in 2002, our first product took us 14 months to deliver;
• New precision engineering record for delivering high-speed 10GE designs in a single spin of the hardware, where 2-3 spins are commonplace in the industry; and
• Actual MTBF of over 2 Million hours, where our customers expect us to achieve 400,000 hours; thus demonstrating the quality of our products and our intense focus on customer satisfaction (our #1 Corporate Objective)
• Audited GAAP compliant financials; thus demonstrating the strength of our business controls and strong financial discipline – key to being a viable, credible, and trustworthy supplier. From our very first day of operations, the time tested “KAIZEN” principles have provided the underpinnings of a very disciplined approach to operating our business.

I want to emphasize that none of the above would have been possible without the support of our customers and business partners, and the efforts and dedication of our employees. I am personally very grateful to our customers, business partners, and employees for helping make BLADE a vibrant company.

Here is what our customers have to say about us –

“BLADE’s network switch technology has been a valuable component to our recently launched HP BladeSystem c-Class architecture and has contributed to the customer adoption that has exceeded our expectations. BLADE’s success as an industry leader in this space has made them valuable to our HP BladeSystem Solution Builder Program, and with them we look forward to delivering additional blade technology innovations to our customers.”

Mark Potter
Vice President, HP BladeSystem Division
HP
January 29th, 2007

“BLADE’s ability to innovate quickly to meet customer needs makes them a leading network switch provider and an ideal partner in our worldwide BladeCenter blade server business. IBM’s collaboration with BLADE has recently resulted in another IBM blade server market first—the industry’s first native 10 Gigabit Ethernet switch for blade servers—and we are confident that our continued BLADE relationship will result in more industry-leading technology innovations and solutions for customers of the world’s most popular blade computing system, IBM BladeCenter.”

Doug Balog
VP & Business Line Executive, IBM BladeCenter
IBM Corporation
Chairman, Blade.org
January 29th, 2007

BLADE’s innovation has attracted the attention of leading industry analysts –

“While external chassis-based switches from leading vendors like Cisco are commonplace in enterprise networks, these solutions do not always perform at wire speed and do not always offer low latency. At twice the throughput, and with nine times less latency than the Catalyst 6509, we expect the BLADE product will garner serious consideration by any enterprise considering blade server deployments.”

Kevin Tolly
President and CEO
The Tolly Group
January 2007

“Collapsing network access and aggregation layers in blade network topologies can help to reduce cost, space, power, and cooling while simplifying the datacenter architecture and improving performance and security. When it comes to blade server switch infrastructure, customers have many good reasons to consider Blade Network Technologies over other solutions in the market.”

Lucinda Borovick
Director, Datacenter Networks
IDC
February 2007

Our employee strength as of the date of this report is 102, with approximately 90% of the resources in engineering, sales, marketing, support, and supply chain operations – driving innovation, ensuring high product quality, and helping our server customers maximize sales of blade server systems.

In addition to the 102 BLADERs that toil around the clock to serve our customers every need, we have an additional 70 dedicated development, test, and support personnel located in the U.S, Vietnam, Romania, and India through strategic outsource relationships. These 70 incremental resources enable BLADE to provide a rapid response to the most demanding requests from our customers.

2007 and 2008 promise to be very exciting years for the industry. Enterprises (large and small), Service Providers, and Institutions (Commercial & Research) around the world are coalescing around “rack dense” platforms to meet their computation and storage requirements.

Blades and other forms of ultra-dense rack systems are going to be widely deployed for a multitude of commercial, research, entertainment, and managed service applications.

A reliable, high performance, and low latency I/O fabric based on popular standards (e.g.: Ethernet) will be a critical need for successful and large scale deployment of rack dense servers (which includes blades).

BLADE will be focused on serving this need, by building on the strengths of our blade server switch installed base and rich intellectual property.

We’ve spent many long months over the last year talking to customers to understand how we can improve our existing products and what new products we can build to serve their needs. This has resulted in what the Chairman of our Technical Advisory Board, Mr. Jeff Birnbaum, has described as “the most comprehensive I/O roadmap the industry has seen in over a decade.”

We’re not going to go it alone. We will work with our server customers, and reputable companies in the ecosystems of our customers to provide the most comprehensive communications gateway (I/O infrastructure) solutions for rack dense compute and storage farms. Our existing and future products will have a material impact on the Performance, Security, Manageability, Scalability, Availability, and Total Cost-of-Ownership of an Enterprises rack dense compute and storage infrastructure.

On February 23rd, 2007, at the Carnelian Room on the 52nd floor of the Bank of America building in San Francisco, our employees and their partners heard the incredible story of a man, Neal Petersen, who overcame significant barriers in his personal and professional life to become the first black man to race solo around the world – a daunting 27,000 miles! http://www.bladenetwork.net/pages/about_us_photos.html

Neal has been the silent force of inspiration behind this business when we operated as BSSBU (Blade Server Switch Business Unit) within Nortel.

The mantra at BLADE for 2007 - “No Barriers; Only Solutions” is inspired by Neal’s amazing story. You can download this as a screensaver at: www.bladenetwork.net/media/EXEs/BLADEscreensaver.exe.

We’re a focused company with finite resources competing against fierce competitors. Our biggest asset is the employees of BLADE and their penchant to overcome all barriers and find the solution to our customer’s problems.

Thank you for your support in our first year of operating as an independent company. You have my personal commitment that we will continue to improve the way we serve you and the way we partner with you.