In-Q-Tel Joins Existing Investors in New Funding Round of Industry Leading Packet Processing Company; Bay Expands Board of Directors

November 21, 2003
Santa Clara, CA

Bay  Microsystems, a leader in high performance packet processing and traffic  management solutions, today announced it has closed $10 million in an  over-subscribed Series C financing round, bringing the total investment in the  company to more than $30 million. Investors in this financing round include a  new institutional investor, In-Q-Tel, as well as participation from existing  institutional investors: Selby Venture Partners, Needham Capital, Thomas Weisel Venture Partners, and Alliance Venture Management.

In-Q-Tel,  founded in 1999, is a private, independent enterprise funded by the Central  Intelligence Agency. In-Q-Tel's mission is to identify and invest in companies  developing cutting-edge information technologies that serve U.S. national  security interests.

Bay  Microsystems also announced the expansion of its board of directors with three  new independent members: C. Nicholas Keating, Jr., Michael Phillips and Dr.  Paul G. Kaminski. They join Bob Marshall (Managing Partner, Selby Venture  Partners), Rick Bleszynski, and Chuck Gershman (President and CEO, Bay  Microsystems).

Nick  Keating is President and CEO of IP Infusion, Inc. and currently serves on the  board of directors of Foundry Networks and net.com. Mike Phillips is the former  Vice President, Business Development and General Counsel of JDS Uniphase  Corporation, and is currently a senior partner in the law firm of Morrison  & Foerster. Dr. Kaminski is the former Under Secretary of Defense and  currently serves as a director with several companies in addition to Bay, including  General Dynamics, RAND, Anteon Corporation, and as Chairman and CEO of Technovation, Inc.

"The  addition of In-Q-Tel and the renewing commitment of our existing investors  speaks well for the progress Bay Microsystems has achieved during a very difficult  economic time," said Gershman. "We are thrilled with the market  acceptance of our products which has lead to meeting our revenue targets in  2003 and we anticipate significant growth leading to profitability next  year."

About Bay Microsystems
 Bay  Microsystems is a privately held, fabless communications IC company delivering  a family of programmable packet processing and traffic management solutions.  Bay's Internetworking Processor (InP) Family is scalable, intelligent, and  ultra-high performance, suited for the full range of carrier class products  from "Access to Long-Haul." The InP Family includes the industry's  first OC192c/10G processor capable of classification, policing, segmentation  and reassembly, and traffic management at wire rate.

Bay's InP products are already in use within broadband networks developed by the US  Government and commercial providers serving the metro-edge, metro-core,  regional and long-haul markets. Bay's seasoned management and world-class  engineering teams have three generations of proven expertise in architecture,  implementation, deployment, marketing and management of network processors. For  more information visit the website at www.baymicrosystems.com.