Philips Semiconductors to license Alcatel core Ethernet technology

Licensing of Alcatel's Ethernet MAC Technology speeds production of 10/100 and Gigabit Ethernet IC solutions for Philips' expanding networking market

Calabasas, Calif. and Sunnyvale, Calif., - Oct. 16, 2000 - Philips Semiconductors, an affiliate of Royal Philips Electronics (NYSE: PHG), and Alcatel (NYSE: ALA) today announced a worldwide licensing agreement to use Alcatel's 10/100 Mbps and Gigabit Ethernet MAC (media access controller) soft cores. Philips Semiconductors plans to implement Alcatel's technology in Applications Specific Integrated Circuits (ASICs) and standard networking chips in Philips growing Computer and Networking business divisions.

Alcatel will assign to Philips Semiconductors the license formerly held by VLSI Technology, which was acquired by Philips Semiconductors last year. This expansion will allow Philips Semiconductors to incorporate Alcatel 10/00 Mbps and Gigabit Ethernet MAC cores into its growing portfolio of Ethernet silicon solutions. Philips Semiconductors will offer Alcatel's intellectual property as a third-party ASIC enabler and also make the technology available to its networking product lines to speed development of standard networking chips.

"The availability of Alcatel's industry-leading Ethernet MAC technology gives Philips Semiconductors a substantial advantage in the development of leading edge networking solutions," said Tyler Smith, product-marketing manager for Philips' Integrated Access Device Product Line. "Alcatel's silicon proven Ethernet MAC core solutions are ideal for our existing and future chip designs and will provide a substantial time to market advantage as we build our presence as a leading networking semiconductor supplier."

"Extending our relationship with VLSI Technology to Philips Semiconductors is sound business for both companies," said Joelle Gauthier, vice president, enterprise data marketing, Alcatel. "Philips Semiconductors benefits by accelerating design cycles and delivering high-performance, highly reliable networking IC's and Alcatel benefits by expanding the market for our products with an emerging industry leader."

Recently, VLSI worked with Alcatel to develop ASICs with significantly reduced pin count and simplified packaging that resulted in a number of ASIC design wins. VLSI was one of the first semiconductor manufacturers to offer a Gigabit Ethernet MAC (GMAC) standard product built around Alcatel's proven core solution. The business model established by VLSI and Alcatel is now incorporated into Philips Semiconductors' ASIC and standard networking platforms to speed the delivery of essential networking solutions to Philips Semiconductors' customers. "Continuing this extremely successful business relationship is a win for all parties, especially our customers, who will have faster access to our networking technology," said Smith.

Alcatel is the market leader in 10/100 Mbps and Gigabit media access technology and a Principal Member of the 10-Gigabit Ethernet Alliance. The Alcatel Technology Licensing Group's silicon-proven products are currently used in approximately 80% of the 10/100 Mbps ports and over 50% of the gigabit ports, shipping worldwide.

About Philips Semiconductors
Philips Semiconductors, which has annual revenues of approximately $5 billion, designs and manufactures semiconductors and silicon systems platforms. Philips Semiconductors is spearheading the emerging field of systems on silicon solutions with the innovative Nexperia(TM) platform and VLSI Velocity(TM) tool set. The company's Sea-of-IP design methodology allows plug and play intellectual property blocks for easily customizable products. The company is a leader in communications, consumer, PC peripherals and automotive semiconductors, which are key applications for convergence in end-user products. Philips Semiconductors is headquartered in Eindhoven, The Netherlands, and has operations throughout the world. For more information: www.philips.semiconductors.com.

About The Alcatel Technology Licensing Group
The Alcatel Technology Licensing Group provides 10/100 Mbps, Gigabit, triple speed 10/100/1000, and 10-Gigabit Ethernet MAC building blocks in the form of Verilog HDL code for designers of networking ICs and system devices. Alcatel IP cores have been licensed to dozens of companies worldwide including Atmel Corporation, Enterasys Networks, Mitel Corporation, Nortel Networks, NEC Electronics, Broadcom Corp., and Riverstone Networks. For additional information about Alcatel Technology Licensing Group products and services, visit http://www.ind.alcatel.com/enterprise/products/ip/index.html.

About Alcatel
Alcatel builds next generation networks, delivering integrated end-to-end voice and data networking solutions to established and new carriers, as well as enterprises and consumers worldwide. With 120,000 employees and sales of $26 billion (EURO 23 billion) in 1999, Alcatel operates in more than 130 countries.