Concentric Network and Microsoft Expand Relationship to Include Development of Co-Branded MSN Portal and Application Hosting Services

SAN JOSE, Calif., June 22, 1999 — Concentric Network Corp. (Nasdaq
), a leader in value-added IP network services, and Microsoft Corp. (Nasdaq
) today announced an expanded relationship consisting of five major initiatives. The initiatives are Concentric’s commitment to establish a co-branded version of the MSN TM portal for its dial-up and broadband DSL Internet subscribers; the development and co-marketing of Microsoft® Windows NT® Server-based application hosting services; a $7.5 million commitment by Concentric to advertise and promote its services via the MSN network of Internet services; a $50 million investment by Microsoft in Concentric; and a two-year extension of Concentric’s current contract to supply network services to WebTV® service.

“These initiatives with Microsoft are major stakes in the ground for Concentric and will provide the company with the ability to offer best-of-class, value-added services to our customers. We have listened to the needs of our customers and are serving as a one-stop source for information and Internet services,”
said Henry Nothhaft, chairman, president and CEO of Concentric Network.
“We believe that integrating Microsoft’s leading Windows NT-based products and platforms with an ‘always on’ high-speed DSL connection will create a powerful combination of services for small and medium-sized companies, enabling them to harness the power of the Internet for their businesses.”

“Our expanded relationship with Concentric will help the company deliver a wide range of next-generation services to their growing customer base,”
said Thomas Koll, vice president, Network Solutions Group, Microsoft.
“By providing these new services on Microsoft platforms and offering a co-branded MSN portal to its customers, Concentric will provide small and medium-sized businesses with the means to succeed in today’s rapidly changing business environment.”

Co-Branded MSN Portal

A key component of the business relationship is a co-branded portal offering in which Concentric will establish a co-branded version of the MSN portal for its dial-up subscribers that will include the integration of MSN content and services along with Concentric’s content and services. Concentric will offer the MSN Hotmail TM Web-based e-mail service as its preferred electronic-mail service for dial-up subscribers. Microsoft and Concentric will also work together to offer a co-branded MSN portal focused on DSL for Concentric’s small and medium-sized business customers. The demand for DSL and associated services is the driving force behind the creation of this specialized portal, which will allow Concentric to monetize its base of small and medium-sized business customers, generating revenue from advertising and e-commerce transactions.

Application Hosting Services Based on Windows NT Server

In late 1999, Concentric plans to launch several new hosting services based on Windows NT Server and the Microsoft BackOffice® family of server products. Microsoft will assist Concentric in the development of application hosting services based on Microsoft technology, which could include Microsoft Exchange e-mail services; Microsoft Windows® Media Technologies streaming media services; and other purchasing, financial and customer relations applications based on Microsoft BackOffice.

WebTV Contract Extended Through 2002

Concentric and WebTV Networks, Inc., a wholly owned subsidiary of Microsoft, have entered into a two-year extension and expansion of the current contract for IP network services that began Jan. 1, 1999. The contract now extends until December 2002, further strengthening and solidifying the close relationship between the companies. From July 1 through the term of the contract, Concentric estimates the value of the contract at $150 million to $200 million.

Concentric was selected in July 1996 as the first network service provider for the WebTV Network TM service, which debuted in September 1996. Today, Concentric provides dial-up access to the interactive television and Internet services for subscribers to the Microsoft WebTV Network Classic and WebTV Network Plus services throughout the United States and Canada.

Microsoft to Invest $50 Million in Concentric

As a commitment to the business relationship, Microsoft will invest $50 million in Concentric in the form of 7 percent convertible redeemable preferred stock due June 2010. This preferred stock may be converted to common stock at a conversion price 20 percent above the current market price. Additionally, Concentric will issue Microsoft a warrant to purchase 500,000 shares of common stock at the current market price.

About Concentric Network

Concentric Network Corp. provides complete, easy-to-use Internet business solutions for small to medium-sized companies and customized Virtual Private Network and data center services for larger organizations. Concentric’s portfolio of services for small to medium-sized companies includes high-speed DSL access, Web hosting and e-commerce. For larger organizations, the company offers dedicated Web hosting services and VPN solutions that enable an organization to securely and reliably communicate with its offices, mobile sales force, business partners, vendors and customers. For more information, access the company’s Web site at or contact [email protected].

About Microsoft

Founded in 1975, Microsoft is the worldwide leader in software for personal computers. The company offers a wide range of products and services for business and personal use, each designed with the mission of making it easier and more enjoyable for people to take advantage of the full power of personal computing every day.

This press release contains forward-looking statements regarding the relationship between Microsoft and its WebTV subsidiary and Concentric, the services they plan to develop and deploy, and estimates regarding potential revenue under the company’s extended contract with WebTV that are subject to a number of risks and uncertainties. Actual results may differ materially from those set forth in such statements as a result of a number of factors including, but not limited to, the parties’ ability to develop and market the co-branded portals, the parties’ ability to develop and market new Windows NT-based hosting services, user acceptance and utilization of the new services, growth of subscribers to the WebTV Network, and the increasingly competitive nature of the IP services market.

Microsoft, MSN, Windows NT, WebTV, Hotmail, BackOffice, Windows and WebTV Network are either registered trademarks or trademarks of Microsoft Corp. in the United States and/or other countries. Concentric Network Corporation, ConcentricHost and the Concentric logo are trademarks of Concentric Network Corporation. Other product names mentioned herein may be trademarks and/or registered trademarks of their respective companies.

Note to editors: If you are interested in viewing additional information on Microsoft, please visit the Microsoft Web site at on Microsoft’s corporate information pages.

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