Microsoft To Acquire Peach Networks

REDMOND, Wash., Feb. 29, 2000 — Microsoft Corp. today announced it has reached an agreement to acquire Israel-based Peach Networks Ltd., a leading provider of technology for enhanced TV services for digital television. This agreement extends the Microsoft® TV platform to now include a solution for basic digital set-top boxes (STBs), like the Scientific Atlanta Explorer 2000 and Motorola DCT 2000 currently being deployed by cable operators. This alliance will help expand the overall availability of enhanced TV services worldwide. With the inclusion of Peach’s technology, Microsoft can offer the most scalable enhanced TV platform solution in the industry. The acquisition underscores Microsoft’s commitment to support a breadth of new enhanced TV services such as information on demand, e-mail, communications, Internet, shopping and entertainment applications to all digital television network operators and their customers.

“Peach Networks contributes breakthrough technology and a world-class team to Microsoft and will extend the Microsoft TV platform to support more types of digital set-top boxes,”
said Jon DeVaan, senior vice president, Microsoft Consumer Group.
“With the Microsoft TV platform, network operators worldwide can bring enhanced TV services to their customers using both existing digital set-top boxes and future advanced digital set-top boxes.”

Peach Networks’ television technology provides operators with an economical way to deliver new content and services to consumers via the existing network infrastructure. This unique, patent-pending technology enables network operators to achieve maximum value from their investments, offer added services to subscribers – interactive services, Internet access, e-mail and instant messaging – and economically generate new revenue opportunities using the digital cable set-top boxes currently in deployment.

“We are thrilled to become a part of Microsoft’s leading initiative to offer interactive TV services for digital set-top boxes,”
said Ofir Paz, president and chief executive officer of Peach Networks.
“Our vision has been to provide solutions that bring interactive content to cable TV subscribers by providing network operators with an affordable means to offer new content to subscribers. We believe our vision maps nicely to Microsoft’s TV strategy.”

Most Scalable Solution for Digital Set-Top Boxes

Peach Networks’ innovative technology, coupled with the Microsoft TV software platform, will enable shared services between basic digital STBs being deployed today and advanced STBs of tomorrow. Current digital set-top boxes, which analysts estimate will be used by 4 million* U.S. subscribers by the end of this year, were designed years ago, when Internet-based services were not expected to be as significant for TV viewers. The Peach technology enables PC servers to deliver new services to these current set-top boxes without wasting network bandwidth. Advanced set-top boxes will be able to access the same content and services, providing a basis for branded interactive services and advertising to reach all digital set-top consumers.

“Microsoft has been evaluating technology solutions for digital set-top boxes for years, and until now we haven’t found a solution that scales to the levels our network partners demand,”
said Phil Goldman, general manager of the Microsoft TV Platform Group.

Peach’s offering excels over all other solutions we evaluated and is the best in this space to deliver scalable Internet and interactive services to digital set-top boxes.

About the Microsoft TV Platform

The Microsoft TV platform is a comprehensive software solution for the television industry that makes television more useful, fun and engaging for consumers and creates significant new economic opportunities for network operators and their suppliers of programming, hardware and software. The client software, Microsoft TV, operates a range of TV-centric appliances, from advanced set-top boxes to integrated televisions. Microsoft TV Server is a suite of software components that offers network operators the tools to provision, manage and operate a large-scale, commercial-grade enhanced TV service.

The Microsoft TV platform supports worldwide digital TV broadcast standards, including DVB, ATSC and ARIB. It also supports commonly used Internet standards such as HTML, JavaScript and Dynamic HTML, as well as all interactive content authored according to the Advanced Television Enhancement Forum (ATVEF) standard.

About Peach Networks

Peach Network’s staff will be integrated into Microsoft’s TV Platforms Division, where they will continue to develop innovative solutions for enhanced television. Ofir Paz, president and chief executive officer of Peach Networks, will be responsible for leading this effort. Peach Network’s primary operations will remain in Israel.

Established in 1998, Peach Networks ( ) is committed to converting television sets into interactive devices by using them to deliver the highest quality of multimedia and Microsoft Windows-based applications and Internet content to subscribers.

Peach Networks Inc. is based in Woburn, Mass. and is a wholly owned subsidiary of Peach Networks Ltd., of Or-Yehuda, Israel. Peach Networks is 60 percent owned by Elbit Ltd. (Nasdaq
) ( ).

About Microsoft

Founded in 1975, Microsoft (Nasdaq
) is the worldwide leader in software for personal and business computing. The company offers a wide range of products and services designed to empower people through great software – any time, any place and on any device.

*Forrester stated in its December 1999 analyst report titled
“TV’s Internet Tier,”
by Jeremy Schwartz, that
“4 million U.S. subscribers will have a digital STB in 2000; 14.1 million subscribers will have one in 2004.”

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