DiviCom Merges with Harmonic

Electronic News, May 8, 2000

C-Cube Microsystems Inc. completed the spin off of its semiconductor division last week, the final step in completing the merger of DiviCom Inc., its former subsidiary, with Harmonic Inc. of Sunnyvale, Calif.The spin-off, announced in October of last year, will launch the semiconductor division into an independent company listed on the Nasdaq under the C-Cube Microsystems name and the stock symbol CUBED. Umesh Padval, president of the Milpitas, Calif.-based C-Cube Semiconductor since 1998, will become chief executive officer of the new company.

"C-Cube semiconductor has made excellent gains over the past year," Padval said. "We foresee accelerating opportunities in our growth platforms of DVDs, set-top boxes, and codecs. We are excited about our growth over the past year as well as the growth potential of our expansion platforms."

"C-Cube shareholders will gain a significant stake in Harmonic/DiviCom in addition to their continued ownership in our semiconductor business," said Alexandre Balkanski, C-Cube chief executive officer. "The spin-off launches a semiconductor pure-play that is strengthening in digital video."

The Harmonic transaction will be structured as a tax-free exchange of stock in which C-Cube shareholders will receive, in exchange for each share of C-Cube stock, 0.5427 shares of Harmonic stock. Based on Harmonic's closing price of $64.875 at the time the merger was announced, the value of the Harmonic combination would be approximately $1.7 billion.

The spin-off carries a corporate tax payable by the new semiconductor company, which is determined by the trading value of the new company as of May 3. Based on the May 2 market closing price of $24.31, the company would need approximately $200 million in debt or equity financing to satisfy this obligation. The new company's board of directors is comprised of Alex Balkanski, who will serve as chairman; T.J. Rodgers, president and chief executive officer of Cypress Semiconductor Corp.; Greg Reyes, chairman of Sync Research; Baryn Futa, chief executive officer of MPEG LA; and Padval.

Although the digital video firm will continue to operate under the C-Cube Microsystems name, the spin-off marks a temporary change in C-Cube's stock symbol. The company's stock will trade on the Nasdaq under the symbol CUBED for approximately 20 trading days, and will then revert to its original CUBE symbol.

DiviCom is a provider of open solutions for digital television. Harmonic makes digital and fiber optic systems that enable cable TV and other network operators to provide interactive services such as high-speed Internet access and video-on-demand.