Acquisition: Intel to Acquire Level One for Approximately $2.2 Billion in Stock-for-Stock Merger; Acquisition Aimed At Building Network Systems in Silicon - Company Business and Marketing

Edge: Work-Group Computing Report, March 8, 1999

Intel Corporation and Level One Communications Thursday announced that the boards of directors of both companies have approved a definitive stock-for-stock merger agreement valued at approximately $2.2 billion under which Intel would acquire Level One. The acquisition is aimed at bringing customers advanced networking capabilities by offering increased bandwidth and functionality through silicon integration. The Sacramento-based Level One provides silicon connectivity solutions for high-speed telecom and networking applications and is expected to establish Intel as a leading component supplier for the rapidly growing Internet and Intranet equipment market segments.

Under the terms of the agreement, each share of Level One stock would be exchanged for 0.43 shares of Intel stock and the merger would be accounted for using the purchase accounting method. A total of approximately 18.6 million shares of Intel stock would be issued to consummate the tax-free merger (including the presumed conversion of Level One's outstanding convertible subordinated notes into Level One common stock when permissible under their terms). The exchange rate and the total number of shares will be adjusted for Intel's previously announced 2 for 1 stock split. The transaction is subject to regulatory review, Level One stockholder approval and other normal closing conditions. Upon completion of the merger, which is expected by the end of the second quarter of 1999, Level One will become a wholly-owned subsidiary reporting into Intel's Network Communications Group and all Level One employees will continue as employees of this subsidiary.

"Thursday's announced merger extends our strength in networking and communications," said Craig Barrett, president and CEO of Intel. "It provides us with the silicon building blocks necessary to supply the rapidly growing demands created by the Internet and e-commerce."

"This merger benefits Level One employees and customers by delivering on our vision of highly integrated communications systems on silicon," said Robert Pepper, Level One's president and CEO who will join Intel as vice president of the company's Network Communications Group and general manager of the Level One Components Division.

"We've been fortunate to have worked with Level One on several programs over the past year, and discovered our common vision and corporate cultural values to be a great match," said Mark Christensen vice president and general manager of Intel's Network Communications Group. The companies do not anticipate any immediate changes to either of their product lines and Level One intends to continue to use its existing manufacturing relationships and provide its products to customers under existing agreements.

Level One Communications (Nasdaq: LEVL), a leader in communications IC technology, provides silicon connectivity solutions for high-speed telecom and networking applications. These components are critical connecting links in today's telecommunication and data communication (LAN/WAN) networks and are the key building blocks for the Intranets and Internets of the future. Level One combines its strengths in analog and digital circuit design with its communications systems expertise to produce mixed-signal solutions with increased functionality and greater reliability, resulting in lower total system cost. Level One Communications, Inc. is ISO 9001 registered, illustrating the company's commitment to world-class standards and providing high quality products.

Company headquarters are located in Sacramento, CA. FMI: http://www.level1.com

Intel, the world's largest chip maker, is also a leading manufacturer of computer, networking and communications products. Additional information about Intel is available at www.intel.com.