Bay Acquires IP-Voice Manufacturer

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Andover, Mass. -- Angling to move swiftly into the
voice-over-IP market that cable operators have been so vociferously clamoring for lately,
Bay Networks Inc. last Wednesday acquired NetServe Gmbh, a German manufacturer of those
products.

The deal is expected to be officially announced this
Wednesday.

Karl May, vice president of Bay's broadband-technology
division, said last week that NetServe's products map well into the cable
industry's PacketCable initiative, which has identified IP (Internet-protocol) voice
as its initial focus.

Specifically, NetServe makes devices that, in PacketCable
parlance, are called "MTAs," or "media terminal adapters," as well as
IP-voice gateways, May said.

MTAs are stand-alone devices targeted for cabled homes
where customers don't use cable modems or advanced digital set-tops with built-in
cable modems, PacketCable executives have said. MTAs work by connecting the twisted-pair
phone interfaces in a home to the cable network to carry and translate IP-phone traffic
for seamless residential use.

May said he expects Bay and NetServe to shave the price of
the MTAs to "just under the $100 range" within six months.

"If you look at the PacketCable initiative and what
the MSOs learned from that, our belief is that we've bought a jump on that
market," in terms of product availability and engineering expertise, May said.

He added that Bay plans to marry its high-speed-data gear
with NetServe's DSPs (discrete-signal-processor chips) and IP-voice and
call-processing expertise.

NetServe, based in Berlin, employs about 15 people, who
will remain in Germany and report to Bay's product-design and engineering group here.

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