<SUBMISSION>
<ACCESSION-NUMBER>0000912093-01-500006
<TYPE>8-K/A
<PUBLIC-DOCUMENT-COUNT>3
<PERIOD>20010213
<ITEMS>7
<FILING-DATE>20010323
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>JDS UNIPHASE CORP /CA/
<CIK>0000912093
<ASSIGNED-SIC>3674
<IRS-NUMBER>942579683
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>0630
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>8-K/A
<ACT>34
<FILE-NUMBER>000-22874
<FILM-NUMBER>1577276
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>210 BAYPOINTE PKWY
<CITY>SAN JOSE
<STATE>CA
<ZIP>95134
<PHONE>4084341800
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>210 BAYPOINTE PARKWAY
<CITY>SAN JOSE
<STATE>CA
<ZIP>95134
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>8-K/A
<SEQUENCE>1
<FILENAME>body8k.htm
<DESCRIPTION>BODY
<TEXT>

<HTML>
<head>
<TITLE>3232001 8K DOC</TITLE>
</head>

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<p align="center"><font size="4"><strong>UNITED STATES</br>
SECURITIES AND EXCHANGE COMMISSION</br>
Washington, D.C. 20549</strong></font></p>


<HR align=center SIZE=2 width="25%">
<br>
<p align="center"><font size="5"><strong>FORM 8-K/A</strong></center></font></p>
<HR align=center SIZE=2 width="25%">


<p align="center"><font size="4"><strong>
               Current Report Pursuant to Section 13 or 15(d) of the
                      Securities Exchange Act of 1934
</strong></font></p>

<p align="center"><font size="3"><strong>
    Date of Report (Date of earliest event reported):
<font color="FF0000"> February 13, 2001
</strong></font></p>
 <br>

<p align="center"><font size="6" color="#0000FF"><strong>
                             <u>JDS Uniphase Corporation</u>
</strong></font></br>
<font size="2">
            <i>(Exact name of registrant as specified in its charter)</i>
</font></p>


<font size="3"><strong>
                         <CENTER><u>Delaware</u></CENTER>
</font></strong>
<font size="2">
                 <i><CENTER>(State of Other Jurisdiction of Incorporation)</CENTER></i>
</font></p>


<P>&nbsp;
<TABLE COLS=2 WIDTH="100%">
<TR>
<TD>
<font size="3"><strong>
<CENTER><u>0-22874</u></CENTER>
</font></strong>
</TD>
<TD>
<font size="3"><strong>
<CENTER><u>94-2579683</u></CENTER>
</font></strong>
</TD>
</TR>
<TR>
<TD>
<font size="2">
<CENTER>&nbsp;<i>(Commission File Number)</i></CENTER>
</font>
</TD>

<TD>
<font size="2">
<CENTER><i>(IRS Employer Identification Number)</i></CENTER>
</font>
</TD>
</TR>
</TABLE>
<BR>



<p align="center"><font size="3"><strong>
                             210 Baypointe Parkway<br>
                         <u>San Jose, California &nbsp;&nbsp; 95134<br>
</strong></font></u><br>

<font size="2">
       <i> (Address of principal executive offices including zip code)</i>
</font></p>

<p align="center"><font size="3"><strong><u>
                                (408) 434-1800
</strong></font></u><br>

<font size="2">
               <i>  (Registrant's telephone number, including area code)</i>
</font></p>

<p align="center"><font size="3"><strong>
                                 Not Applicable
</strong></font></u><br>


<font size="2">
          <i>(Former name or former address, if changed since last report)</i>
</font></p>



<DIV align=left>
<HR align=left SIZE=2 width="100%">
</DIV>
<DIV align=left>
<HR align=left SIZE=2 width="100%">
</DIV>


<FONT SIZE=2>
<P>
This form 8-K/A amends Form 8-K filed with the Securities and Exchange
Commission on February 26, 2001 (the "Original Form 8-K") by including the
financial statements and pro forma financial information referred to below. </P>
<STRONG><P>Item 7. Financial Statements, Pro Forma Information and Exhibits</P>
</STRONG><P>(a) Financial Statements of Business Acquired</P>
<OL TYPE="i">

<LI>Report of Ernst &amp; Young LLP, Independent Auditors</LI>
<LI>Report of
                Arthur Andersen, Chartered Accountants</LI>
<LI>Consolidated balance sheets as of December 31, 2000 and 1999 </LI>
<LI>Consolidated statements of operations for the years ended December 31, 2000, 1999 and
1998</LI>
<LI>Consolidated statements of stockholders' equity for the years ended December 31, 2000,
1999 and 1998</LI>
<LI>Condolidated statements of cash flows for the years ended December 31, 2000, 1999 and
1998</LI>
<LI>Notes to consolidated financial statements as of December 31, 2000</LI></OL>


<P>(b) Pro Forma Financial Information</P>
<P>Pro Forma Combined Consolidated Financial Statements (unaudited)</P>
<OL TYPE="i">

<LI>Pro Forma Combined Consolidated Statements of Operations for the year ended
June 30, 2000</LI>
<LI>Pro Forma Combined Consolidated Statements of Operations for the six months
ended December 31, 2001</LI>
<LI>Notes to Pro Forma Combined Consolidated Financial Statements</LI></OL>

<P>(c) Exhibits</P></FONT>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=534>

<TR><TD WIDTH="18%" VALIGN="TOP"><DIR>
<P><FONT SIZE=2>23.1<br>
                23.2</DIR>
</FONT></TD>
<TD WIDTH="82%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Consent of Ernst &amp; Young LLP, Independent Auditors<br>
                Consent of Arthur Andersen, Chartered Accountants</DIR>
</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=2><STRONG><P ALIGN="JUSTIFY">Item 7. Financial Statements, Pro Forma
Information and Exhibits</P>
<OL TYPE="a">

</STRONG><LI>Financial Statements of Businesses Acquired</LI></OL>

<P ALIGN="CENTER">REPORT OF ERNST &amp; YOUNG LLP, INDEPENDENT
AUDITORS</P>
<FONT SIZE=2><P>The Board of Directors and Stockholders<br>
SDL, Inc.</P>
<P ALIGN="JUSTIFY">We have audited the accompanying consolidated balance sheets of SDL, Inc. as
of December 31, 2000 and 1999, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We did not audit the
financial statements of IOC International plc, which statements reflect a net
loss of $4.9 million in 1998. Those statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates to
data included for IOC International plc, is based solely on the report of the
other auditors.</P>
<P ALIGN="JUSTIFY">We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the report of
other auditors provide a reasonable basis for our opinion.</P>
<P ALIGN="JUSTIFY">In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
SDL, Inc. at December 31, 2000 and 1999, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States.</P>
<P>&#9;&#9;&#9; /s/ Ernst &amp; Young LLP</P>
<FONT SIZE=2><P>San Jose, California<br>
January 22, 2001</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">&nbsp;</P>

<br>
<br>
<br>
<HR WIDTH="85%">
<br>
<br>
<br>


<B><P ALIGN="CENTER">REPORT OF INDEPENDENT AUDITORS</P>

<P>To IOC International plc:</P></B>

<P ALIGN="JUSTIFY">We have audited the consolidated balance sheet of IOC International plc as of
30 September 1998 and the related profit and loss account and cash flow
statement for the year then ended.  These financial statements are not presented
separately herein, but are presented on pages III-3 to III-18 of the
Registration Statement of SDL, Inc on Form S-4 No 333-75639.</P>

<B><P ALIGN="JUSTIFY">Respective responsibilities of directors and auditors</P></B>

<P ALIGN="JUSTIFY">The company's directors are responsible for the preparation of the financial
statements.  It is our responsibility to form an independent opinion, based on
our audit, on those statements and to report our opinion to you.</P>

<B><P ALIGN="JUSTIFY">Basis of opinion</P></B>

<P ALIGN="JUSTIFY">We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board.  An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements.
It also includes an assessment of the significant estimates and judgements made
by the directors in the preparation of the financial statements, and of whether
the accounting policies are appropriate to the circumstances of the company
consistently applied and adequately disclosed.</P>

<P ALIGN="JUSTIFY">We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error.  In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.</P>

<B><P ALIGN="JUSTIFY">Opinion</P></B>

<P ALIGN="JUSTIFY">In our opinion the financial statements give a true and fair view of the
state of affairs of the group as at 30 September 1998, and of the group's loss
and cash flows for the year then ended, in accordance with Generally Accepted
Accounting Principles in the United Kingdom.</P>

<B><P ALIGN="JUSTIFY">Reconciliation to US GAAP</P></B>

<P ALIGN="JUSTIFY">Accounting practices used by the group in preparing the accompanying
financial statements conform with Generally Accepted Accounting Principles in
the United Kingdom, but do not conform with accounting principles generally
accepted in the United States.  A description of these differences and a
reconciliation of net loss or profit and shareholders' equity to United States
Generally Accepted Accounting Principles is set out in note 24.</P>

<P>&nbsp;</P>
<P>&nbsp;</P>
<P>/s/ Arthur Andersen<br>
Chartered Accountants<br>
Cambridge, England</P>

<P>15 December 1998</P></FONT>



<br>
<br>
<br>
<HR WIDTH="85%">
<br>
<br>
<br>


<B><P ALIGN="CENTER">SDL, INC.</P>
<P ALIGN="CENTER">CONSOLIDATED BALANCE SHEETS</P></B></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BORDER=0 CELLSPACING=1 CELLPADDING=2 WIDTH=630>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33>
<P></TD>
<TD WIDTH="34%" VALIGN="TOP" COLSPAN=3 HEIGHT=33>
<FONT SIZE=2><P ALIGN="CENTER">As of December 31,
<HR NOSHADE SIZE=2>
</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="CENTER">2000
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="CENTER">1999
<HR NOSHADE SIZE=2>
</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="34%" VALIGN="TOP" COLSPAN=3 HEIGHT=33>
<FONT SIZE=2><P ALIGN="CENTER">(In thousands, except per share and share
data)</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P>ASSETS</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33><P></P></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><DIR>

<FONT SIZE=2><P>Current assets:</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33><P></P></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><DIR>

<FONT SIZE=2><P>&#9;Cash and cash equivalents&#9;</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">$ 258,253</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">$ 153,016</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><DIR>

<FONT SIZE=2><P>Short-term marketable securities&#9;</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">155,883</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">161,120</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><DIR>

<FONT SIZE=2><P>Accounts receivable, net&#9;</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">112,273</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">41,445</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><DIR>

<FONT SIZE=2><P>&#9;Inventories&#9;</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">66,550</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">32,070</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><DIR>

<FONT SIZE=2><P>&#9;Prepaid expenses and other current assets&#9;</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">12,662
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">3,659
<HR NOSHADE SIZE=2>
</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><DIR>

<FONT SIZE=2><P>Total current assets&#9;</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">605,621</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">391,310</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33><P></P></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><DIR>

<FONT SIZE=2><P>Property and equipment, net&#9;</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">125,591</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">59,772</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><DIR>

<FONT SIZE=2><P>Purchased intangibles and goodwill, net&#9;</FONT></TD></DIR>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">2,639,991</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">2,948</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><DIR>

<FONT SIZE=2><P>Other assets</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">7,670
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">6,923
<HR NOSHADE SIZE=2>
</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><DIR>

<FONT SIZE=2><P>Total assets&#9;</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">$3,378,873
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">$ 460,953
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33><P></P></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P>LIABILITIES AND STOCKHOLDERS' EQUITY</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33><P></P></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P>Current liabilities:</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33><P></P></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><DIR>

<FONT SIZE=2><P>Accounts payable&#9;</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">$ 38,093</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">$ 18,277</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><DIR>

<FONT SIZE=2><P>Accrued payroll and related expenses&#9;</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">20,489</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">10,717</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><DIR>

<FONT SIZE=2><P>Income taxes payable&#9;</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">9,428</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">1,093</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><DIR>

<FONT SIZE=2><P>Other accrued liabilities&#9;</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">26,836
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">5,961
<HR NOSHADE SIZE=2>
</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P>Total current liabilities&#9;</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">94,846</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">36,048</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33><P></P></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P>Long-term liabilities&#9;</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">6,198</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">4,757</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33><P></P></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P>Commitments and contingencies</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33><P></P></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33><P></P></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P>Stockholders' equity:</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33><P></P></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><DIR>

<FONT SIZE=2><P>Preferred stock, $0.001 par value:</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33><P></P></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><DIR>

<FONT SIZE=2><P>Authorized shares - 1,000,000; none issued&#9;</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><DIR>

<FONT SIZE=2><P>Common stock, $0.001 par value:</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33><P></P></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><DIR>

<FONT SIZE=2><P>Authorized shares - 140,000,000; Issued and outstanding shares -
87,613,452 and 71,485,984 in 2000 and 1999, respectively&#9;</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">87</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">36</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><DIR>

<FONT SIZE=2><P>Additional paid-in capital&#9;</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">3,580,308</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">426,029</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><DIR>

<FONT SIZE=2><P>Accumulated other comprehensive income&#9;</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">74</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">1,557</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><DIR>

<FONT SIZE=2><P>Accumulated deficit&#9;</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">(302,640)
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">(7,474)
<HR NOSHADE SIZE=2>
</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P>Total stockholders' equity&#9;</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">3,277,829
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">420,148
<HR NOSHADE SIZE=2>
</FONT></TD>
</TR>
<TR><TD WIDTH="66%" VALIGN="TOP" HEIGHT=33><DIR>

<FONT SIZE=2><P>Total liabilities and stockholders' equity&#9;</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">$3,378,873
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=33><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=33>
<FONT SIZE=2><P ALIGN="RIGHT">$ 460,953
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=2><P ALIGN="CENTER">See accompanying notes.</P>


<br>
<br>
<br>
<HR WIDTH="85%">
<br>
<br>
<br>


<P ALIGN="CENTER">&nbsp;</P>
<B><P ALIGN="CENTER">SDL, INC.<BR>
CONSOLIDATED STATEMENTS OF OPERATIONS</P></B></FONT>


<P ALIGN="CENTER"><CENTER><TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=640>
<TR><TD WIDTH="64%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=5>
<FONT SIZE=2><P ALIGN="CENTER">Years Ended December 31,
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>

<TR><TD WIDTH="64%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">2000
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">1999
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">1998
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>

<TR><TD WIDTH="64%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=5>
<FONT SIZE=2><P ALIGN="CENTER">(In thousands, except per share data)</FONT></TD>
</TR>

<TR><TD WIDTH="64%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>

<TR><TD WIDTH="64%" VALIGN="TOP">
<FONT SIZE=2><P>Revenue
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 504,835</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 187,021</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 112,792</FONT></TD>
</TR>


<TR><TD WIDTH="64%" VALIGN="TOP">
<FONT SIZE=2><P>Cost of revenue&#9;
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">239,644
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">107,238
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">74,061
<HR NOSHADE SIZE=2>
</FONT></TD>
</TR>

<TR><TD WIDTH="64%" VALIGN="TOP">

<FONT SIZE=2><P>Gross profit&#9;
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">265,191
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">79,783
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">38,731
<HR NOSHADE SIZE=2>
</FONT></TD>
</TR>

<TR><TD WIDTH="64%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
</TR>

<TR><TD WIDTH="64%" VALIGN="TOP">
<FONT SIZE=2><P>Operating expenses:
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
</TR>

<TR><TD WIDTH="64%" VALIGN="TOP">
<DIR>
<FONT SIZE=2><P>Research and development&#9;
</DIR>
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">40,136
</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">19,043
</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">12,659</FONT></TD>
</TR>

<TR><TD WIDTH="64%" VALIGN="TOP">
<DIR>
<FONT SIZE=2><P>Selling, general, and administrative&#9;
</DIR>
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">58,582</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">26,695</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">17,593</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<DIR>

<FONT SIZE=2><P>Merger costs&#9;
</DIR>
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">4,019</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">2,677</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>

<TR><TD WIDTH="64%" VALIGN="TOP">
<DIR>
<FONT SIZE=2><P>In-process research and development&#9;
</DIR>
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">27,400</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,495</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>

<TR><TD WIDTH="64%" VALIGN="TOP">
<DIR>
<FONT SIZE=2><P>Amortization of purchased intangibles and goodwill&#9;
</DIR>
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">376,005
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">809
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">777
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>

<TR><TD WIDTH="64%" VALIGN="TOP">
<DIR>
<FONT SIZE=2><P>Total operating expenses
</DIR>
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">506,142
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">50,719
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">31,029
<HR NOSHADE SIZE=2>
</FONT></TD>
</TR>

<TR><TD WIDTH="64%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
</TR>

<TR><TD WIDTH="64%" VALIGN="TOP">
<FONT SIZE=2><P>Operating income (loss)&#9;
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(240,951)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">29,064</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">7,702</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
</TR>

<TR><TD WIDTH="64%" VALIGN="TOP">
<FONT SIZE=2><P>Interest income and other, net
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">22,126</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">5,429</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,284</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">

<FONT SIZE=2><P>Income (loss) before income taxes&#9;
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(218,825)
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">34,493
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">8,986
<HR NOSHADE SIZE=2>
</FONT></TD>
</TR>

<TR><TD WIDTH="64%" VALIGN="TOP">
<FONT SIZE=2><P>Provision for income taxes
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">76,341
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">9,280
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,083
<HR NOSHADE SIZE=2>
</FONT></TD>
</TR>

<TR><TD WIDTH="64%" VALIGN="TOP">
<FONT SIZE=2><P>Net income (loss)&#9;
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$(295,166)
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$25,213
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$7,903
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>

<TR><TD WIDTH="64%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">

<FONT SIZE=2><P>Net income (loss) per share-basic&#9;
</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">($3.63)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">&#9; $0.39</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$0.14</FONT></TD>
</TR>

<TR><TD WIDTH="64%" VALIGN="TOP">
<FONT SIZE=2><P>Net income (loss) per share-diluted</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">&#9;($3.63)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$0.37</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$0.13</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
</TR>

<TR><TD WIDTH="64%" VALIGN="TOP">
<FONT SIZE=2><P>Number of weighted average shares-basic&#9;</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">81,308</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">64,320</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">57,436</FONT></TD>
</TR>

<TR><TD WIDTH="64%" VALIGN="TOP">
<FONT SIZE=2><P>Number of weighted average shares-diluted&#9;</FONT></TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">81,308</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">68,470</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">60,724</FONT></TD>
</TR>
</TABLE>
</CENTER></P>


<FONT SIZE=2><P ALIGN="CENTER">&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P ALIGN="CENTER">See accompanying notes.</P>


<br>
<br>
<br>
<HR WIDTH="85%">
<br>
<br>
<br>


<B><P ALIGN="CENTER">SDL, INC.</P>
<P ALIGN="CENTER">CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY</P></B></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BORDER=0 CELLSPACING=1 CELLPADDING=5 WIDTH=682>
<TR><TD WIDTH="23%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="BOTTOM" COLSPAN=3>
<FONT SIZE=1><P ALIGN="CENTER">Common Stock
<HR NOSHADE SIZE=1></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">&nbsp;</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
</TR>

<TR><TD WIDTH="23%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Shares
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Amount
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Additional
Paid-In Capital
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Accumulated Other Comprehensive
Income
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Accumulated
Deficit
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="CENTER">Total Stockholders' Equity
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="BOTTOM" HEIGHT=16>
<FONT SIZE=1><P><B>Balance at December 31, 1997&#9;</B></FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="10%" VALIGN="BOTTOM" HEIGHT=16>
<FONT SIZE=1><P ALIGN="RIGHT">56,505,252</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="8%" VALIGN="BOTTOM" HEIGHT=16>
<FONT SIZE=1><P ALIGN="RIGHT">$14</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="12%" VALIGN="BOTTOM" HEIGHT=16>
<FONT SIZE=1><P ALIGN="RIGHT">$128,652</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=16>
<FONT SIZE=1><P ALIGN="RIGHT">$70</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM" HEIGHT=16>
<FONT SIZE=1><P ALIGN="RIGHT">$(39,454)</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=16>
<FONT SIZE=1><P ALIGN="RIGHT">$89,282</FONT></TD>
</TR>

<TR><TD WIDTH="23%" VALIGN="BOTTOM">
<FONT SIZE=1><P>Net Income&#9;
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">7,903</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">7,903</FONT></TD>
</TR>

<TR><TD WIDTH="23%" VALIGN="BOTTOM">
<FONT SIZE=1><P>Cumulative translation adjustment</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">748</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">748</FONT></TD>
</TR>

<TR><TD WIDTH="23%" VALIGN="BOTTOM">
<FONT SIZE=1><P>Unrealized gain on investments&#9;
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">69</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">69</FONT></TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="BOTTOM">

<FONT SIZE=1><P>Comprehensive Income
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">8,720</FONT></TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="BOTTOM">

<FONT SIZE=1><P>Proceeds from issuance of common stock, net&#9;
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">435,288</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">5,522</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">5,522</FONT></TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="BOTTOM">

<FONT SIZE=1><P>Issuance of stock pursuant to employee stock plans&#9;
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">2,455,780</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">1</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">4,463</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">4,464</FONT></TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="BOTTOM">

<FONT SIZE=1><P>Income tax benefit from exercise of employee stock
options&#9;
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">218
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">218
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="BOTTOM">

<FONT SIZE=1><P><B>Balance at December 31, 1998</B>
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">59,396,320</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">15</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">138,855</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">887</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(31,551)</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">108,206</FONT></TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="BOTTOM">

<FONT SIZE=1><P>Net Income&#9;
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">25,213</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">25,213</FONT></TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="BOTTOM">
<FONT SIZE=1><P>Cumulative translation adjustment</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(710)</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(710)</FONT></TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="BOTTOM">

<FONT SIZE=1><P>Unrealized gain on investments&#9;
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">&#9;&#9;-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">1,380</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">1,380</FONT></TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="BOTTOM">

<FONT SIZE=1><P>Comprehensive Income
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">25,883</FONT></TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="BOTTOM">

<FONT SIZE=1><P>Compensation expense on issuance of stock options to third
parties&#9;
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">1,360</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">1,360</FONT></TD>
</TR>

<TR><TD WIDTH="23%" VALIGN="TOP">
<FONT SIZE=1><P>Stock-split effected in the form of a stock dividend&#9;
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">15</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(15)</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="BOTTOM">

<FONT SIZE=1><P>IOC net loss for the three months ended December 31,
1998&#9;
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(1,136)</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(1,136)</FONT></TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="BOTTOM">

<FONT SIZE=1><P>Proceeds from issuance of <BR>
common stock, net&#9;
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">6,785,000</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">&#9;&#9;3</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">266,298</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">266,301</FONT></TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="BOTTOM">

<FONT SIZE=1><P>Issuance of stock pursuant to <BR>
employee stock plans&#9;
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">5,304,664</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">3</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">12,669</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">12,672</FONT></TD>
</TR>

<TR><TD WIDTH="23%" VALIGN="TOP">
<FONT SIZE=1><P>Income tax benefit from exercise of employee stock
options&#9;
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">&#9;&#9;-
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">6,862
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">6,862
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="BOTTOM">

<FONT SIZE=1><P><B>Balance at December 31, 1999</B>
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">71,485,984</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">36</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">426,029</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">1,557</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(7,474)</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">420,148</FONT></TD>
</TR>

<TR><TD WIDTH="23%" VALIGN="BOTTOM">
<FONT SIZE=1><P>Net loss&#9;
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(295,166)</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(295,166)</FONT></TD>
</TR>
<TR><TD WIDTH="23%" VALIGN="BOTTOM">
<FONT SIZE=1><P>Cumulative translation adjustment</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(1,920)</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(1,920)</FONT></TD>
</TR>

<TR><TD WIDTH="23%" VALIGN="BOTTOM">
<FONT SIZE=1><P>Unrealized gain on investments&#9;
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">437</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">437</FONT></TD>
</TR>

<TR><TD WIDTH="23%" VALIGN="BOTTOM">
<FONT SIZE=1><P>Comprehensive Loss
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(296,649)</FONT></TD>
</TR>

<TR><TD WIDTH="23%" VALIGN="BOTTOM">
<FONT SIZE=1><P>Compensation expense related to stock options&#9;
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">16,949</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">16,949</FONT></TD>
</TR>

<TR><TD WIDTH="23%" VALIGN="BOTTOM">
<FONT SIZE=1><P>Stock-split effected in the form of a stock dividend&#9;
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">36</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">(36)</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
</TR>

<TR><TD WIDTH="23%" VALIGN="BOTTOM">
<FONT SIZE=1><P>Issuance of stock pursuant to
employee stock plans&#9;
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">3,852,741</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">3</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">22,710</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">22,713</FONT></TD>
</TR>

<TR><TD WIDTH="23%" VALIGN="BOTTOM">
<FONT SIZE=1><P>Issuance of common stock pursuant to acquisitions and related
tax benefits
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">&nbsp;</P>
<P ALIGN="RIGHT">12,274,727</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">&nbsp;</P>
<P ALIGN="RIGHT">12</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">&nbsp;</P>
<P ALIGN="RIGHT">3,044,999</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">&nbsp;</P>
<P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">&nbsp;</P>
<P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">&nbsp;</P>
<P ALIGN="RIGHT">3,045,011</FONT></TD>
</TR>

<TR><TD WIDTH="23%" VALIGN="TOP" HEIGHT=26>
<FONT SIZE=1><P>Income tax benefit from exercise of employee stock
options&#9;
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" HEIGHT=26><P></P></TD>
<TD WIDTH="10%" VALIGN="BOTTOM" HEIGHT=26>
<FONT SIZE=1><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" HEIGHT=26><P></P></TD>
<TD WIDTH="8%" VALIGN="BOTTOM" HEIGHT=26>
<FONT SIZE=1><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" HEIGHT=26><P></P></TD>
<TD WIDTH="12%" VALIGN="BOTTOM" HEIGHT=26>
<FONT SIZE=1><P ALIGN="RIGHT">69,657
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=26>
<FONT SIZE=1><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM" HEIGHT=26>
<FONT SIZE=1><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=26>
<FONT SIZE=1><P ALIGN="RIGHT">69,657
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>

<TR><TD WIDTH="23%" VALIGN="TOP">
<FONT SIZE=1><P><B>Balance at December 31, 2000</B>
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">87,613,452
<HR NOSHADE SIZE=3>
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$87
<HR NOSHADE SIZE=3>
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$3,580,308
<HR NOSHADE SIZE=3>
</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$74
<HR NOSHADE SIZE=3>
</FONT></TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$(302,640)
<HR NOSHADE SIZE=3>
</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$3,277,829
<HR NOSHADE SIZE=3>
</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=2><P ALIGN="CENTER">See accompanying notes.</P>


<br>
<br>
<br>
<HR WIDTH="85%">
<br>
<br>
<br>


<P ALIGN="CENTER">&nbsp;</P>
<B><P ALIGN="CENTER">SDL, INC.</P>
<P ALIGN="CENTER">CONSOLIDATED STATEMENTS OF CASH FLOWS</P></B></FONT>
<P ALIGN="CENTER"><CENTER><TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=645>
<TR><TD WIDTH="53%" VALIGN="TOP" HEIGHT=16>
<P></TD>
<TD WIDTH="47%" VALIGN="TOP" COLSPAN=8 HEIGHT=16>

<FONT SIZE=2><P ALIGN="CENTER">Years Ended December 31,
<HR NOSHADE SIZE=2>
</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="CENTER">2000
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" COLSPAN=3 HEIGHT=16>
<FONT SIZE=2><P ALIGN="CENTER">1999
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2 HEIGHT=16><P></P></TD>
<TD WIDTH="7%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="CENTER">1998
<HR NOSHADE SIZE=2>
</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="47%" VALIGN="TOP" COLSPAN=8 HEIGHT=16>
<FONT SIZE=2><P ALIGN="CENTER">(In thousands)</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP">

<FONT SIZE=2><P><B>Operating activities:</B>
</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP">
<FONT SIZE=2><P>Net income (loss)&#9;</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$(295,166)</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 25,213</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">$ 7,903</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP">
<FONT SIZE=2><P>Adjustments to reconcile net income (loss) to net cash provided
by operating activities:</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Depreciation&#9;</DIR>
</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">20,963</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">10,914</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">7,919</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Amortization of purchased intangibles and goodwill&#9;</DIR>
</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">376,005</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">809</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">777</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>In-process research and development&#9;</DIR>
</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">27,400</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,495</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Stock compensation expense&#9;</DIR>
</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">16,949</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,360</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Tax benefits from employee stock options&#9;</DIR>
</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">69,657</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">6,862</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">218</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Deferred income taxes&#9;</DIR>
</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">460</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">(948)</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Changes in operating assets and liabilities:</DIR>
</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Accounts receivable&#9;</DIR>
</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(52,845)</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(18,284)</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">(1,472)</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Inventories&#9;</DIR>
</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(25,377)</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(9,642)</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">(6,104)</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Accounts payable&#9;</DIR>
</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">14,435</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">8,132</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">356</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Accrued payroll and related expenses&#9;</DIR>
</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">9,533</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">8,170</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">(341)</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Income taxes payable&#9;</DIR>
</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">2,880</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(797)</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">1,062</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Other accrued liabilities&#9;</DIR>
</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">11,986</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,935</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">(1,072)</FONT></TD>
</TR>

<TR><TD WIDTH="53%" VALIGN="TOP"><DIR>
<FONT SIZE=2><P>Other&#9;</DIR>
</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(10,715)
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(1,533)
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">2,059
<HR NOSHADE SIZE=2>
</FONT></TD>
</TR>

<TR><TD WIDTH="53%" VALIGN="TOP">
<FONT SIZE=2><P>Total adjustments&#9;</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">461,331
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">9,421
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">2,454
<HR NOSHADE SIZE=2>
</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP">

<FONT SIZE=2><P>Net cash provided by operating activities&#9;
</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">166,165
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">34,634
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">10,357
<HR NOSHADE SIZE=2>
</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP" HEIGHT=10><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=10><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2 HEIGHT=10><P></P></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=10><P></P></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2 HEIGHT=10><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2 HEIGHT=10><P></P></TD>
</TR>

<TR><TD WIDTH="53%" VALIGN="TOP">
<FONT SIZE=2><P><B>Investing activities:</B>
</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP">
<FONT SIZE=2><P>Acquisition of property and equipment, net&#9;</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(69,448)</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(29,898)</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">(14,075)</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP">
<FONT SIZE=2><P>Purchase of marketable securities&#9;</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(143,606)</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(357,756)</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">(76,426)</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP">
<FONT SIZE=2><P>Sales and maturities of marketable securities&#9;</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">152,853</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">218,626</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">81,874</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP">
<FONT SIZE=2><P>Acquisition of businesses, net of cash acquired&#9;</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(22,406)
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(5,205)
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=2>
</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP">

<FONT SIZE=2><P>Net cash used in investing activities&#9;
</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(82,607)
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(174,233)
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">(8,627)
<HR NOSHADE SIZE=2>
</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP" HEIGHT=10><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=10><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2 HEIGHT=10><P></P></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=10><P></P></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2 HEIGHT=10><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2 HEIGHT=10><P></P></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP">

<FONT SIZE=2><P><B>Financing activities:</B>
</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP">
<FONT SIZE=2><P>Issuance of stock pursuant to employee stock
plans&#9;</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">22,710</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">12,672</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">4,464</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP">
<FONT SIZE=2><P>Issuance of common stock &#9;</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">266,321</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">5,686</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP">
<FONT SIZE=2><P>Other&#9;</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(1,031)
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(2,238)
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">(1,027)
<HR NOSHADE SIZE=2>
</FONT></TD>
</TR>

<TR><TD WIDTH="53%" VALIGN="TOP">
<FONT SIZE=2><P>Net cash provided by financing activities&#9;</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">21,679
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">276,755
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">9,123
<HR NOSHADE SIZE=2>
</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP">
<FONT SIZE=2><P>Net increase in cash and cash equivalents&#9;</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">105,237</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">137,156</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">10,853</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP" HEIGHT=10>
<FONT SIZE=2><P>Net cash activity for IOC for the three months ended December
31,1998</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=10>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2 HEIGHT=10><P></P></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=10>
<FONT SIZE=2><P ALIGN="RIGHT">(1,163)</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2 HEIGHT=10><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2 HEIGHT=10>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP" HEIGHT=10>
<FONT SIZE=2><P>Cash and cash equivalents at beginning of year&#9;</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=10>
<FONT SIZE=2><P ALIGN="RIGHT">153,016
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2 HEIGHT=10><P></P></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=10>
<FONT SIZE=2><P ALIGN="RIGHT">17,023
<HR NOSHADE SIZE=2>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2 HEIGHT=10><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2 HEIGHT=10>
<FONT SIZE=2><P ALIGN="RIGHT">6,170
<HR NOSHADE SIZE=2>
</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP">
<FONT SIZE=2><P>Cash and cash equivalents at end of year&#9;</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 258,253
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 153,016
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">$ 17,023
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>

<TR><TD WIDTH="53%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP">
<FONT SIZE=2><P>Supplemental disclosures of cash flow information:</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
</TR>

<TR><TD WIDTH="53%" VALIGN="TOP" HEIGHT=10>
<DIR>
<FONT SIZE=2><P>Cash paid for income taxes, net&#9;
</DIR>
</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=10>
<FONT SIZE=2><P ALIGN="RIGHT">$ 1,299 </FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2 HEIGHT=10><P></P></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=10>
<FONT SIZE=2><P ALIGN="RIGHT">$ 3,245 </FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2 HEIGHT=10><P></P></TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2 HEIGHT=10>
<FONT SIZE=2><P ALIGN="RIGHT">$ 629</FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP">
<FONT SIZE=2><P>Non-cash transactions:</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP">
<DIR>
<FONT SIZE=2><P>Stock issued in connection with acquisitions&#9;</FONT></TD>
</DIR>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$3,045,011</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ - </FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">$ - </FONT></TD>
</TR>
<TR><TD WIDTH="53%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=2><P ALIGN="CENTER">See accompanying notes.</P>

<br>
<br>
<br>
<HR WIDTH="85%">
<br>
<br>
<br>


<B><P ALIGN="CENTER">SDL, INC.</P>
<P ALIGN="CENTER">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</P>
<P ALIGN="CENTER">As of December 31, 2000</P>
</B><P ALIGN="JUSTIFY">1. Organization and Summary of Significant Accounting
Policies</P>
<I><P ALIGN="JUSTIFY">Organization</P>
</I><P ALIGN="JUSTIFY">SDL, Inc. (the Company), a Delaware corporation, is a
world leader in providing products for optical communications and related
markets. Our products enable the transmission of data, voice, and Internet
information over fiber optic networks to meet the needs of telecommunication,
dense wavelength division multiplexing, or DWDM, cable television and metro
communications applications. Our products allow customers to meet the need for
increasing bandwidth by expanding their fiber optic communication networks more
quickly and efficiently than by using conventional electronic and optical
technologies. The Company's revenue is derived primarily from the sale of
standard and customized products to a diverse worldwide customer base utilizing
various market applications.</P>
<P ALIGN="JUSTIFY">On February 13, 2001, the Company was acquired by JDS
Uniphase. See Note 13, "Subsequent Events."</P>
<I><P ALIGN="JUSTIFY">Basis of Presentation </P>
</I><P ALIGN="JUSTIFY">The consolidated financial statements include SDL and its
wholly-owned subsidiaries. All intercompany accounts and transactions have been
eliminated. The Company has operations in the United States and international
operations in Canada and the United Kingdom.</P>
<P ALIGN="JUSTIFY">In 1997, SDL changed its year-end from a calendar year ending
December 31, to a 52-53 week year ending on the Friday closest to December 31.
The Company's 2000, 1999 and 1998 fiscal years ended December 29, 2000, December
31, 1999, and January 1, 1999, respectively. For ease of discussion and
presentation, all fiscal year-ends are referred to as ending on December 31.</P>
<I><P ALIGN="JUSTIFY">Mergers &amp; Acquisitions</P>
</I><P ALIGN="JUSTIFY">On March 8, 2000, Queensgate Instruments Limited ("Queensgate") was
acquired by SDL in a transaction accounted for as a purchase. Queensgate was a
privately held company and is located in Bracknell, United Kingdom. Queensgate
designs, develops, manufactures and markets optical network monitoring modules
for long haul terrestrial fiber optic transmission systems. The acquisition
agreement provided for initial consideration of $3 million of cash and 347,962
shares of the Company's common stock with a fair value of approximately $77
million, and contingent payments of up to an additional $150 million in common
stock based on Queensgate's pretax profits for the 10 months ending December 31,
2000 and the twelve months ending December 31, 2001. In addition, SDL issued
options in exchange for outstanding Queensgate options with the number of shares
and the exercise price appropriately adjusted by the exchange ratio. On June 26,
2000, SDL signed a supplementary agreement with the prior shareholders and
option-holders of Queensgate extinguishing all rights to future contingent
payments in exchange for 465,102 shares of SDL stock with a fair value of
approximately $130.4 million which increased goodwill. See Note 7, "Mergers
&amp; Acquisitions."</P>
<P ALIGN="JUSTIFY">On April 3, 2000, the Company acquired Veritech Microwave,
Inc. ("Veritech") for 3,000,000 shares of the Company's common stock with a fair
value of approximately $621 million. Veritech was a privately held company
located in South Plainfield, New Jersey. Veritech designs, develops,
manufactures and markets optoelectronic modules for long haul undersea and
terrestrial fiber optic transmission systems. The acquisition was accounted for
under the purchase method of accounting. See Note 7, "Mergers &amp;
Acquisitions."</P>
<P ALIGN="JUSTIFY">On June 2, 2000, the Company acquired Photonic Integration
Research, Inc. (PIRI) for 8,461,663 shares of the Company's common stock with a
fair value of approximately $2.1 billion and a $31.7 million cash payment. PIRI,
a privately held company located in Columbus, Ohio, is a manufacturer of arrayed
waveguide gratings (AWGs) that enable the routing of individual wavelength
channels in fiber optic systems. These products are used in optical multiplexing
(mux) and demultiplexing (demux) applications for dense wavelength division
multiplexed (DWDM) fiber optic systems. The acquisition was accounted for under
the purchase method of accounting. See Note 7, "Mergers &amp; Acquisitions."</P>
<P ALIGN="JUSTIFY">As more fully described in Note 7, the Company merged with
IOC International plc. ("IOC") on May 18, 1999 in a pooling of interests
transaction. The consolidated financial statements have been restated as of the
earliest period presented to include the financial position, results of
operations and cash flows of IOC. There were no transactions between IOC and the
Company prior to the combination and no significant adjustments were necessary
to conform IOC's accounting policies to those of the Company. Because of
differing year ends, financial information relating to SDL's fiscal year ended
December 31, 1998, has been combined with financial information relating to
IOC's fiscal year ended September 30, 1998. IOC's net loss for the three months
ended December 31, 1998 was not combined with SDL's net income, but rather was
included as an adjustment to stockholders' equity in the Company's financial
results for the fiscal year ended December 31, 1999. IOC's results of operations
for the twelve months ended December 31, 1999 have been combined with SDL's
results of operations for the twelve months ended December 31, 1999.</P>
<P ALIGN="JUSTIFY">In February 1999, the Company acquired the fiber laser
business of Polaroid Corporation for $5.3 million in cash, which included
related transaction costs of $0.1 million. The business acquired included all
the physical assets, intellectual property, including the assignment of 38
patents and the licensing of 22 patents in the fiber laser and fiber amplifier
area, and the ongoing operation of the fiber manufacturing facilities and fiber
laser subsystem. The acquisition was accounted for under the purchase method of
accounting. See Note 7, "Mergers &amp; Acquisitions."</P>
<I><P ALIGN="JUSTIFY">Use of Estimates</P>
</I><P ALIGN="JUSTIFY">The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Such estimates relate to the useful lives of
property, plant and equipment, allowances for doubtful accounts and customer
returns, inventory realizability, potential accruals relating to litigation
matters, future taxable income, warranty and other accruals, and contingent
liabilities. Actual results could differ from those estimates, and
such differences may be material to the financial statements.</P>

<I><P ALIGN="JUSTIFY">Cash and Cash Equivalents</P>
</I><P ALIGN="JUSTIFY">The Company considers all highly liquid investments with
original maturities of three months or less at the time of purchase to be cash
equivalents. Cash equivalents are carried at fair value.</P>
<I><P ALIGN="JUSTIFY">Marketable Securities</P>
</I><P ALIGN="JUSTIFY">The Company's securities are classified as available-for-
sale and are recorded at fair value. Fair value is based upon market prices
quoted on the last day of the fiscal year. The cost of debt securities sold is
based on the specific identification method. Unrealized gains and losses are
reported as a separate component of stockholders' equity. Gross realized gains
and losses are included in interest income and have not been material for any
period presented.</P>
<I><P ALIGN="JUSTIFY">Inventories</P>
</I><P ALIGN="JUSTIFY">Inventories are stated at the lower of standard cost
(which approximates actual costs on a first-in, first-out basis) or market. The
market value is based upon estimated net realizable value.</P>
<I><P ALIGN="JUSTIFY">Property and Equipment</P>
</I><P ALIGN="JUSTIFY">Property and equipment are stated at cost. Equipment and
fixtures are depreciated using the straight-line method over estimated useful
lives ranging from two to eight years. Leasehold improvements are amortized
using the straight-line method over the shorter of the estimated useful lives or
the remaining lease terms. Buildings are depreciated using the straight-line
method over an estimated useful life of thirty years.</P>

<I><P ALIGN="JUSTIFY">Purchased Intangibles and Goodwill</P>
</I><P ALIGN="JUSTIFY">Goodwill represents the excess of the purchase price paid over the fair
value of tangible and identifiable intangible net assets acquired in business
acquisitions. Identifiable intangible assets include core and existing
technology, trade names, and assembled workforces.</FONT><FONT FACE="Courier
New" SIZE=2> </FONT><FONT SIZE=2>The Company regularly performs reviews to
determine if the carrying value of the goodwill and other intangible assets is
impaired. The purpose for the review is to identify any facts or circumstances,
either internal or external, which indicate that the carrying value of the asset
cannot be recovered. No such impairment has been indicated to date. Goodwill and
other intangible assets are stated net of accumulated amortization and are
amortized on a straight-line basis over their expected useful lives of three to
seven years.</P>
<I><P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">Revenue Recognition</P>
</I><P ALIGN="JUSTIFY">Revenue recognition is based on the terms of the
underlying sales agreements (purchase orders or contracts). Revenue from product
sales is generally recognized at the time the product is shipped, with
provisions established for estimated product returns and allowances. The Company
provides for the estimated cost to repair products under warranty at the time of
sale. Revenue for costs incurred plus specified fee contracts is recognized on
the percentage-of-completion method. Revenue for fixed price milestone contracts
is recognized upon the completion of the milestone. Customers entering into cost
incurred and fixed price contracts with the Company include the U.S. government,
prime or subcontractors for which the U.S. government may be the end customer,
and other domestic and international end-users.</P>
<I><P ALIGN="JUSTIFY">Concentrations</P>
</I><U><P ALIGN="JUSTIFY">Credit Risk</U> - Financial instruments that
potentially subject the Company to concentrations of credit risk consist
primarily of cash equivalents, short-term investments and trade receivables. The
Company places its cash equivalents and short-term investments with high
credit-quality financial institutions. The Company invests its excess cash equivalents
and short-term investments primarily in money market funds, commercial paper,
municipal bonds, and auction rate preferred stock. The Company has established
guidelines relative to credit ratings, diversification and maturities that seek
to maintain safety and liquidity. The Company sells primarily to customers
involved in the application of laser technology and the manufacture of
telecommunications products. The Company performs ongoing credit evaluations of
its customers' financial condition and maintains an allowance for uncollectible
accounts receivable based upon the expected collectibility of all accounts
receivable. Although such losses have been within management's expectations to
date, there can be no assurance that such reserves will continue to be adequate.
The Company does not require collateral from its customers. At December 31,
2000, two major customers and their affiliates accounted for 23 percent and 11 percent
of accounts receivable. </P>

<U><P ALIGN="JUSTIFY">Major Customers</U> - During fiscal 2000, four customers and
their affiliates accounted for 16 percent, 11 percent, 11 percent, and 10
percent of total revenues. During fiscal 1999, three customers and their
affiliates accounted for 15 percent, 11 percent and 11 percent of total
revenues. During fiscal 1998, another customer accounted for 13 percent of
revenues. All U.S. operations sales to international customers constitute export
sales. Export sales to Europe totaled approximately $219.9 million, $40.2
million, and $9.3 million for 2000, 1999, and 1998, respectively. Export sales
to the Pacific Rim totaled approximately $39.9 million, $9.7 million, and $8.9
million for 2000, 1999, and 1998, respectively. </P>
<U><P ALIGN="JUSTIFY">Dependence Upon Government Programs and Contracts</U> - In
2000, 1999, and 1998, the Company derived less than 1 percent, 8 percent, and 26
percent, respectively, of its revenue directly and indirectly from a variety of
Federal government sources. </P>
<U><P ALIGN="JUSTIFY">Dependence on Single Source and Other Third Party
Suppliers</U> - The Company depends on a single or limited number of outside
contractors and suppliers for raw materials, packages and standard components,
and to assemble printed circuit boards. The Company generally purchases these
single or limited source products through standard purchase orders or one-year
supply agreements and has no long-term guaranteed supply agreements with such
suppliers. While the Company seeks to maintain a sufficient safety stock of such
products and also endeavors to maintain ongoing communications with its
suppliers to guard against interruptions or cessation of supply, the Company's
business and results of operations have in the past been and could in the future
be adversely affected by a stoppage or delay of supply, substitution of more
expensive or less reliable products, receipt of defective parts or contaminated
materials, an increase in the price of such supplies, or the Company's inability
to obtain reduced pricing from its suppliers in response to competitive
pressures.</P>
<I><P ALIGN="JUSTIFY">Foreign Currency Translation</P>
</I><P ALIGN="JUSTIFY">The functional currency of the Company's Canadian
subsidiary (SDL Optics) is the U.S. dollar. The financial statements of the
Canadian subsidiary are remeasured into U.S. dollars for the purposes of
consolidation using the historical exchange rates in effect at the date of the
transactions. Remeasurement gains and losses are recorded in the income
statement and have not been material to date. The functional currency of the
Company's United Kingdom subsidiaries is the British Pound Sterling. All assets
and liabilities of the Company's United Kingdom subsidiaries (SDL Integrated
Optics and SDL Queensgate) are translated at the exchange rate on the balance
sheet date. Revenues and costs and expenses are translated at weighted average
rates of exchange prevailing during the period. Translation adjustments are
recorded in accumulated other comprehensive income as a separate component of
stockholders' equity. Foreign currency transaction gains and losses are included
in interest income and other, net and were immaterial for all periods
presented.</P>
<I><P ALIGN="JUSTIFY">Net Income (Loss) Per Share</P>
</I><P ALIGN="JUSTIFY">The following table sets forth the computation of basic
and diluted net income (loss) per share (in thousands, except per share
amounts):</P></FONT>


<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=680>
<TR><TD WIDTH="50%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="50%" VALIGN="TOP" COLSPAN=8>
<FONT SIZE=2><P ALIGN="CENTER">Years Ended December 31,
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>

<TR><TD WIDTH="50%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">2000
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">1999
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="CENTER">1998
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>

<TR><TD WIDTH="50%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="50%" VALIGN="TOP" COLSPAN=8>
<P>&nbsp;</TD>
</TR>


<TR><TD WIDTH="50%" VALIGN="TOP">
<FONT SIZE=2><P>Numerator:</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>

<TR><TD WIDTH="50%" VALIGN="TOP">
<FONT SIZE=2><P>Net income (loss)</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">$ (295,166)
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">$ 25,213
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 7,903
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>

<TR><TD WIDTH="50%" VALIGN="TOP">
<FONT SIZE=2><P>Denominator:</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>

<TR><TD WIDTH="50%" VALIGN="BOTTOM"><DIR>
<FONT SIZE=2><P>Denominator for basic earnings per share-weighted average
shares</DIR>
</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">81,308</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">64,320</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">57,436</FONT></TD>
</TR>


<TR><TD WIDTH="50%" VALIGN="BOTTOM"><DIR>
<FONT SIZE=2><P>Incremental common shares attributable to shares issuable under
employee stock plans</FONT><FONT SIZE=1> (1)</DIR>
</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">4,150
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">3,288
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="BOTTOM"><DIR>

<FONT SIZE=2><P>Denominator for diluted earnings per share - adjusted
weighted average shares and assumed conversions</DIR>
</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">81,308
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">68,470
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="RIGHT">60,724
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP">
<FONT SIZE=2><P>Net income (loss) per share - basic</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">$ (3.63)
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">$ 0.39
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 0.14
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP">
<FONT SIZE=2><P>Net income (loss) per share -
diluted</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">$ (3.63)
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">$ 0.37
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 0.13
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>
</TABLE>

<DIR>

<FONT SIZE=1><P ALIGN="JUSTIFY">(1) Potential common shares relating to shares
issuable under employee stock plans of 7,215 shares are not included in the
twelve months ended December 31, 2000 calculation due to their anti-dilutive
effect on the loss per share.</P></FONT SIZE=1>
</DIR>

<FONT SIZE=2><I><P ALIGN="JUSTIFY">Comprehensive Income</P></I>

<P ALIGN="JUSTIFY">Accumulated other comprehensive income presented in the
accompanying consolidated balance sheets consists of the accumulated net
unrealized gains and losses on available-for-sale marketable securities and
foreign currency translation adjustments, net of the related tax effect for all
periods presented. The tax effects for other comprehensive income were
immaterial for all periods presented. The components of comprehensive income
(loss) are as follows (in thousands):</P>

<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=594>
<TR><TD WIDTH="48%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="52%" VALIGN="TOP" COLSPAN=8>
<FONT SIZE=2><P ALIGN="CENTER">Years Ended December 31,
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="48%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">2000
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">1999
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">1998
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>

<TR><TD WIDTH="48%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="52%" VALIGN="TOP" COLSPAN=8>
<FONT SIZE=2><P ALIGN="CENTER">(In thousands)</FONT></TD>
</TR>

<TR><TD WIDTH="48%" VALIGN="TOP"><DIR>
<FONT SIZE=2><P>Net income (loss)</DIR>
</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$(295,166)</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">$25,213</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">$ 7,903</FONT></TD>
</TR>

<TR><TD WIDTH="48%" VALIGN="TOP"><DIR>
<FONT SIZE=2><P>Unrealized gains (losses)</DIR>
</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">437</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">1,380</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">69</FONT></TD>
</TR>

<TR><TD WIDTH="48%" VALIGN="TOP"><DIR>
<FONT SIZE=2><P>Change in foreign currency translation</DIR>
</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(1,920)
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">(710)
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">748
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>

<TR><TD WIDTH="48%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Total comprehensive income (loss)</DIR>
</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$(296,649)
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">$25,883
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">$ 8,720
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><I><P ALIGN="JUSTIFY">Recent Financial Accounting
Pronouncements</P></I>
<P ALIGN="JUSTIFY">In December 1999, the staff of the Securities and
Exchange Commission issued Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements" ("SAB 101"). The SAB summarizes certain of
the Staff's views in applying generally accepted accounting principles to
revenue recognition in financial statements. SAB 101 provides that if
registrants have not applied the accounting therein they should implement the
SAB and report a change in accounting principle. SAB 101, as subsequently
amended, was effective for the Company for fiscal 2000. The adoption of SAB 101
did not have a material impact on the Company's financial condition or results
of operations.</P>
<P ALIGN="JUSTIFY">In June 1998, the Financial Accounting Standards Board, or
the FASB, issued SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities. SFAS 133, as amended, establishes methods of accounting for derivative financial
instruments and hedging activities related to those instruments, as well as
other hedging activities. The Company will be subject to SFAS 133 commencing in
2001. The Company believes that the implementation of SFAS 133 will not have a
significant effect on its financial position or results of operations.</P>

<P ALIGN="JUSTIFY">In March 2000, the FASB issued Interpretation, or FIN, No.
44, Accounting for Certain Transactions Involving Stock Compensation an
Interpretation of APB Opinion No. 25. FIN 44 clarifies the definition of an
employee for purposes of applying APB 25, the criteria for determining whether a
plan qualifies as a noncompensatory plan, the accounting consequences of various
modifications to the terms of a previously fixed stock option or award and the
accounting for an exchange of stock compensation awards in a business
combination. FIN 44 was effective July 1, 2000. The Company believes that the
implementation of FIN 44 did not have a significant effect on the Company's
financial position or results of operations.</P>


<P ALIGN="JUSTIFY">2. Marketable Securities</P>
<P ALIGN="JUSTIFY">Available-for-sale marketable securities held at December 31,
2000 and 1999 have original maturities of less than one year from the date of
purchase and consist of the following (in thousands):</P></FONT>

<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=640>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<P><FONT SIZE=2>December 31, 2000
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Amortized Cost
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Gross Unrealized Gains
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Gross Unrealized Losses
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Estimated Fair Value
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Taxable municipal bonds</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 71,250</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ -</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ -</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 71,250</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="JUSTIFY">Commercial paper</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">271,619</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">1,840</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">28 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">273,431</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="JUSTIFY">Taxable auction rate preferred notes</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">39,825</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">39,825</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Money market funds</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">16,269
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">16,269
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 398,963
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 1,840
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 28
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 400,775
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>
</TABLE>

<P ALIGN="JUSTIFY"></P>
<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=640>
<TR><TD WIDTH="42%" VALIGN="TOP" HEIGHT=17>
<P ALIGN="JUSTIFY"><FONT SIZE=2>Included in cash and cash
equivalents</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$244,892</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Included in short-term marketable
securities</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">155,883
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$400,775
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>
</TABLE>

<P ALIGN="JUSTIFY"></P>
<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=640>
<TR><TD WIDTH="37%" VALIGN="BOTTOM">
<P><FONT SIZE=2>December 31, 1999
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Amortized Cost
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Gross Unrealized Gains
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="12%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Gross Unrealized Losses
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Estimated Fair Value
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Taxable municipal bonds</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 69,950</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ -</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ -</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 69,950</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="JUSTIFY">Medium term notes </FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">15,580</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">80</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">15,500</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="JUSTIFY">Commercial paper</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">158,015</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">1,456 </FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">159,471</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="JUSTIFY">Taxable auction rate preferred notes</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">15,000</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="12%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">15,000</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Money market funds</FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">46,137
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">46,137
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 304,682
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 1,456
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 80
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 306,058
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>
</TABLE>

<P ALIGN="JUSTIFY"></P>
<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=640>
<TR><TD WIDTH="42%" VALIGN="TOP">
<P ALIGN="JUSTIFY"><FONT SIZE=2>Included in cash and cash
equivalents</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 144,938</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Included in short-term marketable
securities</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">161,120
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 306,058
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">3. Balance Sheet detail:</P></FONT>

<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=571>
<TR><TD WIDTH="64%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=3>
<FONT SIZE=2><P ALIGN="CENTER">As of December 31,
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">2000
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">1999
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=3>
<FONT SIZE=2><P ALIGN="CENTER">(In thousands)</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP" HEIGHT=10><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=10><P></P></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=10><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=10><P></P></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Accounts receivable:</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Trade receivables</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 118,543</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 43,909</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Allowance for doubtful accounts</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(6,270)
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(2,464)
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$&#9; 112,273
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$&#9; 41,445
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Inventories:</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Raw materials</DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 33,290</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 15,115</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Work-in-process</DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">29,278</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">14,615</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Finished goods</DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">3,982
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">2,340
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$66,550
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$32,070
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Property and Equipment:</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Machinery and equipment</DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$131,755</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 74,488</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Leasehold improvements</DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">25,866</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">16,356</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Furniture and fixtures</DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">3,239</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,765</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Land and buildings</DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">9,434</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Construction-in-progress</DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">13,804
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">7,468
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">184,098</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">100,077</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Less accumulated depreciation and amortization</DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(58,507)
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(40,305)
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 125,591
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 59,772
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Goodwill and other intangible
assets:</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Goodwill</DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$2,684,114</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$1,363</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Other purchased intangibles</DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">362,261
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">3,540
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">3,046,375</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">4,903</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Less accumulated amortization</DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(406,384)
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(1,955)
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$2,639,991
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$2,948
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="JUSTIFY">4. Income Taxes</P>
<P ALIGN="JUSTIFY">The provision for income taxes consists of the
following:</P></FONT>

<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=612>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="53%" VALIGN="TOP" COLSPAN=5>
<FONT SIZE=2><P ALIGN="CENTER">Years Ended December 31,
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">2000
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">1999
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">1998
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>

<TR><TD WIDTH="47%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="53%" VALIGN="TOP" COLSPAN=9>
<FONT SIZE=2><P ALIGN="CENTER">(In thousands)</FONT></TD>
</TR>

<TR><TD WIDTH="47%" VALIGN="TOP"><DIR>
<FONT SIZE=2><P>Current:</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Federal</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 65,919</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 7,144</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 181</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>State</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">7,310</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">46</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">26</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Foreign</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">2,652
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">2,090
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,824
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">75,881
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">9,280
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">2,031
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Deferred:</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Federal</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(948)</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Foreign</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">460
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">460
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(948)
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT"> $ 76,341
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 9,280
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$1,083
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="JUSTIFY">The tax benefits resulting from the exercise of
nonqualified stock options and the disqualifying disposition of shares acquired
under the Company's incentive stock option and employee stock purchase plans
were $69.7 million, $6.9 million and $0.2 million in 2000, 1999 and 1998,
respectively. Such benefits were credited to additional paid-in capital.</P>
<P ALIGN="JUSTIFY">Pre-tax income (loss) from foreign operations was $7.1
million, $3.2 million and $(0.3) million in 2000, 1999 and 1998,
respectively.</P>
<P ALIGN="JUSTIFY">The difference between the provision for income taxes and the
amount computed by applying the Federal statutory income tax rate to income
(loss) before taxes is explained below:</P></FONT>

<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=589>
<TR><TD WIDTH="48%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="53%" VALIGN="TOP" COLSPAN=5>
<FONT SIZE=2><P ALIGN="CENTER">Years Ended December 31,
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="48%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">2000
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">1999
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">1998
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="48%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="53%" VALIGN="TOP" COLSPAN=5>
<FONT SIZE=2><P ALIGN="CENTER">(In thousands)</FONT></TD>
</TR>
<TR><TD WIDTH="48%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="48%" VALIGN="TOP">
<FONT SIZE=2><P>Tax at federal statutory rate</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$(76,590)</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$12,069</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$3,145</FONT></TD>
</TR>
<TR><TD WIDTH="48%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>State tax, net of federal<BR>
tax benefit</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">4,752</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">30</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">17</FONT></TD>
</TR>
<TR><TD WIDTH="48%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Non-deductible stock compensation and related expenses</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">7,419</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="48%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Non-deductible goodwill amortization and in-process
R&amp;D</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">117,924</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">523</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="48%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Non-deductible merger expenses</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,407</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">938</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="48%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Valuation allowance</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">21,021</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(5,203)</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(2,277)</FONT></TD>
</TR>
<TR><TD WIDTH="48%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Other, individually immaterial items</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">408
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">923
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">198
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="48%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Provision for income taxes</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 76,341
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$9,280
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$1,083
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>
<TR><TD WIDTH="48%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
</TABLE>



<FONT SIZE=2><P ALIGN="JUSTIFY">Significant components of the Company's deferred
tax assets are as follows:</P></FONT>
<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=597>
<TR><TD WIDTH="64%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=4>
<FONT SIZE=2><P ALIGN="CENTER">As of December 31,
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">&nbsp;</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">2000
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="9%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">1999
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">&nbsp;</FONT></TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=4>
<FONT SIZE=2><P ALIGN="CENTER">(In thousands)</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Deferred tax assets:</DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Net operating loss carryforward</DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$176,413</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">$ 38,125</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Reserves and other accrued expenses<BR>
not yet deductible for tax</DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">6,974</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">2,564</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Inventory </DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">11,557</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">4,040</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Intangible assets</DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">4,389</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Tax credit carryforward</DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">6,361</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">4,110</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Other</DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">5,978
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">2,663
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Total deferred tax assets</DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">207,283
</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">55,891
</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Valuation allowance</DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(102,710)
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">(50,106)
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Net deferred tax assets</DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">104,573
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">5,785
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP">
<FONT SIZE=2><P>Deferred tax liabilities:</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Depreciation</DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(2,664)</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">(1,253)</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Intangible Assets</DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(97,836)</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Other</DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(533)
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">(532)
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Total deferred tax liabilities</DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(101,033)
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">(1,785)
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="64%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Net deferred tax assets</DIR>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$3,540
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="RIGHT">$ 4,000
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="JUSTIFY">The valuation allowance increased by
approximately $52.6 million, $33.4 million, and $2.4 million in 2000, 1999, and
1998, respectively. Approximately $76 million of the valuation allowance is
related to the benefits of stock option deductions, which will be credited to
paid-in capital when realized.</P>
<P ALIGN="JUSTIFY">As of December&nbsp;31, 2000, the Company had federal and
California net operating loss carryforwards of approximately $483 million and
$130 million, respectively, and federal and California tax credit carryforwards
of approximately $3.1 million and $5.0 million, respectively. The federal and
California net operating loss and the federal credit carryforwards will expire
at various dates beginning in years 2001 through 2020, if not utilized. Certain
of the California tax credits will expire in various years beginning in years
2003 through 2008. The California R&amp;D credit has no expiration date.</P>
<P ALIGN="JUSTIFY">Management has determined, based on the Company's history of
prior operating earnings, its expectations for the future, and the extended
period over which the benefits of certain deferred tax assets will be realized,
that a partial valuation allowance should be provided. The realization of the
Company's net deferred tax assets, which relate primarily to temporary
differences, net operating loss carryforwards and tax credit carryforwards is
dependent on generating sufficient taxable income during the periods in which
the temporary differences are expected to reverse. Although realization is not
assured, management believes it is more likely than not that the net deferred
tax assets will be realized.</P>
<P ALIGN="JUSTIFY">Because of the "change in ownership" provision of the Tax
Reform Act of 1986, utilization of the Company's net operating loss and credit
carryforwards may be subject to an annual limitation in future periods. As a
result of this annual limitation, a portion of these carryforwards may expire
before ultimately becoming available to reduce future income tax liabilities, if
any.</P>
<P ALIGN="JUSTIFY">5. Stockholders' Equity</P>
<I><P ALIGN="JUSTIFY">Common Stock Offerings</P>
</I><P ALIGN="JUSTIFY">In July 1998, the Company issued 435,288 shares of common
stock at a per share price of $15.62. Net proceeds to the Company approximated
$5.5 million.</P>
<P ALIGN="JUSTIFY">In September 1999, the Company issued 6,785,000 shares of
common stock, including the underwriters' exercise of their over-allotment
option for 885,000 shares, priced at $41.00 per share. Net proceeds to the
Company were approximately $266.3 million. </P>
<P ALIGN="JUSTIFY">The Company has been engaged in a pooling-of-interests
transaction and various acquisitions of other companies for which stock was the
primary consideration paid. See Note 7, "Mergers and Acquisitions."</P>

<I><P ALIGN="JUSTIFY">Shareholder Rights Plan </P>
</I><P ALIGN="JUSTIFY">The Company has adopted a Shareholder Rights Plan (Rights
Agreement). Pursuant to the Rights Agreement, rights were distributed at the
rate of one right for each share of Common Stock owned by the Company's
stockholders of record on November 17, 1997. The rights expire on November 5,
2007 unless extended or earlier redeemed or exchanged by the Company. Under the
Rights Agreement, each right entitles the registered holder to purchase one-
hundredth of a Series B Preferred share of the Company at a price of $55. The
rights will become exercisable only if a person or group acquires beneficial
ownership of 15 percent or more of the Company's common stock or commences a
tender offer or exchange offer upon consummation of which such person or group
would beneficially own 15 percent or more or the Company's common stock.</P>
<I><P ALIGN="JUSTIFY">Stock Split</P>
</I><P ALIGN="JUSTIFY">In May 1999, the Company authorized a two-for-one split
of its common stock, effected in the form of a stock dividend, which was paid on
June 2, 1999 to stockholders of record on May 14, 1999. All of the share and per
share data in these financial statements have been retroactively adjusted to
reflect the stock split. </P>
<P ALIGN="JUSTIFY">In December 1999, the Company authorized a two-for-one split
of its common stock, effected in the form of a stock dividend, which was paid on
March 14, 2000 to stockholders of record on February 29, 2000. All of the share
and per share data in these financial statements have been retroactively
adjusted to reflect the stock split. </P>
<I><P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">Share Authorization</P>
</I><P ALIGN="JUSTIFY">In May 1999, the Company's stockholders approved an
increase in the Company's authorized shares of its common stock to 70 million
shares.</P>
<P ALIGN="JUSTIFY">In February 2000, the Company's stockholders approved an
increase in the Company's authorized shares of its common stock to 140 million
shares.</P>

<P ALIGN="JUSTIFY">6. Stock-Based Compensation Plans</P>
<I><P ALIGN="JUSTIFY">Stock Option Plans</P>
</I><P ALIGN="JUSTIFY">The 1992 Stock Option Plan provided for the granting of
incentive stock options and nonqualified options to purchase up to 18,232,500
shares of the Company's common stock to officers, directors and key employees at
exercise prices of not less than fair value on the date of grant as determined
by a committee of the Board of Directors. Options granted were immediately
exercisable; however, unexercised options and shares purchased upon the exercise
of the options are subject to vesting over a one to five year period. Shares not
vested at the date of termination of employment may be repurchased by the
Company at the original exercise price. No further options will be granted under
the 1992 Stock Option Plan.</P>
<P ALIGN="JUSTIFY">The Company's 1995 Stock Option Plan was approved by the
Board of Directors in January 1995 and by the stockholders in February 1995. The
purpose of the 1995 Option Plan is to give the Company's employees and others
who perform substantial services to the Company incentive, through ownership of
the Company's common stock, to continue in service to the Company, and to help
the Company compete effectively with other enterprises for the services of
qualified individuals. The 1995 Stock Option Plan permits the grant of incentive
stock options to employees, including officers and Directors who are employees,
and the award of nonqualified stock options to the Company's employees,
officers, Directors, independent contractors, and consultants. The number of
shares available for grant was initially 2,850,000 shares. Beginning on the
first day of each fiscal year, the number of shares reserved for grant will be
increased by 5 percent of the number of shares of common stock outstanding as of
the end of the preceding fiscal year. Options granted under the 1995 Stock
Option Plan are subject to vesting over a one to five year period and must
generally be exercised by the optionee during the period of employment or
service with the Company or within a specified period following termination of
employment or service. Options currently expire no later than ten years from the
date of grant.</P>
<P ALIGN="JUSTIFY">As a result of the IOC pooling of interest transaction in May
1999, the Company assumed 233,948 options. Of these options, 47,528 options are
subject to performance criteria based on a specified level of increase in
earnings over a three year period. In December 2000, the Company removed the
performance criteria on the vesting of these options and immediately vested a
portion of these options. The Company determined compensation expense for the
stock options based on the intrinsic value of the options as of the date the
Company changed the options to time-based vesting. Accordingly, the Company
recorded a charge of $2.8 million in the fourth quarter of 2000 and will
amortize the additional $6.0 million stock compensation charge over the revised
vesting period of the stock options.</P>
<P ALIGN="JUSTIFY">The Company has reserved 13,060,137 shares of common stock
for future issuance under its Stock Option Plans as of December 31, 2000.</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">Information with respect to stock option activity is
summarized as follows:</P></FONT>

<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=615>
<TR><TD WIDTH="40%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="41%" VALIGN="TOP" COLSPAN=4>
<FONT SIZE=2><P ALIGN="CENTER">Outstanding Options
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>

<TR><TD WIDTH="40%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Available for Grant
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="6%" VALIGN="BOTTOM" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Number of Shares
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Weighted-Average Exercise Price
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<FONT SIZE=2><P>Balance at December 31, 1997</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">2,835,060</FONT></TD>
<TD WIDTH="6%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">9,827,720</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 2.22</FONT></TD>
</TR>

<TR><TD WIDTH="40%" VALIGN="TOP"><DIR>
<FONT SIZE=2><P>Options granted</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(2,641,904)</FONT></TD>
<TD WIDTH="6%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">2,641,904</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">5.87</FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Options canceled</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">627,520</FONT></TD>
<TD WIDTH="6%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(627,520)</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">4.96</FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Options exercised</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="6%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(1,858,400)</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1.02</FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Additional options authorized</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">2,789,360
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="6%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<FONT SIZE=2><P>Balance at December 31, 1998</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">3,610,036</FONT></TD>
<TD WIDTH="6%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">9,983,704</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">3.24</FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Options granted</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(2,967,438)</FONT></TD>
<TD WIDTH="6%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">2,967,438</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">28.08</FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Options canceled</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">245,626</FONT></TD>
<TD WIDTH="6%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(245,626)</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">8.08</FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Options exercised</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="6%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(4,294,988)</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">2.32</FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Additional options authorized</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">2,857,188
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="6%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<FONT SIZE=2><P>Balance at December 31, 1999</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">3,745,412</FONT></TD>
<TD WIDTH="6%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">8,410,528</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$12.30</FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Options granted</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(5,765,412)</FONT></TD>
<TD WIDTH="6%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">5,765,412</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">220.54</FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Options canceled</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">353,069</FONT></TD>
<TD WIDTH="6%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(353,069)</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">51.22</FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Options exercised</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="6%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(2,670,102)</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">6.40</FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP"><DIR>

<FONT SIZE=2><P>Additional options authorized</DIR>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">3,574,299
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="6%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="40%" VALIGN="TOP">
<FONT SIZE=2><P>Balance at December 31, 2000</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,907,368
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="6%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">11,152,769
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$121.38
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="JUSTIFY">During 1999, the Company granted options to
purchase 16,000 shares of common stock to a consultant in exchange for services
at an exercise price of $23.25. In connection with the termination of a former
executive in 1998, the Company extended the exercise period for options to
purchase 16,400 shares of common stock at exercise prices of $3.25 and $6.19.
The Company determined compensation expense for these stock options based on the
estimated fair value of the options as of the end of each accounting period.
Fair value was determined using the Black-Scholes model and the exercise price
of the option on the date of the grant, expected life, current stock price,
estimated volatility and interest rates over the period of the option, and the
option vesting period. As a result, the Company recorded compensation expense
associated with these stock options of $0.7 million and $1.4 million during 2000
and 1999, respectively.</P>
<P ALIGN="JUSTIFY">Under United Kingdom law, the Company is required to pay
national insurance tax on the gain on stock options exercised by employees in
the United Kingdom. During fiscal 2000, the Company recorded expenses associated
with the national insurance tax on the gain on stock options exercised by
employees in the United Kingdom of $0.7 million. Based on the stock price and
the number of options outstanding to United Kingdom employees at December 31,
2000, the Company has a $3.5 million contingent liability that will be charged
to operations in the period that the options are exercised. This estimated
liability will increase or decrease based upon increases or decreases in the
Company's common stock until the options are exercised.</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">The following table summarizes information about options
outstanding at December&nbsp;31, 2000:</P></FONT>


<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=594>
<TR><TD WIDTH="68%" VALIGN="TOP" COLSPAN=4>
<P ALIGN="CENTER"><FONT SIZE=2>Options Outstanding
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="32%" VALIGN="TOP" COLSPAN=2>
<FONT SIZE=2><P ALIGN="CENTER">Options Exercisable
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>

<TR><TD WIDTH="19%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Range of Exercise Prices
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Number Outstanding
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Weighted- Average Remaining Contractual Life
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Weighted - Average Exercise Price
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Number Exercisable
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Weighted - Average Exercise Price
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>

<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">$ 0.09 - $4.00</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,454,269</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">4.5 years</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$2.21</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,058,823</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$1.96</FONT></TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">4.01 - 6.00</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,119,958</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">6.8</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">4.93</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">531,554</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">4.91</FONT></TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">6.01 - 15.00</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">935,030</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">7.4</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">8.88</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">464,768</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">6.57</FONT></TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">15.01 - 25.00</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">337,272</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">8.1</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">22.63</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">34,452</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">22.21</FONT></TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">25.01 - 30.00</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,256,621</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">8.3</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">26.72</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">197,381</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">26.75</FONT></TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">30.01 - 50.00</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">197,301</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">8.6</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">38.06 </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">30,223</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">38.02</FONT></TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">50.01 - 100.00</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">835,788</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">9.0</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">93.19 </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">21,037</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">72.23</FONT></TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">100.01 - 150.00</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">937,900</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">9.2</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">130.55</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">150.01 - 230.00</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,027,854</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">9.4</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">200.76</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">230.01 - 397.31</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">3,050,776
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">9.7</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">283.72</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,800
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">259.25</FONT></TD>
</TR>
<TR><TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">$ 0.09 - $397.31</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">11,152,769
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">8.2</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$121.38</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">2,340,038
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 7.23</FONT></TD>
</TR>
</TABLE>

<br>
<P ALIGN="JUSTIFY"><I>Employee Stock Purchase Plan</I></P>

<P ALIGN="JUSTIFY">To provide employees with an opportunity to purchase
common stock of the Company through payroll deductions, the Company established
the 1995 Employee Stock Purchase Plan (the ESPP) and initially reserved
1,800,000 shares of common stock for issuance to participants. In May 1998, 1999
and 2000, 1,600,000, 1,200,000 and 900,000 additional shares of common stock
were reserved for issuance to participants. Under the ESPP, the Company's
employees, subject to certain restrictions, may purchase shares of common stock
at the lesser of 85 percent of the fair market value at either the beginning of
each two-year offering period or the end of each six-month purchase period
within the two-year offering period. Under the ESPP, the Company sold 1,182,639,
1,009,676, and 597,380 shares in 2000, 1999 and 1998, respectively, and
1,600,077 shares were available for issuance at December 31, 2000. </P>
<P ALIGN="JUSTIFY">As a result of the substantial increase in the market price of the Company's
Common Stock beginning in the fourth quarter of 1998, and the resulting
increased levels of employee participation in the Company's ESPP, the number of
shares issuable pursuant to the Company's ESPP in fiscal 2000 exceeded the
number of shares that were available under the Plan at the beginning of the
October 1998 employee purchase period. As a result, the Company incurred $4.7
million and $8.9 million non-cash charges to operating results in the second and
third quarters of 2000. The non-cash charges to operating results are based on
the difference between the purchase price and the fair value of the common stock
in May 1999 for the first share authorization after the start of the two year
look-back period in October 1998.</P>
<br>

<P ALIGN="JUSTIFY"><I>Stock-Based Compensation</I></P>
<P ALIGN="JUSTIFY">The Company has elected to follow Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25), and
related interpretations in accounting for its employee stock-based awards
because, as discussed below, the alternative fair value accounting provided for
under Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123), requires use of option valuation models
that were not developed for use in valuing stock-based compensation plans. Under
APB 25, the Company generally recognizes compensation expense based on the
difference, if any, between the option exercise price and the fair value of the
stock on the date of grant. Typically, employee stock options are issued with an
exercise price equal to fair value and no compensation expense is required.</P>
<P ALIGN="JUSTIFY">Pro forma information regarding net income and earnings per
share is required by SFAS&nbsp;123 as if the Company has accounted for its
employee stock options granted subsequent to December 31, 1994 under the fair
value method. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model. The Black-Scholes option
valuation model was developed for use in estimating the fair value of traded
options which have no vesting restrictions and are fully transferable. In
addition, option valuation models require the input of highly subjective
assumptions including the expected stock price volatility. Since the Company's
stock-based awards have characteristics significantly different from those of
traded options, and since changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of the fair value of
its stock-based awards. The fair value of the Company's stock-based awards to
employees was estimated assuming no expected dividends and the following
weighted-average assumptions:</P></FONT>

<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=675>
<TR><TD WIDTH="20%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="40%" VALIGN="TOP" COLSPAN=5>
<FONT SIZE=2><P ALIGN="CENTER">Options
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="40%" VALIGN="TOP" COLSPAN=5>
<FONT SIZE=2><P ALIGN="CENTER">ESPP
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>

<TR><TD WIDTH="25%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">2000
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">1999
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">1998
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">2000
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">1999
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">1998
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>

<TR><TD WIDTH="25%" VALIGN="TOP" HEIGHT=12>
<FONT SIZE=2><P ALIGN="JUSTIFY">Expected Life</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP" HEIGHT=12>
<FONT SIZE=2><P ALIGN="CENTER">5 years</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=12><P></P></TD>
<TD WIDTH="11%" VALIGN="TOP" HEIGHT=12>
<FONT SIZE=2><P ALIGN="CENTER">5 years</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=12><P></P></TD>
<TD WIDTH="11%" VALIGN="TOP" HEIGHT=12>
<FONT SIZE=2><P ALIGN="CENTER">4 years</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=12><P></P></TD>
<TD WIDTH="10%" VALIGN="TOP" HEIGHT=12>
<FONT SIZE=2><P ALIGN="CENTER">6 months</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=12><P></P></TD>
<TD WIDTH="11%" VALIGN="TOP" HEIGHT=12>
<FONT SIZE=2><P ALIGN="CENTER">6 months</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=12><P></P></TD>
<TD WIDTH="11%" VALIGN="TOP" HEIGHT=12>
<FONT SIZE=2><P ALIGN="CENTER">6 months</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Expected Volatility</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">0.73</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">0.80</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">0.72</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1.01</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">0.91</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">0.84</FONT></TD>
</TR>
<TR><TD WIDTH="25%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Risk Free Interest Rate</FONT></TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">6.47%</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">4.68%</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">5.15%</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="10%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">5.49%</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">4.70%</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="11%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">5.06%</FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="JUSTIFY">For the purpose of pro forma disclosures, the
estimated fair value of the above stock-based awards is amortized over the
awards' vesting period. The Company's pro forma information follows (in
thousands, except for per share information):</P></FONT>

<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=630>
<TR><TD WIDTH="48%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">2000
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">1999
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">1998
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="48%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Pro forma net income (loss)</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$(508,475)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$(11,925)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 6,789 </FONT></TD>
</TR>
<TR><TD WIDTH="48%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Pro forma net income (loss) per share -
basic</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ (6.25)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ (0.19)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 0.12</FONT></TD>
</TR>
<TR><TD WIDTH="48%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Pro-forma net income (loss) per share -
diluted</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ (6.25)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ (0.19)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 0.11</FONT></TD>
</TR>
<TR><TD WIDTH="48%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="3%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="JUSTIFY">Weighted-average fair value of options granted
during 2000, 1999 and 1998 were $143.07, $18.75 and $3.26, respectively. The
weighted-average fair value of ESPP rights granted in 2000, 1999 and 1998 were
$201.45, $32.39 and $1.89, respectively.</P>

<P ALIGN="JUSTIFY">7. Mergers &amp; Acquisitions</P>
<P ALIGN="JUSTIFY">During fiscal 2000, the Company purchased three business
(Queensgate, Veritech, and PIRI). These acquisitions were accounted for under
the purchase method of accounting. Accordingly, in accordance with the
provisions of Accounting Principle Board Opinion No. 16 (APB No. 16), Business
Combinations, all identifiable assets, including identifiable intangible assets,
were assigned a portion of the cost of the acquired business (purchase price) on
the basis of their respective fair values. This included the portion of the
purchase price properly attributable to incomplete research and development
projects was expensed.</P>
<P ALIGN="JUSTIFY">Intangible assets were identified through: (i) analysis of
the acquisition agreement, (ii) consideration of the Company's intentions for
future use of the acquired assets; and (iii) analysis of data available
concerning the business products, technologies, markets, historical financial
performance, estimates of future performance and the assumptions underlying
those estimates.</P>
<P ALIGN="JUSTIFY">The economic and competitive environment in which the Company
and the acquired businesses operate was also considered in the valuation.</P>
<P ALIGN="JUSTIFY">Specifically, in-process research and development, core
technology and existing technology was identified and valued through extensive
interviews and discussion with the Company and the business acquired management.
The valuation of in-process research and development included an analysis of
data provided by the business acquired concerning the products in development,
their respective stage of development, the time and resources needed to complete
them, their expected income generating ability, target markets and associated
risks. The Income Approach, which included an analysis of the markets, cash
flows, and risks associated with achieving such cash flows, was the primary
technique utilized in valuing the in-process research and development, core
technology and existing technology. Tradename was valued using the Brand Savings
approach and workforce was valued using the estimated cost of recruiting and
training replacement workers. Finally, the design tools and library was valued
using the replacement cost approach. </P>
<br>
<P ALIGN="JUSTIFY"><B><I>Queensgate</I></B></P>

<P ALIGN="JUSTIFY"><I>Overview</I></P>
<P ALIGN="JUSTIFY">On March 8, 2000 Queensgate merged with SDL in a transaction
accounted for as a purchase. Queensgate was a privately held company and is
located in Bracknell, United Kingdom. Queensgate designs, develops, manufactures
and markets optical network monitoring modules for long haul terrestrial fiber
optic transmission systems. The merger agreement provided for initial
consideration of $3 million of cash and 347,962 shares of the Company's common
stock with a fair value of $77.4 million, and contingent payments of up to an
additional $150 million in common stock based on Queensgate's pretax profits for
the 10 months ended December 31, 2000 and the twelve months ended December 31,
2001. In addition, SDL issued options in exchange for outstanding Queensgate
options with the number of shares and the exercise price appropriately adjusted
by the exchange ratio. On June 26, 2000, SDL signed a supplementary agreement
with the prior shareholders of Queensgate extinguishing all rights to future
contingent payments in exchange for 465,102 shares of SDL stock with a fair
value of $130.4 million in order to minimize potential conflicts in management
priorities. This additional payment was recorded as goodwill in the quarter
ended June 30, 2000. </P>
<P ALIGN="JUSTIFY">The total purchase cost and purchase price allocation of the
Queensgate merger is as follows (in thousands): </P>
</FONT>

<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=403>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P><FONT SIZE=2>Value of securities issued</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$207,767</FONT></TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<FONT SIZE=2><P>Cash</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">3,000</FONT></TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<FONT SIZE=2><P>Assumption of Queensgate options</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,502
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">212,269</FONT></TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<FONT SIZE=2><P>Estimated transaction costs</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,125
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="83%" VALIGN="TOP">
<FONT SIZE=2><P>Total purchase cost</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$213,394
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>
</TABLE>

<br>
<TABLE BORDER=0 CELLSPACING=1 WIDTH=499>
<TR><TD WIDTH="46%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">Amount
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">Annual Amortization
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">Useful Lives
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="46%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Purchase Price Allocation:</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="46%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Tangible net liabilities</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$(1,570)</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">n/a</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">n/a</FONT></TD>
</TR>
<TR><TD WIDTH="46%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Tradename</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">2,000 </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$ 400</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">5 years</FONT></TD>
</TR>
<TR><TD WIDTH="46%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Core technology</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">12,000 </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">2,400</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">5 years</FONT></TD>
</TR>
<TR><TD WIDTH="46%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Existing technology</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">6,200 </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">1,240</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">5 years</FONT></TD>
</TR>
<TR><TD WIDTH="46%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>In process technology</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">1,200 </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">n/a</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">n/a</FONT></TD>
</TR>
<TR><TD WIDTH="46%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Workforce</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">1,500 </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">300</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">5 years</FONT></TD>
</TR>
<TR><TD WIDTH="46%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Goodwill</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">200,744 </FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">40,149</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">5 years</FONT></TD>
</TR>
<TR><TD WIDTH="46%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Deferred tax liabilities</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">(8,680)
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">n/a
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">n/a</FONT></TD>
</TR>
<TR><TD WIDTH="46%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Total purchase price:</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$213,394
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$44,489
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="JUSTIFY"><I>Assumptions</I></P>

<P ALIGN="JUSTIFY">The Income Approach used by the Company to value in-
process research and development, core technology and existing technology
included assumptions relating to revenue estimates, operating expenses, income
taxes and discount rates.</P>
<I><P>Revenue</P>
</I><P ALIGN="JUSTIFY">Revenue estimates were developed based on: (i) aggregate
revenue growth rates for the business as a whole, (ii) individual product
revenues, (iii) growth rates for the telecommunications industry, (iv) the
aggregate size of the telecommunication industry, (v) anticipated product
development and introduction schedules, (vi) product sales cycles, and (vii) the
estimated life of a product's underlying technology.</P>
<I><P ALIGN="JUSTIFY">Operating Expenses</P>
</I><P ALIGN="JUSTIFY">Operating expenses used in the valuation analysis of
Queensgate included: cost of goods sold, selling, general and administrative
expenses, and research and development expenses.</P>
<P ALIGN="JUSTIFY">In developing future expense estimates, an evaluation of both
the Company and Queensgate's overall business model, specific product results,
including both historical and expected direct expense levels, as appropriate,
and an assessment of general industry metrics was conducted.</P>
<I><P>Cost of goods sold</P>
</I><P ALIGN="JUSTIFY">Costs of goods sold, expressed as a percentage of
revenue, for the core, existing and in-process technologies ranged from 61
percent for the twelve months ending March 31, 2001 to 53 percent in fiscal 2002
and beyond.</P>
<I><P>Selling, general and administrative expenses</P>
</I><P ALIGN="JUSTIFY">Selling, general and administrative expenses, expressed
as a percentage of revenue, for the core, existing, and in-process technologies
ranged from 17 percent for the twelve months ending March 31, 2001 to 11 percent
in fiscal 2002 and beyond.</P>
<I><P>Research and development expense</P>
</I><P ALIGN="JUSTIFY">Research and development expense consists of the costs
associated with activities undertaken to correct errors or keep products updated
with current information, also referred to as "maintenance" research and
development. Maintenance research and development includes all activities
undertaken after a product is available for general release to customers to keep
the product updated with current customer specifications. These activities
include routine changes and additions. The maintenance research and development
expense was estimated to be 1 percent of revenue for the core, existing, and in-
process technologies throughout the estimation period.</P>
<I><P ALIGN="JUSTIFY">Effective tax rate</P>
</I><P ALIGN="JUSTIFY">The effective tax rate was determined based on federal
and state statutory tax rates and was determined to be 41 percent.</P>
<I><P ALIGN="JUSTIFY">Discount rate</P>
</I><P ALIGN="JUSTIFY">The discount rate for Queensgate's core, existing, and
in-process technologies were 18 percent, 14 percent and 20 percent,
respectively. In the selection of the appropriate discount rates, consideration
was given to (i) the weighted average cost of capital and (ii) the weighted
average return on assets. The discount rate utilized for the in-process
technology was determined to be higher than the Company's weighted average cost
of capital because the technology had not yet reached technological feasibility
as of the date of valuation. In utilizing a discount rate greater than the
Company's weighted average cost of capital, management has reflected the risk
premium associated with achieving the forecasted cash flows associated with
these projects.</P>
<P ALIGN="JUSTIFY">The in-process research and development was comprised of one
project related to the next generation channel monitoring products and amounted
to $1.2 million of the total purchase price and was charged to expense during
the quarter ended March 31, 2000. The estimated cost of completion of the in-
process research and development project was $0.2 million and was expected to be
completed in December 2000. The project was re-scoped in October 2000 to
accelerate the development and cover customer specific requirements and test
engineering. The current estimated time to complete this project is March 2001.
We have incurred post-acquisition research and development expenses of
approximately $0.1 million in developing the acquired in-process technology and
estimate the cost to complete this technology, in combination with our other
continuing research and development expenses, will not be in excess of our
historic expenditures for research and development as a percentage of net sales.
The acquired existing technology is comprised of products in Queensgate
portfolio that are already technologically feasible. The Company expects to
amortize the acquired existing technology of approximately $6.2 million on a
straight-line basis over an estimated remaining useful life of 5 years. </P>
<P ALIGN="JUSTIFY">The core technology represents Queensgate trade secrets and
patents developed through years of experience designing and manufacturing
optical network monitoring modules. This know-how enables the Company to develop
new and improve existing optical network monitoring modules, processes, and
manufacturing equipment. The Company expects to amortize the core technology of
approximately $12.0 million on a straight-line basis over an average estimated
remaining useful life of 5 years. </P>
<P ALIGN="JUSTIFY">The trade names include the Queensgate trademark and trade
name as well as all branded Queensgate products. The Company expects to amortize
the trade names of approximately $2.0 million on a straight-line basis over an
estimated remaining useful life of 5 years. </P>
<P ALIGN="JUSTIFY">The acquired assembled workforce is comprised of 100 skilled
employees across Queensgate's Executives, Direct Production, Indirect
Production, Overhead, Engineers, and Central. The Company expects to amortize
the assembled workforce of approximately $1.5 million on a straight-line basis
over an estimated remaining useful life of 5 years. </P>
<P ALIGN="JUSTIFY">Goodwill, which represents the excess of the purchase price
of an investment in an acquired business over the fair value of the underlying
net identifiable assets, will be amortized on a straight-line basis over an
estimated useful life of 5 years. </P>

<I><STRONG><P ALIGN="JUSTIFY">Veritech</P></STRONG>
<P ALIGN="JUSTIFY">Overview</P>
</I><P ALIGN="JUSTIFY">On April 3, 2000, Veritech Microwave, Inc. was acquired by the
Company in a transaction accounted for as a purchase. The Company issued
3,000,000 shares of the Company's common stock with a fair value of
approximately $621 million in the purchase. Veritech was a privately held
company and is located in South Plainfield, New Jersey. Veritech designs,
develops, manufactures and markets optoelectronic modules for long haul undersea
and terrestrial fiber optic transmission systems. </P>
<P ALIGN="JUSTIFY">The total purchase cost and purchase price allocation of the
Veritech merger is as follows (in thousands): </P>

<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=415>
<TR><TD WIDTH="81%" VALIGN="TOP">
<P><FONT SIZE=2>Value of securities issued</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$620,529</FONT></TD>
</TR>
<TR><TD WIDTH="81%" VALIGN="TOP">
<FONT SIZE=2><P>Transaction costs</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">8,800
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="81%" VALIGN="TOP">
<FONT SIZE=2><P>Total purchase cost</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$629,329
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>
</TABLE>

<br>
<TABLE BORDER=0 CELLSPACING=1 WIDTH=558>
<TR><TD WIDTH="41%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">Amount
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="21%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">Annual Amortization
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">Useful Lives
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Purchase Price Allocation:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Tangible net assets</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$ 23,802</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">n/a</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">n/a</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Core \ existing technology</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">67,800 </FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$ 13,560</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">5 years</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>In process technology</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">25,100 </FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">n/a</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">n/a</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Workforce</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">2,500 </FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">500</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">5 years</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Design tools and device library</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">521 </FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">104</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">5 years</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Goodwill</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">537,934</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">107,586</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">5 years</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Deferred tax liabilities</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">(28,328)
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">n/a
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">n/a</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Total purchase price:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$629,329
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$121,750
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
</TABLE>



<FONT SIZE=2><I><P ALIGN="JUSTIFY">Assumptions</P>

</I><P ALIGN="JUSTIFY">The Income Approach used by the Company to value
in-process research and development and core\existing technology included
assumptions relating to revenue estimates, operating expenses, income taxes and
discount rates.</P>
<I><P>Revenue</P>
</I><P ALIGN="JUSTIFY">Revenue estimates were developed based on: (i) aggregate
revenue growth rates for the business as a whole, (ii) individual product
revenues, (iii) growth rates for the telecommunications industry, (iv) the
aggregate size of the telecommunication industry, (v) anticipated product
development and introduction schedules, (vi) product sales cycles, and (vii) the
estimated life of a product's underlying technology.</P>
<I><P ALIGN="JUSTIFY">Operating Expenses</P>
</I><P ALIGN="JUSTIFY">Operating expenses used in the valuation analysis of
Veritech included: cost of goods sold, selling, general and administrative
expenses, and research and development expenses.</P>
<P ALIGN="JUSTIFY">In developing future expense estimates, an evaluation of both
the Company and Veritech's overall business model, specific product results,
including both historical and expected direct expense levels, as appropriate,
and an assessment of general industry metrics was conducted.</P>
<I><P>Cost of goods sold</P>
</I><P ALIGN="JUSTIFY">Costs of goods sold, expressed as a percentage of
revenue, for the core/existing and in-process technologies was 28 percent
throughout the estimation period.</P>
<I><P>Selling, general and administrative expenses</P>
</I><P ALIGN="JUSTIFY">Selling, general and administrative expenses, expressed
as a percentage of revenue, for the core/existing, and in-process technologies
was 6.6 percent throughout the estimation period.</P>
<I><P>Research and development expense</P>
</I><P ALIGN="JUSTIFY">Research and development expense consists of the costs
associated with activities undertaken to correct errors or keep products updated
with current information, also referred to as "maintenance" research and
development. Maintenance research and development includes all activities
undertaken after a product is available for general release to customers to keep
the product updated with current customer specifications. These activities
include routine changes and additions. The maintenance research and development
expense was estimated to be 1 percent of revenue for the core/ existing and in-
process technologies throughout the estimation period.</P>
<I><P ALIGN="JUSTIFY">Effective tax rate</P>
</I><P ALIGN="JUSTIFY">The effective tax rate was determined based on federal
and state statutory tax rates and was determined to be 41 percent.</P>
<I><P ALIGN="JUSTIFY">Discount rate</P>
</I><P ALIGN="JUSTIFY">The discount rate for Veritech's core/existing and in-
process technologies were 14 percent and 20 percent, respectively. In the
selection of the appropriate discount rates, consideration was given to (i) the
weighted average cost of capital and (ii) the weighted average return on assets.
The discount rate utilized for the in-process technology was determined to be
higher than the Company's weighted average cost of capital because the
technology had not yet reached technological feasibility as of the date of
valuation. In utilizing a discount rate greater than the Company's weighted
average cost of capital, management has reflected the risk premium associated
with achieving the forecasted cash flows associated with these projects.</P>
<P ALIGN="JUSTIFY">The in-process research and development was comprised of one project related
to the next generation data receiver products and amounted to $25.1 million of
the total purchase price and was charged to expense during the quarter ended
June 30, 2000. The estimated cost of completion of the in-process research and
development project was $37,000 and was expected to be completed in September
2000. However, the project has not been completed as of December 31, 2000 and is
currently estimated to be completed in May 2001. We have incurred post-
acquisition research and development expenses of approximately $0.1 million in
developing the acquired in-process technology and estimate the cost to complete
this technology, in combination with our other continuing research and
development expenses, will not be in excess of our historic expenditures for
research and development as a percentage of net sales.</P>
<P>&nbsp;</P>
<P ALIGN="JUSTIFY">The acquired core/existing technology is comprised of products in Veritech's
portfolio that are technologically feasible. These products represent Veritech's
trade secrets and patents developed through years of experience designing and
manufacturing high speed optoelectronic modules. This know-how enables the
Company to develop new and improve existing high speed optoelectronic modules,
processes, and manufacturing equipment, thereby providing Veritech with a
distinct advantage over its competitors and providing the Company with a
reputation for technological competence in the industry. The Company expects to
amortize the acquired existing / core technology of approximately $67.8 million
on a straight-line basis over an estimated remaining useful life of 5 years.</P>
<P ALIGN="JUSTIFY">The acquired assembled workforce is comprised of 104 skilled employees across
Veritech's General and Administration, Research and Development, Sales and
Marketing, and Manufacturing groups. The Company expects to amortize the
assembled workforce of approximately $2.5 million on a straight-line basis over
an estimated remaining useful life of 5 years.</P>
<P ALIGN="JUSTIFY">The acquired design tools and device library is comprised of the software
code for customization of various products. The Company expects to amortize the
acquired design tools and device library of approximately $0.5 million on a
straight-line basis over an estimated remaining useful life of 5 years.</P>
<P ALIGN="JUSTIFY">Goodwill, which represents the excess of the purchase price of Veritech over
the fair value of the underlying net identifiable assets, will be amortized on a
straight-line basis over an estimated useful life of 5 years.</P>

<I><STRONG><P>PIRI</P></STRONG>
<P>Overview</P>
</I><P ALIGN="JUSTIFY">On June 2 2000, the Company acquired Photonic Integration
Research, Inc. (PIRI) for 8,461,663 shares of the Company's common stock with a
fair value of approximately $2.1 billion and a $31.7 million cash payment. PIRI,
a privately held company located in Columbus, Ohio, is a manufacturer of arrayed
waveguide gratings (AWGs) that enable the routing of individual wavelength
channels in fiber optic systems. These products are used in optical multiplexing
(mux) and demultiplexing (demux) applications for dense wavelength division
multiplexed (DWDM) fiber optic systems. The acquisition was accounted for under
the purchase method of accounting. </P>
<P ALIGN="JUSTIFY">The total purchase cost and purchase price allocation of the
PIRI merger is as follows (in thousands): </P>

<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=415>
<TR><TD WIDTH="81%" VALIGN="TOP">
<P><FONT SIZE=2>Value of securities issued</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$2,083,430</FONT></TD>
</TR>
<TR><TD WIDTH="81%" VALIGN="TOP">
<FONT SIZE=2><P>Cash</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">31,732
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="81%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">2,115,162</FONT></TD>
</TR>
<TR><TD WIDTH="81%" VALIGN="TOP">
<FONT SIZE=2><P>Estimated transaction costs</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">12,443
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="81%" VALIGN="TOP">
<FONT SIZE=2><P>Total purchase cost</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$2,127,605
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>
</TABLE>


<TABLE BORDER=0 CELLSPACING=1 WIDTH=558>
<TR><TD WIDTH="41%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="22%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">Amount
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="19%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">Annual Amortization
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">Useful Lives
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Purchase Price Allocation:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Tangible net assets</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$ 39,816</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">n/a</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">n/a</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Existing technology</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">226,400 </FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$ 45,280</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">5 years</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>In process technology</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">1,100 </FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">n/a</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">n/a</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Workforce</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">3,900 </FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">780</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">5 years</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Tradename</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">6,640 </FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">1,328</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">5 years</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Goodwill</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">1,944,525</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">388,905</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">5 years</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Deferred tax liabilities</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">(94,776)
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">n/a
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">n/a</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Total estimated purchase price:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="22%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$2,127,605
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$436,293
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
</TABLE>



<FONT SIZE=2><I><P ALIGN="JUSTIFY">Assumptions</P>

</I><P ALIGN="JUSTIFY">The Income Approach used by the Company to value in-
process research and development and existing technology included assumptions
relating to revenue estimates, operating expenses, income taxes and discount
rates.</P>
<I><P ALIGN="JUSTIFY">Revenue</P>
</I><P ALIGN="JUSTIFY">Revenue estimates were developed based on: (i) aggregate
revenue growth rates for the business as a whole, (ii) individual product
revenues, (iii) growth rates for the telecommunications industry, (iv) the
aggregate size of the telecommunication industry, (v) anticipated product
development and introduction schedules, (vi) product sales cycles, and (vii) the
estimated life of a product's underlying technology.</P>
<I><P ALIGN="JUSTIFY">Operating Expenses</P>
</I><P ALIGN="JUSTIFY">Operating expenses used in the valuation analysis of
PIRI: included: cost of goods sold, selling, general and administrative
expenses, and research and development expenses.</P>
<P ALIGN="JUSTIFY">In developing future expense estimates, an evaluation of both
the Company and PIRI's overall business model, specific product results,
including both historical and expected direct expense levels, as appropriate,
and an assessment of general industry metrics was conducted.</P>
<I><P>Cost of goods sold</P>
</I><P ALIGN="JUSTIFY">Costs of goods sold, expressed as a percentage of
revenue, for the existing and in-process technologies was 40 percent throughout
the estimation period.</P>
<I><P>Selling, general and administrative expenses</P>
</I><P ALIGN="JUSTIFY">Selling, general and administrative expenses, expressed
as a percentage of revenue, for the existing and in-process technologies 12
percent throughout the estimation period.

<I><P>Research and development expense</P>
</I><P ALIGN="JUSTIFY">Research and development expense consists of the costs
associated with activities undertaken to correct errors or keep products updated
with current information, also referred to as "maintenance" research and
development. Maintenance research and development includes all activities
undertaken after a product is available for general release to customers to keep
the product updated with current customer specifications. These activities
include routine changes and additions. The maintenance research and development
expense was estimated to be 1 percent of revenue for the existing and in-process
technologies throughout the estimation period.</P>
<I><P ALIGN="JUSTIFY">Effective tax rate</P>
</I><P ALIGN="JUSTIFY">The effective tax rate was determined based on federal
and state statutory tax rates and was determined to be 41 percent.</P>
<I><P ALIGN="JUSTIFY">Discount rate</P>
</I><P ALIGN="JUSTIFY">The discount rate for PIRI existing and in-process
technologies were 12 percent and 18 percent, respectively. In the selection of
the appropriate discount rates, consideration was given to (i) the weighted
average cost of capital and (ii) the weighted average return on assets. The
discount rate utilized for the in-process technology was determined to be higher
than the Company's weighted average cost of capital because the technology had
not yet reached technological feasibility as of the date of valuation. In
utilizing a discount rate greater than the Company's weighted average cost of
capital, management has reflected the risk premium associated with achieving the
forecasted cash flows associated with these projects.</P>
<P ALIGN="JUSTIFY">The in-process research and development was comprised of two projects related
to future AWG products and amounted to $1.1 million of the total purchase price
and was charged to expense during the quarter ended June 30, 2000. The estimated
cost of completion of the in-process research and development projects was $0.1
million and they were expected to be completed by December 2000.</FONT><FONT
SIZE=2 COLOR="#000080"> </FONT><FONT SIZE=2>However, the projects have not been
completed as of December 31, 2000 and are currently estimated to be completed in
January 2001 and February 2001, respectively. We have incurred post-acquisition
research and development expenses of approximately $0.5 million in developing
the acquired in-process technology and estimate the cost to complete this
technology, in combination with our other continuing research and development
expenses, will not be in excess of our historic expenditures for research and
development as a percentage of net sales.</P>
<P ALIGN="JUSTIFY">The acquired existing technology is comprised of products in PIRI's portfolio
that are technologically feasible. These products represent PIRI's trade secrets
and patents developed through years of experience designing and manufacturing
arrayed waveguide gratings (AWGs). This know-how enables PIRI to develop new and
improved AWGs, processes, and manufacturing equipment, thereby providing PIRI
with a distinct advantage over its competitors and providing the Company with a
reputation for technological superiority in the industry. The Company expects to
amortize the acquired existing technology of approximately $226.4 million on a
straight-line basis over an estimated remaining useful life of 5 years.</P>
<P ALIGN="JUSTIFY">The acquired assembled workforce is comprised of 156 skilled employees across
PIRI's, Senior Management, Sales, General and Administration, Research and
Development, and Manufacturing and Engineering groups. The Company expects to
amortize the assembled workforce of approximately $3.9 million on a straight-
line basis over an estimated remaining useful life of 5 years.</P>
<P ALIGN="JUSTIFY">The trade names include the PIRI trademark and trade name as
well as all branded PIRI products. The Company expects to amortize the trade
names of approximately $6.6 million on a straight-line basis over an estimated
remaining useful life of 5 years. </P>
<P ALIGN="JUSTIFY">Goodwill, which represents the excess of the purchase price
of PIRI over the fair value of the underlying net identifiable assets, will be
amortized on a straight-line basis over an estimated useful life of 5 years.</P>
<P ALIGN="JUSTIFY">The following unaudited proforma information presents the
results of operations of the Company as if the acquisitions of Queensgate,
Veritech and PIRI had taken place on January 1, 1999. The net loss includes
recurring charges relating to the amortization of acquired intangibles and
goodwill and excludes the write-off of purchased in process research and
development of $27.4 million:</P></FONT>


<TABLE BORDER=0 CELLSPACING=1 WIDTH=450>
<TR><TD WIDTH="61%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P>(In thousands except per share amounts)
</FONT></TD>
<TD WIDTH="39%" VALIGN="BOTTOM" COLSPAN=3 HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">For the year ended December 31,
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">2000
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">1999
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP" HEIGHT=17><DIR>

<FONT SIZE=2><P>Revenues</DIR>
</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$551,773 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$274,723 </FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP" HEIGHT=17><DIR>

<FONT SIZE=2><P>Net loss</DIR>
</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">($471,578)</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">($532,604)</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP" HEIGHT=17><DIR>

<FONT SIZE=2><P>Loss per share - basic and diluted </DIR>
</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">($5.48)</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">($6.95)</FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="JUSTIFY">These pro-forma results of operations have been
prepared for comparative purposes only and do not purport to be indicative of
the results of operations which actually would have resulted had the
acquisitions occurred on January 1, 1999, or which may result in the future.</P>

<P ALIGN="JUSTIFY">&nbsp;</P>
<I><P><B>IOC International plc.&#9;</B></P>
</I><P ALIGN="JUSTIFY">On May 18, 1999, the Company merged with IOC, a United
Kingdom-based manufacturer of lithium niobate components for long haul fiber
optic transmission systems in a pooling of interests transaction. The Company
exchanged 2,260,196 shares of SDL common stock and reserved 233,948 shares for
IOC options assumed by the Company. Merger related expenses of $2.7 million were
recorded in the second quarter of fiscal 1999. The following table shows the
historical results of the Company and IOC for the periods prior to and including
the consummation of the merger of the two entities (in thousands):</P></FONT>


<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=420>
<TR><TD WIDTH="61%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="39%" VALIGN="TOP" COLSPAN=3>
<FONT SIZE=2><P ALIGN="CENTER">Years ended December 31,
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">1999
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="CENTER">1998
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">
<FONT SIZE=2><P>Total revenues:</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">
<FONT SIZE=2><P>Prior to April 1, 1999:</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">
<FONT SIZE=2><P>SDL</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$35,730</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$106,138</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">
<FONT SIZE=2><P>IOC</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,936</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">6,654</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">
<FONT SIZE=2><P>Combined results after March 31, 1999</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">149,355
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$187,021</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$112,792</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP" HEIGHT=7><P></P></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=7><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=7><P></P></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=7><P></P></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">
<FONT SIZE=2><P>Net income (loss):</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">
<FONT SIZE=2><P>Prior to April 1, 1999:</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="19%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">
<FONT SIZE=2><P>SDL</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$3,010</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$12,823</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>IOC</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(387)</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(4,920)</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">
<FONT SIZE=2><P>Combined results after March 31, 1999</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">22,590
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="61%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$25,213</FONT></TD>
<TD WIDTH="19%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$7,903</FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><I><P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY"><B>Polaroid Corporation's fiber laser business</B></P>
</I><P ALIGN="JUSTIFY">In February 1999, the Company acquired the fiber laser
business of Polaroid Corporation for $5.3 million in cash, which included
related transaction costs of $0.1 million. The business acquired included all
the physical assets, intellectual property, including the assignment of 38
patents and the licensing of 22 patents in the fiber laser and fiber amplifier
area, and the ongoing operation of the fiber manufacturing facilities and fiber
laser subsystem. </P>
<P ALIGN="JUSTIFY">The acquisition was accounted for under the purchase method
of accounting. The Company recorded $1.5 million as in-process research and
development for development projects that had not yet reached technological
feasibility. Intangible assets are being amortized straight-line over a seven
year life. In-process research and development was identified and valued through
analysis of data provided by Polaroid concerning developmental products, their
stage of development, the time and resources needed to complete them, their
expected income generating ability, target markets and associated risks. The
Income Approach, which includes an analysis of the markets, cash flows, and
risks associated with achieving such cash flows, was the primary technique
utilized in valuing purchased research and development project. The Company
considered, among other factors, the importance of each project to the overall
development plan, and the projected incremental cash flows from the projects
when completed and any associated risks. The projected incremental cash flows
were discounted back to their present value using a discount rate of 25 percent.
This discount rate was determined after consideration of the Company's weighted
average cost of capital and the weighted average return on assets. Associated
risks include the inherent difficulties and uncertainties in completing each
project and thereby achieving technological feasibility, anticipated levels of
market acceptance and penetration, market growth rates and risks related to the
impact of potential changes in future target markets. </P>
<P ALIGN="JUSTIFY">In addition, the Company recorded $0.7 million to accrue for
certain pre-existing obligations to integrate the fiber laser business. The
results of the fiber laser business are not material to the Company's historical
consolidated results of operations. </P>

<P ALIGN="JUSTIFY">The purchase price allocation for the fiber laser business
acquisition was recorded as follows (in thousands):</P>
</FONT><P ALIGN="JUSTIFY">&nbsp;</P>

<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=450>
<TR><TD WIDTH="77%" VALIGN="TOP"><DIR>
<DIR>

<P ALIGN="JUSTIFY"><FONT SIZE=2>Inventory</DIR>
</DIR>
</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 979</FONT></TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP"><DIR>
<DIR>

<FONT SIZE=2><P ALIGN="JUSTIFY">Property and equipment</DIR>
</DIR>
</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">229</FONT></TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP"><DIR>
<DIR>

<FONT SIZE=2><P ALIGN="JUSTIFY">Intangibles</DIR>
</DIR>
</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">2,596</FONT></TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP"><DIR>
<DIR>

<FONT SIZE=2><P ALIGN="JUSTIFY">In-process research and development</DIR>
</DIR>
</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">1,495
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP"><DIR>
<DIR>

<FONT SIZE=2><P ALIGN="JUSTIFY">Net assets acquired</DIR>
</DIR>
</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 5,299</FONT></TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="23%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP"><DIR>
<DIR>

<FONT SIZE=2><P ALIGN="JUSTIFY">Liabilities assumed</DIR>
</DIR>
</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 94</FONT></TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP"><DIR>
<DIR>

<FONT SIZE=2><P ALIGN="JUSTIFY">Cash paid, including transaction costs</DIR>
</DIR>
</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">5,205
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="77%" VALIGN="TOP"><DIR>
<DIR>

<FONT SIZE=2><P ALIGN="JUSTIFY">Total purchase price</DIR>
</DIR>
</FONT></TD>
<TD WIDTH="23%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 5,299</FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="JUSTIFY">8. Commitments </P>
<P ALIGN="JUSTIFY">The Company also leases most of its facilities and certain
equipment under operating leases. Most of the operating facilities leases
contain 5-year renewal options. The future minimum lease payments as of December
31, 2000, under the related leases are as follows (in thousands):</P></FONT>

<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=325>
<TR><TD WIDTH="82%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Fiscal Year
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="18%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">Operating
Leases
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>

<TR><TD WIDTH="82%" VALIGN="TOP"><DIR>
<DIR>
<DIR>

<FONT SIZE=2><P ALIGN="JUSTIFY">2001</DIR>
</DIR>
</DIR>
</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$6,343</FONT></TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP"><DIR>
<DIR>
<DIR>

<FONT SIZE=2><P ALIGN="JUSTIFY">2002</DIR>
</DIR>
</DIR>
</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">4,621</FONT></TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP"><DIR>
<DIR>
<DIR>

<FONT SIZE=2><P ALIGN="JUSTIFY">2003</DIR>
</DIR>
</DIR>
</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">4,286</FONT></TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP"><DIR>
<DIR>
<DIR>

<FONT SIZE=2><P ALIGN="JUSTIFY">2004</DIR>
</DIR>
</DIR>
</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">4,126</FONT></TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP"><DIR>
<DIR>
<DIR>

<FONT SIZE=2><P ALIGN="JUSTIFY">2005</DIR>
</DIR>
</DIR>
</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">6,577
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="82%" VALIGN="TOP"><DIR>
<DIR>
<DIR>

<FONT SIZE=2><P ALIGN="JUSTIFY">Minimum payments</DIR>
</DIR>
</DIR>
</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$25,953
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2><P ALIGN="JUSTIFY">Rent expense was approximately $3.9 million,
$2.6 million and $2.5 million, for 2000, 1999 and 1998, respectively.</P>


<P ALIGN="JUSTIFY">9. Contingencies</P>
<P ALIGN="JUSTIFY">In 1985, Rockwell International Corporation (Rockwell) asserted, and in 1995
filed suit in the Northern California Federal District Court against the Company
alleging, that a Company fabrication process infringed certain patent rights set
forth in a patent owned by Rockwell. Rockwell sought to permanently enjoin the
Company from infringing Rockwell's alleged patent rights and sought unspecified
actual and treble damages for willful infringement plus costs. The Company
answered Rockwell's complaint asserting, among other defenses, that Rockwell's
patent is invalid. Rockwell's suit was stayed in 1995 pending resolution of
another suit, involving the same patent, brought by Rockwell against the Federal
government, and in which SDL had intervened. The suit between the Federal
government and Rockwell was resolved in January 1999, by way of a settlement
payment of $16.9 million from the Federal government to Rockwell. The Company
did not participate in the settlement. As a result of that settlement, the suit
was dismissed and the stay of Rockwell's suit against the Company was lifted and
the California suit was reactivated. </P>

<P ALIGN="JUSTIFY">Thereafter, Rockwell filed motions for partial summary judgment alleging that
the Company has infringed certain claims of the Rockwell patent and that certain
invalidity evidence presented by the Company is not applicable, which motions
the Company vigorously opposed in court. A decision on the motions was rendered
in the beginning of February 2000. The District Court ruled that the Company
infringed the specified claims of Rockwell's patent. However, the Company
continues to vigorously maintain its defense of invalidity of Rockwell's patent.
Additional motions were considered by the Court in June 2000. The Court granted
another motion brought by Rockwell, further limiting the grounds on which the
Company can argue that Rockwell's patent is invalid. The Court also denied a
motion brought by the Company for a ruling that Rockwell's damages were limited
by the doctrine of laches because there were factual issues raised by the issue
of laches that would require trial. The Court also in November 2000 granted
Rockwell's motion for summary adjudication on the Company's affirmative defense
that Rockwell cannot recover damages on its patent because of equitable
estoppel. Rockwell has filed a further motion for summary judgment on the
Company's inequitable conduct defense. The Company has vigorously opposed this
motion because the Company believes there are factual issues that would require
trial. That motion is scheduled for hearing on March 23, 2001.</P>

<P ALIGN="JUSTIFY">If Rockwell prevailed in the litigation, Rockwell could be awarded
substantial monetary damages. The award of monetary damages against the Company,
including past damages, could have a material adverse impact on the Company's
financial position, results of its operations and cash flows. During expert
discovery, Rockwell has contended that the Company's infringement of the
Rockwell patent entitles Rockwell to compensatory damages based on an equity
stake in the Company. The Company believes that Rockwell's equity-based
valuation is excessive and is not supported in law. The Company is vigorously
opposing Rockwell's attempt to seek such damages. The Company has filed a motion
seeking to preclude Rockwell from asserting its equity-based theory of damages
at trial. That motion is scheduled for hearing on March 23, 2001. Rockwell has
also claimed in expert discovery that the Company's infringement of its patent
was willful. If Rockwell establishes willfulness by clear and convincing
evidence, it would be entitled to enhanced damages up to a trebling of
compensatory damages. The Company is vigorously opposing any entitlement by
Rockwell to such an enhancement. Litigation and trial of Rockwell's claim
against the Company is expected to involve significant expense to the Company
and could divert the attention of the Company's technical and management
personnel.</P>
<P ALIGN="JUSTIFY">Rockwell's patent expired in January 2000, so that it is no longer possible
for Rockwell to prevent the Company from using the fabrication process allegedly
covered by Rockwell's patent. A trial date has been set in April 2001. Discovery
in the litigation on several matters is currently ongoing. Despite the District
Court's decisions on Rockwell's motions, the Company believes that Rockwell is
not entitled to any damages because the patent is invalid and unenforceable, and
because Rockwell is guilty of laches and inequitable conduct. While the Company
believes that it has meritorious defenses to Rockwell's lawsuit, there can be no
assurance that Rockwell will not ultimately prevail in this dispute. The
resolution of this litigation is fact intensive so that the outcome cannot be
determined and remains uncertain and the ultimate outcome could have a material
adverse impact on the Company's financial position, results of operations and
cash flows.</P>

<P ALIGN="JUSTIFY">In addition, the Company is involved in other legal matters
arising in the ordinary course of business, none of which are anticipated to
have a material adverse impact on the Company's financial position, results of
operations, or cash flows. </P>


<P ALIGN="JUSTIFY">10. Segments of an Enterprise and Related Information</P>

<P ALIGN="JUSTIFY">SDL has two reportable segments: communications and industrial laser. The
communications business unit develops, designs, manufactures and distributes
lasers, modulators, drivers, receiver circuits, network monitors, amplifiers,
multiplexers, demultiplexers, modules and subsystems for applications in the
telecom, datacom, cable television, and dense wavelength division multiplexing
markets. The recent acquisitions, PIRI, Veritech, and Queensgate, are included
in the communication segment. The industrial laser business unit develops,
designs, manufacturers and distributes lasers and subsystems for applications in
the surface heat treating, product marking, digital imaging, digital proofing,
and thermal printing solutions markets.</P>
<P ALIGN="JUSTIFY">The operating segments reported below are the segments of the Company for
which separate financial information is available and for which operating
income/loss amounts are evaluated regularly by executive management in deciding
how to allocate resources and in assessing performance. The accounting policies
of the operating segments are the same as those described in the summary of
accounting policies. </P>
<P ALIGN="JUSTIFY">The Company's reportable segments are business units that offer different
products. The reportable segments are each managed separately because they
manufacture and distribute distinct products with different applications. The
Company does not allocate assets to its individual operating segments.</P>
<P ALIGN="JUSTIFY">Information about reported segment income or loss is as follows (in
thousands):</P></FONT>

<P ALIGN="CENTER"><CENTER><TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=522>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=29>
<P ALIGN="JUSTIFY"><FONT SIZE=2>&nbsp;Year ended December 31, 2000:
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="22%" VALIGN="BOTTOM" HEIGHT=29>
<FONT SIZE=2><P ALIGN="CENTER">Communication Products
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=29>
<FONT SIZE=2><P ALIGN="CENTER">Industrial Laser
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=29>
<FONT SIZE=2><P ALIGN="CENTER">Total
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Revenue from external customers</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$448,793</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$56,042</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$504,835</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Segment Operating Income </FONT></TD>
<TD WIDTH="22%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$181,157</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$5,875</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$187,032</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<br>
<P ALIGN="CENTER"></P>
<P ALIGN="CENTER"><CENTER><TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=522>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=27>
<P ALIGN="JUSTIFY"><FONT SIZE=2>&nbsp;Year ended December 31, 1999:
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="22%" VALIGN="BOTTOM" HEIGHT=27>
<FONT SIZE=2><P ALIGN="CENTER">Communication Products
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=27>
<FONT SIZE=2><P ALIGN="CENTER">Industrial Laser
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=27>
<FONT SIZE=2><P ALIGN="CENTER">Total
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Revenue from external customers</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$139,826</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$47,195</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$187,021</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Segment Operating Income (loss)</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 38,442</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$(3,697)</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 34,745</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<br>
<P ALIGN="CENTER"></P>
<P ALIGN="CENTER"><CENTER><TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=522>
<TR><TD WIDTH="47%" VALIGN="BOTTOM" HEIGHT=31>
<P ALIGN="JUSTIFY"><FONT SIZE=2>&nbsp;Year ended December 31, 1998:
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="22%" VALIGN="BOTTOM" HEIGHT=31>
<FONT SIZE=2><P ALIGN="CENTER">Communication Products
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="17%" VALIGN="BOTTOM" HEIGHT=31>
<FONT SIZE=2><P ALIGN="CENTER">Industrial Laser
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=31>
<FONT SIZE=2><P ALIGN="CENTER">Total
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Revenue from external customers</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$69,399</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$43,393</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$112,792</FONT></TD>
</TR>
<TR><TD WIDTH="47%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Segment Operating Income </FONT></TD>
<TD WIDTH="22%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$3,571</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$4,908</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 8,479</FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<FONT SIZE=2><P ALIGN="JUSTIFY">A reconciliation of the totals reported for the
operating segments to the applicable line items in the consolidated financial
statements is as follows (in thousands):</P></FONT>

<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=571>
<TR><TD WIDTH="55%" VALIGN="BOTTOM">
<P ALIGN="JUSTIFY"><FONT SIZE=2>&nbsp;</P>
<P ALIGN="JUSTIFY">Operating Income (Loss):</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">2000
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">1999
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<FONT SIZE=2><P ALIGN="CENTER">1998
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Total operating income from operating
segments:</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$187,032</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$34,745</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$8,479</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Merger costs:</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(4,019)</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(2,677)</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">In Process R&amp;D and related
costs:</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(27,400)</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(2,195)</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Stock compensation charges and payroll taxes on
stock options:</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(20,559)</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Amortization of intangibles:</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(376,005)
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(809)
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">(777)
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="JUSTIFY">Total consolidated operating income
(loss):</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">$ (240,951)
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">$29,064
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">$7,702
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>
</TABLE>


<I><FONT SIZE=2><P ALIGN="JUSTIFY">Geographic Information</P>
</I><P ALIGN="JUSTIFY">Information regarding geographic areas for the years
ended December 31, 2000, 1999 and 1998 is as follows (in thousands):</P></FONT>

<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=505>
<TR><TD WIDTH="55%" VALIGN="BOTTOM" HEIGHT=18>
<P ALIGN="JUSTIFY"><FONT SIZE=2>Year ended December 31, 2000
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="21%" VALIGN="BOTTOM" HEIGHT=18>
<FONT SIZE=2>
<P ALIGN="CENTER">Revenue (a)
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=18>
<FONT SIZE=2><P ALIGN="CENTER">Long-Lived
Assets (b)
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>

<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">United States</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$177,910</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$2,549,029</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">United Kingdom</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">105,177 </FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">205,766</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Canada</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">48,856</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">15,365</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">France</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">82,130</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Japan</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">22,812</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Germany</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">21,523</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Hong Kong</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">15,419</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Other foreign countries</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">31,008
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Total</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$504,835</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$2,770,160</FONT></TD>
</TR>


<TR><TD WIDTH="55%" VALIGN="BOTTOM" HEIGHT=18>
<FONT SIZE=2><P ALIGN="JUSTIFY">Year ended December 31, 1999
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="21%" VALIGN="BOTTOM" HEIGHT=18>
<FONT SIZE=2>
<P ALIGN="CENTER">Revenue (a)
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=18>
<FONT SIZE=2><P ALIGN="CENTER">Long-Lived
Assets (b)
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>

<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">United States</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$ 90,587</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$50,848</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Canada</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">22,341</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">8,289</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">United Kingdom</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">20,126 </FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">6,290</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">France</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">24,642</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Japan</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">7,869</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Italy</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">7,453</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Germany</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">5,889</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Other foreign countries</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">8,114
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Total</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$187,021</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$65,427</FONT></TD>
</TR>
</TABLE>



<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=7 WIDTH=505>
<TR><TD WIDTH="55%" VALIGN="BOTTOM" HEIGHT=18>
<FONT SIZE=2><P ALIGN="JUSTIFY">Year ended December 31, 1998
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="21%" VALIGN="BOTTOM" HEIGHT=18>
<FONT SIZE=2>
<P ALIGN="CENTER">Revenue (a)
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" HEIGHT=18><P></P></TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=18>
<FONT SIZE=2><P ALIGN="CENTER">Long-Lived
Assets (b)
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>

<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">United States</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$82,882</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$33,624</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Canada</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">6,503</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">3,016</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">United Kingdom</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">4,340</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">6,917</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Germany</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">4,771</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">France</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">4,308</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Japan</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">6,886</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Other foreign countries</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">3,102
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">-
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="55%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="JUSTIFY">Total</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$112,792</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="20%" VALIGN="TOP">
<FONT SIZE=2><P ALIGN="RIGHT">$43,557</FONT></TD>
</TR>
</TABLE>

<FONT SIZE=2>
<OL TYPE="a">

<LI>Revenue is attributed to countries based on the location of
customers.</LI>
<LI>Long-lived assets excludes deferred income taxes.</LI></OL>

<I><P>Major Customers</P>
</I><P ALIGN="JUSTIFY">During fiscal 2000, four communication product customers
and their affiliates accounted for 16 percent, 11 percent, 11 percent, and 10
percent of revenues, respectively. During fiscal 1999, three communication
product customers and their affiliates accounted for 15 percent, 11 percent and
11 percent of revenues, respectively. These three customers in fiscal 1999 were
also significant customers in fiscal 2000. During fiscal 1998, another customer
purchased products from the communication and industrial laser segments that
accounted for a combined 13 percent of revenues. </P>
<P ALIGN="JUSTIFY">11. Employee Benefit Plan</P>
<P ALIGN="JUSTIFY">In 1990, the Company established the SDL, Inc. Profit Sharing
and Saving Plus Plan (the Plan) that covers substantially all U.S. full-time
employees and is qualified under Sections 401(a) and 401(k) of the Internal
Revenue Code. Participants may defer up to 20 percent of their pre-tax earnings
(up to the Internal Revenue Service limit). The Company matches 50 percent of
employee contributions up to a maximum of 5 percent of the participant's pre-tax
earnings. The participants' as well as the Company's matching contributions are
fully vested. Company contributions to the Plan were approximately $1.0 million,
$0.7 million, and $0.6 million for 2000, 1999, and 1998, respectively.</P>

<P ALIGN="JUSTIFY">&nbsp;</P>
<FONT SIZE=2><P ALIGN="JUSTIFY">12. Quarterly Results (Unaudited)</P>
<P ALIGN="JUSTIFY">The following table contains selected unaudited consolidated
statements of operations data for each quarter of fiscal 2000 and 1999.</P>


<P ALIGN="CENTER"><CENTER>
<TABLE BORDER=0 CELLSPACING=1 CELLPADDING=2 WIDTH=700>
<TR><TD WIDTH="18%" VALIGN="TOP">
<P ALIGN="CENTER"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="TOP" COLSPAN=15>
<FONT SIZE=1><P ALIGN="CENTER">Quarters Ended
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>

<TR><TD WIDTH="22%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="40%" VALIGN="TOP" COLSPAN=7>
<FONT SIZE=1><P ALIGN="CENTER">1999
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<TD WIDTH="40%" VALIGN="TOP" COLSPAN=7>
<FONT SIZE=1><P ALIGN="CENTER">2000
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>

<TR><TD WIDTH="22%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Mar. 31
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P>June 30
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Sept. 30
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Dec. 31
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Mar. 31
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P>June 30
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Sept. 30
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="CENTER">Dec. 31
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>

<TR><TD WIDTH="22%" VALIGN="TOP">
<FONT SIZE=1><P>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="TOP" COLSPAN=15>
<FONT SIZE=1><P ALIGN="CENTER">(In thousands, except per share data)</FONT></TD>
</TR>

<TR><TD WIDTH="22%" VALIGN="TOP">
<FONT SIZE=1><P>Revenue</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ 37,666</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ 43,171</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ 47,507</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ 58,677</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ 72,206</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ 110,512</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ 146,516</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ 175,601</FONT></TD>
</TR>

<TR><TD WIDTH="22%" VALIGN="TOP">
<FONT SIZE=1><P>Cost of revenue
</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">23,033
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">24,973
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">26,656
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">32,576
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">37,616
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">55,214
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">70,058
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">76,756
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>

<TR><TD WIDTH="22%" VALIGN="TOP">
<FONT SIZE=1><P>Gross margin
</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ 14,633</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ 18,198</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ 20,851</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ 26,101</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ 34,590</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ 55,298</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ 76,458</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ 98,845</FONT></TD>
</TR>

<TR><TD WIDTH="22%" VALIGN="TOP">
<FONT SIZE=1><P>Research and development
</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">3,781</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">4,292</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">5,237</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">5,733</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">5,903</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">8,569</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">12,214</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">13,450</FONT></TD>
</TR>

<TR><TD WIDTH="22%" VALIGN="TOP">
<FONT SIZE=1><P>Selling, general, and administrative
</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">5,680</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">6,443</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">6,527</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">8,045</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">7,298</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">13,504</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">18,127</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">19,653</FONT></TD>
</TR>

<TR><TD WIDTH="22%" VALIGN="TOP" HEIGHT=24>
<FONT SIZE=1><P>Merger costs&#9;
</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">2,677</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">3,168</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP" HEIGHT=24>
<FONT SIZE=1><P ALIGN="RIGHT">851</FONT></TD>
</TR>

<TR><TD WIDTH="22%" VALIGN="TOP">
<FONT SIZE=1><P>In-process research and development
</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">1,495</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">1,200</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">26,200</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">-</FONT></TD>
</TR>

<TR><TD WIDTH="22%" VALIGN="TOP">
<FONT SIZE=1><P>Amortization of purchased intangibles and goodwill
</FONT></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">179
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><P></P></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">210
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><P></P></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">210
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><P></P></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">210
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><P></P></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">1,744
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><P></P></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">71,627
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><P></P></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">151,327
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><P></P></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">151,307
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>

<TR><TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=1><P>Operating income (loss)
</FONT></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$ 3,498</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><P></P></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$ 4,576</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><P></P></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$ 8,877</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><P></P></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$ 12,113</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><P></P></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$ 18,445</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><P></P></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$ (64,602)</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><P></P></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$(108,378)</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><P></P></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">$ (86,416)</FONT></TD>
</TR>

<TR><TD WIDTH="22%" VALIGN="TOP">
<FONT SIZE=1><P>Net income (loss)
</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ 2,623
<HR NOSHADE SIZE=3>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ 3,211
<HR NOSHADE SIZE=3>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ 7,384
<HR NOSHADE SIZE=3>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ 11,995
<HR NOSHADE SIZE=3>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ 14,244
<HR NOSHADE SIZE=3>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ (70,731)
<HR NOSHADE SIZE=3>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$(115,833)
<HR NOSHADE SIZE=3>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><P></P></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$(122,846)
<HR NOSHADE SIZE=3>
</FONT></TD>
</TR>

<TR><TD WIDTH="22%" VALIGN="TOP">
<FONT SIZE=1><P>Net income (loss) per share-basic
</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1>
<P ALIGN="RIGHT">$ 0.04
<HR NOSHADE SIZE=3>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1>
<P ALIGN="RIGHT">$ 0.05
<HR NOSHADE SIZE=3>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1>
<P ALIGN="RIGHT">$ 0.12
<HR NOSHADE SIZE=3>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1>
<P ALIGN="RIGHT">$ 0.17
<HR NOSHADE SIZE=3>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1>
<P ALIGN="RIGHT">$ 0.20
<HR NOSHADE SIZE=3>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1>
<P ALIGN="RIGHT">$ (0.89)
<HR NOSHADE SIZE=3>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1>
<P ALIGN="RIGHT">$ (1.34)
<HR NOSHADE SIZE=3>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1>
<P ALIGN="RIGHT">$ (1.41)
<HR NOSHADE SIZE=3>
</FONT></TD>
</TR>

<TR><TD WIDTH="22%" VALIGN="TOP">
<FONT SIZE=1><P>Net income (loss) per share-diluted
</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ 0.04
<HR NOSHADE SIZE=3>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ 0.05
<HR NOSHADE SIZE=3>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ 0.11
<HR NOSHADE SIZE=3>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ 0.16
<HR NOSHADE SIZE=3>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ 0.19
<HR NOSHADE SIZE=3>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ (0.89)
<HR NOSHADE SIZE=3>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ (1.34)
<HR NOSHADE SIZE=3>
</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="TOP">
<FONT SIZE=1><P ALIGN="RIGHT">$ (1.41)
<HR NOSHADE SIZE=3>
</FONT></TD>
</TR>

<TR><TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=1><P>Weighted average shares-basic
</FONT></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">60,176</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">61,894</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">64,186</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">71,022</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">72,019</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">79,246</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">86,608</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">87,357</FONT></TD>
</TR>

<TR><TD WIDTH="22%" VALIGN="BOTTOM">
<FONT SIZE=1><P>Weighted average shares-diluted
</FONT></TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">64,296</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">65,922</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">68,292</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">75,374</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">76,507</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">79,246</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">86,608</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM">
<P ALIGN="RIGHT">&nbsp;</TD>
<TD WIDTH="8%" VALIGN="BOTTOM">
<FONT SIZE=1><P ALIGN="RIGHT">87,357</FONT></TD>
</TR>
</TABLE>
</CENTER></P>


<FONT SIZE=2><P ALIGN="CENTER">&nbsp;</P>
<P>13. Subsequent Events (unaudited)</P>
<P ALIGN="JUSTIFY">On July 10, 2000, the Company entered into a definitive
agreement to be acquired by JDS Uniphase Corporation for common stock valued at
approximately $40.7 billion. The acquisition was completed on February 13, 2001.
Upon closing of the acquisition, the Company exchanged each share of its common
stock for 3.8 shares of common stock of JDS Uniphase Corporation. In addition,
JDS Uniphase issued options in exchange for outstanding options of the Company
with the number of shares and the exercise prices appropriately adjusted by the
exchange ratio.</P>



<br>
<br>
<br>
<HR WIDTH="85%">
<br>
<br>
<br>



<P ALIGN="JUSTIFY"><B>(b) Pro Forma Financial Information</P></B>
<P ALIGN="JUSTIFY">UNAUDITED PRO FORMA CONDENSED COMBINED
CONSOLIDATED FINANCIAL STATEMENTS OF JDS UNIPHASE AND SDL</P>
<P ALIGN="JUSTIFY">The following unaudited pro forma condensed combined consolidated
financial statements give effect to the merger of JDS Uniphase and SDL using the
purchase method of accounting and include the pro forma adjustments described in
the accompanying notes.</P>

<P ALIGN="JUSTIFY">The following Unaudited Pro Forma Condensed Combined Consolidated Statement of
Operations for the six months ended December 30, 2000 and the Unaudited Pro Forma
Condensed Combined Consolidated Balance Sheet as of
December 30, 2000 of JDS Uniphase and SDL
are based on the historical financial statements of
JDS Uniphase and SDL, after giving effect to the merger with SDL under the
purchase method of accounting and the assumptions and adjustments described in
the accompanying Notes to the Unaudited Pro Forma Condensed Combined
Consolidated Financial Statements of JDS Uniphase and SDL. </P>

<P ALIGN="JUSTIFY">The following Unaudited Pro Forma Condensed Combined Consolidated Statement
of Operations of JDS Uniphase and SDL for the fiscal year ended June 30, 2000
is based on the Unaudited Pro Forma Combined Consolidated Statement of
Operations of SDL included in Form 8-K/A filed August 14, 2000 (combining SDL,
PIRI, Veritech and Queensgate), the Unaudited Pro Forma Condensed Combined
Consolidated Statement of Operations of JDS Uniphase in Amendment No. 1 to Form
S-4 filed November 17, 2000 (combining JDS Uniphase, OCLI and E-TEK) after
giving effect to the merger with SDL under the purchase method of accounting and
the assumptions and adjustments described in the accompanying Notes to the
Unaudited Pro Forma Condensed Combined Consolidated Financial Statements of JDS
Uniphase and SDL.</P>

<P ALIGN="JUSTIFY">The Unaudited Pro Forma Condensed Combined Consolidated Financial Statements
of JDS Uniphase and SDL should be read in conjunction with the historical
financial statements of JDS Uniphase and SDL, the Unaudited Pro Forma Condensed
Combined Consolidated Financial Statements of JDS Uniphase, OCLI and E-TEK in
Amendment No. 1 to Form S-4 filed November 17, 2000, and the Unaudited Pro Forma
Combined Consolidated Financial Statements of SDL included in Form 8-K/A filed
August 14, 2000 (combining SDL with PIRI, Veritech and Queensgate).</P>
<P ALIGN="JUSTIFY">The Unaudited Pro Forma Condensed Combined Consolidated Statements of
Operations of JDS Uniphase and SDL are presented as if the combination had taken
place on July 1, 1999. The Unaudited Pro Forma Condensed Combined Consolidated
Statement of Operations for the year ended June 30, 2000 combines the year ended
June 30, 2000 for Pro Forma JDS Uniphase (combining JDS Uniphase, OCLI and E-
TEK) and the twelve months ended June 30, 2000 for Pro Forma SDL (combining SDL
with PIRI, Veritech and Queensgate). The Unaudited Pro Forma Condensed Combined
Consolidated Balance Sheet is presented to give effect to the proposed merger as
if it occurred on December 30, 2000 and combines the balance sheets of JDS
Uniphase and SDL as of that date. The pro forma information does not purport to
be indicative of the results that would have been reported if the above
transactions had been in effect for the period presented or which may result in
the future.</P>


<P ALIGN="JUSTIFY">On February 13, 2001, the Company completed the sale of its Zurich,
Switzerland subsidiary to Nortel Networks ("Nortel") for 65.7 million shares of
Nortel common stock valued at $2.1 billion, as well as up to an additional $500
million in Nortel common stock payable to the extent Nortel purchases do not
meet certain levels under new and existing programs through December 31, 2003.
The Company expects to record a gain estimated at $1.9 billion in the quarter
ended March 31, 2001.</P>

<P ALIGN="JUSTIFY">From August 1999 through January 2001, JDS Uniphase acquired AFC
Technologies, EPITAXX, Inc., SIFAM Limited, Oprel Technologies, Inc., the
remaining 49% interest of IOT of Germany, Cronos Integrated Microsystems, Inc.,
Fujian Casix Laser, Inc., Epion Corporation, Optical Process Automation, Inc. and Iridian Corporation. The
Unaudited Pro Forma Condensed Combined Consolidated Financial Statements of JDS
Uniphase and SDL do not include on a pro forma basis these acquisitions or the
disposition of its Swiss subsidiary since individually and collectively they are not significant
to JDS Uniphase.</P>

<br>
<br>
<br>
<HR WIDTH="85%">
<br>
<br>
<br>



<B><P ALIGN="CENTER">UNAUDITED PRO FORMA CONDENSED COMBINED
                  CONSOLIDATED STATEMENT OF OPERATIONS<br>
                  OF JDS UNIPHASE AND SDL<br>
                  SIX MONTHS ENDED DECEMBER 30, 2000<br>
                  (IN THOUSANDS, EXCEPT PER SHARE DATA)</P></B>

<P ALIGN="CENTER"><CENTER><TABLE BORDER CELLSPACING=1 CELLPADDING=2 WIDTH=596>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=16>
<FONT SIZE=2><P ALIGN="CENTER">JDS Uniphase</FONT></TD>
<TD WIDTH="1%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=16>
<FONT SIZE=2><P ALIGN="CENTER">SDL</FONT></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT SIZE=2><P ALIGN="CENTER">Pro Forma Adjustments</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT SIZE=2><P ALIGN="CENTER">Pro Forma JDS Uniphase Combined</FONT></TD>
</TR>

<TR><TD WIDTH="38%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="4%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
</TR>

<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Net sales</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">$1,711,593 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">$322,117 </FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">($31,346)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">$2,002,364 </FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Cost of sales</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">886,413 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">146,814 </FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(22,142)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">1,011,085 </FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Gross profit</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">825,180</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">175,303</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(9,204)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">991,279</FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Operating expenses:</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Research and development</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">133,607 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">25,664 </FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">- </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">159,271 </FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Selling, general, and administrative</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">221,424 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">37,780 </FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">2,249 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">261,453 </FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Amortization of intangibles and</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(302,634)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>deferred compensation</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">2,211,591 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">302,634 </FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">4,093,922 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">6,305,513 </FONT></TD>
</TR>

<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Acquired in-process research and development</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">8,900 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">- </FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">- </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">8,900 </FONT></TD>
</TR>

<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Other operating expenses</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">487 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">4,019 </FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(4,019)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">487 </FONT></TD>
</TR>

<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Total operating expenses</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">2,576,009</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">370,097</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">3,789,518</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">6,735,624</FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>

<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Loss from operations</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(1,750,829)</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(194,794)</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(3,798,722)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(5,774,345)</FONT></TD>
</TR>

<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Interest and other income, net</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(67,699)</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">12,612 </FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">- </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(55,087)</FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>

<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Loss before income taxes</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(1,818,528)</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(182,182)</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(3,798,722)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(5,799,432)</FONT></TD>
</TR>

<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>

<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Income tax expense</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">93,532 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">56,497 </FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">- </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">150,029 </FONT></TD>
</TR>

<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>

<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Net loss</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">($1,912,060)</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">($238,679)</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">($3,798,722)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">($5,949,461)</FONT></TD>
</TR>

<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>

<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Basic loss per share</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">($2.00)</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">($2.74)</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">($4.63)</FONT></TD>
</TR>

<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>

<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Dilutive loss per share</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">($2.00)</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">($2.74)</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">($4.63)</FONT></TD>
</TR>

<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>

<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Average number of shares outstanding</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">953,664 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">86,993 </FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">1,284,198 </FONT></TD>
</TR>

<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>

<TR><TD WIDTH="38%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Average number of shares outstanding assuming dilution</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">953,664 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">86,983 </FONT></TD>
<TD WIDTH="4%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">1,284,198 </FONT></TD>
</TR>
</TABLE>
</CENTER></P>


<I><FONT SIZE=1><STRONG><P>See accompanying notes to JDS Uniphase and SDL
unaudited pro forma condensed combined consolidated financial statements. </P>
</I></FONT></STRONG>


<br>
<br>
<br>
<HR WIDTH="85%">
<br>
<br>
<br>


<FONT SIZE=2>
<P ALIGN="CENTER"><B>UNAUDITED PRO FORMA CONDENSED COMBINED<br>
                  CONSOLIDATED STATEMENT OF OPERATIONS<br>
                  OF JDS UNIPHASE AND SDL<br>
                  YEAR ENDED JUNE 30, 2000<br>
                  (IN THOUSANDS, EXCEPT PER SHARE DATA)</P></B></FONT>
<TABLE BORDER CELLSPACING=1 CELLPADDING=2 WIDTH=634>
<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=16>
<FONT SIZE=2><P ALIGN="CENTER">Pro Forma JDS Uniphase, OCLI &amp; E-TEK</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=16>
<FONT SIZE=2><P ALIGN="CENTER">Pro Forma SDL (SDL, PIRI, Veritech &amp; Queensgate)</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16>
<FONT SIZE=2><P ALIGN="CENTER">Pro Forma Adjustments</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=16>
<FONT SIZE=2><P ALIGN="CENTER">Pro Forma JDS Unpihase Combined</FONT></TD>
</TR>

<TR><TD WIDTH="34%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Net sales</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">$ 1,900,734 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">$ 373,778 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">$ (37,075)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">$ 2,237,437 </FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Cost of sales</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">972,297 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">186,005 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(16,311)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">1,141,991 </FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Gross profit</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">928,437</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">187,773 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(20,764)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">1,095,446 </FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Operating expenses:</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Research and development</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">162,680 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">27,421 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">- </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">190,101 </FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Selling, general, and administrative</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">238,329 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">49,063 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">4,497 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">291,889 </FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Amortization of intangibles and</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(603,456)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>deferred compensation</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">4,484,427 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">603,456 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">8,187,844 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">12,872,271 </FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Acquired in-process research and</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>development</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">27,611 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">- </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">27,611 </FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Other operating expenses</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(307)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">- </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">-</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(307)</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Total operating expenses</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">4,912,740</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">679,940</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">7,588,885 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">13,181,565 </FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Loss from operations</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(3,984,303)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(492,167)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(7,609,649)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(12,086,119)</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Interest and other income, net</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">85,599 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">15,363 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">- </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">100,962 </FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Loss before income taxes</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(3,898,704)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(476,804)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(7,609,649)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(11,985,157)</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Income tax expense</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">131,640 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">17,269 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">- </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">148,909 </FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Net loss</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$ (4,030,344)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$ (494,073)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$ (7,609,649)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$ (12,134,066)</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Basic loss per share</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">($4.70)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">($6.00)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">($10.36)</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Dilutive loss per share</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">($4.70)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">($6.00)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">($10.36)</FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="35%" VALIGN="TOP" COLSPAN=2 HEIGHT=17>
<FONT SIZE=2><P>Average number of shares outstanding</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">858,287 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">82,393 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">1,171,380 </FONT></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Average number of shares outstanding assuming dilution</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="14%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">858,287 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">82,393 </FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="13%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="3%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">1,171,380 </FONT></TD>
</TR>
</TABLE>

<I><FONT SIZE=1><STRONG><P>See accompanying notes to JDS Uniphase and SDL
unaudited pro forma condensed combined consolidated financial statements. </P>

<br>
<br>
<br>
<HR WIDTH="85%">
<br>
<br>
<br>





</I></FONT><FONT SIZE=2><P ALIGN="CENTER">Unaudited Pro Forma Condensed
Combined</P>
<P ALIGN="CENTER">   Consolidated Balance Sheet<BR>
                       JDS Uniphase and SDL<BR>
                        December 30, 2000<BR>
                    (in thousands) </P></FONT></STRONG>

<TABLE BORDER CELLSPACING=1 CELLPADDING=2 WIDTH=602>
<TR><TD WIDTH="37%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=16>
<FONT SIZE=2><P ALIGN="CENTER">JDS Uniphase</FONT></TD>
<TD WIDTH="1%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=16>
<FONT SIZE=2><P ALIGN="CENTER">SDL</FONT></TD>
<TD WIDTH="1%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=16>
<FONT SIZE=2><P ALIGN="CENTER">Pro Forma Adjustments</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=16>
<FONT SIZE=2><P ALIGN="CENTER">Pro Forma JDS Uniphase Combined</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="BOTTOM" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>ASSETS</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Current assets:</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Cash and cash equivalents</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">$430,102 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">$258,253 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">($366,500)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">$321,855 </FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Short-term investments</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">700,575</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">155,883 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">- </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">856,458 </FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Accounts receivable</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">631,930</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">112,273 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(10,232)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">733,971 </FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Inventories</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">493,944</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">66,550 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">- </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">560,494 </FONT></TD>
</TR>

<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Other current assets</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">140,506</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">12,662 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">- </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">153,168 </FONT></TD>
</TR>

<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Total current assets</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">2,397,057</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">605,621 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(376,732)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">2,625,946 </FONT></TD>
</TR>

<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Property, plant, and equipment, net</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">930,663</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">125,591 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">29,651 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">1,085,905 </FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(2,639,991)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Intangible assets, including goodwill</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">20,018,273</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">2,639,991 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">40,149,269 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">60,167,542 </FONT></TD>
</TR>

<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Other assets</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">1,599,234</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">7,670 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">- </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">1,606,904 </FONT></TD>
</TR>

<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Total assets</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$24,945,227 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$3,378,873 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$37,162,197 </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$65,486,297 </FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>LIABILITIES AND STOCKHOLDERS' EQUITY</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Current liabilities:</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Accounts payable</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">$ 232,924</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">$ 38,093 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">$ (10,232)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">$ 260,785 </FONT></TD>
</TR>

<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Other current liabilities</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">446,018</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">56,753 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">- </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">502,771</FONT></TD>
</TR>

<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Total current liabilities</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">678,942 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">94,846 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(10,232)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">763,556</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Long-term debt</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">27,189</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">- </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">- </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">27,189</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Other non-current liabilities</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">21,331</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">6,198 </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">- </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">27,529 </FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Deferred tax liabilities</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">926,940</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">- </FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">- </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">926,940</FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(3,271,497)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">41,148,329</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(364,600)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16><P></P></TD>
</TR>

<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P>Stockholders' equity</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">23,290,825</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">3,277,829</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">(339,803)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=16><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=16>
<FONT SIZE=2><P ALIGN="RIGHT">63,741,083</FONT></TD>
</TR>

<TR><TD WIDTH="37%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Total liabilities and stockholders' equity</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$24,945,227</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$3,378,873</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$37,162,197</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="15%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$65,486,297</FONT></TD>
</TR>
</TABLE>

<I><FONT SIZE=1><STRONG><P>See accompanying notes to JDS Uniphase and SDL
unaudited pro forma condensed combined consolidated financial statements. </P>
</I></FONT></STRONG><FONT FACE="Times New Roman" SIZE=2>


<br>
<br>
<br>
<HR WIDTH="85%">
<br>
<br>
<br>


<P><B>NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL
STATEMENTS OF JDS UNIPHASE AND SDL</B></P>
<OL>

<LI>BASIS OF PRO FORMA PRESENTATION</LI>
<P ALIGN="JUSTIFY">On July 10, 2000, SDL agreed to merge with JDS Uniphase, in a
transaction accounted for as a purchase. The total purchase price of $41.5
billion includes consideration of 333.8 million shares of JDS Uniphase common
stock, the issuance of 42.2 million stock options valued at $4.1 billion in
exchange for SDL options and estimated direct transaction costs of $367
million.</P>

<P ALIGN="JUSTIFY">The JDS Uniphase Pro Forma Condensed Combined Consolidated Financial
Statements provide for the exchange of 3.8 shares of JDS Uniphase common stock
for each outstanding share of SDL common stock. The average market price per
share of JDS Uniphase common stock of $111.13 is based on the average closing
price for a range of trading days (June 30, 2000 through July 14, 2000) around
the announcement date (July 10, 2000) of the merger. Based on the total number
of SDL options outstanding at February 13, 2001, JDS Uniphase issued options to
purchase 42.2 million shares of JDS Uniphase common stock at a weighted average
exercise price of $32.83. The fair value of the options, as well as estimated
direct transaction expenses of $367 million, have been included as a part of
the total purchase cost.</P>


<P ALIGN="JUSTIFY">The total purchase cost of the SDL merger is as follows (in thousands):</P>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=575>
<TR><TD WIDTH="85%" VALIGN="TOP">
<P><FONT FACE="Times New Roman" SIZE=2>
Value of securities issued
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P ALIGN="RIGHT">$ 37,091,905</FONT></TD>
</TR>
<TR><TD WIDTH="85%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P>
Assumption of SDL options
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P ALIGN="RIGHT"> 4,056,424
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>

<TR><TD WIDTH="85%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P>&nbsp;
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P ALIGN="RIGHT">41,148,329</FONT></TD>
</TR>

<TR><TD WIDTH="85%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P>
Estimated transaction costs and expenses
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P ALIGN="RIGHT">366,500
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="85%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P>
Total purchase cost
</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P ALIGN="RIGHT">$ 41,514,829
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>
</TABLE>


<P ALIGN="JUSTIFY">
The purchase price allocation, which is preliminary and therefore subject to
change based on JDS Uniphase's final analysis, is as follows (in thousands):</P>

<br>
<TABLE BORDER=0 CELLSPACING=1 WIDTH=600>
<TR><TD WIDTH="41%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="2%" VALIGN="BOTTOM" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">Amount
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="21%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">Annual Amortization
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">Useful Lives
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Purchase Price Allocation:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>

<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>&nbsp;&nbsp;&nbsp;&nbsp;Tangible net assets</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$ 661,158</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">n/a</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">n/a</FONT></TD>
</TR>

<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>&nbsp;&nbsp;&nbsp;&nbsp;Intangible assets acquired:</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>

<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Existing technology</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">441,321</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$ 88,264</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">5 years</FONT></TD>
</TR>

<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Core technology</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">214,200 </FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">42,840</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">5 years</FONT></TD>
</TR>

<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trademarks and tradename</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">46,000 </FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT"> 9,200</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">5 years</FONT></TD>
</TR>

<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Assembled workforce</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">47,700 </FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">11,925 </FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">4 years</FONT></TD>
</TR>

<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>&nbsp;&nbsp;&nbsp;&nbsp;Deferred compensation</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">339,802</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">155,605</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">0-4 years</FONT></TD>
</TR>

<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>&nbsp;&nbsp;&nbsp;&nbsp;Goodwill</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">39,400,048</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">7,880,010</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">5 years</FONT></TD>
</TR>


<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>&nbsp;&nbsp;&nbsp;&nbsp;In-process research and development</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">364,600
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">n/a
<HR NOSHADE SIZE=1>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="CENTER">n/a</FONT></TD>
</TR>

<TR><TD WIDTH="41%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P>Total estimated purchase price allocation</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" HEIGHT=17><P></P></TD>
<TD WIDTH="20%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$ 41,514,829
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="21%" VALIGN="TOP" HEIGHT=17>
<FONT SIZE=2><P ALIGN="RIGHT">$ 8,187,844
<HR NOSHADE SIZE=4>
</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP" HEIGHT=17><P></P></TD>
</TR>
</TABLE>

<br>
</FONT><FONT FACE="Times New Roman" SIZE=2><P ALIGN="JUSTIFY">An independent valuation specialist
performed an allocation of the total purchase price of SDL to its individual
assets. Of the total purchase price,$364.6 million has been allocated to
in-process research and development and will be charged to expense in the period
the transaction closes. Due to their nonrecurring nature, the in-process
research and development attributed to the SDL transaction and the transaction
costs incurred by SDL estimated at $40 million have been excluded in the pro
forma statements of operations. The remaining purchase price has been allocated
to specifically identifiable assets acquired, including an adjustment to write-up
property and equipment of SDL to fair value by $29.7 million, and goodwill.</P>

<P ALIGN="JUSTIFY">In addition to the value assigned to the in-process research and development
projects, SDL's tangible assets and specific intangible assets were identified
and valued. The related amortization of the identifiable tangible and intangible
assets is reflected as a pro forma adjustment to the Unaudited Pro Forma
Condensed Combined Statement of Operations. The identifiable intangible assets
include existing technology, core technology, trademarks and trade name, and
assembled workforce.</P>
<P ALIGN="JUSTIFY">The acquired existing technology, which is comprised of products that are
already technologically feasible, includes products in most of SDL's
product lines. The main business segments, in which these product lines fall,
are communication products and industrial products. JDS Uniphase expects to
amortize the acquired existing technology of approximately $441.3 million on
a straight-line basis over an average estimated remaining useful life of 5 years.
The acquired core technology represents SDL trade secrets and patents developed
through years of experience in design, package and manufacture of laser
components and modules for fiber optic telecommunication networks. SDL's
products are designed for long-haul applications, as well as emerging short-haul
applications, such as metropolitan area networks. This proprietary know-how
can be leveraged by SDL to develop new and improved products and
manufacturing processes. JDS Uniphase expects to amortize the acquired core
technology of approximately $214.2 million on a straight-line basis over an
average estimated remaining useful life of 5 years.</P>
<P ALIGN="JUSTIFY">The trademarks and trade names include the SDL trademark and trade name. JDS
Uniphase expects to amortize the trademarks and trade names of approximately
$46.0 million on a straight-line basis over an estimated remaining useful life of
5 years.</P>
<P ALIGN="JUSTIFY">The acquired assembled workforce is comprised of over 2,200 skilled employees
across SDL's Executive, Research and Development, Manufacturing,
Supervisor/Manager, and Sales and Marketing groups. JDS Uniphase expects
to amortize the value assigned to the assembled workforce of approximately
$47.7 million on a straight-line basis over an estimated remaining useful life of
4 years.</P>

<P ALIGN="JUSTIFY">Deferred compensation represents a portion of the estimated intrinsic value
of unvested SDL stock options assumed by JDSU in the merger agreement to the
extent that service is required after the closing date of the merger in order to
vest. In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, Accounting for Certain Transactions involving
Stock Compensation, an Interpretation of APB No. 25. The Interpretation, which
is effective as of July 1, 2000, results in compensation charges over the
remaining term of the option's vesting period, whereas options assumed from
mergers and acquisitions prior to July 2000 resulted in no compensation charges
but were included in JDS Uniphase's allocation of purchase price consideration as
a component of goodwill. JDS Uniphase expects to amortize the value assigned
to deferred compensation of approximately $339.8 million over the remaining
vesting period of up to four years.


<P ALIGN="JUSTIFY">
Goodwill, which represents the excess of the
purchase price of an investment in an acquired business over the fair value of
the underlying net identifiable assets, is amortized on a straight-line basis
over its estimated remaining useful life of 5 years.</P>

<P ALIGN="JUSTIFY">SDL is currently developing new products that qualify as in-process research
and development in multiple product areas. For the purposes of determining which
projects qualified as in-process research and development, technological
feasibility is defined as being equivalent to completion of design
verification testing, when the design is finalized and ready for
pilot manufacturing.</P>

<P ALIGN="JUSTIFY">The following is a general description of in-process research and development
efforts as of February 13, 2001:</P>

<P ALIGN="JUSTIFY">Current engineering efforts are focused on developing new products,
integrating new technologies, improving manufacturing efficiencies, improving
product performance and integrating multiple functions into single components
and multiple components into modules. The principal products to which
research and development efforts are directed are as follows: pump laser chips,
pump laser modules, Raman chips and amplifiers, external modulators and drivers
and industrial products. There is a risk that these developments and
enhancements will not be competitive with other products using alternative
technologies that offer comparable functionality.</P>

<P ALIGN="JUSTIFY">Pump Laser Chips. SDL supplies high power 980nm pump laser chips to provide
power to optical amplifiers used in fiber optic systems. SDL's pump laser
chip development efforts support future generation optical amplifiers. SDL
expects the development cycle for the current research and development project
with respect to these products to continue for another two to four months, with
expected completion dates in the first and second quarters of the calendar year
2001. Development costs incurred to date are approximately $2.5 million with
estimated cost to complete of approximately $0.3 million, which SDL expects to
incur ratably over the remainder of the development cycle.</P>

<P ALIGN="JUSTIFY">Pump Laser Modules. SDL supplies 980nm pump laser modules that lead the
industry in output power and performance. SDL expects the development cycle for
the current research and development project with respect to these pump laser
modules to continue for another 10 months, with expected completion dates in
the fourth quarter of calendar year 2001. Development costs incurred to date
are approximately $2.1 million with estimated cost to complete of approximately
$2.2 million, which SDL expects to incur ratably over the remainder of the
development cycle.</P>

<P ALIGN="JUSTIFY">Raman Chips and Amplifiers. SDL is engaged in the development of Raman chips
and amplifiers, which are an emerging technology in fiber optic transmissions
systems. Raman amplifiers differ from conventional EDFAs in that they use
installed optical fiber as the amplification medium rather than erbium-doped
fiber. SDL expects the development cycle for the current research and
development project with respect to these Raman chips and amplifiers to continue
for another 16 months, with expected completion dates starting in the first
quarter of the calendar year 2001 and finishing in the fourth quarter of
calendar year 2002. Development costs incurred to date are approximately
$13.3 million with estimated cost to complete of approximately $6.6 million,
which SDL expects to incur ratably over the remainder of the development cycle.
External Modulators and Drivers. SDL supplies external modulators that are
utilized in very high channel count systems with very long propagation
distances. Development costs incurred to date are approximately $3.4 million with
estimated cost to complete of approximately $14.0 million, which SDL expects to
incur ratably over the remainder of the development cycle of 22 months.</P>

<P ALIGN="JUSTIFY">Industrial Products. SDL supplies products for non-communications
applications. These include applications such as printing and materials
processing. SDL expects the development cycle for the current research and
development projects with respect to these industrial products to continue for
another two months, with expected completion dates in the first quarter of
calendar year 2001. Development costs incurred to date are approximately $2.6
million with estimated cost to complete of approximately $0.4 million, which SDL
expects to incur ratably over the remainder of the development cycle.</P>

<P ALIGN="JUSTIFY">VALUE ASSIGNED TO IN-PROCESS RESEARCH AND DEVELOPMENT</P>

<P ALIGN="JUSTIFY">The value assigned to in-process research and development was determined by
considering the importance of each project to the overall development plan,
estimating costs to develop the purchased in-process research and development
into commercially viable products, estimating the resulting net cash flows
from the projects when completed and discounting the net cash flows to their
present value. The revenue estimates used to value the purchased in-process
research and development were based on estimates or relevant market sizes and
growth factors, expected trends in technology and the nature and expected timing
of new product introductions by SDL and its competitors. The rates utilized to
discount the net cash flows to their present value are based on SDL weighted
average cost of capital. Given the nature of the risks associated with the
difficulties and uncertainties in completing each project and thereby achieving
technological feasibility, anticipated market acceptance and penetration, market
growth rates and risks related to the impact of potential changes in future
target markets, the weighted average cost of capital was adjusted. Based on
these factors, discount rates of 12% and 20% were deemed appropriate for the
existing and in-process technology, respectively.</P>

<P ALIGN="JUSTIFY">The estimates used in valuing in-process research and development were based
upon assumptions believed to be reasonable but which are inherently uncertain
and unpredictable. Assumptions may be incomplete or inaccurate, and no assurance
can be given that unanticipated events and circumstances will not occur.
Accordingly, actual results may vary from the projected results. Any such
variance may result in a material adverse effect on SDL's financial condition and
results of operations.</P>

<P ALIGN="JUSTIFY">With respect to the acquired in-process technologies, the calculations of
value were adjusted to reflect the value creation efforts of SDL prior to the
merger. Following are the estimated completion percentages with respect to the
current research and development efforts and technology lives:</P></FONT>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=667>
<TR><TD WIDTH="60%" VALIGN="BOTTOM">
<P ALIGN="CENTER"><B><U><FONT FACE="Times New Roman"
SIZE=2>Project</B></U></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><U><FONT FACE="Times New Roman" SIZE=2><P ALIGN="CENTER">Percent Completed
</B></U></FONT></TD>
<TD WIDTH="24%" VALIGN="BOTTOM">
<B><U><FONT FACE="Times New Roman" SIZE=2><P ALIGN="CENTER">Expected Technology
Life</B></U></FONT></TD>
</TR>
<TR><TD WIDTH="60%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P>Pump Laser
Chips</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P ALIGN="CENTER">92%</FONT></TD>
<TD WIDTH="24%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P ALIGN="CENTER">5 years</FONT></TD>
</TR>
<TR><TD WIDTH="60%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P>Pump Laser
Modules</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P ALIGN="CENTER">50%</FONT></TD>
<TD WIDTH="24%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P ALIGN="CENTER">5 years</FONT></TD>
</TR>
<TR><TD WIDTH="60%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P>
Raman Chips and Amplifiers</TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P ALIGN="CENTER">64%</FONT></TD>
<TD WIDTH="24%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P ALIGN="CENTER">5 years</FONT></TD>
</TR>
<TR><TD WIDTH="60%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P>External Modulators and
Drivers</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P ALIGN="CENTER">31%</FONT></TD>
<TD WIDTH="24%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P ALIGN="CENTER">5 years</FONT></TD>
</TR>
<TR><TD WIDTH="60%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P>Industrial
Products</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P ALIGN="CENTER">74%</FONT></TD>
<TD WIDTH="24%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P ALIGN="CENTER">5 years</FONT></TD>
</TR>
</TABLE>



<FONT FACE="Times New Roman" SIZE=2><P ALIGN="JUSTIFY">The value assigned to each acquired
in-process research and development project as of January 31, 2001 was as follows
(in thousands):</P></FONT>

<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=7 WIDTH=618>
<TR><TD WIDTH="85%" VALIGN="TOP">
<P><FONT FACE="Times New Roman" SIZE=2>Pump Laser
Chips</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P ALIGN="RIGHT">$134,848</FONT></TD>
</TR>
<TR><TD WIDTH="85%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P>Pump Laser
Modules</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P ALIGN="RIGHT">21,711</FONT></TD>
</TR>
<TR><TD WIDTH="85%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P>Raman Chips and
Amplifiers</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P ALIGN="RIGHT">108,913</FONT></TD>
</TR>
<TR><TD WIDTH="85%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P>External Modulators and
Drivers</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P ALIGN="RIGHT">83,708</FONT></TD>
</TR>
<TR><TD WIDTH="85%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P>Industrial
Products</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P ALIGN="RIGHT">15,420
<HR NOSHADE SIZE=1>
</FONT></TD>
</TR>
<TR><TD WIDTH="85%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P>Total acquired in-process research and
development&#9;</FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<FONT FACE="Times New Roman" SIZE=2><P ALIGN="RIGHT">$364,600
<HR NOSHADE SIZE=4>
</FONT></TD>
</TR>
</TABLE>

<FONT FACE="Times New Roman" SIZE=2><P ALIGN="JUSTIFY">A portion of the purchase price has been
allocated to developed technology and acquired in-process research and
development. Developed technology and in-process research and development were
identified and valued through analysis of data provided by SDL concerning
developmental products, their stage of development, the time and resources
needed to complete them, if applicable, their expected income generating
ability, target markets and associated risks. The Income Approach, which includes
an analysis of the markets, cash flows and risks associated with achieving such
cash flows, was the primary technique utilized in valuing the developed
technology and in-process research and development.</P>
<P ALIGN="JUSTIFY">Where developmental projects had reached technological feasibility, they were
classified as developed technology, and the value assigned to developed
technology was capitalized. Where the developmental projects had not
reached technological feasibility and had no future alternative uses, they
were classified as in-process research and development and will be charged to
expense upon closing of the merger.</P>

<LI>PRO FORMA ADJUSTMENTS</LI>

<P ALIGN="JUSTIFY">The JDS Uniphase Unaudited Pro Forma Condensed Combined Consolidated
Financial Statements give effect to the allocation of the total purchase cost to
the assets and liabilities of SDL based on their respective fair values and
to amortization over the respective useful lives of amounts allocated to
intangible assets. Intercompany balances between JDS Uniphase and SDL have been
eliminated for pro forma presentations. The pro forma combined provision for
income taxes does not reflect the amounts that would have resulted had JDS
Uniphase and SDL filed consolidated income tax returns during the periods
presented.</P>


<LI>PRO FORMA NET LOSS PER SHARE</LI>
<P ALIGN="JUSTIFY">The pro forma basic and dilutive net loss per share are based on the weighted
average number of shares of pro forma JDS Uniphase common stock outstanding
during each period and pro forma weighted average number of SDL shares of common
stock outstanding multiplied by the exchange ratio. Dilutive securities
including the replacement SDL options are not included in the computation of pro
forma dilutive net loss per share as their effect would be anti-dilutive.</P>

</OL>



</FONT><FONT FACE="Times,Times New Roman" SIZE=2><P ALIGN="JUSTIFY">Item 7. Financial
Statements, Pro Forma Information and Exhibits (continued)</P>
<P>(C) Exhibits</P>
<P>23.1&#9;Consent of Ernst &amp; Young LLP, Independent Auditors<br>
  23.2 Consent of Arthur Andersen, Chartered
Accountants</P>

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<STRONG><P ALIGN="CENTER">SIGNATURES </P>
</STRONG><P>Pursuant to the requirement of the Security Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. </P></FONT>
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<TR><TD WIDTH="38%" VALIGN="MIDDLE">
<P><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="62%" VALIGN="MIDDLE">
<FONT SIZE=1><P>&nbsp;</FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="MIDDLE">
<FONT FACE="Times New Roman" SIZE=2><P>&nbsp;</FONT></TD>
<TD WIDTH="62%" VALIGN="MIDDLE">
<FONT FACE="Times New Roman" SIZE=2><P>JDS Uniphase Corporation </FONT></TD>
</TR>
</TABLE>


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<TR><TD WIDTH="38%" VALIGN="MIDDLE">
<P><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="MIDDLE">
<FONT SIZE=1><P>&nbsp;</FONT></TD>
<TD WIDTH="58%" VALIGN="MIDDLE">
<FONT SIZE=1><P>&nbsp;</FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="MIDDLE">
<FONT FACE="Times New Roman" SIZE=2><P>&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="MIDDLE">
<FONT FACE="Times New Roman" SIZE=2><P>By:&nbsp;</FONT></TD>
<TD WIDTH="58%" VALIGN="MIDDLE">
<FONT FACE="Times New Roman" SIZE=2><P>/s/ Anthony R. Muller </FONT></TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 WIDTH=624>
<TR><TD WIDTH="38%" VALIGN="MIDDLE">
<P><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="62%" VALIGN="MIDDLE">
<FONT SIZE=1><P>&nbsp;</FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="MIDDLE">
<FONT FACE="Times New Roman" SIZE=2><P>&nbsp;</FONT></TD>
<TD WIDTH="62%" VALIGN="MIDDLE">
<P><HR SIZE=0></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="MIDDLE">
<FONT FACE="Times New Roman" SIZE=2><P>&nbsp;</FONT></TD>
<TD WIDTH="62%" VALIGN="MIDDLE">
<FONT FACE="Times New Roman" SIZE=2><P>Anthony R. Muller </FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="MIDDLE">
<FONT FACE="Times New Roman" SIZE=2><P>&nbsp;</FONT></TD>
<TD WIDTH="62%" VALIGN="MIDDLE">
<I><FONT FACE="Times New Roman" SIZE=2><P>Senior Vice President of Finance and CFO
</I></FONT></TD>
</TR>
</TABLE>

<FONT FACE="Times New Roman" SIZE=2><P>Date: March  23, 2001</P></FONT>

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<FILENAME>eyconsen.htm
<DESCRIPTION>EY CONSENT
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<p align="right"><B>
                                               Exhibit 23.1</B></P>


<P> </P>
<P ALIGN="CENTER"><B>
            CONSENT OF ERNST &amp; YOUNG LLP, INDEPENDENT AUDITORS</B> </P>
<P> </P>

<P ALIGN="JUSTIFY">We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-55560) pertaining to the SDL, Inc. 1992 Stock Option Plan and
the SDL, Inc. 1995 Stock Option Plan; the Registation Statement (Form S-8 No.
333-55796) pertaining to the Optical Process Automation, Inc. 2000 Stock Option
and Incentive Plan and the 2000 Series B Preferred Stock Option Plan; the
Registration Statement (Form S-8 No. 33-74716) pertaining to the Uniphase
Corporation 1984 Amended and Restated Stock Plan, the 1993 Flexible Stock
Incentive Plan, the 1993 Amended and Restated Employee Stock Purchase Plan; the
Registration Statement (Form S-8 No. 33-31722) pertaining to the Uniphase
Corporation Amended and Restated 1993 Flexible Stock Incentive Plan; the
Registration Statement (Form S-8 No. 333-09937) pertaining to the Uniphase
Telecommunications Products, Inc. 1995 Flexible Stock Incentive Plan; the
Registration Statement (Form S-8 No. 333-39423) pertaining to the Uniphase
Corporation Amended and Restated 1993 Flexible Stock Incentive Plan and the 1996
Nonqualified Stock Option Plan; the Registration Statement (Form S-8 No.
333-62465) pertaining to the Uniphase Corporation 1998 Employee Stock Purchase
Plan and the Uniphase Corporation Amended and Restated 1993 Flexible Stock
Incentive Plan; the Registration Statement (Form S-8 No. 333-81911) pertaining
to the JDS FITEL Inc. 1994 Stock Option Plan and 1996 Stock Option Plan; the
Registration Statement (Form S-8 No. 333-81909) pertaining to the Uniphase
Corporation Amended and Restated 1993 Flexible Stock Incentive Plan, the 1996
Nonqualified Stock Option Plan, and the 1998 Employee Stock Purchase Plan; the
Registration Statement (Form S-8 No. 333-70339) pertaining to the Broadband
Communications Products, Inc. 1992 Key Employee Incentive Stock Option Plan, the
1997 Employee Stock Option Plan and the 1997 Nonqualified Stock Option Plan; the
Registration Statement (Form S-8 No. 333-90301) pertaining to the JDS Uniphase
Corporation 1999 Canadian Employee Stock Purchase Plan; the Registration
Statement (Form S-8 No. 333-91313) pertaining to the EPITAXX, Inc. Amended and
Restated 1996 Employee, Director and Consultant Stock Option Plan; the
Registration Statement (Form S-8 No. 333-96481) pertaining to the Optical
Coating Laboratory, Inc. 1993 Incentive Compensation Plan, the 1995 Incentive
Compensation Plan, the 1996 Incentive Compensation Plan, the 1998 Incentive
Compensation Plan, the 1999 Incentive Compensation Plan, the 1999 Director Stock
Plan and the 1999 Employee Stock Purchase Plan; the Registration Statement (Form
S-8 No. 333-36114) pertaining to the Cronos Integrated Microsystems, Inc. 1999
Stock Plan; the Registration Statement (Form S-8 No. 333-40696) pertaining to
the E-TEK Dynamics, Inc. 1997 Executive Equity Incentive Plan, the 1997 Equity
Incentive Plan, the 1998 Director Option Plan and the 1998 Stock Plan; the
Registration Statement (Form S-8 No. 333-46846) pertaining to the Epion
Corporation 1996 Stock Option Plan; the Registration Statement (Form S-8 No.
333-50176) pertaining to the Epion Corporation 1996 Stock Option Plan; the
Registration Statement (Form S-8 No. 333-50502) pertaining to the JDS Uniphase
Corporation Amended and Restated 1993 Flexible Stock Incentive Plan and the 1999
Canadian Employee Stock Purchase Plan; the Registration Statement (Form S-8 No.
333-53642) pertaining to the JDS Uniphase Corporation 1998 Employee Stock
Purchase Plan; and the Registration Statements (Form S-3 Nos. 333-27931,
333-70351, 333-78821, 333-82797, 333-83129, 333-88761, 333-91827, 333-94217,
333-39436, 333-48930) of JDS Uniphase Corporation (formerly Uniphase
Corporation) of our report dated January 22, 2001, with respect to the
consolidated financial statements of SDL, Inc. included in this Current Report
(Form 8-K/A) of JDS Uniphase Corporation.</P>


<p>
 /s/  ERNST &amp; YOUNG LLP </P>

<P>San Jose, California<br>
March 19, 2001 </P>
</FONT>


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<TYPE>EX-23.2
<SEQUENCE>3
<FILENAME>aaconsen.htm
<DESCRIPTION>AA CONSENT
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<p align="right">
                                               Exhibit 23.2


<B><P ALIGN="CENTER">CONSENT OF ARTHUR ANDERSEN, INDEPENDENT AUDITORS</P>
</B><P ALIGN="JUSTIFY"></P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">&nbsp;</P>

<P ALIGN="JUSTIFY">As independent auditors, we consent to the incorporation by
reference in the Registration Statement of JDS Uniphase Corporation on Form 8-K
of our report dated 15 October 1998 with respect to the consolidated financial
statements of IOC International Limited as at 30 September 1998 and for the year
then ended, included in SDL, Inc.'s Annual Report (Form 10-K) for the year ended
31 December 1999 and to all references to our Firm included in this registration
statement.</P>
<P ALIGN="JUSTIFY"></P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>

<P>/s/ Arthur Andersen, Chartered Accountants </P>

<P>Cambridge, England<br>
March 19, 2001</P>

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