Since its founding in 1988, Cyrix has provided the personal computer industry with one innovative product after another. Our processors are setting performance standards, and independent tests have shown that Cyrix processors outperform the competition. Our newest products continue the Cyrix engineering legacy and should create new market segments within the evolving computer industry.

The award-winning Cyrix 6x86™ processor has achieved significant market acceptance. A number of OEMs are now using the 6x86 processor in their PCs. Computers built around 6x86 processors are widely available through the reseller channel and in retail outlets worldwide. As a result, sales of the 6x86 processor are expected to continue contributing a significant percentage of the Company's revenues in 1997, particularly in its PR166+ and PR200+ versions.

Beyond the 6x86 processor, Cyrix is poised to make significant contributions to the computer industry with new products designed to respond to changing consumer needs and demands.

According to a recent Dataquest analysis, ongoing consumer research in the U.S. market shows increased interest in PC ownership. The challenge for vendors is to translate this interest into sales. At Cyrix, we believe we have developed the right product at the right time, and at the right price, to excite the consumer PC marketplace -- the MediaGX™ processor. The MediaGX processor will help computer manufacturers offer full-featured PCs for less than $1,000.

First-time buyers who have been hesitant to spend $2,000 or more on a home computer should find that MediaGX processor technology will help make PC ownership much more affordable. As a closed-box, easy-to-use system in a consumer-friendly package, MediaGX-based PCs should spark new user adoption of computers in the home. Additionally, consumers who already have computers in their homes should find that a PC using the MediaGX processor can be a cost-effective choice for a second or third computer.

The ability to offer mainstream multimedia and system features at previously unattainable prices is the result of Cyrix's highly-integrated processor technology. Previously, the price points of computers have been lowered by removing features or capabilities, or by using outdated technology. In contrast, the MediaGX architecture integrates audio, graphics, memory control and PCI interface functions within the processor unit to deliver the compatibility, performance and multimedia features expected in more expensive PCs -- for less. We believe Cyrix was the first to market this ground-breaking technology, which also will have applications beyond the consumer market -- for example, in low-cost network PCs for corporate clients. Using Cyrix's MediaGX technology, PC manufacturers could offer corporate clients feature-rich, cost-effective PCs that improve network manageability and lower the total cost of ownership.

With the MediaGX processor, Cyrix is creating new market opportunities. We are offering PC manufacturers a complete system-level reference design for a MediaGX-based PC system. Our system approach is designed to enable our customers to introduce new technology into the marketplace rapidly. It also demonstrates to OEMs that Cyrix is a technology provider at both the processor and the system levels.

In the second quarter of 1997, Cyrix plans to introduce our next high-performance processor, code-named M2. Featuring Cyrix's fully compatible multimedia extension (MMX) technology, the M2 includes significant architectural enhancements to the 6x86 processor design. It is expected to provide dramatically improved processor performance and new capabilities for multimedia and communications applications.

The demand for sophisticated, graphics-intensive PC applications has driven the need for the lightning-fast rendering of 3-D visual images. In a recent industry trends report, Dataquest noted that 3-D graphics has now joined the processor as one of the more fascinating components of the PC. The M2 processor should offer the advanced performance and enriched graphics that consumers want with features such as multimedia extension (MMX) technology, an internal cache quadrupled to 64-KByte, enhanced memory management and other architectural and performance innovations. This advanced technology is expected to enable the M2 to process audio, video and 3-D graphics at greater speeds than ever before -- and deliver up to twice the performance of the 6x86 processor on 32-bit applications. The M2 should also support new communications technologies important in the business environment such as video conferencing and voice recognition software. As the M2 becomes Cyrix's core processor offering, it should provide the Company with a competitive market advantage at the mid-range computer price level. While few software applications currently take advantage of the latest multimedia technology, consumers should have a wide range of titles available when the M2 reaches anticipated volume production in the second half of 1997.

At Cyrix, we recognize the complexity of the computer industry, and we're prepared to provide the technology, support and leadership that can give our customers an advantage in the marketplace. Our product development plans for 1997 and beyond are expected to supply PC manufacturers with new technologies to satisfy ever-evolving consumer needs. As our new product directions clearly demonstrate, Cyrix is prepared to meet the challenges that are on the road ahead.

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