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Loudcloud Acquires Frontera, Reports Positive Q4

Loudcloud, Inc. , the Sunnyvale, Calif.-based managed services provider (MSP), today announced it had signed an acquisition agreement with Frontera Corp., a privately-held MSP based in Los Angeles, Calif.

Loudcloud will acquire Frontera in an all stock transaction, and the completion of the transaction is subject to customary closing conditions, including Frontera stockholder approval and regulatory approvals. The purchase is expected to close in the second quarter of 2002.

Frontera's customers include Pioneer Electronics, Conseco, Wherehouse Music and Coach, Inc.

"We think this is an excellent fit for our business, as these customers can be readily integrated into our environment," said Ben Horowitz, CEO of Loudcloud.

"Loudcloud's strategy is to execute against our business plan. This acquisition complements it perfectly, because it allows us to add high quality customers, strengthens Loudcloud's regional presence, and provides operational synergies," he added.

Loudcloud also reported results for its fourth quarter and full year ended January 31, 2002, which was highlighted by substantial revenue growth and sharply narrowed EBITDA and net losses.

Total revenue increased to $15.9 million, growing 11 percent from the third quarter, and 79 percent from the same quarter last ear. Revenue for the year grew 262 percent from last year.

Net loss decreased to $0.51 per share, an 18 percent improvement from the previous quarter. Net loss for the quarter decreased 43 percent from the same quarter last year, which Loudcloud says illustrates the improved cost structure in the business.

The firm's EBITDA loss narrowed to $17.3 million, a $15.0 million improvement from the same quarter last year and $7.6 million increase on the prior quarter.

Momentum continued for Loudcloud with its enterprise customers who attributed to 74 percent of total revenue in the fourth quarter was, up from 66 percent in the third quarter and 46 percent in the same quarter last year.

In addition, Loudcloud signed new contracts with several new and existing customers including: Atriax, Bax Global, Fusura, Knight Ridder, Orbitz, USA Today, the U.K. Post Office and the U.K. Government.

The company ended the fourth quarter with approximately $116 million in cash and cash equivalents, including short-term investments and temporarily restricted cash, representing sufficient cash resources to fully fund its business plan.

Marc Andreessen, Chairman of the Board, said: "Loudcloud's results in 2002 demonstrate that delivering critical e-business applications remains a key priority for enterprises and government agencies worldwide."

"We are pleased that Loudcloud capped a solid year by again exceeding both top and bottom line expectations in the fourth quarter," said Ben Horowitz, President and Chief Executive Officer.

Loudcloud's fourth-quarter 2002 revenue of $15.9 million compares with $14.3 million in the previous quarter and represents a 79 percent increase from the same period a year earlier, and an 11 percent increase from the prior quarter.

The company reported an EBITDA loss (net loss before interest, taxes, depreciation, and amortization expenses) of $17.3 million in the quarter, compared with an EBITDA loss of $24.9 million in the prior quarter ended October 31, 2001.

There was a net loss of $33.7 million, or $0.51 per share compared to a loss of $40.7 million, or $0.62 per share in the prior quarter ended October 31, 2001. Rod Sherwood, Loudclouds executive vice president and chief financial officer, said: "Loudcloud made solid progress during the fourth quarter in improving our cost structure, while continuing to grow our overall business. We improved our EBITDA loss by $7.6 million from the prior quarter, which was driven by cost reduction and increased revenue in the period.

"Looking forward, we expect revenues to continue to grow sequentially in the first quarter. We expect further improvement in the bottom line and we continue to have a fully funded plan."

For the first quarter of fiscal 2003, Loudcloud expects revenue will increase to approximately $17.3-$17.5 million. The company expects to report a first quarter EBITDA loss of approximately $16.0-$16.5 million, and a loss per share of approximately $0.48-$0.50.