Blue Coat Systems, Inc. (Nasdaq: BCSI), the leader in WAN Application Delivery and Secure Web Gateway, today announced that it has signed a definitive agreement with Packeteer, Inc. (Nasdaq: PKTR), a leader in WAN optimization and WAN traffic prioritization technologies, under which Blue Coat will acquire Packeteer for $7.10 per share in cash, or approximately $268 million. The acquisition is expected to be accretive on a non-GAAP basis in the second full quarter of combined operations.

The acquisition is expected to deliver the following strategic benefits to Blue Coat:

• Blue Coat's ability to incorporate key Packeteer^® technologies into the Blue Coat^® ProxySG^® family of appliances to provide increased application understanding and traffic prioritization capabilities
• Additional revenue from the sales, support and development of the PacketShaper^® product
• Increased penetration of the WAN optimization market with the addition of Packeteer's well-developed global sales distribution channel to Blue Coat's existing channel
• Expansion of Blue Coat sales opportunities through cross-selling to newly added Packeteer customers
• Extended leadership for Blue Coat in the WAN optimization market
• Significant cost savings and revenue synergies through organizational economies of scale

"WAN optimization is the starting point for adding the next layer of intelligence to the corporate network," said Brian NeSmith, president and chief executive officer, Blue Coat Systems. "The acquisition of Packeteer will enable us to extend our leadership in solving branch office application performance challenges and addressing security threats by adding an extensive, experienced sales channel, integrating our sales organizations and by reinvigorating the well-regarded PacketShaper product and adding it to our solution set. At the same time, we will begin to aggressively integrate Packeteer technologies with our own to continue building the next critical layer above the router."

Packeteer is a pioneer in network traffic prioritization and shaping and holds an extensive patent portfolio in these areas. Its technologies enable the identification of specific applications over the WAN and will enrich existing Blue Coat application intelligence technology. Packeteer has over 10,000 customers worldwide and an installed base of over 50,000 units. By acquiring Packeteer, Blue Coat will add 50 additional sales teams and over 1,400 channel partners to extend its reach into the WAN optimization market.

"Blue Coat has a proven history of efficiently and effectively integrating technologies and organizations, and can expeditiously add valuable Packeteer assets to Blue Coat solutions and operations upon closing the transaction," said Dave Côté, president and chief executive officer of Packeteer. "We believe our customers and channel partners all benefit from this move which results in having a more comprehensive solution for solving the application delivery challenges through advanced application discovery and the intelligent prioritization, security and control of business traffic across the WAN."

Added NeSmith, "Given the size of our respective global organizations and the complementary nature of our businesses, we will achieve substantial cost reductions and significant economies of scale almost immediately. Adding Packeteer's technology, expertise, channel partners and customer base will give Blue Coat a decisive competitive advantage that will help drive future business."

The acquisition will be effected through a tender offer for all of the outstanding shares of Packeteer, followed by a merger between Packeteer and a subsidiary of Blue Coat. The transaction is subject to customary conditions and is expected to close in the second quarter of calendar 2008.

Blue Coat will fund the acquisition through a combination of available cash and an $80 million convertible notes financing.

Merrill Lynch & Co. acted as exclusive financial advisor to Blue Coat in connection with the transaction. Davis Polk & Wardwell served as legal counsel to Blue Coat. UBS Securities acted as the exclusive financial advisor to Packeteer in the transaction, and DLA Piper US LLP served as legal counsel.