Santa Barbara, CA, May 18, 2001 -- Green Hills Software, Inc., a leading supplier of advanced development solutions for embedded systems, today announced record sales and earnings for the first quarter of FY2001, surpassing Wind River Systems, Inc., (NASDAQ:WIND) in operating margin, revenue growth and earnings growth. Green Hills' revenues in the first quarter of 2001 were $12.1 million, an increase of 42% from the first quarter of 2000. Operating income was $3.4 million, an increase of 53% from the first quarter of 2000. Operating margin for the quarter expanded to 28% from 26% in the first quarter of 2000. Net income was $.08 per share, an increase of 100% from the first quarter of 2000.

Revenue: Green Hills Grows While Wind River Declines
Green Hills Software has seen a significant increase in customer spending, resulting in record revenues and earnings for FY2000 and sequential quarter-to-quarter revenue growth in the first quarter of 2001. In contrast, Wind River Systems' Q1 revenues declined 15% from the previous quarter, and Wind River predicts an additional 10% decline in revenue for Q2, which would result in revenues below the year earlier quarter. Wind River attributes its revenue decline to a "significant slowdown in near-term customer spending." Despite Wind River's lament of a "slowing of spending in the communications area" in particular, Green Hills Software's revenue from its Top 10 communications area customers grew by more than 130% from Q1-2000. This strong growth indicates customer confidence in Green Hills, and a shift from other suppliers such as Wind River Systems.

"We believe our continued growth is evidence of the strong customer preference for our more advanced technology, and for our superior royalty-free business model," said Dan O'Dowd, Green Hills Software's founder and CEO. "Recent economic conditions have caused customers to re-evaluate their suppliers. We see customers standing up and making a smart choice, selecting our more advanced INTEGRITY® real-time operating system and market-leading MULTI® embedded development tools to increase their productivity. Half of our first quarter growth was the direct result of customers switching from Wind River Systems to Green Hills Software."

Earnings: Green Hills EPS Doubles While Wind River EPS Drops By 45%
Green Hills Software's first quarter earnings per-share (EPS) doubled to $0.08 from $0.04 in 2000, while Wind River's EPS fell more than 45%, from $0.11 to $0.06. Since 1997, Green Hills Software's EPS has grown by 300%. By contrast, Wind River analysts predict that its EPS for this year will be about the same as it was four years ago.

Business Model: Green Hills' Royalty-Free Business Model Is Displacing Wind River's Royalty-Based Model
"Customers are moving away from Wind River's royalty-bearing products towards royalty-free real-time operating systems such as ThreadX® and INTEGRITY® from Green Hills Software," commented John Carbone, Green Hills VP, Marketing. "For example, we announced this quarter that Hewlett-Packard selected the ThreadX royalty-free real-time operating system for use in HP's Inkjet Printers and All-In-One products. ThreadX displaced Wind River's royalty-bearing VxWorks® real-time operating system. The loss of key customers indicates that Wind River's royalty-based business model is losing traction."

Operating Margin: Green Hills is Consistently High While Wind River is Dangerously Low
Green Hills Software increased its consistently high operating margins to 28% for the first quarter. Wind River reported an operating margin of only 4.8% for the first quarter, a sharp decline from 9.8% for their last fiscal year. Wind River also announced that they expect even further deterioration of operating margins in the second quarter. Wind River's low operating margins provide small margin for error. When Wind River experienced a revenue shortfall in the first quarter, which they expect to worsen in the second quarter, they resorted to layoffs, plant shutdowns, and encouraged "Friday vacations" in an attempt to remain profitable. "Wind River's recent announcement that their customers are buying less indicates that Wind River hasn't been able to adequately satisfy their existing customers even with their former staff working at full strength," said David Chandler, Green Hills Software's VP, Sales. "I don't see how they can possibly satisfy their existing customers, let alone new customers, with a staff reduced by layoffs, whose effectiveness is further reduced by forced shutdowns and 'encouraged' vacations every Friday." Green Hills is expanding its workforce in every department, including a 40% increase in engineering by the end of the summer. Green Hills Software's consistently high margins provide comfortable assurance to customers of continued support and long-term stability.

More On Green Hills Software

Founded in 1982, Green Hills Software, Inc., a privately held company, is a leading supplier of royalty-free real-time operating systems and software development tools for 32- and 64-bit embedded systems. Green Hills' solutions include the royalty-free INTEGRITY® and ThreadX® real-time operating systems. INTEGRITY® is the most advanced real-time operating system for products that require maximum reliability. The ThreadX real-time operating system is ideal for high-volume products that require the lowest unit cost. These real-time operating systems, fully integrated with Green Hills' market leading compilers and MULTI® Integrated Development Environment, provide total development and run-time solutions that address both deeply embedded and maximum reliability applications. Green Hills Software is headquartered in Santa Barbara, CA, with European headquarters in the United Kingdom. For more information on Green Hills Software products, please call 805-965-6044, email inquiries to sales@ghs.com.

Note To Editors: Green Hills Software and MULTI are registered trademarks and INTEGRITY is a trademark of Green Hills Software, Inc. ThreadX is a registered trademark of Express Logic, Inc. VxWorks is a registered trademark of Wind River Systems, Inc.

Except for the historical information contained herein, this news release contains forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those contemplated herein. Factors that could cause or contribute to such differences include but are not limited to timely development, acceptance and pricing of new products, the impact of competitive products and pricing, and other risk factors. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.