Partner Press Release

FalconStor Unveils Innovative Network Storage Services With IPStor Version 3.5

Offers Expanded Connectivity, Advanced Replication Services, SSD-Based I/O Accelerator And HyperTrac Backup Accelerator To Double The Speed Of 3rd Party Backup/Recovery Solutions

CHICAGO, September 17, 2002—FalconStor Software, Inc. (Nasdaq: FALC), a leading provider of network storage infrastructure software, today introduced IPStor version 3.5 at the Storage Decisions show, with new features offering businesses expanded connectivity, advanced replication services, SSD-based I/O Accelerator, and HyperTrac Backup Accelerator to double the speed of 3rd party backup/recovery solutions.

Highlights of key features in IPStor version 3.5 include:

• I/O Accelerator Option, utilizing high speed disks, such as Solid-State Disk (SSD), as a fail-safe cache to turbo-charge an ordinary disk's I/O performance.
• HotZone Option, an intelligent, policy-driven I/O performance optimizer that identifies frequently accessed "zones" of a disk and transparently substitutes them with storage from high speed disks such as SSDs. The performance of I/O intensive applications can be accelerated automatically by IPStor's ability to distribute the storage based on access pattern.
• HyperTrac Backup Accelerator, enhancing the speed of 3 rd party backup software several folds by offering a virtual drive to the backup server to access the target server's data at the speed of FC SAN with complete transactional integrity. This also eliminates the need to deploy open file agents, database agents, SAN sharing options, and other backup related software from all the application servers, further reducing the total cost of operation. Besides elimination of the backup window, the restore operation can also be performed at ultra high speed, which minimizes the downtime and maximizes the availability of mission-critical services.
• SCSI Target Mode, coupled with IPStor's "Service Enabler" technology, facilitates the integration of advanced storage services (Snapshot, TimeMark, Replication, etc.) with Direct Attached Storage (DAS) devices and enables on-line, real-time, migration of legacy SCSI-based disk array to Fibre Channel-based storage subsystems.
• Asynchronous Mirroring, for extending the distance of a mirror to remote locations.
• Replication over FC and SCSI, extending the replication protocol to include local or remote attached SCSI or FC disks using a single IPStor for Online/Nearline Disk-based Backup/Restore.

"The next, progressive step toward storage utopia is intelligent storage networking, which involves placing the smarts for critical storage functions in the network, where the intelligence can be leveraged across all storage arrays and servers," said Michael Fisch, senior storage and networking analyst at The Clipper Group, Inc., technology acquisition consultants based in Wellesley, MA. "Both HotZone and I/O Accelerator not only boost storage access speeds, but also lower overall storage costs by enabling enterprises to squeeze the most performance from a given storage infrastructure. FalconStor has again distinguished itself in the intelligent storage networking market."

"FalconStor's design to maximize the performance of a mixed storage environment of SSDs, RAIDs and hard disk drives corresponds well with our own. Our solutions and functionality are highly complementary, and when combined, enable businesses to experience higher performance for their mission-critical applications," said LeRoy Hand III, CEO of TiGi Corporation. "TiGi is pleased to be working with FalconStor in unlocking the full potential of SSDs." In addition to TiGi Corporation, FalconStor is also working with vendors such as Imperial Technology, INLINE Corporation, MTI Technology Corp., Solid Data Systems, and Texas Memory Systems to increase end-user awareness on the suitability of SSD usage in environments requiring high performance. IPStor version 3.5 will be available in Q4, and will be demonstrated at booth # 211 during the Storage Decisions tradeshow, September 17 – 18, in Chicago.

"We are excited about IPStor's ability to connect Imperial MegaRam SSDs and SANaccelerators into a SAN to both cache write commands and relocate Hot Disk Segments based on data access patterns. This policy-based functionality opens a whole new frontier for our data acceleration devices," said Robert David, CEO and president at Imperial Technology, Inc.

Other key features in IPStor version 3.5 include:

• Capacity-on-Demand, policy-based capacity management previously available only for Solaris, now made available for Windows NT, AIX and HP-UX platforms.
• DynaPath/IP and IP Trunking, to provide highly available network storage to mission-critical servers throughout the enterprise.
• Additional NAS enhancements, addressing LDAP/Active Directory, NetBIOs Alias, CIFS Auditing, and ACL and XFS support.

Today's announcement is lauded by FalconStor's industry partners:

INLINE Corporation
"IPStor's newest enhancements speak directly to the functionality of SSDs," said John Tibbits, CEO at INLINE Corporation. "Complementing the rich feature set of IPStor 3.5, with the ability to recognize and optimize the most frequently accessed data blocks, customers can ensure their applications reap the full benefits of INLINE's SSD, RamStor, and other storage solutions."

MTI Technology Corp.
"The new features in version 3.5 complement MTI's objective for customers to fully utilize all available storage resources while further reducing both management and ownership costs," said Phil Ruff, vice president of engineering at MTI Technology Corp. "IPStor's HyperTrac Backup Accelerator combined with MTI's Vivant offerings provide customers a truly 'serverless' accelerated backup, with little or no impact on the CPU and memory of the application servers."

SAN Solutions, Inc.
"The SCSI Target Mode Option of IPStor solves some real storage needs for businesses dealing with loads of increasingly critical multimedia data," said Harry Aine, president and CEO at SAN Solutions. "IPStor serves as a vital lifeline to the multimedia market to easily access vital storage services such as mirroring and replication. FalconStor technology will help multimedia production companies further improve operating efficiencies."

Solid Data Systems, Inc.
"FalconStor's I/O Accelerator and HotZone options brilliantly paves the way for SSDs to be a more integral part of an enterprise storage network," said Gary Taggart, vice president of sales at Solid Data Systems. "Our Solid-State Disk Systems used in combination with FalconStor's new, intelligent SSD-related options are a cost-effective means to enhance storage performance for a wide range of enterprise applications."

Texas Memory Systems, Inc.
"The new features of IPStor seem tailor made to maximize and efficiently use SSD technology," said Paul Kaler, vice president of technology at Texas Memory Systems. "The RamSan-210 used in conjunction with the I/O Accelerator and HotZone options of IPStor will provide businesses with higher performance, scalability, and efficiency, which will lead to a broader use of SSDs across the enterprise."

About FalconStor
FalconStor Software, Inc. (Nasdaq: FALC), offers network storage infrastructure software that dramatically reduces storage operating costs by aggregating and provisioning storage capacity and management services over Fibre Channel and IP-based storage networks. With unprecedented reliability, performance, manageability, and availability, FalconStor's flagship product, IPStor™, enables leading IT organizations and Service Providers to deploy a highly available network storage infrastructure to ensure business continuity. Founded in 2000, FalconStor is headquartered in Melville, NY. International offices include Paris, Tokyo and Taichung, Taiwan. FalconStor is a voting member of the Storage Networking Industry Association (SNIA) and Fibre Channel Industry Association (FCIA). For more information, visit www.falconstor.com or call 1-631-777-5188.

This press release includes forward-looking statements that involve risk and uncertainties that could cause actual results to differ materially from the forward-looking statements. These risks and uncertainties include: the early stage of FalconStor's business; delays in product development; market acceptance of FalconStor's products and services; technological change in the storage and networking industries; competition in the storage networking software market; the ability to achieve profitability; intellectual property issues; and other risk factors discussed in FalconStor's reports on Forms 10-K, 10-Q and other reports filed with the Securities and Exchange Commission.

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FalconStor and IPStor are trademarks of FalconStor Software, Inc. All other company and product names contained herein are trademarks of the respective holders.

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