Xyratex has over 20 years of research and development experience in disk drive development, storage systems and high-speed communication protocols. We have been first-to-market with several of our data storage subsystem and test and process equipment products that complement our customers' core competencies and objectives.

Our research and development program is focused on the development of new and enhanced products that can support emerging communication protocols while continuing to accommodate legacy technologies. We believe that this focus positions us to capitalize on emerging technologies and standards, such as iSCSI, SAS, and AS, while continuing to support existing technologies, such as Fibre Channel, SCSI, SATA, ATA and both Gigabit Ethernet and 10 Gigabit Ethernet. We have also invested significantly in software and the design of programmable logic devices, such as Field Programmable Gate Arrays, or FPGA, and in the integration of switching technology into our range of storage subsystems.

Over the past three fiscal years, we have increased our research and development expenditures each year. We have consistently maintained approximately 30 percent of our employees in research and development during this period. These employees have an average of over ten years of experience in research and development. We typically undertake between eight to ten significant research and development efforts each year, in addition to a number of smaller research and development projects. We review the status of all of our active research and development projects semi-annually and make adjustments to the investment levels of these projects as needed.

We believe that our future success will depend in part on our ability to continue to deliver advanced products and technologies to all of the markets we serve. We maintain close long-term relationships with industry-leading companies, including both customers and suppliers, in order to develop tailored products to meet specific customer requirements. We enter into joint development projects with our customers. Our close relationships with both customers and suppliers give us an insight into industry trends and the future needs of the industry which enables us to focus and prioritize our investment in future research and development.

We carry out our research and development activities in Havant, United Kingdom; Chicago, Ithaca, Lake Mary, San Jose and Scotts Valley, United States; and Seremban, Malaysia.