OPSWARE INC (LDCL) IPO

We estimate that we will receive net proceeds of approximately $137.9 million 
from the sale of 25,000,000 shares of our common stock in this offering, or 
$158.8 million if the underwriters' over-allotment option is exercised in full,
after deducting the underwriting discounts and commissions and the estimated 
offering expenses payable by us. The proceeds from our sale of shares to Compaq
upon the completion of this offering will be $5.0 million. 

The principal purposes of this offering are to raise funds, create a public 
market for our common stock, facilitate our future access to the public capital 
markets and increase our visibility. We intend to use the net proceeds of this 
offering primarily for general corporate purposes, including working capital 
and capital expenditures. The amounts and timing of these expenditures will 
vary depending on a number of factors, including the amount of cash generated 
or used by our operations, competitive and technological developments and the 
rate of growth, if any, of our business. We may also use a portion of the net 
proceeds to acquire additional businesses, services, products or technologies 
or invest in additional businesses that we believe will complement our current 
or future business. However, we have no specific plans, agreements or 
commitments to do so and are not currently engaged in any negotiations for any 
acquisition or investment. As a result, we will retain broad discretion in the 
allocation of the net proceeds of this offering. Pending the uses described 
above, we will invest the net proceeds of this offering in cash, 
cash-equivalents, money market funds or short-term interest- bearing, 
investment-grade securities to the extent consistent with applicable 
regulations. We cannot predict whether the proceeds will be invested to yield a
favorable return.

The market for Internet infrastructure services is rapidly evolving and 
intensely competitive. We expect competition to persist and intensify in the 
future. 

In addition to in-house solutions, our primary current and prospective 
competitors include: 

. providers of co-location or web site hosting and related services; 

. technology vendors that have recently announced their intentions to offer 
some of the services that we offer currently to a portion of our targeted 
customer base; and 

. providers of Internet systems integration or professional services. 

Many of our competitors have longer operating histories, significantly greater 
financial, technical, and other resources, or greater name recognition than we 
do. Our competitors may be able to respond more quickly to new or emerging 
technologies and changes in customer requirements. Competition could seriously 
harm our ability to sell additional services on terms favorable to us. 
Competitive pressures could cause us to lose market share or to reduce the 
price of our services, either of which could harm our business, financial 
condition and operating results. 

We believe that the principal competitive factors in our market include: 

. quality and reliability of services offered; 

. scope of supported applications and technology platforms; 

. scalability of the operational environment supported; 

. extent to which the services offered provide a complete solution to a 
potential customer's operations requirements; 

. engineering and technical expertise and development of automation software; 

. rapid deployment of services; 

. quality of customer service and support; and 

. price. 

Although we believe our services compete favorably with respect to each of 
these factors, the market for our services is new and rapidly evolving. We may 
not be able to maintain our competitive position against current and potential 
competitors, especially those with greater resources.