Enea Capital Market Day...2 Enea Capital Market Day, October 13, 2005 Program 9.30 Introduction...

Enea Capital Market DayOctober 13, 2005

2 Enea Capital Market Day, October 13, 2005

Program9.30 Introduction Johan Wall * Overall presentation of Enea, with the focus on

business concept, strategy and values

10.00 Financial overview Håkan Gustavson * From consulting business to a product company –

financial implications

10.15 Embedded Technology Per Åkerberg * Embedded software in a changing

10.45 Break

11.00 Enea Product Offering K-G Niska * Presentation of the Enea software

11.30 Eneas consulting services Patrik Holm * Professional services solutions

12.00 Summary Johan Wall * Overview of Enea’s position today, the repositioning

effort and reflections on future developments

12.15 Questions and Answers

12.30 Lunch


Enea in Brief

• Global software company with a Market trends and driversstrong professional services offering

• Customer value through complete embedded solutions, reduced development time and cost

• Revenue SEK ~700 m

• 500+ employees


Enea officesProduct distributorsOther Enea offices

Enea Worldwide


Enea Market Segments


Software -OSE, Real Time Operating System- Polyhedra, In Memory Database- Element, Application Development and High Availability Middleware

Consulting services - Application development, systems integration, testing- Hardware and software design- Training- 300 professional consultants

Third party products - Best of breed tools, network protocols and applications

Market Offering


Telecom Infrastructure Software

HW

RTOSOSE

MiddlewareElement ™

Application Application Application

Polyhedra


Some of Enea’s Clients

Financial OverviewHåkan Gustavson



Enea ShareSEK

0,00

2,00

4,00

6,00

8,00

10,00

12,00

14,00

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2001 2002 2003 2004 2005

Share January 1, 2000: SEK 70


Net Sales Enea Group

mSEK

0

50

100

150

200

250

300

2001 2002 2003 2004 2005

Q1 Q2 Q3 Q4


EBIT

-160

-140

-120

-100

-80

-60

-40

-20

0

20

402002 2003 2004 2005

Q1 Q2 Q3 Q4

mSEK

3,3% EBIT margin in 2004

6,5% EBIT margin until June 2005

Profitable during repositioning


Net Sales per Employee

0,0

50,0

100,0

150,0

200,0

250,0

300,0

350,0

400,0

2001 2002 2003 2004 2005

Q1 Q2 Q3 Q4

kSEK

Number of employees• Jan 1, 2001: 889 (1,060 kSEK per employee and year)• Jun 30, 2005: 516 (1,428 kSEK per employee and year)


Repositioning into a Software Company

0

10

20

30

40

50

60

70

2003 2004 2005

Q1 Q2 Q3 Q4

Software sales, mSEK

Operational target 50 % software

Products30%

Services70%


Solid Financials

0

20

40

60

80

100

120

140

160

180

2002 2003 2004 2005

Q1 Q2 Q3 Q4

mSEK

Equity Issue mSEK 81

June 2005:Cash mSEK 159Equity mSEK 293


IFRS - International Financial Reporting Standards• The new IFRS take effect from 2005• This implies that goodwill amortization

according to plan is not applied• Goodwill items are subject to quarterly

impairment testing• Enea had a goodwill item of 91.3 mSEK per

June 30, 2005 from acquisitions of Enea Epact AB, Enea Embedded Technology AB, TekSci Inc. and Enea GmbH


Capitalized Development Costs

• OSE 5– Book value per January 1, 2005: 16.7 mSEK – Amortization over a five year period, from mid

2004, at 3.7 mSEK/year


-40-30-20-10

01020304050


2001 2002 2003 2004 2005

Our Financial Goals

Enea´s long-term financial goal is to, over a full business cycle, achieve:• Annual growth of at least 15 percent• EBIT margin of 10 percent

-100

-80

-60

-40

-20

0

20


2001 2002 2003 2004 2005

Net sales year on year growth per quarter% %

EBIT margin per quarter

15 %

10 %


Embedded TechnologyPer Åkerberg


Enea’s Software enablesCustomers to achieve:

• Shorter time-to-market• Lower costs for development

and Bill of Material costs • High performance and reliability


OSE - OSE Delta, the ”full fledged” RTOS- OSEck, ”compact kernel” optimized for DSP’s- OSE Epsilon, minimum footprint and maximum speed

Polyhedra - Lightweight in memory real-time database- Uses Industry standards, including SQL, ODBC, JDBC- Runs on Unix, Windows and several RTOS’s;operates cross-platform

Element - Application Development and High availability framework- Debugging and upgrading in run time- Runs on Linux and OSE

Three Product Families


Wireless Value Chain

Protocol Stacks: TTPCom, Interpeak,Sasken, MCCI, Interdigital

RTOS (ARM + DSP) : OSE,Nucleus, BIOS, u-Itron, NOS, REX

HW, Chipset, Baseband (ARM + DSP) Application processor(ARM): TI, Freescale, ADI, Agere, Infineon, STM, Intel

Application Platform: Openwave, Obigo, Access, SKY, Trolltech, CMS

Subscribers, End-users

Mobile Operators: Vodafone, Orange, TIM, NTT Docomo, Cingular etc

Smart-phone

OS:Symbian

MSPalmLinux

Mobile ManufacturerTier 1: Nokia, Samsung,Motorola

Mobile ManufacturerTier 2: LG, SonyEricsson,Siemens, ZTE

ODM/ODE: Bellwave BenQ, Flextronics/Microcell,Compal, Arima, CellOn

PlatformEMP

(GSM,WCDMA)

PlatformQualcomm

(CDMA,GSM,

WCDMA)

PlatformOthers

OPA, BREW, Series 40, OMTP, ...

Applications, Games, UI

Java: Sun, IBM


Telecom Infrastructure Value Chain

Processors(Freescale 8641, Broadcom 1250, Switchcore etc).

Boards and Systems(ATCA from Motorola, Mercury etc.)

RTOS(OSE, Linux, VxWorks etc.)

MiddlewareElement, Clovis,

GoAhead etc.

ProtocolsNexthop, RadVision, DCL, Interpeak etc.

Compilers, Debuggers

IDEs(Green Hills,Windriver,

Metrowerksetc.)

High End Tools

(Telelogic, Ilogix,

Virtutech etc.)

Data BasesPolyhedra,

Birdstep, Solid etc.

Enea IP

Partners Customer Application


Nokia

OSE was selected for:– A simulated environment– Full Memory protection on the PowerPC

provided by the OSE Memory Management System (MMS)

– Multiple processors support

Nokia chooses OSE for the development of their transmission system.


Volvo Powertrain Corporation

OSE Epsilon was selected for:– Great performance and small footprint.– OSE Epsilon’s well integrated environment

with other software products (such us Telelogic tools)

– Its ability to easily integrate new Volvo designs with completed components already supplied by Enea Embedded Technology

Volvo chooses OSE Epsilon to build an embedded control system.


Newport Networks Ltd

Polyhedra was selected for:– Reduced product development and maintenance

costs.– It offered the performance and functionality they were

looking for in a real-time database– Use of industry standards – SQL and ODBC – eased

adoption.– Its availability on a variety of platforms allowed them a

free choice of operating system

Newport networks chooses Polyhedra for its MediaProxy™data switch


RTOS Competitors and Market Penetration

Source: VDC 2004 report

28% 25%

14%

9%6%

7%4%

3%2%

2%

MicrosoftWindSymbianPalm SourceEneaGreen HillsMonta VistaQNXMentorLynux

Total market value 2004: 905 mUSD


Market- Position- Broadness

Technology- Embedded / Real-time- Advanced Technology

Wind RiverMicrosoft

Green Hills

Mentor Graphics

QNX

Enea

Monta Vista(Linux)

Symbian

Server & desktop OSNiche market players

Competitors and Market Position


Outlook for Embedded System

1. The embedded market is a growth market

2. The open source community has been established

3. Moore’s law broken

4. Consolidation and or partnerships in the market to take bigger responsibilities & market shares


1. The Embedded Market is a Growth Market

• Leading industries– Consumer, telecom/datacom, Industrial, Mil/Aero– Enea plays in all these boxes

• Fastest growing industries– Consumer, Automotive, Military/Aerospace, and Medical– Enea positioned to expand presence in key growth industries

– EE-MED, EE-Auto, OSE for Wireless

• Forecasted CAGR 24% through 2007

• In 2010 it is estimated we will have hundreds of embedded processors per person


2. The Open Source Community has been established

• Linux , ATCA, SAF, OCAF, Power.org, Eclipse, SUN/Solaris, Fujitsu Sparc, StarCore

• Open source does not mean freeware

• Enea’s desired position is to combine our products offering with Linux which means best of both worlds

• Enea Link concept and Hybrid OS (OSE and Linux co-exist on single CPU)


3. Moore’s Law broken

• You can’t put more power in the single CPU (processor). But the end customer requires more functionality

• Enea will release support for Multicore during 1HY 06• Enea OSE supports today distributed systems


4. Consolidation and/or Partnerships in the Market to take bigger Responsibilities & Market Shares

• Time to market is everything for our customers• OEMs wants fewer supplier who can take bigger responsibilities• OEMs want their vendors to offer pre integrated solutions

• Enea’s approach to the market is to offer a complete embedded solution with Enea product as well as 3rd party products

• We are integrated with best of breed products in related technology areas

• We are actively looking how we can enrich our product portfolio


Enea: A Strategic Partner

• Market Leader• Global Organization• Proven, Future-Proof Technology• World Class Service Organization• Total Device Software Solution• Fastest Time to Market• Lowest Total Cost of Ownership

Enea Product OfferingKarl-Gustav NiskaEnea Capital Market Day

October 13, 2005


CPU

DSPDSP

CPUCPU

Product Portfolio - OSE- Scaling Capability -

DSP

CPU

OSE

OSEck

Enea LINK

DSP

CPU

OSEck

OSE

Enea LINK

DSP

CPU

OSEck

OSE

DSPDSP

Enea LINK

DSP

OSEck

OSE OSE

OSE OSEck

Multi-Core


Product portfolio – OSE- Linux and OSE co-existence -

DSPDSP

DSP

CPULinux/OSE

OSEck

Enea LINK

DSP

OSEck

DSPDSP

Enea LINK

DSP

OSEck

Wireless Orchestra Orchestra

CPUCPU

OSE

CPUCPULinux

CPU

OSE

OSE OSEck

Multi-CoreLinux

DSPDSP

Enea LINK

DSP

OSEck

CPUCPU

OSE

CPUCPU

Linux/OSE


Product Portfolio – Element & Polyhedra

Element Polyhedra

DSPDSP

DSP

CPULinux/OSE

OSEck

Enea LINK

DSP

OSEck

DSPDSP

Enea LINK

DSP

OSEck


CPUCPU

OSE

CPUCPULinux

CPU

OSE

OSE OSEck

Multi-CoreLinux

DSPDSP

Enea LINK

DSP

OSEck

CPUCPU

OSE

CPUCPU

Linux/OSE


What is HA Middleware?

High Availability Hardware PlatformsHigh Availability Hardware Platforms

Operating System Operating System –– RTOS, CGLRTOS, CGL

High Availability MiddlewareHigh Availability Middleware

HighHigh--Level MiddlewareLevel Middleware

Database, CORBADatabase, CORBA

UserUser

ApplicationsApplications


What is HA Middleware?Core Services

• Distributed programming • Messaging, discovery• Event Logging• Debug & Inspection

High Availability• Fault Management• Hot Upgrade• State Checkpoint

Management• Provisioning• Monitoring•Chassis/Shelf• Accounting


Traditional HA Middleware Development• In-house AND custom• Reinvented over and over for new platforms• Little perceived value outside of

development department• TTM requirements tend to force designers

to cut corners• Diverts resources from core application

development


The HA Middleware Market• Estimated HA Middleware Market - $100M

USD *• Future Growth Estimates vary wildly – from

20-80% CAGR over next 6 years• Our belief – market growth will be on the

high side– Emerging Market – very early days

• Many customers don’t know that Middleware products exist

• Open Standards (SAF) are just now being approved

– Customer development model is changing• Competitive/Efficiency pressure• Customers drives the standards

process

* Source Wintergreen Research


Element History• HA Middleware Solution developed by

Equipe Communications- Former Enea customer and strategic

partner- Market opportunity validated with

customers- Enea acquired assets and employees

Q2-2005

• HA Middleware product is relatively mature

- Developed, tested and maintained for over 5 years

- Deployed on a hardware platform- Tested by major tier 1 telecom service

providers


Value Proposition – Time to Market

Architecture

Application Development

HA-MWPort

PlatInt

Application/Platform Int

Architecture

Application Development

HA-MW CodeConstruction

PlatformIntegration

Application/Platform Integration

Time

”Traditional”

Element-assisted


Value Proposition – Reduce Cost

Development cost• Developing equivalent - service layer from

scratch- +40 man-years of development- +500.000 lines of Code

• Cost of “porting” Middleware is a small fraction of this

Total cost of ownership• Use Enea for new features and maintenance• Outsource porting to new HW• Professional Services


World Wide Packets

Element was selected for:– Save time to market– The extensive HA-functionality– Performance of Element running on OSE– Multi-faceted technology and services offering

World Wide Packets a leader in carrier Ethernet service fiber to home has chosen Element for their next generation product.


Element’s Competitive Landscape• Motorola/Netplane - Hardware, CGL from a

trusted supplier– Significant functional deficiencies in their

HA-offering – Compelling headline story, but…

• GoAhead - has pioneered the Middleware market

– No source code availability– Private company, financial stability concerns– Better suited for “application servers”, not

embedded

• Clovis - startup with a new, clean-room Middleware design, partnering with Large Suppliers (IBM, HP)

– Start-up company…– Better suited for “application servers”, not

embedded


Element Pros and Cons

Element Pros– True embedded solution– Depth of experience in Embedded Systems, High

Availability– Enea’s solution offering is proven to be strong on the

market

Element Cons– Evolution to “open” hardware/software ecosystem

• Linux, ATCA, SAF support– Establish partnerships with ecosystem vendors


Element Future

• A handful of customers in 2005• Major product features will be released in

Q1/Q2-2006– Full Linux support– SAF HPI – support standard platform

interfaces• Partnerships with major ATCA Hardware

Distributors• Market expected to hit mainstream growth in

2007


Enea offers you an Operating Platform!

DSP

DSP

DSP

CPULinux/OSE

OSEck

Enea LINK

DSP

OSEck

DSP

DSP

Enea LINK

DSP

OSEck


CPUCPU

OSE

CPU

CPULinux

CPU

OSE

OSE

OSEck

Multi-CoreLinux

DSP

DSP

Enea LINK

DSP

OSEck

CPU

CPU

OSE

CPU

CPULinux/OSE

High Availability Hardware PlatformsHigh Availability Hardware Platforms

Operating System Operating System –– RTOS, CGLRTOS, CGL

Element Element –– HAHA--MWMW

HighHigh--Level MiddlewareLevel Middleware

Database, CORBADatabase, CORBA

UserUser

ApplicationsApplications


The Element advantage - Summary

• Tried and true off-the-shelf HA Middleware solution

• Element reduces time to market, development cost

– Cuts product development time by as much as 50%

– Cuts software development cost by up to 50%

• A future proof Operating Platform– Full Scalability– Excellent Real-Time embedded capabilities– Linux co-existence– Good generic platform support

• Lets customers focus on value-added Application Development

Consulting ServicesPatrik Holm



Consulting Services• Consulting Services Nordic

– Stockholm, Gothenburg, Malmö and Linköping– 270 employees + >100 subcontractors

• Consulting Services Europe– UK, Germany and France– 5 employees

• Consulting Services US– Phoenix Arizona– 65 employees


Our expertise• Continuously exposed to new

challenges and learning experiences, we have a very good background

– M.Sc. (Ph.D.)– 37 years average age– 5+ years in average with Enea– Our own courses and seminars


Our OfferDesign of embedded systems with real-time requirements• Systems design, architecture and application development• Systems integration• Test environments, testing, verification and quality assurance

Training

ConsultancyServices

Products Cust

omer

’s v

alue

chai

n Maintenance

Test

Development

System ArchitectureSystem Architecture

Business Case


Our offer

• Long-term partnerships– Outsourcing

• Turn-key solutions– Responsibility for a complete

projects, from requirement specification to test phase

• Consulting and training– Experienced, highly

committed and creative consultants who are experts in realtime technology and design of embedded systems

Outsurcing

Complete embedded solutions

Complete embedded solutions

Consulting and training


Embedded systems

HW HW platformplatform

SW Platform / Middle WareSW Platform / Middle Ware

ApplicationApplication

Operating SystemOperating System


SoftwareHardware Solutions

Complete Embedded Solutions are …

ComCom 11 ComCom NN BTBTGSM/GSM/

GPRSGPRSGPSGPS DiagnDiagn

CommunicationCommunication

MemoryMemoryErrorError

handlerhandlernn1nn1 nn2nn2 nn3nn3

ComCom 11 ComCom NN BTBT GSMGSM GPSGPS ...... ......

Hardware Hardware AbstractionAbstraction LayerLayerRTOSRTOS

Hardware Driver Hardware Driver LayerLayer

PlatformPlatform LayerLayer

CoreCore

HardwareHardware

+ +=


Our customers want to ...

• Bring their products to market on time• Reduce total cost• Reduce lead-time• Flexibility• Quality


Competitors

• Internal– R&D departments

• Domestic– Combitech– TietoEnator– Teleca– HiQ– …

• International – low cost– Wipro– Ericpol– …

• Local (5-50 employee)– Softhouse– Endevo– Atero


Focus 2004 - 2005

• Performance• Reputation - profile and image• Commitment• Growth• Embedded solutions


Performance

Interim Report January 1 – June 30, 2005 forEnea Systems AB:

Net sales 153,5 MSEK (160,8 MSEK) – 4,5%Operating profit 17 MSEK (9,1 MSEK) + 87%• Three divested operations 2004 (100 employees)


Reputation - profile and image

Recent external Customer Survey results:• 50% say that Enea is better than competition• 50% say that Enea is as god as competition• Consistently higher quality level• Profile: Recruiting the best professionals• High competence, MSc• More efficient • Social• Embedded systems• Unique competence

– Embedded systems– OSE– Architecture and design– Test– Telecom


Market trends and drivers• Increased willingness to invest among our

customers– The telecom sector continues to be the driving

force• Ongoing price pressure

– Continued focus on cost control and increased efficiency

– Competition has remained aggressive• Integration with customers

– Preferred supplier status – Vertical knowledge– Horizontal knowledge – Geographical expansion– Low cost

• Reduced complexity, time to market and cost– Complete embedded solutions (more products)– Few preferred suppliers


Focus 2005 -• Performance

– Relentless innovation and continuousimprovement

• Reputation (profile and image)– The world’s best and most-trusted supplier of

embedded technology solutions• Commitment

– The employer of choice for top professionalsin our industry

• Growth– A global growth company with increasing

market share• Embedded solutions

– From: Consulting To: Solutions– From: RTOS To: Complete integrated

embedded solutions– From: Consulting and software as separated

offerings To: One integrated offering– From: Time-and-material projects

To: Functional projects

SummaryJohan Wall



Our Vision

To be the first choice for innovative embedded solutions that change the world


Industry Outlook

Software• Fewer suppliers• Integrated solutions• 3G deployment• Price stability

Consulting• Solid demand• Price pressure, specifically in

Swedish market


Enea Share of Software Spend

$/unit

time

AverageSelling Price (ASP)

Element™

X

OSE

Hardware

Software


Development Process

TELELOGIC

RATIONAL (IB

M)

MENTOR

GREEN HILLS

WIND

LAUTERBACH

MENTOR

ENEAWIN

DMENTOR

GREENHILLSQNX

MONTAVISTA

DESIGN SIMULATION

DEVELOPMENTTOOLS(COMPILATIONDEBUG)

TEST .EXE


Enea Expansion Possibilities

Wider tools offering…

…and upwards in the software stack


Our Strategy• Growth

– New products– Geographic expansion– Broaden customer base

• Competitiveness– Platform independent software– Related services and 3rd party products– Middleware integration

• Profitability– Recurring revenue model– Cost efficiency


Summary

• Complete and integrated solutions• Intensified market orientation• Focus on profitable growth

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Enea Capital Market Day...2 Enea Capital Market Day, October 13, 2005 Program 9.30 Introduction...

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