embedded solution company - mds technology co., ltd. investor relations 2008

Embedded Solution Company -

MDS Technology Co., Ltd.

Investor Relations 2008

Trend of Embedded Industry

Contents

Company Overview

Business Domain & Products

Competitive Edges

II

III

IV

I

Investment ProposalⅤ

2

Mobile phone, Car Navigation, PMP,

Automobile, Aerospace,

Digital TV, IP set-top box …

HW

Platform

LCDDisplay

Peripheral

CPU NetworkMemory

D-STB 성장성과 과도한 경쟁가능성에 대한 오해

Application

Middleware

OS

Develo

pm

en

t solu

tion

Embedded

SW

● Embedded SW includes all electrical control SW embedded into the products, such as Mobile phones, Car Navigation, Digital TV, Automobile and Aerospace, etc.

Embedded System

Ⅰ. Trend of Embedded Industry Ⅰ-1. Embedded system

3

● Application of embedded SW is diversified that expects the market size around 10billion.

Defense/Aerospace

Automotive

ElectronicAppliance

Mobile PhoneDigital device

DevelopmentTool

OS Bundle EICS

IndustrialComputer

DevelopmentTool OS Bundle Application

EICS

Mathworks

Lauterbach

IBM

MS

Windriver

Greenhills

Kontron

Radisys

MDS

Mathworks

IBM

MDS

WindRiver

Adventech

Kontron

( MDS )

Advantech

InfrawareNeomtel

MDS

SW

Global Market Korea

Market size US$1.5B US$0.8B US$5B US$80M US$50M US$300M US$100M

EICS = Electronic Integrated Computing System

Ⅰ. Trend of Embedded Industry Ⅰ-2. Market Size

4

● Contains very high growth potential● The demands from each market are vary, however, each industry cooperates and integrates very closely

The trend of embedded industry reflects on our business

structure & model

Ⅰ. Trend of Embedded Industry Ⅰ-3. Market trend

• Requires close relationship with chipset vendors• Requires development tools for design and bug detection

• Unlike PC market, each application requires different SW & solution• US$10M~200M sized segment markets are played by a few companies

• Systems tends to equip more electronics • High profitable industry/increase in SW proportion (ex) mobile phone / Automobile• Over 95% of embedded system manufactured in-house

Characteristic of embedded marketCharacteristic of embedded market

Huge market / Limited competitionHuge market / Limited competition

Very high in growth potential Very high in growth potential

5


Contents

Company Overview


Competitive Edges

II

III

IV

I


6

Financial Statement (FY 08(E), Unit : KRW billion)

55.8Sales Revenue

Operating Income

Net Income

Total Assets

Total Capital

5.24

4.17

45.3

Overview

CEO

Foundation

Address

Homepage

Sangheon Lee

1994. 3 (Incorporated in 1998)

15Fl. Kolon Bilant 222-7 Guro3-dong Guro-gu, Seoul, Korea

152-77 www.mdstec.com

Overseas Subsidiaries

Korea

IndiaSingapore

Australia

(31%)

(19%)

(2%)

(2%)

(46%)

Stockholder Status (As of October, 2008)

Controlling shareholder, etc

Treasury stockInstitutional

Investor

Others

Venture Capital

<Remark> ▲ Par Value : \500

▲ No. of Listed Stock : 9,501,280

33.0

Malaysia

Ⅱ. Company Overview Ⅱ-1. Overview

7

8

● MDS has led the history of Korean Embedded SW Industry

Embedded Development ToolProvider

Embedded Development ToolProvider

The Leader of Embedded Development Tool Business

The Leader of Embedded Development Tool Business

No.1 Total Embedded Solution Provider in Korea

No.1 Total Embedded Solution Provider in Korea

- Selected for the ‘MDS’ Project by the Government

‘97

- dSPACE (Design Automation tool) launched - Founded a branch in India

‘04

-Selected for SW Flagship Government Project – Developing aircraft Real-time OS - NEOS RTOS, Awarded ‘New SW’ by Ministry of Information & Communication

‘07

- MDS Technology established

‘94

-Founded Singapore branch-Awarded Digital prize by Ministry of Information & Communication

‘03

- Selected for Digital Appliance PostPC Government Project Supervisor by MOCIE

‘01

-R&D Center established‘00

- Selected for Embedded Development System Project Supervisor by MOCIE

‘99

- Listed in KOSDAQ(086960)- MDS Networks, a subsidiary founded

‘06

-Founded a branch in Australia-IT Venture Award by IT KOIVA

‘05

Founding Years ▶

(1994 ~ 1997)

Founding Years ▶

(1994 ~ 1997)

Growth Years ▶

(1998 ~ 2004)

Growth Years ▶

(1998 ~ 2004)

Expanding Years ▶

(2005 ~ )

Expanding Years ▶

(2005 ~ )

- Partnered with Microsoft for Windows Embedded Business

‘98

-Merged DST Corp.

Ⅱ. Company Overview Ⅱ-2. History

- KONTRON (EICS) business launched ‘08

9

Sociology, Seoul National Univ.Overseas Sales in KolonCorporative Planning in Kolon Group Certificated CEO Course in KAISTUS UCSD MBA

English, Hankuk Univ. of Foreign StudiesOverseas Sales in Samsung ElectronicsSales/Planning in Doo-in ElectronicsCEO /DST Corp.

Management, Seoul National Univ. Planning in Kolon GroupCorporative Planning In Kolon Group

Computer Engineering, Seoul National Univ. Computer Engineering in KAIST (Master)SK C&C S/W DevelopmentCyberbank S/W Development

CEO / Sangheon LeeCEO / Sangheon Lee CEO / Charles NaCEO / Charles Na

CTO / Myung-sub ChangCTO / Myung-sub Chang CFO / Moon-kyu SongCFO / Moon-kyu Song

Ⅱ. Company Overview Ⅱ-3. Executives


Contents

Company Overview


Competitive Edges

II

III

IV

I


10

11

Embedded SW Development Tool

Embedded SW Development Tool

● No.1 Embedded Solution Company in Korea Providing One-stop Solution & Services

Debugger, Compiler

Ⅲ. Business Domain & Products Ⅲ-1. Products

Embedded SW Embedded SW

Embedded Solution TrainingEmbedded Solution Training

Automotive Solution

SW Testing Solution DMB Solution

Firmware / Embedded OS / Development Tool / Engineering Course

Windows Embedded OS

Windows CE & Mobile Solution

OthersOthers

Device solution (MID, PMP)

EICS

UWB, Multimedia chip

12

Windows Embedded OS

Major ProductsOverview

Features & Advantages

Windows CE, Windows XP Embedded, Embedded Server OS, Classic Desktop OS Microsoft Windows Operating system for embedded devices

- Car Navigation, PMP, ATM, DVR, IP set-top box- Samsung Techwin, LG Nsys, Nautilus Hyosung, Geotel, Reigncom…

- A comprehensive operating system platform with proven performance and reliability- Providing highly customized device designs on a flexible platform with easy-to-usedevelopment tools that enables to reduce development time and cost- Ecosystem partner network with world leading silicon vendors (IHVs, ISVs)- No.1 partner of Microsoft in Asia

Target Market & Customers


13

Debugging Tool

TRACE32-PowerDebug/PowerTrace/PowerProbe

- Mobile, Digital devices, Consumer Electronics, Automotive, SoC, etc - Samsung Electronics, LG Electronics, Pantech, Hyundai Motor, etc- A set of modular microprocessor development tools which major chip vendors recommend (support more than 350 different CPUs)- Support the latest various development environment- Maximize the efficiency of customer’s development by providing optimal embedded systems development solutions




- ‘De facto standard’ debugger in worldwide


14

Automotive Solution

dSPACE- Design automation tool for automotive and aerospace- Supports all development phases from block diagram function prototyping, automatic production code generation to ECU testing and calibration.

Rapid control prototyping

Calibration

Hardware-in-the-loop simulation

Automatic production code generation

Graphical Modeling and

offline simulation

EB tresOS

EB FlexRay Solution

- Modular and static RTOS for automotive- Support all common microcontrollers in the automotive sector- SiemensVDO, BMW, Audi, Volkswagen, DaimlerChrysler

-Development Solution for FlexRay Network communication protocol for automotive-Total solution covering design, modeling, prototyping and analyzing the FlexRay Network


15

SW Testing & Service

QAC, CodeSonar, VectorCAST, TestQuest Pro, Unicorn, Polaris

Solution & services for software testing to ensure the safety and quality assurance

-Automated quality & functional testing-Memory leak detection solution -Source code analysis solution-Static/Dynamic testing solution



- Mobile/Telecom, Consumer Electronics, Automotive, Military, etc - Samsung Electronics, LG Electronics, SKT, Hyundai Motor, etc



16

Device Solution

- Navigation + Mobile TV- PMP, PND- IP Set-top Box, Home controller

- Car Navigation, DMB, Home Network, IPTV- Xroad, Reigncom, Neochips, Reneco, Icontrols- Japan, Europe, South America

- On-demand one-stop service - Selective customization from design to manufacturing - Proven and distinguished quality management system

Better time-to-market providing outstanding rerun-on-investment for the customers

Overview

Benefits



- Providing ODM (Original Design Manufacturing) service- Helping customers to design, engineering and build products from original idea

Major Products


17



DMB Data Broadcasting

Solution

- Multimedia solution for smart phone and PDA, PIMS & Utility Applications- Microsoft Windows Embedded SI Partner (Gold Partner)- Messaging solution (MMS, SMS, SMIL), Camera & Camcorder solution - Platform : Windows Mobile 6.0, Windows CE- BIFS · Binary Format for Scenes is the MPEG-4’s scene description language, designed for representing, delivering and rendering interactive and streamable rich-media services

- TPEG · Transport Protocol Experts Group · Providing the TPEG decoder for delivering traffic and travel information contents through DMB

<MMS> <BIFS> <TPEG>


18

Other Products & Services

NEOS RTOS

Test & Measurement

s

- Real-time OS (RTOS) for embedded system- Developing the core technology for air-craft(T-50) - Assigned by SW Flagship Project – under the consortium of Korea Aerospace Industries

- Agilent Technologies (Universal instruments) - Digital Broadcasting / Electronic Power Test & Measurement- USB Protocol Analyzer /Noise Analysis

SoC Solution

EDA Solution

- RMI Alchemy chip : Power-optimized and high-performance SoC for digital consumer products including PMP, Navigation, etc. - ZigBee chip : ZigBee ready solution which covers chip, module, software

- Electronic Design Automation - Acceleration and Emulation for design verification- Altera FPGA solution distribution- Impulse C : C-to-FPGA solution distribution

Embedded Solution Training

- MDS Academy : The biggest embedded solution training center in Korea- The most up-to-date industry technology curriculum with hands-on training- Produced the largest number of trainees in Korea : more than 10,000 each year

EICS (Industrial Computer)

- Standard-based and custom embedded and communications solutions for OEMs, Systems, integrators and application providers such as industrial automation, telecommunications, medical, infotainment, defense and aerospace.


MSWindows

Embedded OS

Debugger SW TestingDesign

Automation

SWSolution

Defense/Aerospace

Automotive

Digital Device/CE

Mobile

Boards/SoC

EICS

Industrial Computer

EmbeddedOS

<Remark> The size of circle stands for gross profit.

Development Tool

Stagnation

Growing

Develop

Debugger

Mobile Phone

SWDevice

SW DeviceHW

MobilePhoneTesting

SWTesting

Electronic Control Solution

● MDS is No.1 Embedded Solution Provider covering every Embedded SW industry in Korea.

Ⅲ. Business Domain & Products Ⅲ-2. Business Domains

19

Total

• SW upgrade would be a major issue for smart phone market

• Demands for ECU development solutions and test automation expect to be increased in defense and aerospace industry, especially automotive industry• Demands for commercial OS and its pricing are expected to increase• Development of new market such as MID and IPTV• Mobile solution market expects to be increased due to the growth of smart phone market• Needs for communication module for digital device such as MID• Special purpose chip such as UWB chip expects to be increased• We expect to be a major player in industrial computing market

● High feature digital devices such as smart phone and MID will be required more and more embedded solution.● Many markets, especially automotive, are expected high in growth.

25.6

16.8

13.4

55.8

EmbeddedDevelopment

tool

Revenue

FY08 FY12 CAGRMarket Analysis

EmbeddedSW

Others(Embedded

Board)

42.1

26.0

14.9

87.9

13%

12%

3%

12%

(Unit : KRW billion)

Ⅲ. Business Domain & Products Ⅲ-3. Projection

20


Contents

Company Overview


Competitive Edges

II

III

IV

I


21

Goal

Benefit

Fact

<Remark>• (ex) Samsung : MDS is providing specialized solutions to all divisions of Samsung (Mobile, Electronic Appliance, SoC, Multimedia, etc division)

Cost Competitiveness Cost Competitiveness Time-to-marketTime-to-market Quality AssuranceQuality Assurance

Improving the effectiveness & productivity of our customers

● Improving the effectiveness & productivity of our customers by providing a total solution

Providing Total Embedded Solution

Providing Total Embedded Solution

Proven Embedded technology

& Experiences

Proven Embedded technology

& Experiences

Know-how for SW Debugging & Testing

Know-how for SW Debugging & Testing

Ⅳ. Competitive Edges Ⅳ-1. Customer values

22

23

Embedded SW Core Technology Technology in Employment

● Maintain the Highest Level of Technology and Quality by Embedded Engineers

SW testing& quality assurance

SW testing& quality assurance

Window Embedded

OS & Solution

Window Embedded

OS & Solution

Mobile phone development

solution

Mobile phone development

solution

Automotive ECUControl Logic

Automotive ECUControl Logic

Platform development for

digital devices

Platform development for

digital devices

172

persons

R&D (28%)

Technical Sales

(27%)

Technical Support

(22%)

Others

(23%)

77% of employees having technology background

77% of employees having technology background

Ⅳ. Competitive Edges Ⅳ-2. Core technology

● Stable revenue proportion from various customers in each industry

SW (16%)

Revenue by customer (2008(E))

Major 10 customers including Samsung

( 55%)

Other 1,000 Customers (45%)

Revenue by industry (2008(E))

Mobile(24%)Industrial Computer

(38%) Digital Device

(38%)

Revenue by solution (2006)

Development tool (64%)

Device Solution (14%)

Revenue by customer (2006)

Samsung (26%)

Others-over

800companies (63%)

Others (6%)

Revenue by industry (2006)

Mobile

(45%)

Industrial Computer

(36%)

Digital Device

(19%)

LG

(11%)

Revenue by solution (2008(E))

Development tool (46%)

Device Solution

(18%)

Others(6%)

SW (30%)

Ⅳ. Competitive Edges Ⅳ-3. Portfolio

24

25

Mobile/Telecom

Digital Devices/CE

SoC

Automotive

Government/R&D Center

University

● Broad Customer network with more than 1,000 Customers

Seoul National University

Yonsei University

Korea University

Hanyang University

Ⅳ. Competitive Edges Ⅳ-4. Global network

26

OS /SW Solution

Development

Solution

SoC

DMB

● Relationship with Worldwide Leading Embedded SW Vendors

Ⅳ. Competitive Edges Ⅳ-4. Global network


Contents

Company Overview


Competitive Edges

II

III

IV

I


27

High profitability

Expects high growth of Operating Profit in 2008(FY07 KRW 2.5 Bn FY08 KRW 5.2 Bn)

Maintains Operating Profit rate

over 10%

Growth potential Stability

• Developing of embedded software for Defense & Aerospace industries• Rigid relationship with worldwide leading embedded solution partners including Microsoft• Developing Micro Projector

Expands to various applications of embedded systems

Customers & Products in various industries

● MDS is No.1 embedded solution company in Korean embedded industry which has a huge ripple effect and growth potential

Since our competitors have been weaken or disappeared, we expect to maintain the stronger leadership and market dominance.

Since our competitors have been weaken or disappeared, we expect to maintain the stronger leadership and market dominance.

FundamentalFundamental

TurnaroundTurnaround

IssueIssue

Ⅴ. Investment Proposal Ⅴ-1. Market Dominance

28

(Operating profit/KRW Billion)(Stock price/KRW)

Stock price Operating profit

● Financial achievement has been improved, but stock price is still staying low

<Remark> Black line means sum of 4 quarterly operating profit

Ⅴ. Investment Proposal Ⅴ-2. Turnaround

2,000

4,000

6,000

8,000

10,000

12,000

14,000

06.3Q 06.4Q 07.1Q 07.2Q 07.3Q 07.4Q 08.1Q 08.2Q 08.3Q 08.4Q2.0

3.0

4.0

5.0

6.0

7.0

8.0

29

We are seeking financial investors who will purchase our stock from our corporation own stock fund.

ProposalProposal

Stock purchase from our corporation own stock

The proposed investment is flexible and open for negotiation.

The corporation own stock fund has 18% proportion of total outstanding shares. Thus, the number of floating stock has been extremely decreased.

Our stockholders have faced a lack of liquidity because the stock price has dropped sharply and the total asset turnover ratio is too low.

Our stock price has been devalued compared to net asset value per share.Net asset value per share = \4,200, and the current stock price = \2,300 (as of Nov. 13)

High proportion of corporation own stockHigh proportion of corporation own stock

Lack of liquidityLack of liquidity

Devaluation of stock priceDevaluation of stock price

Ⅴ. Investment proposal Ⅴ-3. Transaction overview

30

Subjects 2007 2008 (E) 2009(E) 2012(E)

Sales Revenue 31,665 55,800 52,000 87,900

Cost of Sales 18,744 36,400 33,400 57,100

Gross Profit 12,921 19,400 19,500 30.800

Selling and administrative expense

10,363 14,200 13,500 19,900

Operating Income 2,559 5,200 6,000 10,900

Non-Operating Income

2,642 3,100 1,800 3,000

Non-Operating Expense

805 3,600 1,000 1,000

Ordinary Income 4,396 4,700 6,800 12,900

Income Tax Expense

856 500 1,400 12,900

Net Income 3,540 4,200 5,400 10,300

EPS 442 544 699 1,223

EBITDA 3,185 6,700 7,500 12,100

EV/EBITDA 28.2 3.3

(Unit : KRW Million) (Unit : KRW Million)

Balance Sheet Income Statement & Investment Index

Subjects 2007 2008(E) 2009 (E) 2012(E)

Current Assets 21,690 21,800 25,700 56,800

Quick Assets 19,451 18,300 21,500 49,500

Inventories 2,239 3,500 4,200 7,300

Fixed Assets 28,197 23,500 24,000 22,800

Investment 20,555 7,000 7,500 10,000

Tangible Assets 2,894 4,900 5,900 5,900

In-tangible Assets 3,530 10,000 9,000 6,900

Other In-tangible Assets

1,218 1,600 1,600

Total Assets 49,886 45,300 49,700 45,747

Current Liabilities 10,088 10,000 10,400 16,000

Long-term Liabilities

1,750 2,300 2,500 2,300

Total Liabilities 11,838 12,300 12,900 11,791

Capital Stock 4,020 4,800 4,800 4,800

Capital Surplus 14,770 17,900 17,900 17,900

Capital Adjustment -7,115 -18,900 -18,900 -11,900

Other Comprehensive

Income

-241 -300 -300 -300

Earned Surplus 26,614 29,500 33,300 50,800

Total Capital 38,048 33,000 36,800 61,300

● EV/EBITDA is equal to 3 based on FY08(E) Sales Revenue and current stock price

※ Financial Statements

embedded solution company - mds technology co., ltd. investor relations 2008

Documents

embedded system

application of embedded

market trend

new sw

pc market

different sw solution

mds project

electrical control sw