Year End Report 2006 - Enea

EneaYear End Report 2006

February 6, 2007

Johan WallPresident & CEO

Håkan GustavsonCFO

2Enea Year-End Report 2006, February 6, 2007

Enea Corporate Overview A leading provider of Network software • 500+ employees

Global Presence• North America, Sweden, France, Germany, • United Kingdom, China and Japan

Unique software technology powering • Millions and millions of mobile phones• Half of all radio base stations• Satellite networks, Media Gateways and more…

Industry Leading Services Offering• Leading network technology customers use Enea

professional services teams to accelerate software development

Marquee Customers• Agere, Alcatel-Lucent, Autoliv, Boeing, Bombardier,

Fujitsu, General Dynamics, Infineon, Motorola, Nokia, Saab, Samsung, Sony-Ericsson, Tellabs, Yamaha and ZTE


Objectives

Financial objectives:

• Annual sales increases in excess of 15 percent

• Operating margins exceeding 10 percent

Operating objective:

• Sales mix: 50% software / 50% services


We Have Marquee Customer Momentum


Enea Software Offering

Run-time software - OSE™, Real Time Operating System Family of Products- Element™ Middleware Platform- Polyhedra™, In Memory Database- LINX™ Communications Software- NASP Telecom-in-a-box Software

Tools - Optima™Eclipse-based Software Development tools- Illuminator™ Run-time analysis tools

Third party products - Development tools- Network protocol software- Applications- Linux


Strong International Services Offering

• Providing full life-cycle professional services– application development, systems development, systems

integration, maintenance and technical training• Industry recognized expertise • Embedded systems focus• 300+ professionals in USA and Sweden


Enea Alliance and Partner Program

• Provides access to pre-integrated solutions and accelerated time to revenue

• Lower internal R&D effort • Focus area, key differentiator for Enea


Enea Solutions Create Great Value for Clients

• We provide exceptional value• Lower development costs, reduced time to market,

increased innovation• Enea in joint R&D projects with major telecom companies• Intellectual properties remain with Enea


Enea Product Portfolio for Telecom Infrastructure

Hardware

RTOSOSE-family

MiddlewareElement

CustomerApplication

DatabasesPolyhedra

CustomerApplication

CustomerApplication

Networkprotocols

Third-partyapplications

& stacks

Linux

Communications - LINX

Enea software Third-party products Not provided by Enea

Prof

essio

nal S

ervic

es

X X X

Potential expansion


Enea has Trusted Relationships with Customers


Q4 and Financials


Q4 2006 in Brief

• Four customers actively using Enea’s middleware• Several new products released, including Element 2.0• Solid expansion of software royalties • Strong volumes from marquee customers: Nokia, Sony

Ericsson, Agere• Industry recognized leadership in place in Strategy,

Marketing, and Sales• Further strengthened technology partnerships • North America operations did not meet expectations

– Q4 software revenue low– Longer lead times in middleware market– Services utilization levels still not satisfactory


Q4 2006 Financials

• Net sales increased by 5% to MSEK 206 (197)

• Operating profit increased by 24% to MSEK 21 (17)

• Software sales increased by 1% to MSEK 70 (69) representing 34 (35)% of total sales

• Consulting increased by 6% to MSEK 136 (128)


Full Year 2006 Financials

• Net sales increased by 3% to MSEK 750 (726)

• Operating profit increased by 20% to MSEK 68 (56)

• Software sales increased by 9% to MSEK 271 (250) representing 36 (34)% of total sales

• Consulting increased to MSEK 479 (476,5)• Capitalized investments into new

Middleware products with MSEK 33• F&A stabilized on a lower level due to cost

reduction programs from previous years and continued cost awareness


Enea Group - Net SalesMSEK MSEK

0

50

100

150

200

250

Q1-2005 Q2-2005 Q3-2005 Q4-2005 Q1-2006 Q2-2006

Nordic North America EMEAA

500

550

600

650

700

750

Rolling 12-months

Q3-2006 Q4-2006

• YTD 3% • 4Q06 9%

• YTD 1%• 4Q06 -18%

• YTD 15% • 4Q06 20%


Enea Group - EBITEBIT marginPercent

Nordic North America EMEAA EBIT Margin

MSEK

-2

0

2

4

6

8

10

12

14

16

18

Q1-2005 Q2-2005 Q3-2005 Q4-2005 Q1-2006 Q2-2006 -2

0

2

4

6

8

10

12

14

16

18

Q3-2006 Q4-2006

20

2220

22


Software SalesMSEK MSEK

40

45

50

55

60

65

70

75

80

Q1-2005 Q2-2005 Q3-2005 Q4-2005 Q1-2006 Q2-2006 Q3-2006 Q4-2006100

140

180

220

260

300

Software sales Rolling 12-months• YTD 9%• 4Q06 1%


Nordic75%

EMEAA7%

North America

18%

Sales Distribution Q4 2006

Software34%

Services66%

Telecom Infrastr.

41%

Telecom Handsets

35%

Others 24%


Cash Position

-60

-40

-20

0

20

40

60

80

100

120

140

160

18020

02

2003

2004

2005

2006

-40

-30

-20

-10

0

10

20

30

40

50

60

70

80

90

100

Cash and Cash Equivalents Cashflow

MSEK MSEK


Key Metrics

3.1 (1.3)6.0 (11.9)Investments, MSEK

5.6 (5.3)19.3 (20.7)Return on capital employed, %

0.03 (0.03)1.04 (0.93)Equity per share, SEK

67.8 (67.4)67.8 (67.4)Equity/asset ratio, %

146.4 (178.1)146.4 (178.1)Cash, MSEK

13.6 (2.8)33.1 (3.7)Capitalized investments, MSEK

3.2m (2.6m)9.8 (10.8)Depreciation, MSEK

-2.9 (0.5)-5.8 (3.9)Currency effects, MSEK

0.402 (0.388)1,497 (1,426)Total revenue per employee, MSEK

Q406 (Q405)2006 (2005)Metric


Way Forward


The Mobile Revolution Has Only Just Begun


Exciting Industry Trends • Next generation mobility and

convergence driving new services

• Rapid emergence of 3rd screen

• Unprecedented subscriber growth

• Accelerated migration to IP-based network architectures

• Emergence of middleware to meet demand for “anywhere anytime”network access

Obvious Opportunities for Growth Obvious Opportunities for Growth


Convergence is Driving Revenue Opportunities for Carriers

““Everything networks. People and devices , music, video games, coEverything networks. People and devices , music, video games, content, data and servicesntent, data and services””-- Howard Stringer, CEO SonyHoward Stringer, CEO Sony


Significant Expenditures in Convergence Technology

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

2007 2008 2009 2010 2011

Source: ABI Research

Global Carrier IMS Capex, USD Billion


Market Challenges

Royalty

Enable high-availability Buy-out Ensure scalability

Reduce time-to-market

Reduce development costs

Rental Reduce device costs

“Free”, Loss-leaderReduce R&D effort

Reduce cost of ownership


Enea’s Response

• Traditional product portfolio– RTOS, data management, middleware, tools,

services– Market growth rate: 10 %– Competitive landscape:

• Wind River, Green Hills, Mentor Graphics, Linux

• Convergence solutions– New platforms to address market demands– Market growth rate: double digits– Competitive landscape:

• In-house, OpenClovis, GoAhead,


Our Goal: Building Software Platforms that Span

Our goal is to span multiple product segments across network infrastructure and mobile handsets


Our Strategy• Expand with vertically integrated

solutions positioned towards the convergence market

• Provide off-the-shelf software foundations that enable development of high availability applications, accelerate software development and reduce cost

• Integrate new and existing solutions leveraging our core technologies

• Leverage partnerships and joint customer financed R&D efforts

• Invest in companies with key technologies, content or brands


Our Momentum in Convergence Market

• Leading Silicon Valley MobileTV provider purchased Element middleware.

• Order size: USD 850 000• Customer is in convergence sweet spot

– delivering television, film and music content across the mobile and personal computing markets

• Enea’s solution enables focus on application development, not infrastructure

• Additional service revenue expected• Ideal target profile / segment • Our product delivers as is


Summary

• Enea well positioned for growth in Mobility and Network convergence

• We are in an exciting, rapidly evolving marketplace

• Enea has the resources and the ambition to actively take part in the development and potential consolidation of the market

ThanksFor further information, please contact:

Johan Wall, +46 8 507 140 00, [email protected]åkan Gustavson, +46 8 5071 4000, [email protected]

Enea, OSE, OSEck, OSE epsilon, Element, Polyhedra, Optima, LINX and Device Software Optimizedare all registrated trademarks by Enea AB or its subsidiaries.All rights are reserved.

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Year End Report 2006 - Enea