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Power-One (PWER) Investor Presentation

Power-One (PWER) Investor Presentation. March 2007. Mission Statement.

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Power-One (PWER) Investor Presentation

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  1. Power-One (PWER)Investor Presentation March 2007

  2. Mission Statement To be recognized as the leader in system-level power and power management solutions from AC to the IC in the communications and high-technology markets, utilizing our technical leadership to deliver comprehensive low-cost solutions; providing increasing value to customers, employees, and investors

  3. Power-One Power Supplies Are Everywhere Over 25 million power supplies shipped & now SILICON… Our products convert, process & purify electricity to the high levels of quality, reliability, & precise direct current required by the digital economy

  4. Power Conversion Products for Communications & High-technology Infrastructure Markets AC/DC Power Powers Telecom, Networking & Industrial Equipment Controls Power at the System Cabinet DC/DC Power Plus Digital Power Management Controls Power on the Printed Circuit Board

  5. Power-One Today • 30+ years of success • One of the world’s top power supply companies • Broad-line power conversion supplier – 100’s of standard product families • Over 2,500 employees • Top brand name & quality reputation • Industry leading Gross Margins • Five acquisitions since 1999 • Highly-automated worldwide manufacturing • Strong balance sheet (~$45M cash, ~$80M debt) • ’06 Sales ~$338M – 29% Growth • Investing ~$7M/yr in R&D for silicon design • (Now 4000!) • (Now six!) • ($530-550M in ‘07) Today, Power-One is the technology leader in power; a consolidator; and a developer of silicon products

  6. NEWS FLASH! Power-One Announced Acquisition of a Power Conversion Company • Power Electronics Group of Magnetek, Inc. for $84M in late October ’06 • Expected to increase revenue by over 50% with overall purchase price of only 0.5x forecasted 2007 sales • The acquisition is strategic and accretive • Accretive in Q1 of 2007 • 90% of products are digitally based with micro/DSP’s • Synergies expected to be additive to earnings per share ~$0.07per share in 2007 ~$0.30 per share in 2008 • Q4 ’07 exit rate: Expect sales ~ $150M and ~ EPS $0.10 • January ’07 changes: • U.S. factory will be shutdown; products moved to low cost areas • Dr. Alex Levran joins Power-One as CTO from Magnetek

  7. Overall Transaction Assets • Three main factories • 230K sq. ft. in Shenzen (Bao’an) China • 180K sq. ft. in Valdarno, Italy (Includes R&D and Admin, with low-cost “feeder plant” in Hungary) • 50K sq. ft. in Chatsworth, CA • Best-in-class R&D Center (80+ experienced engineers) • Custom product capability • New applications, like Alternative Energy (AE) & digital control for motors • High-volume purchasing leverage Shenzhen, China Valdarno, Italy Chatsworth, California

  8. Strategic Synergies & Importance • The acquisition is strategic and accretive • Forecasting EPS in 2007 to be ~ $0.20 per share • Expect to exit ’07 at a quarterly run-rate of a range around $150 million in sales and $0.10 EPS • Primary drivers for margin improvement are synergies in purchasing and manufacturing • Size and purchasing power of larger company • Now the 7th largest power supply company in the world • Economy-of-scale to compete with larger competitors • High-volume, low-cost China operation • Adds Custom products (largest & fastest-growing market) and augments top customer base • R&D resources and technologies • Alternative Energy initiative

  9. Acquisition Highlights How Power Conversion & Power Management Are Changing to Digital • Products range from smart motor driver and control circuits to large 50KW power modules • 90% of products are digital implementations with micro/DSP and software • Fewer competitors - less commoditization • Higher margins over time • Greater functionality - market diversity • Higher performance • Software-driven with reduced parts count; higher reliability • Augments Power-One’s board-level Z-One® digital power management capabilities DSP-based Motor Controls Digital Smart Appliance Control & Management

  10. Alternative Energy Initiative In Power InvertersUsing Digital Technology to Innovate Solar – Wind – Fuel Cells • High reliability and efficiency power converters • High power-density & compact size • Primary energy source control • Grid interactive control • System level control Compact Fuel Cell Power Conditioners Wind Power Converters Photovoltaic Inverters

  11. Quarterly Revenue ($M) Q1 07 estimate range is between $125 to $135M

  12. Power-One’s History & Strategic Direction Acquired Powec Acquired HC Acquired IPD Acquired Melcher Acquired PEG of MAG Custom Products & China Mfg. Silicon Division Silicon POL’s + 1st Power Mgt. Acquired di/dt High-density Bricks & POL’s Silicon Initiative Silicon R&D Center Startup Power Systems (Europe/Asia) Power Systems (North America) DC/DC Bricks (North America) DC/DC Conversion (Europe) AC/DC – North America 1998 1999 2000 2001 2002 2003 2004 2005 2006 1973 1997 Strategic Direction Entered Server/Storage markets & acquired Custom capability Strategic shift to communications infrastructure markets & acquisitions A technology leader in powering communications. Integrated five acquisitions, developed silicon & digital power mgt. Initial Public Offering (IPO) Founded as AC/DC power conversion company

  13. 30+ Years of Innovation in Power • 1972 – 1st linear standard • 1989 – 1st in configurable high power AC/DC • 1993 – 1st DC/DC open frame converter • 1995 – 1st dual ½ brick (DC/DC Converter) • 1995 – 1st dual ¾ brick • 1995 – 1st 50 Amp ¾ brick • 1995 – 1st planar transformer • 2000 – 1st 100 Amp AC/DC power supply in a 1U height • 2001 – 1st 150 Amp ¾ brick • 2001 – 1stSurface Mount ¼ brick • 2002 – 1st1/8th brick • 2002 – 1stSurface Mount 1/8th brick • 2002 – 1st triple-output scalable, sequenceable ½ brick • 2004 – 1stin digital power & conversion (Z-One® IBA) • 2004 – 1st97% efficient isolated DC/DC Converter • 2005 – 1st340W 1/8th DC/DC Brick Bus Converter • 2006 – 1st to control both analog & digital with Z-Series

  14. Power-One’s New Global Footprint Ireland Slovakia Andover, MA Switzerland Hungary San Jose, CA Italy Chatsworth, CA Baoan, Shenzhen, China Camarillo, CA Dallas, TX Shekou, Shenzhen, China Carlsbad, CA Dominican Rep. Penang, Malaysia Singapore Australia Manufacturing Centers NEW Mfg Centers R&D Centers NEW R&D Centers

  15. Power-One’s Customers …Acquisition Augments Premier Customer Base Bottom Row Shows Significant Additions to PWER Base

  16. Why Customers Select Power-One Comprehensive product selection Full range of options for power technology solutions. 100’s of products to fit any application Designed-in technology solutions Vision-One process used to strengthen engineering relationships Newer technologies facilitate strong partnerships, especially on-board designs Reliable products at competitive prices Only 2-5% of system cost, but “mission critical to performance” Logistics and customer support Sophisticated Oracle ERP systems EDI links to customers Strong financial partner Excellent balance sheet Investing in infrastructure and R&D

  17. 2005/2006 =Major Restructuring/Sales Growth 2007= Integration Execution and Leverage 2005: Goal of profitability achieved in Q3 & Q4 • Reduction of >$30M in overhead & SG&A • High-cost Norway functions moved to low-cost Slovakia & China • Telecom Power Systems combined with embedded business 2006: Return of Growth • Return of sales growth was #1 goal • Server & Storage and Power Systems growth has been dramatic in 2006 • Original goal of 10-15% growth in ‘06 was at high-end without acquisition 2007: Executing the acquisition integration plan • Acquisition will increase sales dramatically to $530-550M • Material costs and synergy are highest priority to improve profits • Acquisition management teams are fully operational and motivated • Shutdown Chatsworth, CA facility & move products to low-cost areas • Dr. Alex Levran joined as CTO in January ‘07

  18. Core Business SuccessesPower Systems – Telecom & Cell Base Station Backup Power • Turned around our Telecom Systems Business to now one of the fastest growth lines in Power-One • Seeing more new opportunities & strong Bookings (esp. in Europe, Middle East, Russia). • Datacom & Telecom continue to converge – there are many more new opportunities for rectifiers with existing OEMs • Outdoor Cabinet for wireless that was developed in ’06 is a new market for Power-One • Gaining Market Share in Telecom Power Systems • Supply Agreement with Ericsson announced in 2006 is starting to generate sales

  19. Core Business Successes Embedded Products – AC/DC Power Supplies • More aggressive in custom products business • Gained access to larger accounts in Storage/Server market • Strategy: standard platforms to develop customs, which lowers cost, risk, and time to develop • Best distribution network – Award from Arrow for largest sales of all products in the Electro-Mechanical (EM) category • Good upside when ATE/Semi Equipment market improves • New Product Introductions cement leadership, like the Best-in-Class, High-Density, Front-Ends (FNP Series of products) • Penetrated two of the largest Server/Storage companies and working on others • “Supplier of the Year” Award for ALL products from Xyratex • Sun Computer “Meritorious Achievement Award” presented to Power-One. Only 17 companies were honored

  20. Core Business Successes Embedded Products – DC/DC Converters • Growing market share in our space • World-class leadership • One of the broadest DC/DC converter portfolios in the industry. We can control almost any application • High-density bricks (latest example is 1/8th brick with 30A and best thermal performance in its class) • “Y” POLs (standard analog) continuing to gain traction • Using standard platforms for development of custom DC/DC bricks and POLs • Reduced costs attained from moving U.S. manufacturing to Dominican Republic and Asia

  21. Where Power-One Excels • Worldwide Mfg. and R&D (Asia, Americas & Europe) • Worldwide Customer Service and Support Including Field Applications, Sales & Sophisticated IT Infrastructure (EDI) • Technology: • In-house silicon development and packaging capabilities • Digital Power Management, Z-One® Digital IBA, the first complete power conversion AND power management solution • Density leadership in DC-DC bricks and POLs • Leadership in AC Front Ends and Telecom Power Systems • Industry’s highest efficiency and power density • Competitive on a world class level • We are a complete supplier from AC to the IC

  22. Market Drivers & Power-One’s Competitive Position Global Market Trends The Power-One Advantage Vendor ConsolidationCustomers Demand Strong Balance Sheet & Global Operations. • Leading Technology – from Silicon to Systems • Broad Product Line: Standard + Custom • Leading Brand – Top Quality & Support • Proven Consolidation Capabilities • Global Blend of Outsourcing & Vertical Mfg. • Few Competitors Can Compete at Larger Customers. (Top Customers dominate TAM) Product Choices Both Standard & Custom. Silicon to Systems offer “One-Stop-Shop” DPA  IBA Digital Distributed Pwr. Arch. Is Moving to Intermediate Bus Arch. & Digital Pwr. Mgt.

  23. Growth Opportunities • NEW OPPORTUNITIES • New Markets • New Products • Digital Power • CORE GROWTH • Technology Leadership • High Density/Efficiency • Broad Product Portfolio Communications & Industrial Markets Server & StorageMarkets Standard Products Custom Products Power Systems(Indoor) Power Systems(Outdoor & Access) AC/DC Power Supplies AC/DC Front-ends DC/DC Bricks Analog POLs Z-One® Digital Power-Digital POLs-Digital Power Mgt. Acquisitions

  24. Digital Power Revolution--- ZZZZ A Digital Power Revolution • Conversion … Communications… Control

  25. What Do Customers Want and Why The Inflection Point Now….. • More and more lower voltages are needed by our customers • Number of outputs are increasing • Power management functions are escalating, as are # of components • Power takes too much space & costs too much • Power is getting more complex – integration has been non-existent

  26. Power Management and Power Conversion…Two Separate Markets Control(Pwr. Mgt.) Conversion Communication?

  27. Power Management and Power Conversion Becomes One … with Digital Technology Conversion Communication Control(Pwr. Mgt.) Goal: 20% Market Share in 5 Years

  28. The “Z” Strategy & Opportunity … Win by Changing the Rules of the Game • Our Goal: Comprehensively solve our customers’ power management problems • Be first to market – and gain share • Establish leadership position … with a new approach to power management • Silicon strategy + IP for higher margins and sustainable competitive advantage • Attack new markets with disruptive technology

  29. The “Before” – Unmanageable with Analog “BRICK” DC/DC Converter POL3.3V POL2.5V POL3.0V POL1.8V V1 V2 V3 V4 Analog Controller 48 V Intermediate Bus Voltage (12V) “BRICK” DC/DC Converter POL POL POL V6 V5 V7

  30. The “After”: Z-One®DIGITAL IBA™ 48 V “BRICK” DC/DC Converter DPM Z-POL Z-POL Z-POL Z-POL V2 V1 V3 V4 Z-POL Z-POL Z-POL V5 V6 V7 Intermediate Bus Voltage (12V) I2C from Host System

  31. 8-output Power System Comparison IBA with Analog Power Mgmt Z-One®Digital IBA # of components # of traces PCB space Development time Total cost Power mgmt functions BREAKTHROUGH 9 200+ <100 600+ 3.8 in2 ~10 in2 3 Days 8 Weeks ~$90 ~$100+ Virtually Unlimited Limited

  32. Z-One® Architecture Benefits of Z-7000 • Any voltage, any current, any configuration; architecture is highly adaptive & flexible; system reconfiguration on-the-fly • Real-time telemetry – continually monitors temperature, current, and voltage for precise and optimized control • Open architecture communications with industry-standard I2C interface bus and affiliate program with BOTH module mfg. and silicon partners • More reliable and flexible fault management strategies • 90% reduction in time to market, development, # of components & board traces Z-Series Digital Power Manager Z-Point Of Load Converters

  33. And Now … Power Management for Freewith No-bus™ Z-1000 POLs • NO bus, NO protocol, NO memory, NO software and NO programming are required • NO external controllers are needed: • Power management features are inherent in Power-One developed silicon • Based upon proven “Z” silicon technology • Lower price point for “No-Bus” Z-1000 Series allows entry into lower-end applications. Simple, yet fully featured: • No other POL on the market has near the performance • Configurable output voltages from 0.5 to 5.5v • Manage sequencing with configurable delays, tracking and cascading between multiple outputs • Can measure output current and temperature via monitoring pins • Parallel up to ten Z-POL converters

  34. The No-Bus™ Z-1000Power Management for Free 48 V “BRICK” DC/DC Converter Z-POL Z-POL Z-POL Z-POL V2 V1 V3 V4 Z-POL Z-POL Z-POL V5 V6 V7 Intermediate Bus Voltage (12V)

  35. Free Power Management Features Comparison - Modules * Note: If Analog Power Management Is Used by Customer, $5-15 of Analog Components Would be Required Lynx™ is a trademark of Tyco Electronics Power Systems, Inc

  36. No-Bus™ Z-1000 Digital Power Advertisement

  37. Choices in Cost and Functions

  38. 2nd Generation Digital Power Manager – ZM7300 • One IC replaces entire module • (1/6th the footprint) • Increased functionality • Controls non-Z converters, e.g., fans, VRMs • Four non-Z-One devices can be controlled and monitored • Monitoring & enable lines synchronized with Z-POLs • Industry standard 100khz and 400khz I2C comm. bus • Supports hot-swapping of circuit boards

  39. ZM7300 Now Control Non-Z Converters! • Four enable lines synchronized with Z-POLs • Four power good inputs for monitoring of non-Z Devices • Can control any converter or other device with enable signal (e.g., fan) • Enable turn-on/off delays and polarity are programmable via GUI

  40. Z-One Digital (IBA) Outperforms & Is Less Costly POL Market is >$1B with ~15% Growth Analog IBA Cost 2nd Gen Digital Power Controls Analog Full-Featured Digital Power Z-7000 Competitive Std. POLs (No Pwr. Mgt.) “No-bus” Digital Power Mgt. Z-1000 POLs Discrete Analog Solutions (No Pwr. Mgt.) Performance

  41. Results for Z-One Digital Power • We have a significant head-start on the competition • The Z-series disruptive architecture is a true revolution in power • Licensed technology (second sourcing) • Module 2nd source in Dec. ’04 with C&D Technologies (top 5 supplier) • Semiconductor Z-affiliate announced with Atmel in July’05; and with Micrel LDO (Low Drop-Out) regulator IC in Sept ‘06 • Silicon Labs joined the Z-Alliance in August ‘06 • Meeting with other potential partners • Customers who implement the “Z” can offer products with additional system features and benefits; and with faster TTM (time to market) • New markets opened, e.g., Storage & Server, Military, Aerospace & Security (total POL market exceeds $1.0 billion) • Core business is growing as a result of the “Z” • ~80 Z-One® board-level design wins & growing (now with top-tier cust.) • Significantly more embedded in the customers’ systems architecture

  42. Strategic Initiatives Execute on acquisition implementation Invest in most advanced power technologies • Silicon-based products; Protect IP • Leading position in DC/DC bricks; new POL converters • Advanced AC/DC front-ends for DPA/IBA markets • High-density Power Systems for telecom/ISP/infrastructure • Alternative Energy initiative Broaden portfolio into high-end data infrastructure • Gain further traction in Storage/Server markets with the “Z” • Custom AC/DC power supplies & DC/DC converters • New Telecom Power System’s outdoor cabinet Continue to reduce overall cost structure Bottom and top-line growth

  43. Summary & “Take-a-ways” • 2006 was a return to growth; 2007 is a year of execution and leverage • Telecom Power Systems is now a high-growth business • Server & Storage design wins have turned into revenue • Z-One® digital power management gaining momentum • Power-One is a consolidator and can compete with biggest competitors; now # 7 in worldwide sales. • Power-One is the only significant “Pure Power” play • High synergistic & strategic value in acquisition: very quickly accretive • Power-One forecasts Q1 ‘07 range to be between $125-135M with acquisition, $530-550M in 2007 • Forecasting EPS in 2007 to be approximately $0.20 per share • Expect to exit ’07 at a quarterly run-rate of a range around $150M in sales and $0.10 EPS

  44. Z- Digital Power Revolution A Digital Power Revolution Changing the Shape of Power

  45. Thank You!

  46. Disclaimer & Forward Looking Statements This presentation includes forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 that can be identified by the use of forward-looking words such as “will” or “estimate” or comparable words. These statements are subject to a number of factors, risks and uncertainties that could cause actual results to differ materially from those projected. Risks and uncertainties include, but are not necessarily limited to: the Company’s success in securing customer acceptance and adoption of the Company’s products and technologies; the Company’s success in integrating the newly acquired Magnetek PEG operations into the Company’s overall operations; the Company’s success in achieving anticipated cost savings from projected synergies relating to the Magnetek PEG acquisition; the size and pace of growth and improvement in target and potential markets; the Company’s success in establishing and maintaining adequate and qualified manufacturing sources for supply of products; constraints and limitations in the supply chain(s) for critical components contained in Company products; the Company’s ability to achieve and sustain gross margins at levels anticipated and noted as comparable to “silicon-based” companies; the Company’s ability to continue spending at prior or desired levels for research and development related to the products and technologies discussed in this presentation; competitor advances and successes in comparable, alternative or competing technologies; the Company’s success in securing protection for intellectual property incorporated into the Company’s products and/or enforcing such intellectual property against use of same by competitors; intellectual property claims or rights of third parties which are unknown to the Company, and/or which are asserted in the future against the Company. In addition, we refer you to the Company’s most recent SEC financial filings, to include the Company’s report(s) filed with the SEC on Form 10-K and/or 10-Q for disclosure and discussion, where applicable or additional risk factors.

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