Investor Relations 2008
Embedded Solution Company -
MDS Technology Co., Ltd.
Contents
I
Trend of Embedded Industry
II
Company Overview
III
Business Domain & Products
IV
Competitive Edges
Ⅴ
Investment Proposal
2
Ⅰ. Trend of Embedded Industry
Ⅰ-1. Embedded system
● 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
Development solution
Application
D-STB 성장성과 과도한
경쟁가능성에
대한 오해
Embedded
Middleware
SW
OS
Mobile phone, Car Navigation, PMP,
Automobile, Aerospace,
Digital TV, IP set-top box …
LCD
Display
HW
Platform
Memory
CPU
Network
Peripheral
3
Ⅰ. Trend of Embedded Industry
Ⅰ-2. Market Size
● Application of embedded SW is diversified that expects the market size around 10billion.
Korea
Global Market
Development
Tool
OS Bundle
EICS
Development
Tool
SW
OS Bundle
Mobile Phone
Digital device
MS
MDS
Windriver
Mathworks
MDS
Greenhills
Lauterbach
Mathworks
IBM
IBM
Defense/
Aerospace
WindRiver
Adventech
Kontron
Kontron
( MDS )
Radisys
Industrial
Computer
Market size
EICS
Infraware
Neomtel
MDS
Electronic
Appliance
Automotive
Application
US$1.5B
US$0.8B
US$5B
Advantech
US$80M
US$50M
US$300M
US$100M
EICS = Electronic Integrated Computing System
4
Ⅰ. Trend of Embedded Industry
Ⅰ-3. Market trend
● Contains very high growth potential
● The demands from each market are vary, however, each industry cooperates and integrates very closely
Very high in growth potential
•
•
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
Huge market / Limited competition
• Unlike PC market, each application requires different SW & solution
• US$10M~200M sized segment markets are played by a few companies
The trend of embedded industry
reflects on our business
structure & model
Characteristic of embedded market
•
•
Requires close relationship with chipset vendors
Requires development tools for design and bug detection
5
Contents
I
Trend of Embedded Industry
II
Company Overview
III
Business Domain & Products
IV
Competitive Edges
Ⅴ
Investment Proposal
6
Ⅱ. Company Overview
Overview
Financial Statement (FY 08(E), Unit : KRW billion)
CEO
Sangheon Lee
Foundation
1994. 3 (Incorporated in 1998)
15Fl. Kolon Bilant 222-7
Guro3-dong Guro-gu, Seoul, Korea 152-77
Address
Ⅱ-1. Overview
Homepage
www.mdstec.com
Overseas Subsidiaries
Sales Revenue
55.8
Operating Income
5.24
Net Income
4.17
Total Assets
45.3
Total Capital
33.0
Stockholder Status (As of October, 2008)
Others
(31%)
Korea
India
Malaysia
Controlling
shareholder, etc
(46%)
Singapore
Venture
Capital
(2%)
Australia
(2%)
Institutional
Investor
<Remark>
(19%)
Treasury stock
▲ Par Value : \500
▲ No. of Listed Stock : 9,501,280
7
Ⅱ. Company Overview
Ⅱ-2. History
● MDS has led the history of Korean Embedded SW Industry
Expanding Years ▶
(2005 ~
Growth Years ▶
)
(1998 ~ 2004)
‘08 - KONTRON (EICS) business launched
‘04 - dSPACE (Design Automation tool) launched
- Founded a branch in India
Founding Years ▶
(1994 ~ 1997)
‘97 - Selected for the ‘MDS’
Project by the Government
‘94
- MDS Technology established
Embedded Development Tool
Provider
‘03 -Founded Singapore branch
-Awarded Digital prize by Ministry of
Information & Communication
‘01 - Selected for Digital Appliance PostPC
Government Project Supervisor by MOCIE
‘00 -R&D Center established
‘99 - Selected for Embedded Development
System Project Supervisor by MOCIE
‘07
-Merged DST Corp.
-Selected for SW Flagship Government
Project – Developing aircraft Real-time OS
- NEOS RTOS, Awarded ‘New SW’ by Ministry
of Information & Communication
‘06 - Listed in KOSDAQ(086960)
- MDS Networks, a subsidiary founded
‘98 - Partnered with Microsoft for Windows
Embedded Business
‘05 -Founded a branch in Australia
-IT Venture Award by IT KOIVA
The Leader of
Embedded Development Tool Business
No.1 Total Embedded Solution Provider
in Korea
8
Ⅱ. Company Overview
Ⅱ-3. Executives
CEO / Sangheon Lee
Sociology, Seoul National Univ.
Overseas Sales in Kolon
Corporative Planning in Kolon Group
Certificated CEO Course in KAIST
US UCSD MBA
CTO / Myung-sub Chang
Computer Engineering, Seoul National Univ.
Computer Engineering in KAIST (Master)
SK C&C S/W Development
Cyberbank S/W Development
CEO / Charles Na
English, Hankuk Univ. of Foreign Studies
Overseas Sales in Samsung Electronics
Sales/Planning in Doo-in Electronics
CEO /DST Corp.
CFO / Moon-kyu Song
Management, Seoul National Univ.
Planning in Kolon Group
Corporative Planning In Kolon Group
9
Contents
I
Trend of Embedded Industry
II
Company Overview
III
Business Domain & Products
IV
Competitive Edges
Ⅴ
Investment Proposal
10
Ⅲ. Business Domain & Products
Ⅲ-1. Products
● No.1 Embedded Solution Company in Korea Providing One-stop Solution & Services
Embedded SW
Development Tool
Embedded SW
Others
Debugger, Compiler
Windows Embedded OS
Device solution (MID, PMP)
Automotive Solution
Windows CE & Mobile Solution
UWB, Multimedia chip
SW Testing Solution
DMB Solution
EICS
Embedded Solution Training
Firmware / Embedded OS / Development Tool / Engineering Course
11
Ⅲ. Business Domain & Products
Ⅲ-1. Products
Windows Embedded OS
Major Products
Overview
Target Market &
Customers
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-use
development 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
12
Ⅲ. Business Domain & Products
Ⅲ-1. Products
Debugging Tool
Major Products
Overview
TRACE32-PowerDebug/PowerTrace/PowerProbe
- ‘De facto standard’ debugger in worldwide
Target Market &
Customers
- Mobile, Digital devices, Consumer Electronics, Automotive, SoC, etc
- Samsung Electronics, LG Electronics, Pantech, Hyundai Motor, etc
Features &
Advantages
- 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
13
Ⅲ. Business Domain & Products
Ⅲ-1. Products
Automotive Solution
- 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.
dSPACE
EB tresOS
- Modular and static RTOS for automotive
- Support all common microcontrollers in the automotive sector
- SiemensVDO, BMW, Audi, Volkswagen, DaimlerChrysler
EB FlexRay
Solution
-Development Solution for FlexRay Network communication protocol for automotive
-Total solution covering design, modeling, prototyping and analyzing the FlexRay
Network
Graphical Modeling
and offline
simulation
Calibration
Rapid control
prototyping
Automatic production
code generation
Hardware-in-theloop simulation
14
Ⅲ. Business Domain & Products
Ⅲ-1. Products
SW Testing & Service
Major Products
Overview
Target Market &
Customers
Features &
Advantages
QAC, CodeSonar, VectorCAST, TestQuest Pro, Unicorn, Polaris
Solution & services for software testing to ensure the safety and quality assurance
- Mobile/Telecom, Consumer Electronics, Automotive, Military, etc
- Samsung Electronics, LG Electronics, SKT, Hyundai Motor, etc
-Automated quality & functional testing
-Memory leak detection solution
-Source code analysis solution
-Static/Dynamic testing solution
15
Ⅲ. Business Domain & Products
Ⅲ-1. Products
Device Solution
Overview
Major Products
Target Market &
Customers
Features &
Advantages
Benefits
- Providing ODM (Original Design Manufacturing) service
- Helping customers to design, engineering and build products from original idea
- 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
16
Ⅲ. Business Domain & Products
Ⅲ-1. Products
Windows CE & Mobile Solution
Windows CE
& Mobile Solution
DMB Data
Broadcasting
Solution
<MMS>
-
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
<BIFS>
<TPEG>
17
Ⅲ. Business Domain & Products
Ⅲ-1. Products
Other Products & Services
NEOS RTOS
- 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
Test &
Measurements
- Agilent Technologies (Universal instruments)
- Digital Broadcasting / Electronic Power Test & Measurement
- USB Protocol Analyzer /Noise Analysis
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.
SoC 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
EDA Solution
-
Embedded
Solution Training
Electronic Design Automation
Acceleration and Emulation for design verification
Altera FPGA solution distribution
Impulse C : C-to-FPGA solution distribution
- 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
18
Ⅲ. Business Domain & Products
Ⅲ-2. Business Domains
● MDS is No.1 Embedded Solution Provider covering every Embedded SW industry in Korea.
Development Tool
Debugger
Automotive
Defense
/Aerospace
Design
Automation
Mobile
Phone
Testing
Mobile
Digital Device
/CE
SW Testing
SW
Solution
Boards
/SoC
Mobile
Phone
SW
Device
SW Device
MS
HW
Windows
Embedded OS
Debugger
SW
Testing
Electronic
Control
Solution
Embedded
OS
Stagnation
EICS
Growing
Develop
Industrial
Computer
<Remark> The size of circle stands for gross profit.
19
Ⅲ. Business Domain & Products
Ⅲ-3. Projection
● 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.
Revenue
FY08
Embedded
Development
tool
FY12
CAGR
• SW upgrade would be a major issue for smart phone market
25.6
42.1
13%
• 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
Embedded
SW
16.8
26.0
12%
Others
(Embedded
Board)
13.4
14.9
3%
Total
Market Analysis
• 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
55.8
87.9
12%
20
(Unit : KRW billion)
Contents
I
Trend of Embedded Industry
II
Company Overview
III
Business Domain & Products
IV
Competitive Edges
Ⅴ
Investment Proposal
21
Ⅳ. Competitive Edges
Ⅳ-1. Customer values
● Improving the effectiveness & productivity of our customers by providing a total solution
Goal
Benefit
Fact
Improving the effectiveness & productivity
of our customers
Cost Competitiveness
Time-to-market
Quality Assurance
Providing Total
Embedded Solution
Proven
Embedded technology
& Experiences
Know-how for
SW Debugging & Testing
<Remark>
• (ex) Samsung : MDS is providing specialized solutions to all divisions of Samsung
(Mobile, Electronic Appliance, SoC, Multimedia, etc division)
22
Ⅳ. Competitive Edges
Ⅳ-2. Core technology
● Maintain the Highest Level of Technology and Quality by Embedded Engineers
Embedded SW Core Technology
Technology in Employment
Technical Support
R&D (28%)
SW testing
& quality
assurance
Window
Embedded
OS & Solution
Mobile phone
development
solution
(22%)
Platform
development for
digital devices
Automotive ECU
Control Logic
172
persons
Others
Technical Sales
(23%)
(27%)
77% of employees
having technology background
23
Ⅳ. Competitive Edges
Ⅳ-3. Portfolio
● Stable revenue proportion from various customers in each industry
Revenue by industry (2006)
Industrial
Mobile
Computer
(36%)
(45%)
Digital Device
Revenue by industry (2008(E))
Industrial
Computer
(38%)
Mobile(24%)
Digital Device
(19%)
(38%)
Revenue by customer (2006)
Others
-over
800companies
(63%)
Samsung
(26%)
LG
(11%)
Revenue by solution (2006)
Others (6%)
Device
Solution (14%)
Development
tool (64%)
SW
(16%)
Revenue by customer (2008(E))
Other 1,000
Major 10
Customers (45%) customers
including
Samsung
( 55%)
Revenue by solution (2008(E))
Device Solution
Others(6%)
Development
tool (46%)
(18%)
SW (30%)
24
Ⅳ. Competitive Edges
Ⅳ-4. Global network
● Broad Customer network with more than 1,000 Customers
Mobile/Telecom
Digital Devices/
CE
SoC
Automotive
Government/
R&D Center
University
Seoul National
University
Yonsei
University
Korea University
Hanyang
University
25
Ⅳ. Competitive Edges
Ⅳ-4. Global network
● Relationship with Worldwide Leading Embedded SW Vendors
OS /
SW Solution
Development
Solution
SoC
DMB
26
Contents
I
Trend of Embedded Industry
II
Company Overview
III
Business Domain & Products
IV
Competitive Edges
Ⅴ
Investment Proposal
27
Ⅴ. Investment Proposal
Ⅴ-1. Market Dominance
● 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.
Fundamental
Turnaround
Issue
High profitability
Growth potential
Stability
Maintains
Operating Profit rate
over 10%
Expands to
various applications
of embedded systems
Customers & Products
in various industries
Expects high growth of Operating Profit in 2008
(FY07 KRW 2.5 Bn  FY08 KRW 5.2 Bn)
• Developing of embedded software for Defense & Aerospace industries
• Rigid relationship with worldwide leading embedded solution partners including
Microsoft
• Developing Micro Projector
28
Ⅴ. Investment Proposal
Ⅴ-2. Turnaround
● Financial achievement has been improved, but stock price is still staying low
(Stock price/KRW)
(Operating profit/KRW Billion)
8.0
14,000
7.0
12,000
6.0
10,000
5.0
8,000
4.0
6,000
4,000
3.0
2,000
2.0
06.3Q
06.4Q
07.1Q
07.2Q
07.3Q
07.4Q
Stock price
<Remark>
Black line means sum of 4 quarterly operating profit
08.1Q
08.2Q
08.3Q
08.4Q
Operating profit
29
Ⅴ. Investment proposal
Ⅴ-3. Transaction overview
We are seeking financial investors who will purchase our stock from our corporation own stock fund.
Proposal
Stock purchase
from our corporation own stock
The proposed investment is flexible and open for negotiation.
Devaluation of stock price
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)
Lack of liquidity
Our stockholders have faced a lack of liquidity because the stock price has
dropped sharply and the total asset turnover ratio is too low.
High proportion of corporation own stock
The corporation own stock fund has 18% proportion of total outstanding shares.
Thus, the number of floating stock has been extremely decreased.
30
※ Financial Statements
● EV/EBITDA is equal to 3 based on FY08(E) Sales Revenue and current stock price
Income Statement & Investment Index
Balance Sheet
(Unit : KRW Million)
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
1,218
1,600
1,600
49,886
45,300
49,700
45,747
10,088
10,000
10,400
16,000
1,750
2,300
2,500
2,300
11,838
12,300
12,900
11,791
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
38,048
33,000
36,800
61,300
Other In-tangible
Assets
Total Assets
Current Liabilities
Long-term
Liabilities
Total Liabilities
Capital Stock
Total Capital
(Unit : KRW Million)
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
805
3,600
1,000
1,000
4,396
4,700
6,800
12,900
856
500
1,400
12,900
3,540
4,200
5,400
10,300
442
544
699
1,223
3,185
6,700
7,500
12,100
28.2
3.3
Non-Operating
Expense
Ordinary Income
Income Tax
Expense
Net Income
EPS
EBITDA
EV/EBITDA