Transcript The Changing Shape of Power Architectures

Power-One (PWER)
Acquisition Presentation
TM
October 2006
Disclaimer
This presentation contains forward-looking
statements, which are made pursuant to the SafeHarbor provisions of the Private Securities
Litigation Reform Act of 1995. Words such as
“forecast,” “expect,” “anticipate,” “will,” “looking,”
“believe” and similar expressions reflecting
something other than historical fact are intended to
identify forward-looking statements, but are not the
exclusive means of identifying such statements.
Forward-looking statements are not guarantees,
but rather are predictions of and make certain
assumptions regarding anticipated future results.
Please refer to the end of this presentation for
complete disclaimer.
2
Power-One 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 hightechnology 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
Our products convert, process & purify electricity to the
high levels of quality, reliability, & precise direct current
required by the digital economy
Over 30 million power supplies shipped & Silicon…
Soon: Custom, Alternative Energy, digital motor controls,
specialty transportation & systems
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 (Soon 4000!)
– Top brand name & quality reputation
– Industry leading Gross Margins
•
•
•
•
•
Five acquisitions since 1999 (Soon six!)
Highly-automated worldwide manufacturing
Strong balance sheet (~$72M in cash- no debt)
Revenues est. at $300M in 2006 (Soon $530-550M)
Investing ~$7M/yr in R&D for silicon design
Today, Power-One is the technology leader in power;
a consolidator; and a developer of silicon products
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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-OneTM 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
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Digital Power Revolution--- ZZZZ
TM
A Digital Power
Revolution
Conversion … Communications… Control
Power Management and Power Conversion
Becomes One … with Digital Technology
Conversion
Communication
Control (Pwr. Mgt.)
Goal: 20% Market Share in 5 Years
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The “Before” – Unmanageable with Analog
Analog
Controller
48 V
“BRICK”
DC/DC
Converter
POL
3.3V
POL
2.5V
POL
3.0V
V1
V2
POL
V5
POL
1.8V
V3
V4
POL
POL
V6
V7
10
The “After”: Z-One DIGITAL IBA™
48 V
I2 C
from
Host
System
“BRICK”
DC/DC
Converter
DPM
Z-POL
Z-POL
Z-POL
V2
V1
Z-POL
V5
Z-POL
V3
Z-POL
V6
V4
Z-POL
V7
11
8-output Power System Comparison
IBA with Analog
Power Mgmt
Z-One
Digital IBA
200+
9
600+
<100
~10 in2
3.8 in2
8 Weeks
3 Days
~$100+
Limited
~$90
Virtually
Unlimited
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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)
– Benefits in broader/larger market, licensing fees & technology sharing
– 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
– Recent announcement – Silicon Labs is joining the Z-Alliance
– 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”
• ~70 Z-One board-level design wins & growing (now with top 10 cust.)
• Significantly more embedded in the customers’ systems architecture
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Transaction for Power Electronics
Group of Magnetek, Inc.
• Power-One, Inc. has signed a Definitive Agreement to
acquire the Power Electronics Group (P.E.G.) of
Magnetek, Inc.
• P.E.G. has been operating essentially as an autonomous
business unit for many years
• Transaction Closing is expected to be in October
• Power-One has secured $50M of acquisition financing
via an 18 month loan. We will be investigating a variety
of options for longer-term financing that is more accretive
• The company will use a portion of its cash and
investments, but will keep ~$40M on our balance sheet.
Total post-closing debt, with financing will be 65-70M
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Overall Transaction Assets
• Three main factories
– 230K sq. ft. in Shenzen (Baoan) China
– 180K sq. ft. in Valdarno, Italy (Includes
R&D and Admin, with low-cost “feeder
plant” in Hungary)
Shenzhen, China
– 50K sq. ft. in Chatsworth, CA
• Best-in-class R&D Center
experienced engineers)
(80+
• Custom product capability
• New applications, like Alternative
Energy (AE) & digital control for
motors
Valdarno, Italy
• High-volume purchasing leverage
Chatsworth, California
15
Liabilities – What Power-One Will Not Get
• Only taking the liabilities of the parent
company (Magnetek, Inc.) that are for the
Power Electronics Group
• The transaction does not include the
liabilities of the parent company:
– Fluorescent lighting lawsuit and liabilities
will remain with Magnetek
– Employee benefits and pension liability
of Magnetek, Inc. is retained by them
16
Excellent Strategic Value
• Purchase price of ~$72M in cash, plus $17M debt
• Grows Power-One’s revenue by over 50% with
overall purchase price of approximately 0.5x
forecasted sales for 2007
• Power-One will become a ½ billion dollar company
in 2007; forecast sales range from $530M to $550M
• Power-One continues to be a consolidator with this
6th acquisition in 8 years
• Lowers Overheads & Operating Expenses
17
Strategic Synergies & Importance
1.
2.
3.
4.
5.
6.
7.
8.
Accretive in Early 2007
R&D resources and technologies
Size and purchasing power of larger company
High-volume, low-cost China operation
Alternative Energy initiative
European operations expanded
Augments top customer base
Customs and new applications widen market
18
Strategic Synergies & Importance
#1
– Accretive in Early 2007
• The acquisition is strategic and accretive
– Will be accretive in Q1 of 2007
• Synergies will be additive to earnings per share
~$9M ($0.10 per share) in 2007
~$20M ($0.22 per share) in 2008
• Although acquisition has lower gross margins than Power-One, it also
has lower operating costs. Post merger will see margins in the high
20’s%, but should gradually increase throughout 2007 to above 30%,
with further improvements into the low 30’s% in 2008
• Primary drivers for margin improvement are synergies in purchasing and
manufacturing
• Operating expenses of ~30% of sales will immediately decrease into the
mid to high 20’s% range; gradually decrease throughout 2007 with a
target goal in the low 20’s%
• Cash generation expected to begin in 2007
19
Strategic Synergies & Importance
#2
– R&D Resources And Technologies
• Experience (breadth and depth) in Italy
with 80+ Engineers
• Augments other European Design
Centers in Switzerland and Slovakia
• Increased IP portfolio
• Low cost for experienced R&D
personnel
• Products range from smart motor driver
and control circuits to large 50KW
power modules
Custom Power Supplies
Inverters
High Density Data Storage
20
Strategic Synergies & Importance
#2 (Cont) – R&D Resources And Technologies
• 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
One® digital power management
capabilities
DSP-based Motor Controls
ZDigital
Smart Appliance
Control & Management
21
Strategic Synergies & Importance
#3 – Size & Purchasing Power Of Larger Company
• Catapults Power-One into becoming the 6th largest power
supply company in the world – from 16th position
• Combined sales in 2007 is forecast to be in the range of
$530M to $550M
• Economy-of-scale facilitates ability to compete with the
largest competitors in purchasing components
• Size and breadth of products are important in servicing the
Server/Storage markets
• Material purchases is largest part of COGS; this is the most
significant and fastest way to achieve synergy
22
Strategic Synergies & Importance
#4 – High-volume, Low-cost China Operation
• China manufacturing expertise
– 500+ manufacturing people; local
management for 5+ years
– 230,000 sq. ft. of operations - with
capacity & scaling capability
• Factory is close to current PowerOne factory that builds the Power
Systems product line
• Added manufacturing in China
addresses high-volume need for
future growth
• Critical mass in Asia has been
reached with Power-One factories
handling high-volume demand;
Contract Manufacturers (CM) will
continue to support mid-volume
23
Strategic Synergies & Importance
#4 (Cont.) – High-volume, Low-cost China Operation
• New China operation reduces
cost and increases control.
Reduces issues with current
CM arrangement
• Acquisition will increase
profitability with highervolume jobs. No “dual”
profits required
• Customers are driving for
more control over the mfg.
process. Main Competitors
do not use CM’s
• Allows better service and
support of local customers
24
Strategic Synergies & Importance
#5 – Alternative Energy Initiative In Power Inverters
Solar – Wind – Fuel Cells
Compact Fuel
Cell Power
Conditioners
• High reliability and efficiency
power converters
• High power-density & compact
size
• Primary energy source control
• Grid interactive control
• System level control
Wind Power
Converters
Photovoltaic
Inverters
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Strategic Synergies & Importance
#5 (Cont) – Alternative Energy Systems
Aurora® PVI-Wind Interface adapts
solar PV power inverter for use
with wind turbines
Aurora PrePack Panels (Integrated
Solar PV power inversion system)
MultiMode World Inverter (MWI) Tailors power input from any
Alternative Energy Source to any AC or DC power application (grid
interface and/or local load)
Power conditioners and interfaces
for Compact Fuel Cells
26
Strategic Synergies & Importance
#6 – European Operations Expanded
• Italy – 180,000 sq. ft. of R&D, Admin, & Operations
– Impressive R&D center
– Specialized products and manufacturing
• Alternative Energy Systems
• Intelligent digital Motor Driver and Controls
• Specialty transportation
– Excellent mid-volume/complex product capability
• Low-cost “feeder plant” in Hungary (30K sq. ft.)
• Local support for European regional customers
27
Strategic Synergies & Importance
#7 – Acquisition Augments Premier Customer Base
Bottom Row Shows Significant Additions to PWER Base
28
Strategic Synergies & Importance
#8 – Customs & New Applications Widen Market
• Adds “custom” capability to PowerOne’s standard product offerings
• Large Custom market
– AC/DC Custom market in 2007 is ~$7B,
which is more than twice as large as
Standard + Modified AC/DC market.
Additionally, the Custom market is
growing ~7-9%... more than twice as
fast as the Standard market.
Digital Business Machines
– Customers have been asking PowerOne to do more Customs; the issue has
been R&D resources. The acquisition
will greatly expand the resources.
Segway “HT”
29
Strategic Synergies & Importance
#8 (Cont) -- Customs & New Applications Widen Market
Other New Applications
• Intelligent motor drive and controls
– Embedded, Variable-Speed Motor
Drives
– Temperature Control Boards
– User Interfaces
• Specialty transportation products
DISSIPAT.
PICCOLO
3E864500000
– 55kW multi-voltage APSS for European
Intercity Trains
TRASF.
CARICABATTERIE
82100016ATM
CAMBIOTENSIO
NE
3E864800000
TRASFORMATORE
TRIFASE
82100019ATM
I NDUTTANZE CARICABATTERIE
82100017ATM
ALIMENTATORE
3E864300000
COND.1 E COND.2
80102358ATM
INDUTTANZE DIUSCITA
82100021ATM
SCHEDA CONTROLLO
9153E860203
ASSIEME SENSORI 1 C.B
3E864600000
ASSIEME MODULI IGBT
3E864100000
ASSIEME SENSORI 2
3E864700000
INDUTTANZA FILTRO LINEA
82100020ATM
30
Synergistic with Other Products
• Purchasing power of high-volume components will carryover to lower-volume components
• Engineering collaboration between AC/DC R&D
• Digital techniques in AC/DC
• Standardization of Custom products
• Capitalize on Power-One distributors and channels
• Cross-selling opportunities, e.g., Telecom products
DC Power Systems
Rectifiers
Electronic Power
Distribution Unit
Control Unit
‘Smart’ Solid-State Circuit Breakers
31
Integration Plan
• Objective is to combine both into a stronger company
• Will be integrated into Power-One’s functional structure
• Allows quick actions and savings – functional orientation will
facilitate integration
• Materials & purchasing cost reductions will be 1st priority
• Move high-volume products from CM to new China factory.
Note: new China factory in Baoan is very close to our
current factory in Shekou. Both are in Shenzhen.
• Shift Italy’s R&D team to focus on much larger business
deals; from smaller to larger ($5M - $10M) projects. Power
One has several large deals pending.
• Globally – Operations, Engineering, and Marketing & Sales
forces will be combined “Day 1”
32
Integration Status
Synergy leadership
teams have been
identified and
planning is in place
to timely capture
savings
In-depth
discussions,
meetings, and
site visits were
used both for
Due Diligence
and “Fast-track”
integration
33
Acquisition Supports PWER’s 2006 Goals
(In Prior IR Presentations – and Acquisition Impact)
Pre-acquisition Goals Acquisition Impact
10-15% growth forecast in 2006
 $160M+ added
 $530-550M in 2007
Decrease material costs
 Combination will benefit
Execution of higher-volume projects
with Server & Storage customers
Adding resources in Europe
(Slovakia & Switzerland)
Increase AC/DC presence
both in channel & products
 China factory will be used for
Introduce new products/applications
Increase engineering capabilities
high-volume manufacturing
 Italy & Hungary
 Custom AC/DC products
 Alternative Energy, Transportation,
Smart Motor Drive & Control Systems
 Superb R&D Center with 80+
experienced engineers
34
Power-One’s History & Strategic Direction
Custom Products & China Mfg.
Silicon
Division
Silicon POL’s + 1st Power Mgt.
High-density Bricks & POL’s
Acquiring
PEG of MAG
Acquired
di/dt
Silicon
Initiative
Acquired
Power Systems (Europe/Asia)
Powec
Power Systems (North America)
Acquired
HC
DC/DC Bricks (North America)
Acquired
IPD
Acquired
DC/DC Conversion (Europe)
Melcher
AC/DC – North America
Silicon R&D Center Startup
1973
1997
1998
1999
2000
2001
2002
2003
2004 2005 2006
Strategic Direction
Founded as
AC/DC
power
conversion
company
Initial
Public
Offering
(IPO)
Strategic shift to
communications
infrastructure
markets &
acquisitions
A technology leader in
powering communications.
Integrated five acquisitions,
developed silicon & digital
power mgt.
Entered
Server/Storage
markets &
acquiring Custom
capability
35
Power-One’s New Global Footprint
Ireland
Andover, MA
San Jose, CA
Chatsworth, CA
Camarillo, CA
Carlsbad, CA
Switzerland
Italy
Slovakia
Hungary
Baoan, Shenzhen, China
Shekou, Shenzhen, China
Dallas, TX
Dominican Rep.
Penang, Malaysia
Singapore
Australia
Manufacturing Centers
R&D Centers
NEW Mfg Centers
NEW R&D Centers
36
Summary of Potential Synergies
P.E.G.
Product
Orientation
Operations
Increased
Sales
Power-One
Combined Synergy
• Customs
• Standards
• Full Product Portfolio – the best in power
• Strong AC in China (China);
• Excellent Italy midvolume/complex product
capability
• Strong Customer
Relationships
• Diverse Customer Base
• $160M
•Strong DC/DC in Asia &
Dom. Rep.
• Strong AC in mid-volume in
D.R.
• Largest datacom
customers
• ATE & Transportation
Customers
• Server/Storage ramping
• Global Sales Presence
• $300M+ in 2006
• Largest Distribution Base
• $75M in Cash
• Zero debt
• Power Only
• Can compete with the largest competitors
• Combined purchasing power
Financials
* Sound Balance Sheet
Orientation
• Power Only
Technology/
R&D
• Innovation AC/DC
• Very High Power
• Digital Implementations (DSP
& uControllers)
• Software/Firmware
• Very Diverse Applications
• DC/DC Bricks
• Digital Power Mgt (Board
Level)
• High efficiency
• Increased market share
• Cross-selling opportunities
• Customers are different; increased
penetration
• ½ Billion!
• Very secure financially
• Ability to fund future growth & opportunities
• The ONLY top-10 power company that is
exclusively power
• Top Brand-name recognition
• The best in the industry
• IC’s to AC
• New Applications (Solar/Wind/Utility)
• Engineering collaboration
• Increased IP portfolio
37
Growth Opportunities
CORE GROWTH
NEW OPPORTUNITIES
1. Technology Leadership
2. High Density/Efficiency
3. Broad Product Portfolio
1. New Markets
2. New Products
3. Digital Power
Communications &
Industrial Markets
Standard Products
Server & Storage
Markets
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
38
Significance of Acquisition for Investors
• Power-One is a consolidator and can compete with
biggest competitors
• More opportunities with large, global, well-funded
company in fast-growing markets
• Acquisition is very accretive, very quickly
• Power-One is the only significant “Pure Power” play
• High synergistic and strategic value in the acquisition
• Augments and helps fund continuing digital power
developments
• Power-One forecasts 4th quarter range to be between
$120-130M with acquisition, depending upon closing date;
$530-550M in 2007.
39
Other Power-One “Take-a-ways”
• 2005 was a return to profitability year (Q3 & Q4)
• 2006 is a return to growth; Bookings & Backlog are at the highest
levels since 2000. Q3 Guidance: $74-78M
• Telecom Power Systems should be high-growth business
• Server & Storage design wins will turn into revenue (‘06 forward)
• AC/DC Front-End business is strong, especially with new products
• DC/DC products continued strength in market with bricks & POLs
• Z-One™ digital power management gaining momentum
–
–
–
–
Z-Alliance includes C&D Technology, Atmel, and now Silicon Laboratories!
Design-wins growing, multiple platforms, top 10 customers
“No-bus” Z-1000 addresses lower end systems – power mgt. for free!
2nd generation Digital Power Manager now controls non-Z-One devices
• Continuing to forecast 10-15% organic growth for 2006
40
Thank You!
TM
Disclaimer & Forward Looking Statements
This presentation contains forward-looking statements, which are made pursuant to the Safe-Harbor provisions
of the Private Securities Litigation Reform Act of 1995. Words such as “forecast,” “expect,” “anticipate,” “will,”
“looking,” “believe” and similar expressions reflecting something other than historical fact are intended to identify
forward-looking statements, but are not the exclusive means of identifying such statements. Forward-looking
statements are not guarantees, but rather are predictions of and make certain assumptions regarding
anticipated future results. Achievement of actual results are dependent upon and will involve a variety of risks
and uncertainties that could cause actual results to differ materially from assumptions and predictions. Such
risks and uncertainties include, but are not limited to, the risk that Power-One’s and Magnetek’ businesses will
not be integrated successfully; distraction of management as a result of, and the challenges of integration and
restructuring associated with the transaction or other acquisitions, and the challenges of achieving anticipated
synergies in whole or in part; costs related to the transaction; the possibility that the market for the sale of
certain products and services may not develop as expected; Power-One’s ability to manage its international
operations; the risk that the process of reconciling certain Magnetek, Inc. financial information to U.S. GAAP
could result in changes to Magnetek’ financial statements that adversely impact the Power-One’s pro forma
estimates regarding the transaction; the existence or enactment of adverse U.S. and foreign government
regulation; the risk that the development of products and services may not proceed as planned; adverse general
domestic and international economic conditions including interest rate and currency exchange rate fluctuations;
the difficulty of efficiently managing the company’s cost structure for capital expenditures, materials and
overhead, as well as operating expenses such as wages and benefits due to the vertical integration of the
company’s manufacturing processes; the possibility that the transaction or other contemplated acquisitions may
not close; the impact of competitive products or technologies and competitive pricing pressures; potential
business disruptions, including labor unrest, work stoppages, or other short or longer term labor disruptions; and
other risks that are described from time to time in Power-One's Securities and Exchange Commission reports.
See “Risk Factors” in the Company’s 2005 Form 10-K on file with the Securities and Exchange Commission for
greater detail regarding factors that constitute cautionary statements with respect to such forward-looking
statements, including certain risks and uncertainties that could cause actual results to differ materially from
those in such forward-looking statements. Readers of this information are cautioned not to place undue reliance
on these forward-looking statements, since, while we believe the assumptions on which the forward-looking
statements are based are reasonable, there can be no assurance that these forward-looking statements will
prove to be accurate. This cautionary statement is applicable to all forward-looking statements contained in
these materials. We undertake no obligation to update, amend or clarify forward-looking statements, whether as
a result of new information, future events or otherwise.
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