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Contents 1. Kaon Media Overview 2. D-STB Industry 3. Major Highlights

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Presentation on theme: "Contents 1. Kaon Media Overview 2. D-STB Industry 3. Major Highlights"— Presentation transcript:

0 INVESTOR RELATIONS 2006

1 Contents 1. Kaon Media Overview 2. D-STB Industry 3. Major Highlights
Business Plan 5. Appendix

2 1. Company Overview – Fast growth as a “Major Maker”
Kaon Media is a quickly growing D-STB third generation company which leads time to market Company overview Revenue D-STB, PVR, MHP, IP STB etc Core Products 112 (57 R&D: 52% of all ) Personnel 3,664 Million KWN Total Assets May 11, 2001 Foundation Ssangyoung IT Twin Tower, A 901, Sangdaewon-dong , Jungwon-gu, Seongnam-si, Kyunggi-do Address Hwa-Seop Lim CEO 1,304 864 CAGR 82% 1,107 694 118 2004

3 Kaon Media is a key player in digital convergence history
Selected by British “What Satellite” As “Best Buy” STB 2006 Ranked 53rd high growth company in the Asia Pacific region 2006 Award from the Ministry of Commerce, Industry and Energy (MCIE) as a 100 bil. dollar electronics export contributor 2006 Released Multiroom STB 2005 Released IP STB & next generation convergence STB 2005 Silver award as one of the 50th high growth companies in Korea 2005 IBC best design award Selected as an “excellent product” by Germany’s Satvision 2004 Selected as next generation growth driving industry leader in the DTV combined receiver developer by MCIE 2004 Only company awarded the Advanced Technology Center (ATC) award by the MCIE 2004 Released next generation digital convergence STB “KVR-1000” 2003 Developed two-way data DVB-MHP STB for broadcasting for Ministry of Information and Communication 2002 Developed a full line-up of all digital receiver products 2002 Selected by MCIE as first class company in the DTV industry 2002 Developed PVR 2001 Foundation

4 1-2. Digital Broadcasting Specialist Group
Growth Driver = Expertise of the digital broadcasting specialist group Management organized from specialists formally from S company Production Planning Sales & Marketing Strong Skills in Technology R&D personnel with strong expertise in digital broadcasting World First digital hybrid products / World class next generation products / Excellence in industrial design / Possession of all world D-STB formats Digital Broadcasting Specialist Group Digital Multimedia Specialist Group Embedded Solution Specialist Group Consumer Electronics Specialist Group

5 1-3. No.1 Company in Global Digital Convergence
Leap to multimedia convergence specialist group with the competitiveness of D-STB Leap to a digital convergence Value Company [Time for leap] Today ( 2006 ~ ) Yesterday ( ~ 2005 ) Developed into a major D-STB company (Building of growth infrastructure] Full scale growth in digital convergence products - Release of digital convergence products such as IP STB, DAB STB, PVR, PMP Technology specialized in digital broadcasting - Obtain technology in diverse fields such as digital multimedia (H.264, MPEG 4 etc.), consumer electronics, embedded solutions Growth driven from high-end products - PVR, IP STB, digital convergence products for broadcasting companies Established as a major D-STB company in a short period of time - Market adaptation based on high level of skill - Differentiated design - Industry’s highest profitability Full scale market penetration for continuous growth - Penetration of broadcast company market - Establishment of global operations - Increased brand recognition

6 Status of STB convergence Two-way data broadcasting MHP STB
2. Changes in D-STB Products D-STB developed as the key platform of future IT hardware - Evolution of stronger multimedia and network functional products D-STB & Kaon Media’s development strategy Convergence process of D-STB Functionality Charged with role of home network server & automation gateway Home network server Future IP STB Solution (IP STB, Server, Middleware) Status of STB convergence Satellite, cable, ground wave Combo Products Internet capable IP STB Solutions Integrated Game, MP3, DVR, PVR functions Two-way data broadcasting MHP STB DAB/ Multimedia STB Current Home security DVR STB DVB-HD PVR Set-Top Box functions D-STB Past Broadcasting reception Network connectability

7 STB industry at the corner of rapid digital convergence growth
2-1. Digital Product Market Trend STB industry at the corner of rapid digital convergence growth Digital Broadcasting Convergence Market - Mega trend is the formation of the digital convergence market Multimedia digital convergence (Evolution of D-STB) Progression of digital convergence - Maximization of flexibility for users Broadcasting (Digital TV) Network (PC) Communication (Phone) +

8 Enlargement of new growth opportunities due to market changes
2-2. Changing D-STB Market Enlargement of new growth opportunities due to market changes Changing D-STB market World D-STB market size Continued growth with the acceleration of digital broadcasting switch over Further growth due to digital convergence T-commerce, VOD etc. New market formation Merging of broadcasting & communication Changes in video compression tech. standards Million units 10 20 30 40 50 60 70 80 90 100 2000 2001 2002 2003 2004 2005 Satellite cable Terresterial IP STB Changes to MPEG4, H.264 video compression Two-way broadcasting Communication based + One-way broadcasting Broadcast based MPEG2 centered

9 3. Major Highlights Long-term growth and stable profit generation
- Focused penetration of high-end broadcasting business market - Focus on new broadcasting and 64 established in 40 nations Focused penetration of new broadcasting companies Focus on PVR, Multi-Room market Supply contracts with Sky Life MHP, PVR - Supply minimum of 100,000 MHP STB beginning in 2Q - Exclusive PVR supply beginning in 3Q - Forecast domestic sales revenue of billion KWN Oligopolistic market positioning in specific nations in satellite and broadcasting business markets - India: 1 satellite company, 2 cable companies - Indonesia: 1 ground wave plus mobile broadcasting company - Pakistan : 1 satellite company, 1 cable company, 1 ground wave company - Iceland : 1 ground wave, 1 MVDS company - Rumania: 1 satellite company Goal to increase of revenue ratio of PVR from broadcasting markets to more than 15% → Simultaneous achievement in both stability and profitability Through provision of differentiated functionality and convenience actively correspond to broadcasting market’s needs Provide diverse convergence functions such as 6 channel simultaneous recording internet, PVR, DAB, DVR, MP3, Games Defend broadcasting company market profits Actively correspond with European World Cup with special Multiroom products

10 3-1. Broadcasting Business Market Penetration
Achieve 78 bil. KWN revenue in broadcasting business market in 2006 CAS possessed by Kaon Media Broadcasting biz. market revenue plan 60% of 2006 revenue to be made in broadcasting business market Kaon Media’s CAS Main markets Conax Cryptoworks Nagravision NDS Iredeto Viaccess ChinaCrypt TFCAS à E. Europe, Scandinavia, India E. Europe, Turkey, Austria W. Europe, S. America, Asia N. America, Korea, UK, India Europe, Africa, India, Middle East W. Europe, Middle East, CIS China 100 Mil. KWN 780 125 350 Focus marketing on broadcasting businesses market with the CASs in the industry 3 4 6 8 Number of CAS T H 3 H 2 H 1 Kaon Company 2004 2005 2006(E) * Note : Based on license contracts signed (internal analysis)

11 3-2. Penetration of DVB–HD Market
Develop MPEG4, H.264 technology for entering HD quality STB market - Conversion to digital HD broadcasting is a signal for reorganization of the industry - Focused penetration in DVB-HD adoption areas (Europe, Asia, Africa, Australia) Adapted HD broadcasting formats based on region Obtaining core technology that will lead the DVB-HD market DVB-HD ATSC 1. Obtain DVB-HD core technologies MPEG4, and H Develop MPEG4, H.264 chips and possess application technology 2. Obtain technology that allows commercial use of middleware applications such as MHP and PVR 3. Obtain HD based IP TV Solution to penetrate communications business market Foundations developed for DVB-HD in Europe Turkey production plant Europe, N. America, Dubai, U.S. office and China office Logistics center in the Netherlands

12 3-2. Strong Company Brand Marketing
Using company brands for high-end / high margin product to improve profitability and achieve long-term growth objectives Brand policy Company brand Revenue ratio Policy for Kaon Media’s own brand Reliable quality and high technology brand image Marketing high-end products with own brands to establish premiere brand image Harmonize growth and profits accordingly for high growth / high profit brand leverage effect Price 10% higher than OEM products If new market penetration and strategic market expansion are needed, follow ODM as an option Highest percentage of own brand in the industry 29 45 65 35 55 71 2003 2004 2005 Brand OEM

13 1 HQ, 4 factories, overseas sales office, 1 W/H, 1 IPC
3-3. Build Global Operation and System Build production, logistics and sales operations in key locations 1 HQ, 4 factories, overseas sales office, 1 W/H, 1 IPC Netherlands (W/H) Norway office Dubai office U.S office Germany office China office Korea (HQ, F) China (F) Turkey (F) Algeria (F) China (IPC) Production Plant Incorporate independent sales offices US operator US (Irvine, CA) Europe (with Norway) Germany (Frankfurt) Digital cable STB China (Beijing) Middle East, Africa UAE (Dubai) Regions of operations Low-end model SKD line 70k Algeria (Algiers) Europe, Mid. East and neighboring region export 100k Turkey (Istanbul) Low-end model production 50k China (Huizhou) PVR, CAS, COMBO 350k Korea Product Capacity Logistics Center Europe, CIS region Netherlands (Rotterdam) IPC (International procurement center) Main materials, equipment sourcing China (Shenzhen)

14 Ordinary IP STB company business range
3-4. Future Growth Driver (IP STB Solution) Only company possessing IP STB Total Solution IP TV market expansion through IP TV chipset co-development & co-marketing with Intel Turn-key solution for server and middleware needed for IP STB including hybrid type products - Provide total solution for increased competitiveness and high profit generation Differentiated IP STB Solution KIP series revenue plan Domestic : Within 1 month of IP business launch, began supplying IP STB to “Sports Toto,” cyber apartment complexes, and communications business partnerships Overseas : Japan, EU, S.E. Asia – business development with hotel consortiums and backbone network companies N. America : Preparing for home automation IP STB business Movies Content Music News Games Kaon Media business range (IP STB + Server+ Middleware) Encoding Server (H/W) DRM, Authoring (S/W) KIP Series Revenue Forecast Streaming Server 150 350 600 100 mil. KWN Middleware (S/W) Ordinary IP STB company business range IP STB 2006(E) 2007(E) 2008(E)

15 4. 2006 business plan Broadcasting business market penetration as
digital broadcasting expands throughout the world Multi-room STB solution market penetration Expected consumer and broadcasting business demand Added profit generation through patent registration of intellectual property 2006 Business Plan * Revenue Goal billion KWN * Profit Goal billion KWN (10. 7%) * Stock price goal ,000 KWN * Market Cap billion KWN Expand supply of PVR for broadcasting Develop exclusive PVR NDS XTV Middleware Product PVR market penetration as substitute for prior sales accounts Initiatives to obtain CHINDIA, NORDIC markets Co-operation with Chinese global electronics company Highel Penetrate new Indian broadcasting business market New product development for IPTV market Co-development and co-marketing ITPV chipset with INTEL Competitiveness and profit maximization through IP STB total solution development

16 Professional Experience
Appendix 1 : Major Executives Kaon Media manpower comprised of digital broadcasting specialists CEO Hwa-Seop Lim Key Executives Professional Experience Kaon Media President/CEO 2001 Developed European format two way digital TV 2000 Developed European format digital TV (first generation) 1998 Developed European format digital satellite receiver (DVB-S) 1996 Developed 1st & 2nd generation US format (DSS) 1994 Developed digital camera for broadcasting and digital monitor 1992 Samsung Electronics general R&D center 1989 Samsung Electronics color TV division Director (Production) Young-Ho, Lee Samsung Electronics General R&D Center, Samsung visual display division Director of R&D (R&D) In-Kee, Kim Samsung Electronics Overseas HQ, Samsung Panama sales office Executive Director (Overseas Sales) Hong-Kwang, Kim Samsung General R&C Center planning department, Samsung automotives strategic planning department Executive Director (Strategic Planning) Jin-Kyo, Lee Experience Position (Responsibility) Name Awards & Distinctions SMBA Kyung-gi small and medium enterprise company export award SMBA export prospect company certification Chairman Award from the Presidential Commission on Small and Medium Enterprise for venture companies Industrial packaging award and 20 million export award on National Trade Day MIC’s annual information technology business award Maeil Economic newspaper’s excellent venture company award in the field of information technology million dollar export achievement award on National Export Day Silver award as one of the 50 high growth companies in Korea Awarded by the MICE as a 100 bil. Dollar electronics export contributor

17 Appendix 2 : Balance Sheet
Million KWN Category 2005 2004 2003 2002 Current Assets 47,809 38,445 29,409 9,590 Fixed Assets 8,116 5,316 2,655 1,172 Total Assets 55,925 43,761 32,064 10,762 Current Liabilities 8,048 16,125 16,827 6,607 Debt & other liabilities 435 883 831 17 Total liabilities 8,483 17,008 17,658 6,624 Capital stock 3,664 2,875 1,821 Capital surplus 16,154 3,311 2,371 Earned surplus 26,663 20,327 8,129 54 Capital adjustments 961 240 91 - Total capital 47,442 26,753 14,406 4,138

18 Appendix 3 : Income Statement (2006)
Million KWN Category 1Q 2Q 3Q 4Q Total Revenue 20,361 32,085 35,224 42,754 130,424 COGS 15,945 24,890 27,743 34,346 102,925 Gross Profit 4,416 7,194 7,481 8,408 27,499 Selling&general administrative expenses 2,680 3,760 3,568 13,587 Operating income 1,736 3,434 4,840 13,912 Non-operating income 324 149 180 224 877 Non-operating expenses 887 165 200 249 1,502 EBIT 1,172 3,418 3,882 4,815 13,287 Net income 880 3,084 3,478 4,313 11,755

19 Thank you


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