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Pace Analyst Briefing

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Pace plc
Neil Gaydon, Chief Executive Officer
Stuart Hall, Chief Financial Officer
19 June 2008
19 June 2008
Private & Confidential2
The Pace Management Team
19 June 2008
Private & Confidential3
19 June 2008
Private & Confidential4
Business objective
To make Pace a successful company that people aspire to work for and has the
admiration and loyalty of customers, shareholders, partners, suppliers and the
digital TV industry
19 June 2008
Private & Confidential5
Business Model
• Pace is a specialist technology company providing products and services to the
world’s most successful payTV operators and retail markets
• Deliver leading-edge products that create high value add for customers
• Predict future requirements so customers have what they want, when they
need it
• Provide a total package from strategic advice and product development to systems
integration and after-sales service
• New operating model delivers best-in-class products while improving margins
• Investing in new digital TV related technologies to grow the Company
19 June 2008
Private & Confidential6
Pace – two years ago
Strengths
• Growing customer portfolio of major
payTV operators
• Targeting the top 20 payTV operators
• Strong engineering capability
• Engineering skills
• Breadth of knowledge v competition
Weaknesses
• Inflexible & unresponsive
organisational structure
• Poor financial performance
• Margins
• Overheads
• Profitability
• Not customer centric
• Inconsistent delivery
• Weak culture
• Remote management
19 June 2008
Private & Confidential7
Change programme
• New management team
• Creation of customer centric organisation with strong customer ownership
• Development of Pace Operating Model
• Creation of a distinctive Pace culture
• Introduction of Customer Account Teams and Customer Support Teams –
empowered and accountable
• Metric driven performance targets
19 June 2008
Private & Confidential8
Pace’s Vision, Values & Behaviours
19 June 2008
Private & Confidential9
Business Strategy
• Strategic focus
• To focus on core business and add related technologies that will enable Pace
to deliver growth and increase profitability as the world continues to move to
digital TV
• To become the world’s best set-top box company
• To put Pace at the heart of convergence in digital TV, creating a platform for
long-term growth
19 June 2008
Customer Centric Organisation
19 June 2008
Private & Confidential11
• Pace is a totally customer
focussed organisation
• Customer account groups are
dedicated to specific customer
groups with common technical
or regional foundation
• Each customer group has its
own account, engineering and
support team
• Support services support all
Customer Account Teams
Core Principles
19 June 2008
Private & Confidential12
Customer Account Team structure
Executive Team
Customer Account Teams
Customer Support Teams
NDS
BSkyB
Sky Italia
Foxtel
Sky New
Zealand
Viasat
Astro
NAGRA
KDG
Premiere
Virgin Media
UPC
Canal+
Cyfra+
Numericable
Sogecable
Irdeto
Digiturk
Multichoice
Retail
New business
development
Philips brand
retail markets
Networks
Multi-dweller
Americas
Satellite
DirectTV
Sky Mexico
Sky Brazil
IPTV
Connectivity
Telefonica
BT
Belgacom
Americas
Cable
Comcast
Time Warner
Rogers
+60
Net Brazil
Pace UK Pace France Pace Americas
19 June 2008
Private & Confidential13
Customer Support Teams
Operations
IT
Quality
Marketing and Communications
Finance
HR and Facilities
Legal
Engineering Services
Technology
Customer Support Teams
19 June 2008
Private & Confidential14
Global Offices
19 June 2008
Performance achievements
19 June 2008
Private & Confidential16
Consistent improvements in financial
performance
19 June 2008
Private & Confidential17
Newsflow 2006-2008
Pace wins Queens Award for International Trade21 April 2008
Pace announces contract to supply HD PVR to MultiChoice Africa8 Sept 2007
Shipments of standard definition DVR commence to US cable operator Comcast28 Sept 2006
Preliminary results for the 7 months to 31 Dec 2007: Exceptional performance, gross margin improved
to 20.3% and profit before tax £15.4m
29 Jan 2008
Market update: Overall performance for the year ending 2nd June 2007 expected to be slightly ahead of
current market expectations
6 June 2007
Market update: The Board expects profit before tax for the shortened 2007 year to be significantly ahead of
current market expectations of £8m
17 July 2007
Preliminary results for the year to 2 June 2007: Revenues more than doubled, volumes up 77%, over
50% revenues from US
24 July 2007
Pace announces new Sky business win: Sky HD and further Sky+7 Aug 2007
Market update: Board now expects that the outcome for the shortened 2007 year will be significantly ahead
of its existing expectations
14 Sept 2007
AGM & IMS statement: On track to meet the Board’s recently revised expectations for the shortened 2007
financial year
19 Oct 2007
Pace reclassified to technology sector28 Feb 2008
Pace completes acquisition of Philips Set-top box & Connectivity Solutions21 April 2008
BT Awards set-top box contract to Pace13 May 2008
Company name changes Pace plc19 May 2006
Commence HD shipments to DirecTV in US31 Aug 2006
Announce Digiturk as a new customer5 Sept 2006
Pace signs significant new US cable contract29 May 2008
Interim Results for the half year ended 2 Dec 2006: Returned to profit, Revenue more than doubled,
Shipments up over 60%, North America contributed over 50% of revenue
5 Feb 2007
19 June 2008
Private & Confidential18
Critical Success Factors
On Margin
On QualityOn Time
19 June 2008
Private & Confidential19
Critical Success Factors – On Margin
On Margin
• 20% gross margin target achieved by end of 2007
• Also targeting Return on Investment
19 June 2008
Private & Confidential20
Critical Success Factors – On Time
On Time
• Major cross-industry challenge
• Delivering consistent improvement in On Time delivery – 30% improvement over last three years
• Increasing ratio of projects delivered to number of employees
• Now targeting 3rd party technology partners to drive further improvements, take leadership position
and leverage new Pace scale
19 June 2008
Private & Confidential21
Critical Success Factors – On Quality
On Quality
• Key priorities
• Targeting entire supply chain to drive further improvements
• Moving customer focus to total cost of lifetime ownership versus competition
• To lead our markets in the development of great products, with the lowest environmental
impact with three focus areas
• Products
• Partners
• Site Operations
19 June 2008
Acquisition of Philips STB & CS
19 June 2008
Private & Confidential23
Strategic rationale reminder
• The acquisition has brought together two of the world’s leading set top box
companies with an unmatched global customer portfolio
• There is significant potential for improved efficiencies and opportunities for growth
• We are combining world leading engineering expertise in digital TV technology,
enhancing Pace’s technological position
19 June 2008
Private & Confidential24
Current Update
• Eight weeks since acquisition closed
• Disentanglement largely completed
• Now focussed on Integration – functionally and culturally
• Philips shareholding
• Have sold down initial 4.6%
• Added quality new institutional investors
• 17% shareholding locked in until one year post completion
19 June 2008
Customer Portfolio: diversified business
19 June 2008
Private & Confidential26
Pace 2000
Pace 2000
• UK centric – 92% of revenues
• News Corp focussed
• Decreasing European & Latam business
• Nascent US business
BSkyB UK
ONdigital UK
NTL UK
Telewest UK
Chile
Brazil
Colombia
Sky Latin America Mexico
Sky New Zealand
CANAL+ Italy
Time Warner N. America
Tele+ Italy
CANAL+ Poland
Yes Israel
19 June 2008
Private & Confidential27
Pace 2007
Pace 2007
• US & European business growing
• Balanced revenue picture between markets
19 June 2008
Private & Confidential28
Pace 2008
Pace 2008
• Global and diversified customer based through business development & acquisition
60
19 June 2008
Reflecting Change
19 June 2008
Private & Confidential30
Technology Hardware and
Equipment
Pace plc
www.pace.com
19 June 2008
Pace’s global market
19 June 2008
Private & Confidential32
Market drivers
• Operator business plans
• Content
• Local market competition
• Local market economies
• New technology price reductions e.g. evolution of MPEG-4
• Technology evolution
• Consumer demand and take-up of new technologies e.g. flat panels,
broadband
• Analogue Switch Off & other regulatory intervention
19 June 2008
Private & Confidential33
Market growth forecasts
Source IMS Research 2007
19 June 2008
Private & Confidential34
HDTV Channels grow to meet consumer demand
0
50
100
150
200
250
2004 2006 2008 2010
Time
NumberofChannels
Free-to-view channels Pay TV channels Total number of channels
Source: ScreenDigest
19 June 2008
Private & Confidential35
Worldwide Digital Subs by Conditional Access
Source: IMS Research, Screen Digest, Dataxis
19 June 2008
Private & Confidential36
0
25
50
75
100
125
150
175
2003 2004 2005 2006 2007 2008 2009 2010
Cable Satellite Pay-TV Satellite FTA Terrestrial IPTV
MUnits
The Global Set-top Box Market
Source: IMS Research, Screen Digest, Dataxis
19 June 2008
Private & Confidential37
Worldwide payTV subscribers
Worldwide payTV subscribers
250000
300000
350000
400000
450000
500000
550000
600000
650000
2006 2007 2008 2009 2010 2011 2012
Year
Subs(K)
Source: Screen Digest 2008
19 June 2008
Private & Confidential38
0
10
20
30
40
2003 2004 2005 2006 2007 2008 2009 2010
Cable Sat Pay-TV Sat FTA Terrestrial IPTV
Digitalization of cable
networks accelerates from
2006
Rollout of digital Terrestrial TV
proceeding throughout W Europe, with
volumes continuing to grow as analogue
transmissions are switched off, region by
region, with completion planned between
2010-2012.
The Western European Set-top Box Market
MUnits
Source: IMS Research, Screen Digest, Dataxis
19 June 2008
Private & Confidential39
0
5
10
15
20
25
30
35
2003 2004 2005 2006 2007 2008 2009 2010
Total Retail Total B2B
Note: ‘B2B’ sales transaction directly with MSO. ‘Retail’ = B2C sales transaction with other than MSO
through retail distribution. It is possible to categorize an Operator STB under Retail sales, if the STBs are
sold directly to the retailer, and not to the MSO. Retail sales = STBs made for FTA and/or Operator
markets.
55% retail
59% retail
The Western European Set-top Box Market -
Retail and B2B Markets
MUnits
Source: IMS Research, Screen Digest, Dataxis
19 June 2008
Private & Confidential40
New market opportunity
Full PayTV
Pay Free
TV Delivery Spectrum
Freeview
Pay as you go
19 June 2008
Private & Confidential4141
Analogue Switch-off
Migration to digital and Analogue
Switch-Off driving DTT sales
throughout Western and Eastern
Europe
ASO dates for Europe
2007
2006
2006 - 2010
2009
2009
2010
2010
2012
2012
2012
2012
2008
2008 - 2011
2008 - 2011
19 June 2008
Private & Confidential42
High Definition in main European Markets
2006 2007 2008
2009 2010
2011
2012
IPTV
Dig Cable
DTT (pay + free)
Satellite (DTH & FTA)
0
2
4
6
8
10
12
14
16
18
20
Millions
Europe HD-viewing HH by Platform
• HD in main European markets will be led by
satellite in pay and free-to air TV
• All other platforms show strong growth, with
terrestrial and cable in relatively equal
proportion
Source: IMS Research, Screen Digest, Dataxis
19 June 2008
Private & Confidential43
0
10
20
30
40
50
2003 2004 2005 2006 2007 2008 2009 2010
Cable Sat Pay-TV Terrestrial IPTV
Cable volumes increase steadily after
2006 with digitalization by US cable
giants
The North American Set-top Box Market
MUnits
DTT volumes will grow through
analogue switch-off. This segment is
being targeted by cable with new
low-cost products
Source: IMS Research, Screen Digest, Dataxis
19 June 2008
Private & Confidential44
High Definition in North America
2006 2007 2008
2009 2010
2011
2012
IPTV
Dig Cable
DTT (pay + free)
Satellite (DTH& FTA)
0
5
10
15
20
25
30
35
40
Millions
NAM HD-viewing HH by Platform
• HD satellite market in North America is on a
par with that of Europe (rising to 20m
households by 2012)
• Cable will have the largest volume of HD
homes (maintaining around 58% of HD
households through the period)
Source: IMS Research, Screen Digest, Dataxis
19 June 2008
Private & Confidential45
0
2
4
6
8
10
2003 2004 2005 2006 2007 2008 2009 2010
Cable Sat Pay-TV Sat FTA Terrestrial IPTV
In addition to large FTA market, operator
satellite volumes continue to grow and
upgrades to cable networks increase STB
volumes. Key markets Brazil & Mexico
lead with Chile, Argentina & Venezuela
(sat-only) generating volumes from 2007.
The Latin American Set-top Box Market
MUnits
Source: IMS Research, Screen Digest, Dataxis
19 June 2008
Private & Confidential46
Pace Networks – market opportunity
Japan (28m)
Korea (22m)
Taiwan (10m)
50%74 millionAsia
US20%20 millionAmericas
Germany (18m)
Italy (12m)
UK (9m)
Poland (9m)
France 8.5m)
Spain (8.4m)
Scandinavia
(5.1m)
50%74 millionEMEA
Key Markets% age all
HH’s
Residential
MDUs
Region
Pace Networks: Multidweller enables
access to triple-play services on
existing cabling in apartment blocks:
‘no new wires’
19 June 2008
Private & Confidential47
Global Competitors
Source: IMS Research on 2006 shipments
2.2%Coship10
2.6%Echostar9
2.8%ZhuoYi8
3.4%Humax7
3.4%PBI (China)6
4.3%SA/Cisco5
5.2%Tongda4
7.5%Pace3
8.4%Motorola2
11.6%Thomson1
Estimated 2006 Market
Share
Company NameRank
19 June 2008
Private & Confidential48
World’s Top 25 payTV operators
Source: Screen Digest
19 June 2008
Private & Confidential49
World’s Top 25 payTV operators - addressable
19 June 2008
Future Pace
19 June 2008
Private & Confidential51
Strategic priorities
1. Becoming the world’s best set-top box company
• Best in terms of
• Partner of choice for our customers
• Customer satisfaction
• Customer portfolio
• Technology reach
• Environmental performance
2. Being at the heart of convergence in the home for the digital TV
market
• Will be built on strengths of Pace in the set-top box market
• Will utilise the set-top box to drive home entertainment networks
Great products to our
customers every time.
19 June 2008
Integration of Philips STB and CS business
David McKinney COO
19 June 2008
Private & Confidential54
1st Phase – “Disentanglement”
• Objective – Philips to provide a “Stand Alone” STB business
at the point of completion of the transaction –
legally/operationally
• At April 21 this was a combination of 100% stand alone
capability, supported by some TSLAs from Royal Philips
(Transition Service Level Agreements: 3-12 months
duration)
• Operational disentanglement was addressed by function
and critical business need
• Engaged all customers as soon as practical within the
constraints of the process
• Transaction closed April 21 2008
19 June 2008
Private & Confidential55
2nd Phase – Integration
• Overriding Objectives
(a) Deliver the individual (pre closure) 2008 business plans
(b) Integrate the Philips STB and CS businesses in order to deliver upon the
planned operating efficiencies and synergies, without impacting (a)
• Viewed in the Short, Medium and Long term
• Short term: secure all the obvious and straightforward synergies/efficiencies
• Medium/Long term: full integration and implementation of the business and
operating strategies
19 June 2008
Private & Confidential56
Integration – Preparation
Outputs
•100 Day Plan (S Term)
• Company Blueprint (M/L Term)
• Business/Operating Strategy (M/L Term)
19 June 2008
Private & Confidential57
Integration – 100 Day Plan
• No 1 Priority - deliver the individual/combined business plans for the pre/post
acquisition/entities
• A 100 day plan generated that focuses on
• Priorities to achieve business plans
• Teams getting to know and understand one another
• Integration priorities and necessities (People/Systems/Processes/Organisation/Product)
• Communication and education of Operating Model
• Integration opportunities (short term) that will not detract from the business plans (e.g. Product
Cost)
• Integration opportunities/synergies that will drive sustainable performance improvement (medium
term)
• Identifying “Best Practice” with a view to implementation
• Organisational alignment
• Establishing the playing field for Key Partners
• Alignment of S, M, L term goals/objectives and priorities
DISENTANGLEMENT 100 DAY PLAN ONGOING INTEGRATION
JAN FEB MAR APR MAY JUN/JUL AUG ----->
19 June 2008
Private & Confidential58
100 Day Plan – what we have done so far?
• Met with all customers
• Explained the plans for immediate future
• Understanding their specific requirements and priorities
• All employee meetings held, first Global Business Review and Leadership team
event
• Met with all key partners (EMS, component, commodity, SW, HW)
• Outlined the opportunities and 2008 objectives and beyond
• Established all internal communications and business rhythms
• Alignment of the organisation (CAT/CST) & Operating model well underway
• Analysed & Identified by Product/Commodity the product cost opportunities
Product
a b c d e
Commodity
a
b
c
d
e
19 June 2008
Private & Confidential59
• Product priorities established and communicated
• Brand marketing workshops held with Philips for brand transition programme
• TSLA elimination programme in place
• Information Technology
• Perspective roll out plan underway
• Core Business Processes reviewed for best practice
• Product & Field Quality data analysed and compared across product families,
opportunities identified
• Generated combined company, system driven company forecast
100 Day Plan – what we have done so far?
19 June 2008
Private & Confidential60
Brand transition programme
Zapper 3 years
PVR 1.5 years
GOAL
To deliver a return on investment on the brand license
To build Pace brand awareness in retail markets
19 June 2008
Private & Confidential61
Company Blueprint – What is it?
The Company Blueprint defines how we manage our business for success and is an
Integration cornerstone
• Company Culture
• Organisational Structure
• Core Business Processes
• Governance and Strategy Implementation
• Internal Communications
19 June 2008
Private & Confidential62
Company Blueprint – Organisational Structure
• Executive Team
• Regional CAT structure
• Customer Support Teams
• Central CST Service Provision
• Regional CST Structures
• Leadership Group
19 June 2008
Private & Confidential63
Company Blueprint – Operational
• Project Referencing
• Product Creation Process
• Interlock Process
• Core Business Systems
• Financial Management
• Perspective
• Business Metrics
• Project Management
• Performance Management
Great products to our
customers every time.
19 June 2008
People and Culture
Jill Ezard, Director of HR
19 June 2008
Private & Confidential66
People and culture are at the heart of what we do…
19 June 2008
Private & Confidential67
…and we are getting results
Employee satisfaction increased
dramatically from 62.1% in 2007,
to 69% in 2008
19 June 2008
Private & Confidential68
How have we done it?
People and Cultural Focus Long-Term People and Cultural Aspirations
Deliver an Effective
Organisation
Deliver Development
Agenda
Creating a
Performance Culture
Ensure
People Process
Excellence
Support the delivery of an effective organisation structure with the right people
in the right roles enabling “Great Products to our Customers every time”
Offer the development opportunities that enhance employees’ capability and
enjoyment of work and ultimately create employees capable of growing and
driving the business to be the world’s best set-top box company.
Provide the tools and support that make employee performance a competitive
advantage
Deliver efficient and effective processes and systems to ensure the
fundamental people processes are delivered beyond customer expectations
Improve the Working
Environment
Provide the working environment that inspires passion and innovation leading
to increased productivity and effectiveness
Through delivery of a people strategy that clearly links to the business aspirations
19 June 2008
Private & Confidential69
Key programmes delivered since 2006
People and Cultural Focus
Deliver an Effective
Organisation
Deliver Development
Agenda
Creating a
Performance Culture
Ensure
People Process
Excellence
Improve the Working
Environment
Key programmes delivered
• Reorganisation in 2006 into customer focused structure:
•Customer Account Teams and Customer Support teams
•Reduction in management layers from 8 to 4
•Management of performance issues
• Executive development focused on creating a high performance team to develop
and deliver on the strategy
• Leadership development programme focused on improving the calibre of our
next up senior execs
• New performance management approach developed and implemented with focus
on:
•conversation not form filling
•clear alignment between performance and remuneration
•calibration of performance across the group
• Alignment of compensation and benefits globally
•Clear pay and benefits philosophy and approach linked to market
•Clear communication of existing (and some new) benefits available to employees
• Alignment of all contracts to create fairness and consistency across the group
• Significantly improved facilities for employees on Head Office site
•New “facilities”
•New customer and employee meeting suite
•New staff restaurant – “The Hub” – and it literally is!
19 June 2008
Private & Confidential70
What’s next?
HR
StrategyProgrammes
Deliver
Development
Agenda
BUSINESS AS USUAL
• Deliver a development
programme clearly
aligned to the
behaviours model
• Implement group and
individual programmes
to develop high calibre
leaders.
INTEGRATION
• Develop and implement
a cultural alignment
programme
Improve the
Working
Environment
BUSINESS AS USUAL
• Implement 2nd
phase
of refurbishment
programme in Head
Office
INTEGRATION
• Deliver best value
form acquired
premises
Deliver an Effective
Organisation
BUSINESS AS USUAL
• Develop and implement a
global resourcing and
talent strategy that
enables internal
movement and promotion
blended with superior
external hires
INTEGRATION
• Deliver an integrated
organisation structure
that aligns and builds on
the current Pace structure
(CATs and CSTs)
Ensure
People Process
Excellence
BUSINESS AS USUAL
• Maximise value from
Oracle HR system
• Review key partner
relationships to
ensure best value
INTEGRATION
• Align compensation
and benefits strategy
and structures
• Align payroll process
and providers
Effective and
Efficient
Organisation
Key
Results
Great Leaders and
Motivated
Employees
Great Place to
Work
Efficient and
Effective People
Processes
Improve individual
Performance
BUSINESS AS USUAL
• Implement 3600
feedback across the
company (including
external contacts)
• Review and enhance
manager capability
in managing
performance
INTEGRATION
• Align PM processes
across global
business
Performance
Culture
Great products to our customers every time
Great products to our
customers every time.
19 June 2008
Operations
David McKinney COO
19 June 2008
Private & Confidential73
• Customer Support Teams deliver
shared cross-company services to
Customer Account Teams
• Ensures alignment of key operating
strategies and drives group
efficiencies
CAT - CST Structure
19 June 2008
Private & Confidential74
Customer Support Teams - Operations
Quality
After Sales Service
Purchasing
Information Technology
Supply Chain Management
Business Processes
Engineering Services
Manufacturing Operations
Operations
19 June 2008
Private & Confidential75
CAT – CST Operations dynamic tension
19 June 2008
Private & Confidential76
Operations Focus
19 June 2008
Private & Confidential77
On Margin
• To address information provided by product cost analysis and deliver on margin targets
we have
• “Fit for Purpose” analysis & design
• Target Pricing, Terms & Conditions and Commodity Purchasing model
• Component engineering convergence plans
• AFR/Yield analysis & Improvement plans
• Localisation programme for the materials supply chain in Europe
• Product lifecycle management: Operations provide offshore and 3rd party management
to enable efficient and effective use of resources
Product
Cost
(Tier)
Time
Product Lifecycle Management
Internal Resource - Next Gen
Offshore/HW Outsource
19 June 2008
Private & Confidential78
On Time
TimeProduct due (On Time)
ASP/
Margin
Customer
satisfaction
Actual
19 June 2008
Private & Confidential79
On Time
• Pace has established close working partnerships with the CA, middleware and Si
vendors (One Roof Approach)
• CATs are employing concurrent design engineering practices
• Material Lead-time either process or VMI solutions employed
• New Product Introduction process moved to volume facilities working with EMS,
prototype retained with design. EMS partners involved at earliest stage
• Flexibility of capacity (manufacturers) 6 month rolling forecast
• Internally developed Universal Product Test Platform
• In region SW download capability via Pace Service network
• DFx/DFM programmes worked with internal design teams and all EMS/3rd parties to
enable TTV and TTM
• Network of external design capability (burst capacity/capability)
• INTERLOCK PROCESS is the cornerstone of the our planning
19 June 2008
Private & Confidential80
Quality
• Pace has all required ISO accreditations
• BS:EN ISO 9001 (Quality Management Systems)
• BS:EN ISO 14001 (Environmental Management)
• ISO: 27001 (Information Security Management)
• We utilise a combination of best practice in the fields of 6-sigma, TQM, and Lean
sigma
• An EFQM programme is being considered over the next two years
• An ongoing Reliability Programme is dedicated to improving the total cost of
ownership for our customers
• In the last two years we have
• Established the Product Creation Process
• Put in place a devolved and accountable Quality structure
19 June 2008
Private & Confidential81
Quality – devolved and accountable structure
19 June 2008
Private & Confidential82
• EMS – Electronic Manufacturing Services
• JDM – Joint Development Manufacturing (Hardware)
• Offshore – Low-cost high capability entity
• NPI – New Product Introduction
EMS/JDM/Offshore/NPI - Industrial footprint
19 June 2008
Private & Confidential83
Pace India – some facts
•• 10,000 year old ancient civilisation
• 325 languages spoken – 1,652 dialects
• 18 official languages
• 29 states, 5 union territories
• 1.3 Billion population.
• GDP $576 Billion. (GDP rate 8%)
• Parliamentary form of Government
• Worlds largest democracy
• Worlds 4th largest economy
• Largest English speaking nation in the world.
• World-class recognition in IT, bio-technology and
space
• 2nd largest pool of scientists and engineers in the
world
19 June 2008
Private & Confidential84
Outsource – The Model
19 June 2008
Private & Confidential85
World Class Tools – Perspective
19 June 2008
Private & Confidential86
What does Philips bring?
• Further economies of scale to global operations through rationalisation of EMS/JDM
Operations/Partners
• Synergies in product cost (Design, Materials, Manufacturing)
• Additional significant leverage on component pricing and manufacturing cost brought
about by convergence (components), rationalisation (EMS) and overall volume
• Best practices that will further enhance & improve our operating model
• JDM and Offshore practices in the retail model
Great products to our
customers every time.
19 June 2008
Technology Strategy
David Gillies, Director of Technology
19 June 2008
Private & Confidential89
Agenda
• Technology development strategy at Pace
• Technology for Convergence
• Primary Themes
• IPR
• Conclusions
19 June 2008
Private & Confidential90
How Pace Technology creates value
TANGIBLE
• Enabling Diversified Products (“diversified”)
• Enabling New Services (“revenue share”)
• Enabling Evolutionary Core Products (“derivatives”)
• Reducing Time to Market (“pre-emptive”)
• Increasing market share (“best” products)
• Reducing costs through asset creation (“solutions”)
• IP Rights licensing (“pooling” and “blocking”)
INTANGIBLE
• Knowledge
• PR and marketing
• Company Reputation
• Partner Relationships
Increasing
value
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Pace Development Strategy
Product and Technology Development
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Pace Development Strategy
A Full Service Organisation
Prototyping Product Dev
Adv. Dev.
Product Launch
Specification
& Design
Test &
Certification
Customer
Support
Maintenance
Customer
Acceptance
Technology
Volume
Manufacture
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Pace Development Strategy
Development Lifecycles
R&D
Technology Development
Advanced Development
Product Development
-4 0-2-3 -1 1
Content
Publishing, manipulation,
protection and accessibility
PACE Internet Delivery
PACE Networks
Wireless
Fixed, Mobile and
Portable digital delivery
PACE Wireless
PACE Retail
PACE Connected Home
Teams and activities
already spun off
into CATs
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Pace Technology
Technology for Convergence
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Interconnected & Interoperable
Consumers want their devices to work together and share content
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Industry Standards and Regulatory Bodies
Pace Activities
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Primary Themes
Connected Home
Connected Home
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Connected Home
The Key Players
Manufacturers
Security
Standards
Interoperability
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Primary Themes
Internet Delivery
Internet Delivery
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Internet Delivery
The Key Players
Technology providers
Search enginesInternet TV
providers
Broadcasters &
content providers
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Primary Themes
Wireless
Wireless
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Wireless
The Landscape
Technology providers
CPE
Manufacturers
Wireless
Broadband
Operators
Broadcasters &
content providers
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Emerging Themes and Technology Support
IPR
IPR
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IPR
Pace Patents
• Pace’s Patent Portfolio
• Following Pace’s acquisition of Royal Philips STB & CS,
our portfolio of Granted Patents has doubled to
approximately 200.
• With a further 250 inventions pending.
• Protection Strategy
• Historically focused on aspects of practical STB
implementation and its natural evolution
• It is being expanded to cover our broader technology and
product activities (like Multidweller).
• Citations
• Establishing our innovation in the field
• Examples of the companies that cite Pace’s patents are:
Thomson, Digeo, Intel, IBM, Samsung, Nokia, Philips,
Ericsson, Sagem, Sanyo, Denso …
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Pace Technology
Commercially Oriented & Focused
• Pace Technology Development has three main areas
• Product Development – specific customer requirements and launch dates
• Advanced Development – focus on next generation customer products and services
• Technology development – diversification, leadership, IPR generation
• Approach allows Pace to offer a unique customer focused product roadmap
• Technology Development remains focused on Pace core competence – but can
innovate and lead Pace into new market areas to strengthen the company
• Spinning off teams and activities ensures the skills and knowledge developed is
maintained in the product development teams, enhancing both product innovation
and time to market
• IPR Portfolio Management becoming increasingly important – defensive position
strengthening, Pace IPR into future standards new source of revenue
Great products to our
customers every time.
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In Conclusion
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Key messages about Pace
• Pace is a diversified business and is delivering against its objectives
• There is a significant market to address
• There are visible growth drivers and a clear strategy
• Pace has
• World class operational execution
• New and exciting technology opportunities
• We are well on the way to completing integration of Pace France
• We aim to be the best set-top box company in the world