ARCHOS by pengtt


Strategic positioning
   & perspectives
1. Positioning
  . Mobile Audio/Video TV-centric
  . Mobile Audio/Video PC-centric
  . Mobile Audio/Video IP-centric
2. Competitive advantage
3. Unique opportunities
3. Financials
            makes the best
portable entertainment devices, period.
  1. Mobile Audio/Video TV-centric
    a.   Mobile DVR
    b.   Digital Link to STB
    c.   Autosync with STB
    d.   DVB-T Recorder
  2. Mobile Audio/Video PC-centric
  3. Mobile Audio/Video IP-centric
Competitive advantage
a. Mobile DVR (Digital Video Recorder)

•   TV is by far the 1st source of media content
         • An American spends 4h/day in front of his TV set
         • DVRs allow very easy recording of any show in DVD quality
•   Strong growth pulled by DVRs and portable DVD players
•   ARCHOS is the market leader
•   Technology leadership resulting from 4 years of sustained R&D effort
         • Now, 4th product generation of Archos Mobile DVRs
         • AV100 in 2002, AV300 in 2003, AV400 in 2004, AV700 in April 2005…
         Strong growth
            pulled by
       DVR Set-Top Boxes
               (Digital Video Recorder)

•   Dual tuners to receive and record 2 channels simultaneously
     – 1st tuner for the current channel played back while being recorded on internal hard
     – 2nd tuner to record simultaneously a second channel as a background task
•   Inside the box are stored in digital encrypted form:
     – all the TV you have watched lately as well as
     – the TV you have planned to watch
•   EchoStar/ARCHOS joint venture:
     – transfer directly the digital encrypted content from STB to Mobile A/V Players
    b. Digital Link to STB

•    Range of 3 DishPods developed for EchoStar
•    Commercialized by EchoStar with the ARCHOS brand
•    Ultra-fast direct transfer of encrypted media content from STB to AV Player
      – Automatic Synchronization
      – 1 full movie transferred in 1 or 2 minutes
•    2/3d of STBs are now with DVR functionality
•    Introduction in Q4 2005
•    High volume anticipated in 2006
c. AutoSync with STB
    STB directly controls DVR
                                                 Guide TV en ligne
Utterly simple:
     Using STB’s remote control, select
     recordings from STB’s online EPG
     (Electronic Programming Guide)
     STB will automatically switch to
     programmed channel and set AV400 or
     AV700 to start/stop recording on schedule

Using one STB remote control:
     1 remote control of STB                                   AV500
     1 channel guide of STB
200 million STBs:
•    Potential of 200+ millions STBs worldwide
    d. Mobile DVB-T Receivers & Recorders
    (Digital Video Broadcasting – Terrestrial)

•    Adapted from ARCHOS range of Mobile DVRs
•    Dual DVB-T tuner and antennas built in Mobile AV Player
•    Viewing of live or recorded video
•    Automatic recording scheduler using online TV guide
•    Reception possible inside buildings
•    Reception possible inside moving vehicles (car, bus train…)
  1. Mobile Audio/Video TV-centric
  2. Mobile Audio/Video PC-centric
    a. Mobile Audio/Video Players
    b. Mobile Audio Players
  3. Mobile Audio/Video IP-centric
Competitive advantage
Unique opportunities
    a. Mobile Audio/Video Players

•   3 technological breakthroughs that no one competitor can align:
         1. Full compatibility with Microsoft’s Windows Media Technology: AutoSync with
            Windows Media Player 10, Windows Media Video 9, Windows Media Digital Right
         2. Compatibility with MPEG-4 / DivX in full DVD resolution (720x566)
         3. USB Host to connect digital cameras (direct transfer of photos)
•   Only credible competitor against iPod Video
         •   Full range with 2.2”, 4.3” & 7” LCd  iPod 2.5”
         •   DVD playback resolution, 4 times better D1(720x566)   QVGA(320x240)
         •   Compatible with MS WMV and DivX
         •   Supports digital cameras
         •   Camcorder
         •   Video Recording
    b. Mobile Audio Players

•   Highly competitive market, high volume, very low margins
         • 20% price drop by Apple recently
•   Evolution of functionalities towards more Photo & Video
         • Lead by Microsoft’s Windows Media Technology™
•   ARCHOS Positioning
         • Price fighter players at entry level (start from 3GB)
         • Audio/Video players like Gmini 400 in the high end
  1. Mobile Audio/Video TV-centric
  2. Mobile Audio/Video PC-centric
  3. Mobile Audio/Video IP-centric
    -   Pocket Media Assistant
Competitive advantage
Unique opportunities
Pocket Media Assistant
           launches the PMA
direct connection to Internet
• Built-in WiFi
• Direct connexion to new video services:
  Video Streaming, Video Download, TV
  over IP…
• At home, direct connection to Internet
  through ADSL router (Livebox,
  Freebox,…), no need for a PC
• On the move, from any hot spot: airport,
  train station, cyber cafes…
1. Strategy
2. Competitive advantage
    . Technology leadership
    . Intellectual Property build-up
    . Strategic partnerships
3. Unique opportunities
4. Financials
Technology leadership

•   2000: 1st HD-based MP3 player, over 1 year before Apple
•   2002: 1st mobile video player in 2002
•   2003: 1st mobile video recorder in 2003
•   Now, 4th product generation of Archos Mobile DVRs
         • AV100 in 2002, AV300 in 2003, AV400 in 2004, AV700 in April 2005…
•   2005: 1st Wifi IP-Centric mobile video recorder (PMA400)
•   2005: 1st Digital transfer from STB with satellite TV encryption
•   2005: 1st Direct control of Mobile DVR from STB (EchoStar, CANAL+ …)
•   2005: 1st Mobile DVB-T Recorder & Receiver
    Intellectual Property Build-up

•    Key IP in TV-Centric Mobile DVRs
      – Several patents about TV Cradles: digital link to STB, recording circuitry inside TV
        cradle, connections to TV and STB, control from STB…
      – AVOS: proprietary multimedia OS for Mobile DVRs developed over 5 years
      – AVUX: AVOS multimedia engine ported onto Linux
•    Key IP in TV-Centric DVB-T receivers and recorders
      – Patent pending on dual antenna for diversity reception inside buildings or vehicles
      – 1st mobile DVB-T DVR
•    Key IP in DRM technology
      – TV through partnership with EchoStar, CANAL+, Nagra, NDS…
      – PC through partnership Microsoft
Strategic partnerships
•   Strong commercial & capitalistic partnership with EchoStar
     – EchoStar: 26% of ARCHOS (convertibles)
     – EchoStar to commercialize DishPods with ARCHOS brand
         • 35 Million active STBs
         • 20000 retailers in the US
•   Encrypted data exchange between mobile player and STB
     – Partnership with EchoStar: range of 3 mobile video players
     – Partnership with Nagra and NDS: adapting STB encryption to Mobile Player
•   Direct control of Mobile DVR from STB
     – Partnership with CANAL+: control of DVR through serial port
     – Partnership with EchoStar: control of DVR from data packet inserted in video signal
•   Partnership with Microsoft
     – Full porting of Windows Media Technology: Media Transport Protocol, Windows
       Media Player Autosync, Windows Media Video, Windows Media Audio, Windows
       Media DRM, Windows Media Connect…
1. Strategy
2. Competitive advantage
3. Unique opportunities
    . TV partnerships
    . VOD partnerships
4. Financials
TV partnerships
•   Leverage technology leadership and partnerships with EchoStar and CANAL+ to
•   Multiply partnerships with TV operators to offer mobile video players to
    take away your TV content everywhere with you.

    VOD partnerships
•    Apple with the iPod Video has opened wide a new era for video download

     Content   Content     Content     Service    Search   Access
                                                                      End user
     Creator   Publisher   Agregator   Provider   Engine   Provider

•    Every link in the content distribution chain now wants to open its own video
     download web site to compete against Apple
•    ARCHOS’ range of portable video players if the only credible alternative to
     the iPod video
1. Strategy
2. Competitive advantage
3. Unique opportunities
4. Financials
  - 2005 trend
  - 3-year projection
2005: Worldwide presence (w/o EchoStar)
     8%                                           + 41%

                               50   + 35%                              ASIA


                                                             + 75%

                                      USA           EUROPE      ASIA

    % 2005 Turnover by                      2005 growth by region
2005 TV & PC «Centric»: growth drivers
(w/o EchoStar)

             + 89%



        40                        + 31%

                                                        N/A          -100%


                 TV Centric   PC Centric   IP Centric         Misc
Key figures (w/o EchoStar)
  2004            Gross Margin
                     16M€             Operating Expenses       EBIT
   Turnover                                 21M€              (5M€)
                    @ 26.5%
    60 M€

                    Gross Margin        Operating Expenses
Break even          22M€ @ 26%                22M€           EBIT 0M€
 Turnover 85 M€

 2005             Gross Margin
                    2 3.4M€
                                      Operating Expenses
  Turnover          @ 26% +
   90 M€

  Expansion               Structure                 Planification
Strong P&L improvement 2005 versus 2004
 Archos Consolidated Reporting                                                w/o EchoStar

    in 000' EUR         S1-2005       Q3-2005   Q4-2005   S2-2005   FY2005

    Total                   32,147     24,077    33,776    57,853    90,000

 Gross Margin                7,997      6,395     8,972    15,367    23,364

    % of revenue             24.9%        27%       27%     26.6%      26%

 Total operating expenses    9,821      6,313     6,570    12,884    22,705

    % of revenue              31%         26%       19%       22%      25%

 EBIT                       (1,824)        82     2,402     2,484      660

    % of revenue               -6%         0%        7%        4%       1%

        Revenue expected to growth by over 50% for year 2005
        Gross margin improvement thanks to product portfolio upgrade
        Stabilized and controlled operating expenses
        EchoStar revenue estimated round 6 M€ for Q4
2005: a year of transition
• Reviewed sub-contracting model
   – Diversified, best in class quality, best in class flexibility

• Improved working capital
   – Canon agreement, turnkey

• Strengthened finance structure
   – EchoStar cash injection, banking relation ship, share price

• Balanced mix & product range margin
   – XS line, Gmini & AV line

• Focused on operational improvement
   – Returns management, Excess and Obsolescence & logistic
Middle term plan 2005 - 2007
(w/o EchoStar & other partnerships)
 “Continuing diversification &
reducing risks whilst sustaining             240

profitable growth”                           220
                                                      EBIT                                                       11%

         Develop Product Portofolio          180
                                             160                                                                 6%
         Enrich Distribution Network         140


         Improve Customers Paretto           100
                                                                     > 0%                                        1%


         Balance Geographical                 60
         Coverage                             40

         Build up Finance Structure           0
                                                       2004           2005           2006           2007

         Balance Production
         Balance Sourcing Panel
« A managed growth, below the market trend will result in twofold increase in turnover over two years allowing
                ARCHOS to reach 8% EBIT versus revenue w/o EchoStar contribution»
Middle Term ARCHOS business Model
(w/o EchoStar & other partnerships)
 Net Revenue                          100%

 Gross Margin                         26 / 28%

 R & D / Quality                      (6%)

 Sales & Marketing                    ( 8 / 10% )
 G&A                                  ( 5% )

 Operating Margin                     8%
   Forward looking statement
This presentation contains forward-looking statements, including the statements regarding
expected gross margin, operating and net income, and tax rate range for Fiscal 2005, our
long term financial business model, expected product introductions for Fiscal 2005, the
continuing demand for our retail products, and for retail and OEM sales.

These forward-looking statements involve risks and uncertainties that could cause
ARCHOS performance to differ materially from that anticipated in these forward looking

Factors that could cause actual results to differ materially include:
     Our ability to timely introduce successful products

     The effect of pricing, product, marketing and other initiatives by our competitors and our reaction to
     them on our sales, gross margins and profitability

     Our ability to match production to demand and to coordinate the worldwide manufacturing and
     distribution of our products in a timely and cost-effective manner

     Our operations in China being adversely impacted by strains on Chinese energy, transportation, or
     other infrastructures

     Changes in consumer purchasing trends

     Changes in financing strategies

     Fluctuations in exchange rates

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