Telesoft Annual Meeting

1
Telesoft Annual Meeting

• Keith LarsonDirector, Strategic Investments
• Intel Capital
• October 25, 2002

2
Agenda

• Intel Capital Overview
• Communications Investing
• Investment Themes
• Summary and QA

3
Intel Capitals Mission

• Make and manage financially attractive
  investments in support of Intel's strategic
  interests
• Execute Intel's strategic acquisitions
• Be the eyes and ears of Intel on technology and
  business trends

Strategic Intent
Financial Viability
Ideal
4
Experienced Investors

• Summary
• Invested over 350 Million in 175 deals in 2001
• Invested over 1 Billion in both 1999 and 2000
• At end of December 2001
• Over 500 companies
• About 1.7 billion value

5
Worldwide Investment
Invested by Region
6
2
2
15
North America
55
Asia Pacific
96
Europe Israel
1998
24
2001
Rest of World

• Investments outside of USA
• Over 1 billion
• Over 175 companies
• In over 25 countries on 5 continents

6
Intel Capital Geographic Overview
Sweden (1)
Germany (9)
Seattle (1)
Ireland (1)
Mass (7)
New Jersey (2)
England (18)
Oregon (52)
Poland (1)
Korea (3)
France (2)
Virginia (1)
Utah (2)
China (4)
Japan (8)
Arizona (4)
Israel (14)

• California
• Folsom (15)
• Santa Clara (105)

Mexico (1)
Hong Kong (15)
Taiwan (5)
India (7)
Brazil (7)
Singapore (1)
Argentina (4)
Australia (2)
As of 4/24/2002
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Complementary Efforts
The Company

• Venture Capital Firms
• Lead round
• Recruiting
• Board Seat
• Support of exit strategy
• Management support
• Portfolio relationship building

• Intel Capital
• Technology due diligence
• Technology collaboration
• Drive standards
• Promote within Intel
• Marketing cooperation
• Board Observer position
• Portfolio relationship building

8
Intel Capitals Decision Making

• Les Vadasz
• John Miner

Computing
Communications
Treasury
Geographies
Legal
Investment Sectors
9
Intel Capital Process
Gap Analysis
Milestones
Investment Project Authorization Meeting (IPA)
Business Plan Or Proposal Received
Deal Concept Approval Meeting (DCM)
Disposition
Close
Investigation
Due Diligence
Delivering Value
6 months to 3 years
2 weeks to 2 months
2 weeks to 3 months
Intel Capital
Treasury
Legal
Business Unit
10
Intel Capitals Sources of Deals

• Referred by valued source
• Senior management
• Past deal successes
• VCs
• Lawyers, bankers, accountants, i-bankers
• Business Unit or Labs
• Industry association or trade show
• Website or cold call

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Assembling an Investment Strategy

• Tools that Intel Capital uses
• Equity
• Licensing
• Alliances
• MA
• Types of Equity Investing Strategies
• Eyes and Ears
• Ecosystem
• Market Development
• Gap Filling

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Deal Mix Changes with BU Goal
of Deals

• Example Network Processing
• Goal build larger of allies for initiative
• Typical profile for ecosystem development
• Often characteristic of a newer business, but one
  that is closer to Intels core competencies

60
20
Ecosystem
Eyes Ears
Gap Fill
of Deals

• Example Ethernet Solutions
• Goal fill gaps, enable adoption, drive mkt dev
• Typical profile for accelerating deployment (of
  BB for example)
• Sometimes this profile is characteristic of more
  mature businesses

60
20
Ecosystem
Eyes Ears
Gap Fill
13
Agenda

• Intel Capital Overview
• Communications Investing
• Investment Themes
• Summary and QA

14
Investing Environment
Total US VC Invested
USB
140
120
100
80
60
What was once hard times
40
What to Expect ??
20
0
1970
1975
1980
1985
1990
1995
2000
1H02
Source VentureOne
15
Big Part Of Drop Off Is In Comm Investment
Equity into Venture-Backed Communications
Companies
Amount Raised (B)
Number of Deals
Source VentureOne
16
Early-Stage Comm Deals Losing GroundCommunication
Deals by Round Class
829
504
419
357
58
286
271
159
159
51
23
Source VentureOne
17
Connectivity Fiberoptics Continue to Dominate
Comm Deal FlowCommunications Deals by Sector
159
271
286
829
357
419
504
of Investment
Source VentureOne
18
Companies Selling at a DiscountDeals and Amount
Raised Through Communications Companies MAs
Amount Paid (B)
Number of Transactions
Source VentureOne
19
Early 2002 IPOs Look Like 2001Deals and Amount
Raised Through IPOs
Amount Raised (B)
Venture-Backed IPOs
Source VentureOne
20
Communications LiquidityIPOs and MAs Completed
by Venture-Backed Communications Companies
Number of Liquidity Events
Source VentureOne
21
Looked At Another WayOwnership Status by Year
Founded

Total Pool
153
151
212
306
452
488
564
948
1842
608
195
In the BEST years approximately 500 companies
found liquidity through an MA transaction or
IPO 5 years of inventory or ??
Source VentureOne
22
Time To IPONext-Gen, Old-Fashioned Venture
Median Age At IPO (Years)
Source NVCA
23
Communication Valuations Worse Median Pre-Money
IT Valuation by Round Class (M)
Source VentureOne
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Back to Basics

• Business Plans
• Technology With Value
• Business Models That Work
• Total Capital Required
• Experienced Management Teams
• Valuation Sanity
• Deep Pockets and Long Arms
• Real Exit Strategies For Investors

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Technology

• Evolution vs. Revolution
• Technology treadmill is not in recession
• Returns go to the never good enough technology
  suppliers
• Areas of continued interest

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Agenda

• Intel Capital Overview
• Communications Investing
• Investment Themes
• Summary and QA

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Communications Sector Focus Areas
Broadband Wireless Networks
Networking Storage
Cellular and Handheld
Optical

• Memory SW Tech
• OS, Middleware, Java
• PCA Applications
• PCA Carrier Support
• RF/PA Core silicon
• XScaleTM Tools and Capabilities

• Network Processing
• Voice Processing
• Switching
• Telecom SHV Servers
• Wired Ethernet
• Storage
• Comm Fund Mgmt

• 802.11x (Si, SW, Services for Enterprise, Home
  Hot Spots)
• BB CPE Components (Si, SW)
• BB CPE Gateways (Si, SW)
• BB Wireless Access
• IP Services (Apps, SPs)
• EFM
• Home Networking

• Transponders/transceivers
• Optical Integrated Circuits
• III-V Capabilities
• Planar Integration
• Free Space Optics
• Optical Systems
• Disruptive optical devices

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How We Work Internally
Increasing Control
MA
Alliance
Contract
Equity

• Contract
• Joint Venture
• Minority Equity

• License
• OEM
• Minority Equity

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Some Example Investment Themes

• Cellular handset PDA architecture
• Storage networking
• Wireless LANs

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New Business Models

• Over time
• Brands remain important
• ODMs are increasingly significant
• Standard Platforms become critical

data is conceptual
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New Handheld Applications

• Localized / Cultural
• Richer content
• New Usage Models

10
32
Intel Personal Internet Client Architecture (PCA)
Standard Interface
Standard Building Blocks for Standards-based
Devices
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Cellular and Handheld Investment Areas

• Hardware (Core)
• DSP, Tools, IP, Intel XScale, Flash / SRAM
• RF / PA, Baseband / Dual Mode, Mixed Signal, Soft
  Radio
• LP Peripherals/Bluetooth, Power Management
• Software
• Platforms, OS, drivers, IPP, compilers
• Java, WAP, MMS
• Ecosystem (Differentiators)
• Position Location, synchronization, voice
  recognition
• Entertainment, video, multimedia, music, eMail
• 802.11/WAN
• Antenna, mobile battery, peripheral appliances
• Billing, roaming, security

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Some Example Investment Themes

• Cellular handset PDA architecture
• Storage networking
• Wireless LANs

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Importance Of Storage To Intel

• Data growth unabated, despite economic slowdown
• Storage IS A Key Element Of Any Enterprise
  Network
• Storage Is A Key Driver For Future Growth
• Use of Ethernet as backbone for networked storage
  will increase
• SAN (storage over Ethernet) growth in gt2000
  similar to LAN in 90s, 47 CAGR in 06
• Direct Attached and Network Attached CAGRs 12
  26 in 06
• Several key technology transitions within 3yrs
  Play to Intel Strength
• Serial-ATA, Serial Attached SCSI, PCI Express,
  iSCSI, Infiniband, 10G
• Fiber Channel, SCSI and ATA are key elements of
  todays environment
• iSCSI, Fiber Channel, Serial-ATA will drive
  tomorrows networked storage
• Increasing integration to deliver value on
  platform silicon
• gt80 RAID on Motherboard or RAID On Chip by 05

Intels strength today is in I/O processor
silicon (high margin Si)
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Storage Market Segment Summary

• Today
• DAS accessible only via servers
• SAN fabrics are FC today
• Fiber Channel (FC) used as the SAN network
  connection and disk interconnect
• NAS attaches directly to Ethernet LAN
• Tomorrow
• DAS is trending toward modular, blade brick
  architectures
• Total 2005 SAM 3B
• NAS/SAN converging to Fabric Attached Storage
  (FAS)
• FC still growing iSCSI gaining traction
• Total 2005 SAM 4B
• Disk interconnects rapidly moving to serial SATA
  SAS

• Estimate of all system level opportunities at
  60B TAM
• Intel specific BB opportunity SAM at 8B

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Investment Objectives

• Enhance Intel Silicon platforms for Storage
  (Ecosystem)
• Development tools, middleware, RTOS ,
  Pre-validated IP s/w stacks, co-processors
• Accelerate Ethernet storage adoption by
  Workgroup/Enterprise (Ecosystem)
• Security, iSCSI targets, iSCSI management
• Create/Enable tech. critical for maintaining
  Intel leadership (GAP)
• Examples S-ATA PHY, 10G Copper, iSCSI offload,
  NAS SW, PCI Ex
• Displace PPC in Storage systems with Intel BBs
  (GAP)
• System-on-chip technology for IA, IPF, Xscale,
  IOP, IXP
• Enable innovators who disrupt incumbents w/
  Intels storage BBs (Ecosystem / Eyes Ears)
• SAN appliance, Storage virtualization, Dist.
  Mgmt., SAN/NAS convergence
• Promote Standards-based Intra-system Networking
  (Ecosystem)
• Promote transition from proprietary arch to
  Advanced TCA (PICMG 3) arch

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Some Example Investment Themes

• Cellular handset PDA architecture
• Storage networking
• Wireless LANs

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802.11 Explosive Growth
Source ICG Market Model
40
Achieving Our VisionOptimizing the Platform
2002Platforms
TodaysPlatforms
CPU
CPU
Memory I/O
Memory I/O
Graphics
Graphics
Wired LAN
Wired LAN
Wireless LAN, WAN, PAN
Wireless LAN, WAN, PAN

• Wi-PC
• Goal gt50 wireless embedded NIC in 03
• Aggressive joint marketing, 3rd party alliances
  and MDF
• Platform integration
• Validated, stable system w/the heavy qual. test
  lifting done by Intel
• Unique features performance (e.g., lowest
  latency QoS)
• Lower cost

• Working to define the next gen Wi-PC spec

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Banias A New Wireless Era

• Biggest product launch in Intels history
• First product designed from the ground up for
  mobile computers
• Integrated platform designs with wireless (born
  wireless)
• Massive marketing campaign to build the brand and
  create wireless association
• Key programs in the Mobile Platforms Group
• Mobility Enabling Program
• Infrastructure Enabling Program
• Driving the ecosystem for success

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Mobility Enabling Program Elements
2003 Target
BKMs to Deliver Mobility
Platform Guidelines Suggested Ways to Deliver on
the 4 Vectors
Optimize The Platform To Deliver Best Mobility
Wireless Stacks Deliver Seamless
Secure Connectivity Experience
Wireless Stacks Just Work

• An example
• Banias Processor
• Windows XP
• 802.11 Dual Band
• Bluetooth Wireless Tech
• Quick Connectivity
• CAPI Based Security
• ? 1.2 (2 spindles)
• 4.5 lbs (2 spindles)
• 4.5 6.0 hrs battery

Platform Enabling Extend Intels
Validation Efforts to Include Battery Life and
Wireless
Platform is Validated For Mobility
Multi-Year Program to Accelerate Transition to
Mobility
Other names and brands may be claimed as
property of others
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Infrastructure Enabling Program
2003 Target
Select hotels, airports, etc.
Hotspots Promote with network operators, WISPs
through marketing and technical enabling
Multiple Venues for Connecting Banias platforms
wirelessly
Enterprise Blueprint programs with system
integrators, OEMs, including security.
Corporate WLAN deployment pilots
Home Promote with operators, BB service
providers OEMs for residential use.
Broadband WLAN promotions
Multi-Year Program to Accelerate Transition to
Mobility
Other names and brands may be claimed as
property of others
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802.11 Hotspot Growth
144K
98K
65K
37K
17K
7K
Source BWCS Ltd. 2002
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Agenda

• Intel Capital Overview
• Communications Investing
• Investment Themes
• Summary and QA

46
Intel Capital Summary

• Focus on Financial Strategic success
• One of a few credible corporate investors
• Very experienced, value add complement VCs
• Investment strategies complement successful teams

Continue to work with Telesoft Bring us your
ideas and inspirations!
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Backup
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Investment Press
Intel companies don't just get the money, they
get access to its engineers and the testing
equipment in Intel labs. The Intel stamp of
approval can also help on Wall Street during the
IPO process.
Brad Stone, Newsweek, April 17, 2000
Intel is the corporate investor everyone
watches. Intel Capital has grown beyond using
investments to fill gaps in Intel's PC chip
product line to fueling its vision of how the
industry can open up new ways to use the
Internet.
David Barry, Senior Editor The Corporate
Venturing Report March 2001