2009 Report

2010 Outlook
O tl k
Apr 2010

1
1. Turnaround strategy
- Leveraging
L i partnerships
t hi
- Expanding to 3 product lines (2 new)
- Focus
F R&D on AAndroid
d id & PC ttablets
bl t
2. 2009
3 Q1 2010
3.
4. What’s next
2
 2007-2009 ARCHOS niched in high-end >300€

FFrom 2007 tto 2009,

2009 ARCHOS was in i high-end
hi h d off marketk t with
ith products
d t > 300€
Niched in high-end price segment representing less than 10 % of the overall market
4
Segmentt size B€

0
0 50 100 150 200 250 300 350 400
Price segmentation €

Expand the product range to reconquer the centre of the market

3
 Expand the Product Range by leveraging
P
Partnerships
hi with
i h Chinese
Chi ODM
ODMs

• Up to 2008…
2008
– All developments: IN HOUSE
INDUSTRIAL HARDWARE SOFTWARE QUALITY
ARCHITECTURE MANUFACTURING
DESIGN DEVELOPMENT DEVELOPMENT CONTROL

• Starting Q4 2008…
– Most innovative developments : IN HOUSE
INDUSTRIAL HARDWARE SOFTWARE QUALITY
ARCHITECTURE MANUFACTURING
DESIGN DEVELOPMENT DEVELOPMENT CONTROL

• Other developments : PARTNERSHIP

INDUSTRIAL HARDWARE SOFTWARE QUALITY
ARCHITECTURE MANUFACTURING
DESIGN DEVELOPMENT DEVELOPMENT CONTROL
4
 Expand the Product Range by launching
2 new product
d lines
li
ENTERTAINMENT

Positioning

CONNECTIVITY MOBILITY

3 markets, 3 product lines

MP3 & MP4 Players

Internet Tablets Netbooks
5
 Expanding the range by focusing R&D on
A d id IInternet Tablets
Android T bl & PC Tablets
T bl

1st to introduce Android tablets in September 2009

Best Multimedia experience with Android

ARCHOS Multimedia Google Android

• HD Video - Music - Photos • Standard & Open System
• TV Recording • Web browsing
• Web TV & Web Radio • Email
• 3D GPS Navigation • Android Apps
6
 Outcome of turnaround strategy

Product range considerably expanded between 2008 and 2010

2008
2009
2010 <100€ 100€ - 200€ 200€ - 300€ >300€

MP3/MP4

IInternet
t t
Tablets

Netbooks

2010: conquer the center of the market with Internet & PC Tablets
7
1 TTurnaroundd strategy
1. t t
2. 2009
- 2009 achievements
- P&L and Balance Sheet
- Conclusions
3. Q1 2010
4. What’s next

8
 2009 achievements

• Innovation : introduce 1st Internet & PC Tablets

Turnaround • Diversify product range to entry level MP3/MP4
• Penetrate PC Shelf with PC Tablets & Netbooks

• Change
Ch Manufacturing
M f t i from f consignment
i t to
t turnkey
t k
Gross Margin • Leverage partnerships with Chinese ODM’s
• Restore 20 - 23 % Gross margin in line with industry

• Decreased OPEX along with revenue

Operating
• Built up competence center in China
Expenses

9
 Profit & Loss Statement (M€)

M€ FY 2009 FY 2008 Δ % / M€ Comments

Net sales impacted by a product range too

Net Sales 57,9 73,9 (21,6%) concentrated and high-end (>300€) and cash
restrictions in Q4

Gross Margin 7,8 10,1 (22,7%) Gross margin impacted by cash constraint

% GM / Net Sales 13,5% 13,7%

Operating Expenses 18,7 24,3 (22,8%) Significant cut in support functions

Current Operating income (10 9)

(10,9) (14 1)
(14,1) +3 2
+3,2

Financial costs (1,3) (3,5) +2,2 Mainly Echostar Corporation interest on debt

Change of strategy to turnkey implied exceptionnal

Non recurring expenses (6,3) - (6,3)
depreciation of all non finished products inventory

Net Income (18,6) (17,7)

10
 Year End Balance sheet

Assets Liabilities
Fixed assets & other non current 
assets 6,5 Equity 30,2

Deffered taxes 14 9
14,9 Echostar debt
Echostar debt 64
6,4

Cash on hand 20,8 Bank debt 5,1

In entor
Inventory 11 4
11,4 Factors liabilities 33
3,3

Trade receivables 12,0 Trade payables 11,3

Suppliers advance paiements 3,7 Accruals and credits to customers 5,7

Tax & social receivables 3,8 Tax & social liabilities 6

Others receivables 1,1 Others liabilities 6,2

TOTAL 74,2 TOTAL 74,2

11
 Conclusions

New strategy fully implemented in 

2008 & 2009 mainly impacted by
2010
• Company covers large range from 30€ to
• Niched above 300 €
500 €

• Coverage of 3 growing segments with

• Covered only 1 market segment
right entry barriers

• Full turnkey and no more Material costs in

• Consignement manufacturing
the B/S

• Expenses down from 28M€ in 2007 to • Company aiming at reducing its operating
24,3M€ in 2008 and 18,7M€ in 2009 expenses

12
1. Turnaround strategy
2. 2009 Report
3. Q1 2010
- Q1 Report
- Breakeven point
p
4. What’s next

13
 Q1 2010: strategy starting to pay off

M€ Q1 2010 Q1 2009 Δ%
EUROPE 11,3 9,7 +16,6%
USA 3,0 2,4 +24,9%
ASIA 08
0,8 10
1,0 - 20,5%
20 5%
TOTAL 15,1 13,1 + 15,3%

14
 ARCHOS Simulation of break-even point

Revenue
1. Expanded tablet range
Revenue 80M€ 100% 2. Developed MP3/MP4 and Netbooks range
3. Expand in Italy and Spain
4 New Chinese partnerships…
4. partnerships
Gross Margin
1. New china partnerships, improved competitivity
Gross Margin 16M€ 20% 2. Turnkey model versus consignement
3. Increased rotation of product range and better product
life cycle
Operating expenses
1 ¼ R& D
1.
Operating
16M€ 20% 2. ¼ Sales
Expenses
3. ¼ Marketing
4. ¼ Support functions

Operating Results 0M€ 0%

Note: These elements are just a simulation of an economic model. They do not express a forecast, a forward
looking statement or an estimate of future revenue or results. 15
1 TTurnaroundd strategy
1. t t
2. 2009
3 Q1 2010
3.
4. What’s next
- Renew entire MP3/MP4 range
- Home Tablets
- Revamping
R i PC Tablet
T bl t
- Gen 8 of Internet Tablets

16
 Complete redeployment of product range

Full product range covering all price segments from 30€ to 500€

2010 <100€ 100€ - 200€ 200€ - 300€ >300€

MP3/MP4

IInternet
t t
Tablets

Netbooks

Deploy a full line of Internet Tablets ranging from 100€ to 350€17

 Full range of MP3/MP4 players

Target: renewing entire range before year’s end

18
Note: pictures above are not representative of future product design
 Just introduced ARCHOS Home Tablets

Simple Android tablets for the home

Ultra Low Cost: 150€ to 200€
19
 Revamping ARCHOS 9 PC tablet

16 mm ultra-thin
lt thi

Note: pictures above are not representative of future product design 20

 To come: Gen 8 of Internet Tablets

Lineup of 6 new Internet tablets

Screen size from 3” to 10”
Retail
e a prices
p ces ranging
a g g from
o 100€
00€ too 350€
Ultra performing: ARM Cortex 800MHz to 1GHz, 3G OpenGL, Multitouch, etc…
Note: pictures above are not representative of future product design 21
S f harbour
Safe h b statement
t t t

ARCHOS is a company listed on NYSE Euronext Paris, and this presentation

contains
t i certain
t i statements
t t t that
th t constitute
tit t "forward‐looking
"f d l ki statements”.
t t t ” Such
S h
forward‐looking statements are based on management's current expectations
and beliefs and are subject to a number of risks, uncertainties, assumptions
and other factors beyond ARCHOS
ARCHOS’ss control that could cause actual results to
differ materially from the future results expressed, forecasted or implied by
such forward‐looking statements due to changes in global economic and
business forward conditions and risks related to its operations in general.

For further and more detailed financial information and informations regarding
the risks please refer to the company’s documentation registered and
approvedd by
b the
th French
F h stock
t k marketk t authorities
th iti “Autorité
“A t ité des
d Marchés
M hé
Financiers”.

22