+ = Triple Play Powerhouse. The culmination of a long-term strategic goal

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Transcription:

+ = Triple Play Powerhouse The culmination of a long-term strategic goal January 16, 2007

Safe Harbor This presentation contains forward-looking statements which are subject to safe harbors created under the U.S. federal securities laws. These statements include, among others, statements concerning projections of revenues, income and other financial items; plans for future products; growth in the cable equipment market; and growth in demand for high speed access including cable telephony for ARRIS Group Inc, and statements regarding the financial performance of ARRIS following completion of the TANDBERG Television acquisition, its ability to drive the strategic benefits outlined and the timeframe during which the acquisition is expected to close. Statements regarding future events are based on the parties current expectations and are necessarily subject to associated risks related to, among other things, successful outcome of the tender process for the TANDBERG Television shares, regulatory approval of the acquisition, the potential impact on the business of TANDBERG Television due to uncertainty about the acquisition, the retention of employees of TANDBERG Television and the ability of ARRIS to successfully integrate TANDBERG Television s opportunities, technology, personnel and operations. All financials for TANDBERG Television are based on IFRS standards. A U.S. GAAP reconciliation is not available at this time. The statements in this presentation that use such words as believe, expect, intend, anticipate, contemplate, estimate, or plan, or similar expressions are also forwardlooking statements. Actual results may differ materially from those contained in any forward-looking statement. Specific factors which could cause such material differences include: the timing of the introduction and the performance of new products; design or manufacturing defects in our products which could curtail sales and subject us to substantial costs for removal, replacement and reinstallation of such products; manufacturing or product development problems; an inability to absorb or adjust our costs in response to lower sales volume than we anticipate; decisions by our larger customers to cancel contracts or orders as they are entitled to do or not enter into new contracts or orders with us because of dissatisfaction, technological or competitive changes, changes in control or other reasons. Other risks involve capital spending levels by our customers based in part on demand for broadband services, customer adoption of our technologies, the development and marketing of technology by our competitors and the risks associated with potential acquisitions of competitors, additional lines of business and/or product and services offerings. The above listing of factors is representative and is not intended as an all-encompassing list of such factors. We disclaim any obligation to update forward-looking statements, whether as a result of new information, future events or otherwise. 1

Overview Bob Stanzione Chairman and CEO, ARRIS Group, Inc.

ARRIS + TANDBERG Television = Triple Play ARRIS has announced its intent to acquire TANDBERG Television in a tender offer for 96 Norwegian Kroner per share in cash and stock Approximately $1.2 B at Friday, January 12, 2007 exchange rate TANDBERG Television is a world leading supplier of digital video and IPTV hardware and software solutions for the cable, telecom, broadcast & satellite markets 2005 9M 2006 Revenue 1 $289.8M $265.0 Gross Margins 1 56.3% 58.0% The acquisition fulfills ARRIS long term strategic goal of entering the video market and immediately establishes ARRIS as a market leader Cross-selling opportunities between complementary customers bases Products that enable operators to create, manage, and deliver everything IP, everywhere TANDBERG Television s Board and Management have recommended the offer 1. All reported financials for TANDBERG Television are in accordance with IFRS. A reconciliation to U.S. GAAP is not available at this time 3

Key Transaction Terms Purchase Price: Total Consideration ~$1.2B @ Exchange rate on 1/12/07 NOK96 per share consisting of Minimum of NOK80 in cash Up to NOK16 in new ARRIS shares Transaction Mechanism: Voluntary tender offer Board recommending support Timing: Anticipated to Close in Q2, 2007 Closing Conditions: Subject to minimum 90% acceptance Regulatory/Governmental approvals Financing: Available cash balances New Equity Debt financing arranged by UBS New Board Seat Jan Christian Opsahl, Chairman, TANDBERG Television 4

Compelling Transaction Rationale Fast growing video infrastructure market Broad product portfolio to address the Triple Play Customer and geographic expansion and diversification Scale and platform for innovation Attractive financial profile 5

Expansion into Video Market TANDBERG Television transforms ARRIS into a video infrastructure leader for the cable, satellite, telecom and broadcast markets Significantly expands ARRIS addressable market into fast growing video segments driven by the roll-out of high definition television, IPTV, Video on Demand and Interactive Television Total Market ($000) 7,000 6,000 5,000 4,000 3,000 2,000 1,000 $2,764 1,195 94 739 $4,325 2005 2009E CAGR: 22% $3,648 1,785 1,500 269 197 1,404 1,054 $5,265 2,178 404 1,736 $6,100 2,525 584 1,957 2005-09E CAGR 21% 58% 28% 0 736 897 867 947 1,034 9% CY2005 CY2006E CY2007E CY2008E CY2009E ARRIS Products CMTS EMTA Edge QAM Video TANDBERG Television Products Expanding our addressable markets into fast growing video segments Source: Infonetics, In-Stat, Frost & Sullivan, ARRIS and Tandberg Television Estimates 6

Global Leadership & Scale Video, Voice and Data MPEG2 Encoders MPEG4 Encoders Video Voice Data Wireless Content Back EQAM Office emta CMTS Creation (VOD) ARRIS - - - - TANDBERG TV - - - Motorola - - Cisco / SFA - - Fixed Mobile Convergence ARRIS + TANDBERG TV Combined Product Portfolio E / EN Series iplex / Mediaplex E / EN Series iplex / Mediaplex Keystone MediaPath / zband / GPI OpenStream Touchstone Cadant Mobility Application Server, Signaling Gateway, HLR/VLR Best product coverage to address the Triple Play 7

Market Expansion Telco Cable Satellite / Broadcast Source: Arris and Tandberg Television Global Diversification and Expansion into Satellite, Telco and Broadcast B 8

TANDBERG TV - Strong Financial Performance Revenue Gross Margin ($mm) 375 300 225 150 75 149.0 122.3 146.9 202.3 289.8 265.0 ($mm) 90% 75% 60% 45% 30% 15% 50.3% 46.6% 45.3% 48.7% 56.3% 58.0% 0 2001 2002 2003 2004 2005 9M 2006 0% 2001 2002 2003 2004 2005 9M 2006 Operating Cash Flow Diluted EPS ($mm) 45 35 25 15 5 (0.1) (14.4) 11.7 26.7 43.8 36.9 ($mm) 1.00 0.50 0.00 0.01 (0.68) 0.38 0.58 0.68 0.57 (5) (15) (0.50) 2001 2002 2003 2004 2005 9M 2006 (1.00) 2001 2002 2003 2004 2005 9M 2006 Attractive Growth and Margins and Strong Cash Flow Generation Note: All reported financials for TANDBERG Television are in accordance with IFRS. A reconciliation to U.S. GAAP is not available at this time 9

2,000 Global Customers Broad, global customer base across Cable, Satellite, Telco and Broadcast B Source: TANDBERG Television 10

TANDBERG Television - the vision in television Eric Cooney President and CEO, TANDBERG Television

TANDBERG Television - the vision in television Global leader in digital video infrastructure MPEG4 and HD Compression, video on demand, interactive TV Rich patent portfolio: Over 200 granted patents Diversified global customer base Geographic presence across the US, Europe, and Asia Headquarters in Atlanta, GA and Southampton, England 870 employees Attractive financial profile Solid balance sheet and cash flows Strong revenue and earnings growth High gross margin businesses Last 12 months (Sept 05 Sept 06) revenues: $343.5M 1 1 All reported financials for TANDBERG Television are in accordance with IFRS. A reconciliation to U.S. GAAP is not available at this time 12

TANDBERG Television Solutions Create, Manage and Deliver Video Content 13

TANDBERG Television Solutions Create, Manage and Deliver Video Content 14

TANDBERG Television Market Segments and Leadership Position IPTV Market Size Cable Video Headends Satellite TTV Position: 12 of 18 largest Head Ends Telco TTV Position: Market leader in Open VOD solutions Terrestrial TTV Position: #1 in Satellite DTH Programmers TTV Position: Dominant Market Share TTV Position: #1 or #2 Worldwide 15 TTV Position: Market leader in Advance Media Software

TANDBERG Television highlights Strong Market Growth Drivers HDTV, IPTV, VOD, itv-advertising Compelling consumer propositions create demand for TTV products 20%+ Y-o-Y market growth TANDBERG Television s scope of supply Solutions to Create, Manage & Deliver digital TV Compression, On-Demand, Interactive TV, Advertising, Workflow-Asset Management Best in Class Technology, Open Standards based Switzerland Technology Provider Platform neutral Cable, Satellite, Telco, Wireless, Terrestrial Device neutral TV, STB, PC, PVR, Mobile Global relationships provide routes to market Well positioned for continued profitable growth #1 or #2 Supplier globally in target segments 16

Financial Highlights David Potts EVP and CFO, ARRIS Group, Inc.

The Deal and How it will be Financed Consideration $M Purchase Price 1,214 (81.5M shares @ 96NOK or $14.89) Fees/Fx Hedge/Other (Est.) 80 Total Consideration $1,294 How we are funding the deal Equity Issued 202 (81.5M shares @ 16NOK or $2.48) Cash from Balance Sheet 572 Committed Term Loan from UBS 520 Total Funding $1,294 Funding via a combination of cash from combined balance sheets, equity, term loan ~15M shares @ $13.10, will vary with change in stock price Will have $100M of cash post close and a $25M revolving credit facility 18

Our Liquidity & Ability to Service the Debt Post Close Cash (1) & Revolver Estimated $M Cash at Closing (2) ARRIS 540 TANDBERG 132 Total 672 Cash to Fund Deal 572 Cash Maintained on Hand 100 Revolving Credit Facility 25 Total Cash & Revolver 125 Cash Flow to Service Debt Cash from Operating Activities $M 9 Months 2006 ARRIS 77 TANDBERG 37 Total 114 Avg. Per Quarter 38 TTM Avg. Cash from Operating Activities 43 Estimated Interest $M Cost per Quarter at Inception - 2013 Convert 1.4 ($276M x 2% 4) Term Loan 10.4 ($520M x 8% 4) (3) Notes: (1) Cash, Cash Equivalents, Short Term Investments (2) Estimates of Cash at Closing are Management s best estimates and will vary depending upon timing and other factors (3) Assumes LIBOR +250/300bps; to be determined 11.8 19

Income Statement Highlights & Cash from Operating Activities 1 As reported 2 Tandberg began reporting in US$ in 2006 3 NOK/US$ translation based on 6.44 NOK/US$ exchange rate ARRIS (US GAAP) TANDBERG TV (IFRS) 2005 2006-9Mos. 2005 2006-9Mos. (1) (1) (1) (3) (1) (2) US$-M US$-M NOK-M US$-M US$-M Sales $680.4 $657.0 1,868.7 $290.0 $265.0 Gross Margin $190.7 $183.4 1,051.6 $163.4 $153.6 % Margin 28.0% 27.9% 56.3% 56.3% 58.0% Operating Income $53.7 $67.5 349.0 $54.2 $44.8 % Margin 7.9% 10.3% 18.7% 18.7% 16.9% Cash from Operating Activities $25.5 $77.2 281.2 $43.6 $36.9 Strong Operational Performance and Gross Margin Expansion 20

Balance Sheet Highlights ARRIS (US GAAP) TANDBERG TV (IFRS) ($M) 12/31/2005 9/30/2006 12/31/2005 9/30/2006 Cash, Cash Equiv & Short Term Investments $129.5 $478.7 $75.1 $124.4 Net Working Capital $263.1 $617.4 $124.3 $190.2 Debt $0.0 $276.0 $0.0 $0.0 (4) (3) Cash (Net Debt) $129.5 $202.7 $75.1 $124.4 (1) (2) (2) (2) (2) (1) 1 As reported 2 Includes the impact of the November 2006 $276M convertible Note Offering net of offering expenses 3 Defined as Current Assets minus Current Liabilities 4 Defined as Cash and Cash Equivalents and Short Term Investments minus Debt 21

U.S. GAAP & IFRS Reconciliation Underway Required reconciliations of TANDBERG Television financial statements from IFRS to U.S. GAAP is underway Differences do exist between the two accounting standards Revenue recognition (multiple element arrangements) Capitalization of R&D Other (pension, equity compensation, purchase arrangements) These differences are likely to affect near term financial reports as accounting methodologies for TANDBERG Television are conformed to U.S. GAAP Particularly revenue recognition which should mostly be timing Cash will not be impacted by this change in accounting 22

Financial Metrics We Will Provide to Track Our Momentum Sales as adjusted GAAP Sales as reported ± Changes in deferred revenue = Adjusted Sales EPS as adjusted GAAP Net Income + Amortization of Intangibles + Equity Compensation ± Changes in Deferred Revenue ± Changes in Deferred Cost ± Other Items (e.g. Restructuring) = Adjusted Earnings Shares Outstanding = Adjusted EPS We expect these items to be minimized over time Bookings Cash from Operating Activities As we do today, we will provide non-gaap measures to help investors understand our business 23

ARRIS and TANDBERG Television creates a Triple play Powerhouse Bob Stanzione Chairman and CEO, ARRIS Group, Inc.

Why the Combination will be Successful ARRIS and TANDBERG Television have experienced management teams ARRIS/ANTEC merger, Cadant, and COM21 acquisitions TANDBERG Television acquisitions of N2 Broadband, SkyStream Networks, GoldPocket, and ZeTools Geographic and cultural synergies ARRIS Worldwide HQ and TANDBERG Television Americas HQ based in Atlanta Over 600 combined staff TANDBERG Television World HQ in Southampton, ARRIS sales, service, & R&D facilities in Europe Over 400 combined staff Enhances TANDBERG Television s access to US cable companies Provides ARRIS with access to telco, broadcast & satellite markets Complementary engineering locations, processes and skill sets Over 450 ARRIS IP, high speed data, and VoIP engineers Over 370 TANDBERG Television video and software engineers 25

Compelling Transaction Rationale Entry into the fast growing video infrastructure market Broad product portfolio to address the Triple Play Customer expansion and diversification Scale and platform for innovation Attractive financial profile 26

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