Ikanos Communications

Ikanos Communications
(NASDAQ: IKAN)
May 21, 2013
1
Proprietary & Confidential
SAFE HARBOR STATEMENT
This presentation contains, in addition to historical information, forward-looking statements. Such forward-looking
statements are based on management’s current expectations, estimates and projections about our industry and
business, including but not limited to the expected growth of and opportunities in the broadband market, the
company’s position in the market, any statements about historical results that may suggest trends for our business,
any statements of the plans, strategies, and objectives of management for future operations or products, any
statements of expectation or belief regarding the performance of our technology or products, customer demand and
future technology developments, any statements of assumptions underlying any of the foregoing, management's
beliefs, and certain assumptions, all of which are subject to change. Forward-looking statements can often be
identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates,"
"may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or
negatives of these words. These forward-looking statements are not guarantees of future results and are subject to
risks, uncertainties and assumptions that could cause our actual results to differ materially and adversely from those
expressed in any forward-looking statement. For a further discussion of the risks and uncertainties, which could
cause actual results to differ from those contained in the forward-looking statements, see the Company’s periodic
filings on Forms 10-K and 10-Q, as well as other reports the Company files from time-to-time with the Securities and
Exchange Commission (“SEC”). For the most current detailed risk factors, please review our Form 10-K for the
period ended December 30, 2012 filed with the SEC on February 28, 2012 and our Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 2013 filed with the SEC on May 2, 2013. The Company cannot assure that the
events and circumstances reflected in any forward-looking statements will be achieved or occur, nor does the
Company undertake any obligation to update any forward-looking or other statements for any reason after the date of
this presentation.
© Ikanos Communications, Inc. All rights reserved. Ikanos™, NodeScale™ are among the trademarks owned by
Ikanos Communications, Inc. Any other trademarks or trade names mentioned are the property of the respective
owners.
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© Ikanos Communications, Inc. – All Rights Reserved.
IKANOS AT A GLANCE
Leading Broadband Semiconductor and Software Provider
• 
• 
• 
• 
• 
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Founded: 1999
Public: 2005
Employees: 265
Customers:
•  France Telecom, NTT, AT&T …
•  Sagemcom, Sumitomo, NEC,
AVM, ZTE, ALU …
• 
Market: NASDAQ: IKAN
• 
Market Cap: $103M (5/10/13)
• 
Shares Outstanding: ≈70M
• 
Revenue: 2012 – $125.9M
• 
Cash & Equivalents: $31.6M (3/31/13)
• 
Short-term Debt: $5.0M
Offices:
•  Headquarters - Fremont, CA
•  R&D - Red Bank, NJ; Bangalore,
India
•  Sales – China, Taiwan, Korea,
Japan, UK, France, Germany
© Ikanos Communications, Inc. – All Rights Reserved.
Delivering the Best Broadband Experience
High Bandwidth Broadband
Access with Longer Reach
Enables Telcos to Provide
Cloud-based Services to
Consumers
Smart Home Gateway
Enables Seamless
Multi-Screen Connectivity, as
well as New Revenue Streams
for Service Providers
End-to-end Quality of Service Enabling Superior Triple-play Consumer Experience
Seamless Cloud Access
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© Ikanos Communications, Inc. – All Rights Reserved.
WHERE IKANOS PRODUCTS FIT TODAY
Online
Games
Services
Music
and
Media
Library
Storage
&
Backup
Ikanos Solutions for
Broadband over Copper
enable high-speed access to
the Digital Home
Video
Streams
Photos
and
Docs
Copper
Fiber
FTTx
Ikanos Gateway for
Digital Home
•  Entryway for triple-play content
Ikanos delivers end-to-end Broadband Access solutions
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© Ikanos Communications, Inc. – All Rights Reserved.
Delivering Fiber Speeds
at 1/10th the Cost
NEW IKANOS TECHNOLOGY WILL DELIVER FIBER
SPEEDS AT 1/10TH THE COST
Expensive to Deploy
New lines per household
Fiber to the Home
•  $2,500 / household
•  5+ years to deploy
Fiber
Node
vs.
Existing Lines
Central
Office
Fiber
Node
Copper
Fiber to the
Neighborhood +
Copper to the Home
•  $250 / household
•  Deployment over
existing infrastructure
Source: BusinessWeek article on FTTH in USA and
OECD presentation a major US carrier on FTTN
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© Ikanos Communications, Inc. – All Rights Reserved.
GENERIC TELCO CASE STUDY
•  Telcos are under pressure from Cable TV operators to increase data
rates and subscriber coverage.
•  Data rates for single line broadband access:
• 
• 
• 
• 
Today - 32 Mbps max
Announced - 75 Mbps (with vectoring)
Desired - 100 Mbps
Ikanos NodeScale™ Vectoring (NSV) can provide 150 Mbps!
•  Subscriber coverage: 55% today; 95% with Ikanos NSV!
•  Ikanos NSV will Enable Telcos to compete with Cable TV operators,
plus enables Telcos to generate more revenue with lower OpEx…
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© Ikanos Communications, Inc. – All Rights Reserved.
Vectoring Continues to Gain Market Traction
•  Deutsche Telekom gains regulatory approval to
upgrade its copper network via a process called
vectoring, or VDSL2, in order to offer faster Internet.
http://www.reuters.com/article/2013/04/09/us-deutschetelekom-regulatoridUSBRE93808520130409
•  AT&T announces 30% expansion plans for its highspeed U-verse network, incorporating both fiber and
vectored VDSL, to reach 33 million homes over the
next 3 years.
http://www.att.com/gen/press-room?
pid=23506&cdvn=news&newsarticleid=35661&mapcode=corporate%7Cconsumer
•  BT’s Mike Galvin: “We see vectoring as one of the
cornerstone technologies going forward that will
extend the capability and the life of the fibre-to-thecabinet product”.
http://www.zdnet.com/nbn-fibre-to-the-world_p3-7000012385/
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© Ikanos Communications, Inc. – All Rights Reserved.
IKANOS’ NodeScale™ VECTORING SOLUTION IS HERE
Ikanos Vectoring
Transceivers
Ikanos Vectoring
Processor
Ikanos Gateway
Vectoring-Compliant
Communications
Processors
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© Ikanos Communications, Inc. – All Rights Reserved.
Infrastructure Segment
Gateway Segment
FTTx System – TESTING WITH TELCOS NOW
Chassis/ Backplane
To Backplane
(Controller Card and Vector Card)
Vectoring Transceiver
Line Card
16 port
slice
16 port
DSP
Vectoring Processor Card
96 port
VCE
16 port
slice
8Port
AFE
8Port
AFE
96 port
VCE
16 port
slice
Ikanos provides >75% of
silicon content on the line card
Note: 192 line FTTx system shown above
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© Ikanos Communications, Inc. – All Rights Reserved.
Ikanos provides >95% of
silicon content on the vectoring
processor card
TELCO MARKET OPPORTUNITY
•  Telcos (i.e., ADSL, FTTx
including VDSL2) have majority
share in broadband lines
Ø  >74% of Total Broadband
Cable
FTTH
DSL
FTTx
•  Existing copper is Telco’s major
asset
•  Vectored VDSL will provide a
significant opportunity to deliver
broadband over copper to meet
customer demands
Source: Point Topic / Broadband Forum
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© Ikanos Communications, Inc. – All Rights Reserved.
IKANOS MARKET OPPORTUNITY
Millions Projected Vectored VDSL deployment (lines)
Existing Copper Line Creates Significant Opportunity For Upgrade
120 100 ~$1.8B
80 ~$1.5B
60 40 ~$800M
20 Note: Total opportunity includes all
Broadband technologies over copper
0 2013 2014 2015 2016 2017 Source: Projections based on Ikanos analysis of over 50 Incumbent Carrier copper line data
Carrier copper lines data from Dataxis Q2 2012 world wide statistics
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Total
Opportunity =
Over 1 Billion
Copper Lines
© Ikanos Communications, Inc. – All Rights Reserved.
LEVERAGE WORLDWIDE FOOTPRINT – 400 M PORTS
New Vectored VDSL Technology Creates
Significant Upgrade Opportunities For Copper Networks
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© Ikanos Communications, Inc. – All Rights Reserved.
Next Generation
Home Gateways
IKANOS GATEWAY PRODUCT FOR THE HOME
•  Ikanos is a major supplier of
Home gateway processors:
• 
• 
100M+ processors shipped
Both Stand-alone & DSL
integrated processors
•  Home media gateway is
emerging as an explosive new
market opportunity:
•  According to IHS, gateway
shipments will soar 100x from
2011 to 2015.
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© Ikanos Communications, Inc. – All Rights Reserved.
Enabling High Quality Multi-Screen User Experience
Wired
Home Media Gateway
Wireless
Ø  Wired and Wireless Connectivity
• 
WiFi, MoCA, Powerline, Ethernet
Ø  Triple-play services and applications
Ø  Smart connection monitoring and QoS
Ø  Access management and premium
content protection
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© Ikanos Communications, Inc. – All Rights Reserved.
Multiple New Revenue Opportunities
for Service Providers
Home Security
Interactive Gaming
Smart Gateway
Home Automation
IPTV / OTT
VoIP
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© Ikanos Communications, Inc. – All Rights Reserved.
Orange Livebox 3.0 Triple-Play Gateway
Display:
Processor:
Connectivity:
WiFi:
Ethernet:
USB:
Internet Telephone:
Media server:
Compatibility:
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128x32 monochrome OLED
Ikanos Vx185
ADSL2+, VDSL2, FTTH
Dual-band 2.4 GHz 802.11b/g/n + 5 GHz 802.11a/n
4 ports GigE fully routed
2 ports USB 2.0
1 port FXS + Integrated CAT-iq 2.0
Samba, Media player UPnP 2.0, DLNA1.5
IPv4 & IPv6 and EU COC 2013-2014
© Ikanos Communications, Inc. – All Rights Reserved.
Ikanos Business &
Financial Updates
Recent Product & Business Updates
•  Ikanos NodeScale™ Vectoring VDSL Reference Platform Delivers
110Mbps Service with Full Cancellation in OEM and Carrier Lab
Trials; Receives First Design Win.
•  The industry-first reference chassis can also be
configured in a “2x192” design providing 384 ports
•  Orange Deploys the New Livebox 3.0 Gateway based on Ikanos
Fusiv Vx185 Integrated Gateway Processor
•  Triple-play IPTV services
•  Next generation Vector-capable VDSL
•  AVM Fritz!Box 7390 bonded VDSL deployed based on Vx185
(200Mbps)
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© Ikanos Communications, Inc. – All Rights Reserved.
INCOME STATEMENT TRENDS – (NON-GAAP)
Q2-­‐12 Actual
Q3-­‐12 Actual
Q4-­‐12 Actual
Q1-­‐13 Actual
Revenue
$32M
$31M
$32M
$26M
Gross Profit
$16M
$15M
$15M
$14M
OPEX
$17M
$20M
$18M
$17M
Net Income (Loss)
$(2)M
$(5)M
$(3)M
$(3)M
EPS (Loss)
($0.03)
($0.07)
($0.05)
($0.05)
70M
70M
70M
70M
Shares Outstanding
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© Ikanos Communications, Inc. – All Rights Reserved.
REVENUE BY PRODUCT GROUP
Product Group
Infrastructure
Products
Gateway
Products
Representative Products
•  ADSL2+ and VDSL2
•  SHDSL
• 
• 
• 
• 
ADSL2+ and VDSL2
SHDSL
Triple-play Gateway
Managed Gateway (Non-DSL)
1 – Approximate Trailing 12 Months Orders contribution; Excludes professional services.
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© Ikanos Communications, Inc. – All Rights Reserved.
Mix1
37%
63%
Long-Term R&D Commitment in Broadband
$18.0
$16.0
$14.0
$12.0
$10.0
$8.0
$6.0
$16.1
$12.5
$13.6
$12.9
Q4 2012
Q1 2013
$4.0
$2.0
$-­‐
Q2 2012
Q3 2012
R&D $
24
© Ikanos Communications, Inc. All rights reserved.
Resources and Positioning For Growth
Strong Balance Sheet
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Q2-­‐12 Actual
Q3-­‐12 Actual
Q4-­‐12 Actual
Q1-­‐13 Actual
Cash and Investments
$33M
$33M
$31M
$32M
Accounts Receivable
$21M
$20M
$16M
$10M
Inventory
$7M
$6M
$8M
$7M
Total Assets
$79M
$80M
$74M
$65M
Short-­‐term Debt
-­‐-­‐
$5M
$5M
$5M
Total Liabilities
$24M
$30M
$27M
$22M
© Ikanos Communications, Inc. – All Rights Reserved.
Long Term Non-GAAP Financial Model
2010
2011
2012
Long-Term
37%
53%
50%
55% – 60%
Research & Development
31%
39%
44%
20-25%
Sales, General &
Administrative
12%
15%
14%
12%
Total Operating Expenses
43%
54%
58%
35%
Operating Income
(5%)
(2%)
(9%)
18% – 28%
Gross Margin
26
© Ikanos Communications, Inc. All rights reserved.
INVESTMENT SUMMARY
•  Large Customer-base with over 400M Broadband Ports Shipped
•  Shipping Products into Large and Rapidly Growing Markets
•  Technology Leadership with Continued R&D Investment
•  Rich IP Portfolio: 400+ Patents and Patent Applications
•  Service Providers Driving Adoption
•  Strong Balance Sheet
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© Ikanos Communications, Inc. – All Rights Reserved.
Ikanos Communications
(NASDAQ: IKAN)
28
Proprietary & Confidential