ADVA AG Optical Networking 2001 Extraordinary Shareholders Meeting

1
ADVA AG Optical Networking2001 Extraordinary
Shareholders Meeting

• Brian L. Protiva, Chief Strategy Officer
• Andreas G. Rutsch, Chief Financial Officer
• February 8, 2001, Meiningen

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Company overview

• ADVAs positioning in the market space
• Leading global provider of metro area and
  enterprise optical networking solutions
• Leveraging core technology to address exploding
  market for metro
• Aggressive organic growth and acquisition
  strategy
• Clearly differentiated from competitors
• Technological expertise
• Broad product portfolio for enterprise and metro
  networks
• Blue-chip OEM partners and direct sales force
• State-of-art manufacturing capabilities
• Experienced management team

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Optical networking market segments
CP Customer Premise, POP Point of Presence, CO
Central Office
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Optical networking growth trends
Global optical networking opportunity
Growth in market segments from 2000 to 2004 (CAGR)
()
Source RHK 1999
Source Pioneer 2000
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Broad product portfolio
Product portfolio
Product pipeline
FSP 3000 enhancements
central office
FSP 3000
FSP 500
customer premise
CP Customer Premise, POP Point of Presence, CO
Central Office
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Solution benefits

• Enterprises
• enable storage networking across the MAN and WAN
• scale Gigabit and ATM applications in the MAN
• extend broadcast video over the WAN
• low total-cost-of-ownership
• reduce expenditures on dark fiber infrastructure

• Service providers
• create new revenues with managed high-speed LAN
  services to address high-growth opportunities
• expand metro network services to the WAN
• scale metro core network capacity
  cost-effectively
• reduce expenditures on dark fiber infrastructure
  for enterprise services

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Company strategy

• Maintain and expand technology leadership in
  enterprise segment
• Leverage enterprise expertise to address metro
  market demand
• Facilitate growth through strategic relationships
  and acquisitions
• Expand sales and distribution channels
• Leverage expertise in manufacturing of optical
  networking systems

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Expanding customer base
Service providers
Enterprises
End-user customers

• Fortune 1000, banks, automobile manufacturers,
  insurance agencies, industrial and high-tech
  companies

Source ADVA
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Sales strategy
OEM partners
VARS and distribution partners
Direct

• Increasing direct ADVA sales force
• Key enterprise and service provider customers
• Business development team provides network
  consulting and RFQs/RFPs

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Financial highlights
Thousands of Euro, except earnings per share and
number of employees Unaudited, according to U.S.
GAAP
Pro forma consolidated financial results are
calculated excluding purchased in-process RD,
amortization of goodwill and depreciation of
purchased intangible assets resulting from
acquisitions, as well as non-cash charges related
to the stock option program.
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2000 operational highlights

• OEM agreements with Cisco and Siemens
• 3-year contracts with Verizon, British Telecom,
  Swisscom and Torch Telecom
• Strategic marketing relationships with Brocade,
  Compaq and EMC
• Establishment of presence in Tokyo, China, Mexico
  and Chile
• 2000 Market Engineering Product Line Strategy
  Award from Frost Sullivan
• Completion of RD and production facility
• Aggressive acquisition and investment strategy
• SAN Ltd.
• Cellware Broadband GmbH
• First Fibre Ltd.
• Siemens Norway Telecom RD Team
• OptXCon Inc.

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Human resources
ADVA employees worldwide 1997 - 2000
ADVA employees worldwide 2000 total - 398
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Investor relations
ADVA stock price performance March 1999 -
February 2001
adjusted for capital increase (effective 15
stock split)
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Investor relations
ADVA stock price performance vs. optical
networking peers during 2000

• ADVA stock price performance vs. Neuer Markt
  peers during 2000

Source www.neuer-markt.de
Source www.nasdaq.com
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Overview of agenda items

• TOP 1 Stock option program 2001
• TOP 2 Stock option program UK
• TOP 3 Employee option bond program 2001
• TOP 4 Supervisory Board convertible bonds 2001
• TOP 5 Amendment of Articles of Association
• TOP 6 Convertible and option bonds

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Employee participation
Close integration with rise in company valuation

• recruitment of top-quality talent
• involvement in opportunities and risks
• retaining through financial incentives
• minimization of cash outflow for personnel
  expenses
• open, dynamic company culture
• transparent, regular flow of information
• decentralized, flat organizational hierarchy
• consideration of employee structure and hierarchy
• further development/adjustment to actual company
  development
• orientation to international expectations
• supplementation of fixed and variable
  compensation packages

Intangible factors
Adaptation and flexibility through growth phases
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Program overview
prior to IPO
at the time of IPO
after IPO
Requirements/ goals

• Recruiting top-quality leadership expertise
• Retaining liquidity
• Management

• Recruiting technical and management expertise
• Motivating/ incentivizing employees
• All employees

• Recruiting technical and management expertise
• Motivating/ incentivizing employees
• Acquisitions
• Management/ leadership
• Employees
• Supervisory Board members

Participants
Existing shares
Stock options
Stock options/ option bonds/ convertible bonds
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Program overview