Pixelworks Inc. (PXLW)

Presented by

Niladri (Neal) Kansari

High growth technology products

Flat Panel LCD Monitors

Flat Plasma/LCD HDTV

Multimedia

Projectors

Laptops

Tablet PC

Growth of LCD Flat Panel

Displays

4050

LCD Monitor Unit Shipment Growth

Japan Electronics and Information Technology Industries Association (JEITA) & FPD world.

010203040Unit

Shipments

(Million)

2000 2002 2004

Year

LCD

Flat Digital TV’s Growth

12

14

Digital Televisions - John Peddie Associates estimate

0

2

4

6

8

10

12

Unit

Shipments

(Mill)

2000 2005

Year

Series1

Digital Multimedia Projector’s

Growth

Multimedia Projectors - Worldwide Data group

estimate

0

0.5

1

1.5

2

2.5

3

Unit

Shipments

(Million)

2000 2004

Year

Series1

Why PXLW ? Think inside the box

Brain of the Flat Panel Display

How big is the pie?

• Over 1 Billion PC’s

• Over 1 Billion Television sets

• Over 200 Million Media appliances• Over 200 Million Media appliances

• Let us assume 30% PC’s, 20% TV’s, 80%

media devices will ship with FPD’s 10

years from now.

• Assume Avg.Selling price of chip $12.00

How big is the pie (cont)

Estimated Market Size ($ Million)

1920

3600

2400

1920LCD Monitors

HD TV's

Other

Total Market Size = 1920+3600+2400 ~ 8 Billion

Dollars

Semiconductor Industry

1. Ones the design, test and manufacture

semiconductor chips.

2. Ones that only manufacture semiconductor

chips.

3. Ones that only design, test and market the end

product.

Pixelworks Inc.

• A fabless semiconductor company that

designs, develops and markets system-on-a-

chip semiconductors and software. chip semiconductors and software.

• Founded – Jan 1997

• Went Public – April 2000

• No. Of Employees ~ 200

Management Team

• Allen Alley - President, CEO and Chairman of the Board (Infocus, ComputerVision,Battery Ventures, Boeing & Ford)

• Michael West – Vice President, Technology (Scientist positions at Infocus, Bipolar Integrated Circuit, & Vliw supercomputer)

• �ew Members:

– Vice President – Paul Ridey, Founder & CEO of Track Wireless, Ex-Motorola

– Vice President – Mark Fleshman, Ex-Transmeta, and Ex-HP.

Players in LCD Display

Controller Segment

8%

19%

GNSS + SAGI

PXLW

66%7%

8% PXLW

SmartASIC

Others

Market Share by Unit Shipments – Source

DisplaySearch

Why PXLW?

• LCD monitor suppliers are expecting y/y growth of over 60-80%.

• Currently small with 7-8 % market share, but it is the fastest growing display controller player.

• 17% Market share (Revenue) terms

• Close partnership with Samsung (no.1), in developing Smart Panel Displays.

• All top brands as customers – Samsung, NEC-Mistibuishi, Sony, Compaq, Dell.

Why PXLW?

– Strong image processor chips for SXGA (1280*1024) and UXGA (1600*1200) monitor markets, using industry leading 0.18 Micron CMOS technology.

– New product introductions (PW13X Family) jointly developed Analog Devices

– New product introductions (PW13X Family) jointly developed with Analog Devices.

– Jolt based processors are in testing phases with leading manufacturers.

– Lower-end XGA monitor space due to acquisition of Panstera Inc.

– Acquisition of nDSP and early stage investment ($7.5 Million) in Jaldi Semiconductor, a promising player in reconfiguarable DSP chips.

Financial Information

• Market Price – $13.63

• Shares Outstanding – 41.37 (M)

• Market Cap: $ 571 (M)

• 52 Week Range: $7.13 – $35.74

• Book Value Per Share: $2.86

• Debt/Equity: 0

Revenue Growth (Y-O-Y)

Revenues (M)

8090

100

Revenue ($ Million)

0

1020

3040

50

6070

80

1999 2000 2001

Revenue ($ Million)

Revenues (M)

Revenue Growth (Quarterly)

25

Quaterly Revenue Graph

0

5

10

15

20

$ Million

00-q1 00-q2 00-q3 00-q4 01-q1 01-q2 01-q3 01-q4

Series1

Revenue Mix

Revenue Contribution (%)

5%

55%40%

5%

Projectors

LCD Monitors

HDTV's

Earnings Growth

0.29

0.55

0.40.6

Earnings Per Share

-0.5

-1.05-1.2-1

-0.8-0.6-0.4-0.20

0.20.4

$

2000 2001 2002 2003

Year

EPS

Pro-forma earnings

0.4

Proforma Earnings

0

0.2

0.4

Earnings/

Share ($)

2000 2001

Year

Series1

2-Year Price Movement

Chart PXLW

Favorable P/E going forward

FY 2001(actual) FY 2002 FY 2003

EPS ($) -1.05 0.29 0.55EPS ($) -1.05 0.29 0.55

P/E NA 48.3 25.5

Customers/Partners Comments

• `Pixelworks` highly integrated ImageProcessor Architecture helped Samsung to implement advanced designs across several platforms both quickly and cost effectively. Pixelworks ImageProcessors provide our monitors with the flexibility to offer video and computer graphics on the screen simultaneously which we are finding is winning accolades in the press and very popular among consumers,?said Bob accolades in the press and very popular among consumers,?said Bob Eminian, Vice President of Marketing and Corporate Communications at Samsung Semiconductor, Inc. in San Jose, Calif.

• Dell 1701 FP features state-of-the-art technology with dual interface, active-matrix, thin film transistor (TFT) display, developed by Samsung's new brand Wiseview and powered by Pixelworks' award-winning ImageProcessor technology which instantly adjusts to display the industry's best image quality whether the monitor is connected to an analog or digital signal.

Customers/Partners Comments

• The excellent Pixelworks engineering team has extensive experience with Toshiba in developing new technology and processes, so we see them as the logical choice for introducing this powerful technology to the new Internet media appliance market," said Toshinori Moriyasu, general manager of the Microprocessor Division for ToshibaSemiconductor Company. Semiconductor Company.

• The Compaq TFT5030 monitor include: crystal-clear .30 mm pitch, brightness up to 300-nits, 170-degree viewing angles, and both digital and analog compatibility. Sharp Microelectronics' built-in ASV (Advanced Super View) technology also ensures zero pixel defects and includes Pixelworks' PW112 ImageProcessor IC, interface electronics, and inverter to drive the backlight directly onto the LCD (Liquid Crystal Display) module.

•

Concerns

• Net Loss increased from 0.5 Million in 2000 to 42 Million in 2001

• Capacity issues in LCD panels may hurt all players in this segment.players in this segment.

• Big players like Philips, National Semiconductor, Texas Instruments may try to enter in a bigger way.

• Profit Margins may go down due to intense competition.

Conclusion

• The semiconductor business is cyclical.

• Stock seems highly undervalued relative to its peers.

• PXLW is likely to increase market share and • PXLW is likely to increase market share and earnings dramatically in second half 2002, and 2003 when its new processors ship.

• Very strong player in SXGA and UXGA segment.

• There is strong upside potential (Price Target $25), with low downside risk.