Attached files
| file | filename |
|---|---|
| EX-99.3 - EX-99.3 - TESSERA TECHNOLOGIES INC | d528270dex993.htm |
| EX-99.2 - EX-99.2 - TESSERA TECHNOLOGIES INC | d528270dex992.htm |
| 8-K - FORM 8-K - TESSERA TECHNOLOGIES INC | d528270d8k.htm |
 April 2013
Investor Presentation
Exhibit 99.1 |
 2
Safe Harbor
To be updated once deck is
close to final
Tessera Confidential
This presentation contains forward-looking statements, which are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements involve risks and uncertainties that could cause actual results to differ significantly from those projected, particularly with respect
to Tessera Technologies, Inc.’s (the “Company”) financial results, milestones, expected
returns on investments, and financial projections, including the Company's future revenue and
profitability; growth of the Company’s served markets; market opportunities; industry and technology trends; use of the Company’s technology
in additional applications; the Company’s product roadmap and the characteristics and benefits of
such future products; growth opportunities, including with respect to the delivery of next
generation chip packaging, and the production of integrated mems|cam products; growth drivers; the characteristics, benefits,
advantages, features, disruptive qualities and potential of the Company’s technologies and
products, including with respect to 3-D Integrated Circuits and other packaging solutions
in the Company’s Intellectual Property segment and DigitalOptics mems|cam products and the commercialization of such technologies and
products; the effects and duration of the new license agreements with SK hynix; the long term value of
IP business and its portfolios; future payments and running royalties, including from SK hynix;
discussions with other major DRAM players and the ability sign additional long-term licenses; litigation developments and
expectations, including the amount Tessera, Inc. expects to receive from Amkor in connection with the
arbitration award; future investment and research and development resources, including with
respect to strategic growth opportunities; strategic alternatives and partnership opportunities available to the DigitalOptics
segment (DOC) (including the anticipated timing of such alternatives and partnerships); and the
Company’s ability to address upcoming needs of key market segments. Material factors that
may cause results to differ from the statements made include the plans or operations relating to the Company's businesses; market
or industry conditions; changes in patent laws, regulation or enforcement, or other factors that might
affect the Company’s ability to protect or realize the value of its intellectual property;
the expiration of license agreements and the cessation of related royalty income; the failure, inability or refusal of licensees to pay royalties;
initiation, delays, setbacks or losses relating to the Company’s intellectual property or
intellectual property litigations, or invalidation or limitation of key patents; the timing and
results, which are not predictable and may vary in any individual proceeding, of any ICC ruling or award, including in the Amkor arbitration; fluctuations
in operating results due to the timing of new license agreements and royalties, or due to legal costs;
the risk of a decline in demand for semiconductor and camera module products; failure by the
industry to use technologies covered by the Company’s patents; the expiration of the Company’s patents; the Company’s ability to
successfully complete and integrate acquisitions of businesses, including the integration by
DigitalOptics segment (DOC) of its recently acquired camera module manufacturing facility in
Zhuhai, China; the risk of loss of, or decreases in production orders from, customers of acquired businesses; financial and regulatory risks
associated with the international nature of the Company’s businesses; failure of the
Company’s products to achieve technological feasibility or profitability; failure to
successfully commercialize the Company’s products; changes in demand for the products of the Company’s customers; limited opportunities to license
technologies and sell products due to high concentration in the markets for semiconductors and related
products and camera modules; the impact of competing technologies on the demand for the
Company’s technologies and products; failure by DOC to become a vertically integrated camera module supplier; and the
reliance on a limited number of suppliers for the components used in the manufacture of DOC products.
You are cautioned not to place undue reliance on the forward-looking statements, which
speak only as of the date of this document. The Company's filings with the Securities and Exchange Commission, including its
Annual Report on Form 10-K for the year ended Dec. 31, 2012, include more information about
factors that could affect the Company's financial results. The Company assumes no obligation to
update information contained in this document. Although this document may remain available on the Company's website or
elsewhere, its continued availability does not indicate that the Company is reaffirming or confirming
any of the information contained herein. This document includes trademarks, tradenames and tradedress of the Company, its subsidiaries and of
third parties. Those intellectual property rights are owned by their respective
owners.
|
 I.
Overview
II.
Intellectual Property Business –
Strategy for Growth
III.
DigitalOptics Business –
Mitigating Stockholder Risk
IV.
Financial Highlights
V.
Why Our Board is Right (and Starboard is Wrong) for
Tessera
3
Tessera Confidential |
 interconnectology 4
We Produce Real Technology and Products
Through Leveraged Partnerships
We Are Not a Patent Troll
A Technology Development Company
Selling Advanced Technology
Engineer to Engineer
WE HELP TURN THIS …
INTO THIS
Tessera Confidential |
 Overview
Tessera Confidential |
 6
Tessera’s “3 x 3”
Plan
1)
Drive IP business to target model
2)
Continue to execute DOC restructuring to
minimize capital requirements and speed time
to market
3)
Drive down corporate overhead
1)
Enhance position as a technology development
partner, not as a troll
2)
IP: Grow revenue from new customers,
Invensas technology and selective IP
acquisitions
3)
DOC: Focus on core competencies, develop
supply chain ecosystem, and explore strategic
alternatives to reduce cost burden
Tessera’s Board and management implemented significant changes to improve
governance and refocus the Company’s business strategy well before
Starboard’s current agitation Governance
Tessera Confidential
1)
Reconstituted Board: 5 of 6 on slate
added within last 9 months
2)
Effected key Executive-Level changes
3)
Enhance stockholder returns through
expanded dividend strategy and stock
repurchase plan
Operations
Strategy
(1)
___________________
(1)
Based on stockholder meeting to be held on May 23, 2013.
|
 DOC
2013 Plan •
Tessera is committed to the market but will not fund entire investment
•
Limit additional net spending to $50mm
Complete 8MP mems|cam product commercialization (80-90% rolled yield)
Complete 13MP mems|cam design
Complete initial version of mems|cam computational imaging suite
Execute mems|cam supply agreements with module and lens manufacturing
partners •
Will seek alternatives to reduce commitment while optimizing stockholder ROI
(investment, JV, or sale)
7
Tessera Confidential |
 8
____________________
Note: Tessera SG&A includes allocated corporate overhead.
(1)
Assumes tax rate of 30%.
Target Operating Model (IP Business)
IP Business
Target Model
Revenue
100%
Gross Profit
99%
R&D
12%
SG&A
22%
Litigation
15%
Operating
Income
50%
Net Income
After Tax
(1)
35%
Tessera Confidential |
 9
____________________
Note: Tessera SG&A includes allocated corporate overhead.
(1)
Assumes 35% corporate overhead allocated to Intellectual Property Segment and 65%
allocated to DigitalOptics Segment. Includes restructuring charge of $2.5mm.
Where We Are Today (2012 Actuals)
Tessera Confidential
IP Business
DOC
Consolidated
Revenue
100%
100%
100%
Gross Profit
99%
4%
83%
R&D
17%
165%
43%
SG&A
(1)
24%
129%
43%
Litigation
18%
--
15%
Operating
Income
41%
(290%)
(18%)
Net Income
(13%) |
 With
Critical Changes Behind Us, We Are Executing on Our Refined Strategy
10
Meeting With Top Customers and Partners
Listening to Investors
Working with Board & Outside Advisors to Formulate Strategy
Executing New Strategy
8/29/12
Added 2
independent
directors
(Richard S.
Hill & Timothy
Stultz)
11/14/12
Announced cost
cutting measures
in DigitalOptics
unit in Charlotte
& Tel Aviv
1/15/13
Appointed Bernard
J. Cassidy as
president of
Tessera Intellectual
Property Corp
4/6/11
Appointed
Simon McElrea
as President of
Invensas
4/15/13
Appointed
Richard S. Hill as
Interim CEO and
Executive
Chairman
4/25/13
Company announced
in earnings call they
are seeking strategic
options for DOC to
find a financial or
strategic partner
3/21/13
Announced DOC business
strategy refocusing and DOC
and Corporate Overhead cost
reductions of approximately
$78 million, or 45% on an
annualized basis
12/10/12
Appointed James
Chapman as
DOC SVP of
Sales & Marketing
2/7/13
Appointed
John Thode as
president of
DigitalOptics
Corporation
3/22/13
Stopped vertical
manufacturing in
DOC: executed
corporate overhead
reductions
8/15/12
Announced
appointment
of C. Richard
Neely, Jr. as
Executive
VP and CFO
Tessera Confidential
3/25/13
Restructured board with 3 new
independent directors and
appointed Richard S. Hill Chairman
Announced commencement of a
search for a new CEO |
 Strategy in place for new phase of growth
under experienced new management and
Board
Proven track record for effective IP
monetization with industry-leading operating
margins
Executing on a plan for growth driven by
innovation
Strong focus on operational excellence and
creating value for stockholders
Demonstrated willingness to make tough
decisions to drive value
Since we began to implement Board and
management changes in August 2012, our
stock has risen ~30% (peers have only risen
~6%
(1)
)
(1)
As of April 23, 2013. Initial closing price based on August 28, 2012, the day before
Tessera announced it had appointed Richard S. Hill and Timothy J. Stultz to its Board and two weeks
after
Tessera
announced
the
appointment
of
C.
Richard
Neely,
Jr.
as
Executive
Vice
President
and
Chief
Financial
Officer.
Peers
consist
of
Acacia
Research,
InterDigital,
CEVA,
Dolby
Laboratories, Unwired Planet and Rambus. Excludes the impact of dividends.
11
The obvious quick fixes suggested by
Starboard
have
been
made
already
They have said they will slash R&D and
implied they will kill DOC
Led by Peter Feld who:
Lacks management experience
Has demonstrated no ability to create
value at Unwired Planet
Presents material conflicts of interest
Has repeatedly refused good faith offers by
Tessera to resolve amicably
Looking to control company without a
premium
Tessera
Starboard
We
believe
the
decision
is
clear
–
Starboard
simply
has
nothing
useful
to
offer
The Facts Before You
Tessera Confidential |
 Enhanced Board Poised to Drive Stockholder Value
12
Tessera Board has been enhanced with fresh perspectives and the broad set of skills
necessary to effectively oversee the company though these critical times,
including IP monetization, engineering, marketing, sales, and finance
Each of our nominees has years of operational and director experience with companies
that specialize in introducing complex technologies into the market
___________________
Note:
“*”
denotes “independent director”
as defined in NASDAQ Marketplace Rule 5605(a)(2). Richard S. Hill will return to
independent director status upon appointment of new CEO. (1)
Represents tenure up to May 23, 2013 for Robert J. Boehlke, David C. Nagel and
Anthony J. Tether, the effective date of resignation (March 1, 2013) for John B. Goodrich and Kevin G.
Rivette and the effective date of resignation (April 15, 2013) for Robert A.
Young. Tessera Confidential
Board Members Elected at 2012 Annual Meeting
(1)
Robert J. Boehlke*
8 years, 5 months
John B. Goodrich*
11 years, 7 months
David C. Nagel*
8 years, 0 months
Kevin G. Rivette
1 year, 11 months
Anthony J. Tether*
1 year, 9 months
Robert A. Young
22 years
Current Proposed Slate
Richard S. Hill*
9 months
John Chenault*
2 months
John H.F. Miner*
2 months
David C. Nagel*
8 years, 0 months
Christopher A. Seams*
2 months
Timothy J. Stultz*
9 months
Board Member
Tenure
Board Member
Tenure |
 Why is
it Nearly Unprecedented for Stockholders to Give a Dissident Control of the
Board Without a Simultaneous Purchase of the Company at a Premium?
With Board control, Starboard could potentially…
sign
below-market
licenses
or
settle
litigation
for
discounted
sums
to
gain
near-term
profit at the expense of long-term value
ignore R&D investment intended to fund long-term Invensas growth in
exchange for near-term savings
shut down DOC for quick P&L benefit at the expense of a more attractive
alternative that takes longer to consummate
recognize there is limited liquidity in the stock and be first out the door when
their strategy fails, leaving current investors to lose money
buy Unwired Planet to save a poor investment at the expense of Tessera
stockholders
share Tessera's trade secrets and proprietary know-how with an unsuccessful
competitor (Unwired Planet) for free
cause key talent to leave the company
13
Are you willing to take these risks and suffer the
consequences?
Tessera Confidential |
 Intellectual Property Business Overview
Tessera Confidential |
 Tessera Confidential
Intellectual Property Business
Selective Acquisitions
Original IP business
established Tessera as a key
IP licensing company
Proven technology which is
still used today by most OEM
and other electronics
manufacturers
Over 800 U.S. and foreign
patents issued and pending
Created to enable new
avenues for growth
Holds patents in many key
development areas of the
semi space, including
facedown technology (xFD),
BVA, and 3D packaging
Over 1,000 U.S. and foreign
patents issued and pending
Overview of IP Business
15
Tessera’s new business plan
contemplates inorganic
growth outside of traditional
areas of focus
Established team to acquire
companies, divisions, and
patent assets in a disciplined
way
Collectively, a future-focused
IP-engine enabling new and
more effective monetization
strategies for Tessera’s IP
business |
 Tessera Confidential
Customer
Original Portfolio
New Portfolio
Status
Signed new agreements in 2012
Expect significant increase in
revenue
Contract expired in May 2012
Accounted for 13% of 2012
revenue
Renewed through 2017
Key Licensees & Targets for Current Portfolios
16
= Under Contract
= In Negotiations |
 Tessera Confidential
Tessera, Inc.
Portfolio
Invensas Portfolio
Patent and know-how licenses to next-gen technology
Patent licenses to broadly implemented original technology
Cross-selling occurs as vendors require patent licenses to original technology
already implemented, but also patent and know-how licenses to
cutting-edge technology Other customer wins expected as
next-generation technologies become adopted xFD already adopted and
quickly gaining traction BVA targets new licensees outside of our
traditional DRAM licensees 3D
packaging
–
widely
recognized
as
an
optimal
path
to
advance
semi
technology
17
Compelling Opportunities to Cross-Sell Tessera and
Invensas Licenses & Know-How |
 Tessera Confidential
18
xFD™
BVA™
Current DRAM
Package (TCC™)
Current Package
on Package
3D-IC
(Memory)
3D-IC
(Mobile)
Addressable Markets vs. Innovation Roadmap |
 Tessera Confidential
Patent Enrichment
Tessera Compliant Chip Technology
Invensas xFD Multi-Chip Technology
Generated $1.6b in Revenue & Counting
Generating New & Renewal Licenses
19
Window Bonding
through Substrate
Patent #6
Chip-Scale Package
with Compliancy
Patent #1
Encapsulation &
Other Methods
Patent #25
Thermal Solutions &
Improvements
Patent #100+
Multi-Die Face-Down
Structure
Patent #1
Alternate Structures
& New Methods
Patent #16
Improved Electrical
& SI Performance
Patent #44
Thermal Solutions &
Improvements
Patent #140+ |
 Tessera Confidential
Successful Use of War Chest in Litigation Battles
20
Track record of attractive returns through litigation: 2x-3x return per dollar
spent on litigation converted to legal settlement or award
Strong cash position = credible threat of litigation: to defend patents and
discourage free riding
Litigation is strategically focused on high-value patents
Major Cases:
Amkor Arbitration: Amkor initiated but Tessera scored a major win with favorable
ruling against Amkor in February 2013
Over $130mm of cash expected over next few years in addition to the $20mm
Amkor paid in 2012, for a total of over $150mm
Anticipated yield of over 400% based on $36mm cash expenditure
“AMD”
cases (Tessera, Inc. v. Advanced Micro Devices
and Tessera v. Motorola):
Federal
Circuit
has
already
ruled
patents
valid
and
infringed
by
two defendants; three
defendants (including AMD) have already settled
PTI case: PTI initiated but case now represents another significant upside
opportunity
IT WORKS!!! |
 Tessera Confidential
21
____________________
Note: Peer operating margins are as-reported GAAP; Tessera SG&A includes
allocated corporate overhead. (1)
2012 average of ACTG, CEVA, DLB, IDCC, and RMBS. Note: excludes UPIP due to 2012
revenues of ~$3k and operating expenses of ~$32mm. (2)
Assumes tax rate of 30%.
Actual & Target Operating Margins Exceed Peers
IP Business
Target Model
2012 Peer
Avg.
(1)
Gross Profit
99%
84%
R&D
12%
27%
SG&A
22%
28%
Litigation
15%
5%
Operating
Income
50%
23%
Net Income
After Tax
(2)
35%
16%
IP Business
5-Year Average
2012
Operating
Operating
Rank
Firm
Margin
Margin
1
54%
41%
2
44%
35%
3
44%
63%
4
17%
23%
5
8%
32%
6
(20%)
(39%)
7
(21431%)
(107087%) |
 DigitalOptics Business Overview
Tessera Confidential |
 Tessera Confidential
Renewed Emphasis on Capital Efficiency & Focus
23
Focus on DOC value (MEMS & SW)
Leverage manufacturing partners
Minimize capital investment
Focus R&D on 8+13MP mems|cam
for smartphones
Integrated product strategy bundling
mems|cam and computational imaging
features
Strengthen OEM ties via software
Divesting Charlotte, Silent Air Cooling
Closing Tel Aviv and Zhuhai
Froze capital investment
Outsourcing lens, MEMS and CM HVM
$53mm
(1)
OpEx run-rate by year-end
New Strategic Approach
(1)
Represents a GAAP figure.
“Samsung Electronics Co., Ltd. has a signed a multi-year license
for DOC’s Face Detection and Face Tracking software. This
software will be used in Samsung Galaxy S
®
4 smartphones.”
—Tessera, April 23, 2013
Element
Manufacturing Model
Lens
Source From Partners
MEMS
Actuator
Fabless (Source via Foundries)
Lens
Barrel
Module
Leverage CM Partners |
 Tessera Confidential
12-Month Goals for DOC Business
24
4Q13
Execute mems|cam
supply agreements
with module and lens
manufacturing partners
1Q14
Commence
mems|cam HVM
module production
3Q13
Complete closure of
Zhuhai, China facility
and bring up NPI
module line in Taiwan
Mar ‘14
Develop strategy to extend
mems|cam ecosystem (partners
to design & manufacture using
licensed DOC technology)
Dec ‘13
8MP mems|cam
production release
3Q13
Complete 13MP
mems|cam design
Jan ‘14
Complete optical
image stabilization
design
4Q13
Complete initial version of
mems|cam computational
imaging suite
3Q14
Release 13MP
mems|cam to
production
Dec ‘13
Complete financing
transaction to fund
DOC business |
 Tessera Confidential
25
Path Forward –
Implications of Strategic Review
Tessera is committed to the market but
will not fund entire investment
Will seek alternatives to reduce
commitment while optimizing shareholder
ROI (investment, JV, or sale)
Many candidates with strategic overlap
(component, module, OEMs)
Investment bank retained to facilitate
process
Target transaction by year-end
Break-even target mid-2015, ~$100m of
incremental investment |
 Tessera Confidential
26
Holy Grail: Focus, Low Light, Zoom, & Computational Imaging Features
Autofocus modules doubling from 1Bu to 2Bu in next 4 years
“Never miss a
moment”
“Pocket to picture
in seconds”
“40% Faster
photo capture”
“Never miss a shot”
"We
view
imaging
as
a
core
area
for
differentiation
in
the
smartphone
space,"
-
Crawford
Del
Prete,
EVP
and
Chief
Research
Officer,
IDC |
 Tessera Confidential
April 23, 2013
27
Industry Press Praises DOC Technologies
When Samsung unveiled the Galaxy S 4 in March, there was a near-
inescapable emphasis on face detection features. What we
didn't know is just whose technology was making them possible. As it
happens, it's
not
entirely
Samsung's
-
DigitalOptics
has
stepped forward to claim
some of the responsibility. The California firm recently struck a multi-
year licensing deal with Samsung to supply its Face Detection and Face
Tracking software…
it's safe to presume that Samsung isn't dropping its
emphasis on camera-driven software anytime soon. |
 Tessera Confidential
Software
Focus
Quality
Silicon
Firmware
•
Scene Analysis
•
Frame Registration
•
HW Face Detection
•
Distortion Correction
•
Frame Registration
•
Object Detection
•
Frame Registration
•
Distortion Correction
Face Analysis
& Registration
Motion
Estimation
Super
Resolution
28
Why DOC is Uniquely Positioned to Compete –
System-Level Approach is Only Viable Option
Zoom
Low Light
Performance &
Image
Stabilization |
 Tessera Confidential
29
Future of Imaging…Where Does it Go Next?
DOC Computational Imaging Portfolio
Under Exposure
Over Exposure
HDR Output
HDR Output
Multi-Focus
Best Shot
Panorama
All-in-Focus
Strobe Effect
Night Portrait
Depth Sensing
Super Resolution
SDoF (Bokeh effect)
Background Removal
Gesture Control... |
 Financial Highlights
Tessera Confidential |
 31
Q1 Financial Highlights
Source:
Note:
(1)
(2)
Company public filings adjusted for the theoretical model allocation of
non-segment portions of financial statements. Financial statistics exclude
the impact of stock-based compensation expense and amortization of intangibles.
Assumes 35% corporate overhead allocated to Intellectual Property Segment and 65%
allocated to DigitalOptics Segment. Includes stock-based compensation,
amortization of intangibles, restructuring/impairment and other charges.
CY2013
Q2
Guidance
Revenue:
$42mm
–
$50mm
GAAP
OpEx:
$77mm
–
$81mm
Litigation:
$16mm
–
$20mm
(included
in
GAAP
OpEx)
Restructuring:
$5.5mm
–
$6.5mm
(included
in
GAAP
OpEx)
GAAP
EPS:
($0.40)
–
($0.45)
Quarter Ended March 31, 2013
Revenues:
Intellectual
Property
Segment
DigitalOptics
Segment
Consolidated
Royalty and License Fees
$25.6
$2.6
$28.2
Product and Service Revenues
0.0
2.9
2.9
Total Revenues
$25.6
$5.5
$31.1
COGS
0.0
6.1
6.1
Gross Profit
25.6
(0.6)
25.0
Research & Development
5.4
17.9
23.3
SG&A
4.9
4.7
9.6
Litigation
14.0
0.0
14.1
Allocated Corporate Overhead
(1)
3.9
7.3
11.2
Total Operating Expenses
28.3
29.9
58.2
Non-GAAP Operating (Loss)
($2.7)
($30.5)
($33.2)
Total Non-GAAP Adjustments
(1)(2)
5.4
25.9
31.4
GAAP Operating (Loss)
($8.1)
($56.4)
($64.5)
Tessera Confidential |
 32
Existing
Customer Base
Litigation
New Invensas
Customers
New Verticals
FY2012
FY2016
($mm)
Litigation
Existing
Customer Base
Total CAGR: ~15%
Includes 100%
of DOC
Does Not
Include DOC
(1)
Revenue
Tessera Confidential
Source:
Note:
(1)
Company public filings and Tessera management estimates.
Financial statistics exclude the impact of stock-based compensation expense and
amortization of intangibles. FY2016 revenue excludes impact of DOC.
|
 Non-GAAP Operating Margin
51%
2%
0%
10%
20%
30%
40%
50%
60%
IP
Impact of DOC
Tessera
Consolidated
(50%)
(1)
(1)
33
Non-GAAP Operating Margin
Includes 100%
of DOC
Does Not
Include DOC
(2)
FY2012
FY2016
Tessera Confidential
Tessera Consolidated (More
Text)
50 -
60%
____________________
Source:
Company public filings and Tessera management estimates.
Note:
Financial statistics exclude the impact of stock-based compensation expense and amortization of
intangibles. (1)
Assumes 35% of stock-based compensation related to corporate overhead allocated to Intellectual
Property Segment and 65% allocated to DigitalOptics Segment. (2)
FY2016 operating income excludes impact of DOC. |
 34
Non-GAAP EPS
FY2012
FY2016
Includes 100%
of DOC
Tessera Confidential
Source:
Company public filings and Tessera management estimates.
Note:
Financial statistics exclude the impact of stock-based compensation expense and amortization of
intangibles. (1)
Assumes 35% of stock-based compensation related to corporate overhead allocated to Intellectual
Property Segment and 65% allocated to DigitalOptics Segment. Assumes tax adjustments
allocated based on proportion of adjustments. (2)
FY2016 EPS includes illustrative impact of DOC per-share earnings.
|
 Tessera Confidential
35
Stockholder’s Dilemma: Dividends, Growth and
Liquidity
Dividends
Quarterly Dividend: (liquid assets/share count) * 0.05 / 4 (Assures
all cash is dividended out over 20 years) Special Dividend:
20-30% of Episodic Gain (Distributed once per 12 months)
Growth
“Sinking fund”
for fixed dividend growth: 20-30% of Episodic Gain
Investment in portfolio growth: 20-30% of Episodic Gain
Any unallocated Episodic Gain reinvested in business
Liquidity
Opportunistic “buyback program”
to support investor liquidity: 20-30% of Episodic Gain
(3)
(2)
2.0%
8.5%
1.0%
--
--
--
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
Tessera Will Offer All 3
Dividend
Yield
Comparison:
Tessera
Already
Ahead
of
Most
Competitors
(1)
--
(4)
Company public filings.
As of April 23, 2013.
Announced on April 23, 2013. The first of the quarterly cash dividends of $0.125 per
share will be paid on May 30, 2013. Acacia simultaneously announced an extension of its
$100mm share repurchase plan.
On December 11, 2012, Dolby announced a one-time special dividend of $4.00 per
share on its Class A and Class B common stock. On December 5, 2012,
InterDigital announced a special cash dividend of $1.50 per share on its common stock.
Source:
(1)
(2)
(3)
(4) |
 Tessera Confidential
Why Our Board is Right (and Starboard is Wrong) for
Tessera |
       Tessera
Already has a Highly Qualified and Experienced Slate of Directors
37
Relevant Experience
Board Nominee
Public CEO / CFO /
C-Level Suite
Public
Company
Board
Technology
Innovation
Location
(1)
Independent
Appointed
Within Last 8
Months
Richard S. Hill
John Chenault
John H.F. Miner
David C. Nagel
Christopher A.
Seams
Timothy J. Stultz
(1)
Checkmark for “location”
indicates nominee is based within a two-hour flight of Tessera’s San Jose,
CA headquarters. (2)
Richard
S.
Hill
will
return
to
independent
director
status
upon
appointment
of
new
CEO.
(2)
Tessera Confidential |
       Tessera Confidential
The Dissident Slate is Not Right for Stockholders
38
Relevant Experience
Board Nominee
Public CEO / CFO /
C-Level Suite
Public
Company
Board
Technology
Innovation
Location
(1)
Concerns
Tudor Brown
Cambridge, UK
N/A
George Cwynar
Quebec, Canada
N/A
Peter Feld
New York, NY
Lacks Requisite Experience
and Saddled with Conflicts
from Unwired Planet
Thomas Lacey
Connected with Starboard
George Riedel
Weston, MA
N/A
Donald Stout
(2)
Arlington, VA
Troubling Allegations of
Professional Ethics Violations
(1)
Checkmark for “location”
indicates nominee is based within a two-hour flight of Tessera’s San Jose,
CA headquarters. (2)
Donald Stout serves on the Boards of Directors for Vringo, Inc. (AMEX: VRNG) and for
Augme Technologies, Inc. (OTC: AUGT). |
 Tessera Confidential
Peter Feld is Seeking Board Leadership Without the Requisite
Experience Necessary to Keep the Company on the Right Path
39
6
month
tenure
–
ended
in
bankruptcy
1
year
tenure
–
not
re-elected
by
stockholders
25
month
tenure
–
company
has
had
significant decline in revenue
share
price
decline
(1)
10
months
on
Board
–
company
has
had
significant decline in profitability
(1)
Based on UPIP stock price performance from July 28, 2011 (effective date of Peter
Feld’s Board membership) to April 23, 2013. Tessera Stockholders
Deserve Better None
21
months
on
Board
–
very little
revenue
and
~15% |
 Tessera Confidential
40
In
the
more
than
20
months
that
Feld
has
been
on
the
UPIP
Board,
the stock has fallen more than 15% (while
NASDAQ has risen 18%)
(1)
NO
new
revenue-bearing
license
agreements
have
been
signed
–
Microsoft
(lump
sum
agreement)
and
Mobixell were both signed before Feld joined the Board
Established a potential $1bn change of control payment to Ericsson if a change of
control occurs in the next three years, effectively a “poison
pill” Since Feld’s appointment as Chairman, the company has:
generated only a small amount of revenues
generated
over
$35mm
(2)
in
net
losses
from
continuing
operations
produced
a
total
cash
loss
from
operations
of
over
$56mm
(2)
spent
approximately
$20mm
(2)
on
patent
litigation
with
no
results
except
an
embarrassing
ITC
loss
to
Apple
Since Feld’s appointment to the Board of Directors, the company has suffered
a leadership exodus including Six senior management departures, including
the resignation of Starboard Value’s own UPIP Board nominee, Michael
Mulica, from the CEO position The
resignations
of
seven
Board
members,
including
all
3
members
with IP experience
UPIP and TSRA compete for the same portfolios, license to the same customers, and
are drawing from the same
pool
of
potential
CEOs
and
other
executives
–
all
giving
the
perception
and
reality
of
a
conflict
of interest
(1)
Based on UPIP stock price performance from July 28, 2011 (effective date of Peter
Feld’s Board membership) to April 23, 2013. (2)
Based on UPIP public filings.
A Recent Example of Peter Feld’s Track Record as
Chairman of Unwired Planet…
Is this what you want for Tessera? |
 Tessera Confidential
41
Previously served as CEO and Director of Novellus Systems Inc., until its
acquisition for more than $3 billion by Lam Research Corporation in June
2012 During his nearly 20 years leading Novellus, Mr. Hill grew annual
revenues from ~$100 million to over $1 billion
Previous experience with Tektronix Corporation (12 years; from General Manager of
the Integrated Circuits division to President of the Tektronix Development
Company and Tektronix Components Corporation), General Electric, Motorola
and Hughes Aircraft Company
Director of Arrow Electronics, Cabot Microelectronics and LSI Corporation
Will also join the Board of Planar, in another Proxy battle, in which both the
management and the agitator agreed to choose Mr. Hill to be on their
slate ($mm)
Novellus Historical Stock Price
Richard S. Hill is a Seasoned Industry Veteran with a
Track Record of Delivering Value to Stockholders
Peak Revenue:
$1.7 bn
Richard Hill is Well-Qualified to Lead Tessera |
 Tessera Confidential
What Tessera’s Nominees Have Accomplished
42
John
Chenault
John H.F.
Miner
Former CFO, VP of Corporate Development, VP of Operation and Administration,
EVP of Worldwide Sales & Service and EVP of Business Operations of Novellus
Systems
Serves as a Director of Ultra Clean Technology and Synos Technology
Extensive management and operations experience in the semiconductor industry
Venture capitalist and Managing Director of Pivotal Investments LLC
Formerly President of Intel Capital; held various other positions with Intel
including VP and GM of the Communications Products Group, the Enterprise
Server Group, and GM of Intel’s desktop motherboard and PC
building-blocks business Serves as a Director of LSI Corporation and
three private company boards, in addition to his service in numerous
community activities Former President of AT&T Labs and Chief Technology
Officer Led a team which generated more than 5,000 patents
Initiated
a
formal
IP
monetization
program
for
the
first
time
in
company's
history and within 2 years generated annualized patent revenues of more than
$70M
Served for 5 years on a Presidential Advisory Committee on Information Technology
(PITAC) which specifically addressed IP creation and monetization as a key
issue David C.
Nagel |
 Tessera Confidential
What Tessera’s Nominees Have Accomplished
43
Christopher
A. Seams
Currently with Cypress Semiconductor, holding various positions including
Executive VP of Sales & Marketing and Executive VP of Worldwide
Manufacturing and R&D Experience at AMD and Philips Research
Laboratories Served as a Director of Sunpower Corporation
Extensive management, sales and marketing, and engineering experience in the
semiconductor industry
David C.
Nagel
(cont’d)
Currently serves on the Executive Committee for the Board of Trustees of the
International Computer Science Institute
Prior experience with Apple Computer (Senior VP, R&D) and NASA (head of the
Human Factors Research division at NASA’s Ames Research Center)
Most recently President and CEO of PalmSource
Also serves as Director of Vonage Holdings and Director and Chairman of
Technology Committee at Align Technology
Timothy J.
Stultz
President, CEO and Director of Nanometrics
Previous experience with Imago Scientific Instruments (President & CEO)
and Veeco Instruments (VP and GM of Metrology Group)
20 years of executive management and operational and strategic development
experience in technology and capital equipment manufacturing
|
 Tessera Confidential
Experienced Business Line Leadership
44
C. Richard
Neely, Jr.
Executive VP & CFO
Bernard J.
Cassidy
President, Tessera
Intellectual Property
General Counsel and
Executive VP, Tessera
Technologies
Joined company in August 2012
30+ years of financial and operations management experience in
high technology industries
Previously CFO of Livescribe, CFO of Monolithic Power Systems,
and CFO of NuCORE Technology
Prior senior roles at several semiconductor related companies
including, Synopsys and AMD
Appointed President in January 2013
Extensive patent licensing and litigation experience
Nationally recognized expert on patent licensing
Twice testified before Congress on patents
Practiced law at Wilson, Sonsini, Goodrich & Rosati, and at
Skadden, Arps, Slate, Meagher & Flom
Member of Harvard Law Review
John S. Thode
President,
DigitalOptics
Corporation
Joined company in February 2013
Previously served as General Manager and Executive VP of
McAfee's Consumer, Mobile and Small Business
Prior experience with Dell (GM of Mobility Products Group), ISCO
International (President & CEO), and Motorola (25 years in various
management roles)
Extensive consumer mobile product industry experience
|
 Tessera Confidential
If you vote for Tessera’s slate, the Tessera Board commits to:
1)
Immediately expand Board by 2 seats
2)
Interview and select 2 of 3 Starboard nominees (Tudor Brown, George
Cwynar, and George Riedel) to fill those seats
45
You Have the Ability to Drive Compromise –
You Just
Need to Act on It
(1)
See page 51 for additional detail.
Given
Starboard’s
refusal
to
compromise,
you
have
the
power
to
enable
the
creation
of
a
stellar
Board
–
one
with
the
skills
required
to
take
this
Company
to
the
next
level
This gives stockholders 7 of 8 directors new (appointed since August 2012) and with solid
track records
Significant stockholder risk in Board overhaul with Starboard nominees with no familiarity
with the business, customers and products
We have repeatedly tried to work through a compromise with Starboard
(1)
|
 Tessera Confidential
Conclusion
46
Our IP business will drive growth through innovation and licensing
at industry-leading operating margins
Our DOC business has been restructured to capitalize on our core
competencies and addresses our massive TAM; we are also exploring
strategic alternatives to maximize stockholder value
Our focus on cost reduction and revenue optimization is well underway and
predates Starboard’s current involvement
We have the right Board and leadership in place to drive this vision and deliver
growth, dividends and liquidity for our stockholders
Don’t Let Starboard Destroy Your Investment –
Support Our Plan and Our Nominees |
 Tessera Confidential
Appendix |
 Tessera Confidential
•
Customer requirements:
time to market
performance advantage
cost advantage
Pure Troll vs. Value-Added IP Strategy
48
•
No engineers, no know-how
•
Licensing and know-how gets our
customers to market faster
•
Tessera engineers continue to
improve our claims and know-how
•
IP has to offer performance
advantages
•
Engineers convince engineers that
elegant solutions drive down costs
•
Cheaper to license than design
around
Tessera Brings Solutions to Our Partners
Expansions Add Value to Partners |
 Tessera Confidential
New Verticals Growth Strategy
Potential IP Sources
Description
High quality patent assets are increasingly available on the market
Patent sales have been increasing in both size and frequency over the past several
years Struggling / failing product companies often develop important
technologies A company’s patent assets are sometimes worth more than
its value as a product company Underperforming divisions of large
conglomerates are potential sources of high-quality patents May present
opportunities to access valuable patents for monetization at below-market prices
Large technology companies often hold significant patent portfolios that they are
unable or unwilling to monetize
In
these
instances,
companies
sometimes
turn
to
external
parties
to
help
monetize their
investments
Large companies sometimes prefer to acquire a patent portfolio rather than take a
license A licensing partner would allow the large company to monetize the
IP, free of any cross-licenses that limit the large company’s
licensing ability 49
Patent Acquisitions
Company
Acquisitions
Divisional Spin-outs
Outsourced
Monetization
Privateering |
 Tessera Confidential
Mobile Camera Market Opportunity
Still significant growth opportunity in a highly fragmented market
50
(1)
Source: Derived from median estimate of 10 analysts plus module and AF attach rates
from TSR 12/12 (Includes tablets and mobile phones). (2)
IC Insights Dec ’12.
Mobile Camera Modules
(1)
(mm units)
2,767
4,065
Mobile Camera Module Revenue ($B)
(2)
Autofocus Modules Units Expected
to Double in Next 4 Years
Module Revenue Expected to
Nearly Double by 2016 |
 Tessera Confidential
Tessera’s Frustrated Attempts to Collaborate with
Starboard
51
February 12, 2013
The Company contacted Peter Feld to request contact information for four of
Starboard’s director nominees and Starboard’s permission for members of
the Board of Directors to interview such nominees.
February 15, 2013
Bernard Cassidy reiterated to Feld the Company’s request to interview four of
Starboard’s nominees.
February 20, 2013
Press release: “The Board has expressed to Starboard its willingness to
consider Starboard’s nominees.”
February 27, 2013
Richard S. Hill and Robert J. Boehlke in a meeting with Feld noted that the
Nominating
Committee
would
be
open
to
adding
two
candidates
from
Starboard’s
slate of nominees that meet the Company’s criteria, including independence
and business acumen.
March 4, 2013
Open letter to Starboard: “The Board is currently evaluating potential
candidates, and reiterates that it would like to include Starboard’s
nominees in that process.” March 15, 2013
The Company’s chairman of the Nominating Committee on behalf of the Board
Directors
sent
a
letter
to
Feld
offering
to
nominate
two
members
from
Starboard’s
nominees in connection with a settlement of the proxy statement.
March 18, 2013
Skadden, Arps, Slate, Meagher & Flom, on behalf of the Board, indicated that
in connection with a settlement proposal that the Board would include two
of Starboard’s nominees among the Board’s nominees for election
at the Annual Meeting
(but
not
Feld,
unless
he
resigned
from
his
position
as
a
director and
Chairman of the Board of Unwired Planet). |
 Tessera Confidential
Property Segment
52
Segment Financials Model
Source:
(1)
(2)
(3)
Year Ended December
31, 2012
Revenues:
Intellectual
DigitalOptics
Segment
Consolidated
Royalty and license fees
$168.1
$14.4
$182.5
Past production fees
24.7
0.0
24.7
Product and service revenues
0.1
26.7
26.8
Total revenues
$192.9
$41.1
$234.0
COGS
0.9
39.5
40.4
Gross profit
192.0
1.7
193.7
Operating expenses
97.1
90.4
187.5
Allocated corporate overhead
(1)
16.5
30.6
47.0
Total operating expenses
113.6
121.0
234.5
Operating income
78.4
(119.3)
(40.9)
Other income and xpense, net
(2)
4.8
1.0
5.9
Income (loss) before taxes
83.3
(118.3)
(35.0)
Provision for (benefit from) income taxes
(3)
29.2
(34.0)
(4.8)
Net income (loss)
$54.1
($84.3)
($30.2)
Basic
and
diluted
net
income
(loss)
per
share:
Net income (loss) per share-basic
$1.04
($1.62)
($0.58)
Net income (loss) per share-diluted
$1.04
($1.62)
($0.58)
Weighted average number of shares used in per share calculations-basic
51,977
51,977
51,977
Weighted average number of shares used in per share calculations-diluted
51,977
51,977
51,977
Gross Margin
99.5%
4.0%
82.8%
Operating Margin
40.7%
(290.1%)
(17.5%)
Net Margin
28.1%
(205.1%)
(12.9%)
Company public filings and Tessera management estimates.
Assumes 35% corporate overhead allocated to Intellectual Property Segment and 65%
allocated to DigitalOptics Segment. Assumes other income and expenses
allocated based on proportion of revenue. Assumes 35% tax rate for
Intellectual Property Segment. |
 Tessera Confidential
53
In addition to disclosing financial results calculated in accordance with U.S.
Generally Accepted Accounting Principles (GAAP), this presentation contains
non-GAAP financial measures adjusted for either one-time or ongoing
non-cash acquired intangibles amortization charges, acquired
in-process research and development, all forms of stock- based
compensation, impairment charges on long-lived assets and goodwill, restructuring
and other related exit costs, and related tax effects. The non-GAAP
financial measures also exclude the effects of FASB Accounting Standards
Codification 718, “Stock Compensation”
upon the number of diluted shares used in calculating non-GAAP earnings
per share. Management believes that the non-GAAP measures used in this
presentation provide investors with important perspectives into the
Company’s ongoing business performance. The non-GAAP
financial measures disclosed by the Company should not be considered a
substitute for, or superior to, financial measures calculated in accordance with
GAAP, and the financial results calculated in accordance with GAAP and
reconciliations to those financial statements should be carefully evaluated.
The non-GAAP financial measures
used
by
the
Company
may
be
calculated
differently
from,
and therefore may not
be comparable to, similarly titled measures used by other companies.
Non-GAAP Reconciliation |
 Tessera Confidential
54
Non-GAAP Reconciliation
Source:
Company
public
filings
and
Tessera
management
estimates.
(1)
(2)
Assumes 35% of stock-based compensation related to corporate overhead allocated
to Intellectual Property Segment and 65% allocated to DigitalOptics Segment.
Assumes tax adjustments allocated based on proportion of adjustments.
Years Ended December
31, 2012
Intellectual
Property Segment
DigitalOptics
Segment
Consolidated
Segment operating income (loss)
$78.4
($119.3)
($40.9)
Adjustments to GAAP net income (loss):
Stock-based
compensation
5.8
11.3
17.0
Amortization of acquired intangibles
14.5
10.5
25.1
Restructuring and other charges
0.0
2.5
2.5
Non-GAAP operating income (loss)
$98.7
($95.0)
$3.8
Non-GAAP operating margin model
51.2%
(230.9%)
1.6%
GAAP net income (loss)
$54.1
($84.3)
($30.2)
Adjustments to GAAP net income (loss):
Stock-based
compensation
5.8
11.3
17.0
Amortization of acquired intangibles
14.5
10.5
25.1
Restructuring and other charges
0.0
2.5
2.5
Tax adjustments for non-GAAP items
(2)
(5.4)
(6.5)
(11.9)
Non-GAAP net income (loss)
$69.0
($66.5)
$2.5
Non-GAAP net income (loss) per common share -
diluted
$1.30
($1.25)
$0.05
Weighted average number of shares used in per share calculations
excluding the effects of FAS123R -
diluted
53,061
53,061
53,061
(1)
(1) |