Kontron Advances From Supplier of Components to Supplier of Complete Systems

Munich, Germany, March 5, 2001 - Kontron Embedded Computers AG, one of the leading suppliers of embedded computers worldwide, achieved record sales of 247 million DM in the past financial year 2000. This corresponds to an increase of more than 140% compared to the previous year (99.2 million DM). At the same time, earnings before income tax (EBIT) of DM 16.4 million in 1999 could be doubled to 29.6 million DM in the financial year 2000. The annual surplus rose from 11 million DM in 1999 to 23.4 million DM in 2000. The earnings per share amounted to 1.17 Euro. The order entry developed even better than revenue. The orders received could be tripled from 100 million DM in 1999 to 302 million DM in the year 2000. Particularly due to the IPO in April, the balance sheet total of the group increased from 116 million DM to 463 million DM. The number of employees rose from 390 to 772, about 312 engineers working in Research and Development.

Excellent expectations for 2001
Based on the positive order entry and the acquisitions in the year 2000, Kontron is planning to double its turnover to about 475 million DM in the business year 2001. The management expects that the surplus will rise from 23 Mio. DM in year 2000 to 43 Mio. DM in financial year 2001. As board member Hannes Niederhauser explained on the balance press conference held by the company in Munich, these figures do not only exceed the high average growth rates of that market of about 30% but are considerably better than the targets set during the IPO. Niederhauser: "We are aiming at a market share of more than 10% (currently 6.6 %) by the year 2003. In this context, our strategy of advancing from a supplier of components to a supplier of complete solutions is of decisive importance."

High acquisition speed and integration program
As a whole, the Kontron Board described the past business year 2000 as "very successful." It had been possible to successfully note at the New Market of the Frankfurt Stock Exchange, to be listed in the NEMAX50 index after a short time and to put a very ambitious acquisition strategy in place. With the 100% take-over of PEP Modular Com-puters GmbH located in Kaufbeuren, it was possible to integrate one of the most traditional and major German companies of embedded computer technology in September 2000. PEP is a market leader in the field of automization technology worldwide due to 25 years of presence in the market, more than 200 employees and a total turnover of about DM 65 million in 2000. As a result of cost reductions and sales increases, PEP could achieve an EAT of DM 2 million within the last 4 months of the year 2000, thus being successful in turning trends.

In November 2000, Kontron subscribed 55% of shares of the Taiwanese TMC Co.Ltd. within the framework of a capital increase. The company founded at the beginning of the eighties achieved a total revenue of about 70 million DM in 2000 and has shown almost balanced results since November.

Last December, Kontron took over a total of 65% of the shares from American Fieldworks Inc. Fieldworks is one of the leading suppliers of mobile miniaturized computers in North America and achieved a turn-over of about 33 million DM in 2000 with about 80 employees. According to board member Niederhauser, the Fieldworks results are burdened with a 2 million DM "loss pick up" ¿ loss allocations from the times before the take-over of control. However, a balanced result is expected already in the first quarter of this year.

All in all, the three strategic acquisitions could be integrated in a relatively short time; the turnover of the companies acquired in the business year 2000 accounted for 38 million DM (15%) of the total Kontron group revenue. 55% of turnover was achieved in North America and 43% in Europe. Niederhauser: "By an expansive integration management programme, putting emphasis above all on cultural and social aspects, we were able to overcome obstacles b

etween the individual companies and nationalities. In order to reduce integration costs and to increase synergetic effects, we also implemented a special programme for production optimization, systematic technology transfer and the multiple use of sales resources ¿ with saving potentials totalling approx. 20 million DM. By establishing Business Units according to the vertical markets "Communications" (competence centre Teknor in Canada), "Automation" (competence centre PEP in Germany) and "Mobile Computing" (competence centre Fieldworks, USA), the business structure and organization has been consistently adapted to market requirements.

Ambitious goals
Kontron is planning to continue the high growth rate in future. Niederhauser: "In doing so, we are decidedly facing the specific criteria of today¿s fragmented embedded computer market characterized by a high consolidation level." Only those who grow remarkably faster than the average could remain in the medium and long term. After globally addressing the three strategic areas "Communications", "Automation" and "Mobile Computing" ¿ according to Kontron statements, the company is the only ECT supplier both in production and in sales in North America, Europe and Asia ¿ the company is now striving for a still closer contact with customers and an increased added value. "We want to distinguish ourselves primarily as a supplier of technology with high engineering shares. By supplying complete systems from one source, Kontron will stand out as a supplier of complete solutions against the traditional suppliers of components. The high engineering share will strengthen not only customer contacts but also increase the added value". The acquisition strategy is aimed primarily at technology start-ups in the core fields of encription internet, automization and on-board-communications. The most recent example for this are the efforts for the 100% take-over of the Canadian software house Memotec. Additional strategic acquisitions may follow.

In order to realize the targeted increase in revenues by 100% to almost 475 million DM, Kontron will also increase the number of employees from 968 today to approx. 1150, including 450 engineers. To open up sufficient resources, the company has already founded development subsidiaries in Poland and the Czech Republic. Hungary and China will follow in the business year 2001.

The companies of the Kontron group
Today Kontron Embedded Computer AG contains besides the three aquisitions Fieldworks, TMC and PEP, Kontron Elektronik GmbH (headquarter in Eching near Munich) with 200 employees as well as Teknor Applicom Inc. (in Boisbriand Quebec, Canada) with 280 employees. In addition, Kontron has held a share of 100% in the software development house Rotec Industrieautomationen GmbH in Rastatt since October 2000. In the context of a further integration the subsidaries shall get the company name Kontron in summer of this year.