Intel Capital CEO Summit

Arjun Gupta, CEO and Chief Believer

TeleSoft Partners

August 1, 2001

www.telesoftvc.com

Page 2

AGENDA

Page

I. Next-Gen Communications Opportunities 2

II. Supply of Venture Capital 3

III. Private Market Pricing Dynamics 4

IV. Public Market Pricing Dynamics 5

V. Macro Trends & Industry Structure 6

VI. Exits – Acquisitions vs. IPO’s 7

VII. Optical Value Chain – The Next Frontier 8

Page 3

TELESOFT KEY INVESTMENT SEGMENTS

I. Next-Gen Communications Opportunities

Optical layer

ROUTING &SWITCHING

SERVER & STORAGE

ARCHITECTURES

TRANSMISSION & OPTO-ELECTRONICS

BROADBANDWIRELESS

INTEGRATEDACCESS

MIDDLEWARE & SERVICES

• Core• Edge• QoS

• QoS• SAN & NAS

• DWDM

• NMS & OSS • “Black hole”

• CPE• CTE• NTE

NETWORK APPLICATIONS

• New s/w category• Internet

HistoricalVC Focus

• p-t-p• p-t-m-p

SEMICONDUCTORs,COMPONENTS,TOOLs, OTHER

NEXT GENERATIONNETWORKS

• Qwest, Level 3, Hermes

• LMDS, MMDS, PCS

• CLECs, CAPs

ROUTING &SWITCHING

SERVER & STORAGE

ARCHITECTURES

TRANSMISSION & OPTO-ELECTRONICS

BROADBANDWIRELESS

INTEGRATEDACCESS

MIDDLEWARE & SERVICES

• Core• Edge• QoS

• QoS• SAN & NAS

• DWDM

• NMS & OSS • “Black hole”

• CPE• CTE• NTE

NETWORK APPLICATIONS

• New s/w category• Internet

HistoricalVC Focus

• p-t-p• p-t-m-p

SEMICONDUCTORs,COMPONENTS,TOOLs, OTHER

NEXT GENERATIONNETWORKS

• Qwest, Level 3, Hermes

• LMDS, MMDS, PCS

• CLECs, CAPs

Page 4

SUPPLY OF VENTURE CAPITAL

II. Supply of Venture Capital

Source: Venture One

Total $ Invested in VC-based Companies

$ 0

$ 5,000

$ 10,000

$ 15,000

$ 20,000

$ 25,000

$ 30,000

Q1'98

Q2'98

Q3'98

Q4'98

Q1'99

Q2'99

Q3'99

Q4'99

Q1'00

Q2'00

Q3'00

Q4'00

Q1'01

($m

m)

Non-Internet

Internet

Total # of Rounds in VC-Funded Companies

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Q1'98

Q2'98

Q3'98

Q4'98

Q1'99

Q2'99

Q3'99

Q4'99

Q1'00

Q2'00

Q3'00

Q4'00

Q1'01

Non-Internet

Internet

Total $ Raised by VC Funds

$ 0

$ 5,000

$ 10,000

$ 15,000

$ 20,000

$ 25,000

Q1'98

Q2'98

Q3'98

Q4'98

Q1'99

Q2'99

Q3'99

Q4'99

Q1'00

Q2'00

Q3'00

Q4'00

($m

m)

Page 5

PRE ‘98 ‘98-’99 ‘99-’00Stage

}M

E

}ProductDevelopment

MarketingDevelopment

L

$100MM

<$20MM - $25MM

4-5x9 Months

2-3x1-2 Years

$200MM - $300MM

<$25MM - $35MM

$200MM - $300MM

5-10x6 Months

2-3x1-2 Years

$400MM - $500M

$40MM - $60MM

<$10MM - $20MM

2-3x1-2 Years

2-3x1-2 Years

$100MM

TRENDS IN PRICING

III. Private Market Pricing Dynamics

Page 6

•LBO’s•Buyout Firms

Morgan Stanley Study (From 1/1/80 – 3/31/96)

• 801 Technology IPO’s

• Average IPO was $147MM

• Largest IPO was MSFT at $300MM

$147MM

Public Market$$$

Private VC Market

$$$

Early Middle Late

$100MM

• Dot.com IPO’s > $1BN

$1BN

PRICING EFFECTS

IV. Public Market Pricing Dynamics

= $50MM•TCV and ICP•“Crossover Funds”1

= $950MM2

Page 7V. Macro Trends & Industry Structure

Personal Computing

Fortune 100 Businesses

Fortune 1000 Businesses

Every Business

Millions of Households

Billions of Consumers

Communications

200 PTT’s

500 – 1,000 Wireless + LD + Local

5,000 Carriers

10,000 Carriers (B/C/D – LEC’s)

Customer Industry Structure

Supplier Industry Structure

Retrenching

Applications

Microprocessors

Databases

Enterprise Applications

Full-Service

LucentCiscoNortel

AlcatelEricssonSiemens

NEC

CUSTOMER AND SUPPLIER INDUSTRY STRUCTURES

Point Players

ADCCienaMotorolaTellabs

Nokia

HitachiToshiba

North America

Europe

Japan

1998-99Over Expansion

2000-01

IBM

OperatingSystems

SAP, Oracle

Oracle

Microsoft, Lotus

Microsoft

Intel

Page 8

EXITS – ACQUISITIONS vs. IPO’s

VI. Exits – Acquisitions vs. IPO’s

Relative Stock Price Performance of Acquiror Post-Acquisition

0.0%

50.0%

100.0%

150.0%

200.0%

250.0%

1 41 81 121 161 201 241 281 321 361 401 441 481

Days After Acquisition

Rel

ativ

e S

tock

Pric

e

NT / Promatory (3/23/00)

DELL / ConvergeNet (9/8/99)

CSCO / Cerent (8/26/99)

NT =12% of price

DELL =58% of price

CSCO =55% of price

Relative Stock Price Performance Post-IPO

0.0%

50.0%

100.0%

150.0%

200.0%

250.0%

300.0%

350.0%

1 31 61 91 121 151 181 211 241

Days Since IPO

Re

lativ

e S

tock

Pri

ce

C 1

C 2

C 3

C 3 =5% of IPO price

C 2 =9% of IPO price

C 1 =4% of IPO price

Page 9

TELESOFT’S OPTICAL PORTFOLIO

Process & Materials Components Modules & Sub-systems Systems Carriers

AmberWave VersatileLynx-Photonic

CatamaranLara NetworksModeTekNovalux

CalientWINOnFiber

Kymata NP Photonic

VII. Optical Value Chain – The Next Frontier