Exhibit 99.3
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Bryon Look CFO July 31st 2007 |
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Transforming the company for sustainable revenue growth and profitability Achieving Business Model Investing to Grow Efficient Utilization of Assets Key Financial Themes |
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Q2 2007 Revenues $670 million Storage 66% of Total Revenues Grow Revenues Across All Key Businesses Business Overview Storage Systems $185M Consumer $21M Mobility $91M Networking $112M Storage Semi $255M IP $6M |
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Return to Double Digit OI%* ASAP New Target GM* 47% Drive both revenue growth & improvements in cost structure Reduce manufacturing costs Optimize spending R&D* 20% Drive both revenue growth & improvements in cost structure Reduce manufacturing costs Optimize spending SG&A* 10% Drive both revenue growth & improvements in cost structure Reduce manufacturing costs Optimize spending Op Inc* 17% Drive both revenue growth & improvements in cost structure Reduce manufacturing costs Optimize spending *Excluding special items Achievable Business Model Target |
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Headwind for 2007 Y/Y Growth 2008 Growth Drivers Storage Systems None Entry systems; SW attach rate; Growth in mid-range; Customer expansion Storage Semiconductors ~$130M of Maxtor revenue in 2006; $0 in 2007 Expecting share gains at existing and new customers in HDD; ROC ramp; SAS expanders Networking ~$200M of legacy declines in 2007 versus 2006 Growth expected in investment areas, tempered by <$100M of legacy declines; Q207 was the bottom for Networking revenues Mobility None Growth in GPRS/EDGE and increasing ramp of 3G Consumer ~$85M of Digital Audio revenues in 2006; ~$15M in 2007 Sold business to Magnum Semiconductor IP $120M of IP revenues in 2006 affected by merger related effects of approximately $60M/year Expect growth from a lower base as we close new deals; Larger patent portfolio Revenue: A Solid Base for Growth As We Go Forward |
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How Actions Taken Margin Improvement Variable mfg. cost model Increase cost synergies Increase revenue Singapore/Thailand transition Utilize purchasing scale R&D Efficiency Focus investment Reduced infrastructure Portfolio rationalization Low cost geo R&D Eliminate duplicate investments Completed sale of Consumer business Leverage SG&A Reduce overlap SG&A synergies accelerated Sales restructuring Improving Financial Performance: Semiconductors |
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How Actions Taken Margin Improvement Variable mfg cost model Increase software content Improving operations Outsource production StoreAge acquisition Hard tooled chassis R&D Efficiency IP Re-use Increase low cost geo HC Leverage ODMs Entry systems leverage common IP >200 HC in India in '06 ODM projects launched Leverage SG&A Reduce overlap and streamline operations Converged ERP systems Improving Financial Performance: Storage Systems |
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2006 2007 Cash $1158 M 2007 Convertible Notes $272 M, 4.0% coupon, repaid Q4 '06 2009 Convertible Notes $370 M, 6.5% coupon 2010 Convertible Notes $350 M, 4.0% coupon Net Cash $438 M * Net cash Q2 2007 reflects merger with Agere & share repurchase Cash $1158M Share Repurchase Convertible Notes $720M Capital Structure 0 200 400 600 800 1000 1200 1400 Q2 Q3 Q4 Q1 Q2 |
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Q2 2007 Actual Anticipated Trend Revenue $670M Gross Margin* 41% Operating Expenses* $291M Capital Expenses $20M Depreciation and Amortization $24M Net Income* $(14)M Operating Cash Flow $30M Free Cash Flow** $10M *Non-GAAP; **Free cash flow is cash flow from operations less capital expenditures Delivering Increased Cash Flow Solid Cash Earnings Growth Anticipated |
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Item Philosophy Operational Liquidity Working capital to ensure continued operations & optimize business opportunities without undue risk Continuously monitor business, industry & capital markets volatility Growth Capital Inorganic investments to expand growth Acquisition of StoreAge to expand data management & protection software offering (Q4 2006) Acquisition of SiliconStor to expand SAS/SATA storage product offering (Q1 2006) Debt Reduction Manage cost of capital, debt/equity, credit rating $272M repayment of 2007 Convertible Notes Q4'06 Addition of 2009 Agere Convertible Notes Q2'07 Share Repurchases Efficiently return excess capital to shareholders Repurchase shares, subject to market conditions Executed $500M in share repurchase (~8% of outstanding shares) Cash Management |
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Projected revenues of $675 million to $705 million Expect growth in each of our businesses GAAP net loss of 9 - 15 cents per diluted share Net income, excluding special items, in the range of 2 - 5 cents per diluted share Third Quarter 2007 Business Outlook |
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Transforming the company for sustainable revenue growth and profitability Achieving Business Model Investing to Grow Efficient Utilization of Assets Summary |