EXHIBIT 99.13
Acquisition Conference Call Script
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Sam Saracino - EVP, Legal & Corporate Affairs Thank you and good morning.
I want to remind all participants that this call will contain
forward-looking statements. These include:
o statements regarding our future business prospects and
economic conditions in general;
o statements regarding our agreement to acquire the assets and
liabilities of Ergo 2000, Inc. and its expected closing date,
the acquisition of the Touchpaper Group Limited, and the
integration of these two companies and their operations,
products, technologies, and businesses into Avocent;
o statements relating to the revenue and operating margins we
expect from these two companies during the second half of
2008, their impact on our operational earnings per share
during 2008, and the expected return on our investment;
o statements regarding our long term strategy in IT operations
management, , the development and introduction of new products
and technologies, and the size, growth, and leadership of the
potential markets for these products and technologies in the
future; and
o statements regarding expected acquisition accounting in the
current and subsequent quarters related to acquisition and
transaction costs and adjustments (including, among other
costs, amortization of intangible assets).
These forward-looking statements are based on current expectations that involve
a number of risks and uncertainties, which could cause our actual results to
differ materially. These risk factors are described in our periodic SEC filings
(including our Annual Report on Form 10-K).
As we have previously stated, Avocent Corporation intends to comply fully with
Regulation FD and we have adapted our investor relations practices and
procedures to do so. Any and all guidance given to analysts and investors will
be done only during this conference call--either in our prepared statements or
during the question and answer session that follows. Accordingly, we encourage
you to ask any questions you have concerning Avocent, LANDesk, or the
acquisition, during this conference call since we will not be providing
additional material commentary or guidance during one-on-one conversations with
analysts or investors.
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I would now like to introduce Ed Harper, Avocent Corporation's Chairman of the
Board and Interim Chief Executive Officer. Ed....
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Ed Harper - Chairman and interim CEO
Thank you Sam. And thank you everyone for joining us this morning. With me on
today's call are our Senior Vice President and Chief Financial Officer, Teddy
Blankenship, and our Senior Vice President of Corporate Strategy and Chief
Technical Officer, Ben Grimes.
We are excited to announce today that Avocent has acquired Touchpaper Group
Limited, a privately held provider of IT Business Management solutions, and has
signed a definitive agreement to purchase the assets and liabilities of Ergo
2000, Inc., a privately held provider of rack-mounted LCD consoles. These
acquisitions create an exciting opportunity for Avocent in support of our
focused growth area -- IT operations management - as we continue to deliver on
the vision of providing solutions that reach from the desktop to the data
center.
Now, as many of you have also seen, yesterday Avocent announced steps designed
to enhance competitiveness, improve our operating efficiency and reduce the
Company's cost structure. These actions, along with recently announced
management changes, are part of an ongoing strategic plan that began with our
Cyclades and LANDesk acquisitions. Since the company has been progressing toward
a goal of a leadership position in the IT Operations Management space as defined
by Gartner, we see every reason to make progress toward that goal even during
our search for the new CEO. As we evolve into a more focused and responsive
company, I wish to express how proud I am of our employees' contributions and
commitment to drive revenue growth and increase shareholder value.
Let me now turn the call over to Teddy, who will now review the financial impact
of these acquisitions. Later, Ben will be providing a detailed look at the
technology and products that are being integrated into Avocent's offerings for
IT operations management.
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Teddy Blankenship - Chief Financial Officer
Thank you Ed. And thank you everyone for joining us this morning. As Ed has
mentioned, today we announced the execution of the definitive agreements to
acquire the common stock of Touchpaper Group Limited for (pound)23 million or
$45 million and the assets and liabilities of Ergo 2000, Inc. for approximately
$27.5 million. The Touchpaper acquisition also closed last night. We expect Ergo
to close within the next 30 days. As part of today's discussion, I wanted to
share with you some of the expectations surrounding each of these acquisitions
from a financial standpoint and then hand over the conversation to Ben so he can
go into some details on how the technologies and operations will work with the
rest of the Avocent solutions.
First I would like to discuss Touchpaper. As mentioned in our press release
issued this morning, 2007 revenue for Touchpaper was approximately 17.5 million
Pounds or $34 million dollars. We anticipate that Touchpaper will add
approximately $16 to $17 million dollars to our second half 2008 revenue.
Touchpaper's operating margin for 2007 was approximately 4 percent and we will
be working to improve that and bring it in line with our target LANDesk
operating margin of approximately 20% by mid 2009. Much of the integration work
will occur between now and the first half of 2009.
I would like to now provide some of the financial details and expectations
surrounding the asset acquisition of Ergo. For 2007, Ergo earned revenues of
approximately $33 million. Ergo's products will be integrated into the
Management Systems Business Unit as part of that unit's overall product
offering. For the second half of 2008, we anticipate Ergo adding $15 to $16
million in revenues. We anticipate an operating margin of approximately 17
percent for the second half of 2008. Throughout the remainder of 2008, we will
be working to integrate the assets of Ergo into our normal operations, as well
as those of our contract manufactures, and to take advantage of further
synergies where possible. We expect the operating margin to improve to
approximately 25% in 2009.
We have developed detailed integration plans for both of these acquisitions and
will begin implementation immediately upon closing each so that we can attain
the expected cost savings. We have named senior officers to champion and lead
the integration efforts - Kieran MacSweeney will lead the Touchpaper integration
and Gene Mulligan will lead the Ergo integration. Each will be supported by
cross functional teams with members from Avocent and either Touchpaper or Ergo
who have already been engaged in the due diligence and planning activities. We
believe that each of these acquisitions will be modestly accretive to our
operational EPS in 2008 and we expect each will deliver a meaningful return on
investments over the next several years.
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We are excited about these two acquisitions and what they mean to our market
base as we strive to provide more complete product solutions to our customers.
Now, I would like to hand the conversation over to Ben so that he can provide
more details surrounding how these two technologies and businesses fit into the
overall Avocent vision.
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Ben Grimes - Sr. VP of Corporate Strategy
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Thank you Teddy. Good morning everyone. We are extremely excited to announce
these two key acquisitions today. I would now like to share with you some
background on both Touchpaper Group and Ergo 2000 and give you a better
understanding as to how these acquisitions fit into our overall strategic plan.
As a leader in IT infrastructure management solutions, Avocent is consistently
looking for ways to expand its footprint. Part of our long term strategy has
been to identify companies and technologies that would be a good fit for
Avocent's business. The integration of Touchpaper and Ergo 2000 technology with
Avocent's existing product lines puts Avocent in a better position to execute on
our larger growth strategy - specifically in the IT operations management space.
Touchpaper is a provider of IT Business Management solutions. Its products focus
on incident and problem management, an area in which Avocent has wanted to
expand. We also already knew the technology was compatible since LANDesk Service
Desk architecture has been based on Touchpaper technology for almost two years
now. The combined technologies will allow Avocent to expand its portfolio and
offer its customers an integrated solution from a single console and a single
vendor.
Now with regard to the Ergo 2000 acquisition, the advance rack management
offered by this company will provide Avocent with yet another choice product to
offer to our OEM partners. The LCD rack-based console offered by Ergo enables
the ability to uncover problems with any server in the rack and fix it before it
grows into a larger, more expensive, harder to fix situation. This acquisition
adds to our existing LCD tray product line and expands our reach into large OEM
companies.
We are thrilled with the opportunities being presented to us through these
acquisitions and believe that our combined teams will not only help with
Avocent's continued growth but also give our customers a better IT experience
from the desktop to the data center.
I would know like to turn to call back over to Ed for final remarks.
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Ed Harper - Chairman and interim CEO
Thank you Ben. I would now like to open the call up for any questions you
may have. Operator, please allow our guests the opportunity to ask their
questions.
Q&A
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Ed Harper - Chairman and interim CEO
Thank you operator and thank you conference call participants for your interest
in Avocent. As I close this call, I would like to welcome the employees of
Touchpaper Group and Ergo 2000 to the Avocent family. We look forward to working
with each of you to expand our presence and brand in the IT operations
management marketplace and our vision of simplifying IT and business alignment.
Operator, this concludes our call this morning.
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