Annual Report 2007 - AudioDev - #4

MESSAGE FROM THE CEO

which contributed to a further consolidation of our leading posi­tion. he acquisition and integration of the German company ETA Optik, and work on handling the weak demand that has occurred following the switch from red laser to blue laser formats were additional factors that impacted on AudioDev in 2007.

As a consequence of the weak market growth, sales for the group finished the year at SEK 111.2 million (104.6) of which AudioDev GmbH accounted for SEK 22.5 million and other AudioDev companies for SEK 88.7 million. In combination with non-recurrent costs, this resulted in us reporting a loss of SEK 54.7 million, of which SEK -17.9 million was for AudioDev GmbH and SEK -36.8 million for other AudioDev companies.

In order to reverse this trend we initiated a major restructur­ing programme of our Malmo operations in the autumn, which reduced overhead expenses by almost SEK 33 million. From January 1, 2008 we have total overheads of around SEK 55 mil­lion in these operations. For our German operations we intend maintaining the overheads we had in 2007 for 2008 as well, even though a slight redistribution will take place internally between both fields of operations.

Important events for the year

Many of the large manufacturers of blue laser based discs for film implemented initial investments in manufacturing capacity over the year. Strategic orders from leading producers in the field, such as Technicolor and Cinram, have consolidated our position on the market and give a clear indication that we are well equipped ahead of the impending commercial breakthrough of the blue laser formats.

Furthermore, an important event was the acquisition of the German ETA-Optik GmbH in February, which not only expand­ed our existing range in optical media but also gave us access to the hin Film Metrology market. ETA, which last year was re­named as AudioDev GmbH is active in spectrometry based meas­urement technology, an area we assess as having great potential. A spectrometer is an optical instrument that, by dividing up the light from the measurement using a holographic grating, you can analyse the properties of thin layers. he measurements are used in a range of fields for testing the quality of thin film — which is the outer layer whose applications include insulation and protec­tion of everything from flat panel displays and glasses, to solar cells and packaging seals.

As for optical media, regrettably AudioDev GmbH was also affected by the uncertainty that characterised the market for manufacturing equipment and we did not achieve the quantita-

he market for optical media has been characterised by continued uncertainty over the year as to which blue laser format, BD or HD DVD, will be the choice for the future. As a result there re­main persistent doubts concerning the timeline for the real com­mercial breakthrough of the formats. Despite the rapid market penetration of High Definition TV sets (HDTV), consumers have so far not seen the overall benefits of the new high resolution for­mats. his is principally due to the fact that very few programme broadcasts support High Definition. Consequently, individual consumers have not been able to ascertain the fantastic image quality offered by the technology. Another compelling reason is that players that can handle the discs carrying the blue laser for­mat remain relatively expensive, and that the offering for high-resolution media, such as films, has been limited in 2007.

he red laser based formats, CD and DVD, encountered rela­tively stable demand on the media side; a trend that is expected to continue over the next few years. However, the manufactur­ing processes for these formats are now so well-established and technically reliable that the needs of manufacturers for new in­vestment in production equipment, which includes analyzers, are very limited.

Audiodev's market position

As regards the established formats, AudioDev holds a 50 % share of the global market for electrical test equipment, a position we have defended well in 2007. he general growth of the market, however, has impacted on all actors on the manufacturing side, including AudioDev, which means weak volumes for these formats.

From a sales perspective AudioDev also dominates the market for analyzers of the blue laser based formats, with volumes hold­ing up at the same level as 2006. Even though market growth has been slower than we had expected, our opinion as to its potential remains positive. We are thoroughly prepared and well positioned when the demand for the new formats starts to accelerate.

Audiodev's development

he business was influenced over the year by continued inten­sive technical development of analyzers for blue laser formats,

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