GROUP ONE Products Company Performance The Story The Company Overview Outsourcing Competitors Questions March 14, 2007 1 Sonnet Technologies, Inc. Presented.

March 14, 2007 1

GROUP ONE

Products

Company Performance

The Story

The Company

Overview

Outsourcing

Competitors

Questions

Sonnet Technologies, Inc.

Presented by:

Toan Tran Shiao Liang HuJihane Mahani Numair Pirzada

Outsourcing

March 14, 2007 2

GROUP ONE

Products

Company Performance

The Story

The Company

Overview

Outsourcing

Competitors

Questions

Presentation Overview • The Company

– Company background/history– Philosophy and mission statement– Management / organization– Core Competencies

• Products• Competitors• Company Performance• “The Story”• Outsourcing

– Criteria– Locations– Issues

Overview

March 14, 2007 3

GROUP ONE

Products

Company Performance

The Story

The Company

Overview

Outsourcing

Competitors

Questions

Company Background• Founded 1986 by Robert Farnsworth • C Corporation, privately held• Corporate office in Irvine, California• Founder Robert Farnsworth –Experienced in

Printer & Software solutions for Apple• Apple partners could not ship products on time• Founder saw a niche market for Apple Solution

Products• Major clients & distributors: Ingram Micro,

Advanced Micro Systems, Comp USA, Amazon.com

The Company

March 14, 2007 4

GROUP ONE

Products

Company Performance

The Story

The Company

Overview

Outsourcing

Competitors

Questions

Philosophy & Mission Statement• Philosophy

– “Sonnet manufactures upgrade products for the Macintosh that make it easy for Macintosh owners to acquire the latest processor technology at a fraction of the cost of buying a new computer. If it's a Macintosh and it's processor-upgradable, then Sonnet will deliver a product that is trouble-free and Simply Fast™.”

• Mission Statement– “Sonnet Technologies, Inc. is a leading provider of inspiring, easy-to-

use, high-technology products that enhance applications made popular by Macintosh computers. By identifying and developing solutions that emphasize quality, reliability and value, and by placing a high priority on delighting the customer, we set the standard for delivering the products and services that our users demand.”

The Company

March 14, 2007 5

GROUP ONE

Products

Company Performance

The Story

The Company

Overview

Outsourcing

Competitors

Questions

Management & Organization

The CompanyRobert Farnsworth

CEO & President

Accounting Operations MarketingSales

Connie TravisDirector

Accounting

Nita ClemmerDirector

Human Resources

Bob BeaverVice President

Operations

Vicki BurkhardVice President

Sales

Alicia SchieferSenior.Manager Marketing &

Creative Services

Human Resources

March 14, 2007 6

GROUP ONE

Products

Company Performance

The Story

The Company

Overview

Outsourcing

Competitors

Questions

Core Competencies• Technical expertise in Apple upgrade products

• Build to stock and shipped in 48 hours

• Providing superior technical support

• High quality CPU Upgrades, PCI cards and storage solutions to enhance performance

• Established market leader in Apple Solution products

• Established brand name, recognition and marketing channel

The Company

March 14, 2007 7

GROUP ONE

Products

Company Performance

The Story

The Company

Overview

Outsourcing

Competitors

Questions

Products• Central Processing Unit (CPU) Upgrade

- Accelerator cards

- Fire wire upgrades

• Peripheral Component Interconnect (PCI) - Network adaptors

- Network interfaces

• Storage solutions

- Piccolo USB Storage Device • iPod accessories

- iPod replacement batteries- iPod wall chargers

The Products

March 14, 2007 8

GROUP ONE

Products

Company Performance

The Story

The Company

Overview

Outsourcing

Competitors

Questions

Future Products

• Stable storage (External Storage)

- RAID Storage

- SATA Storage

- JPOD – low end solutions

- Fiber Channel – high end solutions

The Products

March 14, 2007 9

GROUP ONE

Products

Company Performance

The Story

The Company

Overview

Outsourcing

Competitors

Questions

Key Facts - Timeline• 1986 to 1996

- Started with products innovation- Growing pains/Would not release sales numbers

• 1996 to 2001 - Sales increased by 800% (Average 45% / yr)

• 2002 to 2003 – Changes in company’s focus - Sales growth averaged 15%

• 2004 to 2005 – Maturing cycle of products - Sales increases averaged 5%

• 2006 - Company changes focus - FLAT LINE YEAR

Company Performance

March 14, 2007 10

GROUP ONE

Products

Company Performance

The Story

The Company

Overview

Outsourcing

Competitors

Questions

Sales Markets

Japan15 %

Other10 %U.K.

10 %U.S40 %

Europe25 %

Company Performance

March 14, 2007 11

GROUP ONE

Products

Company Performance

The Story

The Company

Overview

Outsourcing

Competitors

Questions

THE STORY 1• The iPod FM Transmitter

- Sonnet engineers designing to develop FM transmitter for iPod- Engineers not familiar with FM transmitter

technology with Apple’s requirements- Premium product with high margins- Team Design struggle for over a year

- Strategic decision to outsource FM Transmitter- Sonnet lost a first movers advantage – Other

competitors introduced product into market

The Story

March 14, 2007 12

GROUP ONE

Products

Company Performance

The Story

The Company

Overview

Outsourcing

Competitors

Questions

THE STORY 1 – (Continued) • Outsourced company in Taiwan had expertise in

FM transmitter manufacturing & design• Sonnet sourced them one year later• Outsourced company developed product in 6

months• Sonnet could have developed & delivered

product to market with first movers advantage

~ PARTNER WITH OTHERS WHO HAVE THE EXPERTISE ~

~ OUTSOURCING BEYOND MANUFACTURING ~

The Story

March 14, 2007 13

GROUP ONE

Products

Company Performance

The Story

The Company

Overview

Outsourcing

Competitors

Questions

THE STORY-2• SONNET outsourced the manufacturing

of iPod Wall Chargers• Production and inventory quantity based

on Best Buy Canada’s demand forecast• Sudden sharp decline in demand• Best Buy Canada cut orders by 50%• Sonnet saddled with 30 pallets of product• Reliance on the retail market forecasts –

~ CURSE OF INVENTORY BUILDUP ~

The Story

March 14, 2007 14

GROUP ONE

Products

Company Performance

The Story

The Company

Overview

Outsourcing

Competitors

Questions

Stories: Lessons Learned

Expertise in design only

New product manufacturing practicality – trial & error

One year delay in launching product

Strategic Outsourcing Mistakes – LOSS IN MARKET SALESThe Story

Delay in search for expert partner

March 14, 2007 15

GROUP ONE

Products

Company Performance

The Story

The Company

Overview

Outsourcing

Competitors

Questions

Criteria for Outsourcing• “Input” Outsourcing

- Little or none at the moment• “Output” Outsourcing

- Majority of the outsourcing • Low / high volume of production• Expertise of company personnel• Established infrastructure• Cost of products• Social/Ethical responsibility • Proximity of outsourcing location – No

consideration

Outsourcing

March 14, 2007 16

GROUP ONE

Products

Company Performance

The Story

The Company

Overview

Outsourcing

Competitors

Questions

Outsourcing Locations

China40 %

Japan5 %South Korea

5 %

Taiwan50 %

Outsourcing

March 14, 2007 17

GROUP ONE

Products

Company Performance

The Story

The Company

Overview

Outsourcing

Competitors

Questions

Global Outsourcing Issues • Political concerns

- Stability of government- Past indicators of nationalization threats- Volatility of exchange rates

• Social issues- Involvement of child labor- Property rights- Waste recycling, pollution control- Economic benefits to masses

• Legal issues- Protection of Intellectual Property- Simplicity of legal system

Outsourcing

March 14, 2007 18

GROUP ONE

Products

Company Performance

The Story

The Company

Overview

Outsourcing

Competitors

Questions

CompetitorsAccessories & Casing Competitors

Belkins • MP Accessories - iPod, Samsung, Zune, Universal• Mobility - Cellular, Notebook, Mobile Accessories, PDA

Accessories• Networking/Sharing - wired, wireless, Bluetooth• Data Center Solutions – Fiber Cables, Copper Systems• Desktop Accessories – Mice, pointers, keyboards • Power Protection – Surge Protectors, UPS

Griffin• iPod – Cases & accessories• Gaming – Cases & accessories• Mac/PC – Accessories & adapters• Zune – Cases & accessories• iPhone – Cases & accessories

Competitors

March 14, 2007 19

GROUP ONE

Products

Company Performance

The Story

The Company

Overview

Outsourcing

Competitors

Questions

Competitors – (Continued)

CPU Competitors

Competitors

March 14, 2007 20

GROUP ONE

Products

Company Performance

The Story

The Company

Overview

Outsourcing

Competitors

Questions

Competitors – (Continued)

Storage Competitors

Competitors

March 14, 2007 21

GROUP ONE

Products

Company Performance

The Story

The Company

Overview

Outsourcing

Competitors

Questions

Conclusion & Recommendations

Conclusions:• Outsourcing experience has been positive due to

the experience & knowledge of its leaders • Outsourcing is constantly in focus for the future • Correct strategy in not being the first mover in

outsourcing

Recommendations:• Review payment policy to outsourcing vendors • Institute cost-benefit analysis of hedging options• Better in-house analysis of retail forecasts

Competitors

March 14, 2007 22

GROUP ONE

Products

Company Performance

The Story

The Company

Overview

Outsourcing

Competitors

Questions

QUESTIONS????

Questions THANK YOU!