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Power-One (PWER) Investor Presentation

Power-One (PWER) Investor Presentation. February 2008. Mission Statement.

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Power-One (PWER) Investor Presentation

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  1. Power-One (PWER)Investor Presentation February 2008

  2. Mission Statement To be recognized as the leader in system-level power and power management solutions from AC to the IC in the communications and high-technology markets, utilizing our technical leadership to deliver comprehensive low-cost solutions; providing increasing value to customers, employees, and investors

  3. Power-One Power Supplies Are Everywhere Our products convert, process & purify electricity to the high levels of quality, reliability, & precise direct current required by the digital economy

  4. Power Conversion Products for Communications & High-tech Infrastructure Markets; including Alt. Energy AC/DC Power Powers Communications, Server/Storage & Industrial Controls Power at the System Cabinet DC/DC Power Conversion & Digital Power Management Controls Power on the Printed Circuit Board Renewable Energy Inverters Converts Power from PV Panels & Wind Turbines to the AC Grid

  5. Power-One Today • One of the world’s top power supply companies • 35 years of experience, innovation, and growth • Top brand name, quality reputation & customers • Global reach with ~4000 employees & regional mfg. • Leading technology including digital efficiency & density • Broad-line power conversion supplier – 100’s of standard product families, custom products, and Alternative Energy • Consolidator – six acquisitions since 1999 • Balance sheet (~$36M cash, ~$75M debt) • ’06 Sales: $338M – 29% growth • ’07 Sales: $512M – 51% growth • Progressing toward profitability Power-One Is the Technology Leader In Power; a Consolidator; Uniquely Offering Digital & Renewable Energy Products

  6. New CEO Announced – Richard J. Thompson • Over 30 years of management, operations, and finance experience in electronics, computers, semiconductors and energy companies • Appointed to Power-One’s Board of Directors in August of 2007 • Recently CFO of American Power Conversion (APC), a $2 billion provider of real-time computing & data center infrastructure products & services (APC acquired by Schneider Electric in Feb. ‘07) • Previously Mr. Thompson was CFO of Artesyn Technologies, a leading provider of power electronics, where he also held operations and general management positions

  7. Quarterly Revenue ($M) Q4 '07 estimate is mid-point of guidance range

  8. Power-One’s Global Footprint Slovakia Switzerland Italy Baoan, Shenzhen, China Camarillo, CA Shekou, Shenzhen, China Carlsbad, CA Dominican Rep. Penang, Malaysia Singapore Australia Manufacturing Centers R&D Centers

  9. Power-One’s Customers …Premier Customer Base

  10. Where Power-One Excels • Worldwide Mfg. and R&D (Asia, Americas & Europe) • Worldwide Customer Service and Support includes field applications, sales & sophisticated IT Infrastructure (EDI) • Technology: • Alternative Energy conversion expertise • In-house silicon development and packaging capabilities • Digital Power Management, Z-One® Digital IBA, the first complete power conversion AND power management solution • Density leadership in DC-DC bricks and POLs • Leadership in AC Front Ends and Telecom Power Systems • Industry’s highest efficiency and power density in many products, such as Renewable/Alternative Energy • Competitive on a world class level • Custom products designed with sophisticated software and DSPs • Power-One – a total supplier from the AC to the IC

  11. 35 Years of Innovation in PowerLarge Portfolio of Products and IP • 1972 – 1st linear standard • 1989 – 1st in configurable high power AC/DC • 1993 – 1st DC/DC open frame converter • 1995 – 1st dual ½ brick (DC/DC Converter) • 1995 – 1st dual ¾ brick • 1995 – 1st 50 Amp ¾ brick • 1995 – 1st planar transformer • 2000 – 1st 100 Amp AC/DC power supply in a 1U height • 2001 – 1st 150 Amp ¾ brick • 2001 – 1stSurface Mount ¼ brick • 2002 – 1st1/8th brick • 2002 – 1stSurface Mount 1/8th brick • 2002 – 1st triple-output scalable, sequenceable ½ brick • 2004 – 1stin digital power & conversion (Z-One® IBA) • 2004 – 1st97% efficient isolated DC/DC Converter • 2005 – 1st340W 1/8th DC/DC Brick Bus Converter • 2006 – 1st to control both analog & digital with Z-Series • 2007 – 1st in efficiency (CEC) for Alternative Energy inverters

  12. Why Customers Select Power-One Comprehensive product selection Full range of options for power technology solutions. 100’s of products to fit any application Designed-in technology solutions Vision-One process used to strengthen engineering relationships Newer technologies facilitate strong partnerships Reliable products at competitive prices Only 2-5% of system cost, but “mission critical to performance” Logistics and customer support Sophisticated Oracle ERP systems EDI links to customers Long-term partner Investing in infrastructure and R&D Global resources

  13. Power-One’s History & Strategic Direction Acquired Powec Acquired HC Acquired IPD Acquired Melcher Acquired PEG of MAG Custom Products & Alt. Energy Silicon Division Silicon POLs + 1st Power Mgt. Acquired di/dt High-density Bricks & POLs Silicon Initiative Silicon R&D Center Startup Power Systems (Europe/Asia) Power Systems (North America) DC/DC Bricks (North America) DC/DC Conversion (Europe) AC/DC – North America 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1973 1997 Strategic Direction Entered Commercial Alt. Energy Market Entered Server/Storage markets & acquired Custom + Alt. Energy A technology leader in powering communications. Integrated five acquisitions, developed silicon & digital power mgt. Founded as AC/DC power conversion company Initial Public Offering (IPO) Strategic shift to communications infrastructure markets & acquisitions

  14. Acquisition Highlights

  15. Benefits of the Power Electronics Group Acquisition in Late ‘06 • Significant increase in revenue for low price • Purchasing power of larger company – now the 7th largest power supply company in the world • Economy-of-scale to compete with larger competitors • High-volume, low-cost China manufacturing • Adds custom products (largest & fastest-growing market) • Augments top customer base • R&D resources and technologies are excellent • Alternative Energy initiative • Synergy in SG&A & overall cost structure

  16. Acquisition Highlights: Overall Transaction Assets • Two main factories • 230K sq. ft. in Shenzhen China • 180K sq. ft. in Valdarno, Italy (Includes R&D and Admin) • Best-in-class R&D Center (80+ experienced engineers) • Custom product capability • New markets: • Alternative/Renewable Energy • Digital control for motors Shenzhen, China Valdarno, Italy

  17. Acquisition Highlights: How Power Conversion & Power Management Are Changing to Digital • Products range from smart motor driver & control circuits to large 300kW inverters • 90% of products are digital with micro/DSP and software • Fewer competitors - less commoditization • Higher margins over time • Greater functionality - market diversity • Higher performance • Software-driven with reduced parts count; higher reliability • Augments Power-One’s board-level Z-One® digital power management capabilities DSP-based Motor Controls Digital Smart Appliance Control & Management

  18. Acquisition Highlights: Custom Products – From Dumb … to Smart • Greater functionality and better energy efficiency; DSP-based Motor Controls & Temperature Control • Smart Appliance Modules (“SAMs”)

  19. Acquisition Highlights: Renewable Energy Inverters Using Digital Technology to Innovate Solar & Wind Power Inverters • High-reliability and best-in-class efficiency • High power-density & compact size • Primary energy source control • Grid interactive control • System level control Wind Power Converters Photovoltaic Inverters

  20. Acquisition Highlights: Renewable Energy Inverters High efficiency over extremely wide operating range AURORA PVI-CENTRAL For larger buildings and central architecture PV plants from 30kW up to 40MW AURORA PVI-6000-OUTD For distributed architecture residential or small buildings from 5kW to 10kW AURORA PVI-3600-OUTD Individual inverter for PV trackers up to 10kW Increasing Power Level AURORA PVI-2000/3600 For residential PV plants <5kW

  21. Digital Power Revolution--- ZZZZ A Digital Power Revolution • Conversion … Communications… Control

  22. What Do Customers Want and Why The Inflection Point Now….. • More and more lower voltages are needed by our customers • Number of outputs are increasing • Power management functions are escalating, as are # of components • Power takes too much space & costs too much • Power is getting more complex – integration has been non-existent

  23. Power Management and Power Conversion…Two Separate Markets Control(Pwr. Mgt.) Conversion Communication?

  24. Power Management and Power Conversion Becomes One … with Digital Technology Conversion Communication Control(Pwr. Mgt.) Goal: 20% Market Share in 5 Years

  25. The “Before” – Unmanageable with Analog “BRICK” DC/DC Converter POL3.3V POL2.5V POL3.0V POL1.8V V1 V2 V3 V4 Analog Controller 48 V Intermediate Bus Voltage (12V) “BRICK” DC/DC Converter POL POL POL V6 V5 V7

  26. The “After”: Z-One®DIGITAL IBA™ 48 V “BRICK” DC/DC Converter DPM Z-POL Z-POL Z-POL Z-POL V2 V1 V3 V4 Z-POL Z-POL Z-POL V5 V6 V7 Intermediate Bus Voltage (12V) I2C from Host System

  27. 8-output Power System Comparison IBA with Analog Power Mgmt Z-One®Digital IBA # of components # of traces PCB space Development time Total cost Power mgmt functions BREAKTHROUGH 9 200+ <100 600+ 3.8 in2 ~10 in2 3 Days 8 Weeks ~$90 ~$100+ Virtually Unlimited Limited

  28. Z-One® Architecture Benefits of Z-7000 • Any voltage, any current, any configuration; architecture is highly adaptive & flexible; system reconfiguration on-the-fly • Real-time telemetry – continually monitors temperature, current, and voltage for precise and optimized control • Open architecture communications with industry-standard I2C interface bus and affiliate program with BOTH module mfg. and silicon partners • More reliable and flexible fault management strategies • 90% reduction in time to market, development, # of components & board traces Z-Series Digital Power Manager Z-Point Of Load Converters

  29. 2nd Generation Digital Power • 2nd Gen POLs – "Server Series" • Triples output current to 60 amps • High current expands market • Very high level of interest • Enhanced Digital Power Manager • IC replaces entire module (1/6th the footprint) with increased functionality • Controls four non-Z converters, e.g., fans • No-Bus Z-1000 Series POLs • NO protocol, NO memory, NO software and NO programming are required • Lower price point matches analog POLs

  30. Results for Z-One® Digital Power • We have a significant head-start on the competition. No other competitors’ module available due to our IP • Market adoption was significantly delayed by competing technology that violated Power-One’s IP. Jury found “for” Power-One in recent lawsuit • The Z’s disruptive architecture is a true revolution in power and 2nd Generation POLs - tripled the output current! • Licensed technology (second sourcing) • Module 2nd source with Murata Mfg. (Top 5 DC/DC supplier) • Semiconductor Z-affiliate announced with Atmel in July’05; and with Micrel LDO (Low Drop-Out) regulator IC in Sept ‘06 • Silicon Labs joined the Z-Alliance in August ’06 • Micrel joined the Z-Alliance in March ‘07 • Customers can offer products with additional system features and benefits; and with faster TTM (time to market) • New markets opened, e.g., Storage & Server, Military, Aerospace & Security (total POL market exceeds $1.0 billion) • Board-level design wins continue – significantly more embedded in the customers’ systems

  31. Recent Actions & Improvement Plans

  32. 2005/2006: Major Restructuring/Sales Growth 2005: Goal of profitability achieved in Q3 & Q4 • Reduced >$30M in overhead & SG&A • High-cost Norway functions moved to low-cost areas • Telecom Power Systems integrated with embedded business 2006: Return of Growth • Return of sales growth was #1 goal • Server & Storage and Power Systems growth • 10-15% growth was at high-end without acquisition • Acquisition in Oct. of Power Electronics Group of Magnetek • Q4 negative changes to core business started

  33. 2007: Integration Execution, Synergy & Cost Control • Acquisition increased sales dramatically to $512M with significant opportunities for growth • Material costs and synergy/leverage – some improvement, but off-set by higher logistics’ costs and inefficiencies • Acquisition integration and synergies: • Shutdown California facility & moved products to low-cost areas • Closure of Hungary mfg. in Q4-07 & completed move to low-cost Slovakia in Q1-08 • Moving China outsourced products to acquired mfg. in Asia • SG&A restructured for ~$20M in savings • High-cost R&D (U.S. & Ireland) moved to lower-cost areas • Texas and Finland shutdown • Improved Gross Margins and lowered costs, but not as much as planned (Positive EBITDA in Q3 & Q4)

  34. 2008: Focus on Gross Margin & Efficiency • Sales & orders are not the issue – there are many opportunities. We must be profitable with a $500M+ business. • Main issues are 1.) factory costs increases/inefficiencies, 2.) material costs, and 3.) logistical costs, both fuel and excess component movements • 1. Factory costs: • All low-cost/high-volume products are being transferred to Asia – Increases efficiencies with less product movement, economy of scale, and lowest cost • All factories and products are being evaluated and product transferred to align with customer/supplier bases to gain optimum cost savings • Low margin products and projects (customers) will be rationalized; • 2. Material costs: • Progress has been made, but not as much as planned and the savings have been offset with escalating logistical costs. • We have focused teams assigned for this to continue driving down the costs of materials • 3. Logistic costs: • Improved 1.5% in gross margin in Q4, more improvements expected • Need to minimize movement of components - Lowest costs materials are in Asia, having more products manufactured in the area should increase savings

  35. Strategic Position & Opportunities

  36. Market Drivers & Power-One’s Competitive Position Global Market Trends Vendor ConsolidationCustomers Demand Strong Balance Sheet & Global Operations The Power-One Advantage • Leading Technology – from Silicon to Systems; High Efficiency • Broad Product Portfolio: Standard + Custom • Leading Brand – Top Quality & Support • Proven Consolidation Capabilities • Global Manufacturing • Few Competitors Can Compete at Larger Customers. (Top Customers dominate TAM) Product Choices Both Standard & Custom. Silicon to Systems Offer “One-Stop-Shop” DPA  IBA Digital Distributed Pwr. Arch. Changing to Intermediate Bus Arch. & Digital Pwr. Mgt.

  37. Growth Opportunities • NEW OPPORTUNITIES • Expand Markets • New Products • Digital Power & Control • CORE GROWTH • Technology Leadership • High Density & Efficiency • Broad Product Portfolio Communications & Industrial Markets Server & StorageMarkets Expansion AcquisItions Standard & Custom Products Renewable Energy Power Systems(Indoor & Outdoor) Motor Controls for High-end Applications AC/DC Power Supplies & Front Ends (FE) Z-One® Licensing & Power Management DC/DC Bricks & POLs Digital Controls

  38. Strategic Initiatives Focus on gross margin improvements Invest in most advanced power technologies • Silicon-based products; Protect IP • Leading position in DC/DC bricks; new POL converters • Advanced AC/DC front-ends for DPA/IBA markets • High-density Power Systems for telecom/ISP/infrastructure • Digital power circuitry & control algorithms for all products Broaden portfolio into new markets for Power-One • Gain further traction in Storage/Server markets • Custom AC/DC power supplies & DC/DC converters • Alternative Energy initiative Continue to reduce overall cost structure Bottom and top-line growth

  39. Thank You!

  40. Disclaimer & Forward Looking Statements This presentation includes forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 that can be identified by the use of forward-looking words such as “will” or “estimate” or comparable words. These statements are subject to a number of factors, risks and uncertainties that could cause actual results to differ materially from those projected. Risks and uncertainties include, but are not necessarily limited to: the Company’s success in securing customer acceptance and adoption of the Company’s products and technologies; the Company’s success in integrating the newly acquired Magnetek PEG operations into the Company’s overall operations; the Company’s success in achieving anticipated cost savings from projected synergies relating to the Magnetek PEG acquisition; the size and pace of growth and improvement in target and potential markets; the Company’s success in establishing and maintaining adequate and qualified manufacturing sources for supply of products; constraints and limitations in the supply chain(s) for critical components contained in Company products; the Company’s ability to achieve and sustain gross margins at levels anticipated and noted as comparable to “silicon-based” companies; the Company’s ability to continue spending at prior or desired levels for research and development related to the products and technologies discussed in this presentation; competitor advances and successes in comparable, alternative or competing technologies; the Company’s success in securing protection for intellectual property incorporated into the Company’s products and/or enforcing such intellectual property against use of same by competitors; intellectual property claims or rights of third parties which are unknown to the Company, and/or which are asserted in the future against the Company. In addition, we refer you to the Company’s most recent SEC financial filings, to include the Company’s report(s) filed with the SEC on Form 10-K and/or 10-Q for disclosure and discussion, where applicable or additional risk factors.

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