View:
Download DOC
Download PDF
Download XLS
FORM 8-K

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported): November 17, 2005

 

Mercury Computer Systems, Inc.

(Exact Name of Registrant as Specified in Charter)

 

Massachusetts   000-23599   04-2741391
(State or Other Jurisdiction
of Incorporation)		   (Commission
File Number)		   (IRS Employer
Identification No.)

 

199 Riverneck Road, Chelmsford, Massachusetts   01824
(Address of Principal Executive Offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (978) 256-1300

 

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Item 7.01.  Regulation FD Disclosure.

 

The management of Mercury Computer Systems, Inc. (“Mercury”) will present an overview of Mercury’s business on Thursday, November 17, 2005 at its sixth annual investor conference. Attached as Exhibit 99.1 to this Current Report on Form 8-K (the “Report”) is a copy of the slide presentation to be made by Mercury at the conference.

 

This information is being furnished pursuant to Item 7.01 of this Report and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section and will not be incorporated by reference into any registration statement filed by Mercury under the Securities Act of 1933, as amended, unless specifically identified as being incorporated therein by reference. This Report will not be deemed an admission as to the materiality of any information in this Report that is being disclosed pursuant to Regulation FD.

 

Please refer to page 2 of Exhibit 99.1 for a discussion of certain forward-looking statements included therein and the risks and uncertainties related thereto, as well as the use of non-GAAP financial measures included therein.

 

Item 9.01.  Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit No.
   

Description    

99.1    Presentation materials dated November 17, 2005.

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

       

MERCURY COMPUTER SYSTEMS, INC.

                        (Registrant)

Date: November 17, 2005       By:   /s/    ROBERT E. HULT        
               

Robert E. Hult

Senior Vice President, Operations and

Finance, Chief Financial Officer

EXHIBIT INDEX

 

Exhibit No.
   

Description

99.1    Presentation materials dated November 17, 2005.
PRESENTATION MATERIALS DATED NOVEMBER 17, 2005
©
2005  Mercury Computer Systems, Inc.
Sixth Annual Investor Conference
November 17, 2005
Exhibit 99.1

©
2005 Mercury Computer Systems, Inc.
2
Forward-Looking Safe Harbor Statement
This
presentation
contains
certain
forward-looking
statements,
as
that
term
is
defined
in
the
Private
Securities
Litigation
Reform
Act
of
1995,
including
those
relating
to
anticipated
fiscal
2006
business
performance
and
beyond.
You
can
identify
these
statements
by
our
use
of
the
words
"may,"
"will,"
"should,"
"plans,"
"expects,"
"anticipates,"
"continue,"
"estimate,"
"project,"
"intend,"
and
similar
expressions.
These
forward-looking
statements
involve
risks
and
uncertainties
that
could
cause
actual
results
to
differ
materially
from
those
projected
or
anticipated.
Such
risks
and
uncertainties
include,
but
are
not
limited
to,
general
economic
and
business
conditions,
including
unforeseen
weakness
in
the
Company's
markets,
effects
of
continued
geopolitical
unrest
and
regional
conflicts,
competition,
changes
in
technology,
and
methods
of
marketing,
delays
in
completing
engineering
and
manufacturing
programs,
changes
in
customer
order
patterns,
changes
in
product
mix,
continued
success
in
technological
advances
and
delivering
technological
innovations,
continued
funding
of
defense
programs,
the
timing
of
such
funding,
changes
in
the
U.S.
Government's
interpretation
of
federal
procurement
rules
and
regulations,
market
acceptance
of
the
Company's
products,
shortages
in
components,
production
delays
due
to
performance
quality
issues
with
outsourced
components,
and
inability
to
fully
realize
the
expected
benefits
from
acquisitions
or
delays
in
realizing
such
benefits,
challenges
in
integrating
acquired
businesses,
and
achieving
anticipated
synergies,
and
difficulties
in
retaining
key
customers.
These
risks
and
uncertainties
also
include
such
additional
risk
factors
as
are
discussed
in
the
Company's
recent
filings
with
the
U.S.
Securities
and
Exchange
Commission,
including
its
Quarterly
Report
on
Form
10-Q
for
the
quarter
ended
September
30,
2005.
The
Company
cautions
readers
not
to
place
undue
reliance
upon
any
such
forward-looking
statements,
which
speak
only
as
of
the
date
made.
The
Company
undertakes
no
obligation
to
update
any
forward-looking
statement
to
reflect
events
or
circumstances
after
the
date
on
which
such
statement
is
made.
Use of Non-GAAP (Generally Accepted Accounting Principles) Financial Measures
In
addition
to
reporting
financial
results
in
accordance
with
generally
accepted
accounting
principles,
or
GAAP,
the
Company
provides
non-GAAP
financial
measures
adjusted
to
exclude
certain
non-cash
and
other
specified
charges,
which
the
Company
believes
are
useful
to
help
investors
better
understand
its
past
financial
performance
and
prospects
for
the
future.
However,
the
presentation
of
non-GAAP
financial
measures
is
not
meant
to
be
considered
in
isolation
or
as
a
substitute
for
financial
information
provided
in
accordance
with
GAAP.
Management
believes
these
non-GAAP
financial
measures
assist
in
providing
a
more
complete
understanding
of
the
Company's
underlying
operational
results
and
trends,
and
management
uses
these
measures
to
manage
the
Company's
business,
to
evaluate
its
performance
compared
to
prior
periods
and
the
marketplace,
and
to
establish
operational
goals.
A
reconciliation
of
GAAP
to
non-
GAAP
financial
results
discussed
in
this
presentation
is
contained
in
the
company’s
First
Quarter
Fiscal
2006
earnings
release,
which
can
be
found
on
our
website
at
www.mc.com/mediacenter/pr/.

©
2005 Mercury Computer Systems, Inc.
3
Agenda
Q&A
12:10-12:20
Bob Hult, SVP, Finance & Operations, CFO
11:40-12:10
Barry Isenstein, VP, GM, Defense Business
11:10-11:40
Break
11:00-11:10
Mark Skalabrin, VP, GM, Advanced Solutions Business
10:30-11:00
Marcelo Lima, VP, GM, Commercial Imaging & Visualization
10:05-10:30
Dr. Keith J. Dreyer, M.D., Ph.D -
MGH, Harvard
9:30-10:05
Jay Bertelli, President, CEO & Chairman
9:10-9:30
Bob Hult, SVP, Finance & Operations, CFO
9:00-9:10

©
2005  Mercury Computer Systems, Inc.
Corporate Overview
Jay Bertelli, President, CEO & Chairman

©
2005 Mercury Computer Systems, Inc.
5
Mercury Growth Story
•
Strong competitive position in attractive and
growing markets
•
Leverage technology investments across multiple
applications in diverse markets
Defense and Commercial
•
Straightforward operating model and financial
structure
•
Strong balance sheet, operating cash flow with
significant financing flexibility
•
Open innovation strategy through partnerships and
acquisitions enhances capability to deliver solutions
across target markets

©
2005 Mercury Computer Systems, Inc.
6
Mercury’s Mission
•
To help our customers solve difficult
computing challenges that make a difference
Improving international security
Advancing healthcare
Increasing the world’s oil supply
…And more
•
To use these challenges to drive innovation
Spending approximately 20% of revenues on R&D
Continuing to invest in knowledge of customer
applications
Driving our expertise into new markets and applications
•
To remain committed to open innovation
Enabling standard processors to be utilized in an
increasing number of non-standard applications
Continuing our commitment to open standards
throughout our product line

©
2005 Mercury Computer Systems, Inc.
7
Deep
Algorithm
Expertise
System
Architecture Expertise
Acceleration
Expertise
GPU
Cell
Broadband
Engine
FPGA
Applications
Expertise
…by combining extensive technical expertise with deep knowledge
of
the
science
behind
our
customers’
applications…
•
Radar
•
Sonar
•
Signals
intelligence
•
Image & data
exploitation
•
Smart weapons
Life Sciences:
•
Medical imaging
•
Biotechnology
Geosciences:
•
Oil and gas
exploration
•
Engineering and
simulation
Semiconductor
equipment:
•
Mask generation
•
Wafer inspection
High-end baggage
scanning
Telecommunications
Solving Challenging Problems…
…and delivering broad, sustained value
to our customers.
Parallel
Processing
New markets and
opportunities
that can benefit
from Mercury
expertise

©
2005 Mercury Computer Systems, Inc.
8
Key Elements of Mercury’s Strategy
•
Committed to driving innovation
Average R&D y/y is approximately 20% of revenues
•
Focused on continually enhancing our expertise to
maintain our leading edge
Internal development
•
Cross-pollinating
commercial
technologies/expertise
with
defense
applications
to
provide
cost-effective
solutions
•
Extending our offerings from hardware to software to services
External innovation
•
IBM
partnership/Cell
Broadband
Engine
™
,
strategic
alliances
with
NVIDIA
Corporation,
Ziehm
Imaging,
Massachusetts
General
Hospital
(MGH)
Select acquisitions to complement and strengthen our organic
growth
•
Echotek, SoHard AG, Momentum Computer, TGS, ARC
•
Dedicated to helping customers solve problems and win
business
Broader offerings -
Professional Services
Innovative business arrangements
Cell Broadband Engine is a trademark of Sony Computer Entertainment Inc.

©
2005 Mercury Computer Systems, Inc.
9
Mercury, IBM & Cell: A Landmark Agreement
•
The Cell Broadband Engine processor is
5-100x faster than conventional
microprocessors
•
Mercury is the 1
st
non-gaming company
to integrate the Cell Broadband Engine
into its products
High-volume gaming market is transforming the
technology industry
•
Targeting applications in existing and
new markets with optimized Cell
Broadband Engine-based products
Medical imaging, inspection, defense,
geosciences, telecommunications, etc.
•
Mercury is uniquely capable
The Cell Broadband Engine is designed to solve
the same types of problems Mercury has been
solving for many years

©
2005 Mercury Computer Systems, Inc.
10
Leveraging our Core Competencies
Image and Signal Processing
J-STARS Aircraft
Sensor Data-Scanned
Wafers
Mobile C-Arm
(Digital X-Ray)
Radar Image Display
Wafer Inspection
3D Image
Reconstruction
Mercury Technology in Action
Visualization
Data Acquisition 

©
2005 Mercury Computer Systems, Inc.
11
Enabling a Growing Number of Applications
J-STARS Aircraft
RADAR
Mobile C-Arm
(Digital X-Ray)
Wafer Inspection
Image Processing
Special-Purpose
Computing & I/O
Visualization &
Rendering
Signal Processing
Wireless Communications
Base Stations
Image Storage
& Retrieval
Data Conversion
Echotek™
Series 3000T and 5000T
Seismic
Ray Tracing

©
2005 Mercury Computer Systems, Inc.
12
Entering New Markets
•
Telecommunications
•
Seismic exploration and
reservoir modeling
•
Biotechnology
•
Navigation
•
In the future…
Gaming
Digital media
Others

©
2005 Mercury Computer Systems, Inc.
13
Goal
Sustain a 25% or better long-term revenue
growth rate

©
2005 Mercury Computer Systems, Inc.
14
VIDEO
Harnessing the Power of
the Cell Broadband Engine Processor
Medical Imaging
(webcast
audio only )

©
2005  Mercury Computer Systems, Inc.
Commercial Imaging and
Visualization (CIV)
Marcelo Lima, Vice President & General Manager

©
2005 Mercury Computer Systems, Inc.
16
CIV Overview
•
20% of FY05 revenues
50% growth over FY04
•
Delivering Imaging & Computing Solutions to:
Life Sciences (Medical Imaging & Biotech)
Geosciences  (Oil and gas exploration)
Navigation
•
Competitive Differentiation & Leadership
Scalable systems
High-performance 2D & 3D imaging SW
Large Data Sets
•
Growth
Inorganic: Acquisitions of TGS and SoHard
Organic: New product intros and new market
entries
OEM Available Markets US$M
Source: IDC , Frost & Sullivan, MCS data
0
500
1000
1500
2000
2500
2006
2008
2010
Navigation & CAD
Geoscience
Biotech (Microscopy
& Drug Disc.)
Medical Imaging and
PACS

©
2005 Mercury Computer Systems, Inc.
17
CIV Growth Strategy & Competencies
•
Strategy
Extend and lead in end-to-end OEM solutions
•
Data acquisition, reconstruction, computation, visualization, distribution
Innovate
•
Scalable systems, large data set computing, 3D visualization, servers
Leverage & integrate
•
TGS and SoHard acquisitions
•
Research alliances (ZIB, MGH)
•
Partnerships (NVIDIA, IBM)
Focus
•
Customer success, performance and time to market
•
Core Competencies
Algorithm optimization
Acceleration technologies
Image reconstruction
3D and visualization
Multiprocessing systems
Applications know-how

©
2005 Mercury Computer Systems, Inc.
18
CIV Growth Driver –
Data Explosion
•
Improving Sensors
•
More and better images
•
Large data sets
•
Growing need for intensive
computing in processing and
visualization
•
Increased 3D demand
•
MRCY performance
opportunity
Multi-slice CT (32/64) 4Gbytes typical
OIV/VolumeViz Large Data Set Module
100 Gbytes Typical

©
2005 Mercury Computer Systems, Inc.
19
Continuous R&D Investments –
Innovation
•
Real-Time Image and Signal Processing
Image reconstruction algorithms
General-Purpose GPU (GPGPU) programming
Cell Broadband Engine technology computing platforms
•
Advanced Visualization
High-performance volume data processing
Thin Client/Server visualization technology
Extremely large data management
•
Compute Platforms
Scalable, high density multi-GPU systems and servers
High-density Cell Broadband Engine technology-based
systems
•
New Applications
Electron Beam (EB) microscopy recon & visualization
Molecular dynamics computing & visualization
Visual simulation/terrain visualization
Seismic data processing and analysis

©
2005 Mercury Computer Systems, Inc.
20
CIV Customers & Targets  (not all inclusive)
Oil & Gas

©
2005 Mercury Computer Systems, Inc.
21
OEM Customer Needs
Our Products and Solutions are Designed to Optimize
•
Image quality
•
Throughput and workflow
•
Time to market
•
Ease of integration and use
•
Scalability
•
Reliability
•
Our customers’
brand
•
Value

©
2005 Mercury Computer Systems, Inc.
22
Acquire
Visualize
Archive
Distribute
Life Sciences Value Delivery
•
Large data set    
volume rendering
•
Workstation
•
Clinical packages
Reconstruct
•
Reconstruction
algorithms
•
GPU acceleration
•
Cell Broadband
Engine technology
acceleration
•
SoHard Gantry
Controllers
•
Echotek RF
receivers
•
SoHard
WebPACS
(2D+3D)
•
MCS Thin
Client/Server
•
SoHard
Failsafe
SW
•
Broad end-to-end medical systems OEM solution portfolio
•
All steps from scanner output to end-user applications
•
Image reconstruction, processing, and visualization
•
Embedded components and integrated solutions

©
2005 Mercury Computer Systems, Inc.
23
Life Sciences Modality Customer Example
X-ray
projections
Ziehm C-Arm reconstruction and visualization
C-arm
scanner
Acquisition

©
2005 Mercury Computer Systems, Inc.
24
Life Sciences PACS Example
Example Installation:
Newcastle
upon
Thyne
1,000 WW sites for
our WebPACS
through indirect
sales

©
2005 Mercury Computer Systems, Inc.
25
Life Sciences Biotech Microscopy Example
•
The FEI Company
EB Microscope
•
Drug discovery & nanotechnology
Mercury recon and visualization
Minutes vs. hours
•
From acquisition to images on the
researcher’s desktop

©
2005 Mercury Computer Systems, Inc.
26
Oil & Gas Value Delivery
•
Competitive advantages in computing and visualization
Power/watt/cubic Inch
Extremely large data sets
•
Computing
platforms
–
seismic
acquisition
and
processing
•
Visualization
Seismic QC and interpretation
Horizons, faults, well bores...
Core analysis
Drilling planning
Reservoir models
Data Processing
Interpretation
Structural Modeling
Reservoir modeling, characterization
& simulation
Flow Simulation
Well Placement
Production

©
2005 Mercury Computer Systems, Inc.
27
Oil & Gas Customer Example -
TOTAL
VolumeViz LDM
125GB
dataset

©
2005 Mercury Computer Systems, Inc.
28
CIV Summary
•
Dynamic, growing markets
•
Aligned with strong economic trends
•
Solving real problems
•
Delivering product innovation
•
2D + 3D + systems = competitive advantage
•
Focused on quality & time to market
•
Extending customer base
•
Growing
business
35%

©
2005  Mercury Computer Systems, Inc.
Mark Skalabrin, Vice President & General Manager
Advanced Solutions
Business Unit (ASBU)

©
2005 Mercury Computer Systems, Inc.
30
ASBU Overview
•
20% of FY05 revenues
81% growth over FY04
•
Market Focus
Semiconductor Capital Equipment
Wireless Communications Infrastructure
•
Competitive Differentiation &
Leadership
Solutions that solve the hardest
problems
End-to-end integration of application
expanding technology
Long-term OEM support focus
•
Growth
New applications in semiconductor
equipment
Expanding business in communication
segments
New business emerging in Silicon
Solutions and Data Links
Today
5 years
Telecommunications
Semiconductor
Available Market
$1.5 B
Served
Market
$170 M
*Fiscal 2005 revenues were $48 M
*

©
2005 Mercury Computer Systems, Inc.
31
ASBU Customers & Targets (not all inclusive)
Satellite Data Links and Software Radio
Wireless Infrastructure
Base Stations and Radio Network
Controllers
Silicon IP and Component Solutions
Semiconductor Capital Equipment:
Wafer Inspection, Reticle Inspection,
Mask Generation

©
2005 Mercury Computer Systems, Inc.
32
ASBU Growth Strategy & Competencies
•
Strategy
Targeting market segments where we add
significant value
Innovating to create highly differentiated value
Leveraging alliances and partnerships to provide
more of the solution
•
Core Competencies
Solution architecture
Scalable system design
Application acceleration through specialized
processing

©
2005 Mercury Computer Systems, Inc.
33
Acquire
Detect
Image Correction
& Defect Detection
Semiconductor Equipment Value Proposition
Accelerating customers’
advanced algorithms to market
Analyze
Offline Classification
& Analysis
Sensor Data-
Scanned Wafers
or Reticles
Classify
Requires:
•
Scalable image processing
•
Massive streaming I/O and interconnect
bandwidth
•
Integrated solution

©
2005 Mercury Computer Systems, Inc.
34
Semiconductor Equipment Growth Drivers
Consumer demand for faster, lower power, lower-cost electronics
Drives the need for higher-performance chip equipment
Hard problems that are getting harder
More complex algorithms, higher data rates
New applications that require massive compute power
Example:  Reticle design rule verification and direct write lithography
Subject to market cyclicality
Processing needs outpace mainstream
computing as data rates and algorithm
complexity increase
Year 1
Year 2
Year 3
Moore’s
Law
Processing
Requirements
12X
4X

©
2005 Mercury Computer Systems, Inc.
35
Mercury Has the Solutions

©
2005 Mercury Computer Systems, Inc.
36
Communications Market
•
Application Focus
Wireless base stations
Radio Network Controllers (RNCs)
Video gateways
Satellite data links
Software Defined Radio (SDR)
•
In the Labs of Tier 1 OEMs Today
Supporting development of next-
generation solutions
Accelerating customers’
next-generation
network platform deployment

©
2005 Mercury Computer Systems, Inc.
37
Wireless Infrastructure Growth Drivers
Deployment of data and multimedia services will
drive mobile service provider revenue growth

©
2005 Mercury Computer Systems, Inc.
38
Wireless Infrastructure Growth Drivers
Data and multimedia applications through “wireless broadband 
everywhere”
will demand new network infrastructure solutions
30X
Bandwidth
Increase

©
2005 Mercury Computer Systems, Inc.
39
Total Merchant Market, ATCA and MicroTCA, 2004-2009
(US $ in Millions)
Source:  VDC, September 2005
Wireless Infrastructure Growth Drivers
New standard platforms replacing proprietary solutions

©
2005 Mercury Computer Systems, Inc.
40
Equipment OEMs are looking outside for innovation
•
OEMs emerging from a brutal downturn with a
fraction of their development staff
•
Strong time-to-market demands for new
solutions
•
Push for platform standardization to reduce
deployment costs
Wireless Infrastructure Growth Drivers

©
2005 Mercury Computer Systems, Inc.
41
Mercury Investing to Meet the Challenges
•
High-availability system management
middleware
•
Scalable / reliable system interconnect
Improved quality of service
Tightly integrated DSP and specialized
compute nodes
•
System architected to hundreds of
processing nodes
•
Reconfigurable computing cores
Enabling OEMs to quickly deploy signal, packet, and video
data-plane solutions

©
2005 Mercury Computer Systems, Inc.
42
ASBU Summary
•
Delivering superior architected solutions to solve
hard problems
Systems optimized for scalability and reliability
Accelerating
customers’
application
time
to
market
•
Leveraging alliances with leading silicon and
software suppliers
Tight integration of leading-edge technology
•
IBM Cell Broadband Engine, TI DSP, etc.
•
Strong value proposition in the semiconductor
equipment market
•
Growing customer base in communications

©
2005  Mercury Computer Systems, Inc.
Defense Business Unit (DBU)
Barry Isenstein, Vice President & General Manager

©
2005 Mercury Computer Systems, Inc.
44
DBU Overview
•
60% of FY05 revenues
18% growth over FY04
•
Market focus
Radar
Signals Intelligence (SIGINT)
Other defense technologies
•
Technology leadership
Strong COTS model
Aboard demanding platforms
in air, on land, under sea
Full life-cycle support
•
Growth
Transformation
•
CISR
Smart weapons
Cell Broadband Engine-based
technology
Representative

©
2005 Mercury Computer Systems, Inc.
45
Customer Success
Enabling our customers to win by providing
commercial off-the-shelf technology for new
applications

©
2005 Mercury Computer Systems, Inc.
46
Growth Drivers
•
DoD transformation/ISR
initiative
Persistent ISR
•
Expansion to lower
echelons, smaller platforms
•
Image & data exploitation
•
Software radio/data links
ISR becoming CISR
Network-centric warfare
•
Smart weapons
COTS initiative
Today
5 Years
Available Market
$3 B
Served
Market
$380 M
*
•
Smart
Weapons
•
Image & Data
Exploitation
•
Data links
*Fiscal 2005 revenues were $148 M
225 Active Defense Programs
35 Design Wins in FY05

©
2005 Mercury Computer Systems, Inc.
47
DBU Strategy
•
Target
High-growth CISR applications
Offer COTS “more of the sensor-based computing
system”
Solutions: HW, SW and services
Leadership in performance and functionality per volume
•
Leverage
Leadership in existing radar and SIGINT platforms
Strong customer relationships
Technological expertise

©
2005 Mercury Computer Systems, Inc.
48
Sensor
Defense Value Proposition
•
Sensor streaming
•
Scalable
•
Real time
•
Embedded
Real estate, environmental, cooling constraints
Real-time signal and image processing applications
Acquire
Process
Transmit
Mathematical
transformations
Visualize
Image Display
Complex signal returns

©
2005 Mercury Computer Systems, Inc.
49
DBU Continues to Evolve
Traditional Strength
High Density, High Performance
Multiprocessors
New Form Factors & Capabilities
Conduction-Cooled
Boards
3U Boards
Single Board Computers
Radio Frequency, A/D & D/A
IBM Alliance
Cell Broadband
Engine-Based Products
Software, Silicon & IP
RapidIO IP
Visualization Software
Synthetic
Vision
Professional Services
Integration,
Ruggedization,
Custom Software

©
2005 Mercury Computer Systems, Inc.
50
Defense Budget Update
•
FY 2006 Appropriations and Authorization
Conference finalizing budget mid-November
Final budget appropriation likely to be approximately
$450 billion, including war spending
•
FY 2007 President’s Budget being prepared,
will be presented in January
•
Secretary Rumsfeld has team working on
Quadrennial Defense Review (QDR)
Will help shape defense policy and budget over next
four years

©
2005 Mercury Computer Systems, Inc.
51
Defense Budget Update
Government Electronics & Information Technology Association (GEIA)
Quotes
by
John
Keller,
Aerospace
and
Military
Electronics,
10/28/05
:
“Spending
for
procurement
and
RDT&E
combined,
in
constant
2006
dollars,
is
expected
to
decline
from
$162.7
billion
in
2006
to
$129.8
billion
in
2016…represents
a
drop
of
$32.9
billion,
or
20.22
percent
over
10
years
--
a
decline
of
roughly
2
percent
each
year.”
“Electronics
and
communications
spending
should
decrease
from
$16.4
billion
in
2006
to
$14.1
billion
in
2016,
a
decrease
of
$2.3
billion
or
14.02
percent
over
10
years
--
roughly
1.4
percent
each
year.
These
numbers
suggest
that
electronics
spending
will
not
be
hit
as
hard
overall
as
the
DOD
budget
as
a
whole.”
RTD&E, Procurement in FY2006 Dollars
0
50
100
150
200
FY01
FY02
FY03
FY04
FY05
RDT&E
Procurement
Source: Center for Strategic and Budgetary Assessments, April 2005

©
2005 Mercury Computer Systems, Inc.
52
DBU Elements of Stability
•
The importance of CISR
Old threats
New threats
•
The role of COTS
Lower life-cycle costs
Faster time to deployment
•
Technology is driven by non-defense markets
Servers/Desktops
Graphics/Gamers
Telecommunications/Networking
DBU is extremely well-positioned to out-maneuver
competition in a changing environment

©
2005 Mercury Computer Systems, Inc.
53
Radar –
Leading through Innovation
•
Radar Processing Leadership
Tactical fighters: JSF
Airborne surveillance: MP-RTIP
•
Global Hawk
•
E10-A
Shipboard missile defense: Aegis
UAV SAR: Predator LYNX
•
Expanding Radar Markets
Upgrades to existing radars
Land-based/mobile radar
Propose new technology
•
Passive radars
Cell Broadband Engine for large and
small radars
Aegis (BMD)
JSF (F-35)

©
2005 Mercury Computer Systems, Inc.
54
Signals Intelligence (SIGINT)
•
Communications Intelligence (COMINT) and Electronic
(ELINT) Intelligence
•
Fastest growing DBU segment
Proliferation of signals
Cross-cueing for other sensors
COTS adoption
•
Comprehensive product offering
RF receivers
Analog-to-digital conversion
ASIC and FPGA-based digital receivers
Programmable digital signal processing
Future integrated product
•
Leveraged investments for defense communications

©
2005 Mercury Computer Systems, Inc.
55
Mercury in Smart Weapons
•
Significant missile program wins driven
by COTS benefits
Joint Common Missile (JCM)
Others
•
Software costs outweigh hardware costs
Mercury is cost-effective
•
Frequent technology refreshes
•
Ruggedized COTS modules
•
IP available for licensing
RapidIO switches and endpoints
Software libraries

©
2005 Mercury Computer Systems, Inc.
56
Challenges of Modern Warfare
Sensor data overwhelming analysts
PEO-IEW&S  Eddie Bair:
“Over 90% of all
data falls on the
floor”

©
2005 Mercury Computer Systems, Inc.
57
Mercury Applications for Modern Warfare
Sensor to Shooter:
Providing real-time sensor-based intelligence to the shooter
on the ground
Airborne
Reconnaissance
Image
Exploitation
System

©
2005 Mercury Computer Systems, Inc.
58
DBU Summary
•
DoD investment priorities consistent with DBU
strengths
Transformation agenda driving increasing need for
CISR and processing
•
COTS will grow in importance
•
DBU well-positioned
Significant barriers to entry
Strong investment strategy
•
Defense
and
Commercial
Driving innovations for the next generation

©
2005  Mercury Computer Systems, Inc.
Financial Overview
Bob Hult, SVP, Finance & Operations, CFO

©
2005 Mercury Computer Systems, Inc.
60
Mercury: The Company
•
Well-positioned in attractive and
growing markets
•
Open innovation strategy
•
Commitment to investing in
customer success
•
Solid operating model

©
2005 Mercury Computer Systems, Inc.
61
FY06 projected growth rates
Investment Thesis: Emerging Growth Story
Revenue ($M)
$150
$180
$186
$250
$275-285*
2002A
2003A
2004A
2005A
2006E
*Per Company guidance, Oct. 20, 2005 earnings press release
June Fiscal Year End
DBU
>10%
ASB
~(15)%
CIV
~35%
2005:
Record revenues
2006:
Projected revenue growth 12%
(at midpoint of guidance range)

©
2005 Mercury Computer Systems, Inc.
62
Long-Term Sustainable Growth Rate
Revenue ($M)
$275-285*
$186
$250
2004
2005
2006E
Future
Objective:
25% + CAGR
*Per Company guidance, Oct. 20, 2005 earnings press release

©
2005 Mercury Computer Systems, Inc.
63
CIV Growth Drivers
•
Improving sensors
•
More and better images
•
Large data sets
•
Growing need for
intensive computing in
processing and
visualization
$1.9 Billion Market Opportunity
in 2010

©
2005 Mercury Computer Systems, Inc.
64
ASBU Growth Drivers
•
Semiconductor Capital
Equipment
12x processing needs outpace 4x
mainstream computing
•
Wireless Communications
Infrastructure
Industry emerging from downturn
Strong time-to-market demands for
new solutions
Push for platform standardization
$1.5 Billion Market Opportunity
in 2010

©
2005 Mercury Computer Systems, Inc.
65
DBU Growth Drivers
•
DoD transformation/ISR
initiative
•
Expansion to lower
echelons, smaller platforms
•
Image & data exploitation
•
Software radio/data links
•
Smart weapons
$3 Billion Market Opportunity 
in 2010

©
2005 Mercury Computer Systems, Inc.
66
Fiscal Year 2006 Guidance
Fiscal Year Ending June 30, 2006
Revenues ($M)
$275-285
Gross Margin
64-65%
      GAAP 
Non-GAAP
Operating Income
6%
12%
EPS
$0.50-0.55
$1.00-1.05
Notes:
1)
Figures in millions, except percent and per share data which includes
adjustment for contingent convertibles, in accordance with GAAP
2)
Company guidance, October 20, 2005 Q1 earnings press release
•
Impact of equity-based compensation costs related to
FAS 123(R), amortization of purchased intangibles, and
in-process R&D charges excluded from Non-GAAP

©
2005 Mercury Computer Systems, Inc.
67
Q2 Fiscal 2006 Guidance
Quarter Ending December 31, 2005
Revenues ($M)
$61-64
      GAAP 
Non-GAAP
Operating Income
    ---
    4%
EPS
$(0.02)-0.00
$0.08-0.10
•
Impact of equity-based compensation costs related to FAS
123(R), amortization of purchased intangibles, and in-
process R&D charges excluded from Non-GAAP
Notes:
1)
Figures in millions, except percent and per share data which includes
adjustment for contingent convertibles, in accordance with GAAP
2)
Company guidance, October 20, 2005 Q1 earnings press release

©
2005 Mercury Computer Systems, Inc.
68
FY04
FY05
Guidance
FY06
Timeless
Business Model
Revenue
100%
100%
100%
100%
Gross Margin
67%
66%
64-65%
66-67%
SG&A
30%
29%
29-30%
R&D
21%
20%
20-21%
Income from Operations
17%
17%
12%
16-18%
Timeless Business Model
Notes:
FY06 non-GAAP guidance per October 20, 2005 Q1 earnings call
FY06 GAAP income from operations 6%

©
2005 Mercury Computer Systems, Inc.
69
Focus on Working Capital
Inventory Turns
3.8
4.9
6.9
5.4
8
2002
2003
2004
2005
Model
•
Supply chain investment
Competitive advantage
for Mercury and
customers
•
Customer satisfaction
DSO target 45 days
Days Sales Outstanding
45
50
51
43
64
2002
2003
2004
2005
Model

©
2005 Mercury Computer Systems, Inc.
70
$M
$15.9
$50.5
$25.9
$38.0
$26.6
$20.3
$10.2
$44.3
F2002
F2003
F2004
F2005
Operating Cash Flow
Free Cash Flow
Cash Generation

©
2005 Mercury Computer Systems, Inc.
71
Strong Balance Sheet
Historically strong
balance sheet
Supports open
innovation growth
agenda
(Quarter ended September 30, 2005)
Cash and Equivalents
$171
Total Current Assets
$182
Total Assets
$393
Total Debt
$136
Total Liabilities
$190
Stockholders’ Equity
$203
*
* Includes $125 million convertible senior notes offering

©
2005 Mercury Computer Systems, Inc.
72
Solid Operating Model
•
Healthy operating
margins
•
Focus on working
capital
•
Deliver consistent
cash flow
•
Leverage strong
balance sheet

©
2005 Mercury Computer Systems, Inc.
73
Sustain a 25% or better long-term revenue
growth rate
MRCY Summary
•
Strong competitive position in attractive and
growing markets
•
Leverage technology investments across multiple
applications in diverse markets
Defense and Commercial
•
Straightforward operating model and financial
structure
•
Strong balance sheet, operating cash flow with
significant financing flexibility
•
Open innovation strategy through partnerships and
acquisitions enhances capability to deliver solutions
across target markets