Acting CEO Ingvar Karlsson#s speech to the AGM

Acting CEO Ingvar Karlsson's speech to the AGM Mr Chairman, Ladies and Gentlemen. A warm welcome to the 2001 AGM. 2000 was difficult When we met last year we closed 1999's very successful financial year. We had also carried out three acquisitions. We had high hopes for strong development during 2000. There is much that has not gone as we had planned. We had a combination of external factors that had a positive impact. 2000 has not brought much good news but has brought many problems for DORO. At the end of 1999 we saw the problem of the components shortage and unfortunately saw things worsen drastically during the first six months of the year. In combination with a dominant US dollar we were put in a very difficult position. Sales figures showed sales of SEK 1.4 billion but a loss of SEK 44 million. Following the record sales of SEK 66 million in 1999 the figures for 2000 are obviously a disappointment. A combination of external factors had a negative affect on us. 1) The components shortage worsened during the first six months and also strongly affected the last six months of the year. Part of the year saw a lack of component parts that had been ordered from our manufacturing partners. This was mostly apparent in France where they were without important products for a greater part of the year. The cost cuts given to the component manufacturers remained and we had to pay the same price and in some cases higher prices in USD. In some cases we chose suppliers that posed a greater risk, which resulted in problems concerning quality. To manage customer obligations airfreight increased by SEK 15 million. The components shortage had a total impact of around SEK 100 million. 2) DORO buys a greater part of products in US dollars. We have net purchases for a total of more than USD 100 million a year. The purchase price of our products usually drops and our product sales prices have also fallen during the years. Different rates of reductions in sales prices have been able to compensate for the fluctuations in US dollar exchange rates. It was troubling to have to compensate for this in sales prices and on a few markets we didn't manage to increase this price enough. As consequence the margins was decreased. In total the US dollar increased the costs by around SEK 125 million. 3) The year was also affected by one-off costs. The greatest being for a dispute with a supplier where DORO wrote down the remaining value in the balance sheet at a cost of SEK 21 million. We have sued the Japanese supplier and it could take some time until we see the end of this dispute. Should we receive compensation then we will see both a profit and a positive impact on cash flow. Furthermore we have made extensive cut backs in personnel and all costs for last year have been taken into account. Our stock and guarantee reserves are constantly being valued following different accounting rules. DORO increased provisions in last year's accounts to cover different costs for stocks and guarantee reserves. DORO in transformation. The negative global effects have meant that many different measures have had to be taken. The harder the battle the more important it is to fight change with force. A measures programme was worked out with consequences seen in 2000 and 2001. Different forms of cost-cutting measures are in force in all areas of the Group. · The number of employees has dropped by nearly 10% during the year · An air of caution concerning costs · Purchases being carefully planned and adjustments to stock and orders on hand Better focus on core activities and reduced risk levels resulted in: · Closure of a number of smaller product lines · An end to high risk projects such as DORO Airborne (big delays made market conditions change completely) Improved processes resulted in the following key activities: · More regulation in relationships with suppliers · Improved quality work through greater presence in Asia and work with fewer suppliers · Different projects carried out to improve "Time to market", from conception to launch of a product New products to be launched during 2001 · The number of products will drop by around 30% during 2001. This will reduce our stocks and improve our possibility to get better prices from suppliers · I will get back to you later regarding the new products that are to be launched I have said on numerous occasions that on the flip side of any problem are always an opportunity. It is my fervent opinion that the DORO, following the problems of 2000, will be a strong company with healthy visions for the future. The beginning of 2001 We have successfully completed the first two months of 2001. The interim report will be available on 17 April. We can already see some signs of how 2001 will develop: · The components shortage is drawing to an end and we are seeing much better access to products and a drop in prices. · We have had full production supply in France since the beginning of the year and we are now selling at levels according to plan. · But on a number of other markets we have problems with product supply. · A programme of measures is ongoing according to plan. · Consumers are currently buying less and we are at the moment looking at lower activity levels in many industries and our consumer products. · The USD has so far been seen at a higher rate than it was during the whole of 2000 and at the end of 1999. DORO will show a loss for Q1 2001, which is lower than that of Q1 2000, both in terms of sales and result. In 2000 we reached sales of SEK 347 million and profits of SEK 12 million (the best three month period in 2000). The outlook for the coming year This year DORO will as usual not issue a forecast but I would like to give an outlook for the business situation. We are working hard to return to profitability and this is our most important goal. We have chosen to issue a few comments as to what can affect the rest of the year. The components shortage is accordingly coming to an end and we will see expansive effects on profits during 2001. In the first phase DORO will have access to the products that we want to sell. It is already reality for many companies, among which in France that was hard hit in 2000. With full access to products DORO will receive the opportunity to increase market shares and the impact on result will mainly come during Q3 and Q4. The US dollar rate is impossible to predict. DORO has currently no hedging in foreign currencies. Allow me to go through the different product areas: Cordless telephones is our biggest area and the range will be enlarged during Q3 and Q4. For DECT we will be adding a number of new products including different small telephones with very nice designs. The range will increase and we will have access to products and falling prices. A number of the price cutting effects will be to our advantage with some of this being handed on to the customer in the form of lower prices. The state of competition is improving with a number of players disappearing. The terminal products range (corded telephones, answering machines, caller identity products) will be added to. One with our own design that we have called the DORO Afti that has good functions. We will also receive the value for money Audioline 500 series. Our business customers' exchanges the Congress series will be added along with the Audioline series. For terminal products we are also focusing on selling more to different national telephone operators. They are focusing their activities more and DORO will be a natural choice for supplying more countries. The same opportunity is available for cordless telephones. We have come a long way with exchanges in the Nordic region with a strong organisation and expanding market share. In countries outside the Nordic region we have started or will shortly start to examine the possibility to start exchange sales. During Q3 and Q4 we have been provided with the right to sell three further exchanges and are now working with the international launch. We now have wide-ranging product range for exchanges that cover everything from small to large and from traditional to visionary. DORO's activities for wireless broadband are developing well. UpGrade is the name of our brand and is undergoing change and will change from being a supplier to different distributors to having customers such as operators and systems integrators. We are seeing a greater share of the bigger projects. The share of services in the form of training, pre- studies and service contract is increasing. The increase of activities is largely due to the increase rate for the extension of wireless broadband. The components shortage will soon be solved and we believe that this will positively affect DORO. The US dollar can give different effects on profits even if DORO during Q1 has so far only been negatively affected. The various programs are giving lower costs and reduced number of products. The different launches of new products has a positive, but hard to judge effect on results in size and time. Taking into consideration the fluctuations in the US dollar rate and accessibility of components, DORO will not submit a forecast for 2001. The future For you as shareholders the outlook is often much further forward than just the next few quarterly reports. I would like to give a short description of how DORO sees the future. It is especially important since DORO will be carrying out a new share issue of SEK 75-100 million during the current year. The intention is to return the financial balance and allow for the future growth of DORO. DORO is a growth company and has grown organically very rapidly over the past 10 years and during the past year through acquisitions. We are under constant renewal of products and thereby a high rate of product launches. This offers a sound environment for keenness and humility. We have a flat organisation and can quickly make decisions and change course. DORO's strategic advantage has been the correct analysis of development in telecoms when de-regulation was brought in. We have continuously tried to be open to new trends and catch onto them at an early juncture. A few years ago we stated that Europe was in for great structural change in telecommunications and that DORO would actively compete in it. DORO has competed through acquisitions of Audioline (UK; Switzerland, Australia), Matra of France and Atlantel of Poland. This transformation will continue and we see many players considering leaving the market. We have though no plans for further acquisitions until profitability and the financial balance has returned. Cordless phones and terminal products will also be significant products for us in the future. Cordless phones and terminal products represent around 25% of the European market for us. We consider that more active involvement must be carried out in the former monopolies to sell to them in all countries where we are active. This can be carried out by offering other functions and continued investment in design. The different operators will offer different services and this will be integrated into our products. We see great opportunities for organic growth at existing customers and in the national telephone companies. We will also be able to grow due to more and more players deciding to leave the market. DORO has a strong position in Europe today and is the biggest in terminal products and third biggest for cordless phones. There is an interesting market for our exchanges and they are valued at more than cordless phones and terminal product together. DORO currently has 10% of the European market. We are planning to sell exchanges from most subsidiaries. Exchanges will change. DORO currently sells DORO Alchemy where integration occurs between voice and data. We will be supplying three more products · DECT-office (to allow cordless phones in smaller exchanges) · Izor (which gives us a good exchange for its size) · Swyx, take us into the IP telephony This development will continue and exchanges will be more qualified communication platforms in future. DORO is a strong partner to many installers and investment towards small and mid-sized companies allows excellent opportunities to grow. The biggest growth is being seen in wireless broadband. Sweden has a large number of households with Internet. We will have more services and demand for greater capacity will increase. Other countries will follow this trend. Companies and the 20% of households where fibre optics is not economically viable then wireless broadband is an excellent alternative. Installation is fast and scaleable. Through UpGrade, DORO sells broadband technology in the Nordic countries and the Baltic states. We are considering beginning sales of this kind in other markets over the next few years. We expect to increase sales through markets growing strongly and through increased geographic presence. We also see increased sales to operators and systems integrators. We will work in these four product areas and after time introduce new products and technologies. Our long-term aim is to be more holistic in our approach to the European market. DORO should be able to compete in European restructuring that we have only yet seen the very tip of. DORO-shares DORO also want to practice what they preach where shareholders are concerned. We want fast communication, which you have seen through the first annual report of Swedish listed company and the first general meeting of large companies. We will further improve this year from previous press releases, annual reports and general meetings. In 1999 we had our first capital market day. This was well attended and gave DORO the opportunity to be better known. We will have a new capital market day during the latter part of the spring 2001. DORO currently has 20% of shares owned by institutions. Technology and design award DORO is interested in strengthening cooperation with the Lund Institute of Technology in telecommunication and design. In 1999 we introduced awards for the best MSc dissertation from LIT. Following the formal part of the general meeting we can for the second year hand out the award for design for the first time. This mirrors DORO's technology and design interests. I would finally like to take this opportunity of welcoming Gunnar Åkerblom. In May I will return to the post of deputy CEO and CFO. We look forward to an interesting year under two mottos. A return to profitability Profitable growth ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/03/15/20010315BIT00040/bit0002.doc http://www.bit.se/bitonline/2001/03/15/20010315BIT00040/bit0002.pdf