Business mission
Intoi enters 2010 with three well positioned holdings. Active ownership is our core business and is aimed at building, strengthening and increasing the value of our holdings. Corporate transactions - acquisitions and divestitures - are the activities surrounding our core business, and are carried out on strictly commercial and industrial grounds.
Intoi's core business is to actively drive development of IT companies. Our holdings have innovative technologies, large potential och scalable business models. Intoi contributes strategic business development, capacity and synergies. To increase profitability and create value, we strive to maximize sales, enhance the product offering and ensure effective corporate governance in our IT companies. Active ownership is a process that takes place in close cooperation with the managements of our holdings, where aim is to build and develop through commitment and active involvement. Together with the managements of the companies, we draw up strategies to ensure that their technical edge and market position create value for their customers and our stockholders.
Active ownership is a process that takes place in close cooperation with our holdings. In 2009 Intoi developed four wholly owned subsidiaries; IAR Systems, Northern, Deltaco and Nocom Software. After the end of the year, Nocom was integrated with Northern and Intoi has entered 2010 with three well positioned holdings.
Intoi has actively driven a process of change in IAR Systems during 2009. The aim is to strengthen the company's business by sharpening the focus on the most advanced embedded systems and boosting sales primarily of software licenses and maintenance. For the full year, IAR Systems delivered growth in both sales and operating profit. These measures contributed to a 58 percent increase in operating profit in the fourth quarter compared to the prior year. The effects of Intoi's investments in IAR Systems are now starting to emerge and the company has a leading technical edge and the market's largest customer base in development tools for embedded systems, a combination that gives IAR Systems considerable potential.
Intoi has continued to support DELTACO in the company's successful growth with stronger sales and a record high operating profit. Deltaco became part of Intoi in 2005 and offers computer accessories to resellers in the Nordic region. Intoi's strategy has been to increase the company's resources for investment in logistics and development of its offering. One important step has been the investment in a new logistics center in Tullinge, Sweden, which is already having a tangible effect. The company can now deliver goods faster, which is contributing to both customer loyalty and a greater willingness to pay. In addition, Deltaco has expanded its offering to more than 5,800 products, of which 1,700 under its own brand.
NORTHERN is a world-leading Swedish provider of software for storage resource management. Intoi's strategy for Northern is to give the company global sales reach based on strong products. There are significant economies of scale in that the company sells licenses for proprietary software. The company's technical edge was confirmed by Northern's recognition as "2008 EMC Partner Solution Award: Offering Of The Year" by EMC Corporation and several new orders from leading global organizations.
The company has been highly successful in sales to the US market, while the European sales organization was restructured during 2009. To ensure that the company's technical edge leads to growth in sales, the company's resources were strengthened in February 2010 by integrating Northern with Nocom Software, which is active in distribution and sales of software. Nocom Software got off to an impressive start in 2009 with several new orders, but the market weakened toward the end of the year. The company has a strong customer base and expertise in software sales and we are leveraging these resources more effectively by integrating the company with Northern.
Intoi's business mission also includes corporate transactions - the acquisition and divestment of IT companies. The goal of corporate transactions is to increase the potential and/or reduce risks in the Group as a whole. Intoi has five clearly defined criteria for acquisition of companies.
Product focus - software, primarily standard products that have already been introduced on the market.
Market potential - established customers and significant scope for expansion.
International opportunities - opportunities for rapid introduction of a new offering in several geographical markets, if possible in collaboration with other of Intoi's holdings.
Majority ownership - Intoi's involvement in and development of acquired companies demands a controlling influence over their operations. The ambition is to attain 100 percent ownership, either immediately or over time.
Competent management - a committed management with the ambition and capacity to drive and develop operations in close cooperation with Intoi's Executive Management.
The strategy for divestitures is also well defined. The timing of divestitures is optimized through ongoing and overall assessment of value growth, market conditions and other external factors. In 2009 we carried out no divestitures based on the conviction that we can create more value for our stockholders by developing the companies than was reflected by the bid levels.
Evaluation of possible corporate transactions is an important task for both the Executive Management and the Board of Directors, and our new and clearer focus has widened our contact interface in the industry. The financial turbulence of 2008 led to a dramatic decrease in the number of transactions in the industry, and although the global economy stabilized during 2009, the flow of transactions with quality companies remained very low. Many are choosing to wait and postpone transactions into the future, which has affected Intoi's work during the year.
In the past year we evaluated a large number of companies that we identified ourselves or that came to us. Of these, we have taken a closer look at around 15 companies.
Our model is aimed at scaling up global sales for companies with a strong technology base, and we therefore look mainly at software companies. We are not interested in services, hardware products or software products that require consulting services for adaptation to customer specifications. We are only interested in software that has been launched on the market and has existing customer relationships.
We assess the potential of a company's products and together with its management draw up a plan for driving international sales. One key issue in this context is the management's willingness to remain involved and raise its ambitions and goals together with us. The next step is valuation. Every analysis is company-specific, but we naturally use parameters like growth and profitability, as well as potential, market share and hard facts like net cash and patents. The industry often uses valuation metrics like the p/s ratio, which measures the stock price in relation to sales per share.
We currently have a small number of corporate transactions underway, but nothing that will be pursued in the near future. In the present situation we are taking a very cautious approach and are evaluating the incoming proposals very carefully. The focus in 2010 is on possible supplementary acquisitions in the existing holdings.
STRATEGY
• Acquire high-tech software companies
• Develop companies to increase sales and profitability
• Divest companies as a means for realizing values
ACHIEVED IN 2009
• Measures led to higher sales in all holdings
• Stronger cash flow for the Group
• Improved earnings in the two largest holdings
FOCUS IN 2010
• Continue to develop holdings and increase sales
• Focus on profitability with a target of SEK 32 million
• Supplementary acquisitions in the existing companies
