Microsoft Industry Analysis in Poland from a Capital Investment Perspective

Presented by: Brian Karasik, Syed Saeed

Business Environment

•FDI to Poland in 2010 = $10 billion. •10% increase from 2009•Benefits of FDI (tax revenue, improved skills)

•Taxation and Special Economic Zone•Income and real estate Tax exemptions/reductions•Low corporate income tax rate of 19%

•Labor Cost and Skills •Among lowest cost in the region•Maintain high education and skill level

Money to be made in Poland

Pro-American market & Cost-effective market

Awarded €67bn in Structural Funds by EU

Polish SME used Government Funds to Update IT Infrastructure

The Poland National IT Infrastructure Plan budgeted 75% of €1bn on

Expanding wireless Broadband services

Strong initiative to be a EU member

Software Piracy Rate Declined Slightly

The rate of software piracy in Poland totaled 54%

Poland software producers incurred a $506m loss

Worldwide software producers incurred $51.4bn

Microsoft products are the most counterfeited programsWindows and Office

60% of Adobe Photoshop software is installed illegally

Legal Reform for Piracy

Stronger enforced provisions in copyright infringement cases

Criminal sanctions in the Optical Disc Verdict

Criminal provisions addressing Internet Piracy

Innovation-driven Connectivityeconomies score

United States 7.71Sweden 7.47Netherlands 6.75United Kingdom 6.44Canada 6.15Australia 6.14Singapore 5.99Japan 5.87Finland 5.82Ireland 5.70Germany 5.37Hong Kong SAR 5.33France 5.22New Zealand 4.85Belgium 4.65Korea 4.17Italy 3.99Czech Republic 3.71Spain 3.49Poland 2.79Hungary 2.72Greece 2.62Slovakia 2.09

Overview of 2009 Results

Methodology

© Nokia Siemens Networks

• Best Performing Country

• Poland

Positive Drivers

• High rates of in business usage

• Strong proportion of ICT skills and specialist jobs

• Strong share of corporate data revenue from

IP and Ethernet

Areas for improvement

• Relatively slow broadband speeds

• Few fiber access networks

• 3G Diffusion rate low

• Low government spending on

hardware, software and IT services

• Low online government services usage

• Low spending on ICT resources

• Poor PC and secure server penetration

Country example: Strong business connectivity underlines Poland performance

© Nokia Siemens Networks

Source: OECD, ICT database and Eurostat, Community Survey on ICT usage in enterprises, July 2010.

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Use of broadband, 2009 or latest available year

Polish fixed broadband availability is low compared to the other European countries.

135.36

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Broadband average monthly subscription price, Oct. 2009, USD PPP

Average Subscription Price, USD, PPP

Median

Poland

Slovakia

Czech

UNECE Statistical Database, Economic Statistics

UNECE Statistical Database, Economic Statistics

Forecast PolandForecast Computer

Sales US$ mln 5% - 95% 5% - 95%Date Annual Upper Limit Lower Limit

2012 3,107.74 3,141.43 3,074.06

2013 3,320.63 3,368.27 3,272.99

2014 3,526.54 3,584.88 3,468.19

2015 3,724.54 3,791.91 3,657.16

Forecast CzechForecast Computer Sales

US$ mln 5% - 95% 5% - 95%Date Annual Upper Limit Lower Limit

2012 1,141.30 1,177.86 1,104.75

2013 1,184.08 1,235.78 1,132.38

2014 1,226.38 1,289.69 1,163.06

2015 1,268.13 1,341.25 1,195.02

Forecast SlovakiaForecast Computer

Sales US$ mln 5% - 95% 5% - 95%Date Annual Upper Limit Lower Limit

2012 916.97 925.24 908.71

2013 919.30 930.99 907.61

2014 920.86 935.18 906.54

2015 921.91 938.44 905.37

Results

Transportation Infrastructure

Roadways•90% of roads are paved•Road Construction Projects linking adjacent countries underway

Railroad•Extensive network of rails•Rail infrastructure is old and not maintained limiting higher speeds

Airports•Airports and facitilities have been modernized and expanded

Selection of AR

Possible AR’s Identified•Alternati Projekt – Wroclaw, Poland•Makro Makro 2000 Ltd – Wroclaw, Poland•GM Records – Warsaw, Poland•Agmark – Warsaw, Poland•Takt – Warsaw, Poland

NOTE: All Possible AR’s perform CD/DVD pressing/burning, printing and packaging

Wroclaw vs Warsaw

•Both are large cities

•Both are located near Transportation (Roads, Rail and Airports

•Warsaw average salary is 22% higher than Wroclaw

•Wroclaw is closer to exist AR’s in Germany and Czech Republic

•Lower cost to compete against AR’s

Choice = Wroclaw

Alternati Projekt vs Makro Makro

Both provide similar services

Alernati has licensing contracts from Phillips, Toshiba and DVD FLLC

Makro Makro does not mention any licensing contracts on website

Possible capacity issues at Alternati?

Choice = Alternati Projekt

Process Flow

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Recommendations

1. AR should partner with all of its suppliers and OEM customers in order to maintain a constant supply of communication between parties

2. AR should always, where possible have contingencies plans as far as backup suppliers and motor transport in case of unforeseen circumstances

3. AR should always look to reduce costs, but not to sacrifice service

4. Microsoft and AR should run simulation models in order to see if supply chain is adequate and there are no failures

5. Microsoft should step in if the need arises that prevent the flow of Microsoft product

Questions?