Sdx Business Systems

1) How risky you think the deal is? Why? What would you look for to convince you to invest?

We think that deal is quite risky because there are many uncertainties like:

• At the moment most of SDX products are near the end of their life cycle, because of outdated technology. R&D effort is needed to keep the market share.

• NT is supplying SDX biggest competitor BT with products, which it uses to compete with SDX. NT’s Monkstown factory is main production facility for SDX products. This is still some kind of conflict of interest – NT is supplying two market leaders in UK market.

• There is no certainty about management team, their abilities and motivation to gain success. Administrative support functions are outsourced to NT, there are also shared computer systems, computer workstations (with too high specifications), office space.

• NT has patented microchip technology which is crucial for SDX to develop fully digital product.

• In current economic situation it’s not really possible to finance MBO from banks, which means that most likely some VC fund would be involved, which might reduce management decision power and profits for management team (because this fundng is more expensive).

• Recession in UK economy and high stock levels, some of what might not meet quality standards.

• There are only few customers what increases the risk of loosing significant market share in a case when some customer chooses to buy from somebody else.

To convince us to invest we would look:

• To get Monktown factory included in the deal or at least ensure that NT is forced to invest in factory reasonable amounts of investment and supply SDX on acceptable terms.

• To get NT’s microchip technology patent included in the deal or at least ensure access to this technology.

• To include in the price (price reduction) stock, which might not meet quality standards.

• To clarify other technical details like shared computer system, office space, workstations and other.

• To get...