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Company Overview

Rugged Communications for Harsh Environments

Company Overview

RuggedCom is a leading provider of rugged communications networking solutions designed for mission-critical applications in harsh environments. Our robust technology solutions include Ethernet switches, network routers, wireless devices, serial servers, media converters, software (proprietary embedded software and application software) and professional services. RuggedCom products are designed for use in harsh environments such as those found in electrical power substations, oil refineries, military applications, roadside traffic control cabinets and metals and minerals processing. RuggedCom is well positioned to capitalize on emerging trends within the rugged communications industry, including the growing worldwide demand for IP-based communications networks suitable for harsh environments and the global initiative to integrate communications networks with electric power grids, known as ‘‘Smart Grids’’.

Our solutions facilitate the extension of Internet Protocol (“IP”) based communications networks from benign office environments to harsh non-office environments. IP-based communications networks are faster, more flexible and offer greater functionality than the legacy, serial, low-speed communications systems currently used in most harsh environments. The extension of IP-based communications networks enables the seamless flow of information between an enterprise’s non-office environment and its office environment. Moreover, the implementation of a common networking technology and infrastructure across an entire enterprise improves overall efficiency, increases the ability to monitor and secure operational assets and reduces costs associated with installation, integration, maintenance, parts and training.

Industry Overview

IP-based communications networks utilize a standard communications protocol as the basis of sending and receiving data packets across a network, making use of devices such as network routers, Ethernet switches, wireless devices, serial servers and media converters. IP-based communications networks have existed since the 1970's and have become the dominant communications networking technology for corporate/office networks. Business enterprises rely upon these networks for corporate communication, automation, control, surveillance and other mission-critical networking needs.

The rugged communications networking industry utilizes specialized equipment designed to operate reliably in harsh environments. These environments are characterized by high levels of electromagnetic interference, wide variations in temperature and humidity, high levels of vibration or shock, and/or exposure to airborne and particulate matter (e.g. dust, corrosive gasses, water, etc.). Harsh environments require networking equipment that is significantly more robust and which contains specialized component parts that are less susceptible to failure to ensure that the network remains efficient, secure and operational.

Target Markets

Rugged communications networks are increasingly being deployed across a number of major markets including electric power, transportation systems, military, industrial processes (chemical, oil & gas, metals & mining, pulp & paper) and discrete manufacturing (automotive, food & beverage, electronics & semi-conductors, machinery, pharmaceuticals). RuggedCom targets specific markets that we believe have the greatest need for rugged communications networking solutions, are underserved and enable us to leverage our core proprietary technology platform. These markets currently include electric power, transportation systems, military applications and industrial processes such as chemical, oil & gas, and metals & mining. We believe that these markets offer high growth potential in terms of size of market opportunity and are well suited to our competitive strengths.

Smart Grid Opportunity

An important trend within the North American and European electric power markets is the Smart Grid initiative. The term ‘‘Smart Grid’’ refers to the integration of communications networks with the power grid allowing real time information, monitoring and power exchange status and allows for operator or automatic intervention, when necessary, to maintain the network. For example, by facilitating controlled local black-outs and real-time operator intervention, the Smart Grid is intended to prevent the type of conditions that resulted in the electricity black-out that occurred in Northeast United States and parts of Eastern Canada on August 14, 2003. The integrated communications infrastructure must enable various intelligent electronic devices, smart meters, control centers, protection systems and users to communicate as a network.

The ‘‘Smart Grid’’ concept is currently being implemented in the United States with the support of the United States federal government. The Energy Policy Act of 2005 (United States) was enacted, in part, to encourage investment in all sectors of the energy industry, including the electric power market. In his testimony to the Congress of the United States House of Representatives in September 2003, T.J. Gauthier, President and Chief Executive Officer of the Electricity Innovation Institute Affiliate of EPRI, estimated that approximately US$100 billion would have to be spent over the next ten years in order to upgrade the United States power grid to a Smart Grid. Similar initiatives in the European Union would result in expenditures of approximately €500 Billion between 2003 to 2030 according to the European Commission, Directorate General for Research in its 2006 report ‘‘European Smart Grids Technology Platform — Vision and Strategy for Europe’s Electricity Networks of the Future’’. Because of our leadership in the electric utility market in substation automation, we are uniquely well positioned to capitalize on this significant market trend.