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FORM 8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): November 21, 2006

Mercury Computer Systems, Inc.

(Exact Name of Registrant as Specified in Charter)

 

Massachusetts   000-23599   04-2741391

(State or Other Jurisdiction

of Incorporation)

  

(Commission

File Number)

  

(IRS Employer

Identification No.)

 

199 Riverneck Road, Chelmsford, Massachusetts   01824
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code: (978) 256-1300

N/A

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Item 7.01.  Regulation FD Disclosure.

The management of Mercury Computer Systems, Inc. (“Mercury”) will present an overview of Mercury’s business on Tuesday, November 21, 2006 at its seventh annual investor conference. Attached as Exhibit 99.1 to this Current Report on Form 8-K (the “Report”) is a copy of the slide presentation to be made by Mercury at the conference.

This information is being furnished pursuant to Item 7.01 of this Report and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section and will not be incorporated by reference into any registration statement filed by Mercury under the Securities Act of 1933, as amended, unless specifically identified as being incorporated therein by reference. This Report will not be deemed an admission as to the materiality of any information in this Report that is being disclosed pursuant to Regulation FD.

Please refer to page 2 of Exhibit 99.1 for a discussion of certain forward-looking statements included therein and the risks and uncertainties related thereto, as well as the use of non-GAAP financial measures included therein.

 

Item 9.01.  Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit No.   

Description

99.1    Presentation materials dated November 21, 2006.

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    MERCURY COMPUTER SYSTEMS, INC.
                            (Registrant)
Date: November 21, 2006     By:   /s/ Alex N. Braverman
       

Alex N. Braverman

Vice President, Controller and

Chief Accounting Officer

EXHIBIT INDEX

 

Exhibit No.   

Description

99.1    Presentation materials dated November 21, 2006.
PRESENTATION MATERIALS
©
2005  Mercury Computer Systems, Inc.
7th Annual Investor Conference
November 21, 2006
Exhibit 99.1

©
2005 Mercury Computer Systems, Inc.
2
Forward-Looking Safe Harbor Statement
This
presentation
contains
certain
forward-looking
statements,
as
that
term
is
defined
in
the
Private
Securities
Litigation
Reform
Act
of
1995,
including
those
relating
to
anticipated
fiscal
2007
business
performance
and
beyond.
You
can
identify
these
statements
by
our
use
of
the
words
"may,"
"will,"
"should,"
"plans,"
"expects,"
"anticipates,"
"continue,"
"estimate,"
"project,"
"intend,"
and
similar
expressions.
These
forward-looking
statements
involve
risks
and
uncertainties
that
could
cause
actual
results
to
differ
materially
from
those
projected
or
anticipated.
Such
risks
and
uncertainties
include,
but
are
not
limited
to,
general
economic
and
business
conditions,
including
unforeseen
weakness
in
the
Company's
markets,
effects
of
continued
geopolitical
unrest
and
regional
conflicts,
competition,
changes
in
technology
and
methods
of
marketing,
delays
in
completing
engineering
and
manufacturing
programs,
changes
in
customer
order
patterns,
changes
in
product
mix,
continued
success
in
technological
advances
and
delivering
technological
innovations,
continued
funding
of
defense
programs,
the
timing
of
such
funding,
changes
in
the
U.S.
Government's
interpretation
of
federal
procurement
rules
and
regulations,
market
acceptance
of
the
Company's
products,
shortages
in
components,
production
delays
due
to
performance
quality
issues
with
outsourced
components,
the
inability
to
fully
realize
the
expected
benefits
from
acquisitions
or
delays
in
realizing
such
benefits,
challenges
in
integrating
acquired
businesses
and
achieving
anticipated
synergies,
and
difficulties
in
retaining
key
customers.
These
risks
and
uncertainties
also
include
such
additional
risk
factors
as
are
discussed
in
the
Company's
recent
filings
with
the
U.S.
Securities
and
Exchange
Commission,
including
its
Annual
Report
on
Form
10-K
for
the
quarter
ended
June
30,
2006.
The
Company
cautions
readers
not
to
place
undue
reliance
upon
any
such
forward-looking
statements,
which
speak
only
as
of
the
date
made.
The
Company
undertakes
no
obligation
to
update
any
forward-looking
statement
to
reflect
events
or
circumstances
after
the
date
on
which
such
statement
is
made.
Use of Non-GAAP (Generally Accepted Accounting Principles) Financial Measures
In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, the
Company provides non-GAAP financial measures adjusted to exclude certain non-cash and other specified charges,
which the Company believes are useful to help investors better understand its past financial performance and prospects
for the future. However, the presentation of non-GAAP financial measures is not meant to be considered in isolation or
as
a
substitute
for
financial
information
provided
in
accordance
with
GAAP.
Management
believes
these
non-GAAP
financial measures assist in providing a more complete understanding of the Company's underlying operational results
and
trends,
and
management
uses
these
measures,
along
with
their
corresponding
GAAP
financial
measures,
to
manage the Company's business, to evaluate its performance compared to prior periods and the marketplace, and to
establish operational goals. A reconciliation of GAAP to non-GAAP financial results discussed in this presentation is
contained in the company’s First Quarter Fiscal Year 2007 earnings release, which can be found on our website at
www.mc.com/mediacenter/pr/.

©
2005 Mercury Computer Systems, Inc.
3
Agenda
Jay Bertelli’s Closing Remarks, Q&A
11:45-12:15
Bob Hult, SVP, Chief Financial Officer
11:30-11:45
Philippe Roy, Dir. & GM, Navigation & Simulation Systems
11:15-11:30
Mark Skalabrin, VP & GM, Advanced Solutions Business
10:45-11:15
Break & Trade Show
10:30-10:45
Marcelo Lima, VP & GM, Commercial Imaging & Visualization
10:00-10:30
Didier Thibaud, SVP, Defense & Commercial Businesses
9:25-10:00
Jay Bertelli, President, CEO & Chairman
9:10-9:25
Bob Hult, SVP, Chief Financial Officer
9:00-9:10

©
2005  Mercury Computer Systems, Inc.
Corporate Overview
Jay Bertelli, President, CEO & Chairman

©
2005 Mercury Computer Systems, Inc.
5
What We Do
For diverse customers in:
Aerospace & Defense
Communications
Geosciences
Life Sciences
Semiconductor
Leading provider of:
Computing solutions
for specialized,
compute-
and data-
intensive applications

©
2005 Mercury Computer Systems, Inc.
6
Mercury’s Strategy
•
Focus on relatively small ($200-400M) niche
markets that are not well served by
mainstream suppliers
•
Leverage technology investments across
multiple markets
•
Focus on solving problems that are
challenging and can command high margins
•
Focus on core competencies
Multicomputer architectures
Signal and image processing
Visualization
•
Market-specific domain expertise

©
2005 Mercury Computer Systems, Inc.
7
Our Unique Strengths
Signal Processing
High-Data Rate
Computing
Sensor Data
Acquisition
Visualization
•
Unique skill
set and software for processing and
visualizing data
•
Years of development in software libraries and
tools for embedded multicore computing
•
Domain expertise in niche markets

©
2005 Mercury Computer Systems, Inc.
8
Identifying New Markets to Drive Growth
•
Developing market opportunities
Defense Business Unit (DBU) -
Synthetic vision, wideband data
links
Commercial
Imaging
&
Visualization
(CIV)
-
3D
medical
imaging,
geosciences (oil & gas)
Advanced
Solutions
Business
Unit
(ASBU)
-
Semiconductor,
Design for Manufacturing (DFM)
•
Discovery Phase
Biotechnology -
Drug discovery
Video processing -
Intelligence to compensate for bandwidth
limitations
Defense -
Homeland security
History of finding challenging computing problems
that can be solved with Mercury technology

©
2005 Mercury Computer Systems, Inc.
9
Market-specific Innovation
Leveraged Innovation
Leverage as a Competitive Advantage
Multi-market leverage of technology and core
competencies results in strong competitive
advantage and significant barriers to entry
Defense,
National Labs,
Life Sciences,
Semi-
Equipment,
Oil & Gas
System
Solutions,
Cell Broadband
Engine
™
(BE)*,  
FPGA, GPU,
Multicore, A/D-
D/A, Video
Technology & Core
Competencies
Market Investments
*Cell Broadband Engine is a trademark of Sony Computer Entertainment Inc.

©
2005 Mercury Computer Systems, Inc.
10
Revenue Follows Technology Cycles
Echotek –
A/D-D/A
Revenue ($M)
$186
$250
$150
$181
$141
$107
$86
$180
$235-245*
$236
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007E
June Fiscal Year End
*Per Company guidance, October 26, 2006 earnings conference call
PowerPC
RACE++
®
MP-510
Cell BE
Processor
DSP/GPU / FPGA Processors
Northstar
Ensemble
PowerStream
7000
®
TGS –
3D
Momentum -
SBC
SOHARD –
PACS
ARC -
RF
RapidIO
®

©
2005  Mercury Computer Systems, Inc.
Defense Market
Didier Thibaud, SVP, Defense & Commercial Businesses

©
2005 Mercury Computer Systems, Inc.
12
Defense Budget History and Potential Changes
Threat vs. Investment Spending
(FY 1976 –
FY 2006)
R2
=
0.33
R2
=
0.33
Actual Investment
Spending
Threat Model
Hot War
Cold
War
No
Threat
$0
$50
$100
$150
$200
$250
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
•
Historical defense investment spending is
cyclical in constant year dollars; does not
follow threat, does follow political office
•
President dominates
•
Democratic house and senate = Case 2
(~flat defense investment)
•
Democratic President in ‘08 = Case 3       
(~ -
3.9%
CAGR)
Predicted Market Scenarios
Actual
Investment
Account
Spending
Booz Allen
Defense Market
Model
Case 3
Current
FYDP¹
FYDP1
(0.0% CAGR²)
Case 1 (1.6% CAGR²)
Case 2 (-0.0%
CAGR²)
Case 3 (-3.9%
CAGR²)
Case 2
Case 1
Forecast
History
$100
$110
$120
$130
$140
$150
$160
$170
$180
$190
$200
2000
2002
2004
2006
2008
2010
2012
•
Major DoD investment programs will
remain funded if they perform
AEGIS –
BMD (Korea, Iran)
MP-RTIP –
(Global Hawk, possible
JSTARS upgrade to offset E-10A
cancellation)
SIGINT –
(GWOT)
•
Deficit issues and follow-on
expenses to the war will challenge
new program investment –
but offer
increasing opportunities for
upgrades to existing systems
Chart sources: John H.J. Niehaus, Principal, Global Aerospace & Defense, Booz Allen Hamilton and Ronald J. Epstein, Ph.D. Senior Director, Aerospace &
Defense Equity Research Merrill Lynch.  Other Sources :  DoD Green Book FY07, historical Congressional records, Booz Allen analysis

©
2005 Mercury Computer Systems, Inc.
13
Unique Strengths in Defense
•
Leader in airborne
surveillance
14 years of experience
•
Investing and
innovating to
maintain leadership
position
•
Strong business
relationships and
partnerships with
defense primes
Representative

©
2005 Mercury Computer Systems, Inc.
14
Leveraging Mercury into A&D Segments
•
Track record of success
Leveraging technology to deliver best
value
Strong COTS model
Aboard demanding platforms in air, on
land, under sea
Full life-cycle support
•
Market focus
C4ISR
Defense embedded computing
•
Technology to enable new
application
Wideband data links and satellite
communications
Situation awareness
Synthetic vision and unmanned vehicles

©
2005 Mercury Computer Systems, Inc.
15
State of Warfare –
Battlefield Requirements
•
The nature of war has changed
“The enemy is mobile and our war fighters must be connected to
strategic and tactical aircraft, along with weapons and unmanned
aerial vehicles (UAVs), in order to successfully engage time-critical
targets.”
-Anonymous
•
Reduce casualties
•
Better utilization of deployed forces
Improved communications
Enhanced speed and effectiveness
•
Improve intelligence
Reduce data pollution
Sort, extract & fuse data into information
Understand first, act decisively
•
Transition from platform-centric to network-centric

©
2005 Mercury Computer Systems, Inc.
16
The Challenges of Today’s Warfare
Leveraging COTS
Embedded Solutions
Network Centric
Operations
Combat ID
Precision
Targeting
Information
Superiority
Multi-Mission
Data Fusion
Data Explosion

©
2005 Mercury Computer Systems, Inc.
17
Enabling Technologies for Mission Systems

©
2005 Mercury Computer Systems, Inc.
18
Computing Solutions Across the Board
Medium
(6U)
Large
(8U+)
Small
(<=3U)
XSC-100 ATX
IBM BladeCenter
MAC-100
Busless Embedded
Benign Performance Limit
Benign
Modular Rugged
A
dvanced
T
CA
TM
Modular Performance Limit
CP3-102
VPA-200
TBA-100
ECDR-GC314 PMC
ATR
6600
Extreme
Cell
1U/2U
High

©
2005 Mercury Computer Systems, Inc.
19
Innovation for Today’s Warfare
Processing
Solutions &
Services
IP & Cores
Navigation &
Visualization 3D
Amira
3D Framework
Image
Archiving
CELL BE
Single Board Computers
Fast & Flexible
Radio Frequency
Ultra-fast Tuning
Very Low Phase Noise
Mixed Signal
AD/DA
FPGA
VME, VXS,
PMC, XMC
200 GLOPS per
Cell BE Processor
Serial RapidIO
AdvancedTCA &
AdvancedMC
Compact
Rugged Conduction-
& Air-Cooled
Rugged Air Cooled
VME64 Backwards
Compatibility
Rugged
Conduction
Cooled
Ultimate
Interconnectivity
Rugged
Managed Air-
Cooling
(VITA 41)  
Large
3U
(VITA 46)
(VITA 46/48)  
6U
SFPDP
FPGA
Dev Kit
(VITA 49)

©
2005 Mercury Computer Systems, Inc.
20
Defense Embedded Computing Market Potential
A $14.2 Billion Available Market
90-95%
Primes
5-10% COTS
Opportunity for
Collaborative COTS
SM
Source:
The Embedded Computing Market 2006, Electronic Trend Publications Inc & Internal Estimates.
Defense  Weapons & C3 Boards and Systems

©
2005 Mercury Computer Systems, Inc.
21
Collaborative COTS
•
Solutions & Services
Computer integration
System assembly
Module development
Architecture and
research
Custom software
Ruggedization
Life-cycle management
Intellectual property
Migration services
On-site support
•
Shortening Development Cycles
•
Lengthening Product Life Cycles
•
Strengthening Our Relationship
…when customers need a helping hand…

©
2005 Mercury Computer Systems, Inc.
22
Growth Opportunity: Radar
•
Airborne surveillance: MP-RTIP
Global Hawk (15 platforms)
JSTARS and AWACS upgrade potential
•
Tactical fighters: F-35, F-22, F-16
•
Shipboard missile defense: Aegis
•
UAV: Predator LYNX SAR
•
Land-based/mobile radar
Aegis (BMD)
JSF (F-35)

©
2005 Mercury Computer Systems, Inc.
23
Growth Opportunity: Battlefield Communication
Projected widespread deployment
of battlefield visualization and
decision aids
Multi-sensor visualization for war
fighters on the move
Comprehensive battlefield imagery for
war fighters
Super-smart compression when link
bandwidth is limited
Detection and identification of targets in
urban/civilian environments

©
2005 Mercury Computer Systems, Inc.
24
Growth Opportunity: Wideband Data Links
•
Ground, shipboard, and airborne
communications via satellite
Deployment of broadband closer to the war fighter
Drives the need for new compute solutions
•
Mercury is well positioned with COTS software-
defined radio (SDR) and scalable FPGA and DSP
solutions
•
Technology demonstrated at MILCOM (Oct. 2006)

©
2005 Mercury Computer Systems, Inc.
25
Meeting the Challenges
•
Budget uncertainty
•
Strong customer base
•
Strengthened pipeline
2x increase in business
opportunities in 8 months
•
Broadened product portfolio
•
Technology leadership
•
Increased market penetration
Services
Collaborative COTS

©
2005  Mercury Computer Systems, Inc.
Commercial Imaging and
Visualization Markets
Marcelo Lima, Vice President & General Manager

©
2005 Mercury Computer Systems, Inc.
27
Tremendous Opportunities
•
Big markets @ the forefront of socio-
economic issues
•
Exciting new businesses (s/w centric)
•
Excellent growth potential

©
2005 Mercury Computer Systems, Inc.
28
CIV Business Summary
0
10
20
30
40
50
60
FY04
FY05
FY06
FY07
(plan)
Revenues US$
•
Leading OEM provider of image processing and
visualization solutions
•
Main markets: Life Sciences and Geosciences
Annualized served markets size of approximately $700M to $900M
•
Continued revenue growth
•
170 associates in six centers (US and Europe) organized
by unit:
Visualization Sciences Group (VSG)
•
TGS business had record revenue in FY06,
20%+ growth over FY05
Life Sciences Group (LSG)
•
SOHARD business had record revenue in FY06
•
Won 20 new customers in last 12 months
•
Legacy decreasing by about $10M annually
•
Gained ISO 13485 certification and FDA
clearances

©
2005 Mercury Computer Systems, Inc.
29
0
2
4
6
8
10
12
14
16
18
20
FY'00
FY'01
FY'02
FY'03
FY'04
FY'05
FY06
FY07
CIV
CIV Revenue Trends
CIV Timeline of Events
FY02-03 -
CT designed out
FY04 -
DX & PET ramp, Q4 TGS acquisition
FY05 -
MR production full swing & TGS
FY06 -
Design phase out of 2D Business; crossover new  business; SOHARD acquisition

©
2005 Mercury Computer Systems, Inc.
30
Transition in Revenues FY05 –
FY07
0
10
20
30
40
50
60
FY05
FY06
FY07 Plan
New
Legacy
22%
78%
83%
17%
Legacy
New
59%
41%

©
2005 Mercury Computer Systems, Inc.
31
Visualization Sciences Group (VSG)
•
Industry
Geosciences, visualization and computation
•
Products & Services
Visualization software toolkits (OIV, amira
®
)
High-performance computers
Custom engineering services
•
Segments
Oil & gas visualization –
Growth > 20%

©
2005 Mercury Computer Systems, Inc.
32
VSG –
Oil/Gas Industry Workflow
Data Processing
Seismic
Interpretation
Structural Modeling
Reservoir modeling,
characterization & simulation
Flow Simulation
Well Planning
Production
Mercury SOFTWARE expertise:
Mercury SOFTWARE expertise:
•
3D volume rendering & mesh for huge
data sets
•
Cluster rendering and image compositing
•
Remote visualization
•
Collaboration and immersive VR
capabilities
Economics
Mercury HARDWARE SOLUTIONS:
Mercury HARDWARE SOLUTIONS:
•
Cell BE-based computing cluster
•
Algorithms optimization & mapping
•
High-performance visualization cluster systems

©
2005 Mercury Computer Systems, Inc.
33
Acquire
Interpret &
Visualize
Process
Data migration,
mathematical
transformations,
complex signal
returns…
3D image
interpretation
& visualization
Increase data throughput, dramatically accelerating imaging workflow
Main characteristic of this activity:
Need to compute and analyze HUGE datasets (Terabytes)
3D server
3D server (Thin
client)
& display wall,
VR …
Data acquisition
& sensor
correction
Mercury’s Offerings to Oil & Gas Customers
Pre-stack
visualization
Display wall, VR…
Distribute &
Collaborate

©
2005 Mercury Computer Systems, Inc.
34
Addressable Markets Overview
•
VSG’s strategy: exploit short-term opportunities like seismic data
processing (SDP), and s/w needs for 3D tools to fund entry into
larger segments in the oil & gas market
•
Oil & gas visualization customers’
needs are increasing and our
OIV V6.0 will provide substantial added value and support for
customers to take advantage of large existing or new clusters
•
SDP for image reconstruction growth is driven by exploration
which is at all-time high and expected to remain that way for at
least 2-3 years
in $M
2006
2007
2008
2009
2010
2011
Public Sector Research
10
12
15
18
20
25
Oil & gas Visualization
50
60
70
80
90
100
Oil & Gas Seismic DP
100
110
120
140
160
200
Total served
160
182
205
238
270
325
MARKET NOT SERVED TODAY
MARKET SERVED TODAY
TARGET MARKET PLANNED

©
2005 Mercury Computer Systems, Inc.
35
VSG Competition
•
Mainly small regional companies in the $10-15M
range, such as Coin3D, Hue, etc.
•
In some segments we compete with our
customers: Schlumberger, Landmark, etc.
•
Competitive advantages:
ScaleViz and LDM (Large Dataset Module) extensions
Multi-platform and laptop support
Remote client
Clustering software
amira
®
for oil & gas applications
GPU proprietary compression

©
2005 Mercury Computer Systems, Inc.
36
Life Sciences Group (LSG) Summary
•
Products & Services
Life Sciences SCOPE
OEM products (systems & software)
Recon, visualization, servers, acquisition
19+ years of medical OEM experience.
Open Innovation expertise:
Nvidia GPUs, MGH DBT mammo, Erlangen IMP CT, MCW MRI acq.
s/w, Franhoffer Inst. Cardiac SW
Medical Advisory Board
Clinical sites
•
Segments
DMI –
Diagnostic Medical Imaging modalities
Market growth of 3% to 10%
PACS –
Picture Archiving and Communications System
Market growth of 12+% and higher growth in 3D
Microscopy & Biotech Visualization
High market growth of 20+%

©
2005 Mercury Computer Systems, Inc.
37
Acquire
Visualize
•
Image reconstruction, processing, and visualization
•
Embedded components and integrated solutions
•
Professional services & support
Manage
Distribute
Life Sciences Imaging Workflow: Products
•
Visage VR    
Volume Rendering
•
Visage WS
Workstation
•
AMIRA research
Reconstruct
•
Visage
™
RT Image
Reconstruction
•
GPU Acceleration
•
CELL Technology
Acceleration
•
Multi-channel 
MRI  Receiver
•
CT Gantry
Dosage
Controllers
•
Visage PACS
•
Visage CS      
Thin Client/Server
•
Visage
PACS
•
Broad end-to-end medical systems OEM solution portfolio
•
All steps from scanner output to end user

©
2005 Mercury Computer Systems, Inc.
38
A Selection of Our Customers
•
Visage VR    
Volume Rendering
•
Visage WS
Workstation
•
AMIRA research
(over 3000 sites
worldwide)
•
Visage RT Image
Reconstruction
•
Visage MR
•WIPS
•
CT Gantry 
Controllers
•
Visage PACS
•
Visage CS      
Thin Client/Server
Acquire
Visualize
Distribute & Manage
Reconstruct

©
2005 Mercury Computer Systems, Inc.
39
LSG Medical Imaging Macro Market Conditions
Medical Market Transition
Aging population
More diagnostic imaging
PET, CT and Ultrasound high growth, MR and XR flat
(except oncology machines like Mammo and LINAC)
Interventional radiology a reality with more compute
power
Better acquisition sensors
More data
More
compute intensive tasks
Applications and computation moving
•
From gantry side to PACS
•
From diagnostic radiologist on-site to remote or central reading
PACS growing worldwide
Reimbursements
•
Down in U.S. and most of Europe for all modalities and PACS
•
Up in US for 3D reading

©
2005 Mercury Computer Systems, Inc.
40
Reimbursement in 3D Growing
•In late 2005 the US announced an increase for 2006 in 3D reimbursement rates of 30% at hospitals
(24% at independent imaging centers), if one diagnoses 3D from an independent workstation or PACS.
3D amongst the very few diagnostic reimbursement codes to go up !
•3D CPT Code (Hosp Outpatient)
76375 (05, replaced by ->)  76376 (06, Modality)  76377 (06, Ind. Workstation)
•
-----
------
-----
•Reimbursement (Technical)
97.70
36.52                            98.82
•Reimbursement (Professional) 
8.34
10.99                            43.20
•
-----
------
-----
•Total
$106.04
$47.51
$138.02
•
•3D CPT Code (Img. Center)
76375 (05, replaced by ->)  76376 (06, Modality)  76377 (06, Ind. Workstation)
•
-----
------
-----
•Reimbursement (Technical)   
140.98
133.02                           141.74
•Reimbursement (Professional)  
8.34
10.99                             43.20
•
-----
------
-----
•Total
$149.32
$144.01                          $184.94
•The 'greater than 16-slice' category of CT scanners is the fastest growing and largest segment
of CT right now.
•About 1,200 64-slice systems have been ordered since mid-2005, and the installed base hovers
at a rapidly growing 600.

©
2005 Mercury Computer Systems, Inc.
41
Addressable LSG Markets

©
2005 Mercury Computer Systems, Inc.
42
European 3D/4D Market –
F&S, 2003
•EU OEM Market 2008 80% of $220M = $160M
•US OEM Market estimate 2008 = $200M
•3D alone is a $360M OEM Market

©
2005 Mercury Computer Systems, Inc.
43
U.S. Turnkey Radiology PACS Market –
Growth Forecast

©
2005 Mercury Computer Systems, Inc.
44
LSG -
3D DMI & PACS Competitive Summary

©
2005 Mercury Computer Systems, Inc.
45
CIV Competitive Advantages
•
ISO 13485 certified and Visage CS and PACS are FDA
cleared !
•
Visage CS
Image quality and SPEED
Scalability
COTS platform
PACS integration, workflow advantages
•
Visage PACS
WEB distribution with failover technology
Flexibility and scalability
Only integrated 2D/3D image distribution system
•
Visage VR and RT (Cell or GPU)
Ease of integration into any OEM platform
Extensive volume libraries and recon algorithms
Image quality and ULTIMATE SPEED

©
2005 Mercury Computer Systems, Inc.
46
LSG Products Transforming the Diagnostic Workflow

©
2005 Mercury Computer Systems, Inc.
47
More Signal, Less Noise, Faster Scans
•
Visage
™
MR
Powerful drop-in upgrade to existing MRIs
Breakthrough 16-bit A/D technology
For high-field systems: Enables useful images during
breath hold or cardiac timeframes
For low-field systems: Provides dramatic image
quality and scan-time improvement
Side-by-side images demonstrate Visage MR’s superior
signal-to-noise ratio (SNR) and dynamic range.
WIPS –
In clinical validation

©
2005 Mercury Computer Systems, Inc.
48
Advanced 3D Reconstruction Solutions
•
Visage™
RT –
Award-Winning Technology
Pioneering GPU and Cell-based reconstruction
Reduces reconstruction times by 40x to 100x
•
Cell BE-Based Solutions
Cell Accelerator Board (CAB) –
180 GFLOPS
1U Dual Cell-Based Server –
410 GFLOPS
Enable advanced algorithms in routine procedures
Unparalleled throughput and image quality

©
2005 Mercury Computer Systems, Inc.
49
Award-Winning Advanced Visualization S/W
•
Visage™
WS -
Turnkey Medical
Workstation for OEMs
Full integration with PACS and modalities  
Customization for OEMs and PACS
providers  
Enables fast time to market
•
Visage™
VR -
GPU Accelerated
Volume Rendering
Multitude of advanced 3D visualization
methods
Unmatched levels of performance and
image quality
Seamless integration through flexible API

©
2005 Mercury Computer Systems, Inc.
50
Ultimate Performance Visualization
•
Visage
™
CS Thin Client/Server
The world’s first fully scalable thin client/server
Instant interactive viewing for 2D, 3D and 4D studies
Optimal use of existing PCs throughout the enterprise
Tight integration with PACS and modalities
•
NEW! Visage
™
Cardiac Analysis*
Thin client access to cardiac analysis functionality
Comprehensive package including LV and coronaries
2D/3D Anytime, Anywhere
* PRELIMINARY -
work in progress

©
2005 Mercury Computer Systems, Inc.
51
Industry-Leading 2D/3D Image Management & Distribution
•
Visage™
PACS
Instant image access for
web and thin clients
Cluster and failover
approach for optimum
availability
Fully scalable solution -
small to large sites
Flexible integration with 
imaging modalities and
RIS/HIS
Over 1,400 installations
worldwide

©
2005 Mercury Computer Systems, Inc.
52
Cutting-Edge Visual Data Exploration, Analysis, & Modeling
•
amira
®
3D Visualization
Powerful framework and toolbox for research
Unmatched interactive speed and visual quality
Supports a broad range of data formats
Develop complex patient models and perform
advanced treatment planning
Create spectacular presentations

©
2005 Mercury Computer Systems, Inc.
53
Professional Services -
Fast Time to Market
•
Expertise that ensures the customer’s
competitive advantage
Comprehensive services across the diagnostic workflow
Highest quality standards and certified products
•
Professional services for OEMs
Algorithmic optimization
Cell/GPU acceleration
Customized API and GUI
Integration into customer's framework
•
Professional services for dealers and
distributors
System integration and support services
Custom branding and versioning
Consulting and training

©
2005  Mercury Computer Systems, Inc.
Next: Mark Skalabrin, VP & General Manager    
Advanced Solutions Business (ASBU)
Break

©
2005  Mercury Computer Systems, Inc.
Mark Skalabrin, Vice President & General Manager
Leveraged Platform Investments
Semiconductor &
Communications Markets

©
2005 Mercury Computer Systems, Inc.
56
Leveraged Product and Technology Investments
•
Increasing multi-market leverage of R&D investments
Includes both organically developed and acquired technology
Significant trend reversal
Market
Investments
Leveraged
Investments
Cell
Solutions
3D
Imaging
Software
A/D & D/A
hardware
Algorithm
Libraries
GPU
Acceleration
FPGA
Solutions
Radar
SIGINT
SDR
Semi
Life
Sciences
Biotech
Comms
Seismic
NavSim
GPP
Solutions
•
Major competitive
advantage
Competitors in any one
segment must overcome
the leverage advantage
•
Required to enter
market niches
Most market segments
are too small to support
standalone investment

©
2005 Mercury Computer Systems, Inc.
57
Leverage Example: Cell BE-based Solutions
Cell
Solutions
Medical/
Biotech
Radar
Video
Gaming
Semi
Creation
Oil &
Gas
Intelligence
National
Labs
•
5-100x faster than conventional microprocessors
•
A strong match to Mercury’s unique capabilities
Architected to solve problems in the same way Mercury has been
solving problems for many years
•
Creating value in every major Mercury market segment
Driving next generation engagements with existing customers
Bridging us back to past customers
•
Leading to new market
opportunities
Over 2,000 leads
•
Established significant
relationship with IBM

©
2005 Mercury Computer Systems, Inc.
58
Semiconductor Creation Market
•
Supplying application-
enabling solutions to
leading OEMs
•
Growth driven by production
design wins
Mask generation
Wafer inspection
Reticle inspection
•
Positioned for the next wave
Mercury Cell BE-based solutions
uniquely meet market needs
Emerging new applications for
Mercury solutions
Strong Organic Growth
47% CAGR
FY 2002-2006
Mercury Semiconductor Segment  Revenue
FY 2002 –
FY 2006
$ 7.2 M
FY 2002
$ 33.2 M
FY 2006

©
2005 Mercury Computer Systems, Inc.
59
Semiconductor Creation Market Drivers
Consumer electronics driving the market
Demand for faster, lower cost, lower-power chips
Product life cycles getting shorter
Chip creation process getting harder
Increased time-to-market pressure
More complex physics and higher data rates as line widths shrink
New algorithms that need massive compute power
Mercury solutions allow
OEMs to keep pace as
requirements accelerate
Year 1
Year 2
Year 3
Moore’s
Law
Market
Requirements
12X
4X

©
2005 Mercury Computer Systems, Inc.
60
Mask Synthesis
Reticle Inspection
Wafer Inspection
Stepper/Scanner
Expanding Footprint in Chip Creation Chain
Mask Writing
Growing through expansion into adjacent
applications in the lithography process chain
New
Application
New
Application
Competitive Differentiation
•
Solutions that solve the most challenging computing problems
•
End-to-end integration of application-enabling technology
•
Customer-specific solution optimization
•
Focus on long-term customer success

©
2005 Mercury Computer Systems, Inc.
61
Growth Opportunity: EDA Mask Synthesis
•
New application for Mercury in
Electronic Design Automation
(EDA) space
•
Complex physics processing to
support next generation lithography
Resolution Enhancement Technology
(RET) including Optical Proximity
Correction (OPC)
Design For Manufacturing (DFM),
replacing experimentation with simulation
•
45nm node has blown through the
capability of mainstream
processing technology
Up against size, power, and cost limits
Quotes from end users
“It takes 8 days with 500
nodes to do OPC on a single
[65 nm] chip layer …
and we
need it to be 10 to 100 times
faster”
“We have 10,000 blades
to do
RET”

©
2005 Mercury Computer Systems, Inc.
62
Growth Opportunity: EDA Mask Synthesis
•
Challenge is to turn weeks into days
and days into hours
•
Mercury Cell BE-based solutions
ready to meet the market needs
Teraflops to speed application by 10x to
100x
Mercury middleware, algorithm, and
application expertise
Improvements in all three dimensions -
size, power, and cost
•
Working with a leading EDA
company to deploy a solution by the
end of the year
Mercury 28 node
Cell
BE-based cluster
Goal: Performance
exceeding 1,000
mainstream processors

©
2005 Mercury Computer Systems, Inc.
63
Commercial Communications Market
•
Providing application-specific
solutions for wireless
infrastructure applications
Primary focus is close to the radio
•
Targeting niche applications
where we add significant value
Lower volume, higher value focus
•
Growth opportunity
AdvancedTCA
DSP and FPGA
compute solutions

©
2005 Mercury Computer Systems, Inc.
64
OEMs are looking outside for innovation
•
Data and multimedia driving broadband
everywhere
-
needs new network infrastructure
solutions
•
OEMs emerging from a downturn with scaled-
down development staff
•
Strong time-to-market demands for new
solutions
•
New technology solutions required with limited
in-house expertise
Communications Growth Drivers

©
2005 Mercury Computer Systems, Inc.
65
Communication Platform for Growth
•
Deployed in the labs of top
tier Telecom OEMs
Advanced base station and
radio network prototypes
•
Satellite beamformer design
win
•
Multi-market leverage
emerging
Leverage in and leverage out
•
Significant year over year
platform revenue increase
3.7x increase FY06 to FY07

©
2005 Mercury Computer Systems, Inc.
66
Network
Mercury
Beamformer &
Base station
Example: Satellite Communication Solution
•
Ground-based communications system to support
Ancillary Terrestrial Component (ATC)
ATC allows satellites to work together with terrestrial
communications systems to support spectrum sharing
•
Very hard problem
One of the highest performance signal
processing systems ever deployed
Over 100 FPGAs providing 20+TeraOps per
chassis
High availability management
•
Mercury is uniquely
positioned with the
technology and expertise to
provide the required solution

©
2005 Mercury Computer Systems, Inc.
67
Advanced Solutions Summary
•
Renewed strength in multi-market leverage
Strong leverage of both organic and acquired
products, technology and capabilities
•
Well-positioned for next wave in the
semiconductor creation segment
Strong opportunities in existing and new
applications segments
•
Focusing communications investments to
provide high value
Delivering superior architected solutions to solve
hard problems

©
2005  Mercury Computer Systems, Inc.
Philippe M. Roy, Director & General Manager
Navigation & Simulation Systems Group
Unmanned Systems Market

©
2005 Mercury Computer Systems, Inc.
69
Mercury’s Combined Capabilities 
Aeronautical Applications & Systems Knowledge
3D Visualization
Embedded Design
Sensor Processing
Ruggedization
RF
Airborne Devices
Display Sub-systems

©
2005 Mercury Computer Systems, Inc.
70
Product: VistaNav
TM
-SSR
Ground Control Station
Airborne Components
Smart Surveillance & Reconnaissance Systems
Communication
Satellite
•
Sensors
•
Video feature extraction
•
Navigation
•
Flight control
•
Data compression
•
Encryption
•
Collision avoidance
Camera

©
2005 Mercury Computer Systems, Inc.
71
Airframe Platform
Vector-LRE
Costs
Partnership with innovative airframe designers

©
2005 Mercury Computer Systems, Inc.
72
Synthetic Vision: The Core of the System
Vastly Improved Operational Capabilities
•
Increased situational
awareness
•
Flexible software
integration platform
Payload (video, IR, radar)
Navigation
Mission control
•
Scalable
Portable ground station
Trailer multi-system
Multi-screen control center
•
3D real-time data
dissemination

©
2005 Mercury Computer Systems, Inc.
73
A Broad Range of Applications
•
Forest fire detection and monitoring
•
Oil and gas pipeline monitoring
•
Power line monitoring
•
Precision agriculture
•
Border surveillance
•
Surveillance and reconnaissance
High-growth Market Opportunities
Data sources include: Teal Group, Frost & Sullivan & Forecast International (2004-2006)
-
500
1,000
1,500
2007
2008
2009
2010
2011
2012
Civilian UAV Market in $M
-
2,000
4,000
6,000
8,000
2007
2008
2009
2010
2011
2012
Military UAV market in $M

©
2005 Mercury Computer Systems, Inc.
74
Unmanned Surface Vessel
VistaNav controlled unmanned system
•
Autonomous hydrofoil-
multi-hull surface vessel
•
Ultra long endurance
•
High payload capacity for 
on-board rugged
electronics
•
Remote surveillance &
security in open waters
•
Military & commercial
applications
Image duplicated with permission from Harbor Wing Technologies

©
2005 Mercury Computer Systems, Inc.
75
Nav-Sim Potential
in Thousand USD
FY07
FY08
FY09
FY10
FY11
FY12
Commercial & Military avionics
550
      
1,750
   
4,000
    
9,500
    
24,500
  
42,000
   
Consumer Avionics
1,300
   
2,500
   
4,000
   
6,500
   
8,000
    
10,000
  
Unmanned Systems
450
      
1,750
   
7,850
   
19,000
 
39,000
  
72,500
  
TOTAL AVIONICS
2,300
   
6,000
   
15,850
 
35,000
 
71,500
  
124,500
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
FY07
FY08
FY09
FY10
FY11
FY12
NAV-SIM POTENTIAL
Unmanned Systems
Consumer Avionics
Commercial & Military avionics

©
2005 Mercury Computer Systems, Inc.
76
Why are We Unique?
ULTIMATE SITUATION AWARENESS
AFFORDABLE YET HIGHLY CAPABLE SYSTEMS
UNIQUE MINIATURIZED AIRBORNE INTEGRATION
SUPERIOR DATA EXPLOITATION & DISSEMINATION
INNOVATIVE UNMANNED VEHICLES
ACTIVE COLLISION AVOIDANCE SYSTEM

©
2005  Mercury Computer Systems, Inc.
Financial Overview
Bob Hult, SVP, Chief Financial Officer

©
2005 Mercury Computer Systems, Inc.
78
Mercury: The Company
•
Well-positioned in attractive and
growing markets
•
Niche market strategy
•
Leverage technology investments
across markets
•
Commitment to customer success
•
Solid operating model

©
2005 Mercury Computer Systems, Inc.
79
As Revenue Follows Technology Cycles
Echotek –
A/D-D/A
Revenue ($M)
$186
$250
$150
$181
$141
$107
$86
$180
$235-245*
$236
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007E
June Fiscal Year End
*Per Company guidance, October 26, 2006 earnings conference call
PowerPC
RACE++
MP-510
Cell BE
Processor
DSP/GPU / FPGA Processors
Northstar
Ensemble
PowerStream 7000
TGS –
3D
Momentum -
SBC
SoHard –
PACS
ARC -
RF
Rapid IO

©
2005 Mercury Computer Systems, Inc.
80
EBITDA Follows Revenue
$M
$42
$41
$57
$5
$10
2003
2004
2005
2006
2007E
*Per Company guidance, October 26, 2006 earnings conference call

©
2005 Mercury Computer Systems, Inc.
81
Defense Market Growth Drivers
•
Collaborative COTS
•
Radar –
strong base
•
Battlefield communications
•
Unmanned systems
•
DOD spending outlook

©
2005 Mercury Computer Systems, Inc.
82
Advanced Solutions Growth Drivers
•
Communications/Satellites
(ATC)
•
Semiconductor Equipment
Wafer & reticle inspection
Mask writing systems
Stepper/scanner control
Electronic design automation
(EDA)

©
2005 Mercury Computer Systems, Inc.
83
Commercial Imaging & Visualization Growth Drivers
•
Forefront of socio-economic
issues
•
Expanding product portfolio
across life sciences imaging
workflow
•
Transformation of the
diagnostic workflow to 3D
•
Oil & Gas exploration –
huge
datasets

©
2005 Mercury Computer Systems, Inc.
84
Fiscal Year 2007 Guidance
Fiscal Year Ending June 30, 2007
Revenues ($M)
$235-245
      GAAP 
Non-GAAP
Gross Margin
57%
EPS
$(0.50)
$0.29
Notes:
1)
Figures in millions, except percent and per share data which includes
adjustment for contingent convertibles, in accordance with GAAP
2)
Company guidance, October 26, 2006 earnings conference call
•
Impact of equity-based compensation costs related to
FAS 123(R) of approximately $9.8M excluded from non-
GAAP
•
Acquisition-related amortization of approximately $7M,
Q1 in-process R&D charge of $3.1M, and Q1
restructuring impairment charge of $800K excluded from
non-GAAP

©
2005 Mercury Computer Systems, Inc.
85
Q2 Fiscal Year 2007 Guidance
•
Impact of equity-based compensation costs related to
FAS 123(R) of approximately $2.6M excluded from non-
GAAP
•
Acquisition-related amortization of approximately $1.7 M
excluded from non-GAAP
Notes:
1)
Figures in millions, except percent and per share data which includes
adjustment for contingent convertibles, in accordance with GAAP
2)
Company guidance, October 26, 2006 earnings conference call
Quarter Ending December 31, 2006
Revenues ($M)
$52-54
      GAAP 
Non-GAAP
Gross Margin
55%
EPS
$(0.48)-(0.43)
$(0.23)-(0.19)

©
2005 Mercury Computer Systems, Inc.
86
Timeless Business Model
*Per Company guidance, October 26, 2006 earnings conference call
Non-GAAP 
FY04
FY05
FY06
Guidance
FY07*
Timeless
Business Model
Revenue
100%
100%
100%
100%
100%
Gross Margin
67%
66%
62%
57%
60+%
SG&A
30%
29%
34%
R&D
21%
20%
25%
Income from Operations
17%
17%
3%
3%
16-18%
Emerging

©
2005 Mercury Computer Systems, Inc.
87
Focus on Working Capital
Inventory Turns
8.0
4.9
6.9
5.4
4.6
5.5
2003
2004
2005
2006
2007E
Model
•
Supply chain
transformation
Competitive advantage for
Mercury and customers
•
Quality
Customer satisfaction
Days Sales Outstanding
45
50
59
53
51
43
2003
2004
2005
2006
2007E
Model

©
2005 Mercury Computer Systems, Inc.
88
Strong Balance Sheet
Historically strong
balance sheet
Net cash positive
Cash generation
focus
* Adjusted for October 19 mortgage payoff
** Convertible senior notes offering
*
Quarter ended September 30, 2006
Cash and Equivalents
$142
Total Current Assets
$172
Total Assets
$368
Total Debt
$125
Total Liabilities
$184
Stockholders’
Equity
$184
**

©
2005 Mercury Computer Systems, Inc.
89
Solid Operating Model
•
Return to growth
•
Value-add drives operating
margin
•
Working capital efficiencies
•
EBIDTA potential
•
Strong balance sheet

©
2005 Mercury Computer Systems, Inc.
90
Why Invest in Mercury?
•
Strong competitive position in attractive and
growing markets
•
Large growth opportunities in 3D medical
imaging, semiconductor applications, defense
communications, and synthetic vision
•
Leverage technology investments across
multiple applications in diverse markets
•
Open innovation strategy through partnerships
and acquisitions
•
Strong financial position supports continued 
investments in technology and new market
development

©
2005  Mercury Computer Systems, Inc.
Closing Remarks
Jay Bertelli, President, CEO & Chairman

©
2005 Mercury Computer Systems, Inc.
92
www.mc.com
NASDAQ: MRCY