About Color Kinetics

• Founded in 1997; Leader in Intelligent Solid State Illumination

Technologies

• Creator of Chromacore a patented technology which

generates millions of colors and colored lighting effects via
microprocessor-controlled red, green and blue LEDs

• Dominant intellectual property position

• 8 US Patents; 80+ filings pending

• Provide products and solutions to market through own brand,

private label, OEM and licensing

• $48M in private equity financing

• Projected 2002 revenues of $30+ million

 LED Technologies
Common criteria for selecting among artificial light technologies included
 efficiency (how much light was generated per unit of electrical energy applied),
spectral distribution (what “colors” were generated1)
duration (how long before the device needed to be replaced).

Industry
studies estimated the 1999 total LED component market size at $2.3 billion
and the high brightness LED market at $680 million. The high brightness sector of this
market was expected to grow 21% annually in the following five years.

Industrystudy suggested that replacing the world’s 24 million incandescent traffic

signals with LED signals would save nearly $2.5 billion and reduce electrical usage by
25 million megawatts, eliminating the equivalent of a nuclear generating station.
Chromacore® Technology

 Chromacore technology digitally mixes millions of

colors by pulsing electricity through LEDs at different
rates, creating "intelligent" lighting displays for interior
and exterior applications
 a microprocessor is used to control both the

combination and intensity of colored light in a color-

mixing scheme.
 the resulting colored light appeared more deeply

saturated and was much more efficient than colored

light traditionally created by filtering white light.
Chromacore® Technology
Key benefits of Chromacore technology include:

• 100,000 hours source life  11.4 years

of use
• Low power consumption  Lower
energy costs
• Low heat output  No heat damage
• No UV emissions  Safe for artwork
and fabrics
Product Segment

 C-series was the first product line based on Chromacore technology

introduced by color kinetics in November of 1997.
 Products in the C-Series line was based on entertainment lighting.
It included the C-30, C-75, C-200 and the C-200 WaterColor-C/H. 
 iColor line of architectural lighting product was introduced in May
1999. Products in the iColor line included icolor MR and iClolor
Cove.
 iColor MR lamps were designed to the MR16 lamp standard and
iColor Cove was a 6-or-12-inch tubular or cylindrical lighting fixture.
 By late 1999 iColor MR and iColor Cove had become CKI’s most
popular products.
 Unit prices to distribution for C-Series products ranged from $270 to
$850; iColor products ranged from $88 to $120. CKI also provided
controllers, power supplies and other accessories to integrate C-
Series and iColor products into a lighting system.
Target Segment

 Theatre and Entertainment - First target market

 Retailtainment
 Mass Market & Consumer Products
 Niche Markets (Luxury Boats, Swimming

Pools etc)
 Expand via OEM and licensing to other

industry players
Areas of Concern
 CKI’s greatest concerns was the cost of assembling the digital
technology using its American manufacturing partners. They
wanted to work with a Chinese manufacturer and warehousing
agent, that could handle all production shipped over to Asia. At
first CKI would begin to manufacture molds for its lighting
products in Asia. Then move high-volume products, the iColor
Cove and iColor MR, to an offshore low-cost model.
 The other concern was the current cost of LEDs had a
significant impact for CKI. But even while the management
team thought about lowering costs in an increasingly
competitive environment so that they can achieve better
growth prospects, they did not want to stray from their initial
vision, especially as they contemplated an IPO.
Options Available
 Expand within current “retailtainment” and visual
merchandising markets
 Expand “upwards” into higher performance

theatrical and entertainment markets

 Expand toward mass market with consumer

products
 Expand into other niche markets
 Expand via OEM and licensing to either lighting

industry players or other niche industries.

Option1- Expand within current
“retailtainment” and visual merchandising markets
 Pros:
 There is a lot of potential in the retailtainment and
visual merchandising markets
 There products were positioned well globally
however, they wanted complete hold of the market
 There are already a dozen high-end retailers with
more than 100 stores which are good targets and
additionally many more have also shown interest.
 They wanted to capture “Early market” being an
innovator, technological enthusiasts and visionaries.
 Big markets like these have the funds, are easy to
reach by the Salesforce and have compelling reasons
to buy.
Option1- Expand within current
“retailtainment” and visual merchandising markets
 Cons:
 Huge potential is there but if market downturn causes
retailers to delay or cancel store opening or remodels,
that could have a huge negative impact.
 Another important point is that these firms would be
more price-sensitive.
 Crossover between retailtainment and theatrical/
entertainment market.
 Market have entrenched competitors which are not
particularly interested in technological advancement.
 Also, as dealing in disruptive technologies, it is difficult to
predict future markets from current customers.
 For these markets like retail, the main business is not
fashion or appearance of the store.
Option 2- Expand “upwards” into higher
performance theatrical and entertainment markets
 Pros:
 With CKI’s technology and reputation, it brings more
opportunities for the products to be used in
theatrical/entertainment applications.
 CKI’s existing relationships with lightning designers gives them
additional mileage.
 Other high profile customers like Disney and Universal also
provides great opportunities.
 Casinos are also an attractive part of the market.
 CKI’s early projects like Loews Theatre sign in Times Square and
Boston Symphony Hall has given significant publicity for the
company.
 They have funds and a compelling reason to buy and is part of
their main business.
 There are no main competitors here and this will provide great
visibility for CKI.
Option 2- Expand “upwards” into higher
performance theatrical and entertainment markets
 Cons:
 Major obstruction here would be of the sales
strategy change. It needs to focus more on
lightening designers and single, large projects.
 Also, these segment requires more efforts in terms
of product development to accommodate desired
performance and ease of use unlike, simple
commercial architecture applications.
Option 3- Expand towards mass market
with consumer products
 Team had explored 2 categories of consumer
products: residential/house ware products.
 PROS:
 Higher Volume
 Higher visibility
 Assistance in building better capabilities across all

their markets.
 CONS:
 Creation of a distinctive brand image.
 Requirement of different technology development

& marketing efforts.

Option 4- Expand into other niche markets
 PROS:
 Start in a market segment where the industry

giants are least likely to go.

 They found many opportunities and

innovative usage of their products in this

segment.
 CONS:
 Customized and tailor made products was the

major requirement for this segment.

Option 5- Expand via OEM and licensing to either
lighting industry players or other niche industries

 OEM and licensing to lighting industry players

Pros
 Joint venture of the major players in the industry.

 Premium quality of suppliers

Cons
 Traditional image of CKI as an application players

as per its key supplier.

Option 5- Expand via OEM and licensing to either
lighting industry players or other niche industries
 OEM and licensing to lighting Small players
 Pros
 New market opportunity for the CKI
 Diversion of offerings which may lead to higher
valuations.
 Cons
 Changes will be required in business development
model
Conclusion
The best solutions would be to expand into niche
market. Because
 The Buyers in this industry have compelling

reasons to buy.
 No competitions in the short run.
 Gaining this market can bring large visibility to

CKI
 Aviabilty of funds to buyers.
 New market opportunity to the CKI.
Thank you!