In 2004, TANDBERG made great strides in making business-quality visual communication accessible to everyone who needs to be more productive and build stronger relationships. Our customers know what an advantage it is to be where they need to be, and to be there now.

Inflection points are dramatic advances that cause a move from early adopter to early
majority in a technology lifecycle. In 2004 the key inflection points were video telephony, the implementation of H.264 and the advent of IP utilization for the network. Going forward into FY 2005 we see new inflection points such as Firewall Traversal, SIP and 3G as continued
market validation of visual communication drivers.

TANDBERG is driving the market for visual communication through promoting new applications for video, developing systems that are as easy to use as placing a phone call or sending an e-mail, and designing form factors for any workspace – from desks to classrooms to courtrooms. In 2004, TANDBERG reached more customers and offered more products than at any time in our history.

The company also achieved impressive sales growth and revenues, building strength throughout the year, resulting in a fourth quarter where TANDBERG set records for quarterly revenue, operating profit, unit volume, and earnings per share. Our performance is the result of a strong business model, a company-wide commitment to achieving growth goals, and expanding the market for visual communication in our three theatres: Americas, EMEA, and Asia Pacific.

MARKET EXPANSION The increasing adoption of camera phones, webinars and streaming video is setting expectations for business-quality visualization in the workspace. Over the past year, the rapid expansion of Internet Protocol networks to deliver video, voice, and data has also reached an inflection point – dramatically expanding the market for our solutions and service. Currently, more than 50 percent of our customers rely on IP, and TANDBERG is providing a broad range of IP-ready endpoints and network infrastructure to deliver business-quality visual communication. Our customers leverage their existing IP investments while improving employee productivity.

As the experts in IP video, TANDBERG is partnering with companies that are industry movers. This year we delivered tightly integrated solutions with Microsoft Corp. and Cisco Systems, Inc. technologies. Our customers benefit from maximizing existing business systems; their employees see familiar interfaces to make using video even simpler – speeding adoption and increasing usage.

TANDBERG is also expanding the market for visual communication through acquisition. In 2004 we purchased Ridgeway Systems and Software Ltd. and have already embedded the technology into our own products. This new groundbreaking IP solution, called Expressway, provides firewall traversal and a global dial-plan to connect enterprises visually to their customers, suppliers and home office workers.

TANDBERG is making visual communication integral to the business processes of a host of industries as well. TANDBERG launched industry-specific solutions for the healthcare, education, financial services, legal and judicial, and public sector markets. In the coming year, we will also promote visual communication in manufacturing and to service providers.

PERFORMANCE AND INVESTMENTS For the year, TANDBERG exceeded our revenue goals and ended the year in a strong position to meet growing market demand in our industry. Revenue in 2004 was 305.0 MUSD compared with 223.3 MUSD in 2003. Operating profit was 74.5 MUSD for 2004 and 46.0 MUSD for 2003.

We continued to generate strong cash flow, ending the year with a cash balance of 242.9 MUSD and an equity ratio of 75.8 percent as of December 31, 2004.

We invested in expanding the organization in 2004. To take advantage of the significant market potential in Asia Pacific, we built upon our presence there by establishing Hong Kong as operational headquarters, and Benny Lee joined TANDBERG as the new president of Asia Pacific.

THE OPPORTUNITIES AHEAD In 2005, we will be an industry catalyst by aggressively investing in technology, developing new industry applications, and increasing our strategic alliances. We will continue to build on the strong foundation provided by our advanced endpoint MXP platform, our carrier-class multipoint control unit, TANDBERG MPS, and the Expressway solution. TANDBERG will reinforce its industry leadership, removing the barriers to adopting visual communication.

SPECIFICALLY FOR 2005,
WE HAVE SET FIVE OBJECTIVES THAT THE ENTIRE COMPANY IS FOCUSED ON:

1	Demonstrate technology leadership by creating more TANDBERG "Firsts", continuing to work with Cisco and Microsoft in an effort to validate and expand visual communication and creating vertical solutions to improve user productivity.
2	Expand the market for network product sales, including the TANDBERG Gateway, Gatekeeper, Expressway Solution, MPS and TMS.
3	Implement a global survey process and achieve a Customer Satisfaction Index (CSI) record of 4.25 out of 5.0 in 2005.
4	Improve linearity of revenue permitting a balanced seasonality within the quarter and calendar year.
5	Deliver industry-leading earnings, focusing on profitability and shareholder value.

TANDBERG is a diverse, dynamic, and growing global organization, but we remain true to our values and mission — creating a corporate culture that values integrity and teamwork, encourages innovation at every level, and takes great pride in serving our customers. We appreciate the contribution of every employee, the joint efforts of our partners, and the
support of our shareholders.