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GE Capital Technology & Business Services 1Q10 Industry Research Monitor To sign up to receive an electronic copy of this Industry Research Monitor, please visit: www.gelending.com/IRM CONTENTS: Industry Headlines/Macro Environment 1 Other Industry News & Developments 2 Technology Industry Financing Activity 7 Transaction Capabilities & Conference Calendars 9 Technology Industry Headlines Macro Environment • Following a decline of 4.5% in 2009, IDC says worldwide 2009 was no doubt one of the most volatile on record for the tech spending is on track to increase 3% in 2010. In the technology industry. The collapse in demand to finish 2008 United States, IT spending growth is forecast to under- followed through into 2009 until hitting bottom in the early perform emerging economies but outperform most other part of the year. Since that bottom about a year ago, demand developed regions. for technology infrastructure has shown a marked turnaround with accelerating improvement through the end of 2009. Year- • President Obama named Howard Schmidt as the new U.S. over-year growth is now commonplace albeit against weak cybersecurity czar. Most recently, Schmidt served as comparisons. The 3rd and 4th quarters of 2010 will offer a president of the Information Security Forum and arrives at more valid test of the durability of this IT spending recovery. the White House with 40 years of experience including Not surprisingly, the confidence of senior executives in the IT serving as the White House security advisor to George W. industry has also been on the upswing. Results of a survey Bush, as well as long-held positions at eBay and Microsoft. of industry executives conducted by GE Capital late last year showed that Tech CEOs were the most optimistic across all • After a 2% drop in 2009, global retail consumer electronics industries with 77% of the respondents expecting growth in sales are expected to be flat in 2010, according to the 2010, forecasting on average revenue growth of 10%. Consumer Electronics Association. That follows growth of 14% in both 2007 and 2008, and 17% growth in 2006. IT Spending in U.S. – Strong acceleration to finish 2009 U.S. IT Equipment & Software Capex (1Q05 – 3Q09) • Microsoft named Peter Klein as the company’s CFO 20 following the departure of Chris Liddell at the end of 2009. 15 ) % 10 ( • Rackspace confirmed that a server in one of its data R A 5 A S centers was hit in a massive cyberattack that apparently e g 0 n originated in China and targeted Google and at least 20 a h -5 C other companies. The cyberattack aimed to steal y l r e -10 proprietary code and intellectual property. t r a u -15 Q • Worldwide PC shipments topped 90 million units in Q4, -20 Source: Bureau of Economic Analysis increasing 22.1% from a year ago, according to data from -25 05 05 05 05 06 06 06 06 07 07 07 07 08 08 08 08 09 09 09 09 Gartner. 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Michael H. Zimm, CFA SVP, Senior Research Analyst 646-428-7015 • [email protected] © Copyright 2010 General Electric Capital Corporation. All Rights Reserved. GE Capital – Industry Research Monitor: Technology & Business Services 1Q10 • IBM is also buying National Interest Security, a privately Software/IT Services held company intended to strengthen IBM’s position in the public sector IT market. Steady and reliable. Software and IT Services on average • Microsoft acquired Sentillion Inc., a privately held remain the most resilient technology sectors to macro company specializing in software for the healthcare headwinds. That being said, the growth in these sectors industry. Microsoft also acquired Opalis, a provider of during 2010 may not keep pace with the rebound expected in datacenter process automation software. the more severely depressed hardware sector. IDC’s most • Oracle acquired Silver Creek Systems, Inc. a provider of recent constant currency forecast for 2010 calls for overall product data quality solutions. global spending on software and IT services to be 2% and 3%, • Lawson Software acquired Healthvision Solutions, an respectively compared to 5% growth in hardware. This application and services provider to the healthcare subdued growth outlook for software and services spending industry for $160 million cash. reflects a relatively higher base compared to hardware • BMC Software acquired privately held Phurnace Software, coupled with the lower value of contracts signed in the past a developer of automation software. year and continued caution toward new project-based • CA acquired privately held Oblicore, a developer of service spending in mature economies. Nonetheless, within software level management software. and services, we continue to observe positive momentum • TIBCO Software acquired privately held Foresight around the recession-induced themes of improved efficiencies Corporation, a provider of transaction automation via transformative architectures such as Virtualization, XaaS solutions and EDI productivity tools. and Cloud Computing as well as solutions tied to security • VMware acquired Zimbra, a vendor of open-source email and increasingly stringent regulatory oversight. and collaboration software, from Yahoo! Inc. • Symantec acquired Gideon Technologies, a provider of security content automation technology. Strategic Updates • CACI International acquired SystemWare, Inc., a provider of physical and cybersecurity solutions. • Accenture suffered a legal defeat on all of the preliminary • SRA International, Inc. acquired privately held Perrin issues in a case it is defending against British Gas’ parent Quarles Associates (PQA), Inc., specializing in company, Centrica. Centrica is claiming approx. $300m in environmental program development and implementation relation to the alleged failure of a customer billing system. for air quality and climate change. • Computer Sciences entered into a 10-year master service • Informatica acquired Siperian for $130 million cash. agreement with Zurich Financial Services. Siperian provides Master Data Management (MDM) • Advent Software announced further expansion into the infrastructure technology. Asia-Pacific region with the opening of a new office in • Unisys sold its health information management business Beijing. to Molina Healthcare for $135 million cash. • HP Enterprise Services entered into a seven-year • Digital River and Softonic, a European software download infrastructure services agreement with Eli Lilly. site, announced a strategic partnership, which includes • TeleCommunication Systems and Sybase agreed to settle Digital River acquiring a less than 15 percent ownership two patent infringement lawsuits. stake in Softonic for $26m cash. • The U.S. State Department awarded CGI Federal a 10-year blanket purchase agreement with a ceiling of up to $395 million. Management Changes • McAfee Inc. and Facebook have announced a partnership to provide additional security protection to the more than • SAP’s CEO Leo Apotheker resigned after his contract was 350 million Facebook users. not renewed. SAP will now be run by two co-CEOs who • Microsoft will begin charging for its cloud services have been promoted internally: Bill McDermott, the development platform Azure. company’s head of field organization, and Jim Hagemann Snabe, head of product development. • IBM Lotus GM Bob Picciano has been promoted to GM Mergers & Acquisitions of all software sales at IBM. Alistair Rennie, previously vice president of Lotus development and support, has taken • IBM acquired privately held Guardium, a provider of real- over the IBM Lotus GM post. time enterprise database monitoring and protection • Mischel Kwon resigned as director of the Homeland technology. IBM also purchased privately held Lombardi, Security U.S. Computer Emergency Readiness Team and is which makes software for streamlining product planning, moving to EMC’s RSA security division. human resources, procurement and supply chain • CA has tapped board member William E. McCracken to be management. the company’s new CEO and chairman. 2 © Copyright 2010 General Electric Capital Corporation. All Rights Reserved. GE Capital – Industry Research Monitor: Technology & Business Services 1Q10 • The U.S. International Trade Commission ruled that Nvidia Semi/Capital Equipment is violating three patents owned by Rambus. • Samsung Electronics and Rambus announced an Above average seasonality. According to data from the agreement settling all legal claims between them. Semiconductor Industry Association (SIA), worldwide Samsung will also invest $200M in Rambus stock. semiconductor sales during 2009 were $226.3 billion, down • Applied Materials announced that several of its 9% from 2008. The three-month moving average of sales in employees, including the former head of Applied Materials December increased 29% from December 2008 but declined Korea, were arrested in South Korea. Applied said the 1.2% month-month from November. Sales in the final quarter arrests were related to a “criminal investigation into the of 2009 were supported by healthy demand in a variety of alleged improper receipt and use of a customer’s end markets including PCs, cell phones, and consumer confidential information.” electronics. Following a strong finish to 2009, a return to • The U.S. Attorney for the District of Columbia announced normal seasonal patterns suggests a modest slowdown in the that the owner of MVP Micro, Inc., has entered a guilty first quarter of 2010. For all of 2010, unit sales of personal plea to the charge of trafficking in counterfeit computers