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E QUITY REPORT

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ABOUT OUR FIRM

Software Equity Group is an investment bank and M&A advisory serving the software and technology sectors. Founded in 1992, our firm has guided and advised companies on five continents, including privately-held software and technology companies in the United States, Canada, Europe, Asia Pacific, Africa and Israel. We have represented public companies listed on the NASDAQ, NYSE, American, Toronto, London and Euronext exchanges. Software Equity Group also advises several of the world's leading private equity firms. We are ranked among the top ten investment banks worldwide for application software mergers and acquisitions.

Our value proposition is unique and compelling. We are skilled and accomplished investment bankers with extraordinary software, internet and technology domain expertise. Our industry knowledge and experience span virtually every software product category, technology, market and delivery model, including Software-as-a Service (SaaS), software on-demand and perpetual license. We have profound understanding of software company finances, operations and valuation. We monitor and analyze every publicly disclosed software M&A transaction, as well as the market, economy and technology trends that impact these deals. We're formidable negotiators and savvy dealmakers who facilitate strategic combinations that enhance shareholder value.

Perhaps most important are the relationships we've built and the industry reputation we enjoy. Software Equity Group is known and respected by publicly traded and privately owned software and technology companies worldwide, and we speak with them often. Our Quarterly and Annual Software Industry Equity Reports are read and relied upon by more than eighteen thousand industry executives, entrepreneurs and equity investors in sixty-one countries, and we have been quoted widely in such leading publications as The Wall Street Journal, Barrons, Information Week, The Daily Deal, The Street.com, U.S. News & World Report, Reuters, Mergers & Acquisitions, USA Today, Arizona Republic, Detroit Free Press, Entrepreneur Magazine, Softletter, Software Success, Software CEO Online and Software Business Magazine. Software Equity Group’s senior bankers have keynoted and spoken at more than one hundred software industry conferences and seminars, including Software Business, SoftExpo, Culpepper, VAR Conference, ACETECH, and the Arizona, Colorado, Chicago, Southern California, Denver, San Diego, Washington State and Boulder Software Associations.

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2Q 2011 Software Industry Equity Report Contents

U.S. ECONOMY: SOFTWARE INDUSTRY MACROECONOMICS ...... 2 IT SPENDING ...... 3 INTERNET RETAIL SPENDING AND ADVERTISING ...... 4 PUBLIC SOFTWARE/SAAS/INTERNET COMPANY STOCK PERFORMANCE ...... 4 PUBLIC SOFTWARE/SAAS/INTERNET COMPANY MARKET VALUATIONS ...... 5 PUBLIC SOFTWARE COMPANY MARKET VALUATIONS ...... 5 PUBLIC SOFTWARE COMPANY FINANCIAL PERFORMANCE ...... 6 PUBLIC SOFTWARE COMPANY MARKET VALUATIONS AND FINANCIAL PERFORMANCE BY PRODUCT CATEGORY ...... 7 PUBLIC SOFTWARE AS A SERVICE (SAAS) COMPANY MARKET VALUATIONS ...... 9 PUBLIC SOFTWARE AS A SERVICE (SAAS) FINANCIAL PERFORMANCE ...... 10 PUBLIC INTERNET COMPANY MARKET VALUATIONS ...... 11 PUBLIC INTERNET COMPANY FINANCIAL PERFORMANCE ...... 12 PUBLIC INTERNET COMPANY PERFORMANCE BY PRODUCT CATEGORY ...... 13 INITIAL PUBLIC OFFERINGS ...... 14 M&A DEAL VOLUME AND SPENDING: ALL INDUSTRY SECTORS ...... 17 SOFTWARE M&A DEAL VOLUME AND SPENDING...... 18 SOFTWARE M&A DEAL CURRENCY ...... 18 PRIVATE VS. PUBLIC BUYERS ...... 19 SOFTWARE M&A VALUATIONS ...... 20 SOFTWARE M&A VALUATIONS BY OWNERSHIP ...... 20 SOFTWARE M&A VALUATIONS BY VERTICAL AND HORIZONTAL MARKETS ...... 21 M&A EXIT VALUATIONS BY SOFTWARE PRODUCT CATEGORY ...... 22 SAAS M&A TRANSACTIONS ...... 23 INTERNET M&A TRANSACTIONS ...... 25 APPENDIX A: 2Q11 PUBLIC SOFTWARE MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY ...... 27 APPENDIX B: 2Q11 PUBLIC INTERNET MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY ...... 30 APPENDIX C: 2Q11 MERGERS AND ACQUISITIONS, SELECT PUBLIC SELLER VALUATIONS ...... 31

This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2011 Software Equity Group, L.L.C., All Rights Reserved Software Equity Group, L.L.C.

APPENDIX D: 2Q11 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS ...... 32 APPENDIX E: 2Q11 MERGERS AND ACQUISITIONS, SELECT SOFTWARE INDUSTRY MEGA-DEALS ...... 33 APPENDIX F: 2Q11 MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS ...... 34 APPENDIX G: 2Q11 MERGERS AND ACQUISITIONS – DEAL INSIGHT ...... 35 APPENDIX H: SELECT 2Q11 SOFTWARE INDUSTRY MERGERS AND ACQUISITIONS ...... 37

Figure 1: U.S. Gross Domestic Product and Unemployment Rate

10%

GDP % Growth Unemployment Rate 8%

6% 4.8% 5.0% 3.9% 3.7% 4% 3.0% 3.6% 3.2% 3.1% 2.6% 2.7% 2.6% 2.1% 2.1% 2.2% 1.7% 1.3% 2% 1.5% 1.3% 1.1% 1.2% 0.4%

-0.7% -0.7% -2%

-2.7% -4%

-6% -5.4% -6.4%

-8% 2Q05 2Q06 2Q07 2Q08 2Q09 2Q10 2Q11

U.S. ECONOMY: SOFTWARE INDUSTRY MACROECONOMICS

We begin our analysis, as always, with a brief As testament, the BEA published an advanced synopsis of recent U.S. Gross Domestic Product GDP statistics report in June 2011 highlighting the (GDP) behavior during the prior quarter. GDP is annual percent changes in real value to GDP from best defined as the total market value of all final 2007 to 2010 by industry. In 2010, the goods and services produced in a country in a information-communications-technology- given year, equal to total consumer, investment producing industries, defined to include computer and government spending, plus the value of and electronic products, software, information and exports, minus the value of imports. data processing, and computer systems design, grew an outstanding 16.3%. That made IT the According to the U.S. Bureau of Economic Affairs, only double digit growth industry, and marked the U.S. Gross Domestic Product (GDP) increased first time IT reported double digit growth since only 1.3% in 2Q11, after growing 0.4% in 1Q11, 2005. 3.1% in 4Q10 and 2.6% in 3Q10. The most recent GDP report caused many economists to fear The Conference Board’s index of U.S. Leading another impending recession, since the first Economic Indicators (LEI) rose only 0.3% in June, quarter GDP growth was revised down from 1.8%, following a 0.8% increase in May and a 0.4% and the 1.3% second quarter growth was much decline in April. Five of the Board’s ten LEI lower than anticipated. Although 2011’s anemic indicators increased in June. The positive growth rates are worrisome, Q2 did mark the contributors, beginning with the largest positive eighth consecutive quarter of economic expansion contributor, were, the real money supply, interest (Figure 1). rate spread, building permits, index of supplier deliveries and manufacturers’ new orders for According to the BEA, the increase in real GDP in consumer goods and materials. The negative 2Q11 was primarily due to positive contributions contributors, beginning with the largest negative from exports, nonresidential fixed investment, contributor, were stock prices, the index of private inventory investment and federal consumer expectations, average weekly government spending. Notably absent from this manufacturing hours and manufacturers’ new list is consumer spending, accounting for some orders for nondefense capital goods. 70% of the economy, which increased an abysmal 0.1%. It was no surprise, given the weak GDP data, total private employment increased by only 57,000 jobs Seemingly uncoupled from the broader economy, in June, following net additions of 73,000 jobs in the IT industry continued to exhibit strong growth. May and 157,000 in April. By the end of Q2, the

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U.S. unemployment rate had increased to 9.2%, global IT growth forecast at 6% after ending five consecutive quarters of acknowledging significant cross currents, as CIO unemployment rate decline. Professional and aspirations for mobile and cloud computing vied business services, healthcare, and leisure and with a weak global economy. hospitality accounted for most of Q2’s new jobs. Domestically, Goldman and IDC forecasted 5.0% IT SPENDING and 5.6% IT growth, respectively, in 2011. Although Goldman’s June 2011 IT spending As a reminder, SEG considers IT spending to be survey showed significantly more CIO optimism an important bellwether of downstream public than its August 2010 survey – with 43% of software company financial performance and respondents forecasting greater IT spending in M&A activity. After declining more than 10% in 2011 - Goldman made no change in June to its 2009, global IT spending grew 8% in 2010 to January spending forecast. more than $1.5 trillion, according to the new International Data Corporation (IDC) Worldwide The latest IT spending forecasts confirm that IT Black Book. Gartner pegged 2010 worldwide IT spending has returned to what Goldman Sachs spending at $3.4 trillion, up 5.4% percent from characterizes as “normal levels.” However, a 2009. In the U.S., IT purchases grew 6% in 2010 more granular analysis reveals the growth is according to IDC, driven largely by hardware and driven mostly by a relatively few product infrastructure spending, with spending on categories, including cloud computing and software and services up modestly by 4% and mobility that are receiving a rapidly increasing 2%, respectively. share of the IT budget. Gartner is forecasting tablet spending will grow at a 52% CAGR from In the second quarter, many economists provided 2010 to 2015, boosted by 206% YoY growth from updates to their 2011 global IT growth forecasts in 2010 to 2011. Goldman Sachs estimates the the 6 - 7% range. Although Gartner increased its mobile sector, including tablets, will grow at a growth forecast to 7.1% in June from 5.1% in CAGR of 75% from 2010 to 2014. January, most of the increase was attributed to forecasted spending on tablets and the Investments in public cloud computing and SaaS devaluation of the dollar. Goldman Sach’s left its also continue to rapidly outgrow the broader IT

Figure 2: Major Market Indices Compared to the SEG Software, Internet and SaaS Indices

DOW S&P NASDAQ SEG SaaS SEG SW Index SEG Internet Index 18.0%

16.0%

14.0%

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

(2.0%)

(4.0%) Jan Feb Mar Apr May Jun

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market. Gartner forecasts that spending on public games). The strong Q1 Internet sales tally marks cloud computing and SaaS will grow at a five year the sixth consecutive quarter of positive year- CAGR of 19.1% and 14.9%, respectively, from over-year growth for the online retail industry. 2010 to 2015, while Goldman Sachs forecasts SaaS spending will see a 20.9% CAGR from 2010 The Interactive Advertising Bureau (IAB) and to 2014, driving the percent of SaaS applications PricewaterhouseCoopers (PwC) reported the in the enterprise to 15% by 2014. The shift in Internet advertising industry registered record first mindset by enterprise CIOs, from rejection to quarter results for 1Q11 and 2010. 1Q11 Internet growing acceptance of SaaS deployed solutions, advertising revenues reached $7.3 billion, up a has been clearly noted by large public software whopping 23% year-over-year. The significant companies. Our 2011 buyer survey (published in growth in digital advertising spend portends our 2010 Annual Report and available on our another record year for Internet advertising in blog) documented a 131% increase in buyers who 2011. Recall from our 1Q11 report, 2010 felt SaaS deployed solutions was a “very advertising revenues reached an annual record of important” requisite for potential targets. $26 billion, with the first quarter of 2010 generating only $5.6 billion. Underscoring the shifting attitude of enterprise CIOs toward SaaS solutions, a recent Forrester PUBLIC SOFTWARE/SAAS/INTERNET COMPANY study on enterprise spending found 44% of STOCK PERFORMANCE surveyed companies are currently implementing or planning to implement SaaS solutions. The major U.S. exchanges and the median stock Moreover, the scope of SaaS deployed enterprise performance of public companies comprising our solutions is widening. A recent Gartner report Software, SaaS and Internet Indices, all finished highlighted eight distinct SaaS product categories higher in the first half of 2011. However, the with notable and growing enterprise penetration. journey was very bumpy as investors struggled Collaboration and CRM were the most popular with political unrest in the Middle East and North enterprise deployments of SaaS, at 46% and 32% Africa, the devastating tsunami in Japan, U.S. respectively. SaaS deployed ERP applications, GDP growth downgrades, weakening employment which have struggled to gain an enterprise rates, the European debt crisis and the unwinding foothold due to their mission critical nature and of the Fed’s QE2 program. Despite the macro significant back office application integration headwinds, investors apparently focused on requirements, reached 7% market penetration. corporate profits which approached record levels. Q1 marked the seventh consecutive quarterly INTERNET RETAIL SPENDING AND ADVERTISING increase in real profits from their year-earlier level, following ten straight quarters of annual declines In the Internet sector, SEG considers online retail starting in 2007. sales and Internet advertising spending to be two leading prognosticators of downstream public At the close of the second quarter, the Dow, S&P Internet company financial performance and M&A 500 and NASDAQ were up 7.2%, 5.0% and 4.5%, activity. Buoyed by an increase in number of respectively, from the first trading day of 2011 customers (up 7 percent) and transactions per (Figure 2). The SEG software, SaaS and Internet customer (up 9 percent), comScore indices improved even more. At the close of estimated1Q11 online retail sales were $38.0 2Q11 the SEG Software, SEG SaaS and SEG billion, up 11.8% from 1Q10. The trend of online Internet indices were up 7.0%, 10.7% and 4.3% sales outpacing offline continued in 1Q11, as the respectively. In fact, 179 out of the 278 (64.4%) growth in online spending was roughly double the public companies comprising our indices reported growth in offline spending. The on-line retail higher year-to-date (YTD) stock prices. Ten categories registering at least 13% YoY growth achieved YTD market returns greater than 54% were video games, consoles & accessories, (Figure 3). books & magazines, computers/peripherals/PDAs, consumer electronics and computer software (excluding PC

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Figure 3: High Flyers – YTD Stock Market Return quarter, investors bid up Youku, focusing on the 2011 High Flyers - Stock Market Return Company’s remarkable estimated YoY TTM 2011 revenue growth of 150% and ignoring its negative Company Ticker Category Stock Return EBITDA margin of -8.7%. But even Youku wasn’t Majesco Entertainment immune to Q2’s market decline, and its COOL Video Games 292% Company EV/Revenue multiple at the close of the quarter Glu Mobile, Inc. GLUU Mobile - Games 155% TeleNav TNAV Mobile - LBS 144% dropped to 47.8x TTM revenue. Despite the Velti Plc VELT Mobile - Ads 111% ~30% drop, Youku’s valuation multiple remains MicroStrategy MSTR Business Intelligence 90% incredibly lofty, considering the median Incorporated Magma Design EV/Revenue multiple of the SEG Internet index LAVA Electronic Design Automation 59% Automation, Inc. was 3.1x in Q2. Youku narrowly beat out Renren, Allot Communications Networking & Network ALLT 57% another Chinese company that went public in Ltd. Performance Management CommVault Systems, Storage & Systems 2011, for top honors on the high flyer list. All told, CVLT 55% Inc. Management five of the ten EV/Revenue high flyers are Sapiens International SPNS Vertical - Other 55% headquartered in China. PROS Holdings PRO Business Intelligence 54% Figure 5: High Flyers – Enterprise Value/Revenue PUBLIC SOFTWARE/SAAS/INTERNET COMPANY MARKET VALUATIONS 2011 High Flyers - Enterprise Value/Revenue (Median) Company Ticker Category EV/R The SEG Software, SaaS and Internet indices Youku YOKU Internet - Media 68.2x finished Q2 with median EV/Revenue multiples of Renren RENN Internet - Social Network 63.1x 2.7x, 5.2x and 3.1x respectively (Figure 4). While Qihoo QIHU Internet - Security 42.8x most of the listed companies comprising our three Baidu BIDU Internet - Search 33.7x LinkedIn LNKD Internet - Social Network 24.7x tracking indices saw improved EV/Revenue Yandex YNDX Internet - Search 20.9x multiples year-over-year, ten public software, HomeAway AWAY Internet - Travel 19.3x SaaS and Internet companies excelled at Cornerstone CSOD SaaS - Workforce Management 17.2x boosting their market valuations in 2Q11, primarily OnDemand due to investor response to their stellar financial Mercadolibre MELI Internet - Retail 16.1x performance (Figure 5). Overall, these SINA Corporation SINA SaaS - Workforce Management 15.3x overachievers reported a TTM median revenue growth rate of 57.0% and TTM median EBITDA PUBLIC SOFTWARE COMPANY MARKET margin of 15.3%. VALUATIONS

Figure 4: SEG Indices 2Q11 Median EV/Revenue The median 2.7x enterprise value to revenue (EV/Revenue) multiple of public companies in our 6.0x SEG Software Index in 2Q11 was unchanged from 5.2x 1Q11. Nevertheless, the 2.7x multiple represents a 5.0x marked improvement from 2010’s low of 2.1x, and

Multiple 4.0x is greater than anytime since pre-Recession 4Q07. 3.1x The median valuation of the SEG Software Index 3.0x 2.7x has now been at or above 2.0x for seven consecutive quarters, the first time that’s occurred EV/Revenue 2.0x since 3Q06 – 1Q08 (Figure 6).

Median 1.0x Smaller public software companies, which had 0.0x seen their EV/Rev multiples improve markedly in SEG ‐ Software SEG ‐ SaaS SEG ‐ Internet 4Q10 and 1Q11 saw nervous investors retreat in the second quarter. Despite impressive revenue growth, the median EV/Revenue multiple of SEG The ultimate overachiever was Youku, China’s Software Index companies with revenues leader in online video and often referred to as between $100 million and $200 million dropped to China’s YouTube. Youku’s median 2Q11 3.1x, a sharp retreat from their 3.6x median EV/Revenue multiple was 68.2x. Early in the valuation at the close of 1Q11. The marked 5| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

Figure 6: SEG Software Index Key Statistics revenue growth was the highest since 2Q07’s 16% median TTM growth rate. SEG - Software: Median Metrics

Measure 2Q10 3Q10 4Q10 1Q11 2Q11 EV/Revenue 2.3x 2.2x 2.6x 2.7x 2.7x SEG Software Index companies that focused on EV/EBITDA 11.9x 11.6x 13.2x 14.6x 13.3x the hottest IT spending categories, including cloud EV/Earnings 25.7x 24.9x 27.0x 27.1x 24.8x computing, application optimization and mobility, Current Ratio 2.0 2.0 2.0 2.1 2.1 grew revenue at a rate significantly higher than Cash & Eq ($M) $104.2 $111.6 $109.1 $130.5 $120.0 the median. Among the most notable are mobility Gross Profit Margin 66.6% 67.4% 67.8% 67.7% 68.1% players Gree (83.6% revenue growth) and EBITDA Margin 19.5% 20.2% 19.2% 19.3% 19.2% AutoNavi Holdings (52.3%), and cloud computing Net Income Margin 8.8% 8.7% 8.4% 8.6% 9.3% and application optimization players F5 Networks TTM Revenue Growth 2.6% 7.0% 9.9% 14.3% 14.6% (41.1%), VMWare (40.3%), Informatica (29.7%) TTM Total Revenue ($M) $269.3 $278.1 $288.1 $297.9 $295.4 TTM Total EBITDA ($M) $49.0 $50.0 $49.0 $49.0 $46.4 and SolarWinds (27.1%). Debt / Equity Ratio 21.5% 23.2% 29.2% 26.7% 23.9% Boosted by strong revenue growth, many public decline in median EV/Revenue brought these software companies continued to beat Wall Street smaller public software company valuation estimates. According to our random sample of multiples roughly in-line with their larger recent earnings calls of 28 public software counterparts. Public software companies with companies, 20 (71.4%) exceeded their most revenue between $200 million and less than $1 recent revenue projections (Figure 8). Should the billion recorded a median EV/Revenue multiple of IT spending forecasts for 2011 prove accurate, 2.7x and those with revenue greater than $1 look for steadily improving revenue growth rates billion recorded an EV/Revenue multiple of 2.9x for the duration of 2011. (Figure 7). Throughout the Great Recession, as growth rates On an EV/EBITDA basis, public software plummeted, public software companies focused company valuations closed 2Q11 at a median squarely on profitability and grew their EBITDA 13.3x, well below 1Q11’s 14.6x (Figure 6). In margins from 11.2% in 4Q07 to a high of 20.2% in 2Q11, software companies with revenue greater 3Q10. Median EBITDA margins were 19.2% at than $1 billion posted a median EV/EBITDA the close 2Q11, slightly below the peak, as public multiple of 9.0x, while software companies with software companies invested in sales & marketing revenue between $100 million and $200 million to capitalize on growth opportunities. Indeed, the were valued at 12.6x EV/EBITDA (Figure 7). median sales & marketing expense as a percent of total revenue grew by 33% YoY (Figure 9). PUBLIC SOFTWARE COMPANY FINANCIAL PERFORMANCE Managing profitability while investing more aggressively in growth proved difficult for most The “normalization” of enterprise IT spending is public software companies. Of the 28 public enabling software companies to achieve pre- software companies in our random sample, only Recession revenue growth rates. In 2Q11, public five (17.9%) beat their EPS forecast to the Street software companies grew TTM revenue by a (Figure 8). Among the industry’s largest players, median 14.6%, up slightly from 1Q11’s 14.3%, Microsoft was the only $500+ million revenue and sharply higher than 4Q10’s 9.9% and 3Q10’s company in our random sample to exceed its 7.0%. The second quarter’s 14.6% median TTM earnings target.

Figure 7: SEG Software Valuation and Financial Performance by Size of Buyer (TTM Revenue)

SEG Software Index Companies EV/Revenue EV/EBITDA Revenue Growth EBITDA Margin

2Q10 3Q10 4Q10 1Q11 2Q11 2Q10 3Q10 4Q10 1Q11 2Q11 2Q11 (TTM) 2Q11 (TTM)

Revenue Greater Than $1 billion 2.8x 2.7x 2.7x 3.0x 2.9x 10.1x 9.4x 9.6x 9.2x 9.0x 13.7% 25.5% Revenue Between $200 million and $1 billion 2.4x 2.2x 2.7x 2.7x 2.7x 14.3x 13.1x 13.7x 14.3x 15.3x 12.2% 19.3% Revenue Between $100 million and $200 million 2.6x 2.3x 3.0x 3.6x 3.1x 12.6x 10.7x 12.1x 12.9x 12.6x 22.8% 15.2% Revenue Less Than $100 million 1.5x 1.2x 1.5x 2.1x 2.2x 13.2x 12.9x 14.9x 15.6x 15.3x 14.1% 10.0% 6| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

Public software balance sheets remained healthy analyzing how public software companies in in 2Q11. Median cash and equivalents was discrete product categories are performing, we $120.0 million, up 15.4% year-over-year and increase our understanding of market trends, current ratios remained at a healthy level of 2.1 sector health, product lifecycles, M&A valuations, (Figure 6). The significant cash reserves and IT spending priorities and stock market biases. strong balance sheets of most public software companies, particularly the industry’s largest players, bode well for small and mid-cap software Figure 9: SEG Software Median Sales & Marketing company targets, especially those that enable Expense as % of Revenue buyers to synergistically extend their product 25% offerings and capture new enterprise IT turf. 20% Marketing & Figure 8: Expected vs. Delivered Revenue and 15%

EPS Results (as of June 30, 2011 Sales on

Company Revenue EPS 10% Spent Microsoft Corporation Cisco Systems, Inc. Company 5% Oracle Corporation Revenue of

Revenues:

Google Inc. % Greater than Adobe Systems Incorporated $1 billion 0% Electronic Arts Inc. 2Q11 2Q10 BMC Software, Inc. As we’ve noted in past reports, the median Mentor Graphics Corporation EV/Revenue valuations and financial results for a Informatica particular software category can be stagnant or MSCI Inc. Company Revenues: can fluctuate wildly each quarter. As a result, TIBCO Software Inc. $500 million software category rankings, measured by relative Avid Technology Inc. to $1 billion Open Text Corporation median valuations and financial performance can NICE Systems Ltd. also be consistent or volatile quarter-to-quarter. Manhattan Associates, Inc. That axiom held true, once again, in 2Q11 (Figure QAD Inc. 10). We track this data because the current TeleCommunication Systems, Inc. Company Revenues: median valuation of companies comprising a MicroStrategy Incorporated $100 - $500 particular software category often weighs heavily Real Networks million Blackboard Inc. when buyers value acquisition targets. SS&C Corporation American Software, Inc. The SEG Software Index is comprised of 22 PCTEL, Inc. software product categories sorted into three PDF Solutions, Inc. Company Revenues: broad groups, Infrastructure Software, Application Scientific Learning Corp. Less than Software and Other. The Infrastructure Software Geeknet, Inc. $100 million Pervasive Software Inc. group is comprised primarily of utilities, tools, NetSol Technologies Inc. middleware, systems, platforms and technologies to create, integrate, optimize, deliver, monitor, : Exceeded or Met Expectations : Did Not Meet Expectations store and protect enterprise applications. The Application Software group consists primarily of solutions to perform, analyze, design and manage PUBLIC SOFTWARE COMPANY MARKET in one, or many, specific industry sectors. The VALUATIONS AND FINANCIAL PERFORMANCE BY Other Software group is comprised of companies PRODUCT CATEGORY that concentrate on a specific vertical or the emerging class of IT Conglomerates who span While median financial performance metrics are numerous product categories, such as Oracle, useful for assessing the overall health of the Microsoft and IBM. software industry and for comparisons to other economic sectors, a deeper analysis of these key In 2Q11, Infrastructure Software companies metrics by software product category provides outpaced their Application Software counterparts greater insight about the software ecosystem. By in nearly all metrics tracked (Figure 10).

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Particularly noteworthy was the Infrastructure the infrastructure software group achieved median group’s median 2.9x EV/Revenue multiple and TTM EBITDA margins greater than 20%, led by 17.6% TTM revenue growth in the second Content/Document Management’s median TTM quarter, as compared to the Application group’s EBITDA margin of 27.4%. median 2.4x EV/Revenue multiple and 13.7% revenue growth rate. Networking and Network Within the Application Software segment, BI Performance Management recorded the highest generated the highest median TTM revenue median EV/Revenue multiple of 4.8x, up from growth (26.6%), and investors responded, 1Q11’s 4.3x and 2Q10’s 2.7x, driven in part by the resulting in a 32% YTD increase in median stock demand for WAN optimization required to deliver price and a median EV/Revenue multiple of 4.2x. software rapidly over cloud- based architectures. These results confirmed Forrester’s June survey The category leader was F5 Networks, boasting in which BI was tagged the top software an impressive 7.2x median EV/Revenue multiple, application spending priority in 2011. Other and a jaw dropping TTM revenue growth rate product categories with relatively high (41.5%) and EBITDA margin (31.2%). EV/Revenue multiples include Multimedia, Graphics & Digital Media (3.9x) and Healthcare The only category within the Infrastructure group (3.8x). The Digital Media category’s TTM financial with a median EV/Revenue multiple below the performance has been roughly in-line with the SEG Software Index median of 2.7x was Billing & overall software industry median, but has most Service Management (1.9x). Development tools likely benefitted from growing awareness of & open source achieved the highest median TTM emerging digital platform players, such as Rovi revenue growth rates at 28.6%, led by Corporation, that are taking market share from BSQUARE’s stellar 63.7% growth rate. Perhaps incumbents. Healthcare software companies also most impressive, every product category within fared well in 2Q11, posting well above average

Figure 10: SEG Software Categories SEG - Software: Median Metrics by Category Re ve nue EBIT DA EBIT DA YTD Stock EV/Revenue EV /EBIT DA Category Grow th Grow th Margin Re tur n 2Q10 3Q10 4Q10 1Q11 2Q11 2Q10 3Q10 4Q10 1Q11 2Q11 2Q11 (TTM) 2Q11 (TTM) 2Q11 (TTM) 2011 Infrastructure Software Billing & Service Management 1.7x 1.5x 1.6x 1.9x 1.9x 8.1x 7.2x 7.7x 8.4x 8.3x 13.1% 16.2% 22.4% 4.4% Content/Document Management 2.6x 2.5x 2.7x 3.2x 3.4x 11.6x 10.0x 9.7x 11.1x 11.5x 16.5% 29.3% 27.4% 18.6% Data Management & Integration 2.1x 2.3x 2.9x 3.3x 3.3x 10.3x 9.9x 11.0x 16.0x 15.7x 24.9% 26.6% 23.2% 20.5% Development Tools & Open Source 3.0x 2.4x 2.8x 3.0x 2.7x 9.8x 8.6x 9.9x 11.4x 10.2x 28.6% 34.0% 25.4% -3.1% Netw orking & Netw ork Performance 2.7x 2.5x 3.1x 4.3x 4.8x 18.9x 15.2x 18.8x 28.0x 24.8x 23.2% 53.7% 24.7% -7.1% Management Security 2.9x 2.4x 2.5x 2.4x 2.9x 14.5x 12.9x 14.0x 13.8x 13.9x 12.3% 17.5% 22.1% 17.8% Storage & Systems Management 2.4x 2.4x 2.7x 3.1x 2.9x 9.9x 9.5x 12.0x 12.1x 11.8x 11.9% 11.8% 21.8% 16.0% Median 2.4x 2.4x 2.7x 3.1x 2.9x 11.0x 9.9x 11.8x 12.3x 11.8x 17.6% 28.3% 24.2% 12.7% Application Software Business Intelligence 2.0x 2.6x 3.1x 3.7x 4.2x 18.2x 24.5x 29.4x 40.3x 46.2x 26.6% -9.4% 10.0% 32.2% Education & eLearning 3.4x 2.6x 2.9x 2.7x 2.9x 15.0x 10.2x 12.2x 15.1x 16.6x 12.0% -0.6% 22.8% 2.8% Electronic Design Automation 1.5x 1.4x 1.6x 2.1x 2.1x 12.9x 17.4x 19.2x 20.8x 20.3x 13.2% 124.5% 10.4% 6.8% Engineering, PLM & CAD/CAM 3.3x 3.0x 3.7x 3.9x 3.7x 14.4x 15.4x 16.5x 19.2x 16.4x 12.2% 42.1% 20.2% 3.2% Enterprise Resource Planning 3.2x 3.4x 3.0x 3.2x 3.0x 10.1x 9.9x 11.3x 11.7x 11.3x 11.5% 15.9% 23.2% 5.1% Financial Services 1.9x 2.0x 2.1x 2.1x 2.4x 8.7x 8.5x 8.8x 9.2x 10.2x 7.4% 12.5% 20.4% 11.1% Healthcare 3.4x 3.4x 3.5x 3.7x 3.8x 16.7x 13.8x 15.9x 17.5x 18.7x 20.8% 30.4% 23.3% 7.8% Mobile Solutions/Content 2.4x 2.2x 2.5x 2.7x 2.6x 11.6x 11.0x 11.8x 16.6x 13.4x 21.1% -18.3% 11.9% 5.7% Multimedia, Graphics & Digital Media 4.2x 3.4x 3.6x 4.0x 3.9x 15.2x 11.3x 17.1x 25.2x 26.5x 15.0% 35.9% 20.1% 7.9% Supply Chain Management & Logistics 1.8x 1.5x 1.8x 1.8x 2.0x 11.9x 9.3x 10.8x 10.8x 11.5x 11.6% 6.2% 11.1% 10.3% Video Games 0.8x 0.6x 0.7x 0.9x 1.0x 7.7x 7.7x 10.5x 8.7x 10.9x -1.0% 12.6% 9.3% 24.6% Workforce & Service Management 2.2x 1.9x 2.2x 2.7x 2.7x 15.3x 16.0x 20.0x 17.3x 18.5x 10.3% 32.4% 16.1% 22.6% Median 2.2x 2.0x 2.2x 2.4x 2.4x 12.9x 11.7x 13.6x 14.6x 13.4x 13.7% 12.8% 13.7% 6.3% Othe r Softw are IT Conglomerates 3.1x 2.7x 2.7x 3.0x 2.6x 8.9x 7.3x 7.7x 8.4x 7.9x 15.2% 21.8% 38.3% 5.1% Vertical - Finance 4.1x 4.4x 4.6x 4.9x 4.4x 14.0x 11.6x 12.9x 13.6x 13.3x 18.1% 22.3% 31.6% -2.7% Vertical - Other 2.0x 2.0x 2.7x 2.8x 3.1x 12.3x 12.3x 14.2x 14.3x 14.0x 12.4% 19.8% 18.8% 21.2% Median 2.7x 2.7x 2.9x 3.2x 3.0x 11.4x 10.7x 10.3x 11.0x 11.5x 16.5% 22.3% 19.4% 7.0%

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financial results thanks to the need for improved PUBLIC SOFTWARE AS A SERVICE (SAAS) revenue management, HIPAA compliance and the COMPANY MARKET VALUATIONS growing digitization of patient records. In contrast to the flat quarter-over-quarter median IT Conglomerates achieved an outstanding 38.3% EV/Revenue multiples of on-premise software EBITDA margin in 2Q11, nearly 20% above the companies, the median valuation of public SaaS SEG Software Index median. Although the providers soared to 5.2x EV/Revenue in 2Q11 category achieved TTM revenue growth of 15.2%, from 4.8x in 1Q11 and 4.2x in 4Q10. The 5.2x slightly above the software median of 14.3%, multiple marks the highest median EV/Revenue investors seemed unimpressed, valuing the for the SEG SaaS index since 1Q08 (Figure 11). category at a median 2.6x TTM revenue, slightly Five high flying companies – Cornerstone below the software industry median of 2.7x. OnDemand, Netsuite, RealPage,Salesforce and SuccessFactors - finished 2Q11 with a median On an EV/EBITDA basis, public Business EV/Revenue over 9.0x (Figure 12). Interestingly, Intelligence software companies led all other RealPage and Salesforce were the only two product categories in 2Q11 with an impressive companies to outperform both the SaaS median 46.2x EV/EBITDA median multiple. Publicly listed TTM revenue growth rates and EBITDA margins. IT Conglomerates had the lowest EV/EBITDA The other three high flyers, were either median multiple, 7.9x, reflecting their low unprofitable (Cornerstone and SuccessFactors) or valuation despite having the highest EBITDA posted TTM revenue growth below the median margins of the 22 product categories. (RightNow). Clearly, it’s the extraordinary post- Recession growth prospects of these category Stock returns at the close of 2Q11 varied widely leaders that’s currently driving investors, an by software product category. Following BI, Video investment rationale supported by their steady games had the second best category stock revenue growth and signs of sharply ramping returns in Q2. After responding slowly to the rapid market adoption of SaaS solutions. and marked shift from retail to online and mobile games, public video game companies are making Figure 11: SEG SaaS Index Key Statistics significant investments in these emerging SEG - SaaS: Median Metrics channels and investors are rewarding them for it. Measure 2Q10 3Q10 4Q10 1Q11 2Q11 Electronic Arts is a fine example. On the EV/Revenue 3.8x 3.1x 4.2x 4.8x 5.2x Company’s Q4 earnings call, CEO John Riccitiello EV/EBITDA 31.0x 30.2x 34.9x 38.3x 40.2x stated that digital revenues, encompassing mobile EV/Earnings 81.6x 76.0x 79.7x 124.2x 86.0x and online, grew by 46% YoY. Revenue growth Current Ratio 1.5 1.9 1.8 1.8 2.1 has been bolstered in part by the Company’s ten Cash & Eq ($M) $55.5 $65.1 $69.2 $67.4 $67.1 acquisitions since 2008 (11 if you count the $1.3 Gross Profit Margin 67.4% 67.4% 68.7% 68.6% 69.2% billion dollar acquisition of PopCap at the EBITDA Margin 10.1% 9.3% 9.7% 10.2% 8.7% beginning of Q3). Year to date, investors like Net Income Margin -0.2% 1.4% 2.6% 1.7% 0.9% TTM Revenue Growth 13.7% 14.6% 15.1% 19.6% 23.3% what they see, rewarding the Company with a TTM Total Revenue ($M) $144.4 $151.9 $163.2 $174.2 $184.8 44% increase in its stock price. TTM Total EBITDA ($M) $11.5 $10.0 $12.5 $16.9 $17.2 Debt / Equity Ratio 2.3% 1.1% 3.8% 3.7% 2.9% Despite its impressive EV/Rev multiple, Network & Network Performance Management lagged the SEG Software Index with a -7.1% YTD stock The dramatic rise in the median valuation of return as of the close of 2Q11. Investors were public SaaS companies is once again widening likely leery of running up the stock and valuation their market valuation differential with public on- multiples too far, given the category’s decelerating premise software companies – a differential that TTM revenue growth (30.9% in 1Q11 vs. 23.2% in narrowed quite significantly during the Great 2Q11). Recession. At the close of 2007, public SaaS companies commanded a breathtaking median EV/Revenue multiple of 6.4x, in comparison to the much lower but historically high 2.7x median valuation multiple of their on-premise

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Figure 12: Public SaaS Companies

SEG SaaS Index EV/Revenue EV/EBITDA TTM Revenue Grow th EBITDA Margin Company Category 2Q10 3Q10 4Q10 1Q11 2Q11 2Q10 3Q10 4Q10 1Q11 2Q11 2Q10 3Q10 4Q10 1Q11 2Q11 2Q10 3Q10 4Q10 1Q11 2Q11 Athenahealth (ATHN) Health Care Mgmt 4.2x 4.0x 5.6x 5.8x 5.5x 34.3x 34.6x 42.1x 42.2x 37.2x 36.9% 34.1% 33.9% 30.2% 29.2% 12.2% 11.7% 13.3% 13.8% 14.9% Concur (CNQR) Accounting & Finance 7.5x 7.7x 8.0x 7.9x 7.4x 31.0x 33.4x 36.2x 37.7x 44.3x 14.8% 16.6% 18.3% 19.0% 18.6% 24.3% 23.2% 22.2% 21.0% 16.7% Constant Contact (CTCT) CRM 3.9x 3.1x 3.4x 4.2x 3.6x 75.6x 65.9x 57.6x 59.0x 53.9x 44.4% 41.5% 38.2% 35.0% 31.6% 5.1% 4.7% 5.9% 7.2% 6.6% Convio (CNVO) CRM 2.6x 1.6x 1.5x 1.8x 2.2x 27.9x 17.2x 15.2x 18.5x 25.7x - - - 10.6% 9.5% 9.2% 9.1% 9.7% 9.9% 8.5% Cornerstone OnDemand (CSOD) Workforce Mgmt - - - 21.5x 17.2x - ----49.4%49.4%-49.1%--17.0%-17.0%-19.2%-26.1%-27.1% DealerTrack (TRAK) Vertical - Automotive 2.2x 2.0x 2.6x 2.7x 3.1x 20.9x 19.0x 23.0x 22.3x 22.7x -3.2% 0.9% 3.5% 8.1% 16.6% 10.5% 10.7% 11.1% 12.1% 13.6% DemandTec (DMAN) SCM 1.6x2.0x3.2x4.0x3.0x-----1.4%0.6%1.2%4.3%12.0%-9.1%-8.8%-8.8%-8.7%-8.5% Ellie Mae (ELLI) Financial Services - - - - 4.2x - - - - 52.8x - - - 14.7% 23.3% 3.6% 3.6% -0.4% 6.6% 8.0% IntraLinks Holdings (IL) Financial Services - 3.1x 6.5x 7.7x 5.9x - 53.1x 111.3x 43.5x 36.6x - - - 31.0% 34.8% 10.1% 5.8% 5.8% 17.6% 16.1% Kenexa (KNXA) Workforce Mgmt 1.6x 1.3x 2.1x 2.8x 3.2x 17.3x 14.2x 26.1x 32.2x 40.2x -18.4% -7.6% 6.5% 24.5% 36.7% 9.5% 9.3% 8.2% 8.6% 7.9% LivePerson (LPSN) CRM 3.4x 3.1x 4.2x 4.7x 4.9x 16.6x 15.2x 20.6x 23.7x 23.6x 19.9% 24.3% 27.2% 25.6% 23.7% 20.5% 20.3% 20.3% 19.7% 20.6% Medidata Solutions (MDSO) Clinical Mgmt 1.9x 2.1x 2.5x 3.1x 2.8x 13.6x 13.3x 14.8x 16.1x 14.8x 22.0% 19.0% 16.8% 18.5% 17.4% 13.9% 15.5% 16.8% 19.5% 19.1% Netsuite (N) ERP 4.8x5.9x7.6x9.0x10.8x-----5.8%7.5%11.6%16.0%19.6%-7.6%-7.9%-6.8%-6.9%-7.1% RealPage (RP) Property Mgmt - 7.1x 10.0x 9.7x 9.2x - 51.3x 71.5x 70.3x 69.3x - - - 33.6% 36.6% 14.0% 13.8% 14.0% 13.8% 13.3% Responsys (MKTG) Digital Marketing - - - - 7.3x - - - - 40.7x 33.0% 33.0% - 41.2% - 20.8% 20.8% 17.6% 19.9% 18.0% RightNow (RNOW) CRM 2.5x 2.6x 4.0x 4.2x 5.0x 33.6x 29.6x 41.9x 39.8x 45.8x 10.6% 14.6% 19.4% 21.5% 23.3% 7.4% 8.6% 9.5% 10.6% 10.9% Salesforce.com (CRM) CRM 7.5x 8.7x 9.5x 10.4x 10.3x 63.3x 75.8x 83.2x 108.1x 132.7x 21.5% 22.6% 25.2% 26.9% 29.6% 11.8% 11.5% 11.5% 9.7% 7.8% SciQuest (SQI) SCM - 6.6x 5.6x 5.8x 6.6x - 30.8x 26.3x 29.3x 36.5x - - - 17.4% 19.0% 19.7% 21.5% 21.3% 19.7% 18.2% SoundBite Communications (SDBT)CRM 0.3x0.3x0.3x0.3x0.2x------3.3%0.8%-0.7%-1.7%-4.5%-3.9%-3.2%-4.9%-3.6%-5.1% SPS Commerce (SPSC) SCM 5.2x 2.4x 2.7x 3.2x 3.3x 46.8x 22.0x 24.0x 31.4x 37.5x - - 19.0% 18.2% 19.1% 11.0% 10.7% 11.4% 10.2% 8.7% SuccessFactors (SFSF)Workforce Mgmt7.5x6.8x9.6x11.2x9.9x-----31.5%30.5%31.3%34.5%40.7%-3.5%-2.0%-5.1%-7.1%-8.3% Taleo (TLEO) Workforce Mgmt 3.8x 3.7x 4.3x 4.8x 5.2x 28.1x 28.3x 33.7x 38.9x 45.5x 13.7% 10.8% 12.6% 19.6% 23.5% 13.4% 12.9% 12.7% 12.4% 11.4% The Ultimate Softw are Group (ULTI) Workforce Mgmt 4.1x 3.9x 4.7x 5.6x 5.7x 71.4x 66.2x 67.9x 67.6x 71.0x 10.4% 11.1% 13.3% 16.1% 16.5% 5.7% 5.9% 7.0% 8.3% 8.1% Vocus (VOCS) CRM 2.4x 2.3x 4.2x 4.2x 4.3x 76.8x 111.7x 218.3x 271.9x - 8.0% 8.6% 11.6% 14.4% 17.4% 3.1% 2.0% 1.9% 1.6% -0.5% Zix Corporation (ZIXI) Security 5.2x 4.8x 7.8x 7.3x 6.0x 22.1x 13.4x 18.3x 36.2x 24.2x -5.2% -1.2% -0.9% 25.2% 30.9% 23.5% 35.4% 42.5% 20.2% 24.7% Median: 3.8x 3.1x 4.2x 4.8x 5.2x 31.0x 30.2x 34.9x 38.3x 40.2x 13.7% 14.6% 15.1% 19.6% 23.3% 10.1% 9.3% 9.7% 10.2% 8.7% counterparts. That equated to a 137% SaaS growth remains paramount to investors (i.e., as valuation premium. The median SaaS long as IT spending remains healthy and the EV/Revenue multiple for calendar year 2010 economy expands), we expect the SaaS valuation dropped to 3.6x, compared to 2.3x for on-premise premium to continue increasing. software companies, narrowing the valuation differential to 57%. PUBLIC SOFTWARE AS A SERVICE (SAAS) FINANCIAL PERFORMANCE Figure 13: Historical EV/Revenue Multiples for SEG The Great Recession and a sluggish recovery took their toll on SMBs, the market segment most 6.0x SaaS 5.2x responsible for the remarkable growth rates of 4.8x 5.0x Software many SaaS providers. In response, SaaS growth 4.2x 3.8x rates plummeted. After bottoming out at 13.7% in Multiple 4.0x 3.5x 3.1x 2Q10, the SaaS median TTM revenue growth rate 3.0x 2.6x 2.7x 2.7x reversed course, inching up to 14.6% in 3Q10, 2.3x 2.3x 2.2x ending eleven consecutive quarters of decline. In EV/Revenue 2.0x 4Q10 the TTM median revenue growth rate of

Median 1.0x public SaaS providers was 15.1%, then climbed to 19.6% in 1Q11 and 23.3% in the second quarter. 0.0x Q2’s growth rate is the highest in seven quarters, 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 and marks the fourth consecutive QoQ increase (Figure 11). Impressively, six of 25 public SaaS By the close of 2Q11, however, the valuation companies achieved TTM revenue growth greater differential of public SaaS vs. public on-premise than 30% in 2Q11 (Figure 12). software providers had grown to 93%, marking the third consecutive quarter the SaaS valuation Profitability did not come easily to public SaaS premium widened (Figure 13). Indeed, SaaS companies because of their subscription models valuations outperformed the median on-premise and infrastructure investments. Historically, software valuation almost across the board. Of the median SaaS TTM EBITDA margins were dismal 25 public SaaS companies comprising the SEG in comparison to on-premise EBITDA margins. SaaS Index, only Convio and SoundBite But as SaaS revenue growth rates slowed during Communications posted median EV/Revenue the Great Recession, public SaaS providers multiples below the 2.7x median EV/Revenue of focused on improved profitability, and most the SEG Software Index. As long as extraordinary succeeded in growing their bottom lines through

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operational improvements, reduced infrastructure rewarded with a median 5.9x EV/Revenue spending and subscription renewals. multiple, compared to a median 3.8x EV/Revenue multiple for public SaaS companies with TTM Figure 14: SEG SaaS Median Sales & revenue growth rates below the median SaaS Marketing Expense as % of Revenue revenue growth rate (Figure 15).

35% PUBLIC INTERNET COMPANY MARKET 30% VALUATIONS Marketing 25% &

Sales 20% The median EV/Revenue multiple for the 81

on public companies comprising the SEG Internet 15% Spent

Index was 3.1x in 2Q11, up slightly from 2.9x in 10% 1Q11 and sharply higher than 2Q10’s 1.9x. The Revenue 5% median 2Q11 Internet company EV/EBITDA of

% multiple was 18.0x (Figure 16). The second 0% quarter of 2011 marks the third consecutive 2Q11 2Q10 quarter the SEG Internet Index median EV/Revenue multiple has exceeded the SEG Predictably, SaaS EBITDA margins have eroded Software Index median EV/Revenue multiple. somewhat in the post-Recession, declining to While a similar phenomenon occurred in both 8.7% in 2Q11 from 10.2% in 1Q11, and the lowest 2Q08 and 2Q09, we believe this differential will in more than a year. The decline in EBITDA continue and grow for the foreseeable future, as margins signals a return by public SaaS investors continue to shift their attention from companies to favoring accelerated growth over public on-premise software companies to public profitability. As testament, SaaS companies Internet and SaaS providers. spent 33.2% of revenue on Sales & Marketing in 2Q11, a notable increase over 2Q10’s 25.7% Figure 16: SEG Internet Index Key Statistics (Figure 14). Profitability varied widely as companies shifted into growth mode at varying SEG - Internet: Median Metrics speeds. Six (24%) of the twenty five public SaaS Measure 2Q10 3Q10 4Q10 1Q11 2Q11 EV/Revenue 1.9x 1.9x 2.7x 2.9x 3.1x companies in our index reported negative EBITDA EV/EBITDA 12.9x 11.9x 14.6x 15.0x 18.0x margins in 2Q11, whereas two public SaaS EV/Earnings 22.0x 21.3x 25.6x 26.7x 32.1x companies exceeded 20% EBITDA margins. Current Ratio 2.6 2.4 2.5 2.4 2.4 Figure 15: 2Q11 Public SaaS EV/Rev Cash & Eq ($M) $105.5 $90.0 $89.6 $115.5 $105.7 Multiples versus TTM Revenue Growth & Gross Profit Margin 62.7% 63.8% 64.1% 62.9% 63.2% EBITDA Margin EBITDA Margin 16.2% 16.9% 16.0% 16.9% 16.4% Net Income Margin 6.3% 5.8% 5.7% 6.0% 5.6% 7.0x TTM Revenue Growth 13.6% 16.7% 17.7% 22.0% 19.9% 5.9x Above SaaS Median 6.0x TTM Total Revenue ($M) $237.2 $246.2 $271.6 $285.6 $302.2 Below SaaS Median 5.5x TTM Total EBITDA ($M) $28.5 $31.1 $31.1 $37.1 $35.5 5.0x 4.3x Debt / Equity Ratio 8.5% 5.6% 3.5% 3.8% 7.3% 4.0x 3.8x Chinese based Internet companies are gaining EV/Revenue 3.0x significant attention from investors. Of the 81 2.0x Median public companies in our SEG Internet Index,

1.0x fourteen have headquarters in China and are trading at a median 7.5x EV/Revenue (Figure 17). 0.0x That’s in stark contrast to the remaining 67 public TTM Revenue Growth TTM EBITDA Margin companies in the SEG Internet Index that are trading at a median 2.4x EV/Revenue. Given the Investors appear to be fully on board with this shift premium applied to Chinese based companies, in operating emphasis. At the close of 2Q11, it’s no wonder we have seen over ten software public SaaS companies with TTM revenue growth companies from China IPO in the U.S. since the rates above the 23.3% SaaS median were beginning of 4Q10.

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Figure 17: 2Q11 Median EV/Revenue revenue by an impressive 23.4% in 2Q11. By Comparison of Chinese and U.S. based firms contrast, public software companies in the SEG Software Index with TTM revenue north of $1 billion grew median TTM revenue by only 13.7% 8.0x 7.5x in Q2 (Figure 18). 7.0x

6.0x 5.0x Figure 18: TTM Revenue Growth Comparison of 4.0x Internet & Software Companies over $1B in EV/Revenue

3.0x 2.4x revenue25.0% 23.4%

Median 2.0x 20.0% 1.0x Rate

0.0x 15.0% 13.7%

China HQ U.S. HQ Growth

10.0% PUBLIC INTERNET COMPANY FINANCIAL Revenue

TTM 5.0% PERFORMANCE

0.0% Internet providers in the SEG Internet Index Internet On‐premise closed 2Q11 with a median TTM revenue growth of 19.9%, a surprising drop from 1Q11’s 22.0%, breaking a streak of nine consecutive QoQ Equally impressive, Internet companies achieved increases in revenue growth. Despite the modest a median EBITDA margin of 16.4% in 2Q11, decline in revenue growth, 35% of the public modestly less than the 19.2% median EBITDA Internet companies in the SEG Internet Index margin of public on-premise software companies, posted TTM revenue growth rates above 25%. but considerably greater than the 8.7% median Even more impressive, this revenue growth is EBITDA posted by public SaaS companies. The broadly distributed across all Internet categories solid profitability of these Internet providers exemplifying the innovation and growth of the contributed to very healthy balance sheets, with industry as a whole. Select overachievers and median cash and cash equivalent balances their TTM revenue growth rates include: greater than $100 million, and a strong current ratio of 2.4 (Figure 16). • Advertising and Lead Gen - interCLICK (82%), Velti (31%) The solid EBITDA margins of public Internet • Infrastructure - Limelight (46%), Equinix companies are particularly impressive when (43%) taking into account the mashup nature of Internet • Media - DemandMedia (35%), Netflix (35%) business models which typically involve significant • Retail - Amazon (38%), Mercadolibre (25%) revenue sharing. The median gross profit margin • Search - Baidu (84%), Yandex (43%) of Internet providers was 63.2% in 2Q11, • Services - LinkedIn (102%), Ancestory.com compared to a median 68.1% margin of public (39%) software companies and a median 69.2% margin • Travel - MakeMyTrip (49%), HomeAway of public SaaS companies. Public Internet (40%) companies typically compensate by spending less on Research & Development and Sales & The relatively high median TTM revenue growth Marketing than their on-premise and SaaS rate is particularly impressive considering these software peers. In 2Q11, Internet companies SEG Internet Index companies have the highest spent only 29.9% of revenues on R&D and M&S, median TTM revenue among our three tracking whereas their SaaS and on-premise peers spent indices. Indeed, nearly 16% of the SEG Internet 48.1% and 38.3% respectively (Figure 19). Index have achieved TTM revenue over $1 billion, yet these behemoths (led by Amazon, Google and eBay) were still able to grow median TTM

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Figure 19: Operational Expenses as % of Total • Retail – Companies that facilitate retail Revenue for SEG Indices transactions online. Representative companies include Amazon, eBay and 35.0% Mercadolibre. 30.0% • Search – Companies that operate search engines. Representative companies include 25.0% Google, Baidu and Yandex.

20.0% • Services – Companies that provide various SEG Software services including, but not limited to, photo Revenue SEG Internet of 15.0% sharing, social networking and security over % SEG SaaS the Internet. Representative companies 10.0% include Shutterfly, LinkedIn, Ancestory.com 5.0% and Renren (often referred to as China’s Facebook). 0.0% R&D S&M G&A • Travel – Companies that facilitate ticketing transactions for the travel industry. Representative companies include Priceline, Ctrip and Expedia. PUBLIC INTERNET COMPANY PERFORMANCE BY • Video Games – Companies that primarily PRODUCT CATEGORY deliver video games through the Internet.

Representative companies include Netease, Segmenting the public Internet companies in our ChangeYou and NCSoft. SEG Internet Index into discrete product categories increases our understanding of market Enterprise valuations of companies comprising trends, sector health, product lifecycles, Internet the SEG Internet Index varied widely by Internet retail and advertising spending impacts and stock category in 2Q11 (Figure 20). Internet travel market biases. But perhaps most importantly, we companies led all other categories in 2Q11, track this data because the current median posting a 8.3x EV/Revenue median multiple valuation of companies comprising a particular fueled by impressive TTM revenue and EBITDA Internet category often weighs heavily when growth of 34.5% and 24.5% respectively, the buyers value acquisition targets. highest values across all other product categories.

The median EV/Revenue multiple was propelled The SEG Software Index is comprised of eight by HomeAway (19.3x) and Ctrip (12.7x), both Internet product categories: achieving TTM revenue growth over 40%.

Boosted by recent IPOs of LinkedIn (24.7x), • Ad Tech & Lead Generation – Companies that Renren (63.1x) and Qihoo (42.8x), the Internet provide key elements in the Internet Services category exhibited the highest YoY advertising arena such as search marketing growth in EV/Revenue, growing to 5.0x TTM services, software to host and manage ads revenue in 2Q11 from 2.4x in 2Q10. Internet and a network of websites that run ads. Search posted the lowest median EV/Revenue Representative companies include ValueClick, multiple among all Internet categories at 1.5x, Velti and SINA. despite the sky high median EV/Revenue • Infrastructure – Companies that provide key multiples achieved by Baidu (33.7x) and Yandex elements in hosting, communications, storage (22.9x). and content delivery. Representative companies include Akamai, Rackspace, The stark contrast in financial performance and Digital River and VeriSign. market valuation of on-premise vs. online is • Media – Companies that provide or distribute especially poignant in the video game category. content online. Representative companies Video game developers that generate the majority include Yahoo, Netflix, Pandora Media, of their revenue through on-line gaming are Demand Media and Youku (often referred to significantly outperforming those that generate the as China’s Youtube). majority of their revenue through retail and download. In 2Q11 software companies

13| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

Figure 20: SEG Internet Index Median Metrics by Category

SEG - Internet Index

Revenue EBITDA EBTIDA YTD EV/Revenue EV/EBITDA Gr ow th Gr ow th Margin Stock Category (TTM) (TTM) (TTM) Return

2Q10 3Q10 4Q10 1Q11 2Q11 2Q10 3Q10 4Q10 1Q11 2Q11 2Q11 2Q11 2Q11 2011 Ad Tech & Lead Gen 1.7x 1.6x 2.2x 2.5x 2.3x 23.1x 18.2x 13.2x 14.1x 12.7x 23.4% 36.8% 13.9% 7.3% Infrastructure 1.6x 1.9x 2.9x 3.2x 2.9x 12.7x 12.4x 16.4x 19.1x 16.8x 11.6% 20.2% 15.5% 15.4% Media 1.9x 1.5x 2.8x 3.0x 3.5x 15.2x 11.5x 14.1x 14.1x 13.1x 19.4% 29.5% 16.3% -7.7% Retail 1.3x 1.3x 2.1x 1.8x 1.7x 10.0x 10.6x 22.4x 12.7x 12.6x 17.0% 16.0% 9.0% 5.2% Search 1.7x 1.0x 1.3x 1.4x 1.5x 10.6x 8.5x 8.9x 9.6x 9.9x 24.6% 46.2% 11.3% 7.3% Services 2.4x 2.0x 2.4x 3.0x 5.0x 13.5x 12.9x 14.6x 16.5x 25.8x 20.5% 24.1% 17.0% 25.1% Travel 3.0x 5.2x 6.5x 6.8x 8.3x 14.9x 17.0x 25.0x 27.5x 35.0x 34.5% 62.6% 24.5% 15.5% Video Games 4.4x 4.0x 4.1x 4.1x 4.4x 7.1x 6.2x 6.5x 6.7x 8.7x 12.7% 6.8% 43.4% 3.4%

distributing games through retail channels and that have leveraged the Facebook platform and download closed 2Q11 with -1.0% TTM revenue mobile app stores. growth rate and a 9.3% EBITDA margin – the lowest among all SEG Software Index product INITIAL PUBLIC OFFERINGS categories. Predictably, these public software companies had a median EV/Revenue of 1.0x in The IPO market not only returned to life, but made 2Q11, also the lowest among all SEG Software headlines in 2Q11, led by Pandora Media, Index product categories. LinkedIn, Renren (often referred to as China’s Facebook), and Yandex (leader in the Russian Conversely, public Internet providers that host search engine market). The other public market their games online posted median TTM revenue entrants in 2Q11 were Ellie Mae, Jiayuan.com, growth of 12.7%, and staggering EBITDA margins FriendFinder, The Active Network and HomeAway of 43.4%. In response, investors rewarded these (Figure 21). In total, nine software companies Internet game purveyors with a median were newly listed on major U.S. exchanges in EV/Revenue multiple of 4.4x (Figure 20), led by 2Q11, a marked improvement over Q1’s four NCSoft (8.1x) and Netease (5.0x). We expect the IPOs. Collectively, the second quarter’s nine disparity among retail/download vs online gaming IPOs raised over $3 billion at an average of developers to increase, given the growing roughly $344 million per IPO, nearly triple the popularity of more community focused games, average $120 million raised by the four smart phone gaming enablement and the wild companies that went public in 1Q11. successes of Zynga and a host of other players

Figure 21: 2011 YTD U.S. Software IPOs

IPO EV / Revenue EBITDA First Day Company (Ticker) Category Offering Amount Enterprise Value EV / Rev Revenue YTD Return Date EBITDA Growth Margin Return HomeAway Online Travel 6/29/11 $216,000,000 $3,601,208,300 19.6x 121.2x $183,741,000 39.6% 17.1% 48.9% 43.3% (NASDAQ:AWAY) Pandora Online Media 6/15/11 $234,940,000 $2,746,176,760 16.4x 609.4x $167,205,000 174.8% (0.3%) 8.9% 18.2% ( NY SE:P) The Active Network Online Services - Event 5/25/11 $165,000,000 $1,225,641,770 4.2x 87.7x $289,090,000 15.1% 5.2% 6.0% 17.3% (NYSE:ACTV) Management Yandex Online Search 5/24/11 $1,304,350,000 $12,242,319,710 24.8x 62.2x $493,891,010 43.2% 47.7% 56.0% 42.0% (NA SDA Q:Y NDX) LinkedIn Online Services - Social 5/19/11 $175,000,000 $8,800,435,590 30.1x 247.4x $292,315,000 102.4% 13.0% 109.4% 100.2% (NYSE:LNKD) Network FriendFinder Networks Online Services 5/11/11 $50,000,000 $701,031,870 2.0x 6.6x $343,312,000 5.6% 32.0% (21.5%) (59.4%) (NA SDA Q:FFN) Jiayuan.com International Online Services 5/11/11 $78,000,000 $184,928,560 5.7x 43.7x $32,538,870 162.3% 21.5% (4.4%) 3.9% (NA SDA Q:DA TE) Renren Online Services - Social 5/4/11 $743,000,000 $2,189,859,750 26.4x 149.2x $83,067,000 63.9% 13.4% 28.6% (36.8%) (NY SE:RENN) Network Document and Business Ellie Mae 4/15/11 $86,250,000 $121,317,000 2.7x 42.4x $44,958,000 14.7% 8.0% 35.4% 14.8% (AMEX:ELLI) Process Management Qihoo 360 Technology Online Services - Security 3/30/11 $175,610,000 $3,936,371,720 68.3x 379.8x $57,665,000 78.5% 18.0% 25.9% (28.1%) (NY SE:QIHU) Cornerstone OnDemand Workforce Management 3/17/11 $136,500,000 $975,737,520 22.3x n/a $43,731,000 49.1% (26.1%) 46.7% 35.8% (NASDAQ: CSOD) Demand Media Online Media 2/26/11 $151,300,000 $2,223,332,400 8.8x 43.7x $252,936,000 27.5% 20.1% 25.9% (49.8%) (NY SE: DMD) Trunkbow International Holdings Mobile 2/3/11 $20,000,000 $164,518,050 6.7x 11.9x $24,387,920 81.6% 56.8% (5.2%) (52.4%) (NASDAW: TBOW) Median $165,000,000 $2,189,859,750 16.4x 75.0x $167,205,000 49.1% 17.1% 25.9% 14.8% All financial numbers are as of offering date. First day return compares listed offering price to first day close. Bold denotes SaaS companies.

14| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

By the close of Q2, the 13 companies that listed in The ten newly public Internet companies have a 2011 had a median stock return of 14.8%. The median TTM revenue growth rate of 53.6% and best performer was LinkedIn, returning 100.2% by median EBITDA margins of 17.6%. the quarter’s close. While the allure of investing in a social networking company was partially Seven software companies filed S-1’s in 2Q11, responsible, LinkedIn’s financial performance of bringing the U.S. software IPO queue up to twelve 102.4% revenue growth and 13% margins was (Figure 22). The IPO pipeline consists of a undoubtedly reassuring to investors. Three of the healthy group of software companies boasting a five stocks that were below their initial first day median TTM revenue growth rate of 50.8% and a closing price by the end of 2Q11 are median EBITDA margin of 2.4%. Internet headquartered in China where rumors of companies in the pipeline are much larger and fraudulent accounting practices made headlines growing considerably faster than their on-premise and spooked investors. software company counterparts, with median TTM revenue of $86 million (vs. $50 million) and a Of 2011’s thirteen IPOs, ten are Internet median revenue growth rate of 109% (vs.42%), companies that span an array of categories, but they are far less profitable when measured by including search, media, social media and travel. median EBITDA margin (-9.1% vs. 6.1%). If The median EV/Revenue of these new Internet investors continue to prioritize revenue growth IPOs is 18.0x - well above the 3.1x of the SEG and growth potential over profitability, Internet Internet index - giving some credence to those IPOs should continue to outperform their software who claim we are in the midst of another Internet counterparts. bubble. However, while valuations are certainly frothy, this generation of Internet IPOs are on Groupon will be the ultimate test of investor much firmer financial footing. preference for revenue growth over profitability.

Figure 22: U.S. Software IPO Pipeline

Filing Revenue EBITDA Company (Ticker) Category Offering Amount Revenue Date Growth (YoY) Margin

Software Category

Imperva Security 6/17/11 $75,000,000 $60,500,000 34.0% (17.9%) ( NY SE:IMPV ) Carbonite Security 5/11/11 $100,000,000 $49,100,000 101.8% (31.2%) (NASDAQ:CARB) TrustWave Holdings Security 4/21/11 $100,000,000 $111,503,000 52.5% 4.4% (TBD) Apache Design Solutions Electronic Design Automation 3/14/11 $75,000,000 $44,047,000 27.3% 19.2% (NASDAQ: APAD) Tripwire, Inc. Security 5/28/10 $86,250,000 $74,006,000 18.6% 13.5% (NASDAQ: TPWR) Tangoe, Inc. Asset Lifecycle Management 4/16/10 $75,000,000 $55,917,000 49.0% 7.8% (NASDAQ: TNGO) Software Category Median: $80,625,000 $58,208,500 41.5% 6.1% Internet Category CafePress Online Retail 6/10/11 $80,000,000 $127,900,000 23.6% 7.8% (TBD) Groupon Online Services - Local Deals 6/2/11 $750,000,000 $1,313,900,000 1784.8% (24.5%) (TBD) Cloudary Coporation Online Media 5/24/11 $200,000,000 $60,018,000 201.9% (18.6%) (NYSE:READ) Zillow Online Services - Real Estate 4/18/11 $45,000,000 $30,467,000 74.2% 0.5% (NASDAQ:Z) Kayak Software Corporation Online Travel 11/17/10 $50,000,000 $112,698,000 0.6% 14.4% (TBD) Tudou Holdings Limited Online Media 11/9/10 $120,000,000 $40,327,000 143.2% (28.9%) (NASDAQ: TUDO) Internet Category Median: $100,000,000 $86,358,000 108.7% (9.1%)

Total Median: $83,125,000 $60,259,000 50.8% 2.4% Financial data is most recent TTM numbers from S-1 or F-1 . EBITDA margin estimated when not stated explicitly in S-1 or F-1 Bold denotes SaaS companies. 15| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

The Company’s revenue has increased nearly 20 fold on a YoY basis to $1.3 billion, as the number of subscribers has grown from 1.8 million to 83.1 million. However, the Company’s S-1 IPO filing disclosed an EBITDA margin of -24.5% as of 1Q11.

The negative EBITDA margin stems, in large part, from the huge sales force the Company employs to quickly enroll an ever-growing cadre of merchants and thereby attract additional subscribers. The strategy, clearly, is to scale massively and quickly in order to combat competitors and dissuade others from entering a market with few other barriers. Although Groupon separately delineates its marketing expenses, it lumps selling expenses together with general and administrative expenses, making it difficult to accurately assess its selling expense. However, if we assume the Company spends the Internet industry median of 11.2% on general and administrative expenses, we estimate Groupon spends 58.5% of total revenue on sales, 45.9% more than its public Internet company peers, and 23.2% more than the median selling expense of public SaaS companies, a category notorious for spending heavily on Sales (Figure 23).

Eventually Groupon will need to right size its cost structure and achieve profitability to retain investor interest, but it remains to be seen whether the current financial model will damper investor enthusiasm for the IPO. If Groupon’s IPO valuation surpasses the lofty valuations of other recent Internet IPOs, the chatter about another Internet bubble could become a roar.

Figure 23: Groupon’s Estimated Sales & Marketing Spend Compared to Internet and SaaS Medians

70.0%

60.0%

50.0%

40.0% Revenue

30.0% Total

% 20.0%

10.0%

0.0% Groupon Internet Median SaaS Median

16| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

Figure 24: U.S. Mergers & Acquisition Activity 18000 $1,800 16,818 $1,679 $1,550 15000 $1,500 13,610 12,586 $1,273 11,769 12000 11,254 $1,325 $1,200 Value 9,941 10,130 Deals

9,296 $1,095

(BIllions) of 9000 $900 7,762 $904 $877

Number $748 6000 $600

$550

3000 $300

0 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: Capital IQ Deals Value Note: 2011 data is annualized

M&A DEAL VOLUME AND SPENDING: ALL INDUSTRY SECTORS As for leveraged buyouts, there were 620 worldwide in 2Q11, worth $30.9 billion, compared Globally, there were 11,515 M&A transactions in to 689 deals worth $24.1 billion in 1Q10, and 773 2Q11 aggregating $672 billion, a slight drop from transactions aggregating $52.7 billion in 4Q10. 1Q11’s post recession peak of 11,722 deals The number of U.S. LBOs dropped to 207 in totaling $692 billion, and markedly higher than 2Q11 from 221 in 1Q11 and 258 in 4Q10. The 2Q10’s 10,194 acquisitions that aggregated $464 total price tag of U.S. LBOs aggregated $11.3 billion. billion in 2Q11, down slightly from $11.6 billion in 1Q11 and down significantly from the $24.9 billion Domestically, 4,202 M&A transactions were spent in 4Q10. The significant drop in deal announced across all industry sectors in the volume suggests PE buyers may be having a second quarter of 2011 (Figure 24). The 2Q11 difficult time finding attractively priced targets in U.S. deal total was in line with 1Q11’s 4,207 the face of rising valuations. The leveling off of transactions and nearly 23% higher than 2Q10’s transaction values from 4Q10 is due to the 3,431 transactions. 1H11 marks the first time absence of mega deals (over $1 billion) at this we’ve seen transaction volumes over 4,000 for juncture in 2011. In 4Q10, there were seven two consecutive calendar quarters and puts 2011 megadeals, compared to only two in 2Q11 and well on track for the highest annual M&A deal one in 1Q11. The largest LBO in 2Q11 was volume since 2008. As important, buyers Kohlberg Kravis Roberts & Co’s $2.4 billion loosened their purse strings significantly over the acquisition of Capsugel at a relatively high past year. In 2Q11, acquirers’ total spend for valuation of 3.2x TTM revenue for a financial 4,202 transactions was a healthy $327 billion, a buyer. Should macroeconomic concerns continue whopping 49.7% higher than 2Q10’s aggregate making headlines, look for further trepidation on price tag of $218 billion. The increased spend the part of financial buyers and a lackluster was spread over a large number of transactions, number of mega deals. with average deal size jumping 22% to $77 million from $64 million in 2Q10.

17| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

Figure 25: U.S. Software Merger $ Acquisition Activity

600 $25

$21.3

500 478 $19.5 $20 431 426 $17.2 413 423 402 397 400 378 $14.9 372 345 $15 Value 330 $13.4 316 Deals 311

(BIllions) of 300 $11.1 $9.8 $13.5 $10 Number 200 $7.6 $6.3 $4.6 $5 100 $2.9 $3.3

0 $0 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11

Deals Value SOFTWARE M&A DEAL VOLUME AND SPENDING Note: Each quarter, we recast prior quarters’ There were 397 software M&A transactions in software M&A activity based upon deal data 2Q11, moderately lower than 1Q11’s 423 tally, but released after our publication date to ensure we an improvement over 2Q10’s 378 transactions are providing our subscribers with the most (Figure 25). After five consecutive quarters of accurate deal volume and spending metrics going sub-400 M&A transactions (4Q08 to 4Q09), M&A forward. We expect Q2’s final tally will be closer deal volume has been at or near its historically to 420+ transactions once all the deal data is healthy level of 400 for five of the past six released in time for our Q3 report. quarters. At half-year, there have been 820 software M&A transactions, up 1.4% from 2H10’s Figure 26: TTM Average M&A Deal Size 809 transactions, and 31% greater than1H09’s $60.0 $48 627 deals. $50.0

(Millions) $40 $37 $40.0 $38 $33 A total of $21.3 billion was spent on Q2’s $31 Value $31 $28 transactions with reported values, almost twice $30.0 Deal

$22 1Q11’s $11.1 billion, and the highest software $20 $20 $20 $20.0 $16 M&A spend since 2Q07. Nearly one half of Average 2Q11’s aggregate price tag is attributable to $10.0 Microsoft’s $9.2 billion acquisition of Skype. TTM $0.0

Considering the wide disparities in total M&A 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 spend each quarter, YoY comparisons of TTM SOFTWARE M&A DEAL CURRENCY data can provide more reliable trend analysis. On that basis, the current spending trends are As in years past, cash only deals predominated in encouraging. On a TTM basis, total software 2Q11, comprising 78% of all M&A transactions, transaction dollars aggregated $65.3 billion as of virtually the same as 1Q11. The overwhelming 2Q11, 52% greater than the aggregate TTM use of cash as the sole deal currency is a software M&A spend of $42.9 billion as of 2Q10. longstanding phenomenon that’s attributable to a Similarly, on a TTM basis, the average deal size host of factors: buyers owned by PE firms often increased for the fifth consecutive quarter to $40 eschew dilution of their pre-IPO portfolio million (Figure 26).

18| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

companies; the seller’s founders want retirement software exit valuations in 2Q11 were at record income manageability, and the seller’s investors levels (please see next section). One contributing are anxious for a real IRR. However, while the and historically inconsistent factor was the return percentage of all cash deals has fluctuated from of private equity buyers flush with cash, some of quarter to quarter (mostly inversely with public which paid strategic multiples for targets they market performance), the percentage of cash only perceived as providing an opportune new platform deals remains elevated from pre-recession levels, or a compelling tuck-in for an existing investment. when the percentage of cash deals was frequently Case in point: Providence Equity Partners paid an below 70%. Contributing factors include macro eyebrow raising 3.8x TTM revenue for Blackboard economic uncertainty, record amounts of cash on in June 2011. Another explanation for the buyer balance sheets, and seller stock market growing number of private buyers willing to pay pessimism. Only 7% of 2Q11’s transactions were higher valuations is the abundance of cash paid solely in stock, down significantly from available to help the most rapidly growing private 1Q11’s 12% (Figure 27). software and Internet companies grow even faster. Companies like Facebook, Zynga and Figure 27: Software M&A Deal Currency Groupon, with unlimited ability to raise additional

6% capital have made dozens of acquisitions in the 12% 12% 7% past three years and kept up the pace in 2Q11. Figure 28: Public vs. Private Software M&A 15% 21% 9% Buyers and Sellers 14%

52% 60% 58% 67% 79% 78% 74% 73%

Percentage of Software Buyers 42% 48% 40% 33% Q3 2010 Q4 2010 Q1 2011 Q2 2011

Stock Cash & Stock Cash Q3 2010 Q4 2010 Q1 2011 Q2 2011

PRIVATE VS. PUBLIC BUYERS Private Public

In assessing each quarter’s M&A activity, we continue to track the mix of public and private buyers because it provides useful insight about the current software M&A ecosystem and the level of interest and likely valuation range a potential sell-side candidate might attract. 98% 98% 97% Typically, low M&A deal volumes and fewer public 96% buyers connote lower valuations. Conversely, higher deal volume and 40%+ public buyers mean

increased deal competition and more strategic Percentage of Software Sellers valuations. 4% 2% 2% 3% That wasn’t the case in the second quarter of Q3 2010 Q4 2010 Q1 2011 Q2 2011 2011. The percent of public buyers dropped significantly in 2Q11 to 33% (Figure 28), yet Private Public

19| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

SOFTWARE M&A VALUATIONS multiple for software and SaaS deals is simply that - a median – the midpoint of a very broad The software industry’s benchmark median exit range of exit valuations. Perhaps more useful is valuation grew to a median multiple of 2.7x TTM our calculation that in 2Q11, 36.9% of M&A deals revenue in 2Q11 from 2.3x TTM revenue in 1Q10 with reported EV/Revenue exit multiples had a (Figure 29). 2.0x EV/Revenue multiple or less. By contrast, 21.0% of M&A deals with reported EV/Revenue Figure 29: Median Software M&A Valuation as a exit multiples had a 5.0x EV/Revenue multiple or Multiple of Revenue more (Figure 30).

Since very few software transactions publicly identify a private software seller’s TTM EBITDA, 2.7x 2.5x 2.3x we lacked sufficient data to ascertain the median 2.1x EBITDA exit multiple paid in 2Q11 for private software company sellers. We did, however, determine 2Q11’s median exit multiple for public software company sellers was 14.7x TTM EBITDA, a healthy improvement over 1Q11’s Q3 2010 Q4 2010 Q1 2011 Q2 2011 13.9x and 4Q10’s 12.4x TTM EBITDA exit multiple (Figure 31). Following seven consecutive quarters of sub-2x median exit multiples in 2008 and 2009, 2Q11 marked the sixth consecutive quarter the median Figure 31: Median Software M&A Valuation as a exit multiple equaled or exceeded 2.1x TTM Multiple of EBITDA revenue. The last time we observed such a phenomenon was 2Q05 to 3Q06, during which we also reported a median software M&A multiple of 13.9x 14.7x 2.7x TTM revenue in 3Q06. However, unlike in 13.0x 12.4x ’05-’06, the current median 2.7x exit multiple includes SaaS exits, which have unquestionably pushed the median software exit valuation higher. Excluding these SaaS deals, the median software exit multiple is 2.5x. Q3 2010 Q4 2010 Q1 2011 Q2 2011 Figure 30: 2Q11 Median Software M&A EV/Revenue Multiple Distribution SOFTWARE M&A VALUATIONS BY OWNERSHIP

25.0% 23.7% While a variety of factors impact exit valuation, 21.1% one important ingredient is the nature of the 18.4% 20.0% seller’s equity structure. As a result, we analyzed 2Q11 15.0% 13.2% all 2011 year-to-date (YTD) M&A transactions in 10.5% 10.5% with ascertainable revenue multiples to determine

Deals 10.0% how exit valuations varied by type of equity of

% 5.0% ownership (private vs. public company). 2.6% 0.0% Public company sellers received a median 1.8x <= 1.0x > 1.0x > 2.0x > 3.0x > 4.0x > 5.0x > 6.0x TTM revenue exit valuation, while privately held & & & & & & <= 2.0x <= 3.0x <= 4.0x <= 5.0x <= 6.0x <= 7.0x software companies commanded a median 2.7x TTM revenue multiple (Figure 32). The higher Lest every software entrepreneur who reads this exit multiples paid to private sellers continued a report multiply his/her company’s TTM revenue by trend that began about four years ago. After the 2.7 to determine current fair market value, we bubble burst in 2001, public companies generally must emphasize that the 2Q11 median exit garnered higher exit premiums relative to private

20| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

companies as private equity funds used SOFTWARE M&A VALUATIONS BY VERTICAL AND extraordinary debt leverage to take private an HORIZONTAL MARKETS array of public companies that typically had lots of cash and recurring revenue. By 2006, there were Another important determinant of exit valuation is considerably fewer public software companies the seller’s target market focus and related with those attributes, in large part because fewer domain expertise. We analyzed 2Q11’s median private companies were enticed to go public due software M&A multiple horizontally and vertically, to the cost and complexities of Sarbanes Oxley, a segregating software company sellers with lackluster IPO market and secondary private vertical market solutions (e.g. retail, financial markets that offered liquidity to private company services, telecom, manufacturing, etc.) from shareholders. And so, acquirers focused more on sellers with horizontal software solutions private targets that were often venture-backed, (infrastructure, enterprise applications, etc.). In well-funded, growing rapidly and, consequently, 2Q11, providers of vertical software accounted for expensive. 35% of all software M&A, confirming vertical providers remain attractive acquisition targets As a next step, we separated public and private primarily because of their predictable and software company buyers to ascertain any substantial recurring revenue, domain expertise, difference in median purchase price paid in 2Q11. and highly defensible market positions. Historically, public buyers have paid higher exit Horizontal solution providers accounted for the multiples than private buyers: 2.5x vs. 2.0x TTM remaining 65% of sellers (Figure 33). revenue in 2007; 2.0x vs.1.7x in 2008; 1.9x Figure 33: 2Q11 Median Multiples Segmentation vs.1.2x in 2009; and 2.4x vs.1.8x in 2010. In (EV/Revenue) 1Q11 we saw a significant expansion in premiums public companies were paying over private companies, corresponding with a spike in their 34.7% own public market trading multiples. The public purchase premium remained elevated in 2Q11 as 65.3% public buyers paid a median 2.7x TTM revenue multiple, while private buyers pad a median 1.9x TTM revenue multiple.

Figure 32: 2Q11 Median Multiples Segmentation horizontal vertical (EV/Revenue) During the second quarter, vertical market sellers Public Sellers 1.8x Median Multiple received a median 4.5x TTM revenue multiple, while their horizontal market counterparts were paid a 22% median exit multiple of 2.2x TTM revenue multiple. 78% The higher multiple paid to vertical market software companies marks the second consecutive quarter of vertical market outperformance as measured by median TTM revenue multiple (Figure 34). Private Sellers 2.7x Median Multiple Figure 34: Horizontal vs. Vertical Software Private Buyers M&A Multiples 1.9x Median Multiple Horizontal Vertical 2Q11 2.2x 4.5x 35% 1Q11 2.0x 3.0x 65% 4Q10 2.3x 1.9x 3Q10 2.7x 2.2x Public Buyers 2Q10 2.3x 2.0x 2.7x Median Multiple 21| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

The strength of vertically focused software discussion (Figure 35). Software providers and companies is not a surprise considering 63% of software companies vertically focused on the HR respondents to SEG’s 2011 Annual Buyer M&A & Workforce Management industry garnered the survey (available in our 2010 Annual Report and highest median TTM revenue multiple (4.2x TTM referenced in part in our blog) said management revenue), up significantly from 1Q11’s 2.9x. and domain expertise were the first and second While consolidation was surely a factor in this highest priorities when considering an acquisition. product category, the higher exit valuations were Notable vertical M&A transactions from 2Q11 largely attributable to buyers seeking tuck in include Fiserv’s acquisition of CashEdge ($456 acquisitions that would expand their product suite million, 9.3x TTM revenue), Symantec’s and generate incremental revenue. Notable deals acquisition of Clearwell Systems ($390 million, in the HR & Workforce Management industry 7.8x TTM revenue) and Audatex’s acquisition of include SuccessFactors’ acquisition of Plateau Explore Information ($520 million, 6.8x TTM Systems, Concur Technologies’ acquisition of revenue). GlobalExpense and Taleo’s acquisition of Jobpartners. M&A EXIT VALUATIONS BY SOFTWARE PRODUCT CATEGORY Other software product categories demonstrating high valuation multiples include CRM, Marketing While a company’s target market, size, ownership & Sales (4.1x TTM revenue), Financial Services and software delivery model demonstrably impact (3.7x TTM revenue) and Education (3.5x TTM valuation, software product category continued to revenue). Software M&A valuations in the be the single most important M&A valuation driver Messaging, Conferencing & Communications in 2Q11. For most software product categories, sector fluctuated most widely over the past two there is often an insufficient number of quarters, jumping rather dramatically from 1.1x transactions that publicly report both seller TTM TTM revenue in 1Q11 to 3.0x in 2Q11, benefitting revenue and buyer purchase price, essential data in part by Microsoft’s acquisition of Skype ($9.2 in ascertaining the applicable median exit value billion, 10.6 TTM revenue) and USA Mobility’s for the product category. Consequently, we acquisition of Amcom Software ($163 million, 3.2x aggregate the data each quarter on a TTM basis. TTM revenue). Some industry analysts As a result, it may take several quarters to detect suggested Microsoft over paid for Skype, but changing product category valuation trends, and Skype offers Microsoft the ability to functionally certain outlier transactions consummated nine or enhance its Xbox, Windows Phone, Kinect, Office twelve months ago may have a residual impact on 365 and other Live product lines. The ROI their product category multiples. outcome will depend largely on Microsoft’s ability to successfully integrate and leverage Skype in Among the twenty seven product categories we these various arenas, as well as more tracked in 2Q11, eleven included enough successfully monetize Skype’s business model. transaction values in the quarter to warrant Figure 35: Software M&A by Product Category

4.2x 4.1x 3.9x 3.7x 3.5x 3.1x 3.0x 2.4x 2.2x 2.0x 1.9x Security Education Healthcare Compliance BI, Risk and Retail, etc.) Retail, Software (A&D, Telco, (A&D, Messaging, Enterprise Management Other Verticals Conferencing & HR & Workforce HR & Communications Sales Software Sales Dev Tools & IT & Tools Dev Financial Services sset Management Resource Planning CRM, Marketing& A 22| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

Figure 36: Software M&A by Product Category

Content/Document Mgmt, 3% CRM, Marketing & Sales Software , 4% Database & File Mgmt, 1% Billing & Service Provisioning, 1% Business Intelligence, 3% Dev. Tools, IT Asset Mgmt & App. Testing , Accounting , 1% 6%

Telecommunications, 1% Electronic Commerce, 1%

Retail, 1% Electronic Design Automation, 2%

Engineering, PLM & CAD/CAM , 3%

Other Verticals, 12% Enterprise Application Integration, 1%

Enterprise Resource Planning, 2%

Entertainment, 3% Manufacturing & Asset Mgmt, 3% HR & Workforce Mgmt, 4%

Legal, 0%

Messaging, Conferencing & Communications, 5% Healthcare, 7%

Multimedia, Graphics, Digital Media, 1% Gov't / A&D, 2% Networking & Connectivity, 0% Security, 6%

Financial Services, 7% Storage & Systems Mgmt, 3%

Supply Chain Mgmt & Logistics, 3%

Education, 4%

Mobile, 14%

From a deal activity standpoint, the Mobile from 9.9% in 1Q11 (Figure 37). Just two years product category accounted for 14% of 2Q11’s ago, SaaS acquisitions accounted for only 2.6% transactions, leading all other product categories of all software M&A transactions. (Figure 36). Software providers focused on Healthcare and Financial Services each comprised 7% of the second quarter’s Figure 37: SaaS M&A Deals as % of Total transactions. While other categories seem to Software M&A Deals frequently enter and exit the top five most active 12.0% 11.3%

software M&A categories, Healthcare, Mobile and 9.9% 9.5% Financial Services software providers continue to 10.0% Software 7.7% 8.0%

be the most acquired in 2011, just as in 2010. Total

Deals % 5.4%

6.0% as

6.2% SAAS M&A TRANSACTIONS M&A 3.9%

Deals 4.0%

2.8% 2.6% M&A 2.0% 2.3%

In 2Q11, 45 SaaS companies were acquired, SaaS compared to 39 in 1Q11 and 26 SaaS 0.0% 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 acquisitions in 4Q10. The growing number of SaaS acquisitions is consistent with the results of The accelerating pace of SaaS acquisitions, our 2011 Software Company Buyer Survey, which generally garner a higher median indicating SaaS providers had finally become an EV/Revenue than their on-premise counterparts, important target for acquirers, as well an array of has contributed in part to the historic highs we are recent IT spending surveys showing SaaS was seeing in the SaaS median exit multiple. While the gaining increased acceptance among enterprise number of acquisitions has grown, SaaS exits still CIOs. As a result, SaaS acquisitions accounted comprise a relatively small percentage of all for 11.3% of all software acquisitions in 2Q11, up

23| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

SPOTLIGHT ON MOBILE M&A

The M&A strength of the mobile sector is particularly noteworthy this quarter, with twice as many transactions as any other software product category. Ever since Apple and Google successfully circumvented the wireless carriers by offering app stores directly to consumers, mobile innovation and customer adoption in the space has been breathtaking. High tech research firm Canalys recently estimated app store revenue will reach $14.1 billion in 2012, up 93% from $7.3 billion in 2011, and will soar to $36.7 billion by 2015. The explosion of applications has created many multi-billion dollar market opportunities and has given rise to a frenzy of M&A activity that’s drawing in industry titans.

The most active mobile product category was entertainment, consisting of games, music and video services, representing 31% of all M&A transactions in the Mobile Product Category in 2Q11. Notable transactions within the category include Electronic Arts acquisition of Firemint; Zynga’s acquisition of Sapus Media; Google’s acquisition of PushLife; and Yahoo’s acquisition of IntoNow.

Other mobile product categories accounting for more than 10% of mobile M&A transactions in Q2 include Marketing, Advertising, and Infrastructure. The activity in Mobile Marketing and Advertising was largely driven by online companies looking to expand their reach to mobile devices, exemplified by ValueClick’s acquisition of Greystripe ($70 million, estimated 2.5x TTM revenue) which paved ValueClick’s entry into the rapidly growing $1.1 billion mobile advertising market. Infrastructure transactions have been largely driven by the explosion of data over wireless networks, mandating more efficient pipeline control and policy rules at the carrier’s back office. Two of the larger transactions in this product category included Amdocs acquisition of Bridgewater Systems ($126 million, 1.4x TTM revenue), and Ericcson’s acquisition of Telcordia Technologies ($1.2 billion, 1.6x TTM revenue).

Mobile Application Platforms and Mobile Application Services, which accounted for 10.4% and 6.3% of all mobile transactions respectively, are focused on enabling applications to be accessed across the fragmented mobile device and app store ecosystem. Application Platforms seek to accomplish this with development platforms that transcend the underlying fragmentation complexity, while Application Service providers ordinarily rely upon resource intensive, manual porting. Clearly, Application Platforms are a far more efficient approach to navigating the complexity of the mobile ecosystem, and public buyers and VCs have taken note. A notable 2Q11 transaction in this category was Software AG’s acquisition of Metismo, with Software AG seeking to expand its leadership in the business process arena by creating a flexible and efficient “mobile office.”

Although Mobile Commerce represented less than 10% of mobile M&A transactions in the second quarter, this mobile subcategory is experiencing 86% YoY growth according to a recent IDC report, leading to some notable M&A transactions in 2Q11. EBay continued to acquire companies that would leverage its strategy of facilitating local retail purchases via mobile, acquiring Where and Fig Card Corporation. Along similar lines, Visa acquired Fundamo ($110 million) as it positions itself for the coming wave of mobile enabled payments. 6.3% 10.4% 4.2%

Advertising 10.4% Entertainment Ecommerce

6.3% Infrastructre 31.3% LBS Marketing 8.3% Enterprise Mobility Communications Application Platforms Other 14.6% 6.3% Application Services

8.3% 10.4%

24| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

software M&A activity each quarter, which is why acquisition of Medical Present Value (4.1x TTM we track the median exit value of SaaS M&A on a revenue); and SDC Software’s acquisition of TTM basis. As of 2Q11, the TTM median exit SUPERAnitSpyware (3.4x TTM revenue). EV/Revenue for public SaaS companies was Additional details on 2Q11’s SaaS M&A 4.2x. transactions can be found in Appendix E.

Six of the SaaS companies exiting in Q2 were INTERNET M&A TRANSACTIONS members of one of the earliest and most popular SaaS categories, CRM and Marketing. Thus far The second quarter marks the fourth consecutive in 2011, there have been eleven SaaS deals in quarter of accelerating QoQ deal volume in the this category, with a good number focused on Internet space. In 2Q11, 199 companies were socially enabled CRM solutions which are acquired, up 13.1% from 1Q11 and 46.3% YoY currently in high demand by buyers. That may (Figure 38). give many of the remaining SaaS based, privately held CRM and Marketing players good reason to Not surprisingly, online retail was the most active reevaluate their exit timing assumptions. Internet M&A category in the second quarter with 56 transactions, bringing the TTM total to 165 There were four SaaS transactions in the Storage transactions. Other highly active Internet & Systems Management category, spurred on by categories in 2Q11 were Ad Tech & Services, buyers’ continuing emphasis on cloud Content and Social Technologies (Figure 39). infrastructure and a concomitant requirement for enhanced solutions for virtualization, systems Ad-Tech’s YoY deal volume growth is remarkable, management and integration. at 162%. Notable transactions in the Ad-Tech product category include Google’s acquisition of Of the 45 SaaS acquisitions in 2Q11, six reported AdMeld ($400 million), and DG Fast Channel’s EV/Revenue multiples, and all but one of these acquisition of MediaMind Technologies ($422 exceeded the median software EV/Revenue million, 5.0x TTM revenue). Google continues to multiple of 2.7x. The highest multiple was the make investments into the display advertising 9.3x TTM revenue multiple paid by Fiserv for space, which is growing faster than Search ad CashEdge in an effort to expand its digital spending (15.5% CAGR vs. 10.7% CAGR) and is footprint. Other SaaS transactions with forecasted to surpass Search in total ad spend by EV/Revenue multiples above the software median 2015 ($22.0 billion vs. 21.5 billion) according to were DealerTrack’s acquisition of eCarList (6.5x eMarketer. DG FastChannel acquired MediaMind TTM revenue); SuccessFactors acquisition of to merge MediaMind’s online advertising expertise Plateau Systems (4.2x TTM revenue); Experian’s with DG FastChannel’s TV advertising expertise

Figure 38: Internet Deal Volume by Category

Category Q2 2011 Q1 2011 Q4 2010 Q3 2010 Q2 2010 Total Social Tech. 25 36 23 14 23 121 Ad Tech & Svcs 34 33 21 22 13 123 eCommerce 56 32 29 22 26 165 Content 29 26 34 26 31 146 Video/Photos 5 18 12 15 8 58 Infrastructure 19 16 17 14 13 79 Gaming 15 7 6 10 5 43 Search 8 6 12 6 5 37 Communications 6 1 1 4 8 20 Music 2 1 26415 Total 199 176 157 139 136 807

25| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

so advertisers can plan and execute campaigns exit that exceeded $1 billion in enterprise value. simultaneously, a trend we expect will drive The transaction is the latest in a series of M&A consolidation among online and mobile investments by legacy telecom/cable providers in advertisers, as well. the emerging market for cloud hosting infrastructure. In January, Verizon acquired Figure 39: Internet M&A by Category Terremark for $1.8 billion, paying 5.4x TTM

7.5% revenue. In February, Time Warner bought 3.0% NaviSite for $326 million, paying 2.5x TTM

28.1% e‐Commerce revenue. Search 14.6% infrastructure Ad‐Tech & Services Music 2.5% Social Tech Video/Photos 4.0% Content 12.6% Communications Gaming

1.0% 9.5% 17.1%

Based upon the 13 Internet transactions which released sufficient data to ascertain an exit multiple, the median exit valuation for the Internet category in 2Q11 was 3.1x TTM revenue, down from 1Q11’s 3.5x, but still far greater than 4Q10’s 1.0x. CenturyLink’s acquisition of SAVVIS ($3 billion, 3.0x TTM revenue) was the only Internet

26| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX A: 2Q11 PUBLIC SOFTWARE MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY

Billing & Service Management 2Q10 3Q10 4Q10 1Q11 2Q11 Education & eLearning 2Q10 3Q10 4Q10 1Q11 2Q11 EV/Revenue 1.6x 1.6x 1.8x 1.9x 2.2x EV/Revenue 3.4x 2.6x 2.9x 2.7x 2.9x EV/EBITDA 7.8x 7.5x 8.6x 9.6x 9.3x EV/EBITDA 15.0x 10.2x 12.2x 15.1x 16.6x EV/Earnings 20.2x 17.3x 21.4x 24.8x 17.6x EV/Earnings 42.4x 36.7x 36.3x 35.9x 119.0x Gross Profit Margin 52.6% 50.4% 45.0% 42.1% 51.4% Gross Profit Margin 82.7% 81.2% 77.7% 73.7% 81.4% EBITDA Margin 21.8% 21.7% 22.4% 23.0% 22.4% EBITDA Margin 25.5% 25.5% 25.6% 24.9% 22.8% Net Income Margin 12.2% 12.0% 12.0% 11.3% 12.8% Net Income Margin 9.8% 9.3% 8.7% 8.3% 2.8% TTM Revenue Grow th (YoY) 4.7% 6.4% 10.3% 11.4% 13.1% TTM Revenue Grow th (YoY) 18.4% 16.6% 14.1% 12.9% 12.0% TTM EBITDA Grow th (YoY) 11.5% 10.7% 3.0% 10.6% 16.2% TTM EBITDA Grow th (YoY) 22.1% 26.1% 16.4% 5.7% -0.6% TTM Earnings Grow th (YoY) -22.0% -5.4% 44.0% 0.9% 1.7% TTM Earnings Grow th (YoY) -90.3% -80.7% -8.0% 110.7% 106.2% Current Ratio 2.6 2.7 2.4 2.4 2.2 Current Ratio 1.7 1.3 1.0 0.7 0.7 Cash as Percent of Market Cap 22.8% 29.5% 24.1% 21.8% 20.8% Cash as Percent of Market Cap 10.2% 8.6% 8.6% 8.4% n/a Enterprise Value Grow th (YoY) 57.6% 33.5% 17.4% 15.1% 37.5% Enterprise Value Grow th (YoY) 44.2% 9.8% 4.5% -22.1% -20.2%

Business Intelligence 2Q10 3Q10 4Q10 1Q11 2Q11 Electronic Design Automation 2Q10 3Q10 4Q10 1Q11 2Q11 EV/Revenue 2.0x 2.6x 3.1x 3.7x 4.2x EV/Revenue 1.5x 1.4x 1.6x 2.1x 2.1x EV/EBITDA 18.2x 24.5x 29.4x 40.3x 46.2x EV/EBITDA 12.9x 17.4x 19.2x 20.8x 20.3x EV/Earnings 33.5x 33.9x 44.9x 55.4x 44.1x EV/Earnings 11.4x 11.4x 9.2x 10.6x 25.2x Gross Profit Margin 82.6% 77.8% 74.3% 69.5% 79.3% Gross Profit Margin 81.9% 80.9% 80.2% 76.0% 81.7% EBITDA Margin 15.9% 14.9% 15.5% 12.8% 10.0% EBITDA Margin 8.4% 8.3% 6.9% 8.2% 10.4% Net Income Margin 9.5% 9.2% 8.5% 8.2% 5.8% Net Income Margin -2.7% -2.6% -2.5% -2.5% -0.1% TTM Revenue Grow th (YoY) -1.8% -18.1% -8.6% -3.6% -9.4% TTM Revenue Grow th (YoY) -1.8% -1.1% 4.5% 9.2% 13.2% TTM EBITDA Grow th (YoY) -1.8% -18.1% -8.6% -3.6% -9.4% TTM EBITDA Grow th (YoY) 5.4% 4.2% 131.8% 96.0% 124.5% TTM Earnings Grow th (YoY) 77.4% 47.8% 42.6% 38.2% 74.8% TTM Earnings Grow th (YoY) -70.3% -101.7% -316.9% -146.3% -266.8% Current Ratio 1.8 1.6 1.8 1.8 2.2 Current Ratio 1.3 1.4 1.4 1.5 1.5 Cash as Percent of Market Cap 21.7% 17.6% 15.1% 14.9% n/a Cash as Percent of Market Cap 24.9% 27.9% 23.3% 20.3% 9.3% Enterprise Value Grow th (YoY) 57.2% 1.7% 22.1% 16.4% 90.8% Enterprise Value Grow th (YoY) 68.4% 68.4% 25.8% 69.3% 42.6%

Content & Document Management 2Q10 3Q10 4Q10 1Q11 2Q11 Engineering, PLM & CAD/CAM Softw are 2Q10 3Q10 4Q10 1Q11 2Q11 EV/Revenue 2.6x 2.5x 2.7x 3.2x 3.4x EV/Revenue 3.3x 3.0x 3.7x 3.9x 3.7x EV/EBITDA 11.6x 10.0x 9.7x 11.1x 11.5x EV/EBITDA 14.4x 15.4x 16.5x 19.2x 16.4x EV/Earnings 37.1x 33.1x 34.3x 42.0x 20.5x EV/Earnings 34.7x 33.8x 40.6x 53.6x 31.4x Gross Profit Margin 72.5% 71.3% 70.2% 60.9% 70.4% Gross Profit Margin 82.1% 81.4% 73.2% 68.3% 83.9% EBITDA Margin 26.2% 26.9% 27.8% 28.1% 27.4% EBITDA Margin 16.2% 18.5% 19.8% 19.9% 20.2% Net Income Margin 10.1% 9.4% 8.9% 8.5% 14.9% Net Income Margin 4.8% 4.7% 4.6% 4.6% 11.5% TTM Revenue Grow th (YoY) 0.2% 12.1% 14.5% 19.5% 16.5% TTM Revenue Grow th (YoY) -6.3% -0.3% 10.1% 13.9% 12.2% TTM EBITDA Grow th (YoY) 8.1% 17.9% 23.8% 36.6% 29.3% TTM EBITDA Grow th (YoY) -3.8% -2.4% 17.1% 5.9% 42.1% TTM Earnings Grow th (YoY) -14.0% -14.6% -38.9% -47.9% -40.8% TTM Earnings Grow th (YoY) 0.1% -21.9% -17.7% -30.9% -29.2% Current Ratio 1.7 1.7 1.7 1.3 1.2 Current Ratio 2.0 2.0 2.0 2.2 2.2 Cash as Percent of Market Cap 15.0% 15.0% 14.8% 13.6% 15.6% Cash as Percent of Market Cap 13.6% 15.2% 12.3% 11.2% 10.5% Enterprise Value Grow th (YoY) 26.7% 9.7% 10.5% 18.0% 36.5% Enterprise Value Grow th (YoY) 64.4% 39.4% 41.4% 41.2% 38.2%

Data M anagem ent & Integration 2Q10 3Q10 4Q10 1Q11 2Q11 Enterprise Resource Planning 2Q10 3Q10 4Q10 1Q11 2Q11 EV/Revenue 2.1x 2.3x 2.9x 3.3x 3.3x EV/Revenue 3.2x 2.1x 2.1x 2.1x 2.3x EV/EBITDA 10.3x 9.9x 11.0x 16.0x 15.7x EV/EBITDA 10.1x 8.5x 9.1x 9.2x 9.9x EV/Earnings 18.9x 19.0x 22.6x 25.3x 26.4x EV/Earnings 19.8x 21.0x 23.2x 27.1x 26.6x Gross Profit Margin 76.6% 71.5% 66.3% 62.8% 74.8% Gross Profit Margin 66.7% 57.9% 58.0% 55.1% 58.2% EBITDA Margin 22.3% 22.6% 22.9% 23.0% 23.2% EBITDA Margin 26.8% 22.3% 21.8% 21.7% 8.4% Net Income Margin 11.3% 10.7% 10.0% 9.6% 12.6% Net Income Margin 13.3% 8.3% 8.3% 8.0% 8.2% TTM Revenue Grow th (YoY) 3.3% 8.0% 15.4% 22.3% 24.9% TTM Revenue Grow th (YoY) -5.7% -0.8% 2.3% 3.3% 7.5% TTM EBITDA Grow th (YoY) 13.9% 21.1% 25.5% 27.7% 26.6% TTM EBITDA Grow th (YoY) 14.6% 12.3% 8.3% 16.9% 15.7% TTM Earnings Grow th (YoY) -16.4% -11.2% -14.9% -15.6% -17.5% TTM Earnings Grow th (YoY) 1.3% -6.3% -14.1% -11.9% -3.2% Current Ratio 1.5 1.5 1.4 1.5 2.0 Current Ratio 1.6 1.6 1.5 1.5 1.4 Cash as Percent of Market Cap 16.3% 15.7% 12.5% 13.2% 14.6% Cash as Percent of Market Cap 11.3% 20.9% 20.6% 18.3% 22.1% Enterprise Value Grow th (YoY) 54.4% 33.0% 37.0% 46.2% 58.4% Enterprise Value Grow th (YoY) 25.1% -2.9% 4.8% 13.7% 30.7%

Development Tools & Open Source 2Q10 3Q10 4Q10 1Q11 2Q11 Financial Services Softw are 2Q10 3Q10 4Q10 1Q11 2Q11 EV/Revenue 3.0x 2.4x 2.8x 3.0x 2.7x EV/Revenue 1.9x 2.0x 2.1x 2.1x 2.4x EV/EBITDA 9.8x 8.6x 9.9x 11.4x 10.2x EV/EBITDA 8.7x 8.5x 8.8x 9.2x 10.2x EV/Earnings 23.6x 22.1x 28.9x 33.3x 16.5x EV/Earnings 21.6x 21.7x 22.9x 24.1x 24.8x Gross Profit Margin 79.4% 74.2% 69.2% 66.5% 77.3% Gross Profit Margin 57.4% 56.6% 54.3% 53.1% 55.2% EBITDA Margin 22.4% 23.9% 24.7% 25.2% 25.4% EBITDA Margin 22.1% 23.1% 21.3% 20.4% 20.4% Net Income Margin 11.8% 10.6% 9.7% 8.9% 12.3% Net Income Margin 8.8% 9.2% 9.5% 9.8% 7.1% TTM Revenue Grow th (YoY) 1.2% 16.5% 26.9% 36.8% 28.6% TTM Revenue Grow th (YoY) -1.5% 2.0% 3.1% 3.4% 7.4% TTM EBITDA Grow th (YoY) 7.3% 14.6% 38.4% 43.6% 34.0% TTM EBITDA Grow th (YoY) 4.2% 15.9% 7.3% 10.9% 12.5% TTM Earnings Grow th (YoY) -4.5% -3.6% -33.3% -46.3% -36.9% TTM Earnings Grow th (YoY) -16.5% -15.7% -24.1% -16.8% -1.2% Current Ratio 2.0 2.2 2.4 2.7 2.8 Current Ratio 1.6 1.8 1.8 1.8 1.9 Cash as Percent of Market Cap 18.3% 21.1% 18.1% 18.4% 15.6% Cash as Percent of Market Cap 16.3% 20.9% 18.7% 17.6% 19.9% Enterprise Value Grow th (YoY) 46.3% 24.2% 67.8% 58.8% 48.8% Enterprise Value Grow th (YoY) 15.6% 4.0% 7.2% 13.3% 13.2%

27| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX A: 2Q11 PUBLIC SOFTWARE MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY

Healthcare 2Q10 3Q10 4Q10 1Q11 2Q11 Security 2Q10 3Q10 4Q10 1Q11 2Q11 EV/Revenue 3.4x 3.4x 3.5x 3.7x 3.8x EV/Revenue 2.9x 2.4x 2.5x 2.4x 2.9x EV/EBITDA 15.6x 13.8x 15.9x 17.5x 19.6x EV/EBITDA 14.5x 12.9x 14.0x 13.8x 13.9x EV/Earnings 34.3x 33.8x 36.9x 45.2x 37.4x EV/Earnings 16.4x 16.4x 21.4x 23.4x 22.6x Gross Profit Margin 68.5% 59.3% 56.1% 51.5% 62.3% Gross Profit Margin 83.5% 81.0% 78.0% 74.3% 82.7% EBITDA Margin 24.9% 21.9% 22.3% 22.8% 23.3% EBITDA Margin 19.4% 21.2% 22.5% 21.4% 22.1% Net Income Margin 9.9% 9.6% 8.8% 7.1% 4.5% Net Income Margin 10.8% 10.5% 10.2% 10.2% 12.2% TTM Revenue Grow th (YoY) 10.3% 13.6% 16.4% 19.9% 20.8% TTM Revenue Grow th (YoY) 8.1% 6.7% 8.9% 6.1% 12.3% TTM EBITDA Grow th (YoY) 4.3% 5.3% 13.5% 27.9% 30.4% TTM EBITDA Grow th (YoY) 3.2% 5.9% 15.7% 21.0% 17.5% TTM Earnings Grow th (YoY) -5.9% -5.7% 1.8% -8.5% -18.8% TTM Earnings Grow th (YoY) 12.1% -54.2% -38.3% -37.2% -25.2% Current Ratio 2.9 2.8 2.3 2.3 2.4 Current Ratio 2.3 2.2 2.4 2.4 2.5 Cash as Percent of Market Cap 9.2% 8.5% 8.3% 8.4% 19.1% Cash as Percent of Market Cap 18.8% 23.9% 19.6% 19.8% 21.3% Enterprise Value Grow th (YoY) 39.8% 15.5% 29.6% 39.5% 44.1% Enterprise Value Grow th (YoY) 33.0% 7.3% 7.6% 0.3% 12.2%

IT Conglom erates 2Q10 3Q10 4Q10 1Q11 2Q11 Storage & Systems Management 2Q10 3Q10 4Q10 1Q11 2Q11 EV/Revenue 3.1x 2.7x 2.7x 3.0x 2.6x EV/Revenue 2.4x 2.4x 2.7x 3.1x 2.9x EV/EBITDA 8.9x 7.3x 7.7x 8.4x 7.9x EV/EBITDA 9.9x 9.5x 12.0x 12.1x 11.8x EV/Earnings 16.9x 14.4x 14.3x 15.6x 14.6x EV/Earnings 18.3x 19.4x 24.7x 25.7x 21.9x Gross Profit Margin 64.4% 60.7% 58.2% 57.4% 62.2% Gross Profit Margin 78.6% 78.0% 76.4% 75.2% 76.6% EBITDA Margin 40.6% 38.9% 37.8% 37.9% 38.3% EBITDA Margin 22.0% 22.8% 22.6% 21.7% 21.8% Net Income Margin 18.3% 17.3% 16.6% 16.3% 16.8% Net Income Margin 11.9% 11.9% 11.9% 11.8% 13.1% TTM Revenue Grow th (YoY) -2.7% 6.9% 16.8% 19.2% 15.2% TTM Revenue Grow th (YoY) 2.1% 4.1% 6.1% 10.3% 11.9% TTM EBITDA Grow th (YoY) 1.8% 9.7% 26.2% 25.1% 21.8% TTM EBITDA Grow th (YoY) 4.4% 12.6% 16.2% 7.2% 11.8% TTM Earnings Grow th (YoY) 6.0% 1.3% -9.5% -11.4% -15.6% TTM Earnings Grow th (YoY) -0.9% -14.2% -31.1% -23.3% -24.7% Current Ratio 2.1 2.2 2.5 2.8 2.8 Current Ratio 1.4 1.5 1.6 1.6 1.5 Cash as Percent of Market Cap 13.5% 15.2% 12.6% 14.5% 16.8% Cash as Percent of Market Cap 17.6% 17.8% 14.0% 14.5% 15.7% Enterprise Value Grow th (YoY) 22.3% 4.3% 8.2% 18.9% 23.5% Enterprise Value Grow th (YoY) 22.3% 21.6% 31.6% 44.8% 38.9%

Mobile Solutions/Content 2Q10 3Q10 4Q10 1Q11 2Q11 Supply Chain Management & Logistics 2Q10 3Q10 4Q10 1Q11 2Q11 EV/Revenue 2.4x 2.2x 2.5x 2.7x 2.6x EV/Revenue 1.8x 1.5x 1.8x 1.8x 2.0x EV/EBITDA 11.6x 11.0x 11.8x 16.6x 13.4x EV/EBITDA 11.9x 9.3x 10.8x 10.8x 11.5x EV/Earnings 31.9x 41.4x 41.7x 36.4x 22.8x EV/Earnings 24.9x 26.4x 29.0x 30.7x 22.9x Gross Profit Margin 64.5% 65.6% 59.7% 59.0% 66.7% Gross Profit Margin 57.0% 54.6% 52.5% 51.4% 55.2% EBITDA Margin 19.4% 17.4% 14.6% 18.3% 11.9% EBITDA Margin 11.2% 11.2% 11.2% 11.0% 11.1% Net Income Margin 5.4% 5.1% 4.9% 4.6% 0.6% Net Income Margin 5.0% 4.6% 4.2% 4.0% 6.9% TTM Revenue Grow th (YoY) 10.4% 15.4% 10.4% 19.5% 21.1% TTM Revenue Grow th (YoY) -7.8% -1.6% 5.4% 6.5% 11.6% TTM EBITDA Grow th (YoY) 32.5% 21.3% 29.8% 21.0% -18.3% TTM EBITDA Grow th (YoY) 11.4% 20.4% 2.4% 6.3% 6.2% TTM Earnings Grow th (YoY) -53.2% -68.2% -29.7% -22.8% 31.7% TTM Earnings Grow th (YoY) -55.9% -52.1% -43.6% -38.2% -12.1% Current Ratio 3.0 2.9 3.2 3.5 3.0 Current Ratio 2.0 2.0 2.0 2.2 2.1 Cash as Percent of Market Cap 16.1% 23.7% 15.5% 15.6% 26.2% Cash as Percent of Market Cap 16.1% 25.6% 22.9% 18.9% 16.7% Enterprise Value Grow th (YoY) 52.6% -10.0% 20.4% 28.7% 21.7% Enterprise Value Grow th (YoY) 60.9% 29.1% 15.6% 23.2% 16.8%

M ultim edia, Graphics, Digital M edia 2Q10 3Q10 4Q10 1Q11 2Q11 Ve rtical - Finance 2Q10 3Q10 4Q10 1Q11 2Q11 EV/Revenue 4.2x 3.4x 3.6x 4.0x 3.9x EV/Revenue 4.1x 4.4x 4.6x 4.9x 4.4x EV/EBITDA 15.2x 11.3x 17.1x 25.2x 26.5x EV/EBITDA 14.0x 11.6x 12.9x 13.6x 13.3x EV/Earnings 36.2x 30.3x 32.7x 38.2x 28.3x EV/Earnings 30.7x 34.3x 36.2x 39.6x 43.1x Gross Profit Margin 67.1% 66.5% 74.5% 73.4% 66.6% Gross Profit Margin 54.1% 51.5% 49.4% 47.7% 52.8% EBITDA Margin 23.0% 21.7% 21.3% 20.6% 20.1% EBITDA Margin 30.5% 30.8% 31.0% 31.3% 31.6% Net Income Margin 9.9% 9.7% 9.9% 9.5% 4.1% Net Income Margin 13.4% 13.1% 12.7% 12.3% 10.2% TTM Revenue Grow th (YoY) -1.1% 5.7% 6.3% 12.7% 15.0% TTM Revenue Grow th (YoY) 7.1% 12.2% 19.4% 20.5% 18.1% TTM EBITDA Grow th (YoY) 13.9% 14.0% 20.3% 17.6% 35.9% TTM EBITDA Grow th (YoY) 17.9% 20.2% 24.7% 26.0% 22.3% TTM Earnings Grow th (YoY) 11.1% -17.2% -50.1% -59.5% -60.6% TTM Earnings Grow th (YoY) -26.8% -23.7% -12.5% -20.4% -16.8% Current Ratio 2.1 2.4 2.3 2.3 2.4 Current Ratio 1.0 1.1 1.1 1.2 1.2 Cash as Percent of Market Cap 13.1% 14.7% 11.7% 11.2% 15.6% Cash as Percent of Market Cap 7.7% 8.0% 7.0% 6.9% 1.8% Enterprise Value Grow th (YoY) 42.1% 13.3% 19.9% 23.5% 22.3% Enterprise Value Grow th (YoY) 42.3% 25.8% 34.1% 39.3% 27.5%

Netw orking & Netw ork Perf Mgmt 2Q10 3Q10 4Q10 1Q11 2Q11 Vertical - Other 2Q10 3Q10 4Q10 1Q11 2Q11 EV/Revenue 2.7x 2.5x 3.1x 4.3x 4.8x EV/Revenue 2.0x 2.0x 2.7x 2.8x 3.1x EV/EBITDA 18.9x 15.2x 18.8x 28.0x 24.8x EV/EBITDA 12.3x 12.3x 14.2x 14.3x 14.0x EV/Earnings 38.5x 33.3x 48.5x 59.2x 36.8x EV/Earnings 27.3x 27.9x 32.5x 33.7x 24.2x Gross Profit Margin 78.5% 73.8% 69.8% 66.4% 79.2% Gross Profit Margin 53.2% 50.0% 48.0% 47.6% 56.5% EBITDA Margin 23.1% 23.1% 22.8% 23.1% 24.7% EBITDA Margin 18.6% 18.1% 17.9% 18.4% 18.8% Net Income Margin 10.7% 10.4% 10.0% 9.8% 12.8% Net Income Margin 9.3% 9.2% 9.2% 9.0% 10.5% TTM Revenue Grow th (YoY) 11.3% 23.7% 31.5% 30.9% 23.2% TTM Revenue Grow th (YoY) 3.3% 8.7% 8.4% 12.5% 12.4% TTM EBITDA Grow th (YoY) 31.7% 51.5% 58.7% 35.5% 53.7% TTM EBITDA Grow th (YoY) 7.3% 13.1% 17.4% 16.0% 19.8% TTM Earnings Grow th (YoY) -30.2% -20.5% -33.1% -41.7% -43.2% TTM Earnings Grow th (YoY) -11.6% -19.2% -23.8% -23.4% -19.6% Current Ratio 2.3 2.2 2.2 2.6 2.5 Current Ratio 1.1 1.1 1.1 1.2 1.3 Cash as Percent of Market Cap 19.4% 19.4% 14.0% 15.2% 14.9% Cash as Percent of Market Cap 5.6% 6.7% 6.4% 5.4% 16.5% Enterprise Value Grow th (YoY) 149.2% 55.4% 159.4% 118.8% 59.2% Enterprise Value Grow th (YoY) 44.9% 20.5% 27.6% 46.8% 44.1%

APPENDIX A: 2Q11 PUBLIC SOFTWARE MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY

28| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

Video Gam es 2Q10 3Q10 4Q10 1Q11 2Q11 EV/Revenue 0.8x 0.6x 0.7x 0.9x 1.0x EV/EBITDA 7.7x 7.7x 10.5x 8.7x 10.9x EV/Earnings 21.0x 16.7x 19.2x 25.9x 19.5x Gross Profit Margin 44.1% 40.4% 44.0% 44.0% 47.4% EBITDA Margin 7.7% 3.7% 5.9% 9.3% 9.3% Net Income Margin 1.3% 1.0% 1.3% 1.1% 4.6% TTM Revenue Grow th (YoY) 1.5% -8.8% -5.8% -1.6% -1.0% TTM EBITDA Grow th (YoY) -10.7% -5.5% 98.0% 141.6% 12.6% TTM Earnings Grow th (YoY) 67.2% -31.1% -251.4% -253.6% -171.5% Current Ratio 2.6 2.6 2.2 2.2 2.3 Cash as Percent of Market Cap 27.7% 31.3% 28.2% 24.9% 21.0% Enterprise Value Grow th (YoY) -2.3% -17.6% -3.1% 15.5% 20.7%

Workforce & Service Management 2Q10 3Q10 4Q10 1Q11 2Q11 EV/Revenue 2.2x 1.9x 2.2x 2.7x 2.7x EV/EBITDA 15.3x 16.0x 20.0x 17.3x 18.5x EV/Earnings 40.3x 37.3x 44.8x 48.0x 38.6x Gross Profit Margin 64.8% 61.8% 61.0% 59.9% 61.7% EBITDA Margin 9.6% 10.8% 11.8% 15.5% 16.1% Net Income Margin 2.6% 2.6% 2.6% 2.5% 5.7% TTM Revenue Grow th (YoY) 1.6% 4.4% 7.3% 10.3% 10.3% TTM EBITDA Grow th (YoY) 5.0% 5.6% 7.6% 1.5% 32.4% TTM Earnings Grow th (YoY) 20.5% 1.6% -41.0% -24.7% -22.5% Current Ratio 1.3 1.2 1.2 1.3 1.2 Cash as Percent of Market Cap 18.3% 23.2% 18.9% 15.5% 10.4% Enterprise Value Grow th (YoY) 44.7% 28.5% 42.0% 54.0% 63.1%

29| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX B: 2Q11 PUBLIC INTERNET MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY

Ad Tech & Lead Generation 2Q10 3Q10 4Q10 1Q11 2Q11 Services 2Q10 3Q10 4Q10 1Q11 2Q11 EV/Revenue 1.7x 1.6x 2.2x 2.5x 2.3x EV/Revenue 2.4x 2.0x 2.4x 3.0x 5.0x EV/EBITDA 23.1x 18.2x 13.2x 14.1x 12.7x EV/EBITDA 13.5x 12.9x 14.6x 16.5x 25.8x EV/Earnings 37.2x 24.1x 23.7x 28.7x 18.7x EV/Earnings 30.0x 25.4x 26.8x 32.2x 40.5x Gross Profit Margin 51.7% 50.9% 49.6% 47.7% 50.5% Gross Profit Margin 71.9% 70.8% 60.9% 50.5% 72.4% EBITDA Margin 15.7% 15.4% 14.2% 13.7% 13.9% EBITDA Margin 18.5% 17.3% 16.6% 18.0% 17.0% Net Income Margin 4.6% 4.3% 3.9% 3.7% 2.6% Net Income Margin 7.2% 6.2% 5.5% 3.3% 5.4% TTM Revenue Grow th (YoY) 6.7% 19.2% 23.5% 23.6% 23.4% TTM Revenue Grow th (YoY) 18.7% 21.3% 16.5% 24.9% 20.5% TTM EBITDA Grow th (YoY) 32.0% 38.6% 15.8% 29.2% 36.8% TTM EBITDA Grow th (YoY) 11.4% 22.4% 13.4% 28.9% 24.1% TTM Earnings Grow th (YoY) -400.4% -244.5% -11.9% -5.1% -12.4% TTM Earnings Grow th (YoY) -22.2% -28.7% -38.8% -20.2% -13.3% Current Ratio 3.0 3.4 3.2 3.3 3.2 Current Ratio 3.2 2.7 2.9 2.2 2.4 Cash as Percent of Market Cap 16.4% 22.4% 15.5% 12.4% 16.7% Cash as Percent of Market Cap 22.8% 16.4% 15.6% 12.3% 8.2% Enterprise Value Grow th (YoY) 33.6% 7.1% 42.3% 35.4% 67.2% Enterprise Value Grow th (YoY) 43.0% 26.6% 36.9% 43.6% 62.6%

Infrastructure 2Q10 3Q10 4Q10 1Q11 2Q11 Travel 2Q10 3Q10 4Q10 1Q11 2Q11 EV/Revenue 1.6x 1.9x 2.9x 3.2x 2.9x EV/Revenue 3.0x 5.2x 6.5x 6.8x 8.3x EV/EBITDA 12.7x 12.4x 16.4x 19.1x 16.8x EV/EBITDA 14.9x 17.0x 25.0x 27.5x 35.0x EV/Earnings 22.1x 18.9x 34.6x 38.5x 32.3x EV/Earnings 26.3x 28.7x 47.1x 45.1x 41.6x Gross Profit Margin 67.1% 65.1% 62.3% 57.7% 64.1% Gross Profit Margin 78.5% 73.9% 68.4% 58.7% 78.9% EBITDA Margin 17.0% 15.4% 13.4% 13.6% 15.5% EBITDA Margin 19.3% 21.5% 22.7% 23.6% 24.5% Net Income Margin 5.6% 5.4% 5.2% 4.9% 5.2% Net Income Margin 8.9% 8.7% 8.3% 8.0% 11.2% TTM Revenue Grow th (YoY) 11.1% 17.5% 21.5% 12.5% 20.2% TTM Revenue Grow th (YoY) 24.2% 25.9% 31.5% 31.9% 34.5% TTM EBITDA Grow th (YoY) 11.1% 17.5% 21.5% 12.5% 20.2% TTM EBITDA Grow th (YoY) 13.8% 35.1% 42.5% 50.3% 62.6% TTM Earnings Grow th (YoY) -18.0% 32.1% 8.7% -17.3% -7.4% TTM Earnings Grow th (YoY) -89.6% -70.0% -34.1% -16.6% -3.6% Current Ratio 2.0 2.1 1.9 2.1 2.0 Current Ratio 2.0 1.8 2.5 2.6 1.8 Cash as Percent of Market Cap 22.5% 18.6% 14.7% 12.7% 17.3% Cash as Percent of Market Cap 12.0% 12.4% 7.7% 8.4% 8.5% Enterprise Value Grow th (YoY) 39.7% 16.5% 36.9% 61.0% 99.3% Enterprise Value Grow th (YoY) 107.4% 51.1% 83.0% 67.0% 94.4%

Me dia 2Q10 3Q10 4Q10 1Q11 2Q11 Video Gam es 2Q10 3Q10 4Q10 1Q11 2Q11 EV/Revenue 1.9x 1.5x 2.8x 3.0x 3.5x EV/Revenue 4.4x 4.0x 4.1x 4.1x 4.4x EV/EBITDA 15.2x 11.5x 14.1x 14.1x 13.1x EV/EBITDA 7.1x 6.2x 6.5x 6.7x 8.7x EV/Earnings 18.8x 19.2x 23.1x 23.8x 18.6x EV/Earnings 8.0x 6.8x 7.5x 8.2x 10.3x Gross Profit Margin 50.5% 50.9% 52.1% 53.4% 52.5% Gross Profit Margin 77.9% 78.2% 74.5% 74.1% 80.1% EBITDA Margin 15.3% 15.8% 16.5% 17.5% 16.3% EBITDA Margin 53.3% 51.3% 48.1% 45.9% 43.4% Net Income Margin 3.6% 3.6% 3.4% 3.2% 3.0% Net Income Margin 46.8% 43.6% 40.3% 38.5% 37.1% TTM Revenue Grow th (YoY) 15.0% 15.0% 10.9% 20.4% 19.4% TTM Revenue Grow th (YoY) 34.4% 34.1% 23.5% 10.8% 12.7% TTM EBITDA Grow th (YoY) 12.3% 4.4% 14.7% 16.8% 29.5% TTM EBITDA Grow th (YoY) 13.8% 15.1% 7.4% -7.0% 6.8% TTM Earnings Grow th (YoY) -30.3% -37.9% -25.7% -16.9% -17.3% TTM Earnings Grow th (YoY) -13.0% -12.3% 4.3% 11.4% 3.5% Current Ratio 2.0 2.4 2.2 2.4 3.1 Current Ratio 5.0 4.5 4.1 4.3 4.3 Cash as Percent of Market Cap 18.4% 22.7% 17.5% 18.9% n/a Cash as Percent of Market Cap 23.9% 27.1% 25.4% 28.3% n/a Enterprise Value Grow th (YoY) 10.5% -9.1% -0.2% 26.2% 3.9% Enterprise Value Grow th (YoY) -3.2% -32.9% -14.4% -5.0% 33.4%

Retail 2Q10 3Q10 4Q10 1Q11 2Q11 EV/Revenue 1.3x 1.3x 2.1x 1.8x 1.7x EV/EBITDA 10.0x 10.6x 22.4x 12.7x 12.6x EV/Earnings 26.5x 25.1x 50.3x 58.8x 41.6x Gross Profit Margin 41.2% 40.2% 38.8% 37.1% 40.5% EBITDA Margin 8.2% 8.5% 8.6% 8.6% 9.0% Net Income Margin 2.9% 2.7% 2.5% 2.3% 3.3% TTM Revenue Grow th (YoY) 9.2% 13.6% 13.3% 23.1% 17.0% TTM EBITDA Grow th (YoY) 29.2% 41.7% 11.1% 13.1% 16.0% TTM Earnings Grow th (YoY) -22.1% -33.7% -31.2% -4.7% -1.8% Current Ratio 1.7 1.6 1.9 2.1 2.3 Cash as Percent of Market Cap 15.7% 20.0% 17.2% 14.5% 17.2% Enterprise Value Grow th (YoY) 38.8% 22.1% 44.4% 33.3% 52.1%

Search 2Q10 3Q10 4Q10 1Q11 2Q11 EV/Revenue 1.7x 1.0x 1.3x 1.4x 1.5x EV/EBITDA 10.6x 8.5x 8.9x 9.6x 9.9x EV/Earnings 18.9x 17.6x 22.5x 23.5x 16.2x Gross Profit Margin 63.1% 60.0% 51.3% 42.9% 63.0% EBITDA Margin 9.6% 10.3% 12.5% 12.1% 11.3% Net Income Margin 6.1% 5.7% 5.5% 5.7% 7.9% TTM Revenue Grow th (YoY) 14.6% 15.9% 21.5% 24.0% 24.6% TTM EBITDA Grow th (YoY) 43.2% 69.5% 41.1% 21.6% 46.2% TTM Earnings Grow th (YoY) -46.7% -45.3% -46.6% -38.3% -32.9% Current Ratio 4.0 3.8 3.6 4.0 3.9 Cash as Percent of Market Cap 27.6% 32.4% 23.7% 25.6% n/a Enterprise Value Grow th (YoY) 88.7% -0.5% -0.2% 6.9% 55.8%

30| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX C: 2Q11 MERGERS AND ACQUISITIONS, SELECT PUBLIC SELLER VALUATIONS

TTM Rev Buyer Seller Purchase Price Enterprise Value EV/Rev EV/EBITDA Grow th Providence Equity Partners Blackboard Inc. (NasdaqGS:BBBB) $1,804,610,000 $1,751,880,000 3.8x 20.2x 18.7% CSC iSOFT Group Limited (ASX:ISF) $474,840,000 $444,280,000 1.2x 161.5x -23.2% S1 Corporation Fundtech Ltd. (NasdaqGS:FNDT) $309,360,000 $228,420,000 1.6x 10.8x 16.5% Visma ASA Mamut ASA (OB:MAMUT) $174,670,000 $161,790,000 1.8x 13.6x 1.0% Amdocs Bridgew ater Systems Corporation (TSX:BWC) $210,590,000 $125,940,000 1.4x 8.4x 14.0% Merge Healthcare Ophthalmic Imaging Systems (OTCBB:OISI) $39,020,000 $36,230,000 2.0x - 17.5% Symphony Technology Group IBS AB (OM:IBS B) $42,380,000 $28,270,000 0.1x - -19.4% Triple Point Technology, Inc. Qmastor Ltd. (ASX:QML) $19,830,000 $16,540,000 1.8x 9.6x 19.9%

31| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX D: 2Q11 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS

Buyer Seller Purchase Price Enterprise Value TTM Revenue EV/Rev

3D Systems Print3D - - - - SY CODE - - - - Allen Systems Group TRILOGexpert - - - - visionapp AG - - - - Apax Partners Epicor Softw are $1,041,860,000 $951,450,000 $453,000,000 2.1x Activant Solutions $890,000,000 - - - BMC Softw are Coradiant $125,000,000 $125,000,000 - - NEON Enterprise, products & customers - - - - Commer c eTel DigiMar k - - - - Mobile Visions $4,020,000 $4,020,000 - - Electronic Arts Firemint Pty - - - - Mobile Post Production - - - - Constellation Softw are Efficient Workflow Solutions - - - - Fitronics - - - - Northpointe Institute for Public Mgmt. - - - - Prosoft Technologies - - - - Youbill - - - - IHS Dyadem $52,000,000 $52,000,000 - - ODS-Petrodata - - - - LM Ericsson Telephone Telcordia Technologies $1,150,000,000 $1,150,000,000 $737,000,000 1.6x Telenor Connexion AB - - - - Microsoft Skype Global S.à r.l. $9,224,860,000 $9,082,400,000 $857,000,000 10.6x Prodiance - - - - Nuance Communications Equitrac $157,000,000 $157,000,000 - - SVOX $123,130,000 $123,130,000 - - Oracle FatWire* $160,000,000 $160,000,000 $40,000,000 4.0x Datanomic - - - - P2 Energy Solutions Explorer Softw are Solutions - - - - Wellpoint Systems - - - - PerkinElmer Geospiza $13,300,000 $13,300,000 - - Labtronics - - - - Quest Softw are RemoteScan - - - - Quest Softw ae - - - - Research In Motion Scoreloop AG $71,000,000 $71,000,000 - - Tungle - - - - Ubitexx - - - - Softw are AG Metismo - - - - Terracotta - - - - Thomson Reuters Global Objectives - - - - Mastersaf Brazil S.A. - - - - Skyw ire Softw are - - - - Trimble Tekla Oyj (HLSE:TLA1V) $481,840,000 $426,840,000 $88,000,000 4.9x Dynamic Survey Solutions - - - - Vmw are Digital Fuel Technologies - - - - Event Robot - - - - Mozy $8,400,000 $8,400,000 - - SlideRocket - - - - *Revenue estimate

32| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX E: 2Q11 MERGERS AND ACQUISITIONS, SELECT SOFTWARE INDUSTRY MEGA-DEALS

TTM Rev Date Buyer Seller Purchase Price Enterprise Value EV/Rev EV/EBITDA Grow th 05/10/2011 Microsoft Skype Global S.à r.l. $9,224,860,000 $9,082,400,000 10.6x 47.1x - 06/30/2011 Providence Equity Partners Blackboard Inc. (NasdaqGS:BBBB) $1,804,610,000 $1,751,880,000 3.8x 20.2x 18.7% 04/04/2011 Apax Partners Epicor Softw are Corporation $1,041,860,000 $951,450,000 2.1x 17.5x 10.5% 04/23/2011 Audatex North America Explore Information Services, L.L.C. $520,000,000 $520,000,000 6.8x 15.3x - 06/14/2011 LM Ericsson Telephone Telcordia Technologies, Inc. $1,150,000 $1,150,000 1.6x - -

33| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX F: 2Q11 MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS

En t e p r is e Seller Date Buye r Se lle r Value Revenue EV/Rev 06/30/2011 Dimension Data Holdings plc OpSource, Inc. - -- 06/30/2011 Gary Jonas Computing Ltd. Youbill, Inc. - -- 06/29/2011 Fiserv, Inc. CashEdge, Inc.* $465,000,000 $50,000,000 9.3x 06/29/2011 Hidenet Secure Architectures Locate1Plus - -- 06/28/2011 Experian plc (LSE:EXPN) Medical Present Value, Inc. $185,000,000 $45,000,000 4.1x 06/27/2011 MRI Softw are LLC Workspeed Management, LLC - -- 06/24/2011 Archipelago Learning, Inc. Alloy Multimedia, Inc. $2,000,000 - - 06/21/2011 Taleo Corp. Jobpartners Plc $37,400,000 - - 06/21/2011 ECS Refining Texas, LLC ServoTerra, Inc - -- 06/20/2011 DST Systems Inc. DST Subserveo, Inc. - -- 06/15/2011 SDC Softw are, Inc. SUPERAntiSpyw are.com $8,500,000 $2,500,000 3.4x 06/14/2011 ActiveState Softw are, Inc. Phenona - -- 06/14/2011 MartinJAY Digital, Inc. Social Blaze - -- 06/14/2011 Intermedia.net, Inc. Zlago, LLC - -- 06/12/2011 Descartes Systems Group Inc. Telargo Inc. $9,600,000 - - 06/09/2011 Procura, LLC ContinuLink Health Technologies L.L.C. - -- 06/07/2011 Concur Technologies, Inc. GlobalExpense Limited $23,010,000 - - 06/03/2011 Cendyn Corporation RoundTableHQ, LLC - -- 06/01/2011 Centercode, Inc. Customer Feedback Solutions, Inc. - -- 05/31/2011 VMw are, Inc. Event Robot, Inc. - -- 05/31/2011 UNC Kenan-Flagler Private Equity Fund iContact Corporation - -- 05/26/2011 Oak Hill Capital Partners Intermedia.net, Inc. - -- 05/24/2011 DealerTrack/AAX, Inc. eCarList, LLC $45,330,000 $7,000,000 6.5x 05/23/2011 Citrix Systems, Inc. Kaviza, Inc. - -- 05/18/2011 Skybot Softw are, LLC Open Systems Management Limited - -- 05/17/2011 SPS Commerce, Inc. Direct EDI, Inc. $9,820,000 $4,530,000 2.2x 05/13/2011 Naxicap Partners Eudow eb - $8,920,000 - 05/12/2011 Advent Softw are, Inc. Black Diamond Performance Reporting $73,000,000 - - 05/12/2011 Document Security Systems, Inc. ExtraDev, Inc. $700,000 - - 05/09/2011 Deloitte Consulting Oco, Inc. - -- 05/09/2011 Ozitem SA Ow entis SAS - $8,570,000 - 05/03/2011 Paychex Inc. ePlan Services, Inc $15,200,000 - - 05/02/2011 Limelight Netw orks, Inc. Clickability, Inc. $10,000,000 - - 04/29/2011 Identive Group, Inc. idOnDemand Inc. $27,270,000 - - 04/26/2011 SuccessFactors, Inc. Plateau Systems, LTD.* $290,000,000 $70,000,000 4.2x 04/26/2011 Pearson plc SchoolNet, Inc. $230,000,000 - - 04/26/2011 VMw are, Inc. SlideRocket, Inc. - -- 04/25/2011 SurveyMonkey.com, LLC Infinity Box, Inc. - -- 04/08/2011 MyTeam1, LLC Notification Technologies LLC - -- 04/06/2011 Micros-Fidelio UK Ltd. Snow Valley Ltd. - -- 04/05/2011 Evolution Benefits, Inc. Lighthouse1, LLC - -- 04/05/2011 KANA Softw are, Inc. Overtone, Inc. - -- 04/04/2011 Peoplefluent, Inc. Aquire, Inc. - -- 04/04/2011 VMw are, Inc. Mozy, Inc. $8,400,000 - - 04/04/2011 Monsoon Commerce Solutions, Inc Stone Edge Technologies, Inc. - --

34| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX G: 2Q11 MERGERS AND ACQUISITIONS – DEAL INSIGHT

Oracle (NASDAQ:ORCL) acquires Fatwire Category: Web Content Management Purchase Price (estimate): $160,000,000 Seller Revenue (estimate): $40,000,000 Revenue Multiple (estimate): 4.0x Payment Terms: Cash

SEG’s Perspective: Software behemoth, Oracle, acquires best-of-breed web content and experience management vendor, Fatwire. Fatwire’s technology complements Oracle’s 2010 purchase of e-commerce software provider Art Technology Group ($881EV million, 4.1xEV TTM revenue) and joins other Oracle applications (Fusion Middleware, Siebel CRM, ATG e-commerce) to create a seemingly powerful customer experience management offering. EMC was thought to be a likely acquirer after investing in the Fatwire in early 2010, only to later announce an expanding partnership with Fatwire competitor, SDL Tridion, in early 2011. Oracle’s purchase of Fatwire follows Adobe’s 2010 purchase of web content management vendor Day Software ($177EV million, 4.2xEV TTM revenue).

SuccessFactors (NASDAQ:SFSF) acquires Plateau Systems Category: Employee Talent Management Purchase Price: $290,000,000 Seller Revenue (estimate): $70,000,000 Revenue Multiple (estimate): 4.2x Payment Terms: Cash

SEG’s Perspective: Leading talent management vendor, SuccessFactors, acquires Plateau Systems, a leading provider of employee learning and talent management systems. The acquisition plugs a hole in SuccessFactors’ talent management suite by adding strong corporate learning functionality, strengthens its presence in the public sector and pharmaceutical segments, and adds a significant recurring revenue stream. The acquisition follows Taleo’s purchase of Learn.com ($144EV million, 5.2xEV TTM revenue) in late 2010, as a number of leading talent management vendors have historically lacked strong learning management capabilities and are seeking to provide cradle-to-grave talent management offerings. After making no acquisitions from 2000 to 2009, SuccessFactors has made five acquisitions over the past 18 months.

35| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX G: 2Q11 MERGERS AND ACQUISITIONS – DEAL INSIGHT (CONTINUED)

Apax Partners acquires Epicor (NASDAQ:EPIC) Category: Enterprise Resource Planning Purchase Price: $951,450,000EV Seller Revenue (TTM): $453,290,000 Seller EBITDA (TTM): $54,350,000 Revenue Multiple (TTM): 2.1xEV EBITDA Multiple (TTM): 17.5xEV Payment Terms: Cash

SEG’s Perspective: Global private equity firm, Apax Partners, acquires Epicor, a leading provider of enterprise resource planning (ERP) applications to mid-market and enterprise organizations. Apax plans to merge Epicor with recently purchased Activant Solutions, a leading provider of mid-market retail POS and wholesale distribution applications. Activant brings Epicor significant revenue contribution as well as expertise in the distribution chain and a number of micro-verticals (automotive, hard goods retailers, building materials, etc.). Activant’s product technology innovation, however, has lagged since the company was purchased by private equity firm Hellman and Friedman in 2006 and will benefit from Epicor’s up-to-date development initiatives.

Microsoft (NASDAQ:MSFT) acquires Skype Category: Communications Purchase Price: $9,082,400,000EV Seller Revenue (TTM): $859,820,000 Seller EBITDA (TTM): $192,880,000 Revenue Multiple (TTM): 10.6xEV EBITDA Multiple (TTM): 47.1xEV Payment Terms: Cash

SEG’s Perspective: Microsoft acquires leading internet communications provider, Skype. The combination will enable Microsoft to integrate global communication channels into its many consumer offerings, including Live, Xbox and Bing; increase Skype’s VoIP and video presence via Microsoft channels and accelerate Skype functionality over mobile platforms. The acquisition also allows Microsoft to compete more effectively against major internet competitors Google, Facebook and Apple over internet turf, as Skype brings an enormous customer base of well over 100 million users per month. Founded in 2003, Skype was purchased by eBay in 2005 for $2.6 billion, which subsequently sold 70% interest (valued at $2.75 billion) in Skype back to Founders and an investor group led by SilverLake Partners and Andreessen Horowitz in late 2009. The roughly $9 billion purchase price paid by Microsoft represents a hefty return to recent investors.

36| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX H: SELECT 2Q11 SOFTWARE INDUSTRY MERGERS AND ACQUISITIONS Date Buye r s Se lle r 06/30/2011 Providence Equity Partners LLC Blackboard Inc. (NasdaqGS:BBBB) 06/30/2011 Gary Jonas Computing Ltd. Youbill, Inc. 06/30/2011 Dimension Data Holdings plc OpSource, Inc. 06/30/2011 Speedscan Pty Ltd. Connxion Data Pty Ltd, e-Billing Business 06/30/2011 BeyondTrust Softw are, Inc. Likew ise Softw are, Active Directory Bridge Business Unit 06/30/2011 EG Telecom SA inrevolution S.A. 06/30/2011 Harris Computer Systems, Inc. ProSoft Technologies, Inc. 06/30/2011 MACH S.à.r.l. Optel Informatik GmbH 06/30/2011 EMSystems, LLC FleetEyes LLC 06/29/2011 CA Technologies (NasdaqGS:CA) Interactive TKO, Inc. 06/29/2011 Ansys, Inc. (NasdaqGS:ANSS) Apache Design Solutions, Inc. 06/29/2011 Fiserv, Inc. (NasdaqGS:FISV) CashEdge, Inc. 06/29/2011 Clear2Pay nv/sa Lexcel Solutions, Inc. 06/29/2011 SEB Venture Capital; Lagerstedt & Krantz Ab Temperature Sensitive Solutions Systems Sw eden AB 06/29/2011 Sabre Hospitality Solutions SoftHotel, Inc. 06/29/2011 National Information Solutions Cooperative, Inc. Quintrex Data Systems Corp. 06/29/2011 Hidenet Secure Architectures Inc. (OTCPK:HIDE) Locate1Plus 06/29/2011 Synchronica PLC (AIM:SYNC) Nokia Corp., Operator Branded Messaging Business 06/28/2011 Experian plc (LSE:EXPN) Medical Present Value, Inc. 06/28/2011 SunGard Data Systems Inc. Sw isscom Workplace Services Ltd., FINACE 06/28/2011 ThingWorx, Inc. Palantiri Systems, Inc. 06/27/2011 MRI Softw are LLC Workspeed Management, LLC 06/27/2011 Blaupunkt AudioVision GmbH & Co. KG Blaupunkt Embedded Systems GmbH 06/27/2011 Inteliw orx, LLC BEVINCO Corp., Substantially all Assets 06/27/2011 Ybrant Digital Limited Web 3.0 Ltd. 06/26/2011 S1 Corporation (NasdaqGS:SONE) Fundtech Ltd. (NasdaqGS:FNDT) 06/26/2011 Stonew are, Inc. LanSchool Technologies LLC 06/26/2011 DWS Advanced Business Solutions Limited (ASX:DWS) Taten Pty Ltd 06/24/2011 Nippon Denw a Shisetsu Co. Ltd. (TSE:1956) Bridge Motion Tomorrow Co., Ltd. 06/24/2011 Archipelago Learning, Inc. (NasdaqGS:ARCL) Alloy Multimedia, Inc. 06/23/2011 Triple Point Technology, Inc. Qmastor Ltd. (ASX:QML) 06/23/2011 Chegg, Inc. Notehall, Inc. 06/23/2011 Itella Information Oy OpusCapita Oy 06/22/2011 Zetes Industries (ENXTBR:ZTS) ProScan Group 06/22/2011 Kaplan, Inc. Solunciones Integrales de Formación y Gestión 06/22/2011 AdaptiveMobile Ltd. Sentry Wireless Ltd. 06/22/2011 McKesson Health Solutions LLC Portico Systems, Inc. 06/21/2011 Oracle Corp. (NasdaqGS:ORCL) FatWire Corporation 06/21/2011 ECS Refining Texas, LLC ServoTerra, Inc 06/21/2011 FreshT Limited Mobile Safety Solutions Limited

37| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX H: SELECT 2Q11 SOFTWARE INDUSTRY MERGERS AND ACQUISITIONS (CONTINUED) Date Buye r s Se lle r 06/21/2011 HealthPort Incorporated Universata Inc. 06/21/2011 Taleo Corp. (NasdaqGS:TLEO) Jobpartners Plc 06/20/2011 DST Systems Inc. (NYSE:DST) DST Subserveo, Inc. 06/20/2011 OpenCourseWare Consortium Community College Consortium for Open Educational 06/18/2011 Google Inc. (NasdaqGS:GOOG) SageTV, LLC 06/17/2011 BMC Softw are Inc. (NasdaqGS:BMC) NEON Enterprise Softw are, Info. Mgmt System assets 06/17/2011 8x8 Inc. (NasdaqCM:EGHT) Zerigo, Inc. 06/17/2011 ARM Holdings plc (LSE:ARM) Obsidian Softw are, Inc. 06/16/2011 Amdocs Ltd. (NYSE:DOX) Bridgew ater Systems Corporation (TSX:BWC) 06/16/2011 HubSpot, Inc. Performable, Inc. 06/16/2011 Posera-HDX Inc. (TSX:HDX) 2020 IT Solutions Corp, Hospitality Division Assets 06/16/2011 Quicksilver Real Estate Solutions, LLC Real Design Online, LLC 06/16/2011 Nuance Communications, Inc. (NasdaqGS:NUAN) SVOX AG 06/15/2011 SDC Softw are, Inc. SUPERAntiSpyw are.com 06/15/2011 Taulia Inc. Anoow a, Inc. 06/15/2011 Input AS Firstventura Solutions AS 06/15/2011 Intrado Inc. Contact One, Inc. 06/15/2011 YuMe, Inc. Appealing Media Ltd. 06/15/2011 Prevas A\S DoréDevelopment ApS 06/14/2011 LM Ericsson Telephone Co. (OM:ERIC B) Telcordia Technologies, Inc. 06/14/2011 MartinJAY Digital, Inc. Social Blaze 06/14/2011 ActiveState Softw are, Inc. Phenona 06/14/2011 Intermedia.net, Inc. Zlago, LLC 06/14/2011 Orchard Information Systems Limited Applaud Web Solutions Limited 06/14/2011 Garmin Ltd. (NasdaqGS:GRMN) NAVIGON AG 06/13/2011 VMw are, Inc. (NYSE:VMW) Digital Fuel Technologies, Inc. 06/13/2011 Flintfox International Ltd. Flintfox USA 06/12/2011 Descartes Systems Group Inc. (TSX:DSG) Telargo Inc. 06/10/2011 IMS Health Incorporated Med-Vantage, Inc. 06/10/2011 Callidus Softw are Inc. (NasdaqGM:CALD) Litmos Limited 06/10/2011 Wincor Nixdorf AG (XTRA:WIN) Dynasty Technology Group SA 06/09/2011 Procura, LLC ContinuLink Health Technologies L.L.C. 06/09/2011 prevero AG Winterheller softw are GmbH 06/09/2011 Zeus Technology Limited art of defence GmbH 06/09/2011 CommerceTel Corp. (OTCBB:MFON) DigiMark, LLC 06/09/2011 Visa, Inc. (NYSE:V) Fundamo (Proprietary) Limited 06/08/2011 Certica Solutions, Inc. dataMetrics Softw are, Inc. 06/08/2011 IN2 d.o.o. LabNet and Param 06/08/2011 CCLD Recrutement SAS Frégates SA 06/08/2011 Gary Jonas Computing Ltd. Fitronics Limited

38| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX H: SELECT 2Q11 SOFTWARE INDUSTRY MERGERS AND ACQUISITIONS (CONTINUED) Date Buye r s Se lle r 06/07/2011 Visma ASA Mamut ASA (OB:MAMUT) 06/07/2011 InternetQ PLC (AIM:INTQ) i-POP Netw orks Pte., Ltd. 06/07/2011 MyTeam1, LLC Vontoo, Inc. 06/07/2011 Virsto Softw are Corporation EvoStor Inc. 06/07/2011 Research In Motion Limited (TSX:RIM) Scoreloop AG 06/07/2011 Concur Technologies, Inc. (NasdaqGS:CNQR) GlobalExpense Limited 06/07/2011 Moli Mobile Limited Oberon Media Asia Pacific Pte. Ltd. 06/06/2011 Microsoft Corporation (NasdaqGS:MSFT) Prodiance Corp. 06/06/2011 Quest Softw are International Limited Quest Softw are 06/06/2011 ZANOX.de AG M4N 06/06/2011 Game Outlet Europe AB JoWooD Entertainment AG (WBAG:JWD) 06/06/2011 SoundBite Communications, Inc. (NasdaqGM:SDBT) SmartReply, Inc. 06/05/2011 Merge Healthcare Incorporated (NasdaqGS:MRGE) Ophthalmic Imaging Systems (OTCBB:OISI) 06/03/2011 Cendyn Corporation RoundTableHQ, LLC 06/03/2011 Initiative & Finance Investissement IRIUM France SAS 06/03/2011 Iron Mountain Inc. (NYSE:IRM) Autonomy Corp. plc, Certain Data Backup And Archiving 06/02/2011 TASC, Inc. TexelTek, Inc. 06/02/2011 JSC Neolant CJSC Real Geo Project 06/02/2011 Brass Monkey Inc. Emotely 06/02/2011 USAN, Inc. Interactive Softw orks, Inc. 06/01/2011 Centercode, Inc. Customer Feedback Solutions, Inc. 06/01/2011 Thomson Elite Skyw ire Softw are, LLC 06/01/2011 Internet Solutions (Pty) Limited SYNAQ (Pty) Ltd. 06/01/2011 Point International AB Paybox Services S.A.S. 06/01/2011 Ceridian Corporation Versult Group, Inc. 06/01/2011 Code 42 Softw are, Inc. Recursive Aw esome, LLC 06/01/2011 ePocket Solutions ASA WPA Mobile Aps 06/01/2011 KORE Wireless Group, Inc. Mach Communications Pty. Ltd. 06/01/2011 Sw ingMobility S.A.S. adPhone SAS 05/31/2011 UNC Kenan-Flagler Private Equity Fund iContact Corporation 05/31/2011 VMw are, Inc. (NYSE:VMW) Event Robot, Inc. 05/31/2011 Oodrive Technologies Omnikles SA 05/31/2011 Capita Consulting Red Procurement & Business Systems Ltd. 05/31/2011 Raymark Xpert Business Systems Inc. Retaligent Solutions, Inc. 05/31/2011 Softw are AG (XTRA:SOW) Metismo Ltd. 05/31/2011 Teakw ood Capital, L.P. Clockw ork Solutions, Inc. 05/30/2011 Perfect World Co., Ltd. (NasdaqGS:PWRD) Cryptic Studios, Inc. 05/27/2011 Thomas H. Lee Partners, L.P.; Dow ling Capital Partners Sw ord Insurance Europe Ltd. 05/27/2011 Ernst & Young LLP Cataphora, Inc., Cataphora Legal 05/27/2011 Onthehouse Holdings Limited (ASX:OTH) Console Australia Pty. Ltd.

39| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX H: SELECT 2Q11 SOFTWARE INDUSTRY MERGERS AND ACQUISITIONS (CONTINUED) Date Buye r s Se lle r 05/26/2011 Oak Hill Capital Partners Intermedia.net, Inc. 05/26/2011 SignUp4, LLC Worktopia, Inc. 05/26/2011 Tracsis Plc (AIM:TRCS) MPEC Technology Limited 05/25/2011 The Standard Register Company (NYSE:SR) Dialog Medical, Inc. 05/25/2011 Sedgw ick Claims Management Services, Inc. Nationw ide Better Health, Inc., Productivity Solutions 05/25/2011 Bytes Technology Group Ltd. TSPI Group Pty. Ltd. 05/25/2011 inRiver AB Intellecta AB, Infolog CoreDoc Softw are Platform 05/24/2011 DealerTrack/AAX, Inc. eCarList, LLC 05/24/2011 AppTech Corp. (OTCPK:APCX) Super Star Learning, Inc. 05/24/2011 RTS Realtime Systems AG First Futures Softw are Engineering Pvt. Ltd. 05/24/2011 Blackfin Capital Partners SAS APPLICAM s.a. 05/23/2011 Citrix Systems, Inc. (NasdaqGS:CTXS) Kaviza, Inc. 05/23/2011 Jive Softw are, Inc. Offisync Corp. 05/23/2011 Codenomicon Ltd. Clarified Netw orks Oy 05/23/2011 Softw are AG (XTRA:SOW) Terracotta, Inc. 05/23/2011 Cielo SA (BOVESPA:CIEL3) Braspag - Tecnologia em Pagamento Ltda 05/23/2011 Kohlberg Kravis Roberts & Co. (NYSE:KKR) Ipreo Holdings LLC 05/23/2011 PrivID B.V. Genkey Netherlands B.V. 05/23/2011 BUMP Netw ork, Inc. Bump Mobile Inc 05/23/2011 National Instruments Corporation (NasdaqGS:NATI) AWR Corporation 05/23/2011 AGTech iGaming Limited Fortune Happy Investment Limited 05/23/2011 SMR HR Technologies Sdn. Bhd. SMR HR Technologies Private Limited 05/20/2011 Kofax plc (LSE:KFX) Atalasoft, Inc. 05/20/2011 PRA International, Inc. Kinship Technologies (P) Ltd. 05/20/2011 EPF Partners Rayonnance Technologies SAS 05/20/2011 iTrackr Systems, Inc. (OTCBB:IRYS) RespondQ, LLC 05/20/2011 Glow point, Inc. (OTCBB:GLOW) Certain Assets of Avaya Video 05/19/2011 Symantec Corporation (NasdaqGS:SYMC) Clearw ell Systems, Inc. 05/19/2011 EQT Partners AB jaron GmbH 05/19/2011 K12, Inc. (NYSE:LRN) Kaplan Virtual Education, Credit-Bearing K-12 Assets 05/19/2011 Monument Capital Group, LLC Persistent Sentinel LLC 05/19/2011 TMW Systems Incorporated Appian Logistics Softw are, Inc. 05/19/2011 Nortek Oceanografische Instrumenten en Diensten B.V. SeaDarQ B.V. 05/19/2011 Weatherford International Ltd. (NYSE:WFT) CygNet Softw are, Inc. 05/19/2011 Accelrys Softw are Inc. Contur Softw are AB 05/18/2011 Skybot Softw are, LLC Open Systems Management Limited 05/18/2011 Progressive Distribution Services Inc. Progressive Email Concept LLC 05/18/2011 ngmoco, LLC Rough Cookie B.V. 05/18/2011 Netik LLC CorrectNet, Inc. 05/18/2011 Applied Voice & Speech Technologies, Inc. Beacon Solutions, Inc.

40| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX H: SELECT 2Q11 SOFTWARE INDUSTRY MERGERS AND ACQUISITIONS (CONTINUED) Date Buye r s Se lle r 05/18/2011 AutoTrader.com, Inc. VinStickers, LLC 05/18/2011 DEMCO, Inc. Evanced Solutions, Inc. 05/18/2011 NeuMedia, Inc. (OTCBB:MNDL) Digital Turbine Group, LLC 05/18/2011 Petrofac Training Limited The Tritanium Company BV 05/17/2011 SPS Commerce, Inc. (NasdaqGM:SPSC) Direct EDI, Inc. 05/17/2011 Thomson Reuters Corporation (TSX:TRI) Mastersaf Brazil S.A. 05/17/2011 Loyalize Inc. Savage Entertainment, LLC 05/17/2011 Computer Services Consultants (UK) Limited SoftTech Engineers Pvt. Ltd. 05/17/2011 Cognacq-Jay Image SAS BeBanjo S.L. 05/17/2011 Neqst Partner AB CLX Netw orks AB 05/16/2011 Symphony Technology Group IBS AB (OM:IBS B) 05/16/2011 Thomson Reuters Corporation (TSX:TRI) Global Objectives Ltd. 05/16/2011 Open Source Business Foundation Enterprise Open Source Directory 05/16/2011 Socius1 LLC Lean Back-Office, Microsoft Dynamics NAV Practice 05/16/2011 PerkinElmer Inc. (NYSE:PKI) Labtronics, Inc. 05/16/2011 Trimble Navigation Limited (NasdaqGS:TRMB) Dynamic Survey Solutions Inc. 05/16/2011 iSelect Pty Ltd 100% in Once Life Pty and Bidmy Pty, 98.4% of Infochoice 05/15/2011 Autonomy Corp. plc (LSE:AU.) Iron Mountain Inc., Key Assets of Digital Division 05/14/2011 The Web Atom RaProducts, JavaRa 05/13/2011 Naxicap Partners Eudow eb 05/13/2011 Geral SA Altead Sera SAS 05/13/2011 Insignis, Inc. BridgePortfolio.com, Inc. 05/13/2011 TriNovus, LLC eBankSystems, Inc. 05/13/2011 Webmedia Group AS CCC Corporation Oy 05/13/2011 NE Nomisma Energia Srl QuanTek S.r.l. 05/12/2011 Cerner Corporation (NasdaqGS:CERN) Resource Systems 05/12/2011 Relate Technologies Global Vision Ltd., Resources and Client Base 05/12/2011 24 Mobile Advertising Solutions AB Selatra Limited 05/12/2011 InnovationsKapital Paxport AB 05/12/2011 Rambus Inc. (NasdaqGS:RMBS) Cryptography Research, Inc. 05/12/2011 Advent Softw are, Inc. (NasdaqGS:ADVS) Black Diamond Performance Reporting, LLC 05/12/2011 Document Security Systems, Inc. (AMEX:DSS) ExtraDev, Inc. 05/11/2011 Trivantis Corporation Flypaper Studio, Inc. 05/11/2011 PlumChoice Online PC Services Inc. TiFiC AB 05/11/2011 Thoma Bravo, LLC Tripw ire, Inc. 05/11/2011 Prew ise Group Oy Mobiletools International Oy 05/11/2011 Elsevier Espana S.L. Casitérides S.L. 05/11/2011 Granicus, Inc. Daystar Computer Systems, Inc. 05/11/2011 Beijing Venustech Inc. (SZSE:002439) Beijing Leadsec Technology Co.,Ltd 05/11/2011 SinnerSchrader AG (XTRA:SZZ) TIC-mobile GmbH

41| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX H: SELECT 2Q11 SOFTWARE INDUSTRY MERGERS AND ACQUISITIONS (CONTINUED) Date Buye r s Se lle r 05/10/2011 Marvelous Entertainment (TSE:7844) Livew are Inc. 05/10/2011 Microsoft Corporation (NasdaqGS:MSFT) Skype Global S.à r.l. 05/10/2011 Cadence Des ign Sy s tems Inc. (Nas daqGS:CDNS) A ltos Des ign A utomation, Inc. 05/10/2011 Softw are Paradigms International, Inc. SPI Nepal 05/10/2011 Motorola Mobility Holdings, Inc. (NYSE:MMI) SunUp Digital Systems, Inc. 05/10/2011 GetJar Netw orks Inc. Infrinity Inc. 05/10/2011 Nuance Communications, Inc. (NasdaqGS:NUAN) Equitrac Corporation 05/09/2011 Deloitte Consulting Oco, Inc. 05/09/2011 Ozitem SA Ow entis SAS 05/09/2011 ABB Ltd. (SWX:ABBN) Mincom Pty Ltd 05/09/2011 Region Services Ltd. Kizoom Ltd. 05/09/2011 Zynga, Inc. Sapus Media 05/08/2011 Trimble Finland Oy Tekla Oyj (HLSE:TLA1V) 05/06/2011 Wolters Kluw er Belgie NV Toppow er NV 05/05/2011 Wilken Gmbh Wilken Informationsmanagement GmbH 05/05/2011 Quest Softw are Inc. (NasdaqGS:QSFT) RemoteScan Corporation 05/05/2011 GroupMe, Inc. Sensobi Inc. 05/05/2011 PerkinElmer Inc. (NYSE:PKI) Geospiza, Inc. 05/05/2011 iASPEC Technologies Shenzhen Zhongtian Technology Development Co., Ltd. 05/05/2011 WORDsearch Corp., LLC Findex.com Inc., QuickVerse Product Line 05/04/2011 Via Venture Partners A/S B.V. Electronic A/S 05/04/2011 Klarna AB Analyzd 05/04/2011 Citysearch, Inc. BuzzLabs 05/04/2011 Colt Group S.A. (LSE:COLT) MarketPrizm Limited 05/04/2011 SDL plc (LSE:SDL) Calamares Group B.V. 05/04/2011 Emptoris, Inc. Xcitec GmbH 05/04/2011 Gem Certification & Assurance Lab, Inc. Gemprint Corporation 05/03/2011 Electronic Arts Inc. (NasdaqGS:ERTS) Firemint Pty Ltd. 05/03/2011 Civica UK Limited PSCAL Limited 05/03/2011 Volaris Group Inc. Northpointe Institute for Public Management, Inc. 05/03/2011 Inmar, Inc. M-DOT, Inc. 05/03/2011 Electronic Arts Inc. (NasdaqGS:ERTS) Mobile Post Production, Inc. 05/03/2011 Paychex Inc. (NasdaqGS:PAYX) ePlan Services, Inc 05/02/2011 CRIF Corporation Cypress Softw are Systems LP 05/02/2011 Kaseya International Limited Kaseya Sw eden 05/02/2011 Research In Motion Limited (TSX:RIM) Ubitexx GmbH 05/02/2011 Andiamo Corp. (OTCPK:ANDI) T3 Apps, LLC and Best 05/02/2011 Kronos Incorporated Principal Decision Systems International, Inc. 05/02/2011 Limelight Netw orks, Inc. (NasdaqGS:LLNW) Clickability, Inc. 05/02/2011 Avatar Ventures Corp. (OTCBB:AVVC) App Marketing Solutions Inc.

42| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX H: SELECT 2Q11 SOFTWARE INDUSTRY MERGERS AND ACQUISITIONS (CONTINUED). Date Buye r s Se lle r 04/29/2011 Identive Group, Inc. (NasdaqGM:INVE) idOnDemand Inc. 04/29/2011 RealNetw orks Inc. (NasdaqGS:RNWK) Ring Back Tones Australia Pty Ltd. 04/28/2011 Updata Partners CA Technologies, Internet Security Business 04/28/2011 BMC Softw are Inc. (NasdaqGS:BMC) Coradiant, Inc. 04/27/2011 CellPoint Inc (OM:CPNT) Nya Blankettbasen AB 04/27/2011 Toshiba Medical Systems Corporation Vital Images, Inc. 04/27/2011 Polaris Softw are Lab Ltd. (BSE:532254) IdenTrust, Inc. 04/27/2011 Research In Motion Limited (TSX:RIM) Tungle Corporation 04/27/2011 Getty Images, Inc. PicScout Inc. 04/26/2011 IHS Inc. (NYSE:IHS) Dyadem International, Ltd. 04/26/2011 SuccessFactors, Inc. (NasdaqGS:SFSF) Plateau Systems, LTD. 04/26/2011 VMw are, Inc. (NYSE:VMW) SlideRocket, Inc. 04/26/2011 ESI Group SA (ENXTPA:ESI) Comet Technology Corporation 04/26/2011 3D Sy stems Corp. (NY SE:DDD) Print3D Corporation 04/26/2011 Pearson plc (LSE:PSON) SchoolNet, Inc. 04/25/2011 SurveyMonkey.com, LLC Infinity Box, Inc. 04/25/2011 IData Visual Systems, Inc. Quantum3D, IData and IGL 178 Product Lines 04/25/2011 Yahoo! Inc. (NasdaqGS:YHOO) IntoNow Inc. 04/25/2011 Jaring Metal Industries Sdn Bhd. Infortech Alliance Bhd (KLSE:INFOTEC) 04/23/2011 Audatex North America, Inc. Explore Information Services, L.L.C. 04/22/2011 Edline, LLC TH(i)NQ Ed 04/22/2011 e-Zest Solutions Ltd. Maestro Mobile Services 04/21/2011 NeuStar, Inc. (NYSE:NSR) Evolving Systems, Inc., Numbering Solutions Assets 04/21/2011 ION Trading Ireland Ltd. Wall Street Systems Delaw are, Inc. 04/21/2011 GREE International, Inc. OpenFeint Inc. 04/21/2011 ValueClick Media, Inc. Greystripe, Inc. 04/20/2011 Sanyu Co., Ltd. (OSE:5697) Human Space Co., Ltd. 04/20/2011 Audilog Groupe Ericsson SAS Tridge Group 04/20/2011 Desire2Learn Incorporated Captual Technologies Inc. 04/20/2011 XIX Entertainment, Inc. BlueHaze, Inc. 04/20/2011 Entellect Limited Virtual Communications International Pty Ltd. 04/19/2011 Buongiorno SpA (BIT:BNG) DadaNet S.p.A. 04/19/2011 Cegid SA (ENXTPA:CGD) SA 21S Ingénierie 04/19/2011 FireMon, LLC. Saperix Technologies LLC 04/19/2011 Aw arepoint Corporation Patient Care Technology Systems, LLC 04/19/2011 Chicago Grow th Partners Fineline Technologies, Inc. 04/19/2011 Intergraph Corporation Denali Solutions LLC 04/19/2011 P2 Energy Solutions, Inc. Wellpoint Systems Inc. 04/19/2011 LM Ericsson Telephone Co. (OM:ERIC B) Telenor Connexion AB 04/18/2011 Wal-Mart Stores Inc. (NYSE:WMT) @WalmartLabs

43| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX H: SELECT 2Q11 SOFTWARE INDUSTRY MERGERS AND ACQUISITIONS (CONTINUED). Date Buye r s Se lle r 04/18/2011 Quality Positioning Services B.v. Interactive Visualization Systems 3D 04/18/2011 OCLC GmbH BOND GmbH & Co. KG 04/18/2011 IHS Inc. (NYSE:IHS) ODS-Petrodata, Inc. 04/18/2011 Midas Medici Group Holdings, Inc. (OTCBB:MMED) WeatherWise Holdings, Inc. 04/18/2011 Groupon, Inc. Pelago, Inc. 04/15/2011 Det Norske Veritas ASA Synergi Solutions AS 04/15/2011 Zekiah Technologies, Inc. Upper 90 Systems, Inc. 04/15/2011 REPTrax Inc. Status Blue, LLC 04/15/2011 Gary Jonas Computing Ltd. Efficient Workflow Solutions LLC 04/15/2011 Electric Word plc (AIM:ELE) ikonami Limited 04/14/2011 ORESA Ventures N.V. Librus Sp. z o.o. 04/14/2011 Bechtle AG (XTRA:BC8) SolidLine AG 04/14/2011 GE Medical Systems, Inc. Steady State Imaging, LLC 04/14/2011 Explorer Softw are Inc. Kensington Computer Services Pty Ltd and CSSP Pty Ltd 04/13/2011 3D Sy stems Corp. (NY SE:DDD) SY CODE 04/13/2011 Life360 Inc. MacSpots Softw are LLC 04/12/2011 Altus Group Limited (TSX:AIF) ARGUS Softw are, Inc. 04/12/2011 WSP Sverige AB WSP Natlikan 04/12/2011 Clearlake Capital Group, LLC 3ality Digital LLC 04/11/2011 E-mail Vision smartFOCUS Group Plc 04/11/2011 GE Intelligent Platforms, Inc. CSense Systems (Pty) Ltd., Technology Assets 04/11/2011 Allen Systems Group, Inc. visionapp AG 04/11/2011 Fisher/Unitech, Inc. SolidWorks Softw are Business 04/11/2011 FRS Belgium NV Spring Programs Ltd. 04/11/2011 Agilence, Inc. Vidient Systems, Inc. 04/11/2011 nSphere, Inc. Peekaboo Mobile, Inc. 04/10/2011 Google Inc. (NasdaqGS:GOOG) PushLife Inc. 04/08/2011 MyTeam1, LLC Notification Technologies LLC 04/08/2011 Oracle Corp. (NasdaqGS:ORCL) Datanomic Limited 04/08/2011 Columbia Pacific Advisors, LLC BluePhoenix Solutions Ltd. (NasdaqGM:BPHX) 04/08/2011 CommerceTel Corp. (OTCBB:MFON) Mobile Visions, Inc. 04/07/2011 Solgenia S.p.A. Solgenia USA Inc. 04/07/2011 Deluxe Corp. (NYSE:DLX) Banker's Dashboard, LLC 04/07/2011 Motopia Limited (ASX:MOT) Pro Fantasy Sports Pty Ltd. 04/06/2011 Parametric Technology Corporation (NasdaqGS:PMTC) MKS Inc. 04/06/2011 Micros-Fidelio UK Ltd. Snow Valley Ltd. 04/06/2011 Optis SAS SimplySim SAS 04/06/2011 M5 Netw orks, Inc. Callfinity, Inc. 04/06/2011 Verint Systems Inc. (NasdaqGS:VRNT) Rontal Applications Ltd. 04/06/2011 Metasw itch Netw orks Colibria AS

44| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX H: SELECT 2Q11 SOFTWARE INDUSTRY MERGERS AND ACQUISITIONS (CONTINUED). Date Buye r s Se lle r 04/05/2011 KANA Softw are, Inc. Overtone, Inc. 04/05/2011 Evolution Benefits, Inc. Lighthouse1, LLC 04/05/2011 LabVantage Solutions Inc. Softw are Point Oy 04/04/2011 Apax Partners LLP Epicor Softw are Corporation 04/04/2011 Monsoon Commerce Solutions, Inc Stone Edge Technologies, Inc. 04/04/2011 Peoplefluent, Inc. Aquire, Inc. 04/04/2011 Data Transfer Solutions LLC Vuew orks Inc. 04/04/2011 Pie Medical Imaging BV 3mensio Medical Imaging BV 04/04/2011 Apax Partners LLP Activant Solutions Inc. 04/04/2011 VMw are, Inc. (NYSE:VMW) Mozy, Inc. 04/01/2011 CSC Computer Sciences Australia Holdings Pty Limited iSOFT Group Limited (ASX:ISF) 04/01/2011 SugarCRM, Inc. iEnterprises, Inc., iExtensions CRM 04/01/2011 SmartBear Softw are, Inc. Boca Internet Technologies, Inc. 04/01/2011 Allen Systems Group, Inc. TRILOGexpert Group 04/01/2011 Invoke SA Conceptw are sarl 04/01/2011 RSA Security, Inc. NetWitness Corporation 04/01/2011 Liaison Technologies, LLC nuBridges, Inc. 04/01/2011 Solera Holdings Inc. (NYSE:SLH) Inventory Technology Systems, Inc. 04/01/2011 P2 Energy Solutions, Inc. Explorer Softw are Solutions Ltd. 04/01/2011 Cymer Korea, Inc. eDiag Solutions 04/01/2011 Quality Systems Inc. (NasdaqGS:QSII) IntraNexus Inc. 04/01/2011 VASCO Data Security International Inc. (NasdaqCM:VDSI) Alfa & Ariss BV

45| 2Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

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