SOFTWARE EQUITY REPORT 2003 A COMPREHENSIVE ANALYSIS OF SOFTWARE INDUSTRY VENTURE CAPITAL, INITIAL PUBLIC OFFERINGS AND MERGERS AND ACQUISITIONS Kenneth Bender Managing Director
[email protected] Bryan Warren Senior Vice President
[email protected] Larry Spelhaug Senior Vice President
[email protected] Allen Cinzori Vice President
[email protected] David Legacki Analyst
[email protected] Software Equity Group, L.L.C. 12220 El Camino Real, Suite 320 San Diego, CA 92130 www.softwareequity.com (858) 509-2800 Software Equity Group, L.L.C. ECONOMY Figure 1: U.S. Gross Domestic Product 10% The U.S. economy gained considerable momentum 8.2% 8% in 2003. Most notable was a significant improvement in Gross Domestic Product (GDP), a 6% 4.7% leading economic indicator, which reached its 4.0% 4% 3.4% 3.1% highest level since 1984. While third quarter GDP 2.0% 1.9% 2.0% grew at the sizzling rate of 8.2%, the rate 2% 1.3% decelerated to a more sustainable 4.0% in Q4. For 0% -0.2% the year, GDP grew 3.1%, as compared to 2.2% in -0.6% 2002 and 0.5% in 2001 (Figure 1). Growth GDP Real -2% -1.3% -4% Key contributors to the upturn in GDP were a 20012002 2003 significant increase in business investments and Source: Commerce Department strong consumer spending, both of which surged in the third quarter. Business investments in PUBLIC MARKETS equipment and software jumped 17.6% in Q3 and 10.0% in Q4. A weaker dollar and an improving U.S. markets ended a torrid year on yet another global economy also drove the manufacturing upswing in Q4, with the Dow, Nasdaq and S&P 500 sector, as demand for U.S.