16 March 2015 Asia Pacific Equity Research IT Hardware (Technology - PC TW (Asia)/Technology - Hardware HK (Asia))

Global PC Hardware Sector Research Analysts SECTOR REVIEW

Thompson Wu 886 2 2715 6386 [email protected] 2015 PC volumes back in red: 4% decline Kulbinder Garcha 212 325 4795 Figure 1: CS forecasts 297/292 mn PC in 2015/16E; annual declines of 4%/2% [email protected] 1Q14 2Q14 3Q14 4Q14 1Q15E 2Q15E 3Q15E 4Q15E 2014 2015E 2016E Global PC shipments New estimate 73,378 74,989 79,530 80,237 70,818 71,172 76,434 78,177 308,133 296,602 291,706 Old estimate 74,014 75,808 81,872 80,742 312,435 312,435 314,922 QoQ% change New estimate -11.4% 2.2% 6.1% 0.9% -11.7% 0.5% 7.4% 2.3% 3YR historical average -10.2% -0.9% 6.5% 0.6% -10.2% -0.9% 5.0% 1.0% Old estimate -11.4% 2.4% 8.0% -1.4% YoY % change New estimate -4.4% -0.9% -0.5% -3.1% -3.5% -5.1% -3.9% -2.6% -2.2% -3.7% -1.7% Old estimate -14.4% -1.1% 12.8% 8.7% 0.8% 1.0% Source: IDC, Credit Suisse estimates

■ 4% PC volume decline in 2015. 1Q15 began at a deficit due to PC order pull-in into 4Q14. PC sell-through was below PC vendor plans as through Feb-15, leading to order cuts at Taiwan's notebook and MB/DT ODMs. Intel reduced its 1Q15 guidance last week, citing weakness in Europe. We expect Taiwan notebook and DT/MB ODMs to see a 15.3% decline in their 1Q15 shipments. On this lower-than-seasonal base, the remainder of the year needs above seasonal increase just to reach flat units. We do not believe products seeing better demand (i.e. Chromebook and ultra-slim notebooks) can lift the sector; or Windows 10 launch in 2H15. As a result, we trim our global PC forecasts to 297/292 mn units in 2015/16E, or 4%/2% YoY decline. ■ Trim Lenovo, Acer, and Asus' 2015-16 EPS by 1-2%. We expect Lenovo, Acer, and Asus' CY15 PC volumes to increase 1.4%, 1.6% and 3.2%, respectively from 2.8%, 5.5% and 5.5%, previously. We believe Lenovo (OUTPERFORM, TP HK$13) has the right product momentum and improving PC scale from the x86 server acquisition to protect its share and profit. They also reset their annual PC growth goals last quarter to a "low single-digit premium" to the market and guided Mar-15 sales to decline 15- 20% QoQ. Asus' 15% 2015 PC growth appears unrealistic in our view, but shares are not expensive at 11x 2015 EPS and a 6% dividend yield (NEUTRAL, TP NT$288). We see Acer's PC position as the shakiest, and FX headwinds and market competition may quickly erode its already thin profits. (UNDERPERFORM, TP NT$14). ■ HP: Lowering PC numbers; reiterate OUTPERFORM. Our US Team reduces HP's PC numbers to reflect weaker than expected CY15 global PC forecasts. This lowers HP's EPS by US$0.02 for both FY15/FY16 to US$3.61/$3.79 from US$3.63/$3.81. That said, given stabilising operations, scope for more predictable cash distribution, conservative guidance and steep undervaluation, we reiterate our OUTPERFORM rating and TP of US$45.

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

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16 March 2015 Focus tables and charts

Figure 2: Revisions to our global PC forecasts by product category and vertical YoY % unit change 2014 2015E 2016E 2017E 2018E PC - new -2.2% -3.7% -1.7% 0.8% 0.5% PC - old -2.2% 0.3% 0.8% 0.1% 0.0%

Notebook - new -2.3% -4.5% -2.2% 0.5% 0.5% Notebook - old -2.3% 2.0% 0.4% -0.5% -1.7%

Desktop - new -2.1% -2.8% -0.9% 1.1% 0.6% Desktop - old -2.1% -1.9% 1.3% 1.0% 2.3%

Consumer - new -4.2% -3.5% -1.0% 1.3% -0.2% Consumer - old -4.2% 0.7% 2.3% 0.4% -0.6%

Corporate - new -0.2% -4.0% -2.3% 0.2% 1.3% Corporate - old -0.2% 0.0% -0.7% -0.2% 0.7% Source: IDC, Credit Suisse estimates

Figure 3: Comparison of Taiwan PC ODM builds vs. CS global PC sell-through forecasts YoY % unit change 1Q14 2Q14 3Q14 4Q14 1Q15E 2Q15E 3Q15E 4Q15E Taiwan notebook ODM -18.0% 9.7% 10.8% -1.6% -18.4% 7.9% 10.0% 2.7% 3 YR seasonality -11.7% 5.4% 2.3% 2.8% -13.8% 6.2% 3.9% 3.0% Global notebook shipments -14.4% 1.1% 12.8% 1.2% -15.5% 0.5% 8.5% 2.9% 3 YR seasonality -12.9% -0.5% 9.4% 0.5% -13.6% -0.7% 8.9% 0.6%

Taiwan DT/MB ODM -7.5% 2.2% 4.5% -8.0% -9.0% 5.6% 9.9% 4.1% 3 YR seasonality -3.9% 3.0% 6.9% -9.4% -6.5% 1.3% 7.0% -5.5% Global desktop shipments -7.3% 3.5% -2.0% 0.5% -6.5% 0.5% 6.0% 1.4% 3 YR seasonality -6.3% -1.5% 2.8% 0.7% -5.6% -1.3% 0.2% 1.5% Source: IDC, Company data, Credit Suisse estimates. Note: NB ODM includes Quanta, Compal, Wistron, Pegatron, and Inventec; Motherboard ODM includes Asus, Pegatron, MSI, Gigabyte and Elitegroup

Figure 4: Quanta has the worst declines due to HP Figure 5: We expect Elitegroup to have the most severe inventory adjustment and Apple’s product transition 1Q15 MB decline QoQ% shipment change QoQ% shipment change Total Total DT/MB notebook Elitegroup Asustek MSI Pegatron Gigabyte ODM Quanta Compal Wistron Pegatron Inventec ODM 15% 0% 10%

-5% 5%

0% -10% -5%

-15% -10%

-15% -20% -20%

-25% -25%

1Q15 Forecast 3YR Historical Average 1Q15 Forecast 3YR Seasonal Average

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Global PC Hardware Sector 2 16 March 2015 4% PC volume decline in 2015 We forecast global PC shipments of 297/292 mn in 2015/16E suggesting unit declines of 4%/2%. We forecast notebook shipments of 166 mn in 2015, or about a 4.5% YoY decline; and a 3.0% decline at Taiwan notebook ODMs. Taiwan notebook ODMs build on average 82% of global notebook shipments; and has 95% correlation between shipments changes over the past 10 years. In fact, the correlation has been improving. We forecast global desktop shipments of 130 mn in 2015, or 3% YoY decline, compared to Taiwan MB/DT ODM builds of a 3% YoY decline. Taiwan MB/DT ODMs manufacture nearly 58% of global desktop shipments and their correlation of shipment change over the past ten years is almost 80%. The correlation has been relatively consistent the past three years.

Figure 6: CS forecast global PC shipments of 297/292 mn in 2015/16E suggesting unit declines of 4%/2% Shipments in thousands 2010 2011 2012 2013 2014 2015E 2016E Notebook 200,929 209,010 201,018 178,387 174,285 166,464 162,733 Desktop 156,963 154,819 148,371 136,740 133,849 130,137 128,973 Global PC shipments 357,892 363,828 349,389 315,127 308,133 296,602 291,706

Taiwan notebook ODM 159,660 156,625 156,250 140,580 140,975 136,781 138,743 Taiwan MB/DT ODM 94,476 96,800 85,325 80,100 77,232 75,000 75,000 Total Taiwan ODM 254,136 253,425 241,575 220,680 218,207 211,781 213,743

YoY % change Notebook 19.0% 4.0% -3.8% -11.3% -2.3% -4.5% -2.2% Desktop 7.5% -1.4% -4.2% -7.8% -2.1% -2.8% -0.9% Global PC shipments 13.7% 1.7% -4.0% -9.8% -2.2% -3.7% -1.7%

Taiwan notebook ODM 18.8% -1.9% -0.2% -10.0% 0.3% -3.0% 1.4% Taiwan MB/DT ODM -5.4% 2.5% -11.9% -6.1% -3.6% -2.9% 0.0% Total Taiwan ODM 8.5% -0.3% -4.7% -8.6% -1.1% -2.9% 0.9%

Trailing 10YR correlation in YoY change Notebook 45.5% 47.4% 76.1% 90.3% 94.5% 95.1% 95.8% Desktop 53.5% 44.6% 61.6% 73.6% 82.8% 79.6% 66.3% Total PC 18.6% 11.9% 50.4% 76.4% 93.5% 93.4% 94.5%

Taiwan ODM % of Global PC Notebook 79.5% 74.9% 77.7% 78.8% 80.9% 82.2% 85.3% Desktop 60.2% 62.5% 57.5% 58.6% 57.7% 57.6% 58.2% Total PC 71.0% 69.7% 69.1% 70.0% 70.8% 71.4% 73.3% Source: IDC, Company data, Credit Suisse estimates 1Q15 Notebook ODM units decline 18.4% QoQ; March month needs to rise 53% MoM We expect Taiwan notebook ODMs to see an 18.4% QoQ decline in shipments. We forecasted an 11% QoQ decline at the start of year. Our conversation with supply chain suggests HP, Lenovo, and Dell are adjusting inventories. HP order adjustments appear to be the most severe; over 30% for certain models. These three vendors are large corporate vendors suggesting corporate PC demand is softening. March shipments need to increase at least 53% MoM to reach our forecasts vs. the 28% MoM increase the past five years. We do not see this as unreasonable as Jan/Feb declines were worse than seasonal. 1Q15 DT/MB ODM units decline 9% QoQ; March month needs to rise 45% MoM We expect Taiwan DT/MB units to decline 9% QoQ in shipments. Asus is the largest MB manufacturer; we estimate their shipments would decline 16.4% QoQ. We believe Gigabyte, the second largest MB manufacturer, would offset given their shipment is

Global PC Hardware Sector 3 16 March 2015 tracking to flat QoQ. Elitegroup is tracking worse than our forecast with shipments on track to decline 21% QoQ. March shipments need to increase 55% MoM to reach our forecasts vs. the past five year average of 32% MoM increase.

Figure 7: Quanta has the worst declines due to HP Figure 8: We expect Elitegroup to have the most severe inventory adjustment and Apple’s product transition 1Q15 MB decline QoQ% shipment change QoQ% shipment change Total Total DT/MB notebook Elitegroup Asustek MSI Pegatron Gigabyte ODM Quanta Compal Wistron Pegatron Inventec ODM 15% 0% 10%

-5% 5%

0% -10% -5%

-15% -10%

-15% -20% -20%

-25% -25%

1Q15 Forecast 3YR Historical Average 1Q15 Forecast 3YR Seasonal Average

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates. 2Q15 should be up sequentially Our conversation with the Taiwan PC supply chain after Intel's pre-announcement last week suggests PC orders are still being tempered through March. The severity of this reduction is still uncertain. That being said, the Taiwan notebook and MB/DT ODMs expect March month and 2Q15 units increase MoM/QoQ, largely because of the comparable working days (i.e. February days are reduced because of Chinese New Year). Seasonally, notebook and MB/DT ODM units increase 6% and 1% in the second quarter. We are forecasting 8% and 6% QoQ increase in 2Q15, respectively.

Figure 9: Taiwan's notebook ODM shipments capture over Figure 10: Taiwan's motherboard ODM shipments capture 80% of IDC brand notebook shipments nearly 58% of IDC branded desktop shipments QoQ% shipment change QoQ% shipment change 15.0% 15.0%

10.0% 10.0% 5.0%

0.0% 5.0% -5.0%

-10.0% 0.0%

-15.0% -5.0% -20.0%

-25.0% -10.0% 1Q14 2Q14 3Q14 4Q14 1Q15E 2Q15E 3Q15E 4Q15E 1Q14 2Q14 3Q14 4Q14 1Q15E 2Q15E 3Q15E 4Q15E

Notebook Brand shipments Notebook ODM shipments Desktop Brand shipments Motherboard ODM shipments

Source: IDC, Company data, Credit Suisse estimates. Note: Notebook Source: IDC, Company data, Credit Suisse estimates. Note: MB ODM ODM includes Quanta, Compal, Wistron, Pegatron, and Inventec. includes Asus, Pegatron, MSI, Gigabyte and Elitegroup.

Global PC Hardware Sector 4 16 March 2015

Taiwan notebook and motherboard ODM a good proxy for global PC shipments Taiwan's notebook ODM manufacturers Quanta, Compal, Wistron, Pegatron, and Inventec manufacture over 80% of global notebook shipments. There is a 95% correlation between notebook ODMs quarterly shipments YoY change with IDC reported quarterly notebook shipments YoY change over the past decade. Lenovo, Samsung and Sony still manufacture certain models in-house. This represents the difference between ODM and IDC/brand shipments. Motherboard manufacturers Pegatron, Asus, Gigabyte, MSI, and Elitegroup manufacture 58% of the global desktop shipments reported by IDC. The number is actually higher as we don't have Hon Hai's motherboard shipments, AIO shipments by the notebook ODMs; and in-house production. Nevertheless, the correlation between motherboard ODM and IDC desktop shipments is over 60% in the past 3 years. Intel lowered guidance confirming Taiwan ODM 1Q15 data-point Pre-open US market open on Thursday, 12 March, Intel lowered the mid-point of its March 1Q15 revenues to US$12.8 bn, from US$13.7 bn previously and withdrew full-year guide until they report. Intel's change in revenue outlook was the result of weaker than expected demand in their desktop business and lower than expected inventory levels across the supply chain. Intel attributed these changes to patterns caused by lower than demand from Windows XP refresh in SMB; macro and currency conditions particularly in Europe. They said the data-center business is meeting expectations. Please click here for Credit Suisse Intel analyst John Pitzer's comments.

Figure 11: HP has over 30% market share in Western Europe corporate desktop market Western Europe Corporate DT market share Corporate DT 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 HP 36% 31% 31% 31% 33% 32% 30% 31% 31% 32% 29% 29% Dell 19% 21% 20% 20% 20% 20% 20% 18% 20% 18% 17% 18% Lenovo 9% 10% 11% 12% 11% 11% 12% 14% 13% 14% 14% 16% Fujitsu 8% 8% 9% 9% 9% 8% 9% 9% 10% 8% 8% 8% Acer Group 4% 6% 4% 3% 3% 4% 5% 4% 3% 4% 5% 4% Source: IDC, Credit Suisse estimates Lower EPS for Lenovo, HP, Acer and Asus In conjunction with our global PC forecast reduction, Credit Suisse has lowered 2015-16E earnings estimates for Lenovo, HP, Acer, and Asustek:

■ Lenovo (OUTPERFORM, TP HK$13): We trim FY15 (Mar-15) and FY16 (Mar-16) GAAP EPS by 0.9% and 1.2%, respectively; P/F EPS, excluding amortization, restructuring and stock-based compensation, declines about 0.8% and 0.9%, respectively. We lowered our PC shipments forecast to 1.4% growth in CY15, from 2.8% previously. We forecast commercial PC shipments are flat this year; consumer PC increase 3%; notebooks increase 4%; and desktops decline 2%. Our revised PC forecasts suggest global PC share increases to 19.3% in 2015, from 19.0% in 2014.

■ HP: (OUTPERFORM, TP US$45). Kulbinder Garcha reduced HP's PC numbers to reflect weaker than expected CY15 global PC forecasts. Given end market weakness we reduce both our unit and ASP forecasts from previous -3.8%/+3% to -4.1%/-1% for CY15. This lowers HP's CY15 PC revenues YoY growth rate from prior -3% to -6%, which lowers CY15 PSG revenue to $32.2bn from $30.7bn. For FY16 we assume $31bn, a 2.3% YoY decline. This lowers HP's EPS by US$0.02 for both FY15/FY16 to US$3.61/$3.79 from US$3.63/$3.81. That said, given stabilizing operations, scope for more predictable cash distribution, conservative guidance and steep undervaluation, we reiterate our OUTPERFORM rating and our TP of $45.

Global PC Hardware Sector 5 16 March 2015

■ Acer (UNDERPERFORM, TP NT$14): We trim our 2015 EPS by 2%. We lowered our 2015 PC unit growth to 1.6%, from 5.5% previously. We forecast notebook shipments (including Chromebooks) increase 1.8% and desktop shipments increase 0.9%. Acer has not set official targets for their PC business this year. We believe their focus is profitable growth, which suggests modest share gain to us. Our revised PC forecast suggests global PC share increases to 8.3% in 2015, from 8.2% in 2014.

■ Asustek (NEUTRAL, TP NT$288). We trim our 2015 EPS by 1.3%. We lowered our 2015 PC unit growth to 3.2%, from 5.5% previously. We forecast notebook shipments (including Win 8 tablet PC) increase 3.0%; and desktops increase 5%. In total we forecast Asus ships 23.5 mn PC units this year. Our forecast is below Asus' PC shipment outlook this year, which is +15% or 26 mn units. We continue to believe Asus has set an unrealistic PC shipment target. Our revised PC forecasts suggest global PC share increases to 7.5% in 2015, from 7.3% in 2014.

Global PC Hardware Sector 6 16 March 2015

Figure 12: CS PC forecasts for Lenovo, HP, Acer, Asus and Apple and implied mkt share ('000 shipments) 2010 2011 2012 2013 2014 2015E YoY PC unit chg. % Lenovo 37.1% 28.9% 18.9% 2.8% 10.2% 1.4% HP 6.7% -2.2% -9.1% -6.1% 2.7% -4.1% Acer 14.3% -13.6% -7.6% -29.1% -0.4% 1.6% Asustek 63.7% 29.5% 32.6% -2.8% 11.4% 3.2% Apple 28.5% 23.3% -4.4% 0.6% 14.4% -1.6%

Global PC share % Lenovo 9.5% 12.1% 15.0% 17.1% 19.0% 19.3% HP 17.5% 16.8% 16.0% 16.6% 17.3% 16.5% Acer 12.7% 10.8% 10.4% 8.2% 8.2% 8.3% Asustek 3.4% 4.4% 6.0% 6.5% 7.3% 7.5% Apple 4.0% 4.9% 4.9% 5.4% 6.3% 6.2%

YoY Desktop unit chg. % Lenovo 30.5% 28.0% 16.9% 2.8% 5.7% -1.7% HP 10.4% -1.8% -4.4% -7.3% -0.2% -5.1% Acer 21.0% 2.1% -15.0% -23.6% 1.8% 0.9% Asustek 84.0% -13.2% 73.8% -17.2% 24.4% 5.3% Apple 25.3% 6.5% -18.2% -8.2% -9.0% -5.4%

Desktop share % Lenovo 9.2% 12.0% 14.6% 16.3% 17.6% 17.7% HP 15.7% 15.6% 15.6% 15.7% 16.0% 15.5% Acer 6.0% 6.2% 5.5% 4.6% 4.8% 4.9% Asustek 0.9% 0.8% 1.4% 1.3% 1.6% 1.7% Apple 2.9% 3.2% 2.7% 2.7% 2.5% 2.4%

YoY Notebook unit chg. % Lenovo 42.5% 29.6% 20.4% 2.7% 13.4% 3.5% HP 4.5% -2.5% -12.1% -5.3% 4.7% -3.5% Acer 12.6% -17.7% -5.2% -30.8% -1.1% 1.8% Asustek 61.5% 34.9% 29.3% -1.2% 10.2% 3.0% Apple 30.1% 31.2% 0.9% 3.3% 20.9% -0.9%

Notebook share % Lenovo 9.8% 12.2% 15.3% 17.7% 20.1% 20.4% HP 18.9% 17.8% 16.2% 17.3% 18.2% 17.2% Acer 17.9% 14.2% 14.0% 10.9% 10.8% 10.8% Asustek 5.4% 7.0% 9.5% 10.5% 11.6% 11.7% Apple 4.9% 6.2% 6.5% 7.5% 9.1% 8.9% Source: Company data, Credit Suisse estimates PC supply chain takeaways from 4Q14 results We reviewed 4Q14 earnings calls for key companies of the global PC supply chain including Lenovo, Asus, HP, Microsoft, Intel, AMD, NVIDIA, Seagate and Western Digital. We extract key excerpts relating to 2015 PC demand and key trends:

Global PC Hardware Sector 7 16 March 2015

Lenovo Group (0992.HK, OUTPERFORM, HK$13)

■ 4Q14: "While we tapped our leadership position with a record 20% worldwide PC Analyst: Thompson Wu market share, we will grasp the industry consolidation opportunity and expand more Phone: 886 2 2715 6386 aggressively in the US and Asia Pacific consumer markets, to gain even more market Thompson.Wu@credit- share." Mr. Wai Ming Wong, Chief Financial Officer sussie.com

■ Brazil PC: We have been refining our business strategy in PC, and actions are in place to stabilize the Brazil business. Proactive actions taken to improve our performance include simplifying product portfolio, improving operational controls, and improving supply chain efficiency and a new local leadership is in place to execute our strategy." Mr. Wai Ming Wong, Chief Financial Officer Asustek (2357.TW, NEUTRAL, NT$288)

■ 1Q15 outlook: "Now shipment outlook for the first quarter. PC 5.6m units, mobile 5m. Analyst: Thompson Wu Components we believe to have a zero to 5% revenue growth. IOT we expect to have Phone: 886 2 2715 6386 20% or more growth. For the whole year we want PC to achieve a 15% growth rate. Thompson.Wu@credit- So that would translate into a shipment number of 26m." David Chang, Chief Financial suisse.com Officer, Asus

■ 2015 outlook "For this year we want to have double-digit growth in notebook, growing from, say, 20.3m to 22.5m. Motherboard shipment may remain flat, but in desktop we believe we can grow from 2.2m to 3.5m, a growth of 60%. In addition to growing shipment numbers, we also want to increase the operating margin." David Chang, Chief Financial Officer "The target for our PC business this year is to have a growth of 15%. Based on our internal numbers, based on my observation, the overall ASP may drop by 5%. It's going to be a drop. To my estimate it will drop by 5%, but it will not exceed 15%. It's going to be a single-digit drop. So overall revenue is going to grow, but ASP may drop around 5%." Jerry Shen, Chief Executive Officer Hewlett Packard (HPQ, OUTPERFORM, TP US$45)

■ F1Q16-April outlook: "…It wasn't so much that we were seeing kind of enterprise Analyst: Kulbinder Garcha customers delaying as a result of the currency. That's really what we're not hearing. Phone: 212 325 4795 We did see some softness in January overall in the PC business, and so the quarter Kulbinder.Garcha@credit- was a bit more front-end loaded than what would be kind of our historical norm." suisse.com Cathie Lesjak, Chief Financial Officer ■ 2015 PC outlook: "We believe that PC units will be in small decline but there are pockets of growth across the segments in some segments, including mobility accessories and services. We have seen and expected to slow down and the commercial segment following the XP refreshes that fuelled high growth last year. However, we've seen, to counterbalance that momentum in the consumer side of the business as consumers refresh their older PCs." Dion Weisler, Executive Vice President of Printing and Personal Systems

■ PC Strategy: "Looking forward, the market remains competitive. We believe we can continue to gain share in the areas where we choose to play as the market consolidates. Specifically, we're sort of focused on profitable growth in three areas. Firstly, we're investing in key growth areas of convertibles, commercial mobility accessories and services, where the heat is in the market. Secondly, we remain focused on extending our leadership in the commercial enterprise and SMB segments, including education. And then finally, we just continue to do the hard work of detailed customer segmentation and ensuring that we have the right price value and cost equation set for each market." Dion Weisler, Executive Vice President of Printing and Personal Systems.

Global PC Hardware Sector 8 16 March 2015

Microsoft Corporation (MSFT, OUTPERFORM, TP US$55)

■ 2015 PC themes: “Last spring, we made a strategic decision to introduce new Phil Winslow, CFA Windows pricing programs to drive unit growth in opening-price-point PCs, as well as Phone: 212 325 6157 tablets, and this quarter we saw year-over-year growth. Also, businesses continue to Philip.Winslow@credit- value Windows. We are seeing healthy demand for Windows Pro, even though we suisse.com face challenging prior-year comparable in Q2, as well as in a second half of the year, following the Windows XP end-of-support-related PC refresh." Satya Nadella, Chief Executive Officer

■ Windows 10. "The heritage of Windows was about enabling one single device, the PC. With Windows 10, we are building a device platform for the mobile first, cloud first world. It's a world where the mobility of a person's experience is paramount, requiring a platform that spans devices from small screens to large screens to no screens at all … It is also a world with rich opportunity for developers, and Windows 10 will be the most attractive Windows development platform ever. With our free upgrade offer, and with universal application and unified store for developers, we'll have a large unified up-to-date user base to target." Satya Nadella, Chief Executive Officer Intel Corporation (INTC, OUTPERFORM, TP US$40)

■ Inventory: “The Company saw modest increase in net inventory levels quarter-over- John Pitzer quarter, as we were efficiently managing capacity, while ramping Broadwell on 14- Phone: 212 538 4610 nanometer, and the worldwide PC supply chain appears to be healthy, with inventory John.Pitzer@credit- levels appropriate as we enter the first quarter. These results for the fourth quarter suisse.com completed a strong year for Intel.” Stacy Smith, Chief Financial Officer ■ 2015 PC outlook: If you remember, our forecast is based, even still on flat units, and a slight decrease in ASP” Brian Krzanich, Chief Executive Officer

■ PC pricing: “I think almost like the PC, if you really look back at the PC, the PC began to bifurcate. You did see systems coming in at lower and lower price points, right? And you saw kind of the bottom of the PC market go from the $500 range to, as we said now, you can go out there and get a good system, $249 all the way down to $199 with Chrome." Brian Krzanich, Chief Executive Officer

■ Tablet outlook: "You are going to see a robust low-end of the tablets. I go to Shenzhen, I see what's coming out of China right now, and there's some good low- cost tablets that are going to come out and continue to drive probably that average ASP system down into the sub-$100 range. At the same time, I think you see systems that -- we've got them coming with all of our major OEMs, Lenovo, Dell, HP, systems with real innovation, things like the RealSense snapshot, thinner and lighter, longer battery life, better screens, edge to edge screens, people are willing, if you bring the innovation, a $399 tablet, maybe $299 to $399 tablet is not an unreasonable price." Brian Krzanich, Chief Executive Officer Advanced Micro Devices, Inc. (AMD, UNDERPERFORM, TP US$2.00) John Pitzer Phone: 212 538 4610 ■ PC outlook: "The PC market is expected to stabilize with low single-digit percentage John.Pitzer@credit- decline in 2015." Lisa Su, Chief Executive Officer suisse.com ■ 1Q15 PC outlook: "So if you take a typical -- PC seasonality would be about minus 7% or so, and typical game console seasonality is probably a little bit more than that. What we said in the prepared remarks is that we are taking an opportunity to correct the channel inventory in computing and graphics. So overall, down minus 15%. That is more heavily weighted towards computer and graphics than towards enterprise, embedded, and semi-custom. " Lisa Su, Chief Executive Officer

Global PC Hardware Sector 9 16 March 2015

NVIDIA (NVDA, NOT-COVERED) PC strategy: "PC OEM business is continuing to decline because PCs have largely become good enough and it's fragmented. Most people use their PCs for information access, for working. And some people use them for gaming, and so for those gaming markets we serve those, but for most of the generic and mainstream PCs, we've largely been out of those for some time." Jen-Hsun Huang, Co-Founder and Chief Executive Officer Seagate Technology (STX, NON-RATED)

■ Client/PC Demand: “We had a start of the year that had a lot of relative strength in desktop, especially relative to what people were projecting. And then the second half of the year really flipped the other way, where the relative performance was on the notebook side." Stephen Luczo, Chief Executive Officer "I think as we left the December quarter, we were, I suppose, discouraged a bit by the lack of momentum in the client space. Which I think, again, lends to some of the cautiousness that we're seeing as well as Intel's forecast was about 7% down on their revenue estimate. That's with the, probably, not nearly the pricing pressures we have." Stephen Luczo, Chief Executive Officer

■ HDD pricing. "Yet, in a demand environment that's been volatile, relatively fell flat both in notebook and desktop, if you take a one-year perspective, there's not a lot of movement for absorption or cost reductions from, especially with single-part component companies. So, continued price aggression there doesn't make a lot of sense, but there are certain market segments, for example in retail, where a couple of our competitors seem to be battling it to the end of who can have the last 0.5 point of market share. It's just been kind of silly.” Stephen Luczo, Chief Executive Officer Western Digital Technologies (WDC, NON-RATED)

■ PC demand: “What has been happening is that we've been seeing low single digit decline on a year-on-year basis in the PC space. That has been consistent with our expectation. And we would expect that, going forward, that we'll continue to see that. Steve Milligan, Chief Executive Officer

■ Client/PC HDD technologies?: "As that relates to hard drive shipments into the PC segment, we also have to contemplate the fact that more and more client units are using solid-state devices versus rotating magnetic storage, and so our -- we will see more of a drag than that low single digit in terms of hard drives shipped into the PC market. And so, that is very consistent with what we have been saying for the last several quarters, and very consistent with our expectations.” Steve Milligan, Chief Executive Officer Five unique PC trends in 2014 IDC released its final 4Q14 PC database last month. We've updated and reviewed the data and highlighted five trends we found particularly interesting with the PC market in 2014:

■ Top five PC vendors all gained share in 2014. Never before in the history of the PC had market had the top five PC vendors all gained share in a year. This is exactly what happened in 2014. The top five vendors controlled over 65% of the PC market last year; from less than 59% in 2013. This happened as a result of the PC vendors exiting the market, or reducing their PC scale. These vendors included Toshiba, Samsung, Fujitsu, and Sony. Their combined share exiting 2014 was 8%. We believe another year whereby all five top PC vendors gain share is highly unlikely in our view.

Global PC Hardware Sector 10 16 March 2015

Figure 13: Top 4 PC vendors gained share from Toshiba, Samsung, Fujitsu and Sony Market share % 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 2012 2013 2014 Lenovo + IBM 15.3% 16.7% 17.7% 18.5% 17.6% 19.4% 19.7% 20.1% 15.0% 17.1% 19.2% HP 15.6% 16.4% 17.5% 16.7% 17.1% 18.2% 18.5% 19.8% 16.6% 16.6% 18.5% Dell 11.7% 12.2% 11.9% 12.1% 13.4% 14.0% 13.2% 13.6% 11.1% 12.0% 13.5% Acer Group 8.1% 8.3% 7.4% 7.3% 7.1% 7.9% 8.5% 7.7% 9.6% 7.8% 7.8% Apple 5.2% 5.0% 5.7% 5.8% 5.6% 5.9% 6.9% 6.9% 4.9% 5.4% 6.4% ASUS 6.1% 5.9% 5.7% 6.7% 6.3% 6.3% 6.4% 6.8% 6.6% 6.1% 6.4% Toshiba 5.3% 4.1% 4.1% 4.8% 5.0% 4.0% 3.6% 3.7% 4.8% 4.6% 4.1% Samsung 5.0% 4.4% 3.9% 2.2% 2.4% 1.9% 1.7% 1.2% 4.3% 3.8% 1.8% Fujitsu 1.8% 1.3% 1.7% 1.8% 2.4% 1.7% 1.3% 1.4% 1.7% 1.7% 1.7% Sony 2.1% 1.8% 1.9% 2.0% 1.4% 0.6% 0.1% 0.0% 2.2% 2.0% 0.5% Others 23.8% 23.9% 22.5% 22.0% 21.7% 20.2% 20.1% 18.9% 23.2% 23.0% 20.2% Source: IDC, Credit Suisse

■ Ultra-slim notebooks show surprising resiliency. Demand has been remarkably strong, even with signs of acceleration in 3Q/4Q14. In 2014, ultra-slim notebook units exceeded 33 mn and were nearly 20% of global notebooks. We find this particularly surprising given the high-ASP nature of the devices, which on average priced at US$983 compared to a traditional notebook priced at US$654. Perhaps consumers are choosing to spend more on their PCs as they are refreshing or upgrading less frequently. Apple, Lenovo and HP are the three largest vendors; Apple and Lenovo gained market share in 2014. Combined they are over 56% of the market share.

Figure 14: Ultra-slims sold surprisingly well last year Shipment in 000's, YoY % change 000's 10,000 70% 9,000 60% 8,000 7,000 50% 6,000 40% 5,000 30% 4,000

3,000 20% 2,000 10% 1,000 - 0% 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

Global Ultra-slim notebook units YoY % change

Source: IDC, Credit Suisse. Note: IDC defines ultrabooks as notebooks that meet Intel's Ultra-book requirements (23mm thick at largest point (touch PC), <21mm thick at largest point (non-touch PC)).

■ Corporate market flattens out after two years of declines. Demand was induced by the expiration of Windows XP in July 2013. Enterprises began refreshing PC since as early as 3Q13 through 2Q14. Subsequently demand decelerated and back into declines. This supports our view that Windows-led XP refresh has ended and becomes a volume headwind in 2015. The top three PC vendors all gained market share. HP extended its share to nearly 22%; Lenovo's share exceeded 20% for the first time; and Dell gained 17.4% share. Most of these shares came from regional PC vendors; their combined market share declined from 24.5% in 2013 to 20.8% in 2014.

Global PC Hardware Sector 11 16 March 2015

Figure 15: Corporate PC posted flat YoY change in 2014 after 2 years of negative growth; but demand has begun to decelerate in the past two quarters (YoY % change)

6.0%

4.0%

2.0%

0.0%

-2.0%

-4.0%

-6.0%

-8.0%

-10.0%

-12.0%

-14.0% 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14

Source: IDC, Credit Suisse

■ Chromebook demand still on the rise. Popularity of Chromebook continued to surprise in 2014. Volumes exceed 6 mn for the first time ever and represented 2% of the market. We find this growth particularly surprising in light of the global softness for PC; but more particularly the limited number of vendors and model yield this volume. In aggregate, there are seven vendors and no more than twenty Chromebook models. Acer, Samsung, and HP are three largest vendors in 2014. Samsung's market share eroded significantly from 2013 to 2014, absorbed by both Acer and HP. Asustek has grand Chromebook plans this year and will launch a "HERO" device in 2Q15.

Figure 16: Chromebooks demand accelerating Figure 17: Acer ranked #1 in global Chromebook market Shipment in 000's, YoY % change 2014 Chromebook market share 000's Toshiba Others 2,000 180% Lenovo 2% 5% 0% 1,800 160% ASUS 6% 1,600 140% Acer Group 29% 1,400 120% 1,200 Dell 100% 1,000 13% 80% 800 60% 600 400 40% 200 20% 0 0% 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 HP Global Chromebook units YoY % change 22% Samsung 23% Source: IDC, Credit Suisse Source: IDC, Credit Suisse

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Figure 18: PC OEMs are rapidly expanding their Chromebook product offerings Manufacturer ASUS ASUS Acer Acer Acer Lenovo HP HP Dell Samsung

Model Chromebook C200 Chromebook C300 Chromebook 11 Chromebook 13 Chromebook 15 Chromebook N20P Chromebook 11 G3 Chromebook 14 G3 Chromebook 11 Samsung Chromebook 2

Form factor: Display size (in) 11.6 13.3 11.6 13.3 15.6 11.6 11.6 14.0 11.6 11.6 / 13.3 Resolution 1366 x 768 1366 x 768 1366 x 768 1366 x 768 1920 x 1080 / 1366 x 768 1366 x 768 1366 x 768 1366 x 768 1366 x 768 1366 x 768 / 1920 x 1080 Height x Width x Depth 12.0 x 7.9 x 0.8 in 13.0 x 9.1 x 0.8-0.9 in 11.8 x 8 x 0.7 12.87 x 8.96 x 0.71 in 15.4 x 10.08 x 0.95 in 11.61 x 8.35 x 0.71 in 8.10 x 11.81 x 0.81 in 9.45 x 13.54 x 0.70 in 11.6 x 7.9 x 0.97 in 11.40 x 8.06 x 0.66 / 12.72 x 8.80 x 0.65 in Weight 2.5 lbs 3.1 lbs 2.4 lbs 3.31 lbs 4.85 Ibs 2.9 lbs 2.8 lbs 3.8 lbs 2.9 lbs 2.65 / 3.06 Ibs

Core internals Processor Intel Celeron N2830, 2.16GHz Intel Celeron N2830, 2.16GHz Intel Celeron N2830, 2.16GHz NVIDIA Tegra K1, 2.1 GHz Intel Core i3 / New Intel Celeron Intel Celeron N2830, 2.16GHz Intel Celeron N2830, 2.16GHz NVIDIA Tegra K1 Intel Celeron, 1.4 GHz Intel Celeron N2840 / Samsung Exynos 5 Octa Memory 2 GB 2 GB 2 GB 2 GB 2 GB / 4 GB 2 GB 2 GB 2 GB 2 GB 2GB / 4GB Operating system Chrome Chrome Chrome Chrome Chrome Chrome Chrome Chrome Chrome Chrome Storage type/capacity (GB) 16GB SSD 16GB SSD 16GB SSD 16GB SSD 16 GB / 32 GB SSD 16GB SSD 16GB SSD 16GB SSD 16GB SSD 16GB SSD Cloud storage 100GB 100GB 100GB 100GB 100GB 100GB 100GB 100GB 100GB 100GB

Features Battery life (hrs) Up to 11.5 hours Up to 10 hours Up to 8.5 hours Up to 13 hours Up to 8 hours Up to 8 hours Up to 8 hours Up to 8 hours Up to 10 hours Up to 9 hours Camera HD Webcam HD Webcam HD Webcam HD Webcam HD Webcam HD Webcam HD Webcam HD Webcam HD Webcam HD Webcam USB (version) 1x USB 3.0, 1x USB 2.0 1x USB 3.0, 1x USB 2.0 1x USB 3.0, 1x USB 2.0 2x USB 3.0 1x USB 3.0, 1x USB 2.0 1x USB 3.0, 1x USB 2.0 1x USB 3.0, 1x USB 2.0 1x USB 3.0, 2x USB 2.0 1x USB 3.0, 2x USB 2.0 1x USB 3.0, 1x USB 2.0

Retail Price ($USD) Starting at US$249 Starting at US$249 Starting at US$199 Starting at US$279.99 Starting at US$249.99 Starting at US $329.99 Starting at US$279.99 Starting at US$299.99 Starting at US$279 Starting at US$249.99

Source: Company data, Credit Suisse

■ Emerging markets under-performed mature markets. A common argument for long-term PC shipment growth is the low-PC penetration in emerging markets can drive unit growth exceeds the mature markets where PC-penetration is high. Last year, emerging markets such as Central Europe, Middle East and Africa, Latin America, and Rest of Asia-Pacific all declined in 2014. Meanwhile, mature markets such as North America and Western Europe grew shipments. One factor was the Window XP led corporate refresh. We believe another factor was the faster rate of tablet and smartphone adoption in emerging markets. Interestingly, tablet demand appears to be slowing down globally; while smartphone growth is decelerating. This may create an opportunity to bring spending back into PC in 2015 and beyond.

Figure 19: Mature markets outpaced emerging markets last year (YoY% of unit change)

20% 17% 15% 10% 5% 5% 0% 0% -5% -1% -6% -4% -10% -7% -7% -8% -8% -15% -12% -14% -20% -18% -25% -24% -30% Latin America Rest of CEMA Japan PRC North America Western Europe Asia/Pacific

2013 2014

Source: IDC, Credit Suisse

■ PC ASPs are actually rising year-on-year. Global PC ASP pressure has been relatively benign in the past few years and is partly due to PC vendor strategy (i.e. no growth, no need to gain market share). We believe demand of ultra-slim notebook and corporate PC models improved product mix and ASP by 1.4% in 2014. The risk in 2015 is PC vendors revise their strategy. This may be likely as the top five vendors have limited share gain opportunity from those PC vendors that have exited/reduced their PC business. Product mix could be a concern if Chromebook demand continues

Global PC Hardware Sector 13 16 March 2015

to be strong. Sony reported the largest ASP increase of US$61 in 2014; which was a part of its strategy. Acer, Toshiba, and Samsung's ASPs all declined >US$20.

Figure 20: Sony, HP, and Fujitsu reported the largest increase in PC ASP dollar Change in PC US$ ASP in 2014 vs 2013 70 61 60 50 40 30 20 12 7 10 4 2 2 0

-10 -5 -20 -20 -21 -30 -29 -40 Sony HP Fujitsu Apple Dell Lenovo + ASUS Acer Group Toshiba Samsung IBM

Source: IDC, Credit Suisse

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Companies Mentioned (Price as of 13-Mar-2015) Acer Group (2353.TW, NT$21.2) Advanced Micro Devices, Inc. (AMD.OQ, $2.75) Apple Inc (AAPL.OQ, $123.59) Asustek (2357.TW, NT$322.5) Compal Electronics (2324.TW, NT$26.6) Elitegroup Comp (2331.TW, NT$25.7) Fujitsu (6702.T, ¥792) Gigabyte Technology (2376.TW, NT$38.5) Hewlett Packard (HPQ.N, $32.43) Hon Hai Precision (2317.TW, NT$88.0) Intel Corp. (INTC.OQ, $30.93) Inventec Co Ltd (2356.TW, NT$23.5) Lenovo Group Ltd (0992.HK, HK$10.94) Micro-Star (2377.TW, NT$36.9) Microsoft Corporation (MSFT.OQ, $41.38) NVIDIA (NVDA.OQ, $22.7) Pegatron (4938.TW, NT$88.4) Quanta Computer (2382.TW, NT$77.0) Samsung Electronics (005930.KS, W1,457,000) Seagate Technolo (STX.OQ, $53.76) Sony (6758.T, ¥3,223) Toshiba (6502.T, ¥479) Western Digital Corp. (WDC.OQ, $97.19) Wistron (3231.TW, NT$28.0)

Disclosure Appendix Important Global Disclosures Thompson Wu and Kulbinder Garcha, each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities As of December 10, 2012 Analysts’ stock rating are defined as follows: Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark*over the next 12 months. Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months. Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months. *Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin Ame rican and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10- 15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ratings were based on a stock’s total return relative to the average total return of the relevant country or regional benchmark. Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation: Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months. Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months. Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months. *An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.

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Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution Rating Versus universe (%) Of which banking clients (%) Outperform/Buy* 44% (54% banking clients) Neutral/Hold* 38% (49% banking clients) Underperform/Sell* 15% (44% banking clients) Restricted 3% *For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein. Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and- analytics/disclaimer/managing_conflicts_disclaimer.html Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties. See the Companies Mentioned section for full company names The subject company (2353.TW, 0992.HK, 2357.TW, HPQ.N, 3231.TW, 2324.TW, 4938.TW, 2317.TW, INTC.OQ, MSFT.OQ, AMD.OQ, AAPL.OQ, 6502.T, 005930.KS) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse. Credit Suisse provided investment banking services to the subject company (0992.HK, HPQ.N, 2317.TW, INTC.OQ, MSFT.OQ, AMD.OQ, AAPL.OQ, 005930.KS) within the past 12 months. Credit Suisse has managed or co-managed a public offering of securities for the subject company (0992.HK, AAPL.OQ) within the past 12 months. Credit Suisse has received investment banking related compensation from the subject company (0992.HK, HPQ.N, 2317.TW, INTC.OQ, MSFT.OQ, AMD.OQ, AAPL.OQ, 005930.KS) within the past 12 months Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (2353.TW, 0992.HK, 2357.TW, HPQ.N, 3231.TW, 2324.TW, 4938.TW, 2317.TW, INTC.OQ, 6702.T, MSFT.OQ, AMD.OQ, WDC.OQ, AAPL.OQ, 6502.T, 005930.KS) within the next 3 months. As of the date of this report, Credit Suisse makes a market in the following subject companies (HPQ.N, INTC.OQ, 6702.T, MSFT.OQ, AMD.OQ, WDC.OQ, AAPL.OQ, 6502.T). As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (2353.TW, 2357.TW, 2382.TW, 3231.TW, 2324.TW, 4938.TW, 2317.TW). Credit Suisse has a material conflict of interest with the subject company (0992.HK) . Credit Suisse is acting as financial advisor to Lenovo Group Limited for its proposed acquisition of Motorola Mobility Group from Google. Credit Suisse has a material conflict of interest with the subject company (INTC.OQ) . Credit Suisse Securities (USA) LLC is acting as financial advisor to Intel Corp (INTL) on its announced proposed acquisition of LSI’s Axxia Networking Business from Avago Technologies Limited (AVGO). Credit Suisse has a material conflict of interest with the subject company (6502.T) . Credit Suisse Securities (USA) LLC is acting as an advisor to Landis+Gyr on the announced acquisition by Toshiba Corporation. This acquisition remains subject to regulatory approvals and other customary closing conditions. Credit Suisse has a material conflict of interest with the subject company (005930.KS) . Credit Suisse is acting as exclusive financial advisor to Samsung Electronics and Samsung Fine Chemicals in relation to the proposed sale of their ownership stakes in the semiconductor wafer joint ventures with SunEdison, SMP Ltd and MEMC Korea Company Ltd, to SunEdison. As of the date of this report, an analyst involved in the preparation of this report has the following material conflict of interest with the subject company (AAPL.OQ). A Credit Suisse analyst involved in the preparation of this report has a long position in the common stock of AAPL.

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Global PC Hardware Sector TC2112.doc