2Q10 Software Industry Equity Report.Pdf

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2Q 2010 Software Industry Equity Report Contents

U.S. ECONOMY: SOFTWARE INDUSTRY MACROECONOMICS...... 1

IT SPENDING...... 1

PUBLIC SOFTWARE COMPANY STOCK PERFORMANCE ...... 3

PUBLIC SOFTWARE COMPANY MARKET VALUATIONS ...... 3

PUBLIC SOFTWARE COMPANY FINANCIAL PERFORMANCE ...... 5

PUBLIC SOFTWARE COMPANY PERFORMANCE BY PRODUCT CATEGORY ...... 6

PUBLIC SOFTWARE AS A SERVICE (SAAS) COMPANY MARKET VALUATIONS AND FINANCIAL PERFORMANCE...... 7

PUBLIC INTERNET COMPANY MARKET VALUATIONS AND FINANCIAL PERFORMANCE ...... 8

INITIAL PUBLIC OFFERINGS...... 10

MERGERS AND ACQUISITIONS: THE NUMBERS...... 12 M&A DEAL VOLUME AND SPENDING: ALL INDUSTRY SECTORS ...... 12 SOFTWARE M&A DEAL VOLUME AND SPENDING...... 12 SOFTWARE M&A DEAL CURRENCY ...... 14 PRIVATE VS. PUBLIC BUYERS ...... 14 SOFTWARE M&A VALUATIONS ...... 15 M&A EXIT VALUATIONS BY SOFTWARE CATEGORY...... 17 SAAS ...... 18

APPENDIX A: 2Q10 PUBLIC MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY...... 19

APPENDIX B: 2Q10 MERGERS AND ACQUISITIONS, SELECT PUBLIC SELLER VALUATIONS...... 22

APPENDIX C: 2Q10 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS ...... 23

APPENDIX D: 2Q10 MERGERS AND ACQUISITIONS, SOFTWARE INDUSTRY MEGA-DEALS...... 24

APPENDIX E: YTD MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS ...... 25

APPENDIX F: 2Q10 MERGERS AND ACQUISITIONS – DEAL INSIGHT (CONTINUED) ...... 27

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 © 2010 Software Equity Group, L.L.C., All Rights Reserved Software Equity Group, L.L.C. Investment Banking / Mergers & Acquisitions

Figure 1: U.S. Gross Domestic Product and Unemployment Rate 10%

GDP % Growth 8% Unemployment Rate

6% 5.6% 4.8% 4.4% 3.6% 3.9% 4% 3.6% 3.5% 3.2% 3.0% 3.0% 2.7% 2.5% 2.6% 2.7% 2.1% 2.1% 2.2% 2% 1.3% 1.1% 1.2% 1.5%

0% 2004 2005 2006 2007 2008 2009 2010 -0.7% -0.7% -2%

-2.7%

-4%

-5.4% -6% -6.4%

-8%

U.S. ECONOMY: SOFTWARE INDUSTRY MACROECONOMICS

As of our publication date, 1Q10’s growth rate Fed appear almost equally divided, with some was revised downward from 3.0% to 2.7%, and forecasting continued growth, restored consumer the U.S. GDP growth rate for the second quarter confidence and a housing market recovery, while is now forecast to increase an encouraging 4.4%, others talk of a “double dip” recession and marking the fourth consecutive quarter of deflation. Time will tell, but for the time being, economic expansion (Figure 1). economic uncertainty reigns.

The 2Q10 forecast seems a bit optimistic in light Jobs remained in relatively scarce supply. The of recently released economic data. The U.S. U.S. unemployment rate held steady in 2Q10 at Conference Board’s Leading Economic Index 9.7% for the second consecutive quarter. While (LEI) inched up 0.4% in May, following no change the jobless rate has declined modestly from its in April and a 1.4% increase in March. Five of the 4Q09 high of 10.1%, it remains stubbornly high – ten indicators that make up The U.S. Conference especially when compared to the 5.3% jobless Board’s LEI increased in May. The positive rate just two years ago (Figure 1). Still, total contributors, beginning with the largest positive private employment increased by 116,000 jobs in contributor, were interest rate spread, real money 2Q10, with most new jobs created in the supply, average weekly manufacturing hours, the healthcare, mining and manufacturing sectors. index of consumer expectations and Federal government employment also rose and manufacturers' new orders for consumer goods fell, reflecting the hiring and subsequent and materials. The negative contributors, elimination of temporary workers for Census beginning with the largest negative contributor, 2010. We believe the economy will continue to were stock prices, building permits, stabilize and the unemployment rate will ebb manufacturers' new orders for nondefense capital further – albeit slowly and modestly – in 2H2010. goods, the index of supplier deliveries (vendor performance) and average weekly initial claims for IT SPENDING unemployment insurance (inverted). As a point of reference, our readers will recall that Current sentiments about the pace and trajectory large enterprises cut back sharply on spending for of a sustained economic recovery seem to reflect software, hardware and IT services in 2009. the “glass half full” or “glass half empty” outlook of Following IT spending increases of 9% in 2007 the particular prognosticator. Economists and the and 6% in 2008, IT capital spending declined by

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Copyright © 2010 Software Equity Group, L.L.C., All Rights Reserved Software Equity Group, L.L.C. Investment Banking / Mergers & Acquisitions more than 10% in 2009. To provide some As for enterprise adoption of SaaS applications, perspective, we estimate every percentage CIO negativity seems to be dissipating. In increase/decrease in IT spending equates to Goldman’s latest survey, CIOs who will not use approximately $5 billion. SaaS or who strongly prefer on-premise declined to 26% from 53% since March 2010. Those who It appears the worst is behind us. Extrapolating would at least evaluate SaaS alternatives to on- from three different IT spending surveys we’ve premise apps increased sharply to 74% from 34% analyzed, it’s likely CIO purse strings will continue in March.1 It remains to be seen whether this to loosen in 2010 and 2011, provided the apparent attitude adjustment will translate to economy doesn’t backslide. In its July 2010 sharply higher SaaS adoption and utilization rates survey, Goldman Sachs revised its IT spending among enterprise CIOs in the coming months. forecast to +7% in 2010, an encouraging improvement over its +2% and +5% projections in The Goldman Sachs July 2010 survey also July 2009 and March 2010, respectively. Early included interesting data on the breadth of SaaS estimates on 2011 IT spending predict +4% applications currently deployed – and currently growth, which is less than 2010’s +7% expected planned for deployment – by enterprise CIOs growth for several reasons: 2010 saw significant (Figure 2). Web conferencing, email, e-recruiting pent-up demand in the early part of the year; and CRM, the standard bearers of enterprise economic growth is expected to decelerate in SaaS applications, continue to make inroads. 2H10; and G20 government spending is likely to Noteworthy, though, is the growth in enterprise remain austere in 2011 in an effort to cut record SaaS applications for human capital deficits. management, server/network monitoring and web

Figure 2: Enterprise CIO SaaS Adoption Trends 0% 5% 10% 15% 20% 25% 30%

Web conferencing 27% Email 21% Human capital mgmt 18% eRecruiting 16% Collaboration 11% CRM 12% Learning mgmt systems 10% Travel and entertainment 9% Server/network monitoring 9% Office productivity software 9% Service desk/service mgmt 8% Content mgmt 8% Web analytics 6% Performance and talent mgmt 6% Salesforce automation 6% Supply chain mgmt 6% Call center automation 4% Security/compliance software 3% Accounting and billing 2% Data warehousing 1% Business intelligence 1% Source: Goldman Sachs July 2010 IT Spending Survey

1 Goldman Sachs July 1, 2010 IT Spending Survey 2| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

analytics. Topping the list of new applications At the close of the second quarter, the Dow, S&P being enabled by SaaS is social media for 500 and NASDAQ were down 7.7%, 9.0% and business use. 8.6%, respectively, from the first trading day of 2010 (Figure 3). Public software companies, In the coming months and years, SaaS will however, fared considerably better, consistently undoubtedly continue to make inroads among outperforming the major stock market indices in enterprise CIOs, especially for discrete 1H10. As of June 30, the median stock price of applications. However, we remain convinced that the SEG Software Index, our tracking survey of widespread enterprise adoption of mission critical 172 publicly traded software companies, was SaaS solutions will continue to lag well behind down a modest 4.4% from its January 2 opening their on-premise counterparts until CIOs/CTOs price. Investors took note of the uptick in IT are no longer concerned with SaaS security and spending, restored revenue growth of mid-cap the viability of integrating SaaS applications with public software companies, and the exhuberant on-premise applications. We anticipate markedly reception consumers gave the iPad, iPhone 4 and increased spending on SaaS solutions by other devices. Small/Medium Businesses (SMBs) during the remainder of 2010 and 2011 if the economic At the close of 2Q10, 102 out of the 248 (41.1%) recovery continues, particularly ERP, CRM, public companies comprising our Software, SaaS supply chain and financial applications. and Internet indices reported higher year-to-date (YTD) stock prices. Nine achieved YTD market PUBLIC SOFTWARE COMPANY STOCK returns greater than 40% (Figure 4). PERFORMANCE PUBLIC SOFTWARE COMPANY MARKET The major U.S. stock market indices whiplashed VALUATIONS investors in the first half of 2010, twice moving in and out of negative territory. Although the The median enterprise value (EV) to revenue fluctuations were tame compared to 1H09, market multiple of public companies in our SEG Software performance continued to reflect investor Index was 2.1x in 2Q10, unchanged from the prior uncertainty about a long-term economic recovery, quarter (Figure 5). The median EV/Revenue concerns about the staggering federal deficit, multiple for the SEG Software Index has now impatience with the stubbornly high remained at or above 2.0x for three consecutive unemployment rate and fear about how Europe’s quarters - the first time since 3Q07 to 1Q08. In deleveraging will impact the U.S. addition to stock prices that have withstood 1H10’s

Figure 3: Major Market Indices Compared to the SEG Software, Internet and SaaS Indices

DOW S&P 500 NASDAQ SEG SaaS Index SEG S/W Index SEG Internet Index

20.0%

15.0%

10.0%

5.0%

0.0%

-5.0%

-10.0%

-15.0% January February March April May June 3| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

Figure 4: High Flyers – YTD Stock Market Return Figure 5: SEG Software Index Key Statistics

2Q10 High Flyers - Stock Market Return SEG - Software: Median Metrics 2010 Measure 2Q09 3Q09 4Q09 1Q10 2Q10 Company Ticker Category Stock EV/Revenue 1.4x1.8x2.0x2.1x2.1x Return EV/EBITDA 9.5x 11.1x 12.9x 13.3x 12.8x Simulations Plus, Inc. SLP Healthcare 75% EV/Earnings 18.7x 24.6x 28.9x 27.8x 26.7x Baidu.com, Inc. BIDU Internet - Search Engine 66% Current Ratio 1.9 1.9 2.0 1.9 2.0 Internet - eCommerce & Cash & Eq ($M) $78.8 $91.5 $93.8 $98.7 $104.4 OpenTable OPEN 63% Portals Gross Profit Margin 67.3% 66.9% 67.4% 68.3% 68.6% Sapiens International SPNS Financial Services Software 61% EBITDA Margin 15.3% 15.9% 15.4% 16.3% 16.1% Storage & Systems Support.com, Inc. SPRT 58% Net Income Margin 4.7% 4.7% 5.8% 6.6% 7.7% Management Software TTM Revenue Growth 5.7% 1.3% -2.0% -0.1% -0.3% Internet - eCommerce & InsW eb Corp. INSW 57% TTM Total Revenue ($M) $226.8 $232.0 $224.3 $220.1 $218.5 Portals TTM Total EBITDA ($M) $29.3 $30.0 $30.9 $34.2 $34.6 Storage & Systems VMWare VMW 48% Debt / Equity Ratio 24.9% 26.2% 24.6% 24.4% 25.0% Management Software Engineering, PLM & Stratasys, Inc. SSYS 42% multiples year-over-year, ten public software, CAD/CAM Software SaaS and Internet companies excelled at EasyLink Services Int'l Content/Document ESIC 41% Corp. Management boosting their market valuations in 2Q10 (Figure 7). Overall, these overachievers reported a TTM Novell, Inc. NOVL Networking & Connectivity 37% median revenue growth rate of 30.8% and an impressive TTM median EBITDA margin of market gyrations relatively well, the latest 2.0x or 29.8%. better valua tion trend is a function of healthy public software company operating margins and an The ultimate overachiever was still Baidu, often avoidance of debt (Figure 5). referred to as “China’s Google”. Baidu’s median 2Q10 EV/Revenue of 32.5x far outpaced all Investors, once again, favored the largest (annual others and assured the company, once again, the revenue) public software companies in 2Q10, top spot on our EV/Revenue ranking. Baidu believing they are far better positioned to weather reported year-over-year (YoY) revenue growth of a tough economy and capitalize on a recovery. 43.6% and an EBITDA margin of 45.9%. While SEG Software Index companies with revenues Google may have reversed course and renewed greater than $1 billion posted a median its China license, it must be feeling Baidu EV/Revenue multiple of 3.1x in 2Q10, compared breathing down its neck. Baidu is now the third to a median EV/Revenue multiple of 1.1x for largest search site in the world, and is rapidly software companies with revenue less than $100 closing on Yahoo! for the number two spot. million (Figure 6). In this case, investors seem to have gotten it right, with sub-$100 million software Public software company valuations measured by providers reporting a 6.5% decline in TTM median EV/EBITDA also remained consistent with revenue, compared with a 5.3% increase in TTM the prior two quarters, declining slightly to 12.8x in revenue of their $200 million - $1 billion 2Q10 from 13.3x the prior quarter (Figure 5). In counterparts. 2Q10, software companies with revenue greater than $1 billion posted a median EV/EBITDA While most of the listed companies in our three multiple of 10.8x, while software companies with tracking indices saw improved EV/Revenue revenue between $100 million and $200 million

Figure 6: SEG Software Valuation and Financial Performance by Size of Buyer (TTM Revenue)

SEG Software Index Companies EV/Revenue EV/EBITDA 2Q10 2Q10 TTM EBITDA 2Q09 3Q09 4Q09 1Q10 2Q10 2Q09 3Q09 4Q09 1Q10 2Q10 Rev Growth Margin Revenue Greater Than $1 billion 2.2x 2.6x 2.8x 2.9x 3.1x 8.7x 10.4x 11.2x 11.5x 10.8x 0.5% 23.8% Revenue Between $200 million and $1 billion 1.8x 2.0x 2.1x 2.2x 2.2x 10.9x 11.7x 12.6x 12.6x 12.9x 5.3% 19.3% Revenue Between $100 million and $200 million 1.5x 2.1x 2.2x 2.4x 2.6x 13.3x 13.5x 15.6x 17.6x 18.2x 2.8% 12.5% Revenue Less Than $100 million 0.8x 0.8x 1.0x 1.3x 1.1x 7.2x 10.3x 12.0x 13.1x 10.8x -6.5% 5.5%

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Copyright © 2010 Software Equity Group, L.L.C., All Rights Reserved Software Equity Group, L.L.C. Investment Banking / Mergers & Acquisitions were valued at 18.2x EV/EBITDA (Figure 6). The In light of the continuing economic uncertainties, smallest companies (<$100 million revenue) in the we don’t see public software companies ramping SEG Software Index could muster neither up spending sharply in the coming months. revenue growth or significant profitability, setting Indeed, we expect software companies to remain the stage for further industry consolidation in squarely focused on profitability as they have 2010. been during the past two years and in 2Q10 (Figure 5). Though many have begun to rehire, it Figure 7: High Flyers – Enterprise Value/Revenue has not been at the expense of operating profit.

2Q10 High Flyers - Enterprise Value/Revenue The median TTM EBITDA margin of SEG Company Ticker Category EV/R Software Index companies held steady at 16.1% Baidu, Inc. BIDU Internet - Search Engine 32.5x in 2Q10, but it wasn’t easy. Of the 28 public Internet - eCommerce & software companies in our random sample, only Mercadolibre, Inc. MELI 11.9x Portals five (18%) beat their EPS guidance to the Street. Internet - eCommerce & OpenTable OPEN 11.2x Portals Most public software companies generated cash Storage & Systems VMWare VMW 10.6x Management Software and maintained strong balance sheets in 2Q10, SolarWinds, Inc. SWI Networking & Connectivity 9.6x no small feat after a major recession, restructuring Longtop Financial costs and little or no revenue growth. SEG LFT Financial Services Software 9.2x Technologies Software Index companies increased their year- Archipelago Learning, Education & Computer Based ARCL 8.0x over-year cash and cash equivalents by a median Inc. Training 32.5% in 2Q10, while maintaining a healthy SuccessFactors SFSF Human Resource Mgmt 7.6x median current ratio of 2.0, historically consistent Concur CNQR Accounting & Finance 7.5x CRM, Sales & Marketing with previous years and quarters (Figure 5). Salesforce.com CRM 7.5x Software Figure 8: Expected vs. Delivered Revenue and PUBLIC SOFTWARE COMPANY FINANCIAL EPS Results (as of June 30 PERFORMANCE Company Revenue EPS Microsoft Corporation As noted in our prior reports, reduced IT spending Cisco Systems, Inc. Company Oracle Corporation by large enterprises had a devastating impact on Revenues: Google Inc. the top line growth of public software companies. Greater than Adobe Systems Incorporated $1 billion The median trailing twelve month revenue growth Electronic Arts Inc. rate of companies comprising the SEG Software BMC Software, Inc. Index was in relative free fall during most of 2009, Mentor Graphics Corporation declining from +11.1% in 1Q09 to -2.0% in 4Q09 Lawson Software, Inc. Company MSCI Inc. (Figure 5). 2Q10’s median TTM revenue growth Revenues: TIBCO Software Inc. rate of -0.3% suggests the worst is behind us, but $500 million Avid Technology Inc. to $1 billion don’t expect double digit revenue growth rate Open Text Corporation improvements anytime soon. There’s typically a NICE Systems Ltd. six to nine month lag between material changes in CSG Systems International, Inc. IT spending and the concomitant impact on public QAD Inc. Company TeleCommunication Systems, Inc. software company financial performance. Revenues: MicroStrategy Incorporated $100 - $500 Quest Software Inc. million Still, we see positive signs that 2010’s IT Blackboard Inc. spending recovery is beginning to have an impact. Rovi Corporation According to our random sample of recent American Software, Inc. earnings calls of 28 public software companies, PCTEL, Inc. Company PDF Solutions, Inc. 19 (68%) exceeded their most recent revenue Revenues: Scientific Learning Corp. projections (Figure 8). Should the IT spending Less than forecasts prove accurate, look for public software SourceForge, Inc. $100 million Pervasive Software Inc. company median TTM revenue growth to turn NetSol Technologies Inc. positive in 3Q10 and somewhat more positive (~5%) by close of Q4. : Exceeded or Met Expectations : Did Not Meet Expectations

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The significant cash reserves and strong balance of the public companies comprising that category) sheets of most public software companies, can be stagnant or can fluctuate wildly each particularly the industry’s largest players, bode quarter. As a result, software category rankings, well for small and mid-cap software company measured by relative median valuations and targets, especially those that enable buyers to financial performance can also be consistent or extend their product offerings and capture new volatile quarter-to-quarter. That axiom held true, turf. once again, in 2Q10 (Figure 9). We track this data because the current median valuation of PUBLIC SOFTWARE COMPANY PERFORMANCE BY companies comprising a particular software PRODUCT CATEGORY category often weighs heavily when buyers value acquisition targets. While median financial performance metrics are useful for assessing the overall health of the For the fourth consecutive quarter, security software industry and making comparisons to software providers boasted the highest median other economic sectors, a deeper analysis of EV/Revenue valuations among all categories we these key metrics by software product category track. The median 3.3x EV/Revenue multiple of provides greater insight about the software publicly listed security software companies in Q2 ecosystem. By analyzing how public software was buoyed by stellar valuations for Check Point companies in discrete product categories are Software (5.8x), Zix Corp. (4.3x), Sourcefire (4.3x) performing, we increase our understanding of and Cogent (4.3x). By contrast, perpetual license, market trends, product lifecycles, M&A trends, IT (non-SaaS) CRM companies and Entertainment spending priorities and stock market behavior. software providers each bore the stigma of the lowest TTM EV/Revenue multiple (1.0x) in the As we’ve noted in past reports, the valuation and second quarter. The median valuations of these financial results for a particular software category on-premise CRM and Entertainment providers (measured by the median EV/Revenue valuation have been well below the software industry

Figure 9: SEG Software Categories

SEG - Software: Median Metrics by Category YTD Revenue EBIT DA EBIT DA EV/Revenue EV/EBITDA Stock Grow th Grow th Margin Category Re tur n 2Q10 2Q10 2Q10 2Q09 3Q09 4Q09 1Q10 2Q10 2Q09 3Q09 4Q09 1Q10 2Q10 2010 (TTM) (TTM) (TTM) Infrastructure Software Database & File Management 1.4x 1.6x 2.1x 1.9x 1.9x 7.8x 7.6x 8.6x 8.8x 9.4x -1.5% 8.7% 22.0% -2.0% Development Tools, Operating Systems & 1.2x 1.4x 1.3x 1.6x 1.7x 9.0x 9.7x 12.8x 9.4x 9.3x 1.2% 18.5% 18.8% -7.3% Application Testing Softw are eCommerce Softw are 3.0x 3.0x 2.6x 3.0x 2.6x 20.6x 19.4x 18.4x 18.8x 23.7x 6.6% 38.7% 13.6% 9.5% Enterprise Application Integration 1.4x 2.1x 2.1x 2.1x 2.5x 7.7x 11.4x 9.5x 9.4x 12.4x 5.1% 17.8% 21.9% 1.5% Messaging, Conferencing & Communications 2.0x 2.2x 2.4x 2.9x 1.9x 10.4x 12.8x 13.2x 14.1x 13.7x 8.4% 71.4% 7.8% 15.2% Netw orking & Connectivity 1.7x 2.0x 2.2x 2.4x 2.2x 8.0x 10.8x 13.7x 19.9x 14.3x 2.8% 20.4% 22.3% 11.7% Security 2.8x 3.4x 3.4x 3.5x 3.3x 11.1x 12.6x 13.1x 13.7x 13.7x 8.2% 27.6% 16.4% -13.1% Storage & Systems Management Softw are 1.7x 2.0x 2.3x 2.4x 2.5x 9.4x 12.2x 13.8x 12.7x 11.5x 2.0% 5.0% 17.0% -0.2% Wireless 0.9x 1.0x 1.0x 1.3x 1.6x 11.2x 14.2x 13.4x 11.1x 15.8x -1.2% 79.1% 11.8% -9.7% Application Software Billing & Service Management 1.1x 1.3x 1.5x 2.2x 1.7x 5.6x 6.6x 7.4x 10.9x 8.4x 5.3% 49.2% 20.6% -5.9% Business Intelligence 1.6x 1.9x 2.4x 2.3x 1.9x 9.1x 10.6x 12.9x 13.7x 13.8x 0.7% 5.9% 15.7% -6.6% Content/Document Management 1.6x 1.7x 1.7x 2.0x 1.9x 6.5x 6.8x 7.4x 8.2x 8.2x -7.3% -5.9% 23.2% -7.7% Customer Relationship Management, Marketing & 0.4x 0.7x 0.8x 1.0x 1.0x 33.6x 11.1x 17.1x 16.9x 12.1x -9.7% 60.3% 5.2% -13.5% Sales Softw are Education & eLearning 2.3x 2.1x 2.2x 2.0x 1.6x 14.8x 17.5x 16.3x 14.0x 14.9x 18.6% 35.8% 14.7% 4.0% Electronic Design Automation 0.9x 1.1x 1.4x 1.5x 1.6x 9.0x 9.8x 9.6x 21.3x 21.3x -10.9% 78.5% 5.6% 0.2% Engineering, PLM & CAD/CAM Softw are 1.4x 1.6x 1.7x 1.8x 1.9x 8.0x 11.5x 12.4x 14.9x 14.5x -8.6% 1.8% 14.7% 4.0% Enterprise Resource Planning 1.1x 1.4x 1.5x 1.7x 1.8x 9.0x 9.9x 9.8x 10.5x 10.5x -6.3% 14.3% 17.9% -6.7% Entertainment 1.0x 1.0x 0.9x 1.0x 1.0x 6.8x 7.3x 7.2x 8.8x 6.0x -13.2% -14.1% 1.9% -18.9% Financial Services Softw are 2.1x 2.3x 2.5x 2.6x 2.6x 9.0x 10.7x 11.9x 13.1x 8.8x 4.4% 12.4% 22.1% -7.7% Healthcare 2.1x 2.2x 2.5x 2.2x 3.1x 13.9x 15.0x 16.9x 15.9x 17.8x 6.6% 12.6% 21.2% -1.8% Multimedia, Graphics, Digital Media 1.3x 1.4x 2.1x 2.4x 2.7x 6.3x 10.6x 17.9x 20.1x 18.4x -6.1% -3.2% 9.7% -7.4% Supply Chain Management & Logistics 1.2x 1.3x 1.8x 1.9x 1.8x 10.7x 10.7x 13.1x 14.7x 11.9x -9.7% 22.9% 10.2% -8.7%

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Copyright © 2010 Software Equity Group, L.L.C., All Rights Reserved Software Equity Group, L.L.C. Investment Banking / Mergers & Acquisitions median EV/Revenue for more than two years, Figure 10: SEG SaaS Index Key Statistics signaling a distinct lack of investor enthusiasm for SEG - SaaS: Median Metrics providers in these categories. Measure 2Q09 3Q09 4Q09 1Q10 2Q10 EV/Revenue 2.7x 2.7x 3.1x 3.3x 3.4x On an EV/EBITDA basis, public eCommerce EV/EBITDA 47.4x 36.9x 38.8x 33.1x 32.3x software companies led all other software product EV/Earnings 44.4x 83.4x 95.2x 74.7x 81.6x categories in 2Q10 with an impressive median Current Ratio 1.4 1.4 1.5 2.1 1.6 23.7x EV/EBITDA multiple. Publicly listed Cash & Eq ($M) $68.4 $89.8 $86.9 $82.8 $79.7 Entertainment software providers had the lowest Gross Profit Margin 68.0% 67.4% 67.8% 67.4% 67.4% EBITDA Margin 2.6% 4.3% 6.7% 7.8% 9.2% median EV/EBITDA multiple, 6.0x, as a Net Income Margin -5.9% -5.5% -2.1% -1.0% -0.2% consequence of the category’s median revenue TTM Revenue Growth 29.3% 21.8% 15.5% 14.1% 10.7% decline and EBITDA erosion. TTM Total Revenue ($M) $123.7 $134.9 $143.9 $152.7 $158.5 TTM Total EBITDA ($M) $3.9 $6.2 $9.9 $9.9 $11.1 Stock returns at the close of Q2 varied widely by Debt / Equity Ratio 0.8% 1.3% 1.4% 0.9% 2.3% software product category, largely reflecting the median revenue and EBITDA growth, or lack company valuations. While profitability continues thereof, of the companies comprising the to escape a handful of public SaaS companies, category. Publicly listed Messaging, most seem to have turned the corner, reaping the Conferencing & Communications software benefits of subscription renewals, operational companies grew median TTM revenue (+8.4%) improvements and reduced infrastructure and EBITDA (+71.4%) aggressively, and reported spending. The median TTM EBITDA margin for a median YTD stock gain of +15.2% over their the SEG SaaS Index was 9.2% in 2Q10, almost January 2 opening prices. Conversely, public four times greater than a year ago. Only three software companies comprising the Entertainment profitable SaaS companies, DealerTrack, Kenexa category saw median TTM revenue and EBITDA and Vocus, saw their TTM EBITDA margin decline by -13.2% and -14.1%, respectively, and decrease from 2Q09 (Figure 11). saw their median YTD stock return decrease - 18.9% from January 2. Historically, the median SaaS TTM EBITDA margin has been a small fraction of the median Software Index TTM EBITDA margin, but that has PUBLIC SOFTWARE AS A SERVICE (SAAS) clearly changed. Just one year ago, the median COMPANY MARKET VALUATIONS AND FINANCIAL SEG Software Index TTM EBITDA margin was PERFORMANCE almost 5 times greater than median SEG SaaS

Index TTM EBITDA margin. As of 2Q10, the The economic downturn had a devastating impact differential was less than twice, thanks to the on SMBs, the market segment most responsible marked improvement in SaaS company operating for the stellar growth rates of many SaaS profits. providers during the preceding three years. The resulting pullback in SMB spending on IT, Despite the decline in TTM revenue growth rates, combined with slower than anticipated enterprise SaaS valuations were not impacted, mostly adoption of SaaS, continued to take their toll on because the revenue model continues to appeal public SaaS providers in 2Q10. By the close of to investors and analysts. Companies comprising the quarter, the annual median TTM revenue the SEG SaaS Index saw their 2Q10 median growth rate of public SaaS companies had EV/Revenue multiple grow slightly to 3.4x in 2Q10 plummeted to 10.7% from 29.3% a year earlier from 3.3x in 1Q10 (Figure 11). Still, public SaaS (Figure 10) and 46.5% two years earlier. It was company valuations remain well below pre- the eleventh consecutive quarterly decline in Recession levels and no longer dwarf the SaaS revenue growth since 3Q07. Only three of valuations of their on-premise counterparts. To nineteen public SaaS companies (Constant provide historical perspective, at the close of Contact, Athenahealth and SuccessFactors) 2007, public SaaS companies traded at a median achieved greater than 30% TTM revenue growth EV/ Revenue multiple of 6.4x, compared to 2.7x in 2Q10 (Figure 11). for on-premise software providers - a 137% SaaS

valuation premium. By 2Q10, the median SaaS As SaaS revenue growth rates have slowed, EV/Revenue multiple had dropped to 3.4x vs. 2.1x profitability has become more important to SaaS

7| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

SEG SaaS Index EV/Revenue EV/EBITDA TTM Revenue Growth EBITDA Margin Company Category 2Q09 3Q09 4Q09 1Q10 2Q10 2Q09 3Q09 4Q09 1Q10 2Q10 2Q09 3Q09 4Q09 1Q10 2Q10 2Q09 3Q09 4Q09 1Q10 2Q10 Athenahealth (ATHN) Health Care Mgmt 6.6x 7.4x 7.6x 6.7x 4.2x 71.5x 73.2x 74.0x 52.4x 35.7x 35.9% 37.8% 38.2% 38.3% 36.9% 9.3% 10.1% 10.3% 12.9% 11.7% Concur (CNQR) Accounting & Finance 5.0x 6.2x 6.6x 6.9x 7.5x 20.9x 25.0x 26.3x 27.6x 31.0x 35.5% 24.1% 14.9% 14.2% 14.8% 23.8% 24.7% 25.0% 25.1% 24.3% Constant Contact (CTCT) CRM 3.9x 4.6x 3.3x 3.3x 3.9x 335.4x 177.8x 66.8x 70.4x 75.6x 64.9% 57.2% 52.0% 47.9% 44.4% 1.2% 2.6% 4.9% 4.7% 5.1% Convio (CNVO) CRM - - - - 2.6x - - - - 27.9x 32.3% 32.3% 32.3% 10.7% 10.7% 2.2% 2.2% 2.2% 6.3% 9.2% DealerTrack (TRAK) Vertical - Automotive 1.7x 2.6x 2.5x 2.3x 2.2x 11.9x 20.1x 20.5x 21.0x 21.6x -5.0% -8.9% -8.7% -7.0% -3.2% 14.7% 12.7% 12.0% 10.9% 10.1% DemandTec (DMAN) SCM 2.0x 2.4x 2.3x 1.7x 1.6x - - - - - 15.8% 10.9% 7.8% 5.4% 5.4% -4.0% -5.0% -5.3% -5.8% -5.8% Kenexa (KNXA) Workforce Mgmt 0.9x 1.4x 1.4x 1.3x 1.6x 5.9x 10.7x 12.9x 13.9x 17.3x 3.4% -11.0% -20.7% -22.6% -18.4% 15.1% 12.7% 10.6% 9.5% 9.5% LivePerson (LPSN) CRM 1.5x 2.2x 3.1x 3.5x 3.4x 13.1x 15.3x 17.3x 17.0x 16.6x 32.8% 21.7% 14.6% 17.2% 19.9% 11.4% 14.3% 17.8% 20.7% 20.5% Medidata Solutions (MDSO) Clinical Mgmt 3.2x 2.5x 2.1x 2.0x 1.9x 99.4x 32.1x 16.8x 14.4x 13.6x - - 76.6% 32.8% 22.0% 3.3% 7.9% 12.6% 13.8% 13.9% Netsuite (N) ERP 3.8x 4.4x 5.1x 4.8x 4.8x - - - - - 33.9% 25.5% 15.5% 9.2% 5.6% -7.0% -6.9% -6.3% -6.6% -7.6% RightNow (RNOW) CRM 1.3x 2.1x 2.6x 2.9x 2.5x 63.4x 49.7x 38.8x 37.0x 33.6x 20.4% 13.0% 9.0% 8.7% 10.6% 2.1% 4.3% 6.7% 7.8% 7.4% Salary.com (SLRY) Workforce Mgmt 0.5x 0.8x 0.8x 0.7x 0.9x - - - - - 23.0% 20.8% 17.2% 14.1% 7.8% -43.9% -37.9% -31.9% -28.1% -26.4% Salesforce.com (CRM) CRM 3.8x 4.5x 6.0x 6.2x 7.5x 38.8x 41.7x 51.3x 51.4x 63.3x 36.0% 29.0% 23.6% 21.3% 21.5% 9.8% 10.7% 11.8% 12.1% 11.8% SoundBite Communications CRM - 0.3x 0.3x 0.2x 0.3x - - 63.1x - - 1.6% -6.8% -8.3% -7.0% -3.3% -1.2% -1.0% 0.5% -3.4% -3.9% (SDBT) SPS Commerce (SPSC) SCM - - - - 5.2x - - - - 46.8x 21.8% 21.8% 23.0% 23.0% 23.0% 1.8% 1.8% 7.2% 8.8% 11.0% SuccessFactors (SFSF) Workforce Mgmt 2.9x 3.9x 7.0x 7.0x 7.6x - - - - - 66.2% 58.5% 46.7% 36.8% 30.7% -39.3% -23.6% -10.4% -5.3% -4.1% Taleo (TLEO) Workforce Mgmt 2.2x 2.7x 3.6x 3.8x 3.8x 31.1x 30.9x 31.5x 29.2x 28.1x 33.7% 35.0% 26.0% 17.8% 13.7% 7.1% 8.6% 11.3% 13.1% 13.4% The Ultimate Softw are Workforce Mgmt 2.5x 3.3x 3.4x 3.7x 4.1x 93.7x 94.8x 63.5x 73.2x 74.6x 16.1% 15.0% 13.4% 10.1% 10.6% 2.6% 3.4% 5.4% 5.0% 5.4% Group (ULTI) Vocus (VOCS) CRM 3.2x 2.9x 3.0x 2.6x 2.4x 56.0x 48.2x 50.0x 54.8x 69.0x 26.4% 20.1% 13.5% 9.1% 8.0% 5.8% 6.1% 6.1% 4.7% 3.5% Median: 2.7x 2.7x 3.1x 3.3x 3.4x 47.4x 36.9x 38.8x 33.1x 32.3x 29.3% 21.8% 15.5% 14.1% 10.7% 2.6% 4.3% 6.7% 7.8% 9.2% for on-premise software companies, narrowing the more on the basis of revenue growth than differential valuation premium to 62%. profitability (Figure 12), it should be noted that SaaS profitability influences valuation much more We also noticed 2Q10’s median current ratio than it did a year ago. In 2Q09, SaaS companies decrease and debt / equity ratio increase and with EBITDA margins lower than the group decided to investigate further (Figure 10). Several median traded at a median 2.5x EV/Revenue companies in our SaaS Index used cash to pay multiple vs. a median 2.9x EV/Revenue multiple off long-term debt in 2Q10, hence the median for SaaS companies with EBITDA margins higher current ratio decrease from 2.1 in 1Q10 to 1.6 in than the group median. In 2Q10, SaaS 2Q10. So, then, why did the median debt / equity companies with EBITDA margins lower than the ratio increase? First, all remaining SaaS group median traded at the same median companies reporting long-term debt in 2Q10 had EV/Revenue multiple of 2.5x, while their debt / equity ratios higher than 1Q10’s median. counterparts traded at a median 3.8x EV/Revenue Second, SPS Commerce and Convio both went (Figure 12). Similar to traditional software public in 2Q10 with debt / equity ratios higher than companies, SaaS providers need to make last quarter’s median. conscious choices about whether to drive their companies for profitability or growth. Although investors still value SaaS providers PUBLIC INTERNET COMPANY MARKET Figure 12: 2Q10 Public SaaS Company Revenue VALUATIONS AND FINANCIAL PERFORMANCE Growth Rate and EBITDA Margin vs. Revenue Multiple Though the software and Internet / eCommerce / 5.0x Web 2.0 sectors are rapidly converging, clear distinctions remain between the two in terms of 4.2x business model, revenue model, solution 4.0x TTM 3.8x deployment and end user requirements. We've revenue opted to track these major categories separately growth TTM nue EBITDA e rate >

v 3.0x to enable a more granular analysis of each.

e SEG SaaS margin > R

/ 2.5x Index SEG SaaS V Median 2.2x Index E

n Median Broadly defined, Internet companies are primarily a 2.0x di

e TTM internet based and their solutions are primarily – M revenue TTM often exclusively – web deployed. Our Internet growth EBITDA 1.0x rate < margin < Index is comprised of companies whose principal SEG SaaS SEG SaaS Index Index business models fall within one or more of the Median Median following categories: 0.0x 8| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

• Advertising – Companies that provide key Figure 13: SEG Internet Index Key Statistics elements in the Internet advertising arena SEG - Internet: Median Metrics such as search marketing services, software Measure 2Q093Q094Q091Q102Q10 to host and manage ads and a network of EV/Revenue 1.6x 1.5x 1.6x 1.6x 1.5x EV/EBITDA 9.3x 12.8x 12.4x 13.1x 10.9x websites that run ads. Representative EV/Earnings 16.0x 18.4x 25.0x 24.0x 25.5x companies include InfoSpace, SINA, and Current Ratio 2.1 2.4 2.6 2.6 2.9 ValueClick. Cash & Eq ($M) $64.1 $69.5 $75.0 $84.5 $85.0 • Communications – Companies that provide Gross Profit Margin 62.2% 62.8% 62.5% 62.7% 60.9% EBITDA Margin 9.4% 11.7% 12.1% 13.1% 12.9% web-based communications, products, and Net Income Margin 0.6% 3.2% 3.2% 3.5% 3.8% services. Representative companies include TTM Revenue Growth 5.0% 2.5% -0.5% 0.6% 1.6% Spark Networks, j2 Global Communications, TTM Total Revenue ($M) $140.5 $146.9 $150.8 $151.9 $152.2 and EarthLink. TTM Total EBITDA ($M) $15.4 $15.5 $14.9 $15.8 $18.6 Debt / Equity Ratio 18.1% 14.5% 12.4% 10.7% 12.0% • eCommerce & Portals – Companies whose main line of business is conducted over the web. Representative companies include 1- 13). The median current ratio, measured as 800 FLOWERS.COM, Amazon.com, Bluefly, current assets divided by current liabilities, a eBay and Expedia. measure of a company’s liquidity, was 2.9 in 2Q10, up from 2.1 in 2Q09, suggesting many • Financial – Companies that provide online Internet/eCommerce providers increased cash financial services, content, and financial reserves while controlling spending and avoiding information resources. Representative additional debt. Indeed, the median cash and companies include Banks.com, China Finance equivalents of these Internet providers increased Online and Online Resources. by $20.9 million during that same period. • Networking & Connectivity – Companies

which provide content sharing, testing, Internet providers, among the IT providers hardest measurement, and other related services via hit by the Great Recession, have begun to the Internet. Representative companies recover. After watching growth decline to -0.5% include Internap Network Services, iPass, median TTM revenue growth rate as a result of Keynote Systems, and Sify Technologies. sharply reduced consumer spending, the of the • New Media – Companies that provide online SEG Internet Index moved into positive territory in information and content. Representative 2Q10 growing a median 1.6%. companies include TheStreet.com, WebMD

and TechTarget. Enterprise valuations of companies comprising • Search Engine – Companies include the SEG Internet Index varied widely by Internet Baidu.com, LookSmart, Sohu.com and Yahoo! category in 2Q10 (Figure 14). Internet Search Engine companies led all other categories in The SEG Internet Index fared similarly to the SEG 2Q10, posting a 2.3x EV/Revenue median Software Index in 2Q10 (Figure 3). The median valuation. Far less impressive were Internet 2Q10 EV/Revenue multiple for 57 public Networking and Connectivity companies, which companies comprising the SEG Internet Index posted a median 0.8x EV/Revenue. was 1.5x, while the median 2Q10 Internet company EV/EBITDA multiple was 10.9x (Figure

Figure 14: SEG Internet Index Median Metrics by Category

SEG - Internet Index

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

2Q09 3Q09 4Q09 1Q10 2Q10 2Q09 3Q09 4Q09 1Q10 2Q10 2Q10 2Q10 2010 Advertising 0.8x 1.1x 0.9x 1.2x 1.0x 7.3x 14.6x 14.0x 21.5x 14.6x 0.6% 23.1% -9.2% Communications 1.1x 1.0x 1.2x 1.7x 2.1x 4.0x 4.9x 5.4x 6.1x 7.0x -19.2% -18.2% 9.4% eCommerce & Portals 1.6x 2.3x 1.9x 1.7x 1.9x 11.4x 14.1x 13.8x 13.3x 15.4x 5.3% 16.9% 0.7% Networking & Connectivity 0.8x 1.2x 1.2x 1.2x 0.8x 6.3x 6.5x 11.3x 9.8x 8.0x -1.1% 40.3% -4.2% New Media 1.6x 1.4x 1.7x 1.7x 1.5x 12.6x 17.4x 21.9x 23.3x 16.9x 3.9% 32.2% -1.1% Search Engine 3.2x 3.3x 3.0x 3.0x 2.3x 12.8x 13.2x 14.1x 15.3x 14.3x -7.1% 27.6% 14.7%

9| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

Figure 15: 1H10 U.S. Software IPO’s

Offering Enterprise EV / EV / First Day YTD Company Category IPO Date Amount Value Rev EBITDA Return Return SS&C Technologies Holdings, Financial Services Software 3/31/10 $160,880,000 $1,431,221,000 5.3x 13.9x 1.4% 5.4% Inc. (NA SDA Q: SSNC) SPS Commerce, Inc. Supply Chain Management 4/22/10 $49,160,000 $177,634,000 4.7x 53.4x -2.8% -14.6% (NASDAQ: SPSC) Convio, Inc. Customer Relationship 4/29/10 $46,200,000 $125,347,000 2.0x 31.5x 1.8% -28.3% (NASDAQ: CNVO) Management BroadSoft, Inc. Messaging, Conferencing, & 6/16/10 $67,500,000 $203,472,000 2.8x n/a 2.2% 3.0% (NASDAQ: BSFT) Communications

Motricity, Inc. (NASDAQ: MOTR) Wireless 6/18/10 $58,700,000 $788,884,000 6.6x 59.1x -6.2% -5.0%

Median: $58,700,000 $203,472,000 3.8x 42.5x 1.4% -5.0% *Enterprise Value and associated multiples as of offering date. *First day return compares listed offering price to first day close. *Bold denotes SaaS companies.

INITIAL PUBLIC OFFERINGS EV/Revenue at close of the first day of trading. Despite the relatively enthusiastic initial reception, Four additional software company IPO’s in 2Q10 stock returns ultimately fell victim to the quarter’s brought the year’s total to five (Figure 15). SPS stock market pullback and were down a median Commerce, Convio, BroadSoft and Motricity 5.0% by the close of Q2. joined 1Q10’s entrant, SS&C Technologies Holdings, and investors liked what they saw. Inspired by the market success of these five 1H10 Collectively, the first half’s five IPO’s had a IPO’s, seven software companies filed S-1’s in median 10.7% TTM revenue growth rate, raised 2Q10: Qlik Technologies, IntraLinks Holdings, $382.4 million, and traded at a median 3.8x Tangoe, RealPage, Ellie Mae, Tripwire and

Figure 16: U.S. Software IPO Pipeline

TTM Filing Offering Annual Net Company Category Revenue Date Amount Revenue Income Growth Content/Document Syngence Corporation (TBD) 11/15/07 $12,000,000 $2,703,000 -$2,253,000 -26.6% Management Multimedia, Graphics, Digital Domain (NASDAQ: DTWO) 12/11/07 $78,000,000 $77,800,000 -$19,910,000 16.1% Digital Media Mobile Resource TeleNav, Inc. (NASDAQ: TNAV) 10/30/09 $75,000,000 $155,910,000 $41,130,000 130.7% Management Multimedia, Graphics, MediaMind Technologies Inc. (TBD) 3/10/10 $115,000,000 $69,670,000 $10,860,000 13.1% Digital Media

SciQuest, Inc. (NYSE: SCI) eProcurement 3/26/10 $75,000,000 $37,710,000 $20,621,000 21.5%

Qlik Technologies, Inc. (NASDAQ: QLIK) Business Intelligence 4/1/10 $100,000,000 $174,720,000 $11,040,000 33.1%

IntraLinks Holdings, Inc. Messaging, Conferencing, 4/9/10 $150,000,000 $146,010,000 -$18,130,000 -1.9% (NYSE: IL) & Communications Communications Lifecycle Tangoe, Inc. (NASDAQ: TNGO) 4/16/10 $75,000,000 $58,780,000 -$2,550,000 49.0% Management Enterprise Resource RealPage, Inc. (NASDAQ: RP) 4/29/10 $150,000,000 $149,640,000 $27,100,000 25.2% Planning Customer Relationship Ellie Mae, Inc. (NYSE: ELLI) 4/30/10 $86,250,000 $37,707,000 $1,662,000 12.3% Management

Tripwire, Inc. (NASDAQ: TPWR) Networking & Connectivity 5/28/10 $86,250,000 $77,110,000 $18,720,000 18.6%

AutoNavi Software Co. Ltd. Navigation Software 6/9/10 $99,190,000 $62,130,000 $9,730,000 25.5% (NASDAQ: AMAP) *Bold denotes SaaS companies. Median: $86,250,000 $73,390,000 $10,295,000 20.1%

10| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

AutoNavi Software. Four of the seven 2Q10 filers are SaaS providers. The seven new filers boast a median 25.2% TTM revenue growth rate and EBITDA margin of 13.0%. By the close of Q2, the IPO pipeline for U.S. software companies grew to twelve, up from nine companies in 1Q10 and five in 4Q09 (Figure 16).

From the standpoint of financial results, the current pipeline presents a mixed bag, and will test whether investors will continue to insist upon historical growth and profitability for new entrants – their IPO hedge in a major recession. Of the companies in the IPO pipeline, we believe TeleNav, SciQuest, RealPage and AutoNavi Software will be well received, given impressive financial results. Conversely, IPO aspirants such as Digital Domain, Syngence and IntraLinks Holdings will most likely have to shore up their financial performance or let their filings lapse.

How will the software IPO market fare in 2H10? Pretty hard to tell. There’s a decent pipeline, including a half-dozen sold performers, but continuing economic uncertainty and IT spending caution could dissuade all but a few. In that case, look for 6 – 9 new public software/SaaS companies in 2H10. However, a case can be made that if the economy continues its recovery and the market indices respond in kind, pent-up investor demand could create a much improved environment for software IPOs. In such case, we are forecasting 10 – 12 new software IPOs in 2H2010, and a host of additional filings.

11| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

Figure 17: U.S. Mergers & Acquisition Activity

16,000 $1,800 $1,679B $1,550B

$1,500 12,586 12,454 $1,273B 11,769 12,000 11,254 V s a l 9,941 $1,200 l a

9,585 u

e 9,296 e D (

f $ b o

r 7,762 $1,094B i e 8,000 7,219 $900 llio mb $877B n u $905B s ) N $550B $776B $525B $600

4,000

$300

0 $0 2002 2003 2004 2005 2006 2007 2008 2009 2010 Deals Value

MERGERS AND ACQUISITIONS: THE NUMBERS

M&A Deal Volume and Spending: All Industry $16 billion in 1Q10 and 555 transactions Sectors aggregating $10.3 billion in 2Q09.

Globally, there were 9,467 M&A transactions in The number of U.S. leveraged buy-outs held 2Q10 with an aggregate purchase price of $458 steady at 243 in 2Q10, virtually the same as the billion. By comparison, there were 9,731 deals first quarter, but notably higher year-over year worldwide in Q1 aggregating $466 billion. Year- when there were only 188 LBOs in 2Q09. The over-year, 2Q10’s tally was markedly higher in total price tag, however, was notably greater in both deal volume and total spend than 2Q09’s 2Q10, with LBOs fetching an aggregate $22.6 7,382 acquisitions totaling $317 billion. billion, compared with $8.6 billion in 1Q10, and $4.4 billion in 2Q09. The second quarter’s largest In the U.S., M&A volume across all industry LBO’s included Silverlake and Warburg Pincus’ sectors aggregated 3,227 announced transactions acquisition of Interactive Data for $3.3 billion; in the second quarter of 2010, the sixth CVC Capital and KKR’s purchase of Healthscope consecutive quarterly increase in deal activity for $1.6 billion; and TPG Capital’s acquisition of (Figure 17). We expect the trend to continue for Vertafore for $1.4 billion. With the continued the balance of 2010. The 2Q10 deal tally marks a easing of the credit markets, look for LBO activity modest 7.6% increase over the first quarter’s and spending to significantly ramp in 2H10. 3,000 transactions, but a heartening 44% improvement over 2Q09’s 2,240 transactions. Software M&A Deal Volume and Spending The total spend for 2Q10’s 3,227 transactions was a healthy $236 billion, a 17% increase over Software M&A transactions accounted for 15.7% 1Q10’s $202 billion and a whopping 102% of all U.S.M&A activity in 2Q10, a solid increase over 2Q09’s $117 billion when M&A improvement over 1Q10’s 12.6% share, and activity and valuations hit bottom. modestly better than software’s 14.2% share in 2Q09. The second quarter’s 507 software deals Globally, there were 648 LBOs worth $29.5 billion totaled $17.5 billion, compared to 417 worldwide in 2Q10, compared to 678 deals worth transactions aggregating $3.3 billion in 1Q10, and

12| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

309 transactions totaling $3.3 billion in 2Q09 mega-deal, Elliot Management’s unsolicited bid (Figures 18 and 19). for Novell ($1.02EV billion, 1.2xEV TTM revenue) which was later rejected by Novell’s shareholders. Q2’s aggregate software M&A purchase price was Year-over-year, there was only one mega-deal buoyed by six mega-deals (transactions with announced in 2Q09, Intel’s acquisition of Wind enterprise value greater than $500 million), River Systems ($793.4EV million, 2.2xEV TTM including SAP’s announced acquisition of Sybase revenue). ($5.4EV billion, 4.5xEV TTM revenue); TPG Capital’s announced acquisition of Vertafore ($1.4 After bottoming out in 2Q09 when there were only billion); IBM’s announced purchase of Sterling 309 reported transactions, 2Q10’s 507 deals Commerce from AT&T ($1.4 billion); and marks the fourth consecutive quarterly increase in Allscripts-Misys’ acquisition of Eclipsys ($1.2EV software M&A deal volume, and the largest tally billion, 2.3xEV TTM revenue). since 1Q08’s 518 transactions. It’s an encouraging trend which we believe will continue By comparison, 1Q10 saw only one announced for the balance of the year.

Figures 18 and 19: U.S. Software Sector M&A Activity and Dollars Spent 600

502 518 507 500

470 478 417 456 402 400 345 351

s 326 316 309

eal 300 D f # o 200

100

0 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10

$35.0 $32.0

$30.0

$25.0 $23.5 $22.4 ) s

n $20.0 $17.5 illio

b $15.0 $ ( $14.9 $13.5 $12.6 $9.8 $10.0 $6.3 $7.7 $5.0 $4.3 $2.9 $3.3 $0.0 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10

13| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

Among the software categories we track, there stock as deal currency and sellers are less has been a marked resurgence of security concerned about declining market values and software M&A transactions in 1H10. As of the intrigued by the prospect of additional upside. close of the second quarter, some 45 security During bear markets such as 2Q10, buyers are software companies were acquired for an reluctant to pay with undervalued stock and aggregate price tag of approximately $5.4 billion, sellers opt for the safety of cash over future stock handily beating the security sector’s M&A accretion. performance in both 2009 and 2008. Indeed, security’s M&A results for the first six months of Private vs. Public Buyers this year even best 2007’s tally of 44 transactions worth $3.7 billion. Thus far in 2010, Symantec In assessing each quarter’s M&A activity, we has been the most active security category continue to track the mix of public and private acquirer, announcing four acquisitions totaling buyers because it provides useful insight about almost $1.7 billion, including Verisign’s the current software M&A ecosystem and the Authentication Services Business ($1.3 billion), level of interest and likely valuation range a PGP Corporation ($300 million, 4.0x TTM potential sell-side candidate might attract. Low revenue) and GuardianEdge Technologies ($70 M&A deal volumes and fewer public buyers million, 3.9x TTM revenue). usually connote lower valuations. Conversely, higher deal volume and 40%+ public buyers mean Software M&A Deal Currency increased deal competition and more strategic valuations. The percentage of all-cash software M&A transactions increased to 77% in 2Q10 (Figure Figure 21: Public vs. Private Software M&A 20), compared to 67% in 1Q10. Conversely, the Buyers and Sellers percentage of sellers receiving stock or a

combination of cash and stock declined to 23% s r e

from 33% in 1Q10. Given the volatility of the y u

public markets in 1H10, the strong preference for B

e 62% 60% r 62% cash as deal currency was not surprising. a 58% w

ft o

Unsurprisingly, there has been a longstanding S correlation between software deal currency and

stock market performance. In bull markets such age of ent

as much of 1Q10, buyers are more willing to use c r 42% 40% e 38% P 38% Figure 20: Software M&A Form of Payment 13% 6% 10% 10% Q3 2009 Q4 2009 Q1 2010 Q2 2010 Public Private 23% 13% 15% 23% s r e l l e S e r a w

77% t

f 92%

72% 67% o 71% 95% 95% 96% entage of S c r e

P 5% 5% 4% 8% Q3 2009 Q4 2009 Q1 2010 Q2 2010

Q3 2009 Q4 2009 Q1 2010 Q2 2010 Cash Cash & Stock Stock Public Private 14| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

Public buyers accounted for 40% of all acquirers Since very few software transactions publicly in 1Q10, up slightly from 38% in 1Q10 and on par identify a private software seller’s TTM EBITDA, with 2H09 (Figure 21). By comparison, public we did not have sufficient data to ascertain the software companies comprised only 34% of median EBITDA exit multiple paid them in 2Q10. buyers in 1H09. The return of public software We did, however, determine Q2’s median exit companies to the deal table, most in search of multiple for public software company sellers was strategic acquisitions, has contributed significantly 12.0x TTM EBITDA in 2Q10, down slightly from to the rise in median software exit valuations 13.0x in 1Q10, and up slightly from the 11.3x TTM during the past four quarters. EBITDA exit multiple in 2Q09 (Figure 23).

The rebounding credit markets are also helping to While a variety number of factors drive an exit make more public software companies multiple, three of the most important determinants acquisitive. Although most are sitting on record of exit valuation are the seller’s equity structure, amounts of balance sheet cash, we are seeing a financial performance and product category surprising number of public companies (Figure 24). As a result, we analyzed all 1H2010 contemplating debt financed leveraged M&A transactions with ascertainable revenue acquisitions. Still, the public-private software multiples to determine how exit valuations varied buyer ratio shouldn’t change much more during by equity ownership (private vs. public company), 2H10, as private equity firms are also being lured size (revenue) of buyer and seller, and the seller’s by the same low cost debt and lender willingness software product category. to tolerate more leverage than anytime in the past two years. First, we sorted YTD transactions by ownership type, separating public from private software Software M&A Valuations company sellers to ascertain any difference in median TTM revenue multiple. Public company The software industry’s benchmark median exit sellers received a median 1.8x TTM revenue exit valuation was 2.1x TTM revenue in 2Q10, just valuation, while privately held software companies slightly below the first quarter’s 2.2x TTM revenue commanded a median 2.7x TTM revenue median exit multiple. Following seven multiple. consecutive quarters of sub-2x median exit multiples in 2008 and 2009, 2Q10 marks the The wide variance between public and private second successive quarter the median multiple seller exit multiples in 2Q10 continues the was higher than 2.0x TTM revenue and is a reversal of a well-established trend. Over the significant year-over-year improvement over past few years, we’ve noted a shrinking variance 2Q09’s median exit multiple of 1.6x TTM revenue between public and private seller exit valuations, (Figure 22). with traditionally higher public company exit premiums declining over time as public stock Figure 22: Software M&A Valuations as a market valuations dropped and many of the best multiple of revenue (Quarterly) performing and most valuable public companies were acquired. 2.0x 2.2x 2.1x 1.9x The trend continued in 2Q10, when several devalued, underperforming public companies were acquired, including Vero Software, Q3 2009 Q4 2009 Q1 2010 Q2 2010 purchased by Battery Ventures ($12.9EV million, 0.7x TTM revenue); Symyx, acquired by Tripos Figure 23: Public Software Company Seller and private equity sponsor Vector Capital Valuation as a Multiple of EBITDA ($156.1EV million, 1.0x TTM revenue); and EV 13.0x Maconomy, bought by Deltek ($63.2 million, 11.8x 12.0x 1.7x TTM revenue). Please see Appendix X for 8.7x additional public seller exit valuations in 2Q10.

Q3 2009 Q4 2009 Q1 2010 Q2 2010 15| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

Figure 24: YTD Median Multiples – 4.9x TTM revenue); Lexmark’s acquisition of Segmentation (Enterprise Value/Revenue) Perceptive Software ($280 million, 3.3x TTM revenue estimate); and Symantec’s acquisitions Public Sellers of PGP Corporation ($300 million, 4.0x TTM 1.8x Median Multiple revenue and GuardianEdge Technologies ($70 million, 3.9x TTM revenue). 40% 60% As a next step, we separated public and private software company buyers to ascertain any difference in median purchase price paid in 2Q10. Historically, public buyers have paid higher exit Private Sellers 2.7x Median Multiple multiples than private buyers: 2.5x vs. 2.0x TTM revenue in 2007; 2.0x vs. 1.7x in 2008; and 1.9x Private Buyers vs. 1.2x in 2009. 1.8x Median Multiple The disparity in exit valuations paid by public vs. private software company buyers continued in the 34% 66% second quarter. Public buyers paid a median 2.3x TTM revenue multiple in 2Q10, while private buyers paid a median 1.8x TTM revenue multiple.

Public Buyers We slice and dice software M&A transactions this 2.3x Median Multiple way in part to remind our readers that the median software industry TTM revenue and EBITDA exit Buyer Greater Buyer Less Than multiples we report each quarter have little Than $200 million $200 million 2.4x Median 1.8x Median bearing on the prospective exit valuation of a Multiple Multiple particular software company. Examples abound of companies selling for modest multiples in strong economies and eyebrow-raising multiples 53% 47% in tough economic times. In every economy, the software company valuation range is wide and the valuation drivers are many and varied.

Finally, we analyzed 2Q10’s median software M&A multiple horizontally and vertically, Seller Greater Seller Greater segregating vertical market software company Than $20 Than $20 sellers (e.g. retail, financial services, telecom, million: 0.8x2.3x million: 1.5x1.7x manufacturing, etc.) from sellers with horizontal Seller Less Seller Less software solutions (infrastructure, enterprise Than $20 Than $20 applications, etc.). In 2Q10, providers of vertical million: 2.0x3.9x million: 2.4x2.2x software accounted for 35% of all software M&A, confirming vertical providers remain attractive acquisition targets, primarily because of their Conversely, most of the highest exit multiples in predictable and substantial recurring revenue, 2Q10 were paid to private software companies domain expertise and highly defensible market deemed by their large public suitors to be highly positions (Figure 25). Horizontal solution strategic and worthy of an acquisition premium. providers comprised 65% of sellers. Many of these private targets were venture-

backed entities that were well-funded, growing During the second quarter, these vertical market and, consequently, expensive. Noteworthy sellers received a median 2.0x TTM revenue examples include Dassault’s acquisition of multiple, while their horizontal market Exalead ($161.6 million, 8.4x TTM revenue); counterparts were paid a median exit multiple of Cadence Design Systems’ acquisition of Denali 2.3x TTM revenue. The differential exit multiple Software ($270.0EV million, 6.3xEV TTM revenue); paid to horizontal and vertical software company Google’s acquisition of Global IP ($58.9 million, 16| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

sellers in 2Q10 is historically consistent (Figure Cavium Networks’ acquisition of MontaVista 26). Software ($108.2EV million, 3.6xEV TTM revenue estimate) in 4Q09, and CA’s acquisition of Figure 25: 2Q10 Horizontal vs. Vertical Sellers Nimsoft ($350 million, 10.0x TTM revenue estimate) in 1Q10. 35% Exit valuations for other software product 65% categories ranged from a median 2.7x TTM revenue for providers of Healthcare industry applications (unchanged from 1Q10), to 0.9x TTM revenue for providers of messaging, conferencing and communications applications. Software M&A Vertical Horizontal valuations in the content and document management sector fluctuated most widely over Figure 26: Horizontal vs. Vertical Software the past two quarters, increasing rather M&A Multiples dramatically from 1.2x TTM revenue in 1Q10 to 2.2x in 2Q10 due to several successful VC- Horizontal Vertical 2Q10 2.3x 2.0x Figure 27: Software M&A by Product Category

1Q10 2.2x 1.8x Dev Tools & IT 4Q09 1.7x 2.3x Asset Management 3.5x 3Q09 2.3x 1.5x 2Q09 1.7x 1.6x Healthcare 2.7x

M&A Exit Valuations by Software Category BI, Risk and 2.6x Compliance While company size and software delivery model

demonstrably impact valuation, software product HR & Workforce 2.2x category continued to be the single most Management important M&A valuation driver in 2Q10. For most software product categories, there is often an Content/Document 2.2x insufficient number of transactions that publicly Management report both seller TTM revenue and buyer purchase price, essential data in ascertaining the Database & File 2.1x applicable median exit value for the product Management category. Consequently, we aggregate the data Other Verticals each quarter on a TTM basis. As a result, it may (A&D, Telco, 1.8x take several quarters to detect changing product Retail, etc.) category valuation trends, and certain outlier transactions consummated nine or twelve months Financial Services 1.4x ago may have a residual impact on their product category multiples. Engineering, PLM 1.3x & CAD/CAM Among the 12 product categories we tracked in 2Q10 (Figure 27), Development Tools/IT Asset Supply Chain Management software providers continued to Management & 1.1x garner the highest median exit multiple (3.5x TTM Logistics revenue), in part due to the significant number of Enterprise 1.0x high profile transactions in recent quarters. Deals Resource Planning in this category included VMWare’s acquisition of SpringSource ($446 million, 14.8x TTM revenue Messaging, estimate) in 3Q09; Compuware’s acquisition of Conferencing & 0.9x Gomez ($290 million, 5.5x TTM revenue) in 4Q09; Communications

17| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

Copyright © 2010 Software Equity Group, L.L.C., All Rights Reserved Software Equity Group, L.L.C. Investment Banking / Mergers & Acquisitions backed exits, including Perceptive Software’s sale Most intriguing, however, were the four supply to Lexmark ($280 million, 3.3x TTM revenue chain management SaaS vendors that were estimate). acquired in Q2 – TradeBeam ($18.9 million) and eBizNET, bought by CDC Software; VendorNet, From a deal activity standpoint, CRM, Marketing acquired by GSI Commerce; and SmartTurn, and Sales applications led all other product purchased by Red Prairie. Although on-premise categories in 2Q10 (Figure 28), followed by supply chain providers have long lagged virtually Wireless and security applications, respectively. every other software product category in deal Accounting applications, once again, were in least activity and valuations, the acquisition of these e- demand by acquirers in 2Q10. supply chain SaaS providers seems to connote buyer confidence in a continued economic and SaaS manufacturing sector recovery, and confidence that a growing number of small-medium Thirty SaaS companies were acquired in 2Q10, businesses and enterprises will opt for the compared to ten SaaS acquisitions in 1Q10 and benefits of a hosted supply chain/logistics solution nine during the same quarter a year ago. Two of suite. the earliest and most popular SaaS categories led the pack, with six CRM/marketing/sales There were too few SaaS transactions in Q2 with companies and four workforce management ascertainable exit multiples to calculate the providers exiting. median exit valuation (Appendix E).

Figure 28: Software M&A by Product Category Supply Chain Mgmt & Logistics Security Storage & Systems Mgmt

Telecommunications Wireless Accounting

Manufacturing & Asset Mgmt

Retail Billing & Service Provisioning

Business Intelligence

Other Verticals

Content/Document Mgmt

CRM, Marketing & Sales Softw are

Healthc ar e Database & File Mgmt

Dev. Tools, IT Asset Mgmt & App. Testing Gov't / A&D Education & Computer Based Training

Financial Services

Electronic Commerce

Electronic Design Automation Netw orking & Connectivity

Engineering, PLM & CAD/CAM

Multimedia, Graphics, Digital Media Enterprise Application Integration Entertainment Messaging, Conferencing & Enterprise Resource Planning Communic ations HR & Workforce Mgmt 18| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX A: 2Q10 PUBLIC MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY

Billing & Service Management 2Q09 3Q09 4Q09 1Q10 2Q10 Dev. Tools, Op Systems & App Testing 2Q09 3Q09 4Q09 1Q10 2Q10 Current Ratio 2.8 3.0 3.1 3.0 2.8 Current Ratio 2.1 2.1 2.0 1.9 2.0 EBITDA Margin 17.0% 20.2% 20.5% 20.5% 20.6% EBITDA Margin 16.3% 15.6% 16.3% 18.1% 18.8% Gross Profit Margin 51.4% 52.0% 52.8% 54.1% 55.9% Gross Profit Margin 70.4% 70.4% 70.2% 71.2% 71.6% Net Income Margin 10.9% 10.6% 11.4% 14.4% 15.4% Net Income Margin 7.2% 6.2% 6.7% 8.4% 9.9% TTM Earnings Growth (YoY) -4.3% -3.1% -13.9% -4.8% 22.3% TTM Earnings Growth (YoY) -24.4% -3.0% -7.5% 4.9% 26.2% TTM Revenue Growth (YoY) 8.5% 7.5% 6.1% 22.1% 5.3% TTM Revenue Growth (YoY) 7.2% 3.1% -2.7% -0.1% 1.2% TTM EBITDA Growth (YoY) 9.0% 9.3% 10.7% 49.2% 49.2% TTM EBITD A Growth (YoY) 24.9% 20.1% 13.6% 13.8% 18.5% Cash as Percent of Market Cap 27.0% 27.7% 23.8% 23.0% 24.9% Cash as Percent of Market Cap 28.2% 19.3% 28.8% 21.4% 21.6% Enterprise Value Growth (YoY) 5.5% -10.9% 26.6% 67.5% 46.0% Enterprise Value Growth (YoY) -45.0% -21.0% 46.4% 75.2% 45.2% EV/Revenue 1.1x 1.3x 1.5x 2.2x 1.7x EV/Revenue 1.2x 1.4x 1.3x 1.6x 1.7x EV/EBITDA 5.6x 6.6x 7.4x 10.9x 8.4x EV/EBITDA 9.0x 9.7x 12.8x 9.4x 9.3x EV/Earnings 10.2x 12.1x 13.4x 17.8x 15.0x EV/Earnings 17.7x 25.3x 24.2x 21.7x 18.9x

Business Intelligence 2Q09 3Q09 4Q09 1Q10 2Q10 eCommerce Software 2Q09 3Q09 4Q09 1Q10 2Q10 Current Ratio 2.2 2.2 2.2 2.2 1.8 Current Ratio 1.8 1.8 1.8 1.9 2.1 EBITDA Margin 17.6% 17.4% 17.0% 17.1% 15.7% EBITDA Margin 10.5% 13.2% 14.1% 14.5% 13.6% Gross Profit Margin 78.2% 77.8% 78.0% 77.6% 77.0% Gross Profit Margin 63.8% 65.2% 65.6% 66.0% 66.3% Net Income Margin 11.2% 11.4% 11.3% 11.2% 9.5% Net Income Margin -14.9% -8.0% 5.7% 9.4% 8.7% TTM Earnings Grow th (YoY) 3.3% 27.9% 46.8% 10.2% 10.2% TTM Earnings Growth (YoY) 30.5% 297.5% 33.9% 23.0% 108.5% TTM Revenue Growth (YoY) 1.5% -0.5% -2.0% 0.7% 0.7% TTM Revenue Growth (YoY) 12.3% 8.1% 7.9% 6.6% 6.6% TTM EBITD A Growth (YoY) 2.7% 12.0% 23.9% 21.7% 5.9% TTM EBITDA Growth (YoY) 86.6% 61.5% 11.3% 11.2% 38.7% Cash as Percent of Market Cap 32.5% 27.5% 24.9% 24.1% 27.0% Cash as Percent of Market Cap 27.9% 26.2% 28.3% 27.4% 31.0% Enterprise Value Growth (YoY) -32.3% 2.4% 121.2% 147.8% 59.9% Enterprise Value Growth (YoY) -47.9% -37.3% 14.6% 49.4% -2.4% EV/Revenue 1.6x 1.9x 2.4x 2.3x 1.9x EV/Revenue 3.0x 3.0x 2.6x 3.0x 2.6x EV/EBITDA 9.1x 10.6x 12.9x 13.7x 13.8x EV/EBITDA 20.6x 19.4x 18.4x 18.8x 23.7x EV/Earnings 13.6x 18.9x 28.7x 31.5x 34.2x EV/Earnings 29.8x 44.8x 21.0x 24.8x 24.8x

Content & Document Management 2Q09 3Q09 4Q09 1Q10 2Q10 Education & eLearning 2Q09 3Q09 4Q09 1Q10 2Q10 Current Ratio 1.2 1.4 1.4 1.4 1.5 Current Ratio 1.2 0.9 1.1 1.2 1.2 EBITDA Margin 23.7% 23.1% 23.0% 22.5% 23.2% EBITDA Margin 17.9% 9.5% 12.5% 13.2% 14.7% Gross Profit Margin 73.8% 72.5% 72.6% 71.5% 71.0% Gross Profit Margin 75.5% 75.0% 78.1% 79.1% 78.8% Net Income Margin 0.2% -13.1% -6.6% 1.4% 3.2% Net Income Margin -0.2% 0.9% 2.6% 5.3% 5.7% TTM Earnings Grow th (YoY) 63.4% 34.4% 7.4% 56.4% 101.8% TTM Earnings Growth (YoY) 65.0% 15.3% -15.5% -125.9% 142.3% TTM Revenue Growth (YoY) -7.0% -0.7% -10.3% -12.4% -7.3% TTM Revenue Growth (YoY) 10.2% 18.2% 20.5% 18.6% 18.6% TTM EBITD A Growth (YoY) 13.6% 4.8% 11.0% -3.6% -5.9% TTM EBITDA Growth (YoY) 45.0% -1.6% 50.5% 39.1% 35.8% Cash as Percent of Market Cap 25.2% 18.8% 25.1% 20.8% 21.3% Cash as Percent of Market Cap 9.5% 16.0% 22.2% 15.7% 17.1% Enterprise Value Growth (YoY) -28.8% -4.9% 44.8% 43.6% 26.8% Enterprise Value Growth (YoY) -34.0% -18.3% 30.0% 59.2% 50.5% EV/Revenue 1.6x 1.7x 1.7x 2.0x 1.9x EV/Revenue 2.3x 2.1x 2.2x 2.0x 1.6x EV/EBITDA 6.5x 6.8x 7.4x 8.2x 8.2x EV/EBITDA 14.8x 17.5x 16.3x 14.0x 14.9x EV/Earnings 14.6x 31.8x 41.1x 53.6x 43.6x EV/Earnings 104.3x 79.7x 23.8x 48.8x 42.4x

Customer Relationship Management 2Q09 3Q09 4Q09 1Q10 2Q10 Electronic Design Automation 2Q09 3Q09 4Q09 1Q10 2Q10 Current Ratio 1.3 1.3 1.5 1.3 1.1 Current Ratio 1.8 1.8 1.8 1.9 1.9 EBITDA Margin -2.4% -2.8% -2.1% 0.6% 5.2% EBITDA Margin -4.7% -9.7% -2.3% 3.9% 5.6% Gross Profit Margin 48.8% 47.9% 47.9% 49.5% 51.9% Gross Profit Margin 79.3% 78.2% 79.3% 80.2% 81.9% Net Income Margin -14.6% -9.6% -11.7% -10.2% -2.9% Net Income Margin -86.9% -89.8% -69.9% -8.9% -4.0% TTM Earnings Growth (YoY) -27.5% -16.4% -17.3% 38.0% 75.7% TTM Earnings Growth (YoY) 35.0% -514.0% 81.7% 92.2% 89.6% TTM Revenue Growth (YoY) -0.2% -14.0% -16.3% -12.8% -9.7% TTM Revenue Growth (YoY) -39.1% -32.3% -17.9% -9.0% -10.9% TTM EBITDA Growth (YoY) -11.0% -8.1% 23.0% 17.0% 60.3% TTM EBITDA Growth (YoY) 26.4% 16.5% -3.0% -27.1% 78.5% Cash as Percent of Market Cap 44.2% 33.1% 31.8% 27.9% 23.9% Cash as Percent of Market Cap 34.6% 35.6% 32.7% 31.3% 32.8% Enterprise Value Growth (YoY) -57.7% -39.2% 57.6% 94.8% 58.2% Enterprise Value Growth (YoY) -51.5% -31.0% 37.3% 54.6% 58.3% EV/Revenue 0.4x 0.7x 0.8x 1.0x 1.0x EV/Revenue 0.9x 1.1x 1.4x 1.5x 1.6x EV/EBITDA 33.6x 11.1x 17.1x 16.9x 12.1x EV/EBITDA 9.0x 9.8x 9.6x 21.3x 21.3x EV/Earnings 27.7x 26.6x 23.0x 23.2x 33.0x EV/Earnings 10.1x 10.3x 12.9x - -

Database & File Management 2Q09 3Q09 4Q09 1Q10 2Q10 Engineering, PLM & CAD/CAM Software 2Q09 3Q09 4Q09 1Q10 2Q10 Current Ratio 2.0 2.4 2.4 1.7 1.8 Current Ratio 1.8 1.8 1.9 1.9 2.0 EBITDA Margin 20.7% 22.4% 22.9% 22.9% 22.0% EBITDA Margin 19.2% 15.1% 12.2% 13.7% 14.7% Gross Profit Margin 82.1% 83.0% 83.7% 84.1% 84.0% Gross Profit Margin 82.0% 81.9% 81.3% 81.7% 82.7% Net Income Margin 12.1% 12.6% 13.0% 14.0% 14.7% Net Income Margin 4.4% 2.9% 0.7% 3.8% 4.5% TTM Earnings Growth (YoY) -2.6% -4.9% 1.3% 17.6% 16.4% TTM Earnings Growth (YoY) -33.2% -23.8% -12.5% 5.6% 18.1% TTM Revenue Growth (YoY) 5.0% 2.0% 3.4% -1.1% -1.5% TTM Revenue Growth (YoY) 2.0% -4.4% -11.3% -7.0% -8.6% TTM EBITD A Growth (YoY) 21.2% 20.0% 11.8% 8.7% 8.7% TTM EBITDA Growth (YoY) -6.5% 0.0% -3.8% -10.6% 1.8% Cash as Percent of Market Cap 30.8% 31.7% 29.6% 29.7% 26.2% Cash as Percent of Market Cap 21.3% 18.3% 20.8% 16.7% 16.2% Enterprise Value Growth (YoY) -9.8% -2.9% 49.6% 38.6% 21.1% Enterprise Value Growth (YoY) -51.5% -31.0% 37.3% 65.8% 61.6% EV/Revenue 1.4x 1.6x 2.1x 1.9x 1.9x EV/Revenue 1.4x 1.6x 1.7x 1.8x 1.9x EV/EBITDA 7.8x 7.6x 8.6x 8.8x 9.4x EV/EBITDA 8.0x 11.5x 12.4x 14.9x 14.5x EV/Earnings 15.2x 17.7x 18.2x 17.4x 15.9x EV/Earnings 18.2x 22.8x 29.0x 32.3x 34.1x

19| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX A: 2Q10 PUBLIC MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY (CONTINUED)

Enterprise Application Integration 2Q09 3Q09 4Q09 1Q10 2Q10 Messaging, Conferencing & Comm. 2Q09 3Q09 4Q09 1Q10 2Q10 Current Ratio 1.9 1.8 1.8 1.7 1.9 Current Ratio 1.6 1.7 1.8 1.9 2.0 EBITDA Margin 18.8% 19.8% 20.5% 21.3% 21.9% EBITDA Margin 9.7% 10.0% 8.3% 7.5% 14.8% Gross Profit Margin 71.7% 71.8% 71.6% 71.3% 71.1% Gross Profit Margin 64.7% 64.7% 65.8% 65.5% 69.9% Net Income Margin 9.5% 10.1% 10.0% 10.4% 10.4% Net Income Margin 3.7% 4.4% 3.0% 0.7% 9.3% TTM Earnings Growth (YoY) -10.5% 0.3% 27.9% 30.6% 30.6% TTM Earnings Growth (YoY) -58.8% -38.3% 64.7% 47.2% 53.4% TTM Revenue Growth (YoY) 0.9% 0.7% -3.6% 2.0% 5.1% TTM Revenue Growth (YoY) 4.3% 6.8% 9.3% 11.5% 8.4% TTM EBITDA Growth (YoY) 10.3% 15.5% 15.4% 18.8% 17.8% TTM EBITDA Growth (YoY) -13.9% 39.9% 66.3% 23.8% 32.9% Cash as Percent of Market Cap 29.3% 38.6% 35.5% 28.8% 26.2% Cash as Percent of Market Cap 23.3% 21.5% 21.1% 17.5% 14.9% Enterprise Value Growth (YoY) -24.1% 2.3% 76.3% 87.8% 72.8% Enterprise Value Growth (YoY) -24.7% 9.9% 138.2% 143.7% 70.6% EV/Revenue 1.4x 2.1x 2.1x 2.1x 2.5x EV/Revenue 2.0x 2.2x 2.4x 2.9x 1.9x EV/EBITDA 7.7x 11.4x 9.5x 9.4x 12.4x EV/EBITDA 10.4x 12.8x 13.2x 14.1x 13.7x EV/Earnings 17.3x 19.7x 21.1x 20.6x 28.6x EV/Earnings 8.2x 16.0x 21.1x 22.2x 27.8x

Enterprise Resource Planning 2Q09 3Q09 4Q09 1Q10 2Q10 Multimedia, Graphics, Digital Media 2Q09 3Q09 4Q09 1Q10 2Q10 Current Ratio 1.2 1.2 1.5 1.4 1.5 Current Ratio 2.1 2.2 2.2 2.2 2.4 EBITDA Margin 15.3% 17.4% 17.3% 18.4% 17.9% EBITDA Margin 17.2% 14.9% 11.6% 10.7% 3.7% Gross Profit Margin 53.9% 54.8% 56.5% 57.5% 56.3% Gross Profit Margin 69.7% 68.9% 68.7% 68.7% 68.3% Net Income Margin 3.9% 4.7% 5.9% 8.0% 8.6% Net Income Margin 6.8% 3.7% 5.1% 2.5% 0.9% TTM Earnings Growth (YoY) -5.4% -2.5% -2.9% 3.4% 25.6% TTM Earnings Growth (YoY) -16.4% -50.8% -12.4% -38.8% -9.7% TTM Revenue Growth (YoY) 3.2% -3.2% -8.1% -8.1% -6.3% TTM Revenue Growth (YoY) -7.0% -12.6% -10.1% -9.7% -6.1% TTM EBITDA Growth (YoY) 15.6% 6.6% 1.8% 4.5% 14.3% TTM EBITDA Growth (YoY) 34.0% -14.8% -1.8% 16.9% 12.3% Cash as Percent of Market Cap 31.4% 25.5% 19.6% 19.7% 17.5% Cash as Percent of Market Cap 25.5% 20.4% 15.2% 14.7% 16.0% Enterprise Value Growth (YoY) -25.3% -8.5% 41.7% 51.1% 35.0% Enterprise Value Growth (YoY) -48.5% -29.8% 42.9% 64.9% 55.5% EV/Revenue 1.1x 1.4x 1.5x 1.7x 1.8x EV/Revenue 1.3x 1.4x 2.1x 2.4x 2.7x EV/EBITDA 9.0x 9.9x 9.8x 10.5x 10.5x EV/EBITDA 6.3x 10.6x 17.9x 20.1x 18.4x EV/Earnings 20.4x 22.5x 22.4x 25.4x 22.8x EV/Earnings 21.0x 23.7x 39.5x 42.3x 40.1x

Entertainment 2Q09 3Q09 4Q09 1Q10 2Q10 Networking & Connectivity 2Q09 3Q09 4Q09 1Q10 2Q10 Current Ratio 1.8 1.9 1.7 2.3 2.7 Current Ratio 2.0 2.2 2.2 2.3 2.2 EBITDA Margin 11.6% 24.0% 22.4% 14.7% 1.9% EBITDA Margin 18.5% 19.8% 20.5% 21.3% 22.3% Gross Profit Margin 56.8% 59.6% 61.0% 61.7% 63.5% Gross Profit Margin 77.2% 77.6% 78.1% 78.4% 78.6% Net Income Margin 3.9% -2.7% -7.6% -8.3% -1.0% Net Income Margin 7.5% 9.0% 10.1% 10.4% 10.7% TTM Earnings Growth (YoY) -32.1% 31.1% -21.9% -19.2% 37.8% TTM Earnings Growth (YoY) 32.4% 34.1% 23.1% 22.2% 39.3% TTM Revenue Growth (YoY) 47.7% 14.0% -11.6% -12.0% -13.2% TTM Revenue Growth (YoY) 6.8% 4.0% 1.9% 5.3% 1.9% TTM EBITDA Growth (YoY) 3.7% 57.7% -11.2% 56.5% -14.1% TTM EBITDA Growth (YoY) 19.7% 50.9% 19.8% 26.3% 20.4% Cash as Percent of Market Cap 36.9% 31.4% 31.4% 36.1% 34.5% Cash as Percent of Market Cap 27.3% 27.0% 24.2% 25.0% 23.5% Enterprise Value Growth (YoY) -63.0% -44.1% 24.1% 64.8% -11.2% Enterprise Value Growth (YoY) -27.3% -14.3% 39.2% 88.5% 52.7% EV/Revenue 1.0x 1.0x 0.9x 1.0x 1.0x EV/Revenue 1.7x 2.0x 2.2x 2.4x 2.2x EV/EBITDA 6.8x 7.3x 7.2x 8.8x 6.0x EV/EBITDA 8.0x 10.8x 13.7x 19.9x 14.3x EV/Earnings 9.4x 13.1x 13.2x 10.6x 7.7x EV/Earnings 25.9x 28.4x 29.5x 36.1x 34.0x

Financial Services Software 2Q09 3Q09 4Q09 1Q10 2Q10 Security 2Q09 3Q09 4Q09 1Q10 2Q10 Current Ratio 1.3 1.2 1.3 1.1 1.3 Current Ratio 2.1 2.2 2.2 2.1 2.2 EBITDA Margin 20.1% 19.7% 19.3% 19.8% 21.2% EBITDA Margin 16.8% 18.8% 16.5% 16.1% 19.0% Gross Profit Margin 55.2% 55.7% 56.1% 56.5% 57.4% Gross Profit Margin 76.6% 76.7% 77.1% 77.4% 78.5% Net Income Margin 9.0% 9.1% 9.9% 11.2% 10.0% Net Income Margin 0.6% 2.4% 5.8% 7.6% 10.8% TTM Earnings Growth (YoY) -7.5% -6.2% 3.3% 29.8% 35.9% TTM Earnings Growth (YoY) 11.5% 7.3% 14.4% -2.4% 90.5% TTM Revenue Growth (YoY) 3.7% 1.3% 0.8% 0.4% 5.1% TTM Revenue Growth (YoY) 11.8% 10.2% 8.3% 8.2% 8.2% TTM EBITDA Growth (YoY) 13.3% 8.7% 15.3% 8.8% 15.2% TTM EBITDA Growth (YoY) 36.5% 28.9% 20.5% 14.3% 21.9% Cash as Percent of Market Cap 16.6% 13.0% 13.7% 11.2% 11.5% Cash as Percent of Market Cap 22.3% 19.3% 15.5% 16.1% 19.4% Enterprise Value Growth (YoY) -24.9% -12.3% 31.4% 42.2% 46.6% Enterprise Value Growth (YoY) -12.0% 3.7% 41.0% 77.6% 30.3% EV/Revenue 2.1x 2.3x 2.5x 2.6x 2.6x EV/Revenue 2.8x 3.4x 3.4x 3.5x 3.3x EV/EBITDA 9.0x 10.7x 11.9x 13.1x 8.8x EV/EBITDA 11.1x 12.6x 13.1x 13.7x 13.7x EV/Earnings 25.1x 26.3x 24.5x 25.7x 24.3x EV/Earnings 20.5x 29.6x 17.1x 23.1x 18.6x

Healthcare 2Q09 3Q09 4Q09 1Q10 2Q10 Storage & Systems Management 2Q09 3Q09 4Q09 1Q10 2Q10 Current Ratio 2.5 2.7 2.8 2.8 2.9 Current Ratio 2.0 2.1 2.1 2.2 2.3 EBITDA Margin 18.1% 21.0% 21.3% 22.0% 21.2% EBITDA Margin 22.8% 19.6% 18.0% 16.8% 15.9% Gross Profit Margin 60.6% 60.3% 59.6% 59.0% 64.6% Gross Profit Margin 80.5% 80.7% 80.9% 80.3% 74.4% Net Income Margin 9.6% 10.6% 7.6% 7.4% 6.4% Net Income Margin 6.8% 6.4% 6.0% 8.6% 9.0% TTM Earnings Growth (YoY) 4.2% -46.5% -30.0% -13.2% -3.4% TTM Earnings Growth (YoY) 10.8% 0.2% -5.4% -1.8% 32.1% TTM Revenue Growth (YoY) 6.4% 4.1% 4.4% 5.5% 3.7% TTM Revenue Growth (YoY) 9.3% 5.7% 5.9% 1.0% 1.7% TTM EBITDA Growth (YoY) 1.0% 14.5% -0.4% 9.1% 12.6% TTM EBITDA Growth (YoY) 27.7% 14.3% 10.2% 3.8% 1.8% Cash as Percent of Market Cap 15.0% 10.2% 9.9% 10.0% 14.5% Cash as Percent of Market Cap 21.3% 18.1% 17.8% 20.4% 23.9% Enterprise Value Growth (YoY) -20.8% -6.8% 42.7% 82.2% 34.3% Enterprise Value Growth (YoY) -30.9% -13.1% 46.0% 50.9% 45.3% EV/Revenue 2.1x 2.2x 2.5x 2.2x 3.1x EV/Revenue 1.7x 2.0x 2.3x 2.4x 2.5x EV/EBITDA 13.9x 15.0x 16.9x 15.9x 17.8x EV/EBITDA 9.4x 12.2x 13.8x 12.7x 11.5x EV/Earnings 24.4x 42.5x 64.5x 47.9x 33.0x EV/Earnings 19.4x 26.0x 29.4x 26.3x 22.1x

20| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX A: 2Q10 PUBLIC MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY (CONTINUED)

Supply Chain Management & Logistics 2Q09 3Q09 4Q09 1Q10 2Q10 Current Ratio 1.8 1.8 1.5 2.0 1.7 EBITDA Margin 11.3% 10.8% 10.9% 10.6% 10.2% Gross Profit Margin 54.9% 55.3% 56.4% 56.9% 56.2% Net Income Margin 1.4% 1.6% 3.6% 4.9% 4.0% TTM Earnings Growth (YoY) 79.4% 87.7% -40.6% -16.4% 164.7% TTM Revenue Growth (YoY) 2.6% 1.5% -3.4% -10.4% -9.7% TTM EBITDA Growth (YoY) -34.7% -29.2% 3.5% 22.9% 22.9% Cash as Percent of Market Cap 21.1% 24.9% 19.2% 18.7% 15.3% Enterprise Value Growth (YoY) -30.6% -28.9% 83.4% 61.0% 53.0% EV/Revenue 1.2x 1.3x 1.8x 1.9x 1.8x EV/EBITDA 10.7x 10.7x 13.1x 14.7x 11.9x EV/Earnings 39.5x 25.4x 26.8x 33.2x 39.7x

Wireless 2Q09 3Q09 4Q09 1Q10 2Q10 Current Ratio 2.6 2.4 2.6 2.0 2.1 EBITDA Margin 10.2% 9.7% 10.4% 9.6% 11.2% Gross Profit Margin 54.2% 53.8% 53.1% 53.1% 59.3% Net Income Margin -0.6% -1.7% -10.0% -2.7% -3.4% TTM Earnings Growth (YoY) 99.7% 45.7% 14.1% -364.5% 86.1% TTM Revenue Growth (YoY) 8.6% 13.2% 2.2% -1.2% 4.0% TTM EBITDA Growth (YoY) 57.6% 83.2% -60.7% -13.5% 79.2% Cash as Percent of Market Cap 16.2% 21.9% 16.0% 17.7% 24.2% Enterprise Value Growth (YoY) -37.6% 23.4% 8.4% 42.2% 50.5% EV/Revenue 0.9x 1.0x 1.0x 1.3x 1.6x EV/EBITDA 11.2x 14.2x 13.4x 11.1x 15.8x EV/Earnings 181.1x 67.0x 32.0x 38.8x 31.0x

21| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX B: 2Q10 MERGERS AND ACQUISITIONS, SELECT PUBLIC SELLER VALUATIONS

TTM Rev Buyer Seller Purchase Price Enterprise Value EV/Rev EV/EBITDA Growth SAP Sybase (NYSE:SY) $6,689,610,000 $5,422,840,000 4.5x 14.6x 7.6% Allscripts-Misys Eclipsys (Nasdaq:ECLP) $1,288,480,000 $1,169,810,000 2.3x 21.6x -0.8% Oracle Phase Forward (Nasdaq:PFWD) $720,850,000 $591,110,000 2.7x 20.0x 22.5% - SonicWALL (Nasdaq:SNWL) $757,670,000 $544,580,000 2.6x 17.8x -0.8% MQ Capital Redflex Holdings (ASX:RDF) $264,250,000 $259,090,000 2.3x 7.0x 34.3% Societe Generale de Financement du Quebec Logibec Groupe Informatique (TSX:LGI) $250,340,000 $248,380,000 3.5x 10.5x -0.3% Pharsight Corporation; Vector Capital Symyx Technologies (Nasdaq:SMMX) $235,540,000 $156,120,000 1.0x 9.9x 4.8% Vision Solutions Double-Take Software (Nasdaq:DBTK) $242,230,000 $153,500,000 1.8x 11.1x -8.2% Deltek Maconomy (CPSE:MACO) $71,720,000 $63,160,000 1.7x 17.2x -2.0% Google Global IP Solutions (OB:GIPS) $67,990,000 $58,910,000 4.9x - 9.0% TEOCO TTI Team Telecom (Nasdaq:TTIL) $56,820,000 $30,780,000 0.7x 7.1x -16.1% Tibco Software Proginet (OTC:PRGF) $21,100,000 $19,670,000 2.1x 14.7x 12.2% Battery Ventures Vero Software (AIM:VERO) $16,320,000 $12,960,000 0.7x 6.1x -8.0%

22| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX C: 2Q10 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS

Buyer Seller Purchase Price Enterprise Value TTM Revenue EV/Rev CDC Software TradeBeam $18,850,000 $18,850,000 - - eBizNET Solutions Pvt. - - - - Cons tell ation Software Auriga Systems BuildTopia BMS Computer Solutions eFit Financial InCircuit Development Dassault Systemes Exalead S.A. $161,570,000 $161,570,000 $19,257,449 8.4x Geensoft SAS $6,760,000 $6,760,000 - - Descartes Systems Routing International NV $4,070,000 $4,070,000 - - 882976 Ontario $5,890,000 $5,890,000 - - Google Global IP Solutions $67,990,000 $58,910,000 $12,121,399 4.9x Bump Technologi es - - - - Invite Media - - - - Plink Search - - - - Internati onal Busi ness Machines Sterling C ommerce $1,400,000,000 $1,400,000,000 - - Coremetrics - - - - Oracle Phase Forward $720,850,000 $591,110,000 $221,389,513 2.7x eServ Gl obal Ltd., USP Busi ness $93,990,000 $93,990,000 $51,081,522 1.8x Playdom Hi ve7.com - - - - Mers com - - - - SAP Sybase $6,689,610,000 $5,422,840,000 $1,197,094,923 4.5x TechniDATA - - - - SpringSource GemStone Systems - - - - Rabbit Technologies - - - - Symantec PGP Corp.n $300,000,000 $300,000,000 $75,000,000 4.0x GuardianEdge Technologies $70,000,000 $70,000,000 $17,994,859 3.9x Wall Street Systems Delaware City Financials - - - - Speranza Systems - - - -

23| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX D: 2Q10 MERGERS AND ACQUISITIONS, SOFTWARE INDUSTRY MEGA-DEALS

TTM Rev Buyer Seller Purchase Price Enterprise Value EV/Rev EV/EBITDA Growth SAP Sybase (NYSE:SY) $6,689,610,000 $5,422,840,000 4.5x 14.6x 7.6% IBM Sterling Commerce $1,400,000,000 $1,400,000,000 - - - TPG Capital Vertafore $1,400,000,000 $1,400,000,000 - - - Allscripts-Misys Eclipsys (Nasdaq:ECLP) $1,288,480,000 $1,169,810,000 2.3x 21.6x -0.8% Oracle Phase Forward (Nasdaq:PFWD) $720,850,000 $591,110,000 2.7x 20.0x 22.5% - SonicWALL (Nasdaq:SNWL) $757,670,000 $544,580,000 2.6x 17.8x -0.8%

24| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX E: YTD MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS

Buyer Seller Date Enterprise Value Seller Revenue EV/Rev Constellation HomeBuilder Systems, BuildTopia, Inc. 6/29/10 - - - Alibaba.com Limited (SEHK:1688) Vendio Services, Inc. 6/24/10 - - - Administaff Inc. (NYSE:ASF) OneMind Connect, Inc. 6/15/10 - - - Fiserv Inc. (NasdaqGS:FISV) AdviceAmerica, Inc. 6/7/10 - - - THL Credit, Inc. (NasdaqGS:TCRD) HEA LTHCA REf irs t Inc . 6/7/10 - - - Mettoni Limited Telrex LLC 6/2/10 - - - gomembers, Inc. Information Development 6/2/10 - - - Exponential Impact USA DenoSys, LLC 6/1/10 - - - Fourth Hospitality Ltd. Star Logic Limited 5/28/10 - - - Vertical Computer Systems Inc. Pelican Applications, LLC 5/21/10 - - - uVuMobile, Inc. (OTCPK:UVUM) WASP Mobile LLC 5/19/10 - - - CDC Softw are Corporation TradeBeam, Inc. 5/14/10 $18,850,000 - - The Sant Corporation Kadient, Inc. 5/11/10 - - - RedPrairie Corporation SmartTurn, Inc. 5/11/10 - - - Zamage Digital Art Imaging, Inc. Everdow Softw are (Beijing) Inc. 5/10/10 - - - GSI Commerce Inc. (NasdaqGS:GSIC) VendorNet Inc. 5/10/10 - - - AssetWorks, Inc. InCircuit Development Corporation 5/6/10 - - - Prime Alliance Solutions Inc. Dexma, Inc. 5/6/10 - - - Hew itt Associates Inc. (NYSE:HEW) HRAdvance Enterprises, LP 5/5/10 $11,000,000 - - SuccessFactors, Inc. CubeTree, Inc. 5/3/10 $50,000,000 - - CNW Group Ltd. dna13 Inc. 4/29/10 - - - Wall Street Systems Delaw are, Inc. Speranza Systems, Inc. 4/26/10 - - - DOAR, Inc. Inference Data LLC 4/26/10 - - - United Business Media plc (LSE:UBM) SharedVue, Inc. 4/21/10 - - - CDC Softw are Corporation eBizNET Solutions Pvt. Ltd. 4/20/10 - - - Vocus Inc. (NasdaqGM:VOCS) Data Presse SAS 4/16/10 $10,670,000 $4,600,000 2.3x Cloud Centric Systems, Inc. V-Clouds Limited 4/14/10 - - - - Stoopio Inc. 4/13/10 - - - BoardSuite Corp. HireCaliber.com 4/13/10 - - - BigHand Ltd. nFlow Softw are Ltd. 4/6/10 - - - CSDC Systems Grantium 3/16/10 - - K3 Business Technology (AIM:KBT) DigiMIS 3/2/10 $3,180,000 - - TLC IT Group Vigabyte 2/12/10 - - Proofpoint Everyone.net 2/9/10 - - SuccessFactors (Nasdaq:SFSF) Inform Business Impact* 2/4/10 $40,500,000 $15,000,000 2.7x PGP Corp. Chosen Security 2/2/10 - - NorthgateArinso Neller 2/1/10 - - Citrix Online GoToManage 1/31/10 - - AdvancedMD Softw are PracticeOne 1/6/10 - - Sterling Infosystems Abso 1/4/10 - - *revenue estimate

25| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX F: 2Q10 MERGERS AND ACQUISITIONS – DEAL INSIGHT

ABB (SWX:ABBN) acquires Ventyx Category: Energy Management Software Purchase Price: $1,000,000,000 EV Seller Revenue (TTM): $250,000,000 Revenue Multiple (TTM): 4.0x EV Payment Terms: Cash

SEG’s Perspective: Power and automation technology group, ABB, acquires Ventyx, a leading provider of software to the energy and manufacturing sectors. Ventyx brings ABB complementary geographic coverage and an IT product suite highly complementary to ABB’s operational technology (OT) network management business – energy management systems, distributed management systems and outage management systems. The acquisition will enable ABB to bridge IT and OT departments in the energy management sector, which have begun to cooperate at an increasing rate following the rapid adoption of smart grid projects. Ventyx was formed through Vista Equity Partners’ acquisition of Indus International in 2006 ($212.8EV million, 1.7xEV TTM revenue), which was then merged with MDSI Mobile Data ($45.6EV million, 0.9xEV TTM revenue). Ventyx made four tuck-in acquisitions from 2007 – 2009.

IBM (NYSE:IBM) acquires Sterling Commerce Category: Business Integration Software Purchase Price: $1,400,000,000 Seller Revenue (estimate): $633,700,000 Revenue Multiple (estimate): 2.2x Payment Terms: Cash

SEG’s Perspective: Infrastructure software behemoth IBM acquires Sterling Commerce, a provider of business transaction, selling and fulfillment software. Sterling Commerce will enable IBM to help organizations create more intelligent and dynamic business networks by simplifying and automating the way its businesses connect and communicate with customers, partners and suppliers. The acquisition is also complementary to IBM’s recent purchase of cloud-based B2B integration applications vendor, Cast Iron Systems, and will allow IBM to offer integration-as-a-service for both on-premise and cloud based transaction processing. Sterling Commerce has built its product portfolio in part through inorganic means over the past six years, having acquired Yantra ($170 million), and Comergent Technologies ($155 million).

Vocus (NASDAQ: VOCS) acquires Datapresse Category: Media Content and On-Demand Public Relations Software Purchase Price: $10,800,000 EV Seller Revenue (TTM): $4,500,000 Revenue Multiple (TTM): 2.4x EV Payment Terms: Cash/Earn-out

SEG’s Perspective: Vocus, a leading provider of on-demand software for public relations, acquires Datapresse, a France-based provider of SaaS media content and public relations solutions. Datapresse bolsters Vocus’ presence abroad by adding approximately 2,000 customers in Europe, and was followed by the announced acquisition of BDL Media, a provider of SaaS based public relations solutions in China. The activity demonstrates Vocus’ vision of expanding internationally, often more easily achieved through inorganic means. Vocus’ cash on hand increased by 52% from 2007 to 2009, leaving the company with well over $100 million of cash and a strong position for inorganic growth. Prior to its acquisitions of BDL Media and Datapresse April 2010, Vocus’ most recent acquisition was in August 2006.

26| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX F: 2Q10 MERGERS AND ACQUISITIONS – DEAL INSIGHT (CONTINUED)

Oracle (NASDAQ: ORCL) acquires Phase Forward (NASDAQ: PFWD) Category: Clinical Trial Management Software Purchase Price: $611,750,000 EV Seller Revenue (TTM): $213,260,000 Seller EBITDA (TTM): $30,350,000 Revenue Multiple (TTM): 2.9x EV EBITDA Multiple (TTM): 20.2x EV Payment Terms: Cash

SEG’s Perspective: Enterprise software behemoth Oracle acquires Phase Forward, the leading provider of clinical trials management software. Through its acquisition of Phase Forward, Oracle bolsters its position in the pharmaceutical space by picking up the largest pure-play provider of clinical trials management applications. Phase Forward will also complement Oracle’s pharma-specific CRM and sales force automation on-demand applications set to release this year. Oracle’s $17 per share tender offer represents a 29% premium over Phase Forward’s pre-announced average 30 days closing stock price. Phase Forward has built its product portfolio in part through inorganic means over the past two years, having acquired Maaquzi ($11 million), Covance ($9.7 million), Waban ($14 million, 3.5xTTM revenue), and Clarix ($40 million, 14.6xTTM revenue).

SAP (DB:SAP) acquires Sybase (NYSE:SY) Category: Mobile Data Management Software Purchase Price: $5,422,840,000 EV Seller Revenue (TTM): $1,197,010,000 Seller EBITDA (TTM): $370,540,000 Revenue Multiple (TTM): 4.5x EV EBITDA Multiple (TTM): 14.6x EV Payment Terms: Cash

SEG’s Perspective: Enterprise software giant SAP acquires Sybase, the leading provider of database management and mobility solutions. Sybase will allow SAP to standardize on a mobile middleware platform for a growing number of core applications and will give SAP considerable computing power needed for context-aware computing and pattern analytics. In addition, Sybase IQ, which is the most widely used column store DBMS for data warehousing, will provide SAP with significant performance capabilities when it launches its in-memory column store DBMS for online transaction processing and analytical processing. According to Bloomberg, the acquisition of Sybase marks the fifth-largest software takeover in history, exemplifying SAP’s bet on the future of mobile enterprise. SAP’s cash offer of $65 per share represents a 47% premium over Sybase’s pre-announced average 30 days closing stock price.

27| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX F: 2Q10 MERGERS AND ACQUISITIONS – DEAL INSIGHT (CONTINUED)

Symantec (NASDAQ: SYMC) acquires PGP Corporation Category: Data Protection Software Purchase Price: $300,000,000 Seller Revenue (TTM): $75,000,000 Revenue Multiple (TTM): 4.0x Payment Terms: Cash

SEG’s Perspective: Leading enterprise and consumer security vendor Symantec acquires PGP Corporation, a provider of data protection software. With the acquisition of PGP, Symantec will bolster its email and data encryption software solutions for enterprises, businesses and governments via PGP’s Encryption Platform. Simultaneously, Symantec announced the acquisition of Guardian Technologies, a provider of mobile data encryption solutions. These acquisitions allow Symantec to expand its addressable market opportunity in the encryption software space and more effectively compete against McAfee, CheckPoint and Sophos, which have each made acquisitions of encryption vendors. Experts estimate that the market for encryption products will grow at 14% per year from 2009 to 2013, reaching $1.7 billion in 2013. PGP and Guardian Technologies represent Symantec’s 9th and 10th acquisitions in the past year.

28| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX G: SELECT 2Q10 SOFTWARE INDUSTRY MERGERS AND ACQUISITIONS

Date Buye r Se lle r 06/29/2010 Constellation HomeBuilder Systems, Inc. BuildTopia, Inc. 06/29/2010 Pearson Education, Inc. Cogmed Cognitive Medical Systems AB 06/29/2010 Unify Corp. (NasdaqCM:UNFY) Strategic Office Solutions, Inc. 06/29/2010 International Financial Data Services, L.P. Percana Group Limited 06/28/2010 Idle Media,Inc. (OTCBB:IDLM) Backyard Buddies 06/28/2010 AT&T, Inc. (NYSE:T) Xanboo, Inc. 06/24/2010 Alibaba.com Limited (SEHK:1688) Vendio Services, Inc. 06/24/2010 EDGAR Online Inc. (NasdaqCM:EDGR) UBmatrix, Inc. 06/24/2010 Playdom, Inc. Hive7.com, Inc. 06/24/2010 ESRI S-GROUP Sverige AB Progira Radio Communication AB 06/23/2010 Sage Group plc (LSE:SGE) Teta S.A. (WSE:TET) 06/23/2010 Algorithmics, Inc. Tow ers Watson & Co., VIPitech 06/23/2010 SAS Memex Technology, Ltd. 06/23/2010 Hew lett-Packard Company (NYSE:HPQ) Melodeo, Inc. 06/22/2010 Granada Learning Ltd. W3 Insights Ltd 06/22/2010 Dassault Systemes SA (ENXTPA:DSY) Geensoft SAS 06/22/2010 - SonicWALL, Inc. (NasdaqGS:SNWL) 06/22/2010 E-Bros Oy Fleetlogis Oy 06/22/2010 Independent Specialist Technology Limited N4Solutions Limited 06/21/2010 4INFO, Inc. Butter, Inc. 06/21/2010 Tibco Softw are Inc. (NasdaqGS:TIBX) Proginet Corp. (OTCBB:PRGF) 06/21/2010 SafeCharge Limited xt:Commerce GmbH 06/21/2010 Broadridge Financial Solutions Inc. (NYSE:BR) Broadridge City Netw orks 06/21/2010 Huayi Brothers Media Group (SZSE:300027) Beijing Ourpalm Co. Ltd. 06/17/2010 General ASP Inc. Polaris Selection 06/17/2010 TradeStation Technologies, Inc. Technovest (Pty) Ltd. 06/17/2010 - MDnetSolutions, Inc. 06/17/2010 Benefitfocus.com, Inc. BeliefNetw orks, Inc. 06/17/2010 Multi-Systems, Inc. Remco Softw are Incorporated 06/16/2010 Medical Education Technologies, Inc. Lionis Softw are, LLC 06/16/2010 Consona Corporation Compiere, Inc. 06/16/2010 Cegid SA (ENXTPA:CGD) Vedior Front RH SAS 06/16/2010 Descartes Systems Group Inc. (TSX:DSG) Routing International NV 06/15/2010 Ipsw itch, Inc. MessageWay Solutions, Inc. 06/15/2010 Administaff Inc. (NYSE:ASF) OneMind Connect, Inc. 06/15/2010 International Business Machines Corp. (NYSE:IBM) Coremetrics, Inc. 06/14/2010 Fidelity National Information Services Inc. (NYSE:FIS) Compliance Coach, Inc. 06/10/2010 Kingdee International Softw are Group Co. Ltd. (SEHK:268) Shenzhen FirstSoft Technology Development Co., Ltd. 06/10/2010 NICE Systems Ltd. (TASE:NICE) eglue Business Technologies, Inc. 06/10/2010 Synopsys Inc. (NasdaqGS:SNPS) Synfora, Inc. 06/10/2010 - SpeechStorm Limited 06/10/2010 Akamai Technologies Inc. (NasdaqGS:AKAM) Velocitude, LLC 06/10/2010 TPG Capital Vertafore, Inc. 06/10/2010 Inspired Thinking Group Limited Total Marketing Services LLP 06/09/2010 Autonomy Corp. plc (LSE:AU.) CA Technologies, Information Governance Business 06/09/2010 Allscripts-Misys Healthcare Solutions, Inc. (NasdaqGS:MDRX) Eclipsys Corporation (NasdaqGS:ECLP) 06/09/2010 Check Point Softw are Technologies Ltd. (NasdaqGS:CHKP) Liquid Machines, Inc. 06/09/2010 AccessData Corporation CT Summation, Inc. 06/08/2010 Dassault Systemes SA (ENXTPA:DSY) Exalead S.A. 06/08/2010 Hasso Plattner Ventures Management GmbH Facton GmbH 06/08/2010 Trading Technologies International, Inc. TickIt Trading Systems LLC 06/08/2010 TEOCO Corporation TTI Team Telecom International Ltd. (NasdaqGM:TTIL) 06/08/2010 MQ Capital Redflex Holdings Ltd. (ASX:RDF) 06/08/2010 ABC Trading Co. Ltd. SHH GmbH SystemHaus Hemminger 06/08/2010 TSi Auto Solutions Inc. AutoSoft, Inc. 06/07/2010 Mobile Interactive Group Limited PIRI Ltd. 06/07/2010 Fiserv Inc. (NasdaqGS:FISV) AdviceAmerica, Inc. 06/07/2010 THL Credit, Inc. (NasdaqGS:TCRD) HEALTHCAREfirst Inc. 06/07/2010 HTC France Corporation Abaxia SAS 06/07/2010 NetPickle, Inc. RockYou Asia Inc. 06/07/2010 Energy Solutions, Inc. Entessa, Inc. 06/07/2010 USP Structural Connectors, Inc. Structural Soft, LLC 06/03/2010 Velti Plc (AIM:VEL) Media Cannon, Inc. 06/03/2010 Deltek, Inc (NasdaqGS:PROJ) Maconomy A/S (CPSE:MACO) 06/03/2010 Zynga, Inc. Challenge Games, Inc. 06/03/2010 BancTec GmbH Beta Systems ECM Solutions GmbH 06/03/2010 - Wellfit Deventer B.V. 06/03/2010 Tissue Regenix Ltd. Oxeco plc (AIM:OXE) 06/02/2010 Mettoni Limited Telrex LLC 06/02/2010 gomembers, Inc. Information Development Consultants, Inc.

29| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX G: SELECT 2Q10 SOFTWARE INDUSTRY MERGERS AND ACQUISITIONS (CONTINUED)

Date Buye r Se lle r 06/02/2010 Google Inc. (NasdaqGS:GOOG) Invite Media, Inc. 06/02/2010 Infor Global Solutions, Inc. Bridgelogix Corporation 06/02/2010 Wall Street Systems Delaw are, Inc. City Financials Ltd. 06/01/2010 Exponential Impact USA DenoSys, LLC 06/01/2010 St. Ives plc (LSE:SIV) Occam Direct Marketing Limited 06/01/2010 Axceler, Inc. echoTechnology, LLC 06/01/2010 Strategic Rare Earth Metals, Inc. (OTCPK:SREH) Mobile 2 Earth 06/01/2010 Liquent, Inc. Datafarm, Inc. 06/01/2010 Bigpoint GmbH Radon Labs GmbH 06/01/2010 Capgemini Financial Services UK Ltd Plaisir Informatique S.A.R.L. 05/31/2010 Unit 4 N.V. (ENXTAM:U4AGR) Teta S.A. (WSE:TET) 05/28/2010 Fourth Hospitality Ltd. Star Logic Limited 05/28/2010 Muscato Group Inc. (OTCPK:MGRP) M2 Financial Ltd. 05/28/2010 Nuance Communications, Inc. (NasdaqGS:NUAN) ShapeWriter, Inc. 05/27/2010 Societe Generale de Financement du Quebec; OMERS Private Equity Logibec Groupe Informatique Ltee (TSX:LGI) 05/26/2010 Oracle Corporation Australia Pty Limited eServGlobal Ltd., USP Business 05/26/2010 Teradata Corporation (NYSE:TDC) xkoto, Inc. 05/26/2010 B Global Plc (AIM:BGBL) Utiligroup Limited 05/25/2010 Phase One A/S Microsoft Corporation, Expression Media 05/25/2010 McAfee, Inc. (NYSE:MFE) TD Securities, Inc. 05/24/2010 International Business Machines Corp. (NYSE:IBM) Sterling Commerce, Inc. 05/21/2010 Vertical Computer Systems Inc. (OTCBB:VCSY) Pelican Applications, LLC 05/21/2010 ESET, spol. s.r.o. Comdom Softw are S.R.O 05/21/2010 Nexphone AG Litecom AG, Litephone Telephony Platform 05/20/2010 MZ Consult LLC MZCAN 05/20/2010 Lexmark International Inc. (NYSE:LXK) Perceptive Softw are, Inc. 05/20/2010 Wondershare Softw are Co., Ltd. AnyBizSoft Softw are Co., Ltd. 05/19/2010 uVuMobile, Inc. (OTCPK:UVUM) WASP Mobile LLC 05/19/2010 TNT NV (ENXTAM:TNT) KOWIN e-commerce BV 05/18/2010 UXC Ltd. (ASX:UXC) MXL Holdings Pty Ltd. 05/18/2010 HRsmart, Inc. HRsmart South Africa 05/18/2010 Merchant Focus Processing, Inc.; Inner Fence, LLC AppNinjas Inc. 05/17/2010 Harris Corp. (NYSE:HRS) SignaCert, Inc. 05/17/2010 DataGlobal GmbH GFT inboxx GmbH 05/17/2010 Summit Partners Ogone SA 05/17/2010 Battery Ventures Vero Softw are Plc (AIM:VERO) 05/17/2010 RTN Stealth Softw are Inc. (OTCBB:RTNS.F) Market Guidance Systems, Inc. 05/17/2010 Google Inc. (NasdaqGS:GOOG) Global IP Solutions (OB:GIPS) 05/17/2010 Vision Solutions, Inc. Double-Take Softw are, Inc. (NasdaqGS:DBTK) 05/17/2010 Bitstream Inc. (NasdaqCM:BITS) Press-sense Ltd. 05/17/2010 Encore Softw are, Inc. Punch! Softw are, LLC 05/14/2010 CDC Softw are Corporation (NasdaqGM:CDCS) TradeBeam, Inc. 05/14/2010 Receivable Acquisition and Management Corp. (OTCBB:RCVA) Business Intelligence Solutions Inc. 05/14/2010 Softechnologies Inc. Antenna Softw are, Inc., Mobile Command Center Field 05/13/2010 Lingo Media Corporation (TSXV:LM) Q Group PLC 05/13/2010 Func om N.V . (OB:FUNCOM) Stunloc k Studios A B 05/13/2010 West Corporation Holly Connects, Inc. 05/12/2010 Acxiom Corporation (NasdaqGS:ACXM) GoDigital 05/12/2010 Cadence Design Systems Inc. (NasdaqGS:CDNS) Denali Softw are, Inc. 05/12/2010 ngmoco, Inc. Stumptow n Game Machine, LLC 05/12/2010 Dialogic Corporation Veraz Netw orks, Inc. (NasdaqGM:VRAZ) 05/11/2010 The Sant Corporation Kadient, Inc. 05/11/2010 RedPrairie Corporation SmartTurn, Inc. 05/11/2010 EZFacility, Inc. eFit Financial Inc. 05/11/2010 COMPLETExRM, Inc. Franklin Covey Co., PlanPlus 05/11/2010 RP Data Ltd. (ASX:RPX) Sandstone Technology Pty Ltd, VMS Division 05/10/2010 The Riverside Company Mansell Group, Inc. 05/10/2010 Zamage Digital Art Imaging, Inc. (OTCPK:ZMGD) Everdow Softw are (Beijing) Inc. 05/10/2010 GSI Commerce Inc. (NasdaqGS:GSIC) VendorNet Inc. 05/10/2010 Temenos Group AG (SWX:TEMN) FE-Mobile Ltd. 05/10/2010 Connectiva Systems India Private Ltd. Olista Ltd. 05/09/2010 Pharsight Corporation; Vector Capital; Tripos International; Certara Symyx Technologies Inc. (NasdaqGS:SMMX) 05/07/2010 Infinio Group Limited (Catalist:5CS) Widget TV Pte. Ltd. 05/07/2010 Hotel Management Systems, Inc. (OTCBB:HMSM) Hotel Management Systems, Inc., Prior to Reverse Merger 05/07/2010 Honeyw ell International Inc. (NYSE:HON) Akuacom, Inc. 05/06/2010 AssetWorks, Inc. InCircuit Development Corporation 05/06/2010 Prime Alliance Solutions Inc. Dexma, Inc. 05/06/2010 Allocate Softw are plc. (AIM:ALL) Dynamic Change Limited 05/06/2010 CaseWare IDEA Inc. SymSure Limited 05/06/2010 SpringSource, Inc. GemStone Systems, Inc.

30| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX G: SELECT 2Q10 SOFTWARE INDUSTRY MERGERS AND ACQUISITIONS (CONTINUED)

Date Buye r Se lle r 05/06/2010 NetDragon WebSoft, Inc. (SEHK:777) Fujian TianDi Animation Technologies Co. Ltd 05/06/2010 Aldata Solution Oyj (HLSE:ALD1V) Cosmic Solutions Ltd. 05/05/2010 Hew itt Associates Inc. (NYSE:HEW) HRAdvance Enterprises, LP 05/05/2010 IHS Inc. (NYSE:IHS) Quantitative Micro Softw are, LLC 05/05/2010 Cenveo Inc. (NYSE:CVO) Glyph International Pvt Ltd. 05/05/2010 Tekelec (NasdaqGS:TKLC) Camiant, Inc. 05/05/2010 GoTV Netw orks, Inc. Hands-On Mobile, Inc., HOMBRE Division 05/04/2010 Flexera Softw are ManageSoft Corporation 05/04/2010 Peer Review Mediation and Arbitration, Inc. (OTCPK:PRVW) Docs in a Row , Inc. 05/04/2010 Curve Dental, Inc. Orasphere, Ltd. 05/04/2010 Infoblox, Inc. Netcordia, Inc. 05/03/2010 Intermedix Corporation EMSystems, LLC 05/03/2010 SuccessFactors, Inc. (NasdaqGM:SFSF) CubeTree, Inc. 05/03/2010 IRIS Group (ENXTBR:IRIS) SaveIT AS 05/03/2010 BackOffice Associates, LLC HiT Softw are, Inc. 05/03/2010 Motorola Inc. (NYSE:MOT) Azingo, Inc. 04/30/2010 iMarketing Ltd, Inc. TrackingSoft, LLC 04/30/2010 - Exidio Ltd. 04/30/2010 Google Inc. (NasdaqGS:GOOG) Bump Technologies Inc. 04/30/2010 DiCentral Corporation BASE2 Corporation 04/29/2010 CNW Group Ltd. dna13 Inc. 04/29/2010 Solarsoft Business Systems Limited Informance International, Inc. 04/29/2010 Electronics For Imaging (Luxembourg) S.à r.l. Radius Solutions Incorporated 04/29/2010 Digital River Inc. (NasdaqGS:DRIV) FatFooGoo AG 04/29/2010 Wolters Kluw er (UK) Limited The Simply HR Softw are Company Ltd 04/29/2010 Symantec Corporation (NasdaqGS:SYMC) GuardianEdge Technologies, Inc. 04/29/2010 Symantec Corporation (NasdaqGS:SYMC) PGP Corporation 04/29/2010 Beemw ay B.V. i-w ood BV 04/28/2010 EthicsPoint, Inc. ember ec³ Inc. 04/27/2010 DAPD ddp media holding AG Airmotion GmbH 04/27/2010 Sapiens International Corp. NV (NasdaqCM:SPNS) Harcase Softw are Ltd. 04/26/2010 Wall Street Systems Delaw are, Inc. Speranza Systems, Inc. 04/26/2010 DOAR, Inc. Inference Data LLC 04/26/2010 Playdom, Inc. Merscom, LLC 04/22/2010 MindTree Limited (BSE:532819) Sevenstrata IT Services Private Limited 04/21/2010 United Business Media plc (LSE:UBM) SharedVue, Inc. 04/21/2010 SAP AG (DB:SAP) TechniDATA AG 04/21/2010 Invensys Process Systems (S) Pte Ltd Skelta Softw are Pvt. Ltd. 04/21/2010 Amdocs Ltd. (NYSE:DOX) Streamezzo S.A. 04/20/2010 CDC Softw are Corporation (NasdaqGM:CDCS) eBizNET Solutions Pvt. Ltd. 04/20/2010 New s Corp. (NasdaqGS:NWSA) Irata Labs 04/20/2010 Clear2Pay nv/sa Jw are Technologies SA 04/20/2010 Deloitte AG Exsigno Deloitte 04/20/2010 SAP America, Inc. Sybase, Inc. (NYSE:SY) 04/20/2010 Neusoft Europe AG innovative systems GmbH 04/19/2010 Adtech-GESI, LLC Telindus Surveillance Solutions Ltd. 04/19/2010 Descartes Systems Group Inc. (TSX:DSG) 882976 Ontario Inc. 04/19/2010 CAE Inc. (TSX:CAE) Datamine International Limited 04/19/2010 CG Automation Second Wind, Inc., ADMS Wind SCADA and Wind Turbine 04/16/2010 Vocus Inc. (NasdaqGM:VOCS) Data Presse SAS 04/16/2010 RFID Invest AG InSync Softw are, Inc. 04/16/2010 Mentum S.A. Ascom Netw ork Testing Inc. 04/15/2010 NHN Games Co., Ltd. Webzen Inc. (KOSE:A069080) 04/15/2010 Oracle Corp. (NasdaqGS:ORCL) Phase Forw ard Inc. (NasdaqGS:PFWD) 04/14/2010 Cloud Centric Systems, Inc. (OTCPK:CLDR) V-Clouds Limited 04/14/2010 TPC Training Systems, Inc. IntelliSchematic, LLC 04/13/2010 - Stoopio Inc. 04/13/2010 BoardSuite Corp. HireCaliber.com 04/13/2010 Double Encore, Inc. Massively Overrated, LLC 04/13/2010 SpringSource, Inc. Rabbit Technologies Ltd. 04/13/2010 Iron Data Solutions, LLC CAVU Corporation 04/13/2010 Outer Level Corp. TinyPlanet Softw are, LLC 04/12/2010 BlueCielo ECM Solutions BV Kronodoc Oy 04/12/2010 B2 Hub PSF S.A. RCP Consultants Limited 04/12/2010 - SMR USA Inc. 04/12/2010 Institut de Participations de l'Ouest SA Coveris SAS 04/12/2010 Google Inc. (NasdaqGS:GOOG) Plink Search Ltd. 04/12/2010 Cover-All Systems Inc. Moore Stephens Business Solutions, LLC 04/12/2010 DdD retail A/S NTS Systemhaus Süd GmbH & Co. KG 04/09/2010 Research In Motion Limited (TSX:RIM) QNX Softw are Systems International Corporation

31| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

APPENDIX G: SELECT 2Q10 SOFTWARE INDUSTRY MERGERS AND ACQUISITIONS (CONTINUED)

Date Buye r Se lle r 04/09/2010 Tw itter, Inc. atebits LLC 04/09/2010 Architel, Inc. Applied Resource Technology, LLC 04/08/2010 South African Bankers Services Company Limited Document Solutions Pty Ltd. 04/08/2010 Trickstar Games Pty Ltd Sector3 Pty Ltd 04/08/2010 StrataCare, Inc. CS Stars LLC, MedBillPro Division 04/08/2010 Schlumberger Information Solutions Igeoss sarl 04/07/2010 Management Health Solutions, Inc. AtPar Inc. 04/07/2010 Absolute Softw are Corporation (TSX:ABT) Phoenix Technologies Ltd., FailSafe and Freeze Anti-Theft 04/07/2010 NetApp, Inc. (NasdaqGS:NTAP) Bycast, Inc. 04/07/2010 Herkules Capital AS Elis AS 04/07/2010 ThruPoint, Inc. Ubiquity Softw are Corporation Corporation Limited 04/07/2010 Solera Holdings Inc. (NYSE:SLH) Market Scan Holding B.V. 04/06/2010 BigHand Ltd. nFlow Softw are Ltd. 04/06/2010 Servigistics, Inc. Kaidara, Inc. 04/06/2010 iWave Softw are, LLC Enigmatec Corporation Limited, EMS Run Book Automation 04/06/2010 Innovise Softw are Limited Identifile Systems Limited 04/06/2010 Quark, Inc. GLUON Softw are, Inc. 04/06/2010 EVS Broadcast Equipment S.A. (ENXTBR:EVS) OpenCube Technologies S.A.S 04/05/2010 - Amdocs (China) Limited 04/05/2010 CRIF Corporation Equifax Enabling Technologies LLC 04/05/2010 Practicew orks Systems, LLC Healthsoft, Inc., Windent Business 04/01/2010 Enghouse Systems Ltd. (TSX:ESL) Mettoni Limited 04/01/2010 VeriSign Inc. (NasdaqGS:VRSN) TrustBearer Labs, LLC

32| 2Q10 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com

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