Technology, Media & Telecom Industry Update May 2012 Member FINRA/SIPC www.harriswilliams.com Table of Contents Technology, Media & Telecom What We've Been Reading…………………………………………………………………………………………1 Bellwethers……………………………………………………………………………………………2 TMT Public Market Trading Statistics………………………………………………………………………..…………………..3 Recent TMT M&A Activity…………………………………………………………………………………………….4 Recent U.S. TMT Initial Public Offerings………………………………………………………………………….………………...………..5 Public and M&A Market Overview by Sector Data and Information Services………………………………………………………………..…………..6 Financial Technology…………………………………………………………………………8 Internet & Digital Media……………………………………………………..…………………..10 IT and Tech-Enabled Services………………………………………………………………..13 Software – Application…………………………………………………….…………………..15 Software – Infrastructure……………………………………………………..…………………..18 Software – SaaS……………………………………………………………………………………………………..20 Tech Hardware……………………………………………………………………..…………………..22 Telecom………………………………………………………………………………………………..25 Selected HW&Co. TMT Transactions…………………………………………………………………………………………..28 TMT Group Overview and Disclosures…………………………………………………………………………………………..29 Note: All market data in the following materials is as of April 30, 2012. What We’ve Been Reading How The Bush Tax Cuts Could Lead To A Crazy Year For M&A Business Insider 4/30/2012 An increased amount of M&A activity is expected in the remainder of 2012 as potential changes in the capital gains tax policies are motivating firms to exit investments before the end of the year when the Bush Tax Cuts expire. At the end of 2012, capital gains taxes will jump from 15% to 20%, with some speculating it could reach as high as 39%. Both investors and founders looking to maximize their capital gains are being more aggressive in seeking 2012 exits at the right prices. Read the full article here. Health Care Data Breaches Highlight Need for Security Investment eWeek 4/25/2012 Recent network and data breaches at Emory Healthcare in Atlanta, the South Carolina Department of Health and Human Services, and the Utah Department of Health underscore the need for increased security investment at healthcare organizations. New regulations requiring healthcare organizations to disclose data breaches publicly further support the need to implement proactive security policies. IDC Health Insights recommends investing in software programs providing data mining and intrusion protection, auditing security practices, and limiting data storage to data centers. Read the full article here. Big-Data Investors Look for the Next Splunk Reuters 4/20/2012 The recent successful IPO of Splunk, Inc has sparked stronger investor interest in the big data space. For a sector that has been growing in “relative obscurity” until recently, the growing realization of the broad applications of big data technologies is spurring investor interest. While most pure-play big data companies are still a few years away, the market should expect to see increased M&A activity in the near term. Read the full article here. The Post-Cash, Post-Credit-Card Economy New York Times 4/28/2012 A recent Pew Research Center survey shows that approximately two-thirds of the survey respondents, comprised of technologists and social scientists, believe that mobile payment and banking technologies such as the mobile wallet will have substantially replaced both cash and credit cards by the year 2020. A wide variety of technology startups are vying for a piece of this rapidly expanding market, while established players, such as PayPal who posted $118B in total transactions last year, continue to expand their offerings and partnerships. Read the full article here. Questions for Mobile Computing Technology Review 5/1/2012 Mobile computing is being adopted by consumers at rates never seen before. Last year, smart phones and tablets outsold personal computers for the first time. According to Forrester Research, in the next 4 years more people will access the internet via mobile devices than via personal computers. Hardware distinctions are expected to fade as cloud storage becomes accessible on all devices. These trends raise questions for technology companies evaluating their strategies for the post personal computer era. Read the full article here. 1 Public Market Trading Statistics Bellwethers Stock Last Twelve Months Last 30 Days Performance 140% 120% 130% 115% 120% 110% 110% 105% 100% 100% 90% 95% 80% 90% 11 12 11 12 12 11 11 12 11 11 11 11 11 - - - - - - - - - - - - - Jul Jan Jun Oct Sep Feb Apr Apr Dec Aug Mar Nov May 04/11/12 04/13/12 04/15/12 04/17/12 04/19/12 04/21/12 03/30/12 04/01/12 04/03/12 04/05/12 04/07/12 04/09/12 04/23/12 04/25/12 04/27/12 04/29/12 Nasdaq Bellwethers Nasdaq Bellwethers ($ in millions) Stock Price CY 2012P Multiples Summary LTM Comparable Market As % of 52- Annual Growth Rates Enterprise Value/Revenue Enterprise Value/EBITDA Trading Company Capitalization Current Week High Revenue EBITDA LTM CY 2012P LTM CY 2012P Bellwethers Summary Apple Inc. $ 546,057.5 $ 583.98 90.7% 33.2% 43.4% 3.1x 2.6x 8.2x 6.7x Microsoft Corporation 268,953.7 32.02 97.2% 7.1% 10.3% 2.9x 2.8x 7.0x 6.5x International Business Machines Corporation 238,863.5 207.08 98.3% 1.2% 2.5% 2.4x 2.3x 9.5x 9.3x Google Inc. 197,185.0 604.85 90.2% 24.2% 38.3% 3.9x 3.3x 10.6x 8.0x Samsung Electronics Co. Ltd. 160,467.9 1,229.87 98.7% NA NA 1.0x NA 5.8x NA Oracle Corporation 146,268.1 29.40 80.5% 3.6% 22.0% 3.6x 3.5x 8.3x 7.0x Intel Corporation 142,196.7 28.40 98.7% 5.7% 5.7% 2.5x 2.4x 5.8x 5.4x QUALCOMM Inc. 109,422.2 63.83 92.7% 23.4% 28.0% 4.8x 4.2x 13.0x 9.9x Cisco Systems, Inc. 108,553.6 20.16 94.6% 6.5% 23.8% 1.7x 1.6x 6.4x 5.2x Amazon.com Inc. 104,477.0 231.90 94.0% 31.5% 80.9% 1.9x 1.6x 54.4x 31.9x SAP AG 78,988.5 66.36 91.4% 11.4% 2.2% 4.0x 3.7x 11.1x 10.8x EMC Corporation 59,232.8 28.21 94.0% 10.5% 28.7% 2.5x 2.3x 10.6x 8.6x eBay Inc. 52,966.2 41.02 98.0% 20.3% 36.7% 3.7x 3.3x 13.3x 10.2x Hewlett-Packard & Company 48,959.0 24.76 59.3% (1.5%) 3.5% 0.6x 0.6x 4.6x 4.4x Total Comp Set Median $125,809.4 94.0% 10.5% 23.8% 2.7x 2.6x 8.9x 8.0x 2 TMT Public Market Trading Statistics by Vertical Stock Price % Change LTM Revenue LTM EBITDA TEV / Revenue Multiple TEV / EBITDA Multiple Comparable Industry Segment 1 Month 12 Month Growth Margin LTM 2012P 2013P LTM 2012P 2013P Trading Bellwethers 0.8% 18.8% 11.6% 32.1% 2.7x 2.6x 2.3x 8.9x 8.0x 6.7x Data and Information Services (0.3% ) 11.9% 10.4% 25.9% 2.9x 2.9x 2.7x 10.1x 9.1x 8.4x Summary Diversified Information Services (0.9%) 23.0% 7.7% 28.2% 3.0x 2.9x 2.7x 9.8x 8.9x 8.4x Lender/Mortgage/Real Estate Data and Processing 2.8% 8.9% 7.2% 19.4% 2.5x 2.4x 2.3x 11.9x 8.0x 7.6x Market Data and Research 0.1% (1.1%) 13.0% 16.5% 2.0x 2.2x 2.0x 11.1x 12.1x 10.5x Financial Data and Media (2.3%) 2.3% 10.6% 37.5% 4.1x 4.6x 4.3x 12.5x 10.3x 9.4x Financial Technology 0.2% 14.1% 13.3% 27.6% 3.3x 2.9x 2.7x 11.3x 9.9x 8.9x Financial Software and Solutions (2.0%) 3.3% 13.4% 26.6% 3.7x 3.3x 3.0x 13.3x 11.0x 10.1x Transaction and Payment Processing 1.7% 22.0% 12.0% 27.6% 2.7x 2.6x 2.5x 10.7x 9.3x 8.4x Internet & Digital Media (2.6% ) (5.6% ) 27.5% 20.0% 2.9x 2.4x 2.1x 10.2x 8.5x 7.7x Advertising & Marketing (9.1%) 0.2% 57.8% 29.6% 5.5x 4.6x 2.8x 18.5x 14.5x 10.3x Content & Services (3.9%) (22.0%) 29.3% 13.9% 2.9x 2.4x 2.1x 9.8x 9.8x 8.8x Content Delivery & Management (7.4%) (13.6%) 20.7% 23.0% 2.9x 1.9x 1.8x 9.7x 8.5x 7.3x e-Commerce 4.8% 2.1% 30.3% 18.1% 3.7x 3.3x 2.8x 19.4x 11.5x 10.2x Diversified Media (2.0%) 1.7% 4.9% 21.9% 1.8x 1.7x 1.7x 7.5x 7.2x 6.8x IT and Tech-Enabled Services (1.4% ) 2.5% 10.2% 15.7% 1.4x 1.4x 1.2x 9.6x 8.6x 7.5x IT Services (4.0%) (11.3%) 15.8% 11.2% 0.6x 1.3x 1.1x 6.5x 8.7x 7.7x Government IT & BPO (1.5%) 5.1% 10.2% 9.9% 0.6x 0.5x 0.5x 9.3x 6.2x 5.9x Onshore BPOs (0.2%) 3.5% 2.6% 15.7% 0.9x 1.0x 1.0x 8.6x 5.7x 4.6x Offshore BPOs 0.1% 4.6% 15.8% 18.4% 2.3x 2.1x 1.8x 11.0x 10.6x 9.7x Software – Application (3.2% ) 8.7% 18.9% 21.2% 3.6x 3.4x 3.1x 14.3x 10.6x 10.4x Enterprise Software (1.9%) 11.5% 18.4% 23.2% 3.6x 3.5x 3.2x 11.0x 10.4x 9.5x Product Lifecycle Management/Technical Design (3.5%) 9.1% 14.6% 21.9% 3.4x 2.3x 2.1x 12.9x 8.3x 7.9x Customer Engagement/Call Center Management (3.2%) 4.5% 11.4% 17.9% 2.4x 2.1x 1.9x 14.7x 8.1x 7.6x Human Capital Management (0.2%) 16.8% 21.0% 10.6% 7.6x 6.0x 4.9x 68.6x 29.1x 23.6x Vertically Focused - Public Sector 0.7% 9.0% 13.6% 19.3% 3.7x 3.3x 2.9x 14.4x 13.0x 10.8x Vertically Focused - Healthcare IT (9.5%) 3.2% 24.8% 27.3% 5.0x 4.2x 3.7x 15.9x 12.5x 10.7x Software – Infrastructure (1.8% ) 6.7% 15.6% 22.4% 3.1x 3.5x 3.2x 11.8x 11.1x 10.1x Enterprise IT Management (0.0%) (0.4%) 14.4% 22.6% 3.0x 2.7x 2.5x 10.3x 9.5x 11.4x Security (2.3%) 18.2% 12.8% 27.5% 7.0x 6.5x 5.5x 12.4x 11.1x 10.1x Enterprise Storage (4.4%) 6.2% 22.2% 17.6% 3.6x 3.3x 2.9x 16.3x 12.4x 11.0x Software – SaaS (4.3% ) 5.9% 34.4% 15.3% 6.9x 5.6x 4.4x 23.5x 18.8x 15.2x Technology Hardware (5.6% ) (5.7% ) 0.9% 17.4% 1.1x 1.2x 1.1x 7.4x 6.6x 5.5x Semiconductor Devices (5.0%) (11.1%) 0.5% 21.9% 2.2x 2.1x 1.8x 9.8x 8.2x 6.9x Semiconductor Equipment (6.8%) (4.2%) (6.5%) 22.1% 1.4x 1.4x 1.2x 6.6x 6.8x 5.6x Electronic Manufacturing (8.3%) (9.8%) 3.3% 5.7% 0.3x 0.3x 0.3x 5.7x 5.0x 4.5x PCs, Servers, and Computing Components (0.6%) 6.4% 3.3% 13.2% 0.8x 0.7x 0.8x 6.9x 6.0x 5.4x Storage and Networking Components (13.8%) (12.4%) 8.6% 23.6% 1.0x 1.0x 0.9x 6.0x 4.8x 3.6x Telecommunications (5.8% ) (9.5% ) 9.8% 22.7% 2.0x 1.9x 1.7x 8.4x 7.9x 6.2x Network Optimization (7.8%) (20.2%) 18.2% 21.3% 3.7x 3.3x 2.8x 10.8x 9.2x 7.8x Fiber Optics (12.9%) (31.9%) 5.5% 7.1% 1.3x 1.2x 1.1x 26.9x 10.8x 9.2x Telecom/Networking Equipment (9.0%) (18.2%) 6.4% 16.6% 1.2x 1.2x 1.2x 7.4x 7.8x 5.8x Carriers and Content Providers (5.3%) (14.3%) 11.1% 25.5% 1.8x 1.8x 1.7x 6.1x 5.7x 5.3x Infrastructure Services 6.1% 31.0% 11.8% 62.7% 13.2x 11.1x 9.8x 21.1x 17.6x 15.1x Managed Services 7.0% 49.2% 27.1% 40.0% 5.7x 5.1x 4.4x 13.7x 11.1x 9.5x NASDAQ (0.8% ) 8.6% Note: Public comparables exclude companies with market capitalization below $500 million.