JACKSON SECURITIES, LLC

Research for the Prudent Investor

Date 5/21/07 Google (GOOG): Earnings

Current Price $470.32
estimates revised, maintain BUY
52WK HI $513.00 • Industry: Internet Services
52WK LO $360.57 • GOOG: NASDAQ; $470.32
EPS (TTM) $11.53 • 12-month price target: $560.00
Shares Outstanding 315M Buy initiated 6/26/06: $404.22 Buy 7/21/06: $387.12
Market Cap. $146B Target: $500.00 Target: $500.00
Dividend Yield NA
Price/Earnings (TTM) 40X
Price/Sales (TTM) 12.2X
EV/Revenue (TTM) 11.2X
EV/EBITDA (TTM) 25X
EBITDA (TTM) $5.23B Buy 2/01/07 Target: $560

Brian Bolan
Director of Research
Company Description
Technology
Google is an internet search and technology company that has
Jackson Securities, LLC established itself as the leader in its growing market. Free downloads of
300 S. Wacker Dr., Suite 2450 applications, tools and other products have helped to fortify the brand
Chicago, IL 60606 which has come to stand for something more than just a search engine.
Ph: (312) 253-0578
Fax: (312) 986-0560 Valuation and Recommendation:
Skype: BBolan As a leader in a growing market, we see many opportunities for Google to
bbolan@jacksonsecurities.com grow revenue, earnings and market share. We continue to recommend
investors BUY shares of Google.

Jackson Securities, LLC seeks to do business with companies

covered in its research reports. As a result, investors should be
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as only a single factor in making their investment decisions. Please
also refer to the important disclosures found on page numbers 4 and
5. Analyst Certification is found on page number 4.
Google (GOOG)

Summary

We are raising our earnings estimates for Google due to the superb
execution the company posted over the most recent two quarters.
Data trends and changes in the broader landscape have been
factored into our estimates.

Earnings

We had previously estimated that Google would earn $3.47 a share

on $3.76B in revenue in 2Q07. Our new estimate of $3.93 per
share on $3.89B in revenue for the same quarter. The consensus
EPS number of $3.56 is considerably lower than our estimate, but
this could be due to our adjustment in the tax rate. The company
has guided over the last two quarter to a rate of about 30% and
come in significantly below that. We have moved our estimated
tax rate to 26% from 29.9% to reflect this.

We are raising our TAC (traffic acquisition cost) estimates for the
quarter and the year from 81% of network revenues to 84% of
network revenues over the next two quarters and 85% in the fourth
quarter.

Valuation

Previously, we believed a 39x multiple for Google was appropriate

given its growth and consistent out performance of earnings. The
39x multiple landed us at a price target of $560, which we are
maintaining today. In looking forward, the landscape is set to
change due to the number of large acquisitions in the space. The
DoubleClick acquisition by Google, the aQuantive deal and its
large price tag incurred by Microsoft, and the purchase of 24/7
Real Media by the WPP Group all show how quickly the game can
change in the online ad world.

At the current price of $470 a share, we believe that Google

represents a significant value. Our earnings estimate for the year of
$16.47 is easily the highest on the Street, so due to our aggressive
stance on the rest of the calendar year we are holding back on
adjusting our price target at this time.

JACKSON Brian Bolan 2

SECURITIES, Director of Equity Research – Technology Research
LLC
 Google (GOOG)

Source: Google reports and Jackson

Securities.

JACKSON Brian Bolan 3

SECURITIES, Director of Equity Research – Technology Research
LLC
Disclosures:

Analyst Certification
I, Brian Bolan, hereby certify that the views expressed in this research report accurately reflect my personal
views about the subject securities and issuers. I also certify that no part of my compensation was, is, or will
be, directly or indirectly, related to the specific recommendations or views expressed in this research report. I
may be compensated in part based on the overall profitability of Jackson Securities, LLC, which includes
earnings from investment banking and all other aspects of the firm’s business.

Conflicts of interest:
Neither Jackson Securities nor any of its publishing analysts or their immediate family members has a position
in the securities described herein.

Compensation:
The research analyst has not received compensation based upon investment banking revenues or from the
subject company in the last 12 months.
Jackson Securities has not in the last 12 months managed or co-managed a public offering of securities,
received compensation for investment banking services from the subject company or any compensation for
products or services other than investment banking
Jackson Securities will seek investment banking compensation from the subject company in the next 3 months.

Position as Officer or Director:

Neither the research analysts nor members of their immediate households occupy positions as an officer or
director with the company/companies mentioned in this report.

Market Making:
Jackson Securities does not make a market in this stock

Explanation of Ratings:
Buy - Expected 12-month absolute performance of +10% or higher than the market price at which time the
rating was issued.
Hold - Expected 12-month absolute performance of +5% to –5% from the price at the time the rating was
issued.
Sell - Expected 12-month absolute performance of –10% or lower than the market price at which time the
rating was issued.

Distribution of Ratings:
Jackson Securities, LLC has a distribution of ratings among its coverage universe as follows:
Buys – 51.4% (18 of 35 active recommendations)
Holds – 45.7% (16 of 35 active recommendations)
Sells – 2.9% (1 of 35 active recommendations)

Jackson Securities has provided investment banking services within the previous 12 months with the following
percentage of the companies they have rated:

Brian Bolan
Research Analyst – Technology
Buys – 0.0% (0 of 35 active recommendations)
Holds – 0% (0 of 35 active recommendations)
Sells – 0% (0 of 35 active recommendations)

Risks: General economic conditions, economic slowdown/recession, adverse industry news.

Other Important Disclosures and Disclaimers

Disclaimer: This communication is neither an offer to sell nor a solicitation of an offer to buy any securities mentioned
herein. This material should not be construed as an offer to sell or the solicitation of an offer to buy any securities
mentioned herein in any jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any action
based on this material. This document is for general information only, and it does not constitute a personal
recommendation or take into consideration the particular investment objectives, financial condition or financial needs of
any clients. Before acting on any advise or recommendation in this research report, clients should consider seek
professional advice. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss
of original capital may occur.

The information contained herein has been obtained from sources that we believe to be reliable, but we do not guarantee
its accuracy or completeness. Any opinions expressed herein are statements of our judgment on the date appearing on
this material only and are subject to change without notice. We endeavor to provide updates on a reasonable basis of the
information discussed in research reports, but there may be reasons which prevent us from doing so.

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Brian Bolan
Research Analyst – Technology