CONFIDENTIAL

PRESENTATION TO:

Annual EcoSystem Meeting

Technology IPO Perspectives
October 29, 2004

Table of Contents
1

Technology IPO Perspectives

2005 IPO Market Outlook

Software Overview
Semiconductor Overview
Communications Overview

Google Case Study

Technology IPO Perspectives

Annual EcoSystem Meeting - Technology IPO Perspectives / October 29, 2004

Technology IPO Perspectives

2004 Technology IPO Observations

>

39 Technology IPOs priced YTD; up from 16 in 2003

>

Technology is 25% of IPO market dollar volume; healthcare leads with 27%

>

Year-to-date returns up 24.2%; better than all other equity indices

>

Since Q2, it has been a buyers market

>

Window has opened a crack for smaller transactions (versus 2003)

>

Internet-related IPOs returned (with profits!)

>

First year that China has had a material impact; more to come

>

It was a nice media event, but Google did not impact investors technology IPO
perceptions

>

High public company costs create barriers to IPO supply

>

IPOs occur in brief windows of opportunity

Annual EcoSystem Meeting - Technology IPO Perspectives / October 29, 2004

Technology IPO Perspectives

Number of IPOs From All Industries

(January 1, 1980 October 22, 2004)

1000

874

900
817
800
728
685

700

607

642

630
578

600

554

540

500

392

384

356

348

290

300

200

402

353

400

254
214

149

161
181
170

173

122
127

129

100

0
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Source: Securities Data Corporation

Annual EcoSystem Meeting - Technology IPO Perspectives / October 29, 2004

Technology IPO Perspectives

Number of Technology IPOs

(January 1, 1980 October 28, 2004)

PC Revolution

Retrenchment

Networking

Internet Revolution

Retrenchment

350
308
300

250
221
203

200

148

150

129
95
82
56

16

16
2003

2004

19

2002

39
29
27

2001

2000

1999

1998

1997

1996

1995

1993

1992

1991

23

1990

1988

17

27

1989

34

1987

1983

1982

1981

46

13
1986

24
12

1985

13
0

36

33

1984

50

85

80

1994

100

1980

Cyclicality of
IPOs follows
the evolution of
new industries
and broader
economic
themes

Source: Securities Data Corporation

Annual EcoSystem Meeting - Technology IPO Perspectives / October 29, 2004

Technology IPO Perspectives

Average Technology IPO Market Value and IPO Size

Networking

Internet Revolution

Retrenchment

$1,000

$900

$800

$700

(in millions)

$600

$500

$400

$300

$200

$100

Average IPO Market Value

2004

2003

2002

2000

1999

1998

1997

1996

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

$0

1980

Average IPO
market value
and size have
steadily
increased as
investors
demand
greater
liquidity and
companies with
greater critical
mass

Retrenchment

2001

PC Revolution

1995

(January 1, 1980 October 28, 2004)

Average IPO Size

Source: Securities Data Corporation

Excludes Accenture and Agere IPOs in 2001; median data for 2004

Annual EcoSystem Meeting - Technology IPO Perspectives / October 29, 2004

Technology IPO Perspectives

Technology IPOs by Sector Breakdown 2001 2004 YTD

(By # of Deals)

2004 YTD
Software and
Semiconductors
consistently
account for the
largest IPO
sectors

Miscellaneous
8%

Semi Capital
Equipment
3%

Telecom
Equipment
10%

2003
Miscellaneous
8%
Services &
Internet
Related
30%

Telecom Equipment
8%

Software
33%

Semiconductor
34%

Software
21%

Semiconductor
28%

Services & Internet

Related
17%

2002

2001

Semiconductor
17%

Software
49%

Telecom Equipment
13%

Semiconductor
27%

Semi C apital
Equipment
17%

Services & Internet

Related
17%

Software
40%
Services & Internet
Related
20%

Source: Equidesk
Excludes deals under $30M

Annual EcoSystem Meeting - Technology IPO Perspectives / October 29, 2004

Technology IPO Perspectives

2004 Technology IPO Market by Month

>

39 deals have priced 2004 YTD, raising $9.3B

Since June, the IPO market has deteriorated

Equity funds flow is a key leading indicator

Deteriorating earnings forecasts and high energy prices on investor minds in 2H04

$3,500

$1,000
$500

9.0
6.0
3.0
0.0
(3.0)

Ja

nFe 04
bM 04
ar
A 04
pr
M 04
ay
Ju 04
n
-0
Ju 4
lA 04
ug
S -04
ep
t0
O 4
ct
-0
4

$0

12.0

No. of Issues

$ Volume

-0
4
Fe
b04
M
ar
-0
4
A
pr
-0
4
M
ay
-0
4
Ju
ne
-0
4
Ju
l04
A
ug
-0
4
S
ep
t04
O
ct
-0
4

$2,000
$1,500

$ 15.0

$3,000
$2,500

Ja

9
8
7
6
5
4
3
2
1
0

Equity Funds Flow ($ in billions)2

Volume ($mm)

Number o f Issues

Technology IPO Issuance1

AMG

1 Dealogic; IPOs and IDSs filed/ revised within the last 180 days, current amount filed greater than or equal to $30mm
2 Bloomberg, AMG Database; AMG estimates based on a 1,000 firm survey

Annual EcoSystem Meeting - Technology IPO Perspectives / October 29, 2004

Technology IPO Perspectives

2004 Technology IPO Price Performance

IPO pricing
was strong in
Q1 as
investors
were more
confident in
projected
earnings
Subsequent
market
shortcomings
has led to
poor
aftermarket
pricing results
Since Q2, it
has been a
buyers
market,
leading to
strong
aftermarket
gains

Issue Date
10/26/04
10/21/04
10/13/04
09/29/04
09/29/04
09/28/04
09/27/04
09/23/04
08/24/04
08/05/04
08/05/04
07/29/04
07/21/04
07/21/04
07/16/04
07/14/04
07/08/04
07/08/04
06/25/04
06/24/04
06/23/04
06/22/04
06/22/04
06/17/04
06/15/04
06/09/04
05/25/04
05/15/04
04/22/04
03/31/04
03/25/04
03/16/04
03/12/04
03/06/04
03/04/04
02/20/04
02/12/04
02/06/04
02/06/04

Issuer
SHOPPING.COM
TELVENT GIT SA
PLANETOUT
NESS TECHNOLOGIES
CALLWAVE
JAMDAT MOBILE
WEBSIDESTORY
COGENT
GOOGLE
RIGHTNOW TECHNOLOGIES
NAVTEQ
VOLTERRA SEMICONDUCTOR
KANBAY INTL
BLACKBAUD
FREESCALE SEMICONDUCTOR
PHASE FORWARD
KONGZHONG
NETLOGIC MICROSYSTEMS
MULTI-FINELINE ELECTRONIX
MOTIVE
XYRATEX GROUP
SALESFORCE.COM
COLOR KINETICS
BLACKBOARD
LEADIS TECHNOLOGY
POWERDSINE
BLUE NILE
SHANDA
SIRF TECHNOLOGY HLDGS
MARCHEX
ULTRA CLEAN HOLDINGS
TNS
SEMICONDUCTOR MFG INTL
TOM ONLINE
LINKTONE LTD
CHEROKEE INTERNATIONAL
ATHEROS COMMUNICATIONS
ALPHASMART
STAKTEK HOLDINGS

Offer Price
18.00
9.00
9.00
12.00
10.00
16.00
8.50
12.00
85.00
7.00
22.00
8.00
13.00
8.00
13.00
7.50
10.00
12.00
10.00
10.00
14.00
11.00
10.00
14.00
14.00
11.50
20.50
$11.00
12.00
6.50
7.00
18.00
17.50
15.55
14.00
14.50
14.00
6.00
13.00

Excludes deals under $30M

Annual EcoSystem Meeting - Technology IPO Perspectives / October 29, 2004

Price as of
10/28/04
27.36
9.11
10.00
12.46
9.93
31.25
9.80
19.40
193.30
13.65
38.95
16.89
24.41
12.40
15.80
7.55
6.80
6.57
12.20
15.13
10.97
20.15
15.94
17.78
7.50
12.84
27.21
$31.20
11.75
14.30
5.07
19.55
10.48
12.32
8.30
6.73
11.38
3.05
3.69

Average

% Change
52%
1%
11%
4%
-1%
95%
15%
62%
127%
95%
77%
111%
88%
55%
22%
1%
-32%
-45%
22%
51%
-22%
83%
59%
27%
-46%
12%
33%
184%
-2%
120%
-28%
9%
-40%
-21%
-41%
-54%
-19%
-49%
-72%

24.2%
10

Technology IPO Perspectives

2004 Technology IPO Multiples

Company

Demonstrated
earnings are
an investor
focus

Gross
Proceeds

Shopping.com
$
Telvent GIT SA
PlanetOut
CallWave
Ness Technologies
Jamdat Mobile
WebSideStory
Cogent Systems
Google
Navteq
RightNow Technologies
Volterra
Blackbaud
Kanbay Intl
Freescale Semiconductor
Phase Forward
KongZhong
NetLogic Microsystems
Multi-Fineline Electronix
Motive
Xyratex Group
Color Kinetics
Salesforce.com
Blackboard
Leadis Technology
PowerDsine
Blue Nile
Shanda
SiRF Technology
Marchex
Ultra Clean Holdings
TNS
Semiconductor Manufacturing
TOM Online
Linktone Ltd.
Cherokee Intl
Atheros Communications
AlphaSmart
Staktek Holdings

Average
Median

123.7
78.3
48.1
40.0
161.1
88.8
42.5
200.9
1,916.4
1,012.0
44.1
36.0
64.8
106.9
1,581.1
39.4
100.0
69.3
55.7
50.0
97.4
40.0
110.0
77.0
84.0
69.0
76.7
169.0
132.0
26.0
42.0
79.6
1,712.9
175.0
86.0
95.7
144.9
26.4
169.0

$ 237.7
$ 84.0

Stock Price
@ IPO
10/28/04
$ 18.00
9.00
9.00
10.00
12.00
16.00
8.50
12.00
85.00
22.00
7.00
8.00
8.00
13.00
13.00
7.50
10.00
12.00
10.00
10.00
14.00
10.00
11.00
14.00
14.00
11.50
20.50
11.00
12.00
6.50
7.00
18.00
17.50
15.55
14.00
14.50
14.00
6.00
13.00

27.36
9.11
10.00
9.93
12.46
31.25
9.80
19.40
193.30
38.95
13.65
16.89
12.40
24.41
15.80
7.55
6.80
6.57
12.20
15.13
10.97
15.94
20.15
17.78
7.50
12.84
27.21
31.20
11.75
14.30
5.07
19.55
10.48
12.32
8.30
6.73
11.38
3.05
3.69

%
+/52.0%
1.2%
11.1%
-0.7%
3.8%
95.3%
15.3%
61.7%
127.4%
77.0%
95.0%
111.1%
55.0%
87.8%
21.5%
0.7%
-32.0%
-45.2%
22.0%
51.3%
-21.6%
59.4%
83.2%
27.0%
-46.4%
11.7%
32.7%
183.6%
-2.1%
120.0%
-27.6%
8.6%
-40.1%
-20.8%
-40.7%
-53.6%
-18.7%
-49.2%
-71.6%

24.2%
11.7%

Market Cap
@ IPO
Current
$

500.6
258.3
145.3
189.0
372.3
316.0
132.2
216.0
23,053.7
1,927.7
199.4
185.5
340.3
420.7
5,239.0
237.8
342.5
226.5
232.6
251.6
394.3
178.8
1,113.8
352.4
383.8
214.1
355.5
767.8
526.1
157.8
113.7
482.0
6,375.3
757.3
366.8
278.1
636.3
87.8
654.9

$ 1,256.0
$ 342.5

761.0
261.5
161.4
187.7
386.5
617.2
152.4
349.2
52,426.8
3,412.9
388.8
391.6
527.4
789.9
6,367.4
239.4
232.9
124.0
283.7
380.6
309.0
285.0
2,040.3
447.5
205.6
239.1
471.9
2,177.8
515.2
347.2
82.4
523.5
3,817.9
600.0
217.5
129.1
517.2
44.6
185.9

$ 2,092.3
$ 380.6

Estimated EPS
2004
2005

NA
NA
NA
NA
NA
NA
NA
NA
1.38 $
0.63
0.08
0.16
0.51
0.78
0.90
0.13
0.55
(0.25)
1.30
0.18
1.06
NM
0.08
0.25
0.68
0.15
0.46
0.59
0.49
(0.11)
0.67
0.81
0.32
1.08
0.41
0.70
0.27
0.38
0.49

NA
NA
NA
NA
NA
NA
NA
NA
2.18
0.90
0.15
0.37
0.58
0.88
1.15
0.26
0.65
0.44
1.25
0.30
1.10
0.20
0.22
0.68
0.72
0.63
0.62
0.79
0.50
0.07
0.90
0.93
0.65
1.43
0.57
1.15
0.43
0.46
0.63

2004E P/E
@ IPO Current

2005E P/E
@ IPO Current

NA
NA
NA
NA
NA
NA
NA
NA
61.6x
34.9x
87.5x
50.0x
15.7x
16.7x
14.4x
57.7x
18.2x
NM
7.7x
55.6x
13.2x
NM
137.5x
56.0x
20.6x
76.7x
44.6x
18.6x
24.5x
NM
10.4x
22.2x
54.7x
14.4x
34.1x
20.7x
51.9x
15.8x
26.5x

NA
NA
NA
NA
NA
NA
NA
NA
140.1x
61.8x
170.6x
105.6x
24.3x
31.3x
17.6x
58.1x
12.4x
NM
9.4x
84.1x
10.3x
NM
251.9x
71.1x
11.0x
85.6x
59.2x
52.9x
24.0x
NM
7.6x
24.1x
32.8x
11.4x
20.2x
9.6x
42.1x
8.0x
7.5x

NA
NA
NA
NA
NA
NA
NA
NA
39.0x
24.4x
46.7x
21.6x
13.8x
14.8x
11.3x
28.8x
15.4x
27.3x
8.0x
33.3x
12.7x
50.0x
50.0x
20.6x
19.4x
18.3x
33.1x
13.9x
24.0x
NM
7.8x
19.4x
26.9x
10.9x
24.6x
12.6x
32.6x
13.0x
20.6x

NA
NA
NA
NA
NA
NA
NA
NA
88.7x
43.3x
91.0x
45.6x
21.4x
27.7x
13.7x
29.0x
10.5x
14.9x
9.8x
50.4x
10.0x
79.7x
91.6x
26.1x
10.4x
20.4x
43.9x
39.5x
23.5x
NM
5.6x
21.0x
16.1x
8.6x
14.6x
5.9x
26.5x
6.6x
5.9x

37.9x
25.5x

51.6x
27.8x

23.2x
20.6x

30.1x
21.2x

Excludes deals under $30M

Annual EcoSystem Meeting - Technology IPO Perspectives / October 29, 2004

11

Technology IPO Perspectives

2004 Technology IPO Multiples

Date

Company

Proceeds

10/26
10/21
10/13
9/29
9/29
9/28
9/27
9/23
8/24
8/5
8/5
7/29
7/21
7/21
7/16
7/14
7/8
7/8
6/25
6/24
6/23
6/22
6/22
6/17
6/15
6/9
5/25
5/15
4/22
3/31
3/25
3/16
3/12
3/6
3/4
2/20
2/12
2/6
2/6

Shopping.com
Telvent GIT SA
PlanetOut
CallWave
Ness Technologies
Jamdat Mobile
WebSideStory
Cogent Systems
Google
Navteq
RightNow Technologies
Volterra
Blackbaud
Kanbay Intl
Freescale Semiconductor
Phase Forward
KongZhong
NetLogic Microsystems
Multi-Fineline Electronix
Motive
Xyratex Group
Color Kinetics
Salesforce.com
Blackboard
Leadis Technology
PowerDsine
Blue Nile
Shanda Interactive Entertainment
SiRF Technology
Marchex
Ultra Clean Holdings
TNS
Semiconductor Manufacturing
TOM Online
Linktone Ltd.
Cherokee Intl
Atheros Communications
AlphaSmart
Staktek Holdings

Stock Price
@ IPO
Current
18.00
9.00
9.00
10.00
12.00
16.00
8.50
12.00
85.00
22.00
7.00
8.00
8.00
13.00
13.00
7.50
10.00
12.00
10.00
10.00
14.00
10.00
11.00
14.00
14.00
11.50
20.50
11.00
12.00
6.50
7.00
18.00
17.50
15.55
14.00
14.50
14.00
6.00
13.00

27.36
9.11
10.00
9.93
12.46
31.25
9.80
19.40
193.30
38.95
13.65
16.89
12.40
24.41
15.80
7.55
6.80
6.57
12.20
15.13
10.97
15.94
20.15
17.78
7.50
12.84
27.21
31.20
11.75
14.30
5.07
19.55
10.48
12.32
8.30
6.73
11.38
3.05
3.69

%
+/-

Enterprise Value
@ IPO
Current
$

389.3
200.6
106.2
139.8
344.8
257.2
103.7
59.9
21,400.2
1,925.3
154.2
145.3
334.2
357.0
4,984.1
179.0
264.8
179.6
202.0
174.1
362.5
125.0
971.8
291.1
234.4
145.6
299.7
598.5
436.4
128.5
104.0
552.4
5,445.8
591.9
294.2
307.6
498.3
80.1
614.9

Average
Median

649.7
203.7
122.4
138.5
359.1
556.5
123.9
193.1
50,773.3
3,410.5
343.6
351.4
421.9
726.3
6,112.5
180.6
155.2
77.1
253.2
303.1
277.1
231.2
1,898.3
386.2
76.6
170.6
416.1
2,008.5
425.5
317.8
72.6
594.0
2,888.4
434.6
144.9
158.6
379.2
36.9
145.9

Estimated Rev.
2004
2005
NA
NA
NA
NA
NA
NA
NA
NA
1,747.0
474.0
59.6
40.0
135.1
178.0
5,850.0
71.9
46.0
47.0
274.7
97.3
450.6
37.5
175.8
109.8
154.8
37.0
161.1
120.4
119.8
40.8
195.8
251.0
1,023.9
105.3
47.9
140.5
192.0
43.2
84.3

NA
NA
NA
NA
NA
NA
NA
NA
2,257.0
572.0
80.2
58.0
150.2
222.0
6,300.0
87.6
63.1
68.0
317.0
110.1
518.1
50.0
285.0
132.8
200.0
55.5
201.4
176.9
150.0
60.3
244.0
272.0
1,631.5
138.8
81.7
163.0
253.1
48.9
109.7

2004E EV / Rev
@ IPO Current

2005E EV / Rev
@ IPO Current

NA
NA
NA
NA
NA
NA
NA
NA
12.2x
4.1x
2.6x
3.6x
2.5x
2.0x
0.9x
2.5x
5.8x
3.8x
0.7x
1.8x
0.8x
3.3x
5.5x
2.7x
1.5x
3.9x
1.9x
5.0x
3.6x
3.2x
0.5x
2.2x
5.3x
5.6x
6.1x
2.2x
2.6x
1.9x
7.3x

NA
NA
NA
NA
NA
NA
NA
NA
29.1x
7.2x
5.8x
8.8x
3.1x
4.1x
1.0x
2.5x
3.4x
1.6x
0.9x
3.1x
0.6x
6.2x
10.8x
3.5x
0.5x
4.6x
2.6x
16.7x
3.6x
7.8x
0.4x
2.4x
2.8x
4.1x
3.0x
1.1x
2.0x
0.9x
1.7x

NA
NA
NA
NA
NA
NA
NA
NA
9.5x
3.4x
1.9x
2.5x
2.2x
1.6x
0.8x
2.0x
4.2x
2.6x
0.6x
1.6x
0.7x
2.5x
3.4x
2.2x
1.2x
2.6x
1.5x
3.4x
2.9x
2.1x
0.4x
2.0x
3.3x
4.3x
3.6x
1.9x
2.0x
1.6x
5.6x

NA
NA
NA
NA
NA
NA
NA
NA
22.5x
6.0x
4.3x
6.1x
2.8x
3.3x
1.0x
2.1x
2.5x
1.1x
0.8x
2.8x
0.5x
4.6x
6.7x
2.9x
0.4x
3.1x
2.1x
11.4x
2.8x
5.3x
0.3x
2.2x
1.8x
3.1x
1.8x
1.0x
1.5x
0.8x
1.3x

3.5x
2.7x

4.7x
3.1x

2.6x
2.2x

3.5x
2.5x

Excludes deals under $30M

Annual EcoSystem Meeting - Technology IPO Perspectives / October 29, 2004

12

Technology IPO Perspectives

Impact of Election on New Issue Receptivity

>

New issue activity has historically continued through the US election period (including
IPOs)

>

During the last two election years, November activity levels have been lower than
October due to the election and (more importantly) U.S. Thanksgiving Holiday

>

Who wins may not be as important as how it is won divisiveness is not good

1996 Election Equity Issuance Activity

6.0
Election Date:
November 5, 1996

5.0
4.0

30

3.0

20

2.0

10

1.0

Election Date:
November 7, 2000

16
14

4.0

12
10

3.0

2.0

6
4

1.0

2
0

0.0

0
-3

p
Se

c
O

07
t-

c
O

14
t-

c
O

21
t-

IPO

c
O

28
t-

2
9
6
04
11
18
25
-0
-0
-1
vvvvec
ec
ec
o
o
o
o
D
D
D
N
N
N
N
Follow-on

5.0

$ Volume ($B)

40

6.0

18

$ Volume ($B)

Number of Issues

50

20

Number of Issues

60

2000 Election Equity Issuance Activity

0.0

2
9
6
3
0
06
13
20
27
04
11
18
-0
-0
-1
-2
-3
cccvvvvct
ct
ct
ct
ct
O
O
O
O
O
De
De
De
No
No
No
No

Total $ Volume

IPO

Follow-on

Total $ Volume

Source: Dealogic, Equidesk

Annual EcoSystem Meeting - Technology IPO Perspectives / October 29, 2004

13

Technology IPO Perspectives

Asias Billion Boomers: The Case for Asia

>

Domestic consumption and infrastructure spending is driving Asian economic growth

>

All Asian economies will continue to report good economic growth. Intra-regional
trade will continue to grow faster than the regions trade with Europe and America

>

The economic growth center of gravity has shifted from U.S./Europe to China/India.
India and China dominate the region and impact the world

>

Asias Billion Boomers will underpin regional economic growth just as Americas baby
boomers shaped the U.S. economy from 1963-1999

>

Asian natives with Silicon Valley executive experience are populating decision-making
roles at companies, leading to greater comfort for U.S. investors

>

Increased presence by U.S. VCs adding to diligence comfort level

>

5 IPOs in 2004; several in the shadow pipeline

Annual EcoSystem Meeting - Technology IPO Perspectives / October 29, 2004

14

Technology IPO Perspectives

What are Company Metrics for a Technology IPO?

Sizable end-market opportunity with leading market position
Product and customer diversification
Good visibility one year forward (the period valuation will be based upon)
Critical mass at least annual revenue rate of $60 mm
Demonstrated momentum through quarterly sequential revenue and earnings
growth
Profitability in year of issuance
Post-money market capitalization of at least $200 million
Experienced management

Annual EcoSystem Meeting - Technology IPO Perspectives / October 29, 2004

15

2005 IPO Market Outlook

Annual EcoSystem Meeting - Technology IPO Perspectives / October 29, 2004

16

2005 IPO Market Outlook

Technology IPOs Currently in Registration

>

19 Technology IPOs in registration versus 10 at same time last year

>

Semiconductors and Software are largest sector components, consistent with history

>

Demands of marketplace are being heard creating better supply/demand

equilibrium

Distribution by # of IPOs
Services & Internet
Related
11%
Miscellaneous
11%

Semiconductors
26%

Semi C ap
Equipment
21%
Software
31%

Annual EcoSystem Meeting - Technology IPO Perspectives / October 29, 2004

17

2005 IPO Market Outlook

Software IPO Market Outlook

>

Overall sentiment for the software IPO market is fair

>

Salesforce.com and RightNow Technologies were both fairly well received

Up 83% and 95% respectively since IPO

>

Market will demand double digit revenue growth and profitability

>

Companies will need to project $80 100M of revenue within 18 months of an IPO

>

Uncertainty whether there is a hot area in the application sector

>

Security remains very strong within infrastructure software

Annual EcoSystem Meeting - Technology IPO Perspectives / October 29, 2004

18

2005 IPO Market Outlook

Semiconductor IPO Market Outlook

>

Only 4 of the 11 IPOs have outperformed Nasdaq since going public

>

Famously cyclical market

>

Inventory movements exacerbate cycle

>

Ever present threat of disruptive technologies

>

September pre-announcements spooked market

>

Temporary inventory correction? or beginning of cyclical downturn?

Wall Street has bi-polar view

Pollyanna or chicken little?

All eyes on a few marquee names

Annual EcoSystem Meeting - Technology IPO Perspectives / October 29, 2004

19

2005 IPO Market Outlook

Communications IPO Market Outlook

>

2004 CapEx by carriers was a catch-up year; 2005 looks to be modestly up for
wireless and more robust for wireline

>

Enterprise IT spending expected to grow slightly faster than economic growth (5%+)

>

>

FTTx trials hope to convert to revenue

Key areas of focus are security, storage, IP everywhere

Combination of factors make public markets difficult

Concentrated customer base

Accounting (revenue recognition)

Quarterly volatility / lumpiness of orders

Some segments will be more attractive

Security

Broadband/Triple play

Annual EcoSystem Meeting - Technology IPO Perspectives / October 29, 2004

20

Google Case Study

Annual EcoSystem Meeting - Technology IPO Perspectives / October 29, 2004

21

Google Case Study

Google: A Dutch-Auction Experiment

Filing Data
Total Shares:
By Google:
By selling shareholders:
Price:

25,697,529 shares
14,142,135 shares
11,555,394 shares
$108 - $135 range

Pricing Data
19,605,052 shares
14,142,135 shares
5,462,917
$85

>

Despite feverish anticipation, Google failed to price within its range

>

After choosing an auction methodology designed to leave no money-on-the-table, Google priced

below its range (43% below mid-point), and then saw its stock rise immediately after the IPO

>

The auction process spooked institutional investors who feared involvement in an offering where
terms could be significantly affected by retail investors

>

Googles shares traded up 18% after the first day of trading, and 25% after the first week

60% of Googles publicly traded shares are held by retail investors, which leads to the
potential for excessive volatility

In addition to the lessons learned regarding auctions, Googles IPO reinforced common wisdom
regarding the IPO process

Avoid silly gun-jumping mistakes

Take care to adhere to all federal and blue sky requirements relating to options and private
company stock

Avoid conducting a roadshow in August

Annual EcoSystem Meeting - Technology IPO Perspectives / October 29, 2004

22