Goldman Stanley, Inc.
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Confidential Draft

Executive Summary
Aardvark Valuation
Potential Acquisitions
Process Recommendations
Appendix
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• As of January 29, 2010, Aardvark’s share price and valuation are at all-time highs, having more than doubled since early 2009
• As Aardvark’s stock price has soared in value, it has also generated over $35B in cash & cash-equivalents
• As Aardvark’s cash balance grows, it is likely to face shareholder pressure to reinvest the cash in its business and to make significant acquisitions
• Given Aardvark’s strong currency and cash balance, it could easily make several
“tuck-in” acquisitions – or larger-scale acquisitions to acquire customers
•
Such a strategy would allow Aardvark to capture more of the smartphone, laptop, and desktop markets, and significantly improve its software offerings
• Given Aardvark’s cash position, such acquisitions could be made with 100% cash – or in the case of a larger deal, stock could also be used
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• Aardvark’s current share price of $192.61 far exceeds the value implied by comparable public companies
•
Recent comparable transactions show higher implied valuation ranges due to flurry of consolidation and hardware M&A activity over 2009
•
Discounted Cash Flow Analysis under base-case assumptions shows implied valuation onpar with Aardvark’s current share price, implying that share price is justified
• All valuation analysis is based on “base-case” financial projections in line with Wall
Street analyst expectations
• Given Aardvark’s cash balance and high valuation multiples vs. similar public companies, few competitors are well-positioned to make substantial acquisitions
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DCF Assumptions:
Discount Rate: 12.5%
Terminal EBITDA Multiple: 7.0 x
Model Uses “Base Case” Financial
Projections
Mid-Year Convention Used For PV
Of Cash Flows
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• Given Aardvark’s large cash balance, it could make a wide variety of acquisitions – ranging from small “tuck-in” deals to acquire technology and IP to larger deals driven by customer or market share acquisition
•
Tier 1 Potential Acquisitions
– “Tier 1” acquisition candidates are worth over $1 billion and would significantly boost Aardvark’s market share or result in substantial revenue or cost synergies
– Leading candidates include ARM, for its chipset technology and integration with
Aardvark’s existing products, and Research in Motion – to capture additional share in the corporate smartphone market
•
Tier 2 Potential Acquisitions
– “Tier 2” acquisition candidates are worth less than $1 billion and would enhance
Aardvark’s core technology and fill in gaps in existing products
–
Potential acquisitions include specialized chipset and semiconductor companies as well as Web 2.0, social media, and mobile software companies
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Tier 1 Acquisition Candidates
Tier 2 Acquisition Candidates
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ARM Holdings
Headquarters:
Employees:
Founded:
Cambridge, UK
Financial Information:
1700
ARM Holdings is a supplier of semiconductor intellectual property and components of digital electronic products. It designs and licenses intellectual property rather than manufacturing and
Market Cap:
Cash:
2009 Revenue:
2009 EPS:
2010E Revenue:
2010E EPS: selling semiconductor chips, and it licenses its IP to
$2.5B
a wide network of hardware, mobile, and
$204M networking companies. It also provides tools to optimize system-on-chip designs.
$531M
$10.97
Goldman Stanley
Warren East
Tudor Brown
Graham Budd
Mike Muller
Tim Score
John Cornish
Ian Drew
Antonio Viana
• Processors – ARM provides 32-bit embedded microprocessors based on a common architecture that delivers high-performance, power efficiency, and reduced system cost.
•
System IP
– Serves as the connection between processors, memory, and peripherals to ensure optimum performance.
• Multimedia – ARM provides graphics processors that enable embedded graphics, audio, and video applications.
• Physical IP – Provides SoC integrated circuits and logic, embedded memory, and interface IP.
•
Tools
– ARM subsidiaries provide compilers, debuggers, simulators, and other optimization tools for a wide variety of chip and processor families.
Management Team:
CEO
President
COO
CTO
CFO
EVP, Systems
EVP, Marketing
EVP, Sales

Research In Motion
Headquarters:
Employees:
Founded:
Waterloo, ON
12,000
1984
Management Team:
Research In Motion designs the BlackBerry smartphone and creates solutions for the worldwide mobile communications market, including a variety of software for the BlackBerry device. In addition to its line of BlackBerry devices, the company also provides enterprise server software to support businesses using the device.
Jim Balsillie
Mike Lazaridis
Don Morrison
Robin Bienfait
Brian Bidulka
David Yach
Co-CEO
Co-CEO
COO
CIO
CFO
CTO
Financial Information:
Market Cap:
Cash:
2009 Revenue:
2009 EPS:
2010E Revenue:
2010E EPS:
Products:
$36B
• BlackBerry Pearl 3G – Provides Trackpad and dedicated media keys as well as SureType technology and 3G network support.
• BlackBerry Bold – Provides extended battery life as well as GPS, Wi-Fi, and 3G network support.
• BlackBerry Curve 8500 – Includes Trackpad and dedicated media keys, easy media sharing, and 2.0
MP camera.
• BlackBerry Tour 9630 – Provides GPS, worldwide compatibility, and 3.2 MP camera.
• BlackBerry Storm – Features Wi-Fi, SurePress technology, and 3G network support.
• BlackBerry Curve 8900 – Features thin, lightweight design as well as GPS and Wi-Fi support and 3.2 MP camera.
AT&T, Brightstar, Digital China,
GPXS, Hewlett-Packard, IBM,
Skype, Sprint, Tata Indicom, T-
Mobile, Verizon, Virgin, and
Vodafone,
Key Partners:
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Goldman Stanley

•
We recommend engaging in targeted discussions with the Tier 1 acquisition candidates and assessing their receptiveness to M&A discussions
•
At the same time, Goldman Stanley will reach out to Tier 2 candidates and introduce
Aardvark as a potential acquirer
•
M&A process with Tier 1 candidates will take significantly longer due to the scale of the companies, so we recommend conducting both processes simultaneously
•
Depending on responses from Tier 1 and Tier 2 candidates, Goldman Stanley and
Aardvark may do additional research to determine other potential acquisitions and then approach them
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Broad
Marketing
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