CONFIDENTIAL
PRESENTATION TO:
Annual EcoSystem Meeting
Technology IPO Perspectives
October 29, 2004
Table of Contents
1
Technology IPO Perspectives
2
2005 IPO Market Outlook
Software Overview
Semiconductor Overview
Communications Overview
3
Google Case Study
1
Technology IPO Perspectives
Annual EcoSystem Meeting - Technology IPO Perspectives / October 29, 2004
3
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 buyer’s 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
4
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
5
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
6
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
7
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
8
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
$2,000
$1,500
$1,000
$500
12.0
9.0
6.0
3.0
0.0
(3.0)
Ja
n
Fe 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
$ 15.0
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
$3,000
$2,500
Ja
n
9
8
7
6
5
4
3
2
1
0
Equity Funds Flow ($ in billions)2
Volume ($mm)
Number of 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
9
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
buyer’s
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
8
2.0
6
4
1.0
2
0
0.0
30
pSe
ct
O
07
ct
O
14
21
ct
O
IPO
ct
O
28
04
vNo
11
18
25
02
09
16
cccvvvDe
De
De
No
No
No
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
0.0
2
9
6
3
0
04
11
18
06
13
20
27
-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
Asia’s 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 region’s 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
>
Asia’s Billion Boomers will underpin regional economic growth just as America’s 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
2
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
3
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
•
>
Google’s shares traded up 18% after the first day of trading, and 25% after the first week
60% of Google’s publicly traded shares are held by retail investors, which leads to the
potential for excessive volatility
In addition to the lessons learned regarding auctions, Google’s 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