Goldman Stanley, Inc.Project Aardvark Presentation to the Board of Directors January 29, 2010 Goldman Stanley Confidential Draft Table Of Contents Executive Summary 3 Aardvark Valuation 5 Potential Acquisitions 11 Process Recommendations 16 Appendix 19 Goldman Stanley 2 Executive Summary Goldman Stanley 3 . Aardvark’s share price and valuation are at all-time highs. 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.Executive Summary • As of January 29. having more than doubled since early 2009 • As Aardvark’s stock price has soared in value. such acquisitions could be made with 100% cash – or in the case of a larger deal. and desktop markets. and significantly improve its software offerings • Given Aardvark’s cash position. 2010. laptop. stock could also be used Goldman Stanley 4 . it has also generated over $35B in cash & cash-equivalents • As Aardvark’s cash balance grows. Aardvark Valuation Goldman Stanley 5 . Valuation Summary • Aardvark’s current share price of $192. few competitors are well-positioned to make substantial acquisitions Goldman Stanley 6 .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 on-par 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. 00 $200.00 Goldman Stanley $100.00 (1) EBITDA excludes stock-based compensation and non-recurring charges.00 $500.00 $300. 5-9x Terminal Multiple: $0. 2010. $700.Aardvark Valuation Summary ($ in Millions Except Per Share Data) Public Company Comparables(1)(2) 2009 EV / Revenue: 2010E EV / Revenue: 2009 EV / EBITDA: 2010E EV / EBITDA: 2009 P / E: 2010E P / E: Min to 25th Precedent Transactions (1) 25th to Median Median to 75th Trailing EV / Revenue: 75th to Max Forward EV / Revenue: Trailing EV / EBITDA: Forward EV / EBITDA: Discounted Cash Flow Analysis 11-15% Discount Rate. (2) Financial data as of January 29.00 $400.00 7 .00 $600. 5 x 2009 EBITDA Multiple 2010E EBITDA Multiple 2.Aardvark Comparable Public Companies US-Based Hardware & Networking Companies with Over $20 Billion Revenue ($ in Millions Except Per Share Data) Comparable Public Companies – Operating Metrics (1) 45.0% 15.0%) 39% 31% 29% 18% 14% 8% 25% 22% 2010E Revenue Growth 8% 7% 2009A EBITDA Margin 4% (6%) Comparable Public Companies – Valuation Multiples(1)(2) 14.0% 40.0% 25.0 x 4.4 x 3.0% (5.0% 5.0% 20.5 x 10.8 x 4.0% 10.7 x 8.0% 0. 8 .0 x Goldman Stanley (1) EBITDA excludes stock-based compensation and non-recurring charges.0 x 6.0 x 12.6 x 7.0 x 0. (2) Financial data as of January 29. 2010.1 x 5.0 x 10.6 x 7.4 x 6.7 x 10.0 x 11.3 x 5.0%) (10.0 x 8.0% 35.0% 30.6 x 8. Aardvark Precedent Transactions Networking & Hardware M&A Transactions Over $1 Billion with US-Based Sellers Since January 1. 9 . 2008 ($ in Millions Except Per Share Data) Goldman Stanley (1) Excludes stock-based compensation and non-recurring charges. 0 x Model Uses “Base Case” Financial Projections Mid-Year Convention Used For PV Of Cash Flows Goldman Stanley 10 .Aardvark Discounted Cash Flow Analysis ($ in Millions Except Per Share Data) DCF Assumptions: Discount Rate: 12.5% Terminal EBITDA Multiple: 7. Potential Acquisitions Goldman Stanley 11 . social media.0.Potential Acquisitions • 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. 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. for its chipset technology and integration with Aardvark’s existing products. and mobile software companies Goldman Stanley 12 . Potential Acquisition Candidates Tier 1 Acquisition Candidates Tier 2 Acquisition Candidates Goldman Stanley 13 . and it licenses its IP to a wide network of hardware. UK 1700 1990 Financial Information(1): Market Cap: Cash: 2009 Revenue: 2009 EPS: 2010E Revenue: 2010E EPS: $2. National Semiconductor. and other optimization tools for a wide variety of chip and processor families. Real Networks. Electronic Arts. mobile. and reduced system cost. It also provides tools to optimize system-on-chip designs. Samsung. simulators. Microsoft. (1) Financial data as of January 29. embedded memory.5B $204M $490M $7. Management Team: Warren East Tudor Brown Graham Budd Mike Muller Tim Score John Cornish Ian Drew Antonio Viana CEO President COO CTO CFO EVP. Systems EVP.85 $531M $10.Company Profile: ARM ARM Holdings Headquarters: Employees: Founded: Cambridge. •Multimedia – ARM provides graphics processors that enable embedded graphics. Nokia. 2010. NVIDIA. •Tools – ARM subsidiaries provide compilers. •Physical IP – Provides SoC integrated circuits and logic. 14 . and networking companies. and Toshiba. memory. Sales Products: Key Partners: •Processors – ARM provides 32-bit embedded microprocessors based on a common architecture that delivers high-performance. Rambus. and peripherals to ensure optimum performance. and interface IP. debuggers. and video applications. •System IP – Serves as the connection between processors. Marketing EVP. LSI Logic. It designs and licenses intellectual property rather than manufacturing and selling semiconductor chips. power efficiency. audio.97 Goldman Stanley ARM Holdings is a supplier of semiconductor intellectual property and components of digital electronic products. the company also provides enterprise server software to support businesses using the device. Hewlett-Packard. and Vodafone.000 1984 Financial Information(1): Market Cap: Cash: 2009 Revenue: 2009 EPS: 2010E Revenue: 2010E EPS: $36B $2. (1) Financial data as of January 29. Management Team: Jim Balsillie Mike Lazaridis Don Morrison Robin Bienfait Brian Bidulka David Yach Co-CEO Co-CEO COO CIO CFO CTO Key Partners: AT&T. TMobile. Verizon. •BlackBerry Tour 9630 – Provides GPS.2 MP camera. easy media sharing.5B $13B $3.Company Profile: Research In Motion Research In Motion Headquarters: Employees: Founded: Waterloo. Sprint. 15 .03 Goldman Stanley Research In Motion designs the BlackBerry smartphone and creates solutions for the worldwide mobile communications market. and 3G network support. including a variety of software for the BlackBerry device. Tata Indicom. Products: •BlackBerry Pearl 3G – Provides Trackpad and dedicated media keys as well as SureType technology and 3G network support.2 MP camera. In addition to its line of BlackBerry devices. 2010. and 2. Skype. lightweight design as well as GPS and Wi-Fi support and 3. ON 12.0 MP camera. Wi-Fi. •BlackBerry Storm – Features Wi-Fi. Digital China. •BlackBerry Bold – Provides extended battery life as well as GPS. and 3. and 3G network support. •BlackBerry Curve 8500 – Includes Trackpad and dedicated media keys. IBM. Brightstar. Virgin.70 $17B $5. GPXS. worldwide compatibility. SurePress technology. •BlackBerry Curve 8900 – Features thin. Process Recommendations Goldman Stanley 16 . Goldman Stanley will reach out to Tier 2 candidates and introduce Aardvark as a potential acquirer • M&A process with Tier 1 candidates will take significantly longer due to the scale of the companies. so we recommend conducting both processes simultaneously • Depending on responses from Tier 1 and Tier 2 candidates.Key Recommendations • We recommend engaging in targeted discussions with the Tier 1 acquisition candidates and assessing their receptiveness to M&A discussions • At the same time. Goldman Stanley and Aardvark may do additional research to determine other potential acquisitions and then approach them Targeted Buy-Side M&A Broad Buy-Side M&A < 5 parties 10 – 100 companies 6 months to 1 year Time required is highly variable Close-ended Iterative process Higher success probability Lower success probability Goldman Stanley 17 . Process Recommendation Specialized Negotiations With One Party Highly Targeted Process Targeted Discussions + Broader Search Broad M&A Process Broad Marketing RECOMMENDED • Combination of targeted discussions plus broader search conducted in background maximizes success probability and minimizes disruption to Aardvark • Additional parties contacted depend on responsiveness of Tier 1 and Tier 2 companies • Interested parties would sign NDAs and then proceed into due diligence and valuation discussions with Aardvark Goldman Stanley 18 . Appendix Goldman Stanley 19 . Aardvark Projected Income Statement ($ in Millions Except Per Share Data) Goldman Stanley (1) Excludes stock-based compensation and non-recurring charges. 20 . 21 . (2) Excludes stock-based compensation and non-recurring charges.Aardvark Comparable Public Companies US-Based Hardware & Networking Companies with Over $20 Billion Revenue ($ in Millions Except Per Share Data) Goldman Stanley (1) Share prices as of January 29. 2010. (3) Revenue growth from Apple’s FY2009 through FY2010E. 22 .Aardvark DCF Analysis – WACC Calculation ($ in Millions Except Per Share Data) Goldman Stanley (1) Financial data as of January 29. 2010.