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  • 1. Is Carl Icahn Buying the Wrong Stock? October 25, 2013 Microsoft Corp. NASDAQ: MSFT
  • 2. Disclosure! Longboard  Asset  Management,  LLC  (“Longboard”)  is  an  investment  advisor  to  funds  that  are  in  the  business  of  buying  and  selling  securi>es   and  other  financial  instruments.       Longboard  currently  has  a  long  posi>on  in  MicrosoB  Corpora>on  (“MicrosoB”)  common  stock.  We  do  not  own  any  op>ons  on  MicrosoB   common  stock.     Longboard  will  profit  if  MicrosoB  stock  increases  in  value  and  will  lose  money  if  it  decreases  in  value.  Longboard  may  change  its  views   about  or  investment  posi>on  in  MicrosoB  at  any  >me  for  any  reason  or  for  no  reason.         Longboard  may  buy,  sell,  cover  or  otherwise  change  the  form  or  substance  of  its  MicrosoB  investment.  Longboard  disclaims  any  obliga>on   to  no>fy  the  market  of  any  such  changes.       The  informa>on  and  opinions  expressed  in  this  presenta>on  (the  “Presenta>on”)  is  based  on  publicly  available  informa>on  about   MicrosoB.  Longboard  recognizes  that  others  may  disagree  with  Longboard’s  analyses,  conclusions  and  opinions.       The  Presenta>on  includes  forward-­‐looking  statements,  es>mates,  projec>ons  and  opinions.  Such  statements,  es>mates,  projec>ons  and   opinions  may  prove  to  be  substan>ally  inaccurate  and  are  inherently  subject  to  significant  risks  and  uncertain>es  beyond  Longboard’s   control.       Although  Longboard  believes  the  Presenta>on  is  substan>ally  accurate  in  all  material  respects  and  does  not  omit  to  state  material  facts   necessary  to  make  the  statements  therein  not  misleading,  Longboard  makes  no  representa>on  or  warranty,  express  or  implied,  as  to  the   accuracy  or  completeness  of  the  Presenta>on  or  any  other  wriNen  or  oral  communica>on  it  makes  with  respect  to  MicrosoB  and   Longboard  expressly  disclaims  any  liability  rela>ng  to  the  Presenta>on  or  such  communica>ons  (or  any  inaccuracies  or  omissions  therein).   Thus,  shareholders  and  others  should  conduct  their  own  independent  inves>ga>on  and  analysis  of  the  Presenta>on  and  of  MicrosoB  and   other  companies  men>oned.       The  Presenta>on  is  not  investment  advice  or  a  recommenda>on  or  solicita>on  to  buy  or  sell  any  securi>es.  Except  where  otherwise   indicated,  the  Presenta>on  speaks  as  of  the  date  hereof,  and  Longboard  undertakes  no  obliga>on  to  correct,  update  or  revise  the   Presenta>on  or  to  otherwise  provide  any  addi>onal  materials.  Longboard  also  undertakes  no  commitment  to  take  or  refrain  from  taking   any  ac>on  with  respect  to  MicrosoB  or  any  other  company.       As  used  herein,  except  to  the  extent  the  context  otherwise  requires,  Longboard  includes  its  affiliates  and  its  and  their  respec>ve  partners,   directors,  officers  and  employees.     For Investment Professional Use Only 2  
  • 3. ! To  Buy,  or  Not  To  Buy,  That  is  the   Ques3on     3  
  • 4. A No Brainer?!   Apple  Buyback  Thesis     §    §    §    §  Carl  Icahn  is  calling  for  a   $150  Billion  Apple  share   buyback   Says  buyback  is  a  “no   brainer”   Thinks  Apple  board  is   doing  a  poor  job   Believes  the  stock  is   undervalued   4  
  • 5. Is Carl Icahn Missing Something?!   §  We  believe  Apple   shareholders  over  the   next  5  years  would  be  far   beMer  off  if  Tim  Cook   ignored  Mr.  Icahn  and   instead  bought  $150   Billion  of  MicrosoR      The  Future  of  MicrosoB?   $60   $55   Microsoft: MSFT        ?    ?       $50   $45   $40   $35   $30   $25   $20   $15   5  
  • 6. Apple Value Hinges on 3 Key Questions!   Key  Ques>ons     §    §    §    Does  Google,  Samsung,   Amazon  &  MicrosoR   building  their  own  Android   OS  devices  help  or  hurt   aggregate  Apple  demand?   How  vulnerable  is  iPad   demand  to  more   produc3ve  and  innova3ve   devices?   How  aMrac3ve  are  higher   produc3vity  tablet  devices   which  run  both  Windows  +   Android  to  PC  buyers?   6  
  • 7. Why is Tim Cook Afraid of Microsoft?!   If  the  Apple  buyback  is  such  a  “no   brainer”,  why  is  Tim  Cook  so   worried  about  MicrosoB?       “Our  compe33on  is  confused.   They’re  turning  tablets  into  PCs   and  PCs  into  tablets.  Who  knows   what  they’re  going  to  do  next?”     Tim  Cook  just  dedica3ng  his  key   note  speech  to  talk  about  a   compe3tor.  If  MicrosoR  is   confused  and  irrelevant,  why  is   Apple  spending  so  much  3me   talking  about  the  Windows  8     strategy  during  their  own  product   launch?     7  
  • 8. Same Picture, Different Views!          MicrosoB  Percep>on  =  Confused                                  MicrosoB  Reality  =  Success     8  
  • 9. Microsoft is Out Innovating Apple!   Windows  8  Device  Strategy     §  MicrosoR  Surface  plaaorm  is  a   completely  new  category  of   tablet  devices         §  Delivering  the  most  produc3ve   and  innova3ve  compu3ng  devices   on  the  planet     §  PC  users  want  a  unified  new   experience  which  delivers   Android  +  Windows  on  one   device     §  Leveraging  Android  is  the  future   of  MicrosoR  device  strategy  and   Tim  Cook  knows  that’s  a  serious   problem  for  Apple   Will  Surface  3  Include  Android?     9  
  • 10. Apple Vulnerable to Competition!   Apple  Threats     §  Fickle  Consumer  Dependence     §  Hit  product  dependent       §  iOS  geeng  flanked  by  Android     §  Dual  Boot  Windows  +  Android   Devices  become  iPad  category   killer     §  Weakness  in  Enterprise     §  MicrosoR  Mojo  is  Back     10  
  • 11. Summary!   Mr.  Icahn  has  Right  Idea,  Wrong  Stock     §    §    §    §    We  believe  an  Apple  buyback  is  not  as   much  of  a  no  brainer  as  Mr.  Icahn  thinks   A  large  buyback  does  not  improve   Apple’s  strategic  posi3on  or  hedge   serious  fundamental  business  risks  on   the  horizon   Buying  $150  Billion  of  MicrosoR  stock   gives  Apple  economic  exposure  to   enterprise  market  dominance,  hedges   fundamental  business  risk  and  provides   a  beMer  long  term  value  and  risk  reward   use  of  cash  for  Apple  shareholders   If  Mr.  Icahn  truly  cares  about  maximizing   long  term  value  for  Apple  shareholders,   he  should  be  pitching  MicrosoR  stock  to   Tim  Cook   11  
  • 12. About Longboard! An  alterna>ve  approach  to  naviga>ng  the   investment  ocean       Longboard  is  an  asset  management  firm   specializing  in  trend  following  strategies.  The   firm’s  principals  have  been  inves3ng  in  and   researching  trend  following  strategies  since  the   late  1990s.       We  manage  both  private  investment  funds  and   mutual  funds  applying  our  trend  following   investment  style.             “Trends  come  like  a  series  of  ocean   waves,  bringing  the  high  3de  when   things  are  good  and,  as  condi3ons   recede,  the  low  3de  appears.  These   trends  come  unexpectedly,   unpredictably,  and  they  have  to  be   weathered  with  temperance,  poise,  and   pa3ence-­‐  good  or  bad.”     Jesse  Livermore,  Reminiscences  of  a   Stock  Operator   12  
  • 13. Contact Us! To  learn  more  about  Longboard,  connect  with  us  at:      info@longboard-­‐am.com                602.910.6961                  2355  East  Camelback  Road,  Suite  750              Phoenix,  Arizona  85016                  www.longboardmutualfunds.com                www.longboard-­‐am.com                                           For  media  inquiries,  please  contact:                                          Dukas  Public  Rela>ons                                        longboard@dukaspr.com                                        212.704.7385                                                                                         13