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Google Valuation Presentation

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A sample valuation of Google. Includes market snapshots, financial summary and projected income statement.

A sample valuation of Google. Includes market snapshots, financial summary and projected income statement.

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  • 1. CONFIDENTIAL | 25 JANUARY 2010 PRESENTATION TO INVESTORS | VALUATION ANALYSIS Project Google Sample Valuation
  • 2. Confidential Project Google Table of Contents I. INDUSTRY OVERVIEW………………………………………………… 3 II. COMPANY OVERVIEW………………………………………………… 6 III. FINANCIAL OVERVIEW……………………………………………….. 10 IV. APPENDIX……………………………………………………………….. 18 Sample Valuation
  • 3. Project Google INDUSTRY OVERVIEW | INTERNET SOFTWARE & SERVICES Sample Valuation 3
  • 4. Industry Overview Project Google Global Search Market Posted 46% Growth in 2009  The worldwide internet search reached over 131 billion queries in December 2009. This statistic represents: (1)  4 billion searches per day  175 million searches per hour  2.9 million searches per minute  The U.S. had the largest share of the global individual search market with 22.7 billion searches conducted by people age 15 or older. (2) 25,000 Top 10 Countries by Number of Searches Conducted 22% Global Searches (MM) 20,000 15,000 13% December-08 10,000 48% December-09 35% 38% 61% 5,000 44% 53% 28% 92% 0 United China Japan United Germany France South Brazil Canada Russian States Kingdom Korea Federation Sample Valuation 1) Source: “comScore Reports Global Search Market Growth of 46 percent in 2009.” (January 22, 2010) 4 2) Source: “comScore Reports Global Search Market Growth of 46 percent in 2009.” (January 22, 2010)
  • 5. Industry Overview Project Google Google Sites Had a Dominate Share Of Search Query Volume in 2009  The U.S. core search market grew 16% overall in 2009  Google Sites search query volume grew 21 %  Microsoft Sites had the greatest growth in search volume at 49%  Ask Network increased its search query volume by 12% Sample Valuation 5
  • 6. Project Google COMPANY OVERVIEW | GOOGLE INC. Sample Valuation 6
  • 7. Company Overview Project Google Selected Company Data (1) (2) Company Information Selected Market Data Company Name Google Inc. Stock Valuation Date Jan/25/10 Ticker: GOOG Share Price as of (01/25/10) $529.0 Fiscal Year Ending Dec-31-08 F.D. Shares Outstanding 320.3 Fiscal Year Ending + 1 Dec-31-09 Equity Value $169,435.4 Fiscal Year Ending + 2 Dec-31-10 Marginal Tax Rate 35.0% Net Debt ($21,994.4) Beta 1.08 Enterprise Value $147,441.0 700 % 600 % 500 % 400 % Google 300 % Nasdaq 200 % 100 % 0% Google NASDAQ Sample Valuation 1) 2) Based on company filings. Based on closing prices as of January 25, 2010. 7
  • 8. Company Overview Project Google Google Stock Price Trading History (1) $700 12,000 $650 $600 10,000 Volume in Thousands $550 $500 $450 8,000 $400 $350 6,000 $300 $250 4,000 $200 $150 $100 2,000 Volume $50 Share Price $0 0 Price Volume High (01/04/2010) $626.75 High (04/17/2009) 10,730 Low (03/09/2009) $290.89 Low (12/24/2009) 858.7 Average $456.18 Average 3,480 Volume Share Price Sample Valuation 1) Source: Yahoo! Finance. Note: Price and volume data are based on closing prices and volumes. 8
  • 9. Company Overview Project Google Google Stock Trading History (1) 26 Oct 09 16 Sep 09 On2 Technologies Announced Proposed $700 Google Acquires Carnegie Settlement in Litigation. -Reuters 03 May 09 Mellon Spin-Off $650 ReCapture Inc. - Reuters 12 Feb 09 Apple and $600 Google Ties are $550 Google Investigated. - Exits Radio NYT $500 Advertising 06 Dec 09 Business. - 13 Jan 2010 $450 Google Buys Online Reuters 09 Nov 09 Rejecting $400 Word Processing Startup AppJet.- Censorship, Google 05 Aug 09 Google Signs Agreement Threatens To Quit $350 To Acquire AdMob. - Reuters China. -Reuters $300 Google to acquire On2 Reuters 03 Apr 09 technologies.-Reuters $250 26 Mar 09 23 Nov 09 Google Could Be in $200 Talks To Buy Google To Buy Display Google Cut 200 Twitter. - Reuters. Advertising Startup $150 Jobs From Sales Force. - Teracent. -DJ $100 Reuters $50 $0 Sample Valuation 1) Yahoo! Finance. Note: Price and volume data are based on closing prices and volumes. 9
  • 10. Project Google FINANCIAL OVERVIEW | GOOGLE INC. Sample Valuation 10
  • 11. Financial Overview Project Google Valuation Summary PREMIUM IMPLIED 2009E MULTIPLES GOOGLE VALUATION – TO 01/25/2010 IMPLIED PRICE PER SHARE PRICE: $533.50 EBITDA P/E COMPARABLE PUBLIC $170.89 $1081.61 212.2% - (50.0%) 7.2x – 34.7x 9.5x – 60.1x COMPANIES (1) PRECEDENT $193.75 $1617. 37 175.4% - (67.0%) 7.9x – 50.8x 10.8x – 90.0x TRANSACTIONS (2) DISCOUNTED $ 553.59 $781.66 Median: $659.9 (3.6%) - (31.7%) 18.8x – 25.6x 30.8x – 43.5x CASH FLOW (3) PREMIUMS PAID $540.46 $1348. 58 (1.3%) - (60.0%) 18.4x – 42.7x 30.1x – 75.0x ANALYSIS (4) 52-WEEK RANGE $290.89 $626.76 (83.4%) - (14.9%) 10.8x – 21.0x 16.2x – 34.9x (5) ANALYST PRICE TARGETS $600.00 $635.00 (11.1%) - (16.0%) 20.2x – 21.2x 33.4x – 35.3x (5) $200.00 $700.00 $1,200.00 $1,700.00 1) Based on selected comparable companies for the “Internet Software & Services” sector. 2) Selected transactions are based on data provided by techcrunch.com and company press-releases. 3) Reflects WACC of 12.1% and exit multiple of 14.5x. 4) Source: Techcrunch.com. Includes transactions greater than $1 billion from 2007 to date. 5) Based on closing prices as of January 25, 2010. Sample Valuation 6) Based on selected Wall Street analysts„ equity reports on October 16, 2009. 11
  • 12. Financial Overview Project Google ($ in millions, except per share data ) Comparable Public Companies (1) Multiples Analysis Share Price % of 52- Market Enterprise EV/Revenue EV/EBITDA Company Name Ticker 1/11/2010 Week High Capitalization Value Cash Debt LTM FYE +1 FYE +2 LTM FYE +1 FYE +2 Amazon.com, Inc. AMZN $120.4 17.5% $52,915.0 $49,030.0 $4,001.0 $116.0 2.3x 2.1x 1.6x 30.9x 27.5x 19.2x eBay Inc. EBAY $23.7 8.2% $30,630.3 $27,671.0 $3,159.3 $200.0 3.3x 3.2x 3.0x 9.2x 9.0x 8.0x Yahoo Inc. YHOO $15.9 12.0% $22,220.8 $17,801.3 $4,503.1 $83.6 3.7x 3.8x 3.6x 10.3x 10.5x 10.0x Microsoft Corp. MSFT $29.3 7.0% $260,494.6 $260,494.6 $36,728.0 $5,996.0 4.1x 3.8x 3.5x 9.8x 9.5x 8.6x Maximum $120.4 17.5% $260,494.6 $260,494.6 $36,728.0 $5,996.0 4.1x 3.8x 3.6x 30.9x 27.5x 19.2x 75th Percentile $52.1 13.4% $104,809.9 $101,896.1 $12,559.3 $1,649.0 3.8x 3.8x 3.5x 15.5x 14.7x 12.3x Median $26.5 10.1% $41,772.6 $38,350.5 $4,252.0 $158.0 3.5x 3.5x 3.3x 10.1x 10.0x 9.3x Mean $47.3 11.2% $91,565.1 $88,749.2 $12,097.8 $1,598.9 3.3x 3.2x 2.9x 15.0x 14.1x 11.5x 25th Percentile $21.7 7.9% $28,527.9 $25,203.5 $3,790.6 $107.9 3.0x 2.9x 2.7x 9.6x 9.4x 8.5x Minimum $15.9 7.0% $22,220.8 $17,801.3 $3,159.3 $83.6 2.3x 2.1x 1.6x 9.2x 9.0x 8.0x Google Inc. GOOG $533.5 14.9% $170,879.4 $148,885.0 $21,994.4 $0.0 8.9x 8.3x 7.2x 14.2x 14.0x 11.8x Margins Analysis Revenue Growth (CAGR) EBITDA Growth (CAGR) EBIT Growth (CAGR) LTM CapEx EBIT Margin EBITDA Margin Company Name FYE '06-08 FYE '08-10 FYE '06-08 FYE '08-10 FYE '06-08 FYE '08-10 % Revenue LTM FYE +1 FYE +2 LTM FYE +1 FYE +2 Amazon.com, Inc. 33.8% 26.7% 42.1% 34.7% 51.0% 25.7% 2.0% 5.7% 4.6% 5.7% 7.3% 7.5% 8.3% eBay Inc. 19.6% 3.2% 18.3% 3.8% 19.3% 8.2% 6.6% 26.3% 29.6% 31.9% 35.9% 35.4% 37.9% Yahoo Inc. 8.8% (4.9%) (2.5%) (0.9%) (13.5%) (20.8%) 9.5% 20.1% 8.8% 13.2% 35.9% 36.6% 36.5% Microsoft Corp. 6.9% 6.3% 7.9% 3.3% 5.9% 3.0% 4.9% 37.1% 35.4% 36.0% 41.8% 39.8% 40.4% Maximum 33.8% 26.7% 42.1% 34.7% 51.0% 25.7% 9.5% 37.1% 35.4% 36.0% 41.8% 39.8% 40.4% 75th Percentile 23.2% 11.4% 24.3% 11.5% 27.2% 12.6% 7.3% 29.0% 31.0% 32.9% 37.4% 37.4% 38.5% Median 14.2% 4.7% 13.1% 3.5% 12.6% 5.6% 5.8% 23.2% 19.2% 22.5% 35.9% 36.0% 37.2% Mean 17.3% 7.8% 16.5% 10.2% 15.7% 4.0% 5.8% 22.3% 19.6% 21.7% 30.2% 29.8% 30.7% 25th Percentile 8.3% 1.2% 5.3% 2.3% 1.0% (2.9%) 4.2% 16.5% 7.7% 11.3% 28.7% 28.4% 29.4% Minimum 6.9% (4.9%) (2.5%) (0.9%) (13.5%) (20.8%) 2.0% 5.7% 4.6% 5.7% 7.3% 7.5% 8.3% Google Inc. 47.4% 13.9% 49.0% 16.1% 46.9% 12.3% 5.7% 53.5% 46.1% 48.1% 62.7% 59.4% 61.3% Sample Valuation 1) Based on selected comparable companies for the “Internet Software & Services” sector. 12
  • 13. Financial Overview Project Google ($ in millions) Precedent Transactions Announce Target LTM Transaction EV/Revenue EV/EBITDA Date Acquiror Target Target description Revenue EBITDA Value LTM FYE+1 LTM FYE+1 04/29/07 (1) Yahoo Inc. Right Media Right Media, Inc. is an online advertising company that $70.0 $18.0 $850.0 12.1x N/A 47.2x N/A operates the Right Media Exchange (RMX), a marketplace that enables advertisers, publishers, and ad networks to trade digital media. 05/18/07 (2) Microsoft Corp. aQuantive Inc., aQuantive is a digital marketing company with three $492.6 $129.5 $6,376.9 12.3x 9.9x 46.7x 39.3x distinct business segments: digital marketing services; digital marketing technologies; and digital performance media. 04/13/07 (3) Google Inc. DoubleClick DoubleClick is a provider of digital marketing technology $232.0 $72.0 $3,100.0 13.4x 10.4x 46.7x 31.6x and services with a focus on ad serving, media, video, search and affiliate marketing. 05/17/07 (4) WPP Group 24/7 Real Media 24/7 Real Media provides multi-platform internet marketing $215.0 $20.8 $668.6 2.8x 2.2x 29.0x 22.3x strategies including behavioral targeting, ad serving and Web advertising. 03/15/07 (5) CISCO Systems WebEX Com. Inc. WebEx Communications Inc. provides on-demand $380.0 $124.1 $3,090.5 7.2x 6.0x 22.1x 18.6x collaboration, online meeting, web conferencing and video conferencing applications. 05/15/08 (6) CBS Corp. CNET Networks CNET is an interactive media company providing tech $408.2 $73.3 $1,794.3 4.3x 4.0x 23.8x 20.1x product reviews, news and price comparisons, free software downloads, daily videos, and podcasts. 10/23/09 (7) Adobe Systems Omniture, Inc. Omniture is a provider of online business optimization $335.5 $68.8 $1,771.0 4.9x 3.6x 24.1x 11.2x products and services including integrated set of optimization applications for online analytics, channel analytics, visitor acquisition and conversion. Maximum $492.6 $129.5 $6,376.9 13.4x 10.4x 47.2x 39.3x 75% Percentile $394.1 $98.7 $3,095.3 12.2x 8.9x 46.7x 29.3x Median $335.5 $72.0 $1,794.3 7.2x 5.0x 29.0x 21.2x Mean $304.8 $72.4 $2,521.6 8.1x 6.0x 34.2x 23.9x 25th Percentile $223.5 $44.8 $1,310.5 4.6x 3.7x 23.9x 19.0x Minimum $70.0 $18.0 $668.6 2.8x 2.2x 22.1x 11.2x 1) Source: “Yahoo to buy rest of Right Media for $680mln.” (Reuters, 04/30/2007) Note: Includes 20% stake (~$200MM) Yahoo! acquired in October, 2006. 2) Source: “Microsoft to Acquire aQuantive, Inc.” (Microsoft, 05/18/2007) 3) Source : “Google to Acquire DoubleClick.” (Google, 04/13/2007) 4) Source :”WPP has agreed to acquire 24/7 Real Media for $11.75 per share.” (WPP, 05/17/2007) 5) Source: “CISCO Announces Agreement to Acquire WebEx.”(CISCO, 03/15/2007) 6) Source: “CBS to buy CNET Networks.” (05/15/2008) Sample Valuation 7) Source : “Adobe to Acquire Omniture.” (Adobe, 10/23/2009) 13
  • 14. Financial Overview Project Google ($ in millions, except per share data) Discounted Cash Flow Analysis Fiscal Year Ending 12/31/09 12/31/10 12/31/11 12/31/12 12/31/13 DCF Assumptions Discount Rate 12.1% Revenue (excl. TAC) $17,879.5 $20,561.4 $23,350.2 $26,275.8 $29,326.9 Tax Rate 35.0% EBIT $8,246.3 $9,888.8 $11,470.0 $13,300.2 $14,998.1 Mid-Year Conversion (Y/N)? Y Less: Taxes $3,074.4 $3,694.7 $4,304.0 $5,010.6 $5,680.3 Terminal Multiple 14.5x Debt-Free Earnings $5,171.9 $6,194.1 $7,166.1 $8,289.6 $9,317.8 Gordon Growth Approach (Y/N)? N Less: Capital Expenditures ($1,984.6) ($1,871.1) ($1,657.9) ($1,865.6) ($2,082.2) Gordon Growth Rate 8.0% Less: Working Capital Requirements ($328.6) ($515.8) ($525.0) ($577.4) ($581.3) Add: Depreciation and Amortization $1,302.2 $1,557.4 $1,775.0 $1,973.7 $2,216.0 Terminal Multiple Increment 1.0x Add: Stock-Based Compensation $1,073.5 $1,155.1 $1,184.4 $1,267.9 $1,326.0 Discount Rate Increment 1.0% Total Net Investment $62.4 $325.6 $776.6 $798.6 $878.6 Terminal Value Assumptions Net Debt-Free Cash Flows: $5,234.3 $6,519.7 $7,942.6 $9,088.2 $10,196.4 Terminal EBITDA $18,540.1 Projection Year 1.0 2.0 3.0 4.0 5.0 Terminal Multiple 14.50 Discount period 0.5 1.5 2.5 3.5 4.5 Terminal Value $268,831.6 Discount Factor @ 12.1% 0.94 0.84 0.75 0.67 0.60 Discount Period 4.50 PV of Net Debt-Free Cash Flows: $4,944.8 $5,496.5 $5,975.8 $6,102.1 $6,109.7 Discount Factor @ 0.60 PV of Terminal Value $161,084.2 Free Cash Flow Growth Rate: % of Enterprise Value Enterprise Value $189,713.0 Sensitivity Analysis Implied Equity Value and Share Price Exit Multiple Enterprise Value $189,713.0 Enterprise Value 12.5x 13.5x 14.5x 15.5x 16.5x Less: Net Debt ($21,994.4) Discount Rate 10.1% $180,286.2 $192,310.8 $204,335.4 $216,359.9 $228,384.5 11.1% $173,589.4 $185,134.6 $196,679.7 $208,224.9 $219,770.0 Implied Equity Value $211,707.4 12.1% $167,209.2 $178,298.1 $189,386.9 $200,475.8 $211,564.7 F.D. Shares Outstanding 320.3 13.1% $161,127.8 $171,782.2 $182,436.7 $193,091.1 $203,745.6 Implied Share Price $660.9 14.1% $155,328.7 $165,569.3 $175,809.9 $186,050.6 $196,291.2 Distribution of Value Period Cash Flow 15.1% Exit Multiple Terminal Cash Flow 84.9% Implied Share price 12.5x 13.5x 14.5x 15.5x 16.5x Total 100.0% Discount Rate 10.1% $631.5 $669.0 $706.6 $744.1 $781.7 11.1% $610.6 $646.6 $682.7 $718.7 $754.8 Implied Analyses 12.1% $590.7 $625.3 $659.9 $694.5 $729.2 LTM EBITDA Multiple 18.1x 13.1% $571.7 $605.0 $638.2 $671.5 $704.7 NFY EBITDA Multiple 17.9x 14.1% $553.6 $585.6 $617.5 $649.5 $681.5 Implied Gordon Growth Rate 13.4% Sample Valuation 14
  • 15. Financial Overview Project Google ($ in millions) WACC Analysis Market Debt to Preferred to Equity to Preferred Value of Total Debt to Total Total Total Ticker Debt Stock Equity Capitalization Equity Capitalization Capitalization Capitalization Amazon.com, Inc. AMZN $116.0 $0.0 $52,915.0 $53,031.0 0.2% 0.2% 0.0% 99.8% eBay Inc. EBAY $200.0 $0.0 $30,630.3 $30,830.3 0.7% 0.6% 0.0% 99.4% Yahoo Inc. YHOO $83.6 $0.0 $22,220.8 $22,304.4 0.4% 0.4% 0.0% 99.6% Microsoft Corp. MSFT $5,996.0 $0.0 $260,494.6 $266,490.6 2.3% 2.2% 0.0% 97.8% Median $158.0 $0.0 $41,772.6 $41,930.6 0.5% 0.5% 0.0% 99.5% Mean $1,598.9 $0.0 $91,565.1 $93,164.1 0.9% 0.9% 0.0% 99.1% Google Inc. GOOG $0.0 $0.0 $170,879.4 $170,879.4 0.0% 0.0% 0.0% 100.0% Equity Levered Unlevered Risk Cost of Cost of Cost of Ticker Beta Beta Premium Equity Debt Preferred WACC Amazon.com, Inc. AMZN 1.25 1.25 7.0% 13.1% 0.0% 0.0% 13.1% eBay Inc. EBAY 1.92 1.91 7.0% 17.8% 0.5% 0.0% 17.7% Yahoo Inc. YHOO 0.76 0.76 7.0% 9.7% 0.0% 0.0% 9.7% Microsoft Corp. MSFT 0.96 0.95 7.0% 11.1% 2.4% 0.0% 10.9% Median 1.11 1.10 7.0% 12.1% 0.2% 0.0% 12.0% Mean 1.22 1.22 7.0% 12.9% 0.7% 0.0% 12.8% Google Inc. GOOG 1.10 1.10 7.0% 12.1% 0.0% 0.0% 12.1% Source: Company filings, Yahoo! Finance and equity research. Weighted Average Cost of Capital (WACC) = (Cost of Debt*(1- Tax Rate) * Debt to Enterprise Value) + (Cost of Equity * Equity to Enterprise Value) + (Cost of Preferred *Preferred to Enterprise Value ) Cost of Equity = Risk Free + (Levered Beta * Equity Risk Premium) Risk Free Rate is based on the 30-year treasury rate of 4.375%. Sample Valuation Equity Risk Premium (average) is sourced from equity research and press-releases. 15
  • 16. Financial Overview Project Google ($ in millions) Premiums Analysis – Technology M&A Deals Over $1 Billion with Public, U.S.-Based Sellers Since 01/01/2007 Date Equity Offer Share Price History Premium/(Discounts) Acquirer Target Announced Value Price 1-Day 20-Day 1-Day 20-Day Microsoft Corp. (1) aQuantive Inc., 05/18/07 $6,376.93 $66.50 $35.87 $31.90 85.4% 108.5% CISCO Systems, Inc. (2) WebEX Com. Inc. 03/15/07 $3,090.52 $57.00 $25.98 $26.18 119.4% 117.7% CBS Corp. (3) CNET Networks 05/15/08 $1,794.35 $11.50 $7.95 $7.95 44.7% 44.7% Adobe Systems, Inc. (4) Omniture, Inc. 10/23/09 $1,771.04 $21.50 $21.48 $21.51 0.1% (0.05%) Hewlett-Packard (5) EDS 05/13/08 $13,900.00 $25.00 $24.13 $17.17 3.6% 45.6% Oracle Corp. (6) Sun Microsystems 04/20/09 $7,400.00 $9.50 $6.69 $7.94 42.0% 19.6% Dell Inc. (7) Perot Systems 09/21/09 $3,900.00 $30.00 $17.91 $17.00 67.5% 76.5% CISCO Systems, Inc. (8) Starent Systems 10/13/09 $2,900.00 $35.00 $34.97 $34.39 0.1% 1.8% Hewlett-Packard (9) 3Com 11/11/09 $2,700.00 $7.90 $5.41 $5.84 46.0% 35.3% IBM (10) SPSS 07/28/09 $1,200.00 $50.00 $35.09 $33.37 42.5% 49.8% Max $66.50 $35.87 $34.39 119.4% 117.7% 75th Percentile $46.25 $32.72 $30.47 62.1% 69.8% Median $27.50 $22.81 $19.34 43.6% 45.1% Mean $31.39 $21.55 $20.33 45.1% 49.9% 25th Percentile $14.00 $10.44 $10.21 13.2% 23.6% Min $7.90 $5.41 $5.84 0.1% (0.0%) 1) Source: “Microsoft to Acquire aQuantive, Inc.” (Microsoft, 05/18/2007) 2) Source: “CISCO Announces Agreement to Acquire WebEx.”(CISCO, 03/15/2007) 3) Source: “CBS to buy CNET Networks.” (05/15/2008) 4) Source : “Adobe to Acquire Omniture.” (Adobe, 10/23/2009) 5) Source: “HP to Acquire EDS for $13.9 Billion.” (HP, 05/13/2008) 6) Source: “Sun and Oracle.” (Sun, 04/20/2009) 7) Source: “Dell to Acquire Perot Systems for $3.9Billion.” (Dell, 09/21/09) 8) Source: “CISCO Announces Agreement to Acquire Starent Networks.” (CISCO,10/13/2009) Source: “HP to Acquire 3Com for $2.7 Billion.” (HP, 11/11/2009) Sample Valuation 9) 10) Source: “IBM to Acquire SPSS Inc. to Provide Clients Predictive Analytics Capabilities.” (IBM, 07/28/2009) 16
  • 17. Financial Overview Project Google Wall Street Analysts’ Price Targets Analyst Price Earnings Per Share Firm Date Name Rating Target Susquehanna Financial Group 10/16/2009 Marianne Wolk Positive $625.00 $22.72 - $25.69 Morgan Stanley 10/16/2009 Mary Meeker Overweight $625.00 $20.17 - $22.87 Jefferies & Co. 10/16/2009 Youssef H. Squali Buy $600.00 $23.02 - $26.54 Credit Suisse 10/16/2009 Spencer Wang Outperform $600.00 $22.51 - $26.18 Collins Stewart 10/16/2009 Sundeep Aggarwal Buy $635.00 $22.68 - $25.89 Median $625.00 $22.68 - $25.89 Mean $617.00 $22.22 - $25.43 Sample Valuation Source: Thomson Reuters One Banker and analysts‟ equity research reports on October 16, 2009. 17
  • 18. Project Google APPENDIX Sample Valuation 18
  • 19. Appendix Project Google ($ in millions, except per share data) Projected Income Statement Income Statement (Exc. TAC) - Google Inc.: Historical Statement Projected Statements FY2006A FY2007A FY2008A FY2009P FY2010P FY2011P FY2012P FY2013P Net revenue (Exc.TAC): $7,296.1 $11,660.1 $15,856.6 $17,879.5 $20,561.4 $23,350.2 $26,275.8 $29,326.9 Other cost of revenue: $916.2 $1,715.2 $2,682.5 $2,826.3 $2,976.0 $3,124.3 $3,258.5 $3,380.1 Research & development: $1,601.3 $2,120.0 $2,793.2 $3,071.7 $3,521.8 $3,920.0 $4,441.2 $4,942.4 Sales & marketing: $849.5 $1,461.3 $1,946.2 $2,071.5 $2,324.2 $2,692.3 $2,949.7 $3,358.1 General & sales: $751.8 $1,279.3 $1,802.6 $1,663.7 $1,850.5 $2,143.6 $2,326.2 $2,648.2 Total operating Expenses: $4,118.8 $6,575.7 $9,224.6 $9,633.2 $10,672.6 $11,880.2 $12,975.6 $14,328.9 Operating Income: $3,177.3 $5,084.4 $6,632.0 $8,246.3 $9,888.8 $11,470.0 $13,300.2 $14,998.1 4% 11% 11% 9% 10% EBITDA: $4,207.3 $6,920.7 $9,251.7 $10,622.0 $12,601.3 $14,429.4 $16,541.8 $18,540.1 EBITDA margin: 57.7% 59.4% 58.3% 59.4% 61.3% 61.8% 63.0% 63.2% EBITDA growth: N/A 64.5% 33.7% 14.8% 18.6% 14.5% 14.6% 12.1% Interest & other, net: $461.0 $589.6 $316.4 $537.7 $667.4 $827.0 $1,015.9 $1,231.3 Impairment of equity investments: (1) $0.0 $0.0 ($1,094.8) $0.0 $0.0 $0.0 $0.0 $0.0 Pre-tax income: $3,638.3 $5,674.0 $5,853.6 $8,784.0 $10,556.1 $12,297.1 $14,316.0 $16,229.3 Income tax provision $933.6 $1,470.3 $1,626.7 $3,074.4 $3,694.7 $4,304.0 $5,010.6 $5,680.3 Effective Income tax: 25.7% 25.9% 27.8% 35.0% 35.0% 35.0% 35.0% 35.0% Net Income: $2,704.8 $4,203.7 $4,226.9 $5,709.6 $6,861.5 $7,993.1 $9,305.4 $10,549.1 Net income margin: 37.1% 36.1% 26.7% 31.9% 33.4% 34.2% 35.4% 36.0% Net income growth: N/A 55.4% 0.6% 35.1% 20.2% 16.5% 16.4% 13.4% Weighted average diluted shares outstanding: 309.5 316.2 317.5 317.5 317.5 317.5 317.5 317.5 Diluted EPS (GAAP): $8.74 $13.29 $13.31 $17.98 $21.61 $25.17 $29.31 $33.22 Depreciation: $494.4 $807.7 $1,212.2 $1,050.4 $1,336.5 $1,605.8 $1,844.0 $2,112.0 Amortization: $77.5 $159.9 $287.7 $251.8 $220.9 $169.2 $129.7 $104.0 Stock-based compensation: (2) $458.1 $868.6 $1,119.8 $1,073.5 $1,155.1 $1,184.4 $1,267.9 $1,326.0 Sample Valuation 1) 2) Impairment of equity investments in AOL and Clearwire. Per 2008 10K - SBC was estimated to be ~ $1.0 billion in 2009 and ~$1.4 billion thereafter. 19
  • 20. Appendix Project Google Revenue And Operating Expenses Projections Total Net Revenue (Exc. TAC) - Google Inc.: Historical Statements Projected Statements FY2006A FY2007A FY2008A FY2009P FY2010P FY2011P FY2012P FY2013P Search/Paid click revenue: $7,173.9 $11,396.8 $14,919.6 $16,553.3 $18,829.8 $21,275.0 $23,814.5 $26,422.4 % of advertising revenue: 99.9% 99.3% 98.2% 97.3% 96.2% 95.4% 94.5% 93.6% Display/YouTube revenue: $10.0 $82.0 $270.0 $459.0 $734.4 $1,028.2 $1,388.0 $1,804.4 % of advertising revenue: 0.1% 0.7% 1.8% 2.7% 3.8% 4.6% 5.5% 6.4% Total advertising revenue: $7,183.9 $11,478.8 $15,189.6 $17,012.3 $19,564.2 $22,303.1 $25,202.5 $28,226.9 % of net revenue: 98.5% 98.4% 95.8% 95.2% 95.2% 95.5% 95.9% 96.2% Licensing & other revenue: $112.3 $181.3 $667.0 $867.1 $997.2 $1,047.1 $1,073.3 $1,100.1 % of net revenue: 1.5% 1.6% 4.2% 4.8% 4.8% 4.5% 4.1% 3.8% Net Revenue: $7,296.1 $11,660.1 $15,856.6 $17,879.5 $20,561.4 $23,350.2 $26,275.8 $29,326.9 Growth: n/a 59.8% 36.0% 12.8% 15.0% 13.6% 12.5% 11.6% Operating Expenses- Google Inc.: Historical Statements Projected Statements FY2006A FY2007A FY2008A FY2009P FY2010P FY2011P FY2012P FY2013P Cost of revenue: $916.2 $1,715.2 $2,682.5 $2,826.3 $2,976.0 $3,124.3 $3,258.5 $3,380.1 % of total revenue 12.6% 14.7% 16.9% 15.8% 14.5% 13.4% 12.4% 11.5% Research and development: $1,228.6 $2,120.0 $2,793.2 $3,071.7 $3,521.8 $3,920.0 $4,441.2 $4,942.4 % of total revenue 16.8% 18.2% 17.6% 17.2% 17.1% 16.8% 16.9% 16.9% Sales and marketing: $849.5 $1,461.3 $1,946.2 $2,071.5 $2,324.2 $2,692.3 $2,949.7 $3,358.1 % of total revenue 11.6% 12.5% 12.3% 11.6% 11.3% 11.5% 11.2% 11.5% General and administrative: $751.8 $1,279.3 $1,802.6 $1,663.7 $1,850.5 $2,143.6 $2,326.2 $2,648.2 % of total revenue 10.3% 11.0% 11.4% 9.3% 9.0% 9.2% 8.9% 9.0% Total operating expenses: $3,746.1 $6,575.7 $9,224.6 $9,633.2 $10,672.6 $11,880.2 $12,975.6 $14,328.9 % net revenue: 51.3% 56.4% 58.2% 53.9% 51.9% 50.9% 49.4% 48.9% Sample Valuation 20