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11. merger of qualcomm and atheros (deb sahoo)
 

11. merger of qualcomm and atheros (deb sahoo)

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    11. merger of qualcomm and atheros (deb sahoo) 11. merger of qualcomm and atheros (deb sahoo) Presentation Transcript

    • ACQUISITION OF ATHEROS COMMUNICATIONS BY QUALCOMM DEB SAHOO, MBA, ROSS SCHOOL OF BUSINESS, UNIVERSITY OF MICHIGAN, ANN ARBOR April 25, 2011
    • INDUSTRYNEWS Industry Buzz
    • TABLEOFCONTENTS Executive Summary Financial Statements of Buyer Financial Statements of Target Discounted Cash Flow Valuation of Target Comparable Company Valuation of Target Financial Projections of Buyer and Target Transaction Analysis 3 7 11 15 18 26 29 Target Overview 5 EPS Accretion/Dilution Analysis 35 Profitability Contribution Analysis 40 Deal Fact 42 Precedent Transactions Valuation of Target 22 Valuation Summary 24
    • EXECUTIVE SUMMARY
    • EXECUTIVESUMMARY Target OverviewBuyer Overview •Total deal value: $3,654 MM •Total Enterprise Value/ 2011P EBITDA: 18.7x •Total Enterprise Value/ 2011P Revenue: 3.15x •FY 2011P P/E: 28.9x •Offer Price per Share: $45.0 •Cash Consideration: 40% •Premium: 30.4% •EPS Accretion without synergy: +1.4% •EPS Accretion with synergy: +2.5% •% Shares owned by Qualcomm shareholders: 98% Valuation •Company: Qualcomm Inc. •Headquarter: San Diego, CA •CEO: Paul E. Jacobs •Number of Employees: 17,500 •Engaged in the development, design, manufacture, and marketing of digital wireless telecommunications products and services based on code division multiple access technology •Develops and supplies CDMA based integrated circuits and system software for wireless voice and data communications, multimedia functions and global positioning system products for wireless device and infrastructure manufacturers Key Financials of Buyer and Target Buyer • Ticker: QCOM • Stock Price: $56.82 • 5 Year avg. Sales Growth: 15.0% • Market Cap: $95.55B • Number of Basic Shares: 1,617.7MM • 2010 EBITDA: $3,949 MM • Total Enterprise Value: $78.54B Target • Ticker: ATHR • Stock Price: $34.50 • 5 Year avg. Sales Growth: 40.3% • Market Cap: $3.27 B • Number of Basic Shares: 73 MM • 2010 EBITDA: $147 MM • Total Enterprise Value: $2,686B •Company: Atheros Communications Inc. •Headquarter: Santa Clara, California •CEO: Willy C. Shih, PhD •Number of Employees: 1,778 •Developer of semiconductor system solutions for wired and wireless communications products •Combines its wireless systems expertise with high performance radio frequency (RF), mixed signal and digital semiconductor designs and provides highly integrated but low cost chipsets
    • TARGET OVERVIEW
    • TARGETOVERVIEW Products and ServicesCompany Overview Develops semiconductor system solutions for communicationproducts that include solutions for wireless local area network (WLAN), mobile WLAN, Ethernet, Bluetooth, global positioning system (GPS), and power line communications Offers reference designs used in designing networking cards and routers, broadband gateways, mobile devices, and handsets and provides single and multi-chipWLAN products, including wireless networking products for personal computers (PCs) and small office/homeoffice (SOHO) markets; and wireless infrastructure systems- on-chip with network management capabilities for the enterprise networking market Atheros wireless system solutions are used in various applicationsin the PCs, enterprise access, broadband gateway, SOHO networking, consumer electronics, and mobile communicationsmarkets and Its radio-on-chips for mobile solutions are used for WLAN in mobile devices, such as smart phones and mobile consumer products It’s ETHOS products comprise access points, routers, gateways, Ethernet physical layer, transceivers, and switches for personal computer customers Also provides Bluetooth solutions for PCs; GPS system solutions for signal acquisition, tracking, data extraction, and GPS navigation Stock PerformanceIndustry Comparables • WLAN •ETHERNET •BLUETOOTH •HYBRID •GPS •PLC •PON •Stock Price: $34.50 •52 Week High: $44.88 •52 Week Low: $22.77 •Stock Beta: 1.82 •FY 2010 EPS: $0.73
    • FINANCIAL STATEMENTS OF BUYER
    • FINANCIALSTATEMENTSOFBUYER 5 Year Income Statement of Qualcomm Inc. All figures in millions of U.S. Dollar, except per share items 30-Sep-10 30-Sep-09 30-Sep-08 28-Sep-07 29-Sep-06 Sales/Revenue 10,991.0 10,416.0 11,142.0 8,871.0 7,526.0 Cost of Goods Sold (COGS) incl. D&A 3,517.0 3,181.0 3,414.0 2,681.0 2,182.0 COGS excluding D&A 2,851.0 2,546.0 2,958.0 2,298.0 1,910.0 Depreciation & Amortization Expense 666.0 635.0 456.0 383.0 272.0 Depreciation 437.0 428.0 372.0 317.0 239.0 Amortization of Intangibles 229.0 207.0 84.0 66.0 33.0 Gross Income 7,474.0 7,235.0 7,728.0 6,190.0 5,344.0 SG&A Expense 4,191.0 3,996.0 3,998.0 3,351.0 2,654.0 Research & Development 2,549.0 2,440.0 2,281.0 1,829.0 1,538.0 Other SG&A 1,642.0 1,556.0 1,717.0 1,522.0 1,116.0 Other Operating Expense 0.0 230.0 0.0 0.0 0.0 EBIT (Operating Income) 3,283.0 3,009.0 3,730.0 2,839.0 2,690.0 Nonoperating Income (Expense) - Net 935.0 653.0 646.0 826.0 523.0 Interest Expense 58.0 24.0 22.0 11.0 4.0 Unusual Expense (Income) - Net 122.0 1,545.0 529.0 27.0 24.0 Pretax Income 4,038.0 2,093.0 3,825.0 3,627.0 3,185.0 Income Taxes 787.0 484.0 666.0 323.0 686.0 Income Taxes - Current Domestic 1,557.0 182.0 465.0 229.0 387.0 Income Taxes - Current Foreign 389.0 291.0 245.0 185.0 156.0 Income Taxes - Deferred Domestic -1,152.0 30.0 -36.0 -90.0 142.0 Income Taxes - Deferred Foreign -7.0 -19.0 -8.0 -1.0 1.0 After-tax Adjustments - Net -4.0 -17.0 1.0 -1.0 -29.0 Equity in Earnings of Affiliates -4.0 -17.0 1.0 -1.0 -29.0 Consolidated Net Income 3,247.0 1,592.0 3,160.0 3,303.0 2,470.0 Minority Interest Expense 0.0 0.0 0.0 0.0 0.0 Net Income 3,247.0 1,592.0 3,160.0 3,303.0 2,470.0
    • FINANCIALSTATEMENTSOFBUYER 5 Year Balance Sheet of Qualcomm Inc. All figures in millions of U.S. Dollar, except per share items 30-Sep-10 30-Sep-09 30-Sep-08 28-Sep-07 29-Sep-06 Assets Cash & ST Investments 10,279.0 11,069.0 6,411.0 6,581.0 5,721.0 Total Accounts Receivable 730.0 729.0 4,038.0 715.0 700.0 Inventories 528.0 453.0 521.0 469.0 250.0 Other Current Assets 596.0 319.0 753.0 1,056.0 378.0 Total Current Assets 12,133.0 12,570.0 11,723.0 8,821.0 7,049.0 Net Property, Plant & Equipment 2,373.0 2,387.0 2,162.0 1,788.0 1,482.0 Total Investments and Advances 8,123.0 6,673.0 4,858.0 5,234.0 4,228.0 Long-Term Note Receivable -- 0.0 0.0 0.0 0.0 Intangible Assets 4,510.0 4,557.0 4,621.0 1,989.0 1,707.0 Other Assets 1,511.0 415.0 369.0 345.0 230.0 Total Assets 28,650.0 26,602.0 23,733.0 18,177.0 14,696.0 Liabilities & Shareholders' Equity ST Debt & Curr. Portion LT Debt 1,086.0 2.0 1.0 0.0 0.0 Accounts Payable 764.0 636.0 570.0 635.0 420.0 Income Tax Payable 1,443.0 0.0 20.0 119.0 137.0 Other Current Liabilities 2,175.0 2,175.0 1,700.0 1,504.0 865.0 Total Current Liabilities 5,468.0 2,813.0 2,291.0 2,258.0 1,422.0 Long-Term Debt 0.0 187.0 142.0 91.0 58.0 Provision for Risks & Charges -- 47.0 -- -- -- Deferred Taxes -1,922.0 -840.0 -829.0 -313.0 -512.0 Other Liabilities 4,246.0 4,079.0 4,185.0 306.0 322.0 Total Liabilities 7,792.0 6,286.0 5,789.0 2,342.0 1,290.0 Common Equity 20,858.0 20,316.0 17,944.0 15,835.0 13,406.0 Total Shareholders' Equity 20,858.0 20,316.0 17,944.0 15,835.0 13,406.0 Liabilities & Shareholders' Equity 28,650.0 26,602.0 23,733.0 18,177.0 14,696.0
    • FINANCIALSTATEMENTSOFBUYER 5 Year Cash Flow Statement of Qualcomm Inc. All figures in millions of U.S. Dollar, except per share items 30-Sep-10 30-Sep-09 30-Sep-08 28-Sep-07 29-Sep-06 Operating Activities Net Income before Extraordinaries 3,247.0 1,592.0 3,160.0 3,303.0 2,470.0 Depreciation, Depletion & Amortization 666.0 635.0 456.0 383.0 272.0 Deferred Taxes & Investment Tax Credit 116.0 -33.0 306.0 91.0 514.0 Other Funds 93.0 985.0 344.0 10.0 10.0 Funds from Operations 4,122.0 3,179.0 4,266.0 3,787.0 3,266.0 Changes in Working Capital -46.0 3,993.0 -708.0 24.0 -13.0 Receivables -18.0 3,083.0 -653.0 -16.0 -133.0 Inventories -80.0 69.0 -47.0 -234.0 -71.0 Accounts Payable 148.0 57.0 -63.0 209.0 51.0 Other Accruals -- -- -- 139.0 -- Other Assets/Liabilities -96.0 784.0 55.0 -74.0 140.0 Net Operating Cash Flow 4,076.0 7,172.0 3,558.0 3,811.0 3,253.0 Investing Activities Capital Expenditures 426.0 761.0 1,397.0 818.0 685.0 Net Assets from Acquisitions 0.0 0.0 0.0 0.0 0.0 Purchase/Sale of Investments 617.0 -5,223.0 -991.0 -494.0 -1,534.0 Other Funds -1,030.0 527.0 -431.0 -586.0 -404.0 Net Investing Cash Flow -839.0 -5,457.0 -2,819.0 -1,898.0 -2,623.0 Financing Activities Cash Dividends Paid -1,177.0 -1,093.0 -982.0 -862.0 -698.0 Change in Capital Stock -2,327.0 357.0 -486.0 -909.0 -797.0 Issuance/Reduction of Debt, Net 1,064.0 0.0 0.0 0.0 0.0 Other Funds 35.0 -97.0 161.0 660.0 403.0 Net Financing Cash Flow -2,405.0 -833.0 -1,307.0 -1,111.0 -1,092.0 Exchange Rate Effect -2.0 -5.0 -3.0 2.0 -1.0 Miscellaneous Funds 0.0 0.0 0.0 0.0 0.0 Net Change in Cash 830.0 877.0 -571.0 804.0 -463.0
    • FINANCIAL STATEMENTS OF TARGET
    • FINANCIALSTATEMENTSOFTARGET 5 Year Income Statement of Atheros Communications Inc. All figures in millions of U.S. Dollar, except per share items 31-Dec-10 31-Dec-09 31-Dec-08 31-Dec-07 29-Dec-06 Sales/Revenue 926.8 542.5 472.4 417.0 301.7 Cost of Goods Sold (COGS) incl. D&A 507.7 290.4 248.7 217.0 159.4 COGS excluding D&A 459.0 272.0 229.9 204.6 156.1 Depreciation & Amortization Expense 48.7 18.5 18.8 12.4 3.3 Depreciation 8.7 6.9 6.5 5.0 1.8 Amortization of Intangibles 40.0 11.6 12.2 7.4 1.5 Gross Income 419.1 252.0 223.7 200.0 142.3 SG&A Expense 320.7 219.3 197.8 160.1 113.6 Research & Development 189.7 130.6 121.6 100.9 71.1 Other SG&A 131.0 88.7 76.3 59.2 42.5 Other Operating Expense 0.0 0.0 0.0 0.0 0.0 EBIT (Operating Income) 98.4 32.7 25.9 39.8 28.7 Nonoperating Income (Expense) - Net 4.3 6.0 8.9 11.5 8.7 Interest Expense 0.0 0.0 0.0 0.0 0.0 Unusual Expense (Income) - Net 36.8 12.6 15.5 7.2 10.8 Financial Assets Impairment -- 2.0 15.5 2.3 -- Legal Claim Expense 33.7 -- -- -- -- Other Unusual Expense 3.1 10.5 0.0 4.9 10.8 Pretax Income 66.0 26.2 19.3 44.2 26.5 Income Taxes 11.6 -20.2 0.4 4.2 7.8 Income Taxes - Current Domestic -4.8 7.5 6.4 8.8 6.5 Income Taxes - Current Foreign 3.8 -20.4 1.2 0.9 0.1 Income Taxes - Deferred Domestic 12.3 -7.1 -6.4 -4.7 1.5 Income Taxes - Deferred Foreign 0.3 -0.2 -0.8 -0.8 -0.2 Consolidated Net Income 54.4 46.4 18.9 40.0 18.7 Net Income 54.4 46.4 18.9 40.0 18.7
    • FINANCIALSTATEMENTSOFTARGET 5 Year Balance Sheet of Atheros Communications Inc. All figures in millions of U.S. Dollar, except per share items 31-Dec-10 31-Dec-09 31-Dec-08 31-Dec-07 29-Dec-06 Assets Cash & ST Investments 515.8 402.2 293.8 219.5 185.9 Total Accounts Receivable 103.1 58.0 58.4 58.0 46.0 Inventories 95.7 70.4 69.8 35.5 25.9 Other Current Assets 20.1 27.0 15.9 16.1 10.6 Total Current Assets 734.8 557.6 437.8 329.1 268.4 Net Property, Plant & Equipment 22.1 15.0 14.8 13.5 9.0 Total Investments and Advances 12.8 15.5 17.0 30.5 0.0 Long-Term Note Receivable 0.0 0.0 0.0 0.0 0.0 Intangible Assets 375.3 324.2 125.0 136.1 81.7 Other Assets 9.0 0.0 0.0 0.0 0.0 Total Assets 1,154.0 912.3 594.6 509.2 359.2 Liabilities & Shareholders' Equity ST Debt & Curr. Portion LT Debt 0.0 0.0 0.0 0.0 0.0 Accounts Payable 51.8 59.9 30.5 29.6 17.1 Other Current Liabilities 118.5 81.2 65.5 47.3 46.9 Total Current Liabilities 170.2 141.1 96.0 76.8 64.0 Long-Term Debt 0.0 0.0 0.0 0.0 0.0 Deferred Taxes 17.8 39.4 27.1 30.9 -4.9 Other Liabilities 71.3 -0.0 0.0 0.0 18.6 Total Liabilities 259.3 180.5 123.1 107.7 77.7 Common Equity 894.8 731.9 471.5 401.5 280.9 Total Shareholders' Equity 894.8 731.9 471.5 401.5 280.9 Accumulated Minority Interest 0.0 0.0 0.0 0.0 0.5 Total Equity 894.8 731.9 471.5 401.5 281.5 Liabilities & Shareholders' Equity 1,154.0 912.3 594.6 509.2 359.2
    • FINANCIALSTATEMENTSOFTARGET 5 Year Cash Flow Statement of Atheros Communications Inc. All figures in millions of U.S. Dollar, except per share items 31-Dec-10 31-Dec-09 31-Dec-08 31-Dec-07 29-Dec-06 Operating Activities Net Income before Extraordinaries 54.4 46.4 18.9 40.0 18.7 Depreciation, Depletion & Amortization 48.7 18.5 18.8 5.0 3.3 Deferred Taxes & Investment Tax Credit 9.6 -23.0 -2.0 1.6 1.4 Other Funds 57.8 50.8 46.8 36.9 19.6 Funds from Operations 170.5 92.7 82.4 83.4 43.0 Changes in Working Capital -24.3 50.1 -19.0 -11.9 6.5 Receivables -44.3 11.6 -0.4 -10.7 -12.5 Inventories -25.8 7.6 -35.0 -7.7 -1.4 Accounts Payable -9.7 20.2 0.6 11.9 -1.0 Other Accruals 55.6 13.5 17.8 -4.0 24.3 Other Assets/Liabilities -0.1 -2.8 -1.9 -1.3 -3.0 Net Operating Cash Flow 146.2 142.8 63.4 71.5 49.4 Investing Activities Capital Expenditures 14.0 3.9 7.4 9.7 5.9 Net Assets from Acquisitions -70.6 -70.7 -0.5 -23.7 -52.1 Sale of Fixed Assets & Businesses 0.0 0.0 0.7 2.3 0.0 Purchase/Sale of Investments -131.0 -57.9 -133.6 9.8 11.1 Other Funds -1.2 0.2 -2.5 -0.3 0.0 Net Investing Cash Flow -216.8 -132.2 -143.3 -21.6 -46.9 Financing Activities Change in Capital Stock 53.0 22.6 18.6 23.1 14.1 Issuance/Reduction of Debt, Net 0.0 0.0 0.0 0.0 0.0 Other Funds 0.0 0.7 1.5 2.9 6.3 Net Financing Cash Flow 53.0 23.2 20.1 26.0 20.4 Miscellaneous Funds 0.0 0.0 -0.0 0.0 -0.0 Net Change in Cash -17.7 33.8 -59.7 75.9 23.0
    • DISCOUNTED CASH FLOW VALUATION OF TARGET
    • DISCOUNTEDCASHFLOWVALUATIONOFTARGET Free Cash Flow Projection Free Cash Flow Projection FY Ending December 30 CAGR 2009 2010 2011 2012 2013 2014 2015 2011-2015 Revenue $542.5 $926.8 $986.6 $1,129.3 $1,210.0 $1,222.1 $1,234.3 5.8% % Growth 70.8% 6.5% 14.5% 7.1% 1.0% 1.0% EBITDA 147.1 166.4 248.3 297.0 300.0 303.0 16.2% % Margin 15.9% 16.9% 22.0% 24.5% 24.5% 24.5% Less: Depreciation (8.7) (7.0) (8.2) (8.5) (8.6) (8.7) EBITA 138.4 159.4 240.1 288.5 291.4 294.3 16.6% Tax Rate 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% Unlevered Net Income $110.7 $127.5 $192.1 $230.8 $233.1 $235.4 16.6% Plus: Depreciation 8.7 7.0 8.2 8.5 8.6 8.7 Less: Capital Expenditures (12.5) (15.6) (17.7) (18.1) (23.2) (23.5) Less: Change in Working Capital 288.2 44.9 107.0 60.5 9.1 9.2 Free Cash Flow $395.1 $163.8 $289.6 $281.7 $227.5 $229.8 8.8% Net Debt ($490.4) FDSO 75.629 TEV/EBITDA 14.4x
    • DISCOUNTEDCASHFLOWVALUATIONOFTARGET Valuation Sensitivity Analysis DCF Valuation (2011-2015): EBITDA Multiple Method Total Enterprise Value Total Equity Value (1) Terminal EBITDA Multiple Terminal EBITDA Multiple 14.0x 15.0x 16.0x 14.0x 15.0x 16.0x Discount 15.0% $2,899.8 $3,050.4 $3,201.1 Discount 15.0% $3,390.2 $3,540.8 $3,691.5 Rate 16.0% $2,791.5 $2,935.7 $3,080.0 Rate 16.0% $3,281.9 $3,426.1 $3,570.4 (WACC) 17.0% $2,688.3 $2,826.5 $2,964.7 (WACC) 17.0% $3,178.7 $3,316.9 $3,455.1 Implied Perpetuity Growth Rate Price Per Share (2) Terminal EBITDA Multiple Terminal EBITDA Multiple 14.0x 15.0x 16.0x 14.0x 15.0x 16.0x Discount 15.0% 9.1% 9.5% 9.8% Discount 15.0% $44.8 $46.8 $48.8 Rate 16.0% 10.0% 10.4% 10.7% Rate 16.0% $43.4 $45.3 $47.2 (WACC) 17.0% 11.0% 11.4% 11.7% (WACC) 17.0% $42.0 $43.9 $45.7 DCF Valuation (2011-2015): Perpetuity Growth Method Total Enterprise Value Total Equity Value (1) Terminal Perpetuity Growth Rate Terminal Perpetuity Growth Rate 3.0% 4.0% 5.0% 3.0% 4.0% 5.0% Discount 15.0% $1,771.8 $1,871.3 $1,990.8 Discount 15.0% $2,262.2 $2,361.7 $2,481.2 Rate 16.0% $1,638.9 $1,720.3 $1,816.5 Rate 16.0% $2,129.3 $2,210.7 $2,306.9 (WACC) 17.0% $1,524.9 $1,592.3 $1,670.9 (WACC) 17.0% $2,015.3 $2,082.7 $2,161.3 Implied Terminal EBITDA Multiple Price Per Share (2) Terminal Perpetuity Growth Rate Terminal Perpetuity Growth Rate 3.0% 4.0% 5.0% 3.0% 4.0% 5.0% Discount 15.0% 6.5x 7.2x 8.0x Discount 15.0% $29.91 $31.23 $32.81 Rate 16.0% 6.0x 6.6x 7.2x Rate 16.0% $28.16 $29.23 $30.50 (WACC) 17.0% 5.6x 6.1x 6.6x (WACC) 17.0% $26.65 $27.54 $28.58
    • COMPARABLE COMPANY VALUATION OF TARGET
    • COMPARABLECOMPANYVALUATIONOFTARGET Industry Comparables
    • COMPARABLECOMPANYVALUATIONOFTARGET Comparable Company Key Financial Statistics Capitalization Analysis LTM as of 21-Apr-2011 Diluted Cash Long Price Market Shares Equity Enterprise and ST Total Preferred Minority Total Term D/ Company Name Ticker (21-Apr-2011) Value Outstanding Value Value Investments Debt Equity Interest Assets Debt D+E Broadcom Corp. BRCM 40.16 19,504.4 544.6 21,871.6 17,543.7 2,657.7 697.0 0.0 0.0 7,944.3 697.0 0.11x Intel Corp. INTC 21.94 118,150.4 5,696.0 124,970.2 98,380.4 21,885.0 2,115.0 0.0 0.0 62,897.0 2,077.0 0.04x Marvell Technology MRVL 15.83 10,026.7 676.9 10,715.0 7,097.2 2,930.0 0.5 0.0 0.0 6,310.5 0.0 0.00x RF Micro Devices RFMD 6.17 1,703.7 284.2 1,753.2 1,611.5 304.7 212.5 0.0 0.0 1,053.4 207.4 0.24x Intersil Corp. ISIL 14.54 1,815.1 124.6 1,811.7 1,730.6 383.0 298.5 0.0 0.0 1,578.6 275.0 0.22x Mean 19.7 30,240.1 1,465.2 32,224.3 25,272.7 5,632.1 664.7 - - 15,956.7 651.3 0.1 Median 15.8 10,026.7 544.6 10,715.0 7,097.2 2,657.7 298.5 - - 6,310.5 275.0 0.1 Margin Analysis LTM as of 21-Apr-2011 Company Name Ticker FY-1 FY0 LTM FY-1 FY0 LTM FY-1 FY0 LTM FY-1 FY0 LTM Broadcom Corp. BRCM 50.4 51.4 51.4 4.5 16.9 16.9 6.8 18.9 18.9 1.5 15.9 15.9 Intel Corp. INTC 55.6 65.2 65.2 16.9 35.6 35.6 31.3 46.2 46.2 12.4 26.3 26.3 Marvell Technology MRVL 52.5 57.0 57.0 11.9 25.0 25.0 18.8 29.8 29.8 12.6 25.0 25.0 RF Micro Devices RFMD 24.5 36.3 36.0 (98.1) 11.2 14.9 - 20.5 23.0 (100.2) 7.3 11.5 Intersil Corp. ISIL 52.7 54.8 54.8 8.8 15.8 15.8 14.3 21.7 21.7 6.3 3.2 3.2 Mean 47.1 52.9 52.9 (11.2) 20.9 21.6 17.8 27.4 27.9 (13.5) 15.5 16.4 Median 52.5 54.8 54.8 8.8 16.9 16.9 16.6 21.7 23.0 6.3 15.9 15.9 Valuation Analysis LTM as of 21-Apr-2011 Price to Price Market Enterprise Book to Company Name Ticker Value Value Sales EBITDA LTM FY1 FY2 Sales EBIT EBITDA Value Sales Broadcom Corp. BRCM 19,504.4 17,543.7 6,818.3 1,291.0 20.18 14.38 13.13 2.6x 15.2x 13.6x 3.7x 3.2x Intel Corp. INTC 118,150.4 98,380.4 43,623.0 20,148.0 10.92 9.74 9.09 2.3x 6.3x 4.9x 2.4x 2.9x Marvell Technology MRVL 10,026.7 7,097.2 3,611.9 1,077.1 11.81 10.66 9.52 2.0x 7.8x 6.6x 1.9x 3.0x RF Micro Devices RFMD 1,703.7 1,611.5 1,099.3 252.9 13.41 10.06 11.16 1.5x 9.8x 6.4x 2.6x 1.6x Intersil Corp. ISIL 1,815.1 1,730.6 822.4 178.6 69.24 14.57 11.39 2.1x 13.3x 9.7x 1.7x 2.2x Mean 30,240.1 25,272.7 11,195.0 4,589.5 25.1 11.9 10.9 2.1x 10.5x 8.2x 2.5x 2.6x Median 10,026.7 7,097.2 3,611.9 1,077.1 13.4 10.7 11.2 2.1x 9.8x 6.6x 2.4x 2.9x Low 1,703.7 1,611.5 822.4 178.6 10.9 9.7 9.1 1.5x 6.3x 4.9x 1.7x 1.6x High 118,150.4 98,380.4 43,623.0 20,148.0 69.2 14.6 13.1 2.6x 15.2x 13.6x 3.7x 3.2x Price / EPS Enterprise Value / Gross Margin (%) EBIT Margin (%) EBITDA Margin (%) Net Margin (%)
    • COMPARABLECOMPANYVALUATIONOFTARGET Comparable Company Valuation Range Atheros Inc. Key Financial Metrics Net Debt ($490.4) FDSO 75.629 Book Value of Share 11.8$ EPS (FY1) 1.6$ EPS(FY2) 1.9$ Sales 926.8$ EBIT 98.4$ EBITDA 147.1$ Mean Median Low High Mean Median Low High 2,213.1 2,188.3 1,551.5 - 3,321.9 29.3 28.9 20.5 - 43.9 1,399.9 1,255.9 1,147.3 - 1,716.5 18.5 16.6 15.2 - 22.7 1,555.4 1,599.1 1,302.3 - 1,880.4 20.6 21.1 17.2 - 24.9 1,921.0 1,950.3 1,358.7 - 2,384.7 31.9 32.3 24.4 - 38.0 1,034.5 968.6 624.2 - 1,496.4 20.2 19.3 14.7 - 26.3 1,209.8 969.3 718.3 - 1,999.0 22.5 19.3 16.0 - 32.9 Implied Total Enterprise Value Implied Price per Share
    • PRECEDENT TRANSACTIONS VALUATION OF TARGET
    • PRECEDENTTRANSACTIONVALUATIONOFTARGET Precedent Transactions Analysis Precedent Transactions Deal Year Name Industry Ticker Name Industry Ticker Enterprise Value EV/Revenue EV/EBITDA Premium 2009 Cisco Systems Hardware CSCO Tandberg Hardware TAA $3,000.0 3.5x 15.1x 11% 2009 Cisco Systems Hardware CSCO Starent Hardware STAR $2,400.0 5.4x 22.1x 20% 2009 EMC Corp. Hardware EMC Data Domain Hardware DDUP $2,100.0 5.5x 20.0x 30% 2009 Hewlett Packaard Hardware HPQ 3Com Hardware COMS $2,700.0 2.5x 19.3x 39% 2009 Dell Inc. Hardware DELL Perot Systems IT Services PER $3,900.0 2.4x 12.9x 67% Mean $2,820.0 3.9x 17.9x 33% Median $2,700.0 3.5x 19.3x 30% Low $2,100.0 2.4x 12.9x 11% High $3,900.0 5.5x 22.1x 67% Buyer Target Deal Details Atheros Inc. Key Financial Metrics Net Debt ($490.4) FDSO 75.629 Revenue 926.8$ EBITDA 147.1$ Mean Median Low High Mean Median Low High 3,577.4 3,243.8 2,224.3 5,097.4 53.8 49.4 35.9 73.9 2,630.1 2,839.0 1,897.6 3,250.9 41.3 44.0 31.6 49.5 Implied Total Enterprise Value Implied Price per Share
    • VALUATION SUMMARY
    • VALUATIONSUMMARY Target Valuation Summary 15% -17% WACC 14x -16x Exit Multiple 2.4x -5.5x Revenue 12.9x -22.1x EBITDA 1.5x - 2.4x Revenue 4.88x - 9.7x EBITDA Low $2,826.5 $2,791.5 $2,224.3 $1,897.6 $1,358.7 $718.3 Range $223.9 $288.5 $2,873.1 $1,353.3 $865.6 $707.0 High $3,050.4 $3,080.0 $5,097.4 $3,250.9 $2,224.3 $1,425.3 DCF Analysis Precedent Transactions Comparable Companies
    • FINANCIAL PROJECTIONS OF BUYER AND TARGET
    • FINANCIALPROJECTIONSOFBUYERANDTARGET Income Statement Projection of Qualcomm Inc. FY Ended December 30 FY Ending December 30 CAGR 2008A 2009A 2010A 2011P 2012P 2013P 2014E 2015E 2011-2015 Total Revenue $11,142.0 $10,416.0 $10,991.0 $14,263.0 $15,996.2 $17,581.0 $19,322.8 $21,237.2 10.5% % Growth NA (6.5%) 5.5% 29.8% 12.2% 9.9% 9.9% 9.9% COGS - ex D&A 2,958.0 2,546.0 2,851.0 4,017.4 4,403.6 4,964.4 5,456.2 5,996.8 % of Sales 26.5% 24.4% 25.9% 28.2% 27.5% 28.2% 28.2% 28.2% Gross Profit $8,184.0 $7,870.0 $8,140.0 $10,245.6 $11,592.6 $12,616.6 $13,866.6 $15,240.4 10.4% % Margin 73.5% 75.6% 74.1% 71.8% 72.5% 71.8% 71.8% 71.8% SG&A 3,998.0 3,996.0 4,191.0 4,221.5 4,554.6 5,059.8 5,561.1 6,112.0 % of Sales 35.9% 38.4% 38.1% 29.6% 28.5% 28.8% 28.8% 28.8% EBITDA $4,186.0 $3,874.0 $3,949.0 $6,024.1 $7,038.0 $7,556.8 $8,305.5 $9,128.3 10.9% % Margin 37.6% 37.2% 35.9% 42.2% 44.0% 43.0% 43.0% 43.0% Depreciation 372.0 428.0 437.0 362.6 600.0 800.0 879.3 966.4 % of Sales 3.3% 4.1% 4.0% 2.5% 3.8% 4.6% 4.6% 4.6% Amortization 84.0 207.0 229.0 100.0 93.3 83.1 83.1 83.1 % of Sales 0.8% 2.0% 2.1% 0.7% 0.6% 0.5% 0.4% 0.4% Total D&A $456.0 $635.0 $666.0 $462.6 $693.3 $883.1 $962.4 $1,049.5 % of Sales 4.1% 6.1% 6.1% 3.2% 4.3% 5.0% 5.0% 4.9% Stock-Based Comp 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% EBIT $3,730.0 $3,239.0 $3,283.0 $5,561.5 $6,344.7 $6,673.7 $7,343.1 $8,078.9 9.8% % Margin 33.5% 31.1% 29.9% 39.0% 39.7% 38.0% 38.0% 38.0% EBITA $3,814.0 $3,446.0 $3,512.0 $5,661.5 $6,438.0 $6,756.8 $7,426.2 $8,162.0 9.6% % Margin 34.2% 33.1% 32.0% 39.7% 40.2% 38.4% 38.4% 38.4% Interest Income 646.0 653.0 935.0 0.0 0.0 0.0 0.0 0.0 Interest Expense 22.0 24.0 58.0 0.0 0.0 0.0 0.0 0.0 Equity Income 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Minority Interest 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other Income 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other Expense 529.0 1,545.0 122.0 0.0 0.0 0.0 0.0 0.0 Income Before Taxes $3,825.0 $2,323.0 $4,038.0 $5,561.5 $6,344.7 $6,673.7 $7,343.1 $8,078.9 9.8% Income tax 666.0 484.0 787.0 671.2 1,160.3 813.8 895.4 985.1 % Tax Rate 17.4% 20.8% 19.5% 12.1% 18.3% 12.2% 12.2% 12.2% Net Income $3,159.0 $1,839.0 $3,251.0 $4,890.3 $5,184.4 $5,859.9 $6,447.7 $7,093.7 9.7% % Margin 28.4% 17.7% 29.6% 34.3% 32.4% 33.3% 33.4% 33.4% Diluted EPS $1.90 $1.10 $1.96 $2.63 $2.83 $3.55 $3.72 $4.07 11.5% Diluted Shares Out 1,663.158 1,675.789 1,656.633 1,856.916 1,832.791 1,648.788 1,734.815 1,742.123 Cash to GAAP Reconciliation Amortization $69.4 $163.9 $184.4 $87.9 $76.2 $73.0 $73.0 $73.0 Stock-Based Comp 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 One-Time Charges 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Net Income - GAAP $3,089.6 $1,675.1 $3,066.6 $4,802.4 $5,108.2 $5,786.9 $6,374.7 $7,020.7 10.0% % Margin 27.7% 16.1% 27.9% 33.7% 31.9% 32.9% 33.0% 33.1% Diluted EPS - GAAP $1.86 $1.00 $1.85 $2.59 $2.79 $3.51 $3.67 $4.03 11.7% Capex $1,397.0 $761.0 $426.0 $466.3 $672.4 $899.9 $966.1 $1,061.9 % of Sales 12.5% 7.3% 3.9% 3.3% 4.2% 5.1% 5.0% 5.0%
    • FINANCIALPROJECTIONSOFBUYERANDTARGET Income Statement Projection of Atheros Communications Inc. FY Ended December 30 FY Ending December 30 CAGR 2008A 2009A 2010A 2011P 2012P 2013P 2014E 2015E 2011-2015 Total Revenue $472.4 $542.5 $926.8 $986.6 $1,129.3 $1,210.0 $1,222.1 $1,234.3 5.8% % Growth NA 14.8% 70.8% 6.5% 14.5% 7.1% 1.0% 1.0% COGS - ex D&A 229.9 272.0 459.0 532.0 555.3 578.0 583.8 589.6 % of Sales 48.7% 50.1% 49.5% 53.9% 49.2% 47.8% 47.8% 47.8% Gross Profit $242.5 $270.5 $467.8 $454.6 $574.0 $632.0 $638.3 $644.7 9.1% % Margin 51.3% 49.9% 50.5% 46.1% 50.8% 52.2% 52.2% 52.2% SG&A 197.8 219.3 320.7 288.2 325.7 335.0 338.4 341.7 % of Sales 41.9% 40.4% 34.6% 29.2% 28.8% 27.7% 27.7% 27.7% EBITDA $44.7 $51.2 $147.1 $166.4 $248.3 $297.0 $300.0 $303.0 16.2% % Margin 9.5% 9.4% 15.9% 16.9% 22.0% 24.5% 24.5% 24.5% Depreciation 6.5 6.9 8.7 7.0 8.2 8.5 8.6 8.7 % of Sales 1.4% 1.3% 0.9% 0.7% 0.7% 0.7% 0.7% 0.7% Amortization 12.2 11.6 40.0 14.0 14.5 15.2 15.2 15.2 % of Sales 2.6% 2.1% 4.3% 1.4% 1.3% 1.3% 1.2% 1.2% Total D&A $18.7 $18.5 $48.7 $21.0 $22.7 $23.7 $23.8 $23.9 % of Sales 4.0% 3.4% 5.3% 2.1% 2.0% 2.0% 1.9% 1.9% Stock-Based Comp 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% EBIT $26.0 $32.7 $98.4 $145.4 $225.6 $273.3 $276.2 $279.1 17.7% % Margin 5.5% 6.0% 10.6% 14.7% 20.0% 22.6% 22.6% 22.6% EBITA $38.2 $44.3 $138.4 $159.4 $240.1 $288.5 $291.4 $294.3 16.6% % Margin 8.1% 8.2% 14.9% 16.2% 21.3% 23.8% 23.8% 23.8% Interest Income 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Interest Expense 0.0 0.0 0.0 2.0 4.0 0.0 0.0 0.0 Equity Income 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Minority Interest 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other Income 8.9 6.0 4.3 0.0 0.0 0.0 0.0 0.0 Other Expense 15.5 12.6 36.8 0.0 0.0 0.0 0.0 0.0 Income Before Taxes $19.4 $26.1 $65.9 $143.4 $221.6 $273.3 $276.2 $279.1 18.1% Provision for Tax 3.4 5.4 12.8 17.3 40.5 33.3 33.7 34.0 % Tax Rate 17.4% 20.8% 19.5% 12.1% 18.3% 12.2% 12.2% 12.2% Net Income $16.0 $20.7 $53.1 $126.1 $181.1 $240.0 $242.5 $245.1 18.1% % Margin 3.4% 3.8% 5.7% 12.8% 16.0% 19.8% 19.8% 19.9% Diluted EPS $0.25 $0.33 $0.73 $1.56 $1.89 $2.48 $2.48 $2.50 12.5% Diluted Shares Out 62.910 63.570 72.500 80.940 95.610 96.650 97.770 98.200 Cash to GAAP Reconciliation Amortization $10.1 $9.2 $32.2 $12.3 $11.8 $13.3 $13.3 $13.3 Stock-Based Comp 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 One-Time Charges 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Net Income - GAAP $5.9 $11.5 $20.9 $113.8 $169.2 $226.6 $229.2 $231.7 19.5% % Margin 1.3% 2.1% 2.2% 11.5% 15.0% 18.7% 18.8% 18.8% Diluted EPS - GAAP $0.09 $0.18 $0.29 $1.41 $1.77 $2.34 $2.34 $2.36 13.8% Capex $7.4 $3.9 $12.5 $15.6 $17.7 $18.1 $23.2 $23.5 % of Sales 1.6% 0.7% 1.3% 1.6% 1.6% 1.6% 1.9% 1.9%
    • TRANSACTION ANALYSIS
    • TRANSACTIONANALYSIS Sources and Uses of Funds Current Price $34.50 $44.00 $45.00 $46.00 $47.00 $48.00 $49.00 $50.00 Sources & Uses Uses Atheros Inc. Common Consideration $2,779.0 $3,544.2 $3,624.8 $3,705.3 $3,785.9 $3,866.4 $3,947.0 $4,027.5 Atheros Inc. Options Consideration 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Atheros Inc. Preferred Consideration 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Equity Consideration $2,779.0 $3,544.2 $3,624.8 $3,705.3 $3,785.9 $3,866.4 $3,947.0 $4,027.5 Atheros Inc. Revolver Refinanced 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Atheros Inc. Convertible Debt Assumed 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Atheros Inc. Convertible Debt Refinanced/Retired 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Atheros Inc. Non-Convertible LT Debt Assumed 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Atheros Inc. Non-Convertible LT Debt Refinanced/Retired 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Levered Consideration $2,779.0 $3,544.2 $3,624.8 $3,705.3 $3,785.9 $3,866.4 $3,947.0 $4,027.5 Acquirer Refinanced Debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Financing Fees 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Advisory Fees 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 Total Uses $2,809.0 $3,574.2 $3,654.8 $3,735.3 $3,815.9 $3,896.4 $3,977.0 $4,057.5 Sources Qualcomm Inc. Common Consideration $1,667.4 $2,126.5 $2,174.9 $2,223.2 $2,271.5 $2,319.8 $2,368.2 $2,416.5 Qualcomm Inc. Options Consideration 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Qualcomm Inc. Preferred Consideration 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Cash Consideration 1,141.6 1,447.7 1,479.9 1,512.1 1,544.3 1,576.6 1,608.8 1,641.0 Qualcomm Inc. Revolver 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Acquisition Debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Atheros Inc. LT Debt Assumed 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Sources $2,809.0 $3,574.2 $3,654.8 $3,735.3 $3,815.9 $3,896.4 $3,977.0 $4,057.5 Check 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 Cash Schedule Cash Available Qualcomm Inc. Existing Cash $10,279.0 $10,279.0 $10,279.0 $10,279.0 $10,279.0 $10,279.0 $10,279.0 $10,279.0 Atheros Inc. Existing Cash 515.8 515.8 515.8 515.8 515.8 515.8 515.8 515.8 Minimum Cash Balance (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) Total Cash Available $10,694.8 $10,694.8 $10,694.8 $10,694.8 $10,694.8 $10,694.8 $10,694.8 $10,694.8 Cash Needed Cash Paid to Atheros Inc. Shareholders $1,111.6 $1,417.7 $1,449.9 $1,482.1 $1,514.3 $1,546.6 $1,578.8 $1,611.0 Financing Fees 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Advisory Fees 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 Qualcomm Inc. Debt Retired 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Atheros Inc. Debt Retired 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Cash Needed Before Revolver $1,141.6 $1,447.7 $1,479.9 $1,512.1 $1,544.3 $1,576.6 $1,608.8 $1,641.0 Optional Paydown of Atheros Inc. Revolver 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Optional Paydown of Qualcomm Inc. Revolver 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Cash Needed $1,141.6 $1,447.7 $1,479.9 $1,512.1 $1,544.3 $1,576.6 $1,608.8 $1,641.0 Transaction Prices Per Atheros Inc. Share
    • TRANSACTIONANALYSIS Pro Forma Balance Sheet Transaction Value Per Share $45.00 Qualcomm Inc. Atheros Inc. Adjustments Pro Forma 25-04-11 25-04-11 Write-Up Financing 25-04-11 Assets Current Assets Cash and Equivalents $10,279.0 $515.8 ($1,479.9) $9,314.9 Accounts Receivable 730.0 103.1 833.1 Inventory 528.0 95.7 623.7 Deferred Income Taxes 0.0 0.0 0.0 Other Current Assets 596.0 20.1 616.1 Total Current Assets $12,133.0 $734.7 $11,387.8 Net PP&E $2,373.0 $22.1 15.0 $2,410.1 Goodwill 1,488.0 222.0 2,142.4 3,852.4 Intangibles 3,022.0 153.4 682.5 3,857.9 Investments/Restricted Cash 8,123.0 12.8 8,135.8 Unearned Compensation 0.0 0.0 0.0 0.0 Deferred Financing Fees 0.0 0.0 0.0 0.0 Other Assets 1,511.0 9.0 1,520.0 Total Assets $28,650.0 $1,154.0 $31,164.0 Liabilities and Stockholders' Equity Current Liabilities Accounts Payable $764.0 $51.8 $815.8 Accrued Expenses 0.0 0.0 0.0 Income Taxes Payable 1,443.0 0.0 1,443.0 Deferred Revenue 0.0 0.0 0.0 Other Current Liabilities 2,175.0 118.5 2,293.5 Current Portion of Long-Term Debt 1,086.0 0.0 1,086.0 Total Current Liabilities $5,468.0 $170.3 $5,638.3 Revolver $0.0 $0.0 $0.0 $0.0 Non-Convertible Debt 0.0 0.0 0.0 0.0 Convertible Debt 0.0 0.0 0.0 0.0 Deferred Income Taxes (1,922.0) 17.8 127.6 (17.8) (1,794.4) Other Long-Term Liabilities 4,246.0 71.3 4,317.3 Total Liabilities $7,792.0 $259.4 $8,161.2 Preferred Stock, par value $0.0 $0.0 $0.0 $0.0 Common Stock, par value 0.0 773.7 1,401.2 2,174.9 APIC / Capital Surplus 6,856.0 0.0 0.0 6,856.0 Treasury Stock 0.0 0.0 0.0 0.0 Accum. & Other Comp. Income (Loss) (88.0) 0.0 0.0 (88.0) Unrealized Gain/Loss Marketable Securities 785.0 0.0 0.0 785.0 Retained Earnings 13,305.0 120.9 (150.9) 13,275.0 Total Stockholders' Equity $20,858.0 $894.6 $23,002.9 Total Liabilities and Stockholders' Equity $28,650.0 $1,154.0 $31,164.0 Check 0.000 0.000 0.000
    • TRANSACTIONANALYSIS Pro Forma Income Statement FY Ended December 30 FY Ending December 30 CAGR 2008A 2009A 2010A 2011E 2012E 2013E 2014E 2015E 2011-2015 Total Revenue $11,614.4 $10,958.5 $11,917.8 $15,249.6 $17,125.5 $18,791.0 $20,544.9 $22,471.5 10.2% % Growth NA (5.6%) 8.8% 28.0% 12.3% 9.7% 9.7% 9.7% COGS 3,187.9 2,818.0 3,310.0 4,549.4 4,958.9 5,542.4 6,040.0 6,586.4 COGS Synergies 0.0 0.0 0.0 0.0 (25.0) (25.0) (25.0) (25.0) % of Sales 27.4% 25.7% 27.8% 29.8% 28.8% 29.4% 29.3% 29.2% Gross Profit $8,426.5 $8,140.5 $8,607.8 $10,700.2 $12,191.6 $13,273.6 $14,529.9 $15,910.1 10.4% % Margin 72.6% 74.3% 72.2% 70.2% 71.2% 70.6% 70.7% 70.8% SG&A 4,195.8 4,215.3 4,511.7 4,509.7 4,880.3 5,394.8 5,899.4 6,453.8 SG&A Synergies 0.0 0.0 0.0 0.0 (50.0) (50.0) (50.0) (50.0) % of Sales 36.1% 38.5% 37.9% 29.6% 28.2% 28.4% 28.5% 28.5% EBITDA $4,230.7 $3,925.2 $4,096.1 $6,190.5 $7,361.3 $7,928.8 $8,680.4 $9,506.3 11.3% % Margin 36.4% 35.8% 34.4% 40.6% 43.0% 42.2% 42.3% 42.3% Existing Depreciation 378.5 434.9 445.7 369.6 608.2 808.5 887.8 975.0 New Depreciation 0.0 0.0 0.0 1.5 1.5 1.5 1.5 1.5 % of Sales 3.3% 4.0% 3.7% 2.4% 3.6% 4.3% 4.3% 4.3% Existing Amortization 96.2 218.6 269.0 114.0 107.8 98.3 98.3 98.3 New Amortization 0.0 0.0 0.0 136.5 136.5 136.5 136.5 136.5 % of Sales 0.8% 2.0% 2.3% 1.6% 1.4% 1.2% 1.1% 1.0% Total D&A 474.7 653.5 714.7 621.6 854.0 1,044.8 1,124.2 1,211.3 % of Sales 4.1% 6.0% 6.0% 4.1% 5.0% 5.6% 5.5% 5.4% Stock-Based Comp 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% EBIT $3,756.0 $3,271.7 $3,381.4 $5,568.9 $6,507.3 $6,884.0 $7,556.3 $8,295.0 10.5% % Margin 32.3% 29.9% 28.4% 36.5% 38.0% 36.6% 36.8% 36.9% EBITA $3,852.2 $3,490.3 $3,650.4 $5,819.4 $6,751.6 $7,118.8 $7,791.1 $8,529.8 10.0% % Margin 33.2% 31.9% 30.6% 38.2% 39.4% 37.9% 37.9% 38.0% Interest (Income) / Expense 0.0 29.6 29.6 29.6 29.6 Equity (Income) 0.0 0.0 0.0 0.0 0.0 Minority Interest 0.0 0.0 0.0 0.0 0.0 Other (Income) / Expense 0.0 0.0 0.0 0.0 0.0 Other Transaction Adjustments 0.0 0.0 0.0 0.0 0.0 Income Before Taxes $5,819.4 $6,722.0 $7,089.2 $7,761.5 $8,500.2 9.9% Income Tax 1,064.2 1,229.3 1,296.5 1,419.4 1,554.5 % Tax Rate 18.3% 18.3% 18.3% 18.3% 18.3% Pro Forma Net Income $4,755.2 $5,492.7 $5,792.7 $6,342.1 $6,945.7 9.9% % Margin 31.2% 32.1% 30.8% 30.9% 30.9% Pro Forma Diluted EPS $2.51 $2.94 $3.43 $3.58 $3.90 11.7% Diluted Shares Out 1,895.192 1,871.068 1,687.064 1,773.091 1,780.400 Accredition/Dulition Qualcomm Inc. Standalone Diluted EPS $2.63 $2.83 $3.55 $3.72 $4.07 $ Accretion / (Dilution) ($0.12) $0.11 ($0.12) ($0.14) ($0.17) % Accretion / (Dilution) (4.7%) 3.8% (3.4%) (3.8%) (4.2%) Incremental Pre-Tax Synergies to Breakeven $288.7 ($244.8) $248.7 $303.3 $371.9 Capex $481.9 $690.1 $918.0 $989.4 $1,085.3 % of Sales 3.2% 4.0% 4.9% 4.8% 4.8%
    • TRANSACTIONANALYSIS Purchase Price Allocation and Accounting Adjustments Current Price Transaction Prices Per Atheros Inc. Share $34.50 $44.00 $45.00 $46.00 $47.00 $48.00 $49.00 $50.00 Fair Value of Options Issued by Acquirer Unvested Options Weighted Average Strike $14.60 $14.60 $14.60 $14.60 $14.60 $14.60 $14.60 $14.60 Weighted Average Remaining Term (yrs) 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 Black Scholes Value Per Option $24.51 $33.44 $34.39 $35.35 $36.30 $37.26 $38.22 $39.18 Options Outstanding 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 Fair Value of Unvested Options $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 Vested Options Weighted Average Strike $29.49 $29.49 $29.49 $29.49 $29.49 $29.49 $29.49 $29.49 Weighted Average Remaining Term (yrs) 2.7 2.7 2.7 2.7 2.7 2.7 2.7 2.7 Black Scholes Value Per Option $15.91 $23.64 $24.48 $25.33 $26.19 $27.05 $27.92 $28.79 Options Outstanding 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 Fair Value of Vested Options $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 Purchase Price Calculation Common Equity Consideration $2,779.0 $3,544.2 $3,624.8 $3,705.3 $3,785.9 $3,866.4 $3,947.0 $4,027.5 Fair Value of Unvested Options 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Fair Value of Vested Options 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Fair Value of Preferred Stock 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Purchase Price $2,779.0 $3,544.2 $3,624.8 $3,705.3 $3,785.9 $3,866.4 $3,947.0 $4,027.5 Unearned Compensation $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 Adjusted Purchase Price $2,779.0 $3,544.2 $3,624.8 $3,705.3 $3,785.9 $3,866.4 $3,947.0 $4,027.5 Purchase Price Allocation Adjusted Purchase Price $2,779.0 $3,544.2 $3,624.8 $3,705.3 $3,785.9 $3,866.4 $3,947.0 $4,027.5 Less: Target Book Value of Net Assets (894.6) (894.6) (894.6) (894.6) (894.6) (894.6) (894.6) (894.6) Excess Purchase Price to Allocate $1,884.4 $2,649.6 $2,730.2 $2,810.7 $2,891.3 $2,971.8 $3,052.4 $3,132.9 Write-Up of Tangible Assets $15.0 $15.0 $15.0 $15.0 $15.0 $15.0 $15.0 $15.0 Write-Up of Identifiable Intangible Assets 471.1 662.4 682.5 702.7 722.8 743.0 763.1 783.2 Write-Off of Target's Existing Goodwill (222.0) (222.0) (222.0) (222.0) (222.0) (222.0) (222.0) (222.0) Write-Off of Target's Existing DTL 17.8 17.8 17.8 17.8 17.8 17.8 17.8 17.8 Allocation to Goodwill (Before DTL Allocation) $1,602.5 $2,176.4 $2,236.8 $2,297.2 $2,357.6 $2,418.1 $2,478.5 $2,538.9 DTL From Write-Up of Assets ($88.9) ($123.9) ($127.6) ($131.2) ($134.9) ($138.6) ($142.3) ($146.0) DTL From Deferred Compensation 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Goodwill Created $1,691.4 $2,300.3 $2,364.4 $2,428.5 $2,492.6 $2,556.7 $2,620.8 $2,684.9 Amortization of Identifiable Intangibles Excess of Purchase Price Over Book Value $1,884.4 $2,649.6 $2,730.2 $2,810.7 $2,891.3 $2,971.8 $3,052.4 $3,132.9 % Allocated to Identifiable Intangibles 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% Write-Up of Intangible Assets $471.1 $662.4 $682.5 $702.7 $722.8 $743.0 $763.1 $783.2 Amortization Period (yrs) 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 Annual Incremental Amortization Expense $94.2 $132.5 $136.5 $140.5 $144.6 $148.6 $152.6 $156.6 Marginal Tax Rate 18.3% 18.3% 18.3% 18.3% 18.3% 18.3% 18.3% 18.3% After-Tax Annual Amortization Expense $77.0 $108.3 $111.5 $114.8 $118.1 $121.4 $124.7 $128.0 Depreciation of Fixed Asset Write-Up Write-Up of Tangible Assets $15.0 $15.0 $15.0 $15.0 $15.0 $15.0 $15.0 $15.0 Depreciation Period (yrs) 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 Annual Incremental Depreciation Expense $1.5 $1.5 $1.5 $1.5 $1.5 $1.5 $1.5 $1.5 Marginal Tax Rate 18.3% 18.3% 18.3% 18.3% 18.3% 18.3% 18.3% 18.3% After-Tax Annual Depreciation Expense $1.2 $1.2 $1.2 $1.2 $1.2 $1.2 $1.2 $1.2
    • TRANSACTIONANALYSIS Transaction Premium and Multiple Analysis Atheros Inc. Transaction Prices Per Atheros Inc. Share Qualcomm Inc. $34.50 $44.00 $45.00 $46.00 $47.00 $48.00 $49.00 $50.00 $56.82 Common Stock $2,519.3 $3,213.1 $3,286.1 $3,359.1 $3,432.1 $3,505.2 $3,578.2 $3,651.2 $91,918.5 Stock Options 259.6 331.1 338.7 346.2 353.7 361.2 368.8 376.3 12,213.9 ITM Convertible Securities 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Diluted Equity Value $2,779.0 $3,544.2 $3,624.8 $3,705.3 $3,785.9 $3,866.4 $3,947.0 $4,027.5 $104,132.4 Net Debt (515.8) (515.8) (515.8) (515.8) (515.8) (515.8) (515.8) (515.8) (17,316.0) Total Enterprise Value $2,263.2 $3,028.4 $3,109.0 $3,189.5 $3,270.1 $3,350.6 $3,431.2 $3,511.7 $86,816.4 Premiums Analysis Atheros Inc. Transaction Premium Per Atheros Inc. Share Qualcomm Inc. Current Price $34.50 0.0% 27.5% 30.4% 33.3% 36.2% 39.1% 42.0% 44.9% 0.0% $56.82 52-Week High 44.88 (23.1%) (2.0%) 0.3% 2.5% 4.7% 7.0% 9.2% 11.4% (5.0%) 59.84 52-Week Low 22.77 51.5% 93.2% 97.6% 102.0% 106.4% 110.8% 115.2% 119.6% 79.6% 31.63 1 Week Trading Average 41.60 (17.1%) 5.8% 8.2% 10.6% 13.0% 15.4% 17.8% 20.2% (6.2%) 60.60 1 Month Trading Average 41.70 (17.3%) 5.5% 7.9% 10.3% 12.7% 15.1% 17.5% 19.9% (7.2%) 61.20 3 Months Trading Average 41.70 (17.3%) 5.5% 7.9% 10.3% 12.7% 15.1% 17.5% 19.9% (9.4%) 62.70 6 Months Trading Average 63.50 (45.7%) (30.7%) (29.1%) (27.6%) (26.0%) (24.4%) (22.8%) (21.3%) (22.0%) 72.80 Multiples Analysis Transaction Muliple Analysis of Atheros Inc. Acquisition FY 2011P Revenue $986.6 2.29x 3.07x 3.15x 3.23x 3.31x 3.40x 3.48x 3.56x 6.09x $14,263.0 FY 2012P Revenue 1,129.3 2.00x 2.68x 2.75x 2.82x 2.90x 2.97x 3.04x 3.11x 5.43x 15,996.2 FY 2013P Revenue 1,210.0 1.87x 2.50x 2.57x 2.64x 2.70x 2.77x 2.84x 2.90x 4.94x 17,581.0 FY 2011P EBITDA $166.4 13.6x 18.2x 18.7x 19.2x 19.7x 20.1x 20.6x 21.1x 14.4x $6,024.1 FY 2012P EBITDA 248.3 9.1x 12.2x 12.5x 12.8x 13.2x 13.5x 13.8x 14.1x 12.3x 7,038.0 FY 2013P EBITDA 297.0 7.6x 10.2x 10.5x 10.7x 11.0x 11.3x 11.6x 11.8x 11.5x 7,556.8 FY 2011P EBITA $159.4 14.2x 19.0x 19.5x 20.0x 20.5x 21.0x 21.5x 22.0x 15.3x $5,661.5 FY 2012P EBITA 240.1 9.4x 12.6x 12.9x 13.3x 13.6x 14.0x 14.3x 14.6x 13.5x 6,438.0 FY 2013P EBITA 288.5 7.8x 10.5x 10.8x 11.1x 11.3x 11.6x 11.9x 12.2x 12.8x 6,756.8 FY 2011P Cash P/E $1.56 22.1x 28.2x 28.9x 29.5x 30.2x 30.8x 31.5x 32.1x 21.6x $2.63 FY 2012P Cash P/E 1.89 18.2x 23.2x 23.8x 24.3x 24.8x 25.3x 25.9x 26.4x 20.1x 2.83 FY 2013P Cash P/E 2.48 13.9x 17.7x 18.1x 18.5x 18.9x 19.3x 19.7x 20.1x 16.0x 3.55
    • EPS ACCRETION/DILUTION ANALYSIS
    • EPSACCRETION/DILUTIONANALYSIS EPS Accretion/Dilution – All Stock Deal Standalone Qualcomm Inc. Transaction Value Per Share Equity Purchase Price $95,854.3 Transaction Multiples Analysis FY 2011P Revenue 6.09x FY 2012P Revenue 5.43x FY 2011P EBITDA 14.4x FY 2012P EBITDA 12.3x FY 2011P Cash P/E 21.6x FY 2012P Cash P/E 20.1x Qualcomm Inc. Standalone EPS FY 2012P Cash Net Income FY 2012P Shares Outstanding FY 2012P Cash EPS After-Tax Acquisition Adjustments Atheros Inc. FY 2012P Cash Net Income Interest Lost on Cash Used Incremental Interest on New Debt Interest Gained on Conversion of Convert(s) Deferred Stock-Based Compensation Amortization of Indentifiable Intangibles Depreciation of Acquired Tangible Assets Write-Down of Deferred Revenue Pro Forma Cash Net Income Without Synergies After-Tax Synergies Pro Forma Cash Net Income With Synergies Diluted Shares - Treasury Method Qualcomm Inc. FY 2012P Shares Outstanding Shares Issued for Atheros Inc. Basic Shares Total Shares Post-Transaction Accretion/Dilution Summary FY 2012P Cash EPS Without Synergies $2.83 $ Accretion / Dilution % Accretion / Dilution Pre-Tax Synergies to Breakeven % of Combined Opex (Excl. Syngergies) FY 2012P Cash EPS With Synergies $2.83 $ Accretion / Dilution % Accretion / Dilution Pre-Tax Synergies to Breakeven % of Combined Opex (Excl. Syngergies) Ownership Structure Post Transaction % Shares Owned by Qualcomm Inc. Shareholders Post-Transaction % Shares Owned by Atheros Inc. Post-Transaction Total % All Stock $44.00 $45.00 $46.00 $47.00 $48.00 $49.00 $50.00 $3,544.2 $3,624.8 $3,705.3 $3,785.9 $3,866.4 $3,947.0 $4,027.5 3.07x 3.15x 3.23x 3.31x 3.40x 3.48x 3.56x 2.68x 2.75x 2.82x 2.90x 2.97x 3.04x 3.11x 18.2x 18.7x 19.2x 19.7x 20.1x 20.6x 21.1x 12.2x 12.5x 12.8x 13.2x 13.5x 13.8x 14.1x 28.2x 28.9x 29.5x 30.2x 30.8x 31.5x 32.1x 23.2x 23.8x 24.3x 24.8x 25.3x 25.9x 26.4x $5,184.4 $5,184.4 $5,184.4 $5,184.4 $5,184.4 $5,184.4 $5,184.4 1,832.791 1,832.791 1,832.791 1,832.791 1,832.791 1,832.791 1,832.791 $2.83 $2.83 $2.83 $2.83 $2.83 $2.83 $2.83 $181.1 $181.1 $181.1 $181.1 $181.1 $181.1 $181.1 (0.5) (0.5) (0.5) (0.5) (0.5) (0.5) (0.5) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 $5,363.8 $5,363.8 $5,363.8 $5,363.8 $5,363.8 $5,363.8 $5,363.8 61.3 61.3 61.3 61.3 61.3 61.3 61.3 $5,425.0 $5,425.0 $5,425.0 $5,425.0 $5,425.0 $5,425.0 $5,425.0 1,832.791 1,832.791 1,832.791 1,832.791 1,832.791 1,832.791 1,832.791 62.376 63.794 65.211 66.629 68.046 69.464 70.882 1,895.167 1,896.585 1,898.003 1,899.420 1,900.838 1,902.255 1,903.673 $2.83 $2.83 $2.83 $2.82 $2.82 $2.82 $2.82 $0.00 ($0.00) ($0.00) ($0.00) ($0.01) ($0.01) ($0.01) 0.1% (0.0%) (0.1%) (0.2%) (0.2%) (0.3%) (0.4%) ($3.6) $1.3 $6.2 $11.2 $16.1 $21.0 $25.9 (0.0%) 0.0% 0.1% 0.1% 0.2% 0.2% 0.2% $2.86 $2.86 $2.86 $2.86 $2.85 $2.85 $2.85 $0.03 $0.03 $0.03 $0.03 $0.03 $0.02 $0.02 1.2% 1.1% 1.0% 1.0% 0.9% 0.8% 0.7% ($78.6) ($73.7) ($68.8) ($63.8) ($58.9) ($54.0) ($49.1) (0.7%) (0.7%) (0.6%) (0.6%) (0.6%) (0.5%) (0.5%) 96.7% 96.6% 96.6% 96.5% 96.4% 96.3% 96.3% 3.3% 3.4% 3.4% 3.5% 3.6% 3.7% 3.7% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
    • EPSACCRETION/DILUTIONANALYSIS EPS Accretion/Dilution – 60% Stock + 40% Cash Deal Standalone Qualcomm Inc. Transaction Value Per Share Equity Purchase Price $95,854.3 Transaction Multiples Analysis FY 2011P Revenue 6.09x FY 2012P Revenue 5.43x FY 2011P EBITDA 14.4x FY 2012P EBITDA 12.3x FY 2011P Cash P/E 21.6x FY 2012P Cash P/E 20.1x Qualcomm Inc. Standalone EPS FY 2012P Cash Net Income FY 2012P Shares Outstanding FY 2012P Cash EPS After-Tax Acquisition Adjustments Atheros Inc. FY 2012P Cash Net Income Interest Lost on Cash Used Incremental Interest on New Debt Interest Gained on Conversion of Convert(s) Deferred Stock-Based Compensation Amortization of Indentifiable Intangibles Depreciation of Acquired Tangible Assets Write-Down of Deferred Revenue Pro Forma Cash Net Income Without Synergies After-Tax Synergies Pro Forma Cash Net Income With Synergies Diluted Shares - Treasury Method Qualcomm Inc. FY 2012P Shares Outstanding Shares Issued for Atheros Inc. Basic Shares Total Shares Post-Transaction Accretion/Dilution Summary FY 2012P Cash EPS Without Synergies $2.83 $ Accretion / Dilution % Accretion / Dilution Pre-Tax Synergies to Breakeven % of Combined Opex (Excl. Syngergies) FY 2012P Cash EPS With Synergies $2.83 $ Accretion / Dilution % Accretion / Dilution Pre-Tax Synergies to Breakeven % of Combined Opex (Excl. Syngergies) Ownership Structure Post Transaction % Shares Owned by Qualcomm Inc. Shareholders Post-Transaction % Shares Owned by Atheros Inc. Post-Transaction Total % 60.0% Stock / 40.0% Cash $44.00 $45.00 $46.00 $47.00 $48.00 $49.00 $50.00 $3,544.2 $3,624.8 $3,705.3 $3,785.9 $3,866.4 $3,947.0 $4,027.5 3.07x 3.15x 3.23x 3.31x 3.40x 3.48x 3.56x 2.68x 2.75x 2.82x 2.90x 2.97x 3.04x 3.11x 18.2x 18.7x 19.2x 19.7x 20.1x 20.6x 21.1x 12.2x 12.5x 12.8x 13.2x 13.5x 13.8x 14.1x 28.2x 28.9x 29.5x 30.2x 30.8x 31.5x 32.1x 23.2x 23.8x 24.3x 24.8x 25.3x 25.9x 26.4x $5,184.4 $5,184.4 $5,184.4 $5,184.4 $5,184.4 $5,184.4 $5,184.4 1,832.791 1,832.791 1,832.791 1,832.791 1,832.791 1,832.791 1,832.791 $2.83 $2.83 $2.83 $2.83 $2.83 $2.83 $2.83 $181.1 $181.1 $181.1 $181.1 $181.1 $181.1 $181.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 $5,364.2 $5,364.2 $5,364.2 $5,364.2 $5,364.2 $5,364.2 $5,364.2 61.3 61.3 61.3 61.3 61.3 61.3 61.3 $5,425.5 $5,425.5 $5,425.5 $5,425.5 $5,425.5 $5,425.5 $5,425.5 1,832.791 1,832.791 1,832.791 1,832.791 1,832.791 1,832.791 1,832.791 37.426 38.276 39.127 39.977 40.828 41.678 42.529 1,870.217 1,871.068 1,871.918 1,872.769 1,873.619 1,874.470 1,875.320 $2.87 $2.87 $2.87 $2.86 $2.86 $2.86 $2.86 $0.04 $0.04 $0.04 $0.04 $0.03 $0.03 $0.03 1.4% 1.4% 1.3% 1.3% 1.2% 1.2% 1.1% ($90.5) ($87.6) ($84.7) ($81.7) ($78.8) ($75.8) ($72.9) (0.8%) (0.8%) (0.8%) (0.8%) (0.7%) (0.7%) (0.7%) $2.90 $2.90 $2.90 $2.90 $2.90 $2.89 $2.89 $0.07 $0.07 $0.07 $0.07 $0.07 $0.07 $0.06 2.6% 2.5% 2.5% 2.4% 2.4% 2.3% 2.3% ($165.5) ($162.6) ($159.7) ($156.7) ($153.8) ($150.8) ($147.9) (1.5%) (1.5%) (1.5%) (1.5%) (1.4%) (1.4%) (1.4%) 98.0% 98.0% 97.9% 97.9% 97.8% 97.8% 97.7% 2.0% 2.0% 2.1% 2.1% 2.2% 2.2% 2.3% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
    • EPSACCRETION/DILUTIONANALYSIS EPS Accretion/Dilution – All Cash Deal Standalone Qualcomm Inc. Transaction Value Per Share Equity Purchase Price $95,854.3 Transaction Multiples Analysis FY 2011P Revenue 6.09x FY 2012P Revenue 5.43x FY 2011P EBITDA 14.4x FY 2012P EBITDA 12.3x FY 2011P Cash P/E 21.6x FY 2012P Cash P/E 20.1x Qualcomm Inc. Standalone EPS FY 2012P Cash Net Income FY 2012P Shares Outstanding FY 2012P Cash EPS After-Tax Acquisition Adjustments Atheros Inc. FY 2012P Cash Net Income Interest Lost on Cash Used Incremental Interest on New Debt Interest Gained on Conversion of Convert(s) Deferred Stock-Based Compensation Amortization of Indentifiable Intangibles Depreciation of Acquired Tangible Assets Write-Down of Deferred Revenue Pro Forma Cash Net Income Without Synergies After-Tax Synergies Pro Forma Cash Net Income With Synergies Diluted Shares - Treasury Method Qualcomm Inc. FY 2012P Shares Outstanding Shares Issued for Atheros Inc. Basic Shares Total Shares Post-Transaction Accretion/Dilution Summary FY 2012P Cash EPS Without Synergies $2.83 $ Accretion / Dilution % Accretion / Dilution Pre-Tax Synergies to Breakeven % of Combined Opex (Excl. Syngergies) FY 2012P Cash EPS With Synergies $2.83 $ Accretion / Dilution % Accretion / Dilution Pre-Tax Synergies to Breakeven % of Combined Opex (Excl. Syngergies) Ownership Structure Post Transaction % Shares Owned by Qualcomm Inc. Shareholders Post-Transaction % Shares Owned by Atheros Inc. Post-Transaction Total % All Cash $44.00 $45.00 $46.00 $47.00 $48.00 $49.00 $50.00 $3,544.2 $3,624.8 $3,705.3 $3,785.9 $3,866.4 $3,947.0 $4,027.5 3.07x 3.15x 3.23x 3.31x 3.40x 3.48x 3.56x 2.68x 2.75x 2.82x 2.90x 2.97x 3.04x 3.11x 18.2x 18.7x 19.2x 19.7x 20.1x 20.6x 21.1x 12.2x 12.5x 12.8x 13.2x 13.5x 13.8x 14.1x 28.2x 28.9x 29.5x 30.2x 30.8x 31.5x 32.1x 23.2x 23.8x 24.3x 24.8x 25.3x 25.9x 26.4x $5,184.4 $5,184.4 $5,184.4 $5,184.4 $5,184.4 $5,184.4 $5,184.4 1,832.791 1,832.791 1,832.791 1,832.791 1,832.791 1,832.791 1,832.791 $2.83 $2.83 $2.83 $2.83 $2.83 $2.83 $2.83 $181.1 $181.1 $181.1 $181.1 $181.1 $181.1 $181.1 (58.4) (59.7) (61.0) (62.4) (63.7) (65.0) (66.3) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) (1.2) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 $5,305.8 $5,304.5 $5,303.2 $5,301.9 $5,300.6 $5,299.3 $5,297.9 61.3 61.3 61.3 61.3 61.3 61.3 61.3 $5,367.1 $5,365.8 $5,364.5 $5,363.2 $5,361.9 $5,360.5 $5,359.2 1,832.791 1,832.791 1,832.791 1,832.791 1,832.791 1,832.791 1,832.791 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1,832.791 1,832.791 1,832.791 1,832.791 1,832.791 1,832.791 1,832.791 $2.89 $2.89 $2.89 $2.89 $2.89 $2.89 $2.89 $0.07 $0.07 $0.06 $0.06 $0.06 $0.06 $0.06 2.3% 2.3% 2.3% 2.3% 2.2% 2.2% 2.2% ($148.6) ($147.0) ($145.4) ($143.8) ($142.2) ($140.6) ($139.0) (1.4%) (1.4%) (1.4%) (1.3%) (1.3%) (1.3%) (1.3%) $2.93 $2.93 $2.93 $2.93 $2.93 $2.92 $2.92 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 $0.10 3.5% 3.5% 3.5% 3.4% 3.4% 3.4% 3.4% ($223.6) ($222.0) ($220.4) ($218.8) ($217.2) ($215.6) ($214.0) (2.1%) (2.1%) (2.1%) (2.0%) (2.0%) (2.0%) (2.0%) 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
    • EPSACCRETION/DILUTIONANALYSIS EPS Accretion/Dilution Sensitivity Analysis Accretion/Dilution without Synergy Accretion/Dilution with Synergy Pre Tax Synergy Required to Breakeven % Share Owned by Microsoft Post Transaction 1.4% 43.00$ 44.00$ 45.00$ 46.00$ 47.00$ 30% 1.1% 1.1% 1.0% 1.0% 0.9% Cash 35% 1.3% 1.2% 1.2% 1.1% 1.1% % 40% 1.4% 1.4% 1.4% 1.3% 1.3% 45% 1.6% 1.6% 1.5% 1.5% 1.4% 50% 1.8% 1.7% 1.7% 1.7% 1.6% Offer Price 2.5% 43.00$ 44.00$ 45.00$ 46.00$ 47.00$ 30% 2.3% 2.2% 2.2% 2.1% 2.1% Cash 35% 2.4% 2.4% 2.3% 2.3% 2.2% % 40% 2.6% 2.6% 2.5% 2.5% 2.4% 45% 2.8% 2.7% 2.7% 2.6% 2.6% 50% 2.9% 2.9% 2.9% 2.8% 2.8% Offer Price -8759.7% 43.00$ 44.00$ 45.00$ 46.00$ 47.00$ 30% ($72.4) ($68.9) ($65.5) ($62.1) ($58.6) Cash 35% ($82.9) ($79.7) ($76.6) ($73.4) ($70.2) % 40% ($93.5) ($90.5) ($87.6) ($84.7) ($81.7) 45% ($104.0) ($101.3) ($98.6) ($95.9) ($93.2) 50% ($114.6) ($112.1) ($109.7) ($107.2) ($104.8) Offer Price 98.0% 43.00$ 44.00$ 45.00$ 46.00$ 47.00$ 30% 97.7% 97.7% 97.6% 97.6% 97.5% Cash 35% 97.9% 97.8% 97.8% 97.7% 97.7% % 40% 98.0% 98.0% 98.0% 97.9% 97.9% 45% 98.2% 98.2% 98.1% 98.1% 98.0% 50% 98.4% 98.3% 98.3% 98.3% 98.2% Offer Price
    • PROFITABILITY CONTRIBUTION ANALYSIS
    • PROFITABILITYCONTRIBUTIONANALYSIS Profitability Contribution by Buyer and Target Qualcomm Inc. Atheros Inc. Combined (1) Synergies Pro Forma (2) FY11 FY12 FY11 FY12 FY11 FY12 FY11 FY12 FY11 FY12 Revenue $14,263.0 $15,996.2 $986.6 $1,129.3 $15,249.6 $17,125.5 $0.0 $0.0 $15,249.6 $17,125.5 % Growth 29.8% 12.2% 6.5% 14.5% 28.0% 12.3% 28.0% 12.3% EBITDA $6,024.1 $7,038.0 $166.4 $248.3 $6,190.5 $7,286.3 $0.0 $75.0 $6,190.5 $7,361.3 % Margin 42.2% 44.0% 16.9% 22.0% 40.6% 42.5% 40.6% 43.0% GAAP Net Income $4,802.4 $5,108.2 $113.8 $169.2 $4,916.2 $5,277.4 $0.0 $61.3 $4,977.4 $5,338.7 % Margin 33.7% 31.9% 11.5% 15.0% 32.2% 30.8% 32.6% 31.2% Cash Net Income $4,890.3 $5,184.4 $126.1 $181.1 $5,016.4 $5,365.5 $0.0 $61.3 $5,077.7 $5,426.8 % Margin 34.3% 32.4% 12.8% 16.0% 32.9% 31.3% 33.3% 31.7% Contribution Revenue 93.5% 93.4% 6.5% 6.6% 100.0% 100.0% EBITDA 97.3% 96.6% 2.7% 3.4% 100.0% 100.0% GAAP Net Income 97.7% 96.8% 2.3% 3.2% 100.0% 100.0% Cash Net Income 97.5% 96.6% 2.5% 3.4% 100.0% 100.0%
    • DEAL FACT
    • Prepared by Deb Sahoo MBA, Ross School of Business University of Michigan, Ann Arbor