TMT Valuations - Report

TMT Valuations
Trends, drivers and metrics in the TMT industry
Alessandro Masi
8/2/2011

Hult International Business School Boston, 8/2/2011 © Alessandro Masi
2TMT Valuations
EXECUTIVE SUMMARY
TABLE OF CONTENTS
TMT trends Page 3
Cloud, mobile and social networks Page 4
TMT valuations Page 6
The new wave of Internet IPOs Page 15
APPENDIX – Sales pitch: hot TMT picks Page 18
EXHIBIT 1 Page 20
EXHIBIT 2 Page 20
RESOURCES Page 21
What is the nexus that connects technology, media, and telecommunication industries and motivates major investment banks
to cluster those industries in the so called TMT groups? The main hypothesis is that those industries strongly rely on positive
externalities: technologies that have always driven the sector will continue to affect their activity, especially as globalization
and technology blur boundaries between industries. Hence, companies look for synergies through an intense M&A activity.
TMT companies represent attractive investments because of (particularly in the early stages) very high ROI and huge growth
potentials, therefore the market generally has a positive attitude towards their IPOs, even when they show poor (or negative)
free cash flows. As a result, the TMT group of major investment banks is often a very profitable one. Focusing on valuations,
this paper aims to define the main economics and trends of the TMT sector. It will analyze the new wave of Internet IPOs,
the new frontiers of TMT and the role of i-bankers in them, and finally will attempt to pick hot stocks for the next future.

TMT trends
Convergence trends are accelerating in the TMT
industries. Several factors are driving the convergence of
the TMT industry, most notably digitization, connectivity,
and innovation. TMT convergence is occurring at three
levels: 1) product and services to meet real customer
needs, 2) platform convergence involves consolidation
around a small number of standards (e.g. the IP as a
universal standard for digital communication), 3)
organizational convergence involves different companies’
people and IT systems working together to deliver a
convergent product or service. The opposite reaction is
intensifying risk as TMT companies increasingly foray
into untested markets, uncertain alliances, and unfamiliar
products. As identified by Deloitte in a recent report, “the
net effect of convergence is that TMT companies are
becoming more and more intertwined in a tangle of
content, technology development, and distribution
partnerships”. As these business models converge, TMT
companies increasingly share responsibility for managing
performance and risk, such as complex business models
and intellectual property management, operating outside
core competencies and risk of cascade failure, regulatory
risk, retention of talent, vulnerability of digital products
and services and digital rights management. (Deloitte
2008)
The report also highlights that “increased confidence and
activity by the large trade players in the global technology
market will change the deal dynamics with several factors
aligning to create a window of opportunity for increased
M&A activity in 2011, such as more high quality assets
being brought to the market as sellers seek to take
advantage of the presence of cash-rich corporates with a
renewed appetite for mega deals, while aggressive private
equity buyers are returning, and improving capital
markets provide a supportive influence”. (Deloitte 2011)
The average value of deals per month (for the three
months ended May 31) reached almost $60 billion, with a
peak of 620 deals in the month of May.
Global TMT M&A activity. Source: Bloomberg.
The value of deals was boosted by the $8.5 billion
acquisition of internet phone services Skype by Microsoft.
Social media has also been in the spotlight in May, with
the acquisition of London-based Tweetdeck by Twitter
for £40 million. (M&A Deals 2011)
The high levels of M&A activity in the sector indicate
that it is on the up, and most companies have sound
financial basis, and big cash balances: the result is that
these companies are now seeing opportunities for new
ideas and concepts coming out from exciting new
ventures. The increased M&A activity has been
accompanied by a rise in PE and Price/Sales ratios.
According to Deloitte, technology stocks outperformed
the FTSE 100 and NASDAQ Composite indices on the
public markets in 2010: FinTech companies rose by 24%,
while Cloud companies saw a rise of 20%, and SaaS
(Software-as-a-Service) companies were the stock market
stars in 2010 delivering a rise of 78%. (Deloitte 2011)
In addition, both the Nasdaq-100 Tech Index and the
MSCI USA/Tech Index outperformed the S&P500 Index
by, respectively, 22.94% and 14.02% in the last three
years period.

4TMT Valuations
Source: Bloomberg.
Nevertheless, the M&A valuation multiples in the last two
years period are much lower than in the dot-com bubble
period 1999-2000, therefore it is possible to assume that,
despite an upward trend in the M&A activity, today TMT
companies are more attractive targets for acquisitions.
TMT M&A 1999-2000 and 2009-2010 valuation multiples. Source:
Bloomberg.
In particular, for Internet companies the average annual
premium (19.07% in 2011) is substantially stable from
2007 but following a downward trend.
Average premium Internet M&A 1999-2011. Source: Bloomberg.
Cloud, mobile and social networks
Cloud computing, mobile, and social networks are
without any doubt the main drivers reshaping the TMT
Industry at the moment, and developments in those
sectors will drive valuations of the all industry.
Cloud technologies are transforming the way computing
power is bought, sold and delivered. Rather than
purchasing licenses or hardware, users may now obtain
computing power as a service, buying only as much as
they need, and only when they need it. This new business
model brings vast efficiency and cost advantages to
government agencies, individuals, and companies of all
sizes. The numerous benefits of cloud computing have
already won over many adopters and are generating
significant cost savings, efficiencies, flexibility,
innovation, and new market opportunities. The Cloud
does not yet have a dominant player, but all the larger
technology players are aggressively battling for position
and have been active in broadening their product offerings
to build a full range of Cloud services. In many instances
this has meant building scale and capabilities through
acquisitions. According to a recent report by PWC, the
major M&A activity to date has focused on infrastructure
and virtualization technologies which underpin the
Cloud’s development. The most active acquirer in 2010

5TMT Valuations
has been CA Technologies with 6 acquisitions in 14
months totaling $1bn, whereas Oracle’s acquisition of
Sun Microsystems was also driven by a Cloud rationale as
“Oracle plans to engineer and deliver an integrated system
where all pieces fit and work together so customers do not
have to do it themselves.” (Sun Microsystems press
release). Deal multiples in the Cloud space are high:
according to analysts’ reports Dell’s offer for Compellent
values the company at almost 50x forecast EBITDA,
while HP offered multiples of 8x sales for 3PAR. In
addition to infrastructure and data storage and
management, data security is also expected to be a strong
growth area in the next M&A activity. To be mentioned
that security is one factor behind the expected dominance
of the Cloud market by large players, as corporates are
more likely to entrust the security of their data to a large
established player. Finally, the Cloud demands a different
business model with a move from license sales and
maintenance revenue approach to a usage basis, opening
this up the market to innovative new players that can
grow rapidly. (PWC 2011)
Mobile is emerging as a high-growth platform for media
companies, thanks to the rapid penetration of smartphone
devices and growth of applications. According to
Deloitte, in 2011 more than 50 percent of computing
devices sold globally (825 million units) will not be PCs,
but smartphones (375 millions) and tablets (50 millions).
The result is “a shift from a world of mostly standardized
PC-like devices, containing standardized chips and
software, to a far more heterogeneous environment, with
at least two substantially different chips architecture and
at least 5 different operating systems that each have more
than five percent market share.” (PWC 2011) Being the
dominant operating system provider for the non-PC
market will be a tremendous prize. The content
experience here is focused on applications rather than
Web pages, hence growth in media usage is likely to be
monetized primarily by local search, location-based
services, social media, targeted forms of promotional
marketing, and paid entertainment services such as sports
and games. The mobile Internet experience is evolving
rapidly away from Web pages to downloadable
applications, and it eventually may migrate again to
cloud-based services. As the battle intensifies between
Apple iPhone and Google Android in terms of devices
and apps, media companies need to position themselves in
terms of mobile-focused organic investment, partnerships,
and acquisitions. (Alston & Bird LLP 2009) As regards to
the rapid expansion of online video, limited innovation
has happened in offering analog content for the Web, and
media companies do not control (exception done for
Hulu) the customer interface in digital, rather other play
this key role (Apple, Google, Amazon). Media companies
need to improve the customer experience and provide
consumers with a more enhanced digital experience that
they cannot get in analog media, particularly for tablet
devices, and understand how to develop attractive
applications, how to create a user interface that consumers
find compelling, and how their brands can best be
positioned in an interactive environment. Nevertheless,
the volume of data uploaded or downloaded from portable
devices will grow at a much faster rate (25-50%) than the
volume carried over cellular broadband networks, thus
Wi-Fi’s increasing share of the mobile device data load
will likely have a ripple effect by slowing the growth rate
of cellular broadband traffic, potentially helping improve
margins for mobile providers’ data services. (PWC 2011)
Focusing on media consumption, Deloitte predicts that “in
2011 television will solidify its status as the current super
media, (…) revenues from pay TV in the BRIC countries
will rise by 20 percent, worldwide TV advertising will
increase by $10 billion (…)”. A recent report by Booz &
Company highlights the emerging strategies of media and
entertainment companies: continued vigilance on cost

6TMT Valuations
reduction; focus on more diversified revenue mix, leading
brands, and strong cash flows; development of digital
business models with targeted, loyalty-focused, high
quality content offerings supported by both advertising
and subscription or transaction revenue streams; ongoing
consolidation and portfolio realignment through M&A
with a prominent role of private equity, anchored on
branded content, technology, advertising/marketing
services, digital businesses, and coherent capabilities;
evolvement of the media-as-a-service model for
advertisers, particularly for digital media, with media
sales and marketing teams going beyond basic advertising
placement to drive breakout growth; increased importance
of analytic approaches to content decision making;
important role of social media outlets as distribution hubs
and monetization vehicle for content, given consumers’
propensity to share content, links, and networks. (Booz &
Co. 2010)
Social networks in 2011 are “likely to surpass the
breathtaking milestone of one billion unique members.
Also, they may deliver over 2 trillion advertisements. Yet
the advertising revenues directly attributable to social
networks may remain relatively modest compared to other
media, at least in the short term. With per member annual
advertising revenue of about $4, that implies total 2011
advertising revenues of about $4 billion.” (PWC 2011)
Such figures represent only one percent of total
worldwide advertising spend, but other sources of
revenues such as payments systems and e-commerce
might exhibit faster growth. Total industry revenues of $5
billion and a year-over-year growth of 30 percent are
impressive numbers, but revenue on a per-subscriber basis
is unlikely to match search or traditional media in the next
year or two. Also, advertising rates, measured on a cost
per thousand impressions (CPM) basis, are likely to
remain low compared to other forms of online advertising
as well as traditional media. Nevertheless, a social
network’s cost of content is close to zero since it merely
provide infrastructure, while its users and third party app
developers provide the content. (PWC 2011) Since social
networks’ potential is measured by subscriber growth,
time spent on the network, and CPMs, the question relies
in how much additional growth they can gain. The billion
unique us03042ers milestone – half of global computer-
based Internet users – could put a ceiling to the expansion
of social networks, but mobile might offer a better
opportunity, especially in developing countries where
mobile penetration continues to rise steadily. The next
challenge is the delivering of mobile ads at volumes and
prices sufficient to create a multi-billion dollar business.
In addition to the increased value of mobile ads, growth
will come from increased time spent on the network, and
from improved CPM metrics, currently among the lowest
of all the forms of online advertising. Social networks
value has been already partially recognized by the market,
but there are still questions whether they can sustain their
growth and find better ways to monetize their value.
Social networks have to find better ways to exploit the
gigantic amount of information they contain being aware
of privacy regulations, and enlarge non-advertising
revenues, such as the ones coming from e-commerce and
subscriptions for premium content, for instance.
TMT valuations
The valuation of TMT companies has undergone
profound changes over the last few years, especially after
the speculative bubble linked to new technologies, to the
propagation of mobile telephony and to Internet, when the
definition of existing companies and the new competitors
with a different economic-financial profile required new
valuation techniques. The DCF model has traditionally
constituted the theoretical foundation to determine the
economic value of TMT companies, however during the
new economy expansion alternative criteria based on

7TMT Valuations
operational rather than financial performance, such as
multiples calculated on the number of mobile telephony
customers, on unique users for websites, on miles of fiber
optics installed and on other proxies, became points of
reference in the portfolio choices of TMT investors.
(Global Startup Blog 2011) Many high-tech companies
that obtained financing through venture capital, private
equity and debt markets at extremely high valuation
levels, justifiable only by the application of non-
traditional methods, have not been able to sustain that
value on the public market. As a result, multiples based
on proxies and revenues are now considered to be not
very significant and DCF valuation is often just used as a
means of checking. There has been advancement in
valuation techniques, which today support multiples like
EV/EBITDA with increasingly complex estimates and
calculations, often with a superior information value, such
as multiples of free cash flow for the company (Operating
FCF) and free cash flow for stakeholders (Equity FCF).
(Borsa Italiana 2009)
TMT valuations should be examined looking at the
industry structure and to drivers and metrics for each of
the sectors. Having highlighted cloud computing, mobile,
and social media as main drivers of the TMT industry,
making extensive use of the information provided by the
Bloomberg platform, the following analysis focuses on
the media industry and on the communication Integrated
Circuits (ICs) and computer storage sectors.
Advertising & Marketing. Advertising is a $403 billion
global industry, with the agency business accounting for
about $70 billion. Ad holding companies typically own a
variety of agencies as well as marketing businesses such
as public relations, customer relationship management,
digital and market research. Six large holding companies
dominate the industry and generate more than two-thirds
of global revenue. Global revenue grew at a 7.1% CAGR
from 2001-10, while U.S. revenue ($30 billion in 2010)
expanded by 3.6%.
Advertising agency holding companies' prospects are
largely tied to macro-economic conditions. The growth of
online advertising and the development of emerging
markets represent two themes that will influence long-
term growth. As the agencies pursue these two dynamic
opportunities, they must invest wisely to ensure
competitive returns. Media investors have become
accustomed to aggressive returns of cash, which raises the
bar on capital investment options.
Television is the dominant platform, accounting for a
third of advertising spending. Traditional mass media
platforms such as newspapers, magazines and radio have
been in a secular decline over the past 10 years,
accelerated by the recession's impact on advertising from
2008-10. Digital advertising has been the fastest-growing
platform and now accounts for 16% of global ad
spending.
The key metric for advertising companies is organic
growth. From 2000-10, the industry's organic growth
averaged 3%. In 2010, agencies posted organic growth of
6.5%, a steep improvement from a decline of 8.5% in
2009, as advertising responded to the economic recovery.
Organic growth has been the fastest in the emerging
Asian and Latin American markets. During the past
decade, operating margins have averaged 10%, as costs
are mainly variable and dominated by salaries.
Advertising agencies are typically valued using P/E
multiples, along with EV/EBITDA and EV/sales. The
seven largest global agency networks are trading at about
15x forward 12-month EPS and 7.5x next year's expected
EBITDA, below their five-year historical averages of 18x
and 8.5x, respectively. The modest discount to historical
levels reflects recent concerns about slowing economic
growth and political instability in some emerging markets.

8TMT Valuations
Ad agency holdings EV/EBITDA(x) 2000-10. Source: Bloomberg.
The base case for advertising agency stocks reflects the
steady yet uncertain global economic recovery.
Advertising and marketing budgets have rebounded from
the post-financial crisis lows of 2009 and U.S. ad
spending has been robust during the recovery. However,
tepid macro-economic trends have given investors reasons
to be cautious. Emerging markets and digital advertising
are the key long-term revenue growth drivers. Agencies
must manage costs and increase margins during this
recovery cycle.
Cable & Satellite. The $180 billion pay-TV industry is
well consolidated in subscribers and revenue. Cable
multiple system operators (MSOs) such as Comcast and
Time Warner Cable have the largest share, at about 62%.
The two satellite providers, DirecTV and Dish Network,
account for 33%, while telephone companies Verizon and
AT&T make up the remaining 5%. Cable and telephone
providers have a competitive advantage with their triple-
play offering of video, Internet and phone services, while
satellite has only video.
The pay-TV business has become increasingly
competitive, with cable operator monopolies threatened
by satellite and telephone providers. Pay-TV companies
have responded by including high- speed Internet data and
telephone service to their core video product. Internet
video (Netflix, YouTube) has emerged as the greatest
threat to pay-TV. Cable operators and their programming
partners have responded with initiatives such as “TV
Everywhere” that give subscribers access to video on any
device at any time.
The pay-TV industry has grown three times faster than
the U.S. economy in recent years. The domestic pay-TV
industry is a $170 billion business and is now large, well
penetrated and fairly mature. Investors have benefited
from limited cyclicality in the cable and satellite business,
especially over the past two years. Since 2004, cable
revenue has grown at a CAGR of 10% while satellite has
increased at a 12.5% CAGR. Advertising typically
accounts for less than 5% of an operator’s revenue.
The key revenue metrics for pay-TV providers are
subscribers and average revenue per user (ARPU). The
growth in each category has historically provided the best
measures of future earnings. While video ARPU has been
increasing because of new products and services such as
high-definition TV and digital video recorder
functionality, gross margins have been hurt by double-
digit increases in programming expenses. Pay-TV
subscriber growth has slowed as the market has matured
and competition has increased.
The primary metrics used for valuing companies in the
cable and satellite TV industry are multiples of EBITDA
and free cash flow. Cable and satellite stocks are trading
at about 5x to 7x current year EBITDA, which is at the
low end of the group’s historical trading range. The
companies have become prodigious generators of free
cash flow currently trade at 7x to 12x that measure. Pay-
TV companies have begun to aggressively return cash to
shareholders through dividends and stock buybacks.

9TMT Valuations
Cable and satellite EV/EBITDA(x) and EV/Subscriber($) 2005-11.
Source: Bloomberg.
Although cable and satellite stocks have outperformed the
market and overall media industry the past two years,
investors are concerned about existing competition (cable
vs. satellite vs. telephone providers) and potential
competition (the Internet). While the pay-TV model
remains robust, challenges to top-line growth and existing
cost structures such as programming provide fodder for
bulls and bears. Regulatory risk has returned as the
Federal Communications Commission considers
tightening oversight on high-speed Internet access.
Diversified Entertainment. The media industry is
dominated by several large companies with interests in
networks, filmed entertainment and other leisure
businesses. The TV networks, including broadcast and
cable, are well consolidated, with the top incumbents
representing 80% of the industry’s revenue. Filmed
entertainment (movies and TV programming) constitutes
17% to 42% of total revenue for the diversified media
conglomerates. The major film studios have maintained at
least 10% market share in the past few years.
Cable networks’ twin streams of advertising and affiliate
revenue have driven the top-line success in recent years.
Broadcasters are now starting to demand their own
version of affiliate revenue from the program distributors
to offset a cyclical decline in advertising. The emergence
of digital media platforms such as Netflix and Hulu has
highlighted media’s changing economic landscape. One
of the greatest challenges facing media companies is how
to optimize the value of their digital content.
The key drivers for TV networks are advertising and
affiliate fees. While advertising is cyclical, cable
networks have exhibited the best growth profile of all
advertising-driven media due to growing subscriber bases
and a secular shift of audience and ad budgets from
broadcast networks to cable. The filmed entertainment
business is driven primarily by theatrical film sales and
television production. The global theme park industry
generated annual revenue of $25.4 bn in 2010.
Broadcast networks have historically depended on
advertising, while cable networks have also generated
revenue from affiliates through distribution fees paid by
cable, satellite and telephone providers. To ease the
impact on revenue from the broader economy, broadcast
networks are now demanding their own version of
affiliate revenue in the form of re-transmission fees.
Studio revenue from filmed entertainment (film and TV
production) is about $100 billion a year, with operating
margins of 10% to 15%.
The primary metrics for valuing large media stocks are
P/E, EV/EBITDA and P/FCF. The large companies are
currently trading at about 18x trailing 12-month EPS and
9.0x trailing EBITDA, which are in line with their four-
year historical averages. The current valuation likely
reflects the positive outlook for ad spending, offset by the
longer-term threat to “traditional” media posed by the
Internet. On a trailing P/FCF basis, the large, media
stocks are trading at 16x, which is in line with their four-
year average, but a discount to their 15-25% FCF growth.
Most large media companies generate significant free
cash flow (margin about 12% and yield 7-8%).

10TMT Valuations
Source: Bloomberg.
As the economy improves and advertising rebounds,
media investors are optimistic about near-term trends. The
key issue is how and to what extent content creators can
generate revenue and profit from their products in a
digital world. Most investors appear confident that there
will be demand for quality proprietary content no matter
how it is distributed across the growing number of
platforms in the global market. The concern is that the
media industry repeats the mistakes of the music industry.
Telecom Carriers. Following years of M&A, the North
American telecom industry is largely a duopoly, with
AT&T and Verizon generating 62% of 2009 industry
revenue. The industry, which grew at a CAGR of 2%
between 2005 and 2009, has two main segments including
wireless (56% of revenue) and wireline (44% of revenue).
Wireline revenue is in secular decline, having contracted
at a CAGR of -4% between 2005 and 2009. In contrast,
wireless generates all of the industry’s growth, posting a
+8% CAGR over this same period.
The telecom industry is in transition, with wireless growth
slowing and wireline revenue in secular decline. In the
wireless sector, net adds are contracting, as market
saturation leaves little room for future subscriber growth.
In response, carriers have launched new data services
aimed at boosting ARPU. In wireline, access lines are in
secular decline, prompting carriers to launch new data and
video services. These services are not yet large enough to
offset the access-line revenue decline.
GDP is the primary driver of growth in the telecom
industry. Each of the industry segments has distinct
drivers, but all are influenced by GDP. The secular
decline in the fixed line business has been driven by
wireless substitution and competition from cable MSOs as
well as weakness in new home sales and high
unemployment. In contrast, wireless revenue has grown
over the past few years, driven by growth in smartphones,
tablets and connected devices.
As with any subscription business, a telecom carriers’
revenue model hinges on subscribers and rates. In order to
gain insight into a carriers’ business and its outlook, it is
important to monitor subscriber and segment revenue
trends, access line erosion, growth in data revenue and
average revenue per unit (ARPU) trends. Among these
measures, the most important are growth in data ARPU
and revenue trends, as data holds the key to future
industry growth while voice revenue structurally declines.
There are several approaches to valuing telecom stocks,
including comparative analysis based on EV/EBITDA,
P/E ratio or Price/FCF. Discounted free cash flow
analysis and dividend discount models are broadly used
methods. The most common approach is comparable
valuation based on EV/EBITDA for 2011. The forward
EV/EBITDA multiple is just above 6.0x and has been
moving lower since year-end 2010. This compares with a
long-term average of 6.4x. AT&T is trading at 5.5x, and
Verizon at 5.6x. Both have risen year-to-date, despite a
drop in the industry average.

11TMT Valuations
Source: Bloomberg.
North American telecom services stocks outperformed the
S&P 500 in 2010, based on the belief that the U.S.
economy would remain in recovery. This belief is
supported by modest improvements in some of the more
economically sensitive segments of the telecom business,
including the fixed-line and enterprise segments.
Expectations for a continued recovery are also evident in
analyst consensus estimates, which call for industry
revenue to rise approximately 3% in both 2011 and 2012.
Communications ICs. The $42 billion communications
integrated circuits industry is concentrated, with few
competitors having the resources to shape the landscape.
It has three categories: mobile & wireless ($31 billion; top
five control 64%), enterprise & carrier ($7 billion) and
wired consumer. Cellular integrated circuits, adjacent
technologies and infrastructure ICs account for 80% of
sales. Technology integration, chip size and power
consumption are challenges amid falling prices and a
short business cycle.
2011 should see growth in integrated circuits, driven by
3G expansion and ensuing smartphone sales in the BRIC
region. With dramatic content increase, this opportunity
bodes well for the large IC makers - especially
Qualcomm. The degradation of smartphone IC ASP’s in
integrated basebands and competition in
application/graphics processors will determine the extent
of sales growth. Infrastructure IC sales should benefit,
albeit unevenly. The Japan crisis likely affects near-term
component supply.
Consumers drive cell phone units and complexity, leading
to communications IC market growth. This market varies
regionally by unit growth rate, device complexity, data
consumption and pricing. Developed regions are closer to
transitioning to 4G in 2011 while BRIC countries likely
shift volumes to 3G. Overall IC ASP decline may
moderate, as emerging market 3G networks and
smartphones add to the total addressable market.
Offsetting factors are large number effect, IC integration
and ASP weakness.
The integration of ICs, smartphone sales, 3G and the
expansion of the LTE/4G network are key metrics for the
communications semiconductor industry for the next two
years. These factors are intertwined and the ensuing effect
may be dramatic, particularly in the populous,
economically improving BRIC nations. Large total
addressable market expansion in integrated circuits comes
from advanced phones, new networks and the integrated,
complex and expensive ICs in those phones.
Communications semiconductor valuations have
compressed to a level similar to analog semiconductors. If
the smartphone impact is higher than expected,
communications integrated circuits might again become a
cyclical growth industry rather than a commodity group
facing a secular valuation decline. Enterprise networking,
carrier infrastructure and mobile and wireless appear to be
highly valued relative to the wired consumer group,
reflecting the latter’s narrower margins and lower growth
rate.
Multiples based on sample companies from each group
show that mobile and wireless IC firms along with
infrastructure semiconductors trade higher than home
consumer on EV/sales. Some companies are highly
valued for their growth while others for their margin
levels.

12TMT Valuations
Mobile&wireless, carrier and enterprise, and home consumer
EV/Sales(x). Source: Bloomberg.
Communications IC makers face offsetting trends
following a rebound post recession. Unit growth should
help the phone IC industry, while declining ASPs hurt
sales. The mix of smartphone sales and rate of 3G/4G
infrastructure expansion, especially in BRIC, will
determine whether Comm. IC sales grow faster than the
last four years. Smartphone IC ASP is growing due to
content expansion (Wifi, processors, graphics, memory),
while feature phone IC ASPs are declining due to
commoditization.
Computer Storage. The $64 billion computer storage
industry is divided into PC storage (52%), network
storage (46%) and storage fabric (interconnect adapters).
Consolidation has concentrated the industry ― Seagate
and Western Digital control 90% of the PC-heavy hard
disk market, while EMC, IBM, HP, NetApp and Dell hold
80% of enterprise-heavy network storage. Increased
corporate IT spending, cloud computing and unstructured
data growth (big data) continue to drive enterprise
storage. Hard drive vendors face weaker PC demand.
Digital data grew by a record 62%, to 800 million
terabytes in 2009 and is expected to reach 10 trillion
terabytes by 2015, according to IDC. Storage technology
is evolving to support this growth in the wake of
unstructured data (big data), real-time analytics and cloud
transitions. Adoption of solid-state drives, virtualized
unified storage and cloud storage, along with the need to
efficiently manage large data growth, could result in total
addressable market expansion for key vendors.
Network storage systems have had a high correlation with
corporate capital spending and server shipments. The key
near-term drivers of the storage industry are a continued
increase in corporate IT spending, technology transition to
virtualized environments and big data growth. Storage
fabric vendors are affected by their high OEM
dependence, while hard disk drive vendors are highly
sensitive to PC unit shipments.
The storage industry has registered a five-year revenue
CAGR of just 3% even as capacity shipped increased
five-fold. Steep declines in average selling prices, driven
by demand for systems costing less than $50,000, likely
limit near-term revenue growth. Share gains and margin
improvement through software and service offerings
packaged with hardware appear to have the potential to
expand EPS. Big data and real-time analytics continue to
offer longer-term opportunities to expand the market.
The storage industry is becoming non-cyclical due to
rapidly increasing data growth. Company valuations,
though, have cyclically compressed during the last two
years, taking storage vendors' multiples to relatively low
historical levels. Storage stocks continue to be sensitive to
market share in the near-term while big data/real-time
analysis remains the longer-term growth driver. Cash-
adjusted multiples are better valuation metrics because the
companies tend to accumulate cash.
With 20% of the market cap in cash, P/E excluding cash
and related interest is a preferred metric to compare
companies. With this measure, NetApp’s valuation is
lower than EMC due to its rapid increase in cash-per-
share over the last year. Both have higher multiples than
the S&P 500 Technology Index.

13TMT Valuations
Source: Bloomberg.
Driven by the rebound in corporate spending, most
network storage stocks outperformed the S&P 500 over
the last year. Consensus expectations for 2011 are
positive as virtualization continues to drive data center
spending. That said, investors are more cautious on hard-
disk drives due to weak PC consumer demand, as well as
market share losses by storage fabric vendors.
Internet Media. The Internet advertising industry is
largely consolidated, with a small group of big U.S.
companies ― including Google, Yahoo! and AOL ―
controlling a majority of global revenue. Search and
display are the two main types of Internet advertising.
Global Internet ad revenue was $62 billion in 2010 and
has grown at a 27% CAGR since 2005. U.S. Internet ad
spending was $26 billion in 2010 and has grown at a
CAGR of 16% since 2005. Google leads with 46% of
global advertising and 52% of U.S. spending.
Internet investors are searching for the next “new thing”
that will drive Internet revenue higher as traditional
search and display ad growth rates moderate. Social,
mobile and local advertising have captured investors’
attention and have resulted in a vigorous private funding
market and a growing IPO pipeline that reminds some of
the late ‘90s. Social media companies such as Facebook,
Twitter and LinkedIn lead the way with high-profile
financings at impressive valuations.
Internet penetration is about 27% globally, well below the
76% of the U.S. Penetration in China is only 29%. While
advertising declined for most media in 2009, global
online ad revenue increased 9% to $54 billion, and grew
14% to $62 billion in 2010. The primary components of
global online advertising are search (50% of the market),
display (34%) and classified (16%).
Global ad revenue sources. Source: Bloomberg.
Social networking and mobile represent meaningful new
growth opportunities for ad publishers. Since 2006, ad
spending in the US on social media has increased at a
CAGR of 38% to more than $1.1bln.
US ad spending 5-Yr CAGR social vs. total. Source: Bloomberg.
Since 2005, US mobile ad spending has grown at a
CAGR of 58%, well above the 16% growth rate of US
Internet advertising. Mobile still represents only 5% of
total US online advertising, but the diffusion of
smartphones and tablets will sustain the growth of the
mobile platform.

14TMT Valuations
US mobile ad spending ($mln), 2004-2009. Source: Bloomberg.
Since 2005, global Internet ad spending has grown at a
CAGR of 30%, while the US was 16%. If Internet
penetration continues to grow in developing markets, ad
spending should follow.
Global vs. US online ad spending ($mln), 2005-09. Source: Bloomberg.
Internet advertising is generated from three platforms:
search, display and classified. Search (4-yr CAGR: 36%)
comprises about half of global Internet advertising,
followed by display (CAGR: 26%). Internet media
companies have had double-digit growth in revenue and
adjusted earnings in recent years, with EBITDA margins
in the 40% range. Costs are dominated by traffic
acquisition costs. The group is well capitalized with little
to no long-term debt and ample liquidity.
The primary metrics used to value Internet stocks are P/E,
EV/EBITDA and P/FCF (see Exhibit 1 for a breakdown
of valuations in the sector). The four largest Internet
advertising stocks are trading at about 19x forward 12-
month EPS and 6x next year’s expected EBITDA,
compared with their five-year historical averages of 25x
and 11x, respectively. Google currently trades at 10x
consensus 2011 EBITDA, which is the low end of its
three-year range of 10x-22x. The discounted valuations
are likely a result of the stocks transitioning from rapid
growth in the early stages of advertising share shift to the
Internet to a more steady state of revenue and earnings
expansion.
Internet stocks have historically been valued on future
earning, due in part to their relatively high earnings
growth. The large Internet advertising stocks currently
trade at a modest premium to the group’s five-year
historical average of 32x.
Historical and forward P/E (x) – Internet Media, 2006-11. Source:
Bloomberg.
Internet stocks are also valued as multiples of free cash
flow. Google’s FCF has exhibited an impressive 44%
CAGR during the past four years. On a P/FCF basis,
Google and Yahoo trade at 22x (low end of historical
range) and 41x (mid-point of historical range),
respectively.

15TMT Valuations
FCF growth ($M) and P/FCF (x), 2007-2010. Source: Bloomberg.
Equity capital raised in the Internet sector has accelerated
as companies and their investors seek to capitalize on
improving equity markets and the growth of social media
and e-commerce: at least nine Internet companies have
raised more than $2.7 billion at ever increasing valuations
since 2010 (see Exhibit 2).
The Base Case for Internet stocks reflects a positive view
of both the short-term cyclical and long-term secular
industry trends. Investors place a premium on the superior
growth of search vs. display advertising-driven
companies. Investors are focusing on areas of accelerating
growth, such as social networking (Facebook) and online
video (Netflix). Internet stalwarts such as Google and
Yahoo! have underperformed the S&P 500 Index this
year, even with signs of a cyclical advertising recovery.
The new wave of Internet IPOs
With the Internet IPOs pipeline building up, the question
is whether the current interest in social media is dot.com
hype or represents sustainable value creation. This time,
however, valuations seem to be much focused on
fundamentals (like cash flow generation) rather than on
how cool is the website. A big difference between social
media businesses and web 1.0 is the ability of social
networks to benefit from network effects, which raise
users’ switching costs and create greater (yet not
insurmountable) barriers to entry than exist for
transactional web-site businesses. (MediaTech Analyst
2011)
To be mentioned that UBS has recently launched a new
Internet IPO ETN (EIPO) that is linked to the UBS
Internet IPO Index (exposed to Internet-related companies
that have been publicly traded for less than three years).
The underlying portfolio includes companies that have
recently completed high profile IPOs, such as Pandora
Media, OpenTable, and LinkedIN, with the result of a
collection of stocks engaged in a wide variety of
businesses with a focus on the Internet. Upcoming
Internet companies that complete IPOs will be included in
the index at a later stage. This shows the increasing
attention of investment banks to Internet companies and
to the related IPOs pipeline. (ETF Database 2011)
If these companies continue to grow rapidly and throw off
ever larger amounts of cash, then they could be easily be
worth well north of what they are worth today. Each of
the companies earning big valuations, either in the private
and in the public market, have revenues in the hundreds
of millions or more, and operating profits in the tens of
millions or more, most also have operating histories of
many years. In addition, the market has changed, and
users are comfortable spending money using the Web,
and such companies express solid business models that
could represent the future of how business will be done.
Newly public companies will prove their value in the long
run by delivering growth, but they already have strong
platforms of revenues and profits, and extraordinary
market positions from which to start. (WSJ Blog 2011)
Internet startups are difficult to price because of the lack
of direct competitors to base an IPO valuation on, and the
private market valuations are based on a handful of trades
made by a small group of investors. Given the risk of
underselling, the gains that can be made on first-day
transactions if the price goes up, and also the positive

16TMT Valuations
publicity effect, underwriters usually try to price the IPOs
to rise about 15 percent on their first day of trade. So far
this year, tech-related IPOs debuting in the United States
have risen an average of 23.4 percent on their debut,
according to data from Ipreo. (MSN Money 2011)
LinkedIN. The professionals’ social network sold $352.8
million of stock in the IPO, making it the fifth biggest
Internet software and services IPO since Google, which
raised $1.67 billion pricing the shares at $45 for a
valuation of $4.25 billion or 13x 2010 revenues and 90x
EBITDA, but might have risen far more than that (shares
more than doubled in the first day of trading, giving the
company a valuation of $8.91 billion), considering also
that the offering accounted for only the 8% of shares
outstanding. (SEC Archives 2011) LinkedIn barely raised
any money during its pre-IPO days, but in a 2008
fundraising round with Goldman Sachs, Bessemer and
other investors, LinkedIn was valued at roughly $1
billion. Today LinkedIN stock is trading up $100, but JP
Morgan, one of the leading underwriters, said that $85 is a
fairer price as its current market value of $12 billion does
not reflect the risk/reward balance of the stock (Netflix
market value is $15 billion and the company will generate
seven times the revenue and earnings of LinkedIN next
year). Today its valuation is at over 233x EV/EBITDA or
almost 20x compared to Google. (Berg E. 2007)
LinkedIN has around 100 million users, financial
performance is improving but even if it could keep up
186% growth rate in earnings in 2011, that would still
only be a projected $10.43 mln in Net Income, giving a
PE multiple of 800x. (Business Week 2011) The biggest
question is the sustainability of such growth, given that
the business model is based mainly on advertising, which
however does not match with the “trustworthiness”
referred as main strength. In addition, the hiring solutions
and the social networking aspects have strong competitors
such as Monster.com and, of course, Facebook and latest
also Google+. On the other side, the upcoming Facebook
IPO and the small float (10% of outstanding shares)
should continue to move LinkedIN upward over the next
year.
Pandora. The other side of the coin is represented by the
Internet radio Pandora, whose stock declined 13.38%
after its initial offering price of $16 per share and
$234.9mln raised, which valued the company at $2.56
billion or 20x 2010 revenues. (SEC Archives 2011)
During the first day of transactions the stock was up only
8.9%. The company was and it is still unable to show any
profit, nevertheless the offering ended up raising $235
million and sold 14.7 million initial public offering
shares, almost double the amount originally aimed. So far,
the company hasn’t been able to generate enough revenue
from advertising (87% of revenues) to offset its royalty
expenses, and it warns that it expects to continue
generating operating losses at least through fiscal 2012,
which ends in January. (Business Insider 2011) The
company has high growth potential given the low
marginal cost per user, hence it seems too early to say that
the company is overvalued. But it may face competition
from Apple, Amazon, Google, which are investing in
their own online music offerings, and also from CBS
Corp.’s Last.fm and Spotify Ltd.
Facebook. The business is growing faster than the
company had predicted: the company is on track to earn
$2 billion EBITDA this year, a figure that is higher than
the numbers presented to Goldman Sachs Group and
Russian investor Digital Technologies when they invested
$500 million at a $50 billion valuation. Rumors say that
Facebook will be valued $100 million, but anyway 25x to
50x EBITDA for one of the premier Internet companies in
the world is not crazy. (Seeking Alpha 2011) Facebook
made $1.2 billion in the first 9 months of 2010 or $1.6
billion at an annualized rate, which would equate to a 31x
trailing revenue multiple. Compared to Google's $185bn

17TMT Valuations
value / $29bn 2010 revenue = 6.3x trailing revenue
multiple this indicates people are willing to pay ~5x more
for "$1 of Facebook revenue," presumably because of
growth expectations. (Deloitte 2011) There is, potentially,
a lot of additional value to be created in Facebook stock
from driving traffic, audience, brand, attention, value. In
addition, the social network intends to raise $1.5 billion
through a special purpose vehicle (SPV) that Goldman
Sachs would be setting up to allow some of its clients to
indirectly invest on Facebook, and would allow to work
around the SEC regulation that requires companies with
500 or more shareholders to disclose their earnings to the
SEC.
Groupon. The coupon company could seek to raise as
much as $750mln at a valuation of about $20 billion, or
28x revenues in 2010, from a fund raising round in
January 2011 at a valuation of less than $5 billion. The
lead underwriter will be Morgan Stanley. (Reuters 2011)
The company is growing at absurd rates ($30mln
revenues in 2009, $713mln in 2010, $644mln in Q1
2011), has not generated any profit and it expects its
“operating expenses will increase substantially in the
foreseeable future as we continue to invest to increase our
subscriber base, increase the number and variety of deals
we offer each day, expand our marketing channels,
expand our operations, hire additional employees and
develop our technology platform.” But 2010 and in Q1
2011, Groupon generated free cash flow of $72.2 million
and $7.0 million, respectively, even spending heavily to
acquire new subscribers and merchants. (HBR Blog 2011)
Growth potential is there and seems to be quite
sustainable, even though some concerns can be raised as
regards to its business model: there are relatively few
switching costs for customers, the model is based on
individual transactions, the user interface for Groupon
offers no particular advantage, benefits of discounted
prices and access to vendors are largely optional or
discretionary, there is modest impact on customers
experience. On the other side, there is a strong network
externality effect, as its business relies on hundreds of
representatives who sign up hundreds of retailers, and
there are many and ongoing benefits that customers might
derive. Groupon is very likely to face increasing
competition at the local level and from big players such as
Facebook, Google and Microsoft, each of which has
launched initiatives which are directly competitive,
therefore it requires not only organic growth, but also
ongoing alliances and acquisitions in order to satisfy
customer needs. Currently, it offers a 50-50 deals with
businesses: one winning point might be to scale the
business and be able to offer better deals that competitors
are not able to imitate., thus attracting more and higher
quality businesses and increasing customer loyalty.
Zynga. The gaming developer is getting ready to turn
public raising $1.5-2 billion at $15-20 billion valuation, or
up to 46x EV/EBITDA. Comparable multiples: Activision
has a 6x multiple, Electronic Arts came in at 11x, Take-
Two and Ubisoft both had 8x multiples. Concerns can be
raised on the dependence on the Facebook platform, so
Zynga should gain a bigger presence on Apple’s products
and in Android as well. (Battelle Media 2011) Other
downturn is the dependency on strong brands such as
Mafia Wars and Farmville, rather than on having a strong
brand itself. Nevertheless, the growth potential of the
gaming industry, particularly in the mobile markets and if
related to social media, is huge: this attracts more
competitors, but it also stimulates growth in revenues
(from $121mln in 2009 to $597mln 2010, expected
$1.5bln in 2011, earnings of $90.6 million last year and
expected $500mln this year) and makes possible for the
148 million monthly unique users in 166 countries to
grow further.

18TMT Valuations
APPENDIX
Sales pitch: hot TMT picks
Utilizing the Credit Suisse HOLT® platform data, gently
provided by the Institute of Equity Analysis and
Strategy™, it is possible to compare current EV/IC'1
and
expected ROI'2
and identify firms that are currently
undervalued by the market, with the applied restrictions
that assets and sales growth rates for FY2011, combined,
have to be at least 5%, and ROI' has to be at least 5%. The
model assumes that firms are correctly valued if:
EV/IC'=ROI'/Cost of Capital, which for simplicity is
assumed to be equal to 5% in real terms. These
recommendations have the purpose to underline the
fundamentals that will drive a change of Enterprise Value,
but will not provide a target price as this would require
further analysis.
Media. Viacom, Inc. (NYSE: VIA.B) is a potential long,
Charter Communications, Inc. (Nasdaq: CHTR) is a short.
1
EV is Enterprise Value, defined as Market Cap + Minority Interest +
Book Debt; IC is Invested Capital, defined as Net Working Capital +
Long Term Non Depreciating Operating Assets (including Land and
Non Depreciating Operating Intangible Assets, excluding Goodwill and
other acquisition related Intangible Assets) + Inflation Net PP&E + Net
Capitalized R&D + Net Capitalized Leases + Net Depreciating
Operating Intangible Assets.
2
Return is Net Operating Cash Flow (NOCF) calculated as Net Income
+ Special Items +Interest Expense + Depreciation and Amortization
Expense + R&D Expense + Rental Expense + Minority Interest Expense
+ Pension Charges + LIFO to FIFO adjustments + Stock Option
Expense + Purchase Accounting Cash Flow Adjustments – Non
Operating (Investment) Income – Asset Life Based Charge on
Depreciating Assets; Investment is Invested Capital, or Net Working
Capital + Long-Term Non Depreciating Operating Assets (including
Land and Non Depreciating Operating Intangible Assets, excluding
Goodwill and other acquisition related Intangible Assets) + Inflation Net
PP&E + Net Capitalized R&D + Net Capitalized Leases + Net
Depreciating Operating Intangible Assets.
VIA.B, media entertainment producer, should see its
EV/IC' increasing by approximately 2 points leveraging
on increasing ROI', growing EPS, and sufficient growth.
CHTR, broadband Internet communications services
provider, has modest market share, no prospective growth
and is overpriced compared to its peers.
Hardware. SanDisk Corp. (Nasdaq: SNDK), Synaptics,
Inc. (Nasdaq: SYNA) and Harris Corporation (NYSE:
HRS) are potential long.
SNDK, supplier of flash data storage products, is slightly
underpriced, has a projected 5% growth and growing
EPS. SYNA, developer of custom-designed user interface
solution, should see its EV/IC' rise by 2 points due to a
noticeable 12% assets and 17% sales growth.
Internet Media. J2 Global Communication, Inc. (Nasdaq:
JCOM) is a potential long, LogMeln, Inc. (Nasdaq:
LOGM) is a short.
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
0.0 10.0 20.0 30.0 40.0 50.0
EV/IC'
FY1 ROI'
Media
VIA.B
CHTR
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
0.0 10.0 20.0 30.0 40.0
EV/IC'
FY1 ROI'
Hardware
SNDK
SYNA

19TMT Valuations
JCOM delivers cloud-based communication services at an
extraordinary 66% ROI' which would imply a 4 points
increase in EV/IC': the company has been beating
earnings estimates and growing its revenues and profit for
5 consecutive years due to growing industry and
international expansion.
Semiconductors. Lam Research Corp. (Nasdaq: LRCX)
and Microsemi Corp. (Nasdaq: MSCC) are potential long,
CEVA, Inc. (Nasdaq: CEVA) is a short.
LRCX, manufacturer and marketer of semiconductor
processing equipment, has been currently struggling due
to lower than expected results to important customers in
its supply chain such as Toshiba and Samsung, but is
expected to grow assets by 27% and sales by 49% and
ROI' by 10%, reverting the negative trend and rising its
EV/IC' by 3 points.
Software. Microsoft Corp. (Nasdaq: MSFT) and Intuit,
Inc. (Nasdaq: INTU) are potential long, Qlik
Technologies, Inc. (Nasdaq: QLIK) is a short.
MSFT trades at a discount compared to its peers: its ROI'
levels would imply an increase by 2 points of its EV/IC',
considering also 16% asset (both organic and through
acquisitions) and 10% sales growth. Ongoing questions
are if MSFT will be able to compete with new products,
alliances, and acquisitions in the strategic Internet search
and in the mobile markets.
Telecom. Windstream Corp. (Nasdaq: WIN) is a potential
long, CenturyLink, Inc. (NYSE: CTL) is a short.
WIN, telecommunications services provider to rural
communities in the US, is currently the only underpriced
stock in the telecom sector: however, its ROI' momentum
is negative and its EPS is only slightly increasing. EV/IC'
might go up by .5 if the company finds ways to increase
its market share and improve its profitability.
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
0.0 20.0 40.0 60.0 80.0
EV/IC'
FY1 ROI'
Internet Media
JCOM
LOGM
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
0.0 10.0 20.0 30.0 40.0
EV/IC'
FY1 ROI'
Semiconductors
LRCX
MSCC
CEVA
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
0.0 10.0 20.0 30.0 40.0 50.0 60.0
EV/IC'
FY1 ROI'
Software
MSFT
INTU
QLIK
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
0.0 5.0 10.0 15.0
EV/IC'
FY1 ROI'
Telecom
CTL
WIN

20TMT Valuations
EXHIBIT 1: Internet Media valuations
Source: Bloomberg.
EXHIBIT 2: financing raised by Internet companies
Name Valuation
($,billion)
Valuation
Date
Market Revenue
2010 ($,
billion)
Revenue
2011E
($,
billion)
Global
Unique
Visitors
(million)
EV/Revenue
2010x
EV/Revenue
2011x
EV/User
($)
Comments
FACEBOOK INC 24 Jun-10 Private 2 3 551 12x 8x 44 $120mln funding Elevator
Partners
50 Jan-11 Private 4.05 647 25x 12x 77 $500mln Goldman
Sachs/Digital Sky
Technologies investment
79 Feb-11 Public-SharesPost 4.05 693 40x 20x 114
GROUPON INC 1.35 Apr-10 Private 0.73 0.92 2x 1x $135mln Digital Sky
Technologies investment
4.75 Dec-10 Private 0.73 2.579 50 7x 2x 95 $950mln series G funding
6 Dec-10 Private 0.73 2.579 50 8x 2x 120 Rumored buyout from
Google
6 Feb-11 Public-SharesPost 0.73 2.579 70 8x 2x 86
20 Jun-11 Public 0.73 2.579 83 28x 8x 241 $750mln IPO filed
LINKEDIN CORP - A 2 Jul-10 Private 0.243 0.486 65 8x 4x 31 $20mln round led by Tiger
Global
2.9 Jan-11 Public-SharesPost 0.243 0.486 65 12x 6x 45
3 May-11 Public 0.243 0.486 65 12x 6x 46 $315mln IPO filed
4.25 May-11 Public 0.243 0.486 65 17x 9x 65 $352.8mln raised from IPO
ZYNGA INC 4 Jul-10 Private 0.85 275 5x 15 $147mln Softbank
investment
5.8 Jan-11 Public-SharesPost 0.6 1.2 10x 5x
8 Feb-11 Private 0.6 1.2 13x 7x $250mln funding from
potential investors
8.2 May-11 Public-SharesPost 0.6 1.2 14x 7x
20 Jun-11 Public 0.6 1.2 33x 17x IPO filed
PANDORA MEDIA INC 1.27 Feb-11 Public 0.138 0.27 9x 5x $109mln IPO filed
2.6 Jun-11 Public 0.138 0.27 19x 10x $235mln raised from IPO
Latest transaction multiple
IPO filed
Source: Bloomberg.
Name Mkt
Cap
EV P/E FY1 P/E FY2 PEG
Ratio
FY1
PEG
Ratio
FY2
EV/TTM
Revenue
EV/Reve
nue FY1
EV/Reve
nue FY2
EV/TTM
EBITDA
EV/EBIT
DA FY1
EV/EBIT
DA FY2
P/FCF
Google Inc 194.66B 159.74B 17.01 14.33 0.91 0.77 4.79 5.56 4.6 13 10.16 8.39 20.32
Baidu
Inc/China
54.79B 342.52B 54.21 36.08 1.29 0.86 32.45 24.73 16.14 N.A. 42.64 28.16 N.A.
Tencent
Holdings Ltd
47.87B 292.48B 27.52 21.19 0.92 0.71 13.45 10.49 8.03 N.A. 19.87 15.37 N.A.
Yahoo Japan
Corp
20.71B 1.42T 16.09 N.A. 2.41 2.24 4.85 4.63 4.36 8.35 7.92 7.42 28.91
Yahoo! Inc 17.07B 14.69B 16.97 15.16 1.28 1.14 2.64 3.31 3.15 9.55 8.99 8.39 36.82
Yandex NV 11.24B 307.04B 60.57 41.33 2.02 1.38 19.57 16.33 11.43 45.87 36.27 24.44 N.A.
LinkedIn Corp 9.67B 9.67B N.A. 331.25 N.A. 5.1 33.07 21.7 14.39 233.35 271.64 92.44 N.A.
NHN Corp 9.59B 9.72T 18.4 15.3 N.A. N.A. 7.32 4.76 4.26 15.38 12.39 11.13 22.72
Sina
Corp/China
6.68B 5.87B 94.57 55.2 5.76 3.36 14.06 12.36 9.7 62.37 69.17 44.88 N.A.
IAC/InterActiv
eCorp
3.77B 3.01B 21.88 18.03 0.81 0.67 1.66 1.54 1.38 13.9 8.69 7.13 11.36
Sohu.com Inc 3.45B 2.84B 17.55 14.87 0.91 0.77 4.31 3.6 2.93 10.15 9.09 7.42 19.22
Pandora
Media Inc
2.41B 2.52B N.A. N.A. N.A. N.A. 15.1 9.9 6.25 N.A. 3.80k N.A. N.A.
AOL Inc 1.84B 1.55B 14.99 15.3 N.A. N.A. 0.68 0.71 0.75 2.77 3.71 4.03 6.27
ValueClick Inc 1.42B 1.22B 16.58 14.71 1.18 1.05 2.7 2.35 2.1 9.83 7.87 6.96 13.47
Earthlink Inc 884.49
M
931.07
M
22.97 24 1.31 1.37 1.01 0.72 0.71 4.04 2.98 3.09 6.14

21TMT Valuations
RESOURCES
• Alston & Bird LLP. "Board Focus on M&A: A Closer Look at Technology, Media and Telecom." 2009.
• Battelle Media. 2011. http://www.battellemedia.com.
• Berg E., Neumann R. "Searching for Google's Value." 2007.
• Bloomberg. Proprietary Platform. 2011.
• Booz & Co. "Media Industry Perspective ." 2010.
• Borsa Italiana. "Valuation Guide." 2009.
• Business Insider. 2011. http://www.businessinsider.com.
• Business Week. 2011. http://www.businessweek.com.
• Deloitte. "Technology, Media & Telecommunications Predictions." 2011.
• Deloitte. "Urgent Convergence: Fostering Risk Intelligence in the Technology, Media & Telecommunications
Industries." 2008.
• ETF Database. 2011. http://etfdb.com.
• Global Startup Blog. 2011. http://globalstartupblog.com.
• HBR Blog. 2011. http://blogs.hbr.org.
• M&A Deals. 2011. http://www.mandadeals.co.uk.
• Mashable. 2011. http://mashable.com.
• MediaTech Analyst. 2011. http://www.mediatechanalyst.com.
• MSN Money. 2011. http://money.msn.com.
• PWC. "Technology M&A Insights." 2011.
• Reuters. 2011. http://www.reuters.com.
• SEC Archives. 2011. http://www.sec.gov/Archives/edgar.
• Seeking Alpha. 2011. http://seekingalpha.com.
• WSJ Blog. 2011. http://blogs.wsj.com.

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