Piper Jaffray Technology, Media and Telecommunications ...

Piper Jaffray Technology, Media and Telecommunications Conference

M A R C H 1 2 – 1 3 , 2 0 1 3 I N N E W Y O R K C I T Y

Piper Jaffray does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decisions. This report should be read in conjunction with important disclosure information, including an attestation under Regulation Analyst Certification, found at the end of this report or at the following site: http://www.piperjaffray.com/researchdisclosures.

Piper Jaffray Technology, Media and Telecommunications Conference

M A R C H 12 – 13 , 2 0 13 I N N E W YO R K C I T Y

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Technology, Media and Telecommunications ConferenceMarch 12–13, 2013

CONTENTS

Technology, Media and Telecommunications Conference

• Event Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

• Keynote Speakers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

• Panels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

• Participating Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

• Company Overviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

• Piper Jaffray Investment Research Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41

• Technical Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

• Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

• Important Research Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

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Steve CanianoVice President, Hosting, Managed Applications and Cloud SolutionsAT&T Business Solutions

Steve Caniano is responsible for developing the strategy and execution plan to scale AT&T’s cloud solutions business. This includes defining and establishing alignment with key industry players to ensure AT&T’s services are embedded in their cloud platforms, providing the broadest enablement of cloud solutions for our customers. Caniano previously led AT&T’s global hosting, application and cloud services business, where he directed product and investment strategy, marketing and communications, and held accountability for customer satisfaction, and the financial health of the business.

Caniano developed AT&T’s network enabled cloud strategy and led the transformation of the company’s hosting business into scalable, on-demand solutions. He has been instrumental in forging key partner alliances to support the business, while scaling services globally. Caniano regularly collaborates with customers to ensure AT&T is meeting customer expectations and requirements, but more importantly, incorporating customer insights into AT&T’s cloud solutions strategy and portfolio. He frequently represents AT&T in key industry events and analyst forums to position cloud solutions and to shape marketplace perceptions of AT&T’s role in the “cloud”.

During his career at AT&T, Caniano has held positions in sales, operations, program management, product management, strategic planning, supplier management and systems development. Caniano designed and launched the original Global Solution Center in support of business customers, and led the team having responsibility for engagement management, solution strategy and technical solution design for AT&T’s largest enterprise and global customers. He has worked with and managed leading-edge technologies throughout his career, while always maintaining focus on the customer solution.

David KirkpatrickInternet and Technology ExpertAuthor of The Facebook Effect

For more than 20 years, David Kirkpatrick was a writer for Fortune, most recently as senior editor of Internet and technology. He is regularly ranked one of the world’s top technology journalists.

Kirkpatrick created Fortune’s Brainstorm brand, which ran for five years. Now, with a group of former Fortune colleagues, Kirkpatrick has a media company called Techonomy, focusing on the centrality of technology to business and social progress and the urgency of embracing the rapid pace of change brought by technology.

Kirkpatrick’s expertise on technology subjects led him to pen the definitive book on Facebook, The Facebook Effect: The Inside Story of the Company That is Connecting the World. The Facebook Effect uncovers how in little more than half a decade, Facebook has gone from a dorm-room novelty to a company with over 900 million users. It is one of the fastest growing companies in history, an essential part of the social life not only of teenagers but hundreds of millions of adults worldwide. Kirkpatrick had the full cooperation of Facebook’s key executives in researching this fascinating history of the company and its impact on our lives.

K E Y N O T E S P E A K E R S

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Zach NelsonPresident and Chief Executive OfficerNetSuite Inc.

Zach Nelson has more than 25 years of leadership experience in the high-tech industry, where he has held a variety of executive positions spanning marketing, sales, product development and business strategy with leading companies including Oracle, Sun Microsystems and McAfee/Network Associates.

Nelson has been CEO of NetSuite since 2002. He led NetSuite’s successful IPO in 2007 and its rise from start-up to the industry’s cloud ERP leader. Under his leadership, NetSuite has become the leading provider of cloud computing business management software suites in the world.

Nelson holds bachelor’s and master’s degrees from Stanford University.

Fred WilsonManaging PartnerUnion Square Ventures

Fred Wilson is a managing partner of Union Square Ventures (“USV”), a New York-based firm that manages $450 million and has been one of the top performing venture funds over the past decade. USV was the initial investor in companies including Twitter, Zynga, Foursquare, Etsy, Covestar, Tumblr, Disqus and Indeed. Wilson writes a widely followed blog called AVC. He has sold portfolio companies to Google, Yahoo, AOL and other prominent Internet consolidators.

At the conference, we will hear Wilsons’s view of the technology landscape, trends in the Internet and social media spaces, and his investment philosophy. We will also be exploring the growth of Silicon Alley and the opportunities it has provided. Finally, we will be discussing the differences between the Internet marketplace today and that of the late 90s.

Wilson has been a venture capitalist since 1987 and founded Flatiron Partners (JP Morgan) before founding USV.

Wilson holds a bachelor’s degree in mechanical engineering from MIT and a Master of Business Administration degree from The Wharton School of Business.

K E Y N O T E S P E A K E R S

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P A N E L S

Accelerating Design Cycles and Direct Digital Manufacturing ApplicationsAs companies continue to search for ways to accelerate revenue growth and better compete in the global marketplace, design cycles are constantly being reworked in hopes of improving time to market for new product introductions. 3D printing manufacturers and service bureaus have experienced significant growth with product development teams, discovering how 3D printer and services can help accelerate design cycles. In addition to shortening design cycles, additive manufacturing technologies have had significant technological improvements and 3D printers are now being used for direct digital manufacturing (AKA rapid prototyping or rapid manufacturing) to produce end user parts. This panel will include service provider Proto Labs, investment firm Lux Capital Management, and system manufacturers 3D Systems, Arcam and Stratasys.

All-Flash StorageThe “I/O bottleneck” problem has quickly become the top threat to the data storage industry, driven by the accelerating improvements in CPU performance vs. the lagging performance of disk drives. This performance gap creates an I/O bottleneck, which severely hinders the performance of applications and the overall efficiency and productivity of the data center. In order to address this problem, storage vendors are turning toward NAND flash to provide extremely fast access to the data. This panel will focus on the I/O bottleneck problem, its implications to data center productivity and how each vendor is specifically addressing the problem. We will hear from Whiptail and Nimbus Data, both of which have incorporated NAND flash memory into their respective storage arrays.

Back-End Test Teradyne and LTX-Credence will join us in a panel on the back-end test market where we hope to get clarity on how the mobility and connectivity segments could evolve in 2013 and some of the key drivers. We hope to hear about the timing of the recovery in the microcontroller segments along with the competitive landscape in the RF testing segment. We expect an update on the overall wireless test segment and the medium-term and long-term prospects. We also expect to hear about traction of new product rollout. Use of cash is a key question given that both the companies have accumulated a pile of cash. Finally, we anticipate an update on OSAT’s spending outlook for 2013 along with a view on upcoming inflection points that would increase test intensity.

Big Data and Analytics The increase of large and complex data sets, driven by things like social networks, smart meters, RFID, and national defense or scientific research, is creating new opportunities for software vendors to tackle the difficult tasks associated with aggregating, storing, analyzing and searching data. Datawatch and Jaspersoft will join us for a discussion on big data and how new technologies are solving the problems presented by big data, and what technologies and methodologies will be most suitable for capturing big data spending in the future.

Cloud-Based Human ResourcesIT organizations are beginning to funnel greater amounts of money into HR and talent management solutions as more organizations are recognizing employees as assets to their business rather than simply resources. “Strategic HR” is becoming the talk of the table and next-generation HR processes are gaining importance. The emergence of cloud-based systems, which deliver a remarkable user experience and value proposition that eclipses that of pre-Internet solutions, is further catapulting this trend into an acceleration mode. With a panel of executives from Cornerstone OnDemand and Ultimate Software, we will discuss the impact of cloud-based software on the HR industry and the contribution of these two companies toward this trend.

Communicating with Customers in the CloudThe way companies interact with both business and consumers has changed dramatically over the last decade with the introduction of SaaS-based software and the explosion of open-source software. With a panel of executives from ON24, SugarCRM and LivePerson, we will discuss the impact of cloud-based and open-source software on customer interaction and which technologies will ultimately win or lose.

Consumer Applications in 3D PrintingThe additive manufacturing (3D printing) market has taken a step in a completely new direction, aimed at the consumer market. This market, which was relatively nonexistent a few years ago, has grown substantially as new technology and more user-friendly systems have hit the market. We believe several obstacles still remain before consumer 3D printers can go mainstream and this panel will address how the industry is addressing some of these hurdles. Our consumer 3D printing panel will include service and content providers (Shapeways), system manufacturers (MakerBot, 3D Systems) and venture capitalist firm Lux Capital.

Cross Media Convergence and Ad EffectivenessMobile is shifting media consumption from a single screen (TV or PC) to multi-screen (TV, PC, smartphone, tablet, radio) simultaneous usage, creating an increasingly challenging environment for advertisers to reach audiences. Key panel topics include: 1) Despite “big data” captured everywhere, capturing ROI across a multitude of mediums remains a distant hope. How close are we to a scalable cross-screen solution that can demonstrate ROI and ultimately answer the age-old question: “I know half of my ad dollars are wasted, I just don’t know which half”? 2) Are gross rating points (GRP: the standard unit of currency for TV reach and ad buying) an acceptable measure in the digital world? Do vast amounts of new digital media data argue for more advanced measurement beyond GRP? 3) How important is the ability to measure viewable impressions and how effective is measurement today?

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Data Privacy/Do-Not-Track DebateMicrosoft’s decision to enable “Do Not Track” (DNT) as default setting in upcoming Internet Explorer 10 browser has brought online data privacy back to the front and center. Key panel topics include: 1) Can industry self-regulation come to a consensus on DNT, third-party cookie data collection and behavioral ad targeting standards before the FTC steps in and forces action? 2) How does European privacy regulation compare to the U.S. and why may/not the U.S. develop similar policy? 3) What impact would a DNT default setting on Internet Explorer 10 and/or other browsers have on the ad ecosystem? And on the consumer Web experience?

Emerging Laser TechnologyNewport and Raydiance join us to discuss current and emerging trends in laser technologies and applications. We expect to gain insight into growing markets and applications for lasers such as UV lasers and green lasers. Newport’s broad laser product offering should help in terms of understanding some of the key applications that are being actively targeted including microelectronic, semiconductor and industrial manufacturing markets. Raydiance’s fascinating femtosecond-based laser approach should help investors gain a perspective into some of the new applications that are being pursued.

FiberIf you have metro fiber, there’s someone out there who may want to buy it. If history is any indicator, Zayo, who will be on this panel, may be interested or has at least looked at it. While public investors were looking the other way, Zayo has quietly built one of the largest networks of metro fiber. Why are private market multiples so much higher? What is it that the public markets are missing? Cogent carries an estimated 15% of the world’s Internet traffic connecting more than 30,000 customers in nearly 2,000 buildings. Management will be on-hand to help discuss industry pricing and demand dynamics. RedIT, another private company that operates in the southwestern U.S. and Latin America, will address the importance of fiber and connectivity in a cloud and data center-centric IT world.

Future of RadioThe sector is in such a state of flux, it’s sometimes difficult to define ‘radio.’ We have assembled a panel (Slacker, CMLS and HD Radio (iBiquity)) to discuss the evolving radio landscape and explore competitive strengths and weaknesses, shifts in listenership growth, advertising trends, shift to mobile and how changes to music licensing could alter the landscape.

Green Power Power consumption is a critical consideration in designing any electronic system. In order to minimize power consumption in any system from a mainframe to a handheld, the power delivery needs to be optimized across a broad range of operating conditions. This creates opportunity for power semiconductor companies that solve these issues.

Healthcare in the CloudWith the increasing adoption of cloud-based technology solutions in healthcare, we are stepping into a new avenue of growth for healthcare technology companies. Our panel consists of the companies that are at the forefront of this SaaS-based cloud solution revolution. Athenahealth has built a strong reputation and foothold in physician-based cloud solutions and is considered the market leader in the segment, while CareCloud is the newcomer. Medidata has disrupted the clinical trials market with their revolutionary cloud-based EDC (Rave®) platform and is ramping up analytical capabilities. We will be discussing why healthcare is the ideal use case for the cloud, and how new technologies can truly reform the nation’s largest industry.

Local Local advertising remains the next frontier for online advertising dollars. As customers seek local information more rapidly on mobile devices, the opportunity has become much more important to local businesses. Our panel will include platform and technology providers Marchex and ReachLocal to discuss how local businesses are navigating the available ad products.

Next-Gen Content ConsumptionThe biggest story in consumer electronics over the last several years has been the explosive growth in the Internet-connected device ecosystem and the improving ways users can access and interact with content. Whether via iOS devices, game consoles, peripheral Internet set-top boxes or other, the average household now has multiple ways to access Internet-delivered content on both the living room TV and mobile devices. Panelists will discuss the future direction of content consumption devices and changes in how we will all interface with video content in the coming years.

Next Leg of Online TravelWhile traditional online travel agents (OTAs) have multiple avenues for continued growth, we believe peripheral online travel services that go beyond the traditional OTA will continue to emerge. Online travel offerings including reviews and recommendations, travel inspiration, last-minute bookings, vacation rentals, metasearch and others will be discussed in this panel. Additionally, we will focus on the panelists’ view of the leading OTAs in the current environment and how they will partner or be competitive with the major OTAs.

Online Ad The emergence of mobile, social and video has reshaped both the performance and branded online advertising spaces over the past two years. These three sectors will continue to increase in terms of advertising budget allocation, but we are only at the beginning of companies developing unique technologies to take advantage of each unique medium. Our panel will explore the overall state of the online ad industry and how each participant utilizes their technology platforms to serve advertisers.

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OpticalThe optical industry has been in a six-quarter funk with demand from telco service providers at a three-year low, but datacom optics have remained strong given the growing demand for 100G technologies and data center investments. Given the cyclical nature of the optical industry, we believe spending on these technologies will improve with bandwidth-thirsty devices and video applications consuming more data than ever before. This panel will focus on telco spending intentions in 2013 and emerging products and technologies such as iTLAs, ROADMs, Tunable-XFPs and 100G coherent. We will be hosting two optical panels, including component suppliers Ciena, EMCORE and Oclaro (day one) followed by FNSR, Fabrinet and Neophotonics (day two).

Rapid Growth in Real-Time Bidding (RTB) and Impacts on Display Ad MarketRTB has taken the online display market by storm the past two years (now 25%+ of online impression volumes) causing average premium pricing contractions of 40% in LTM (PJC estimate). Key panel topics include: 1) What prevents online/mobile/video display transactions moving to 100% RTB and how will ad networks, agencies, publishers and private exchanges be impacted? 2) How will Facebook’s exchange (FBX) impact supply and demand dynamics in the exchange marketplace? How much demand can Facebook ultimately capture and can it be a needle-mover for the stock? 3) How can Nielsen and comScore’s viewable impression solutions add support to display pricing and benefit publishers in an increasingly high-volume RTB world?

Semiconductor Opportunities in Communication InfrastructureWe anticipate a broad upgrade cycle in communications driven by deferred capital investments, increasing speeds and feeds in access, government targets for broadband coverage, IPv6 upgrades, the ongoing transition from SONET to Ethernet and the explosion of wireless data to name a few. We believe the communication infrastructure IC companies that address these issues best will outperform the chip market in the years to come.

Social Media, Video and Mobile Advertising 2.0We will debate the effectiveness of social, mobile and online video advertising beyond clicks to tangible sales and engagement. Key panel topics include: 1) What are the latest learnings of these next-gen ad mediums from an effectiveness standpoint? What is/is not working? 2) Are we closer to finding a holy grail (versus a year ago) to achieving high engagement and loyalty from an “always-on” and “on-the-go” consumer? 3) How have smartphones and tablets closed the gap between commerce and marketing? How effective are smartphone ads today? Will tablet ad platforms ultimately trump smartphones from an effectiveness standpoint?

Software-Defined NetworkingIn its most basic form, software-defined networking (SDN) aims to replace traditional networking architecture, creating a more flexible and scalable network environment. We believe the continued adoption and deployment of SDN will have a substantial effect on the core networking landscape, posing numerous challenges for traditional networking vendors. As such, a handful of these vendors have further explored the implications of SDN and are attempting to position themselves ahead of the curve. Our panel (consisting of Arista Networks, Brocade Communications and Silver Peak Systems) will provide incremental insight into current SDN trends and how they believe the market landscape will look as this revolutionary technology continues to penetrate the networking space.

What’s Next in Mobile and Social GamesExcitement in the social gaming arena has given way to disappointment in recent months as leaders in the space (Zynga, etc.) have faced challenges in replicating successful game launches and improving monetization. Mobile gaming continues to be an area of growth due to increasing footprint of mobile devices, but could potentially face similar challenges. Our panelists will provide insight on the changing dynamics of social gaming, the potential implications for mobile gaming and the impact that growth in these categories is having on console gaming.

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P A R T I C I P AT I N G C O M P A N I E S (as of March 6, 2013)

3D Systems Corporation DDDAccedo Broadband AB PrivateActivision Blizzard, Inc. ATVIAlpha and Omega Semiconductor AOSLAltisource Asset Management Corporation AAMCAltisource Portfolio Solutions S.A. ASPSAltisource Residential Corporation RESIAmazon.com, Inc. AMZNAnaren, Inc. ANENAppirio, Inc. PrivateAppSense Limited PrivateAquantia Corp. PrivateArcam AB ARCM SSArista Networks, Inc. PrivateAscent Capital Group, Inc. ASCMAASML Holding NV ASMLAT&T Inc. Tathenahealth, Inc. ATHNAxcelis Technologies Inc. ACLSBackflip Studios, Inc. PrivateBatanga, Inc. PrivateBoxee, Inc. PrivateBrocade Communications Systems, Inc. BRCDCareCloud Corporation PrivateCiena Corporation CIENCisco Systems, Inc. CSCOCogent Communications Group Inc. CCOICoherent Inc. COHRcomScore, Inc. SCOR Cornerstone OnDemand, Inc. CSODCumulus Media Inc. CMLSDatawatch Corporation DWCHDHX Media Ltd. DHX CNDigital River, Inc. DRIVDigitalGlobe, Inc. DGIDreamWorks Animation SKG Inc. DWADun & Bradstreet Corp. DNBeMagin Corp. EMANEMCORE Corporation EMKREmulex Corporation ELXEquinix Inc. EQIX Euronet Worldwide, Inc. EEFTEvidon, Inc. PrivateExar Corp. EXARExpedia, Inc. EXPEFabrinet FNFinancial Engines, Inc. FNGNFingerprint Cards AB FINGB SSFinisar Corporation FNSRFreescale Semiconductor, Inc. (FSL) Gartner Inc. ITGlobal Eagle Entertainment Inc. ENTGlu Mobile, Inc. GLUUGreen Dot Corporation GDOTGrupo redIT PrivateHigher One Holdings, Inc. ONE

Hitachi Data Systems, subsidiary of Hitachi Ltd. HTHIYHome Loan Servicing Solutions, Ltd. HLSSHomeAway, Inc. AWAYHotel Tonight Inc. PrivateiBiquity Digital Corporation PrivateIMAX Corporation IMAXImpinj, Inc. PrivateinContact, Inc. SAASInformatica Corp. INFAInphi Corporation IPHIInternap Network Services Corporation INAPInterpublic Group of Companies, Inc. (The) IPGInterxion Holding N.V. INXNInvenSense, Inc. INVNIPG Photonics Corporation IPGPIris Mobile Corporation PrivateIsola Group Ltd. PrivateJasperSoft Corporation PrivateJDS Uniphase Corporation JDSUKinetic Social PrivateLevel 3 Communications, Inc. LVLTLinkedIn Corporation LNKDLionsgate Entertainment Corp. LGFLivePerson Inc. LPSNLTX-Credence Corporation LTXCLux Capital Management PrivateMajesco Entertainment Co. COOLMakerBot Industries, LLC PrivateMarchex, Inc. MCHXMDC Partners Inc. MDCAMedidata Solutions, Inc. MDSOMellanox Technologies, Ltd. MLNXMillennial Media Inc. MMMonolithic Power Systems Inc. MPWRMoody’s Corporation MCOMoSys, Inc. MOSYNanometrics Incorporated NANONeoPhotonics Corporation NPTNNetApp, Inc. NTAPNetSuite, Inc. NNewport Corp. NEWPNimble Storage, Inc. PrivateNimbus Data Systems, Inc. PrivateNQ Mobile Inc. NQOclaro, Inc. OCLROcwen Financial Corporation OCNOCZ Technology Group, Inc. OCZON24, Inc. PrivatePandora Media, Inc. PPower Integrations, Inc. POWIProto Labs, Inc. PRLBQLogic Corp. QLGCRackspace Hosting, Inc. RAXRaydiance, Inc. PrivateReachLocal, Inc. RLOCRealD Inc. RLD

Company Name Ticker Company Name Ticker

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Rentrak Corporation RENTRetail Solutions, Inc. PrivateRimini Street, Inc. PrivateRofin-Sinar Technologies Inc. RSTIRovi Corporation ROVIsalesforce.com, inc. CRMServiceSource International, Inc. SREVShapeways, Inc. PrivateSilver Peak Systems, Inc. PrivateSIRIUS XM Radio Inc. SIRISlacker, Inc. PrivateSolera Holdings Inc. SLHSTEC, Inc. STECStratasys, Inc. SSYSSugarCRM, Inc. PrivateTeradyne, Inc. TERTessera Technologies Inc. TSRAThe McGraw-Hill Companies, Inc. MHPThe Trade Desk, Inc. PrivateTiVo Inc. TIVOTripAdvisor, Inc. TRIPTurn Inc. PrivateUltimate Software Group, Inc. (The) ULTIUltra Clean Holdings, Inc. UCTTUnion Square Ventures PrivateValueVision Media, Inc. VVTVVeriFone Systems, Inc. PAYVerizon Communications Inc. VZVolterra Semiconductor Corporation VLTRWalter Investment Management Corp. WACWeb.com, Inc. WWWWWEX Inc. WXSWhipTail Technologies, Inc. PrivateWildTangent, Inc. PrivateWisdomTree Investments, Inc. WETFYelp, Inc. YELPZayo Group Inc. Private

P A R T I C I P AT I N G C O M P A N I E S (as of March 6, 2013)

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C O M P A N Y O V E R V I E W S (Highlighted companies are followed by Piper Jaffray investment research)

3D Systems (DDD) – $36.96 Market Cap: $2.14B Rating: Overweight 12-mo. Price Target: $42 (30x CY14E op income + cash)Thesis: We believe the market for 3D printers is in a secular growth phase and the growing adoption of 3D CAD usage coupled with price elasticity and increased awareness will continue to drive im-pressive 3D printer unit growth for the industry. This ultimately will create a growing annuity of high-margin consumable sales into this captive audience of 3D printing users. 3D Systems has also done an impressive job of rolling up the 3D printing service bureau industry, which has been one of the biggest factors in the company’s earnings accretion and operating margin expansion. We believe 3D Systems will continue to selectively acquire given the success it has had with this strategy and anticipate the ac-quisition focus will be more on international expansion. Given our belief in strong secular growth trends for the industry, and continued market penetration for 3D Systems, we reiterate our Overweight rating and $42 price target.Key Questions:• When do you believe the consumer 3D printing market will

start to drive meaningful revenue growth?• Can you discuss how 3D Systems is helping to grow the con-

sumer market by developing libraries of 3D content?• How have you been able to acquire so many different busi-

nesses without any channel/customer conflicts or integra-tion issues?

• Any estimate regarding how much of your system sales are going into direct digital manufacturing applications?

• How is 3D Systems protecting the material sales from third-party suppliers?

Description: 3D Systems is a leading provider of rapid prototyping services and 3D printers.Troy Jensen, CFA, Sr. Research Analyst, 612 303-6291

Accedo Broadband AB – PrivateDescription: Accedo is an enabler of TV application solutions to media companies, CE manufacturers and TV operators glob-ally. The company’s cloud-based platform provides applications, tools and services that allow customers to deliver IPTV solutions. Accedo’s platform enables companies to cost-efficiently develop, roll out, and manage IPTV applications and stores on multiple devices globally. Currently, CE device manufacturers and network operators are developing “TV Everywhere” solutions and are look-ing to roll these solutions out over the very near-term.Key Questions:• Will TV manufacturers attempt to build app ecosystems

themselves or increasingly look to third parties to enable this functionality?

• How does Apple’s rumored entry into the TV space change the landscape for devices app ecosystems in the living room? Will it be no more impactful than the existing Apple TV STB?

• Are TV operators supportive of enabling more content deliv-ery to the TV that is outside of the scope of their subscription offerings?

• Consumers are purchasing TVs that connect to the Internet, but in many cases not connecting them. What is the hurdle to increased usage of this functionality?

Activision Blizzard, Inc. (ATVI) – $14.30 Market Cap: $15.88B Rating: Overweight 12-mo. Price Target: $17 (19x CY13E EPS)Thesis: Activision holds a leading position among video game publishers due to the company’s ability to create engaging new content in existing titles, while also consistently generating new IP that adds layers to the story beyond to the core franchises. In 2013, Activision faces tough comps due to the massive success of Diablo 3 in 2012. The company has now factored this impact into CY13 guidance and, we believe, this outlook could prove conservative given the introduction of other new titles during the year, most notably Destiny (a Bungie title), and management’s consistent pattern of guiding initial full-year EPS well below ac-tual results. Additionally, with the catalyst of a new hardware cycle coming, there is potential for an improved trajectory of growth for video game publishers in 2014/15.Key Questions:• Will the company’s new game Destiny, a potentially material

title, ship in late 2013 or sometime in 2014? This could mate-rially impact EPS for the year.

• Is Activision gearing up to purchase a portion of the 61% stake in the company that Vivendi currently owns?

• How will video game software sales be impacted near-term by the announcement that new consoles are coming later this year and are likely not backward compatible?

• Can continued growth of Skylanders, shipment of Starcraft II and potential launch of Destiny lead to a revenue decline that is less material than the 14% year-over-year decline implied in Street consensus for CY13?

Michael Olson, Sr. Research Analyst, 612 303-6419

Alpha and Omega Semiconductor (AOSL) – $8.06; Market Cap: $204.96M Rating: Neutral 12-mo. Price Target: $8 (8x CY14E EPS)Thesis: Alpha and Omega is undergoing a unique transition from a fabless to a fab-lite business model, hoping to achieve margin expansion through accelerated new product introduction. We be-lieve this is still somewhat of a show-me story. We expect muted revenue growth as personal computer (PC) sales (56% of rev-enue) are likely to be weak. Moreover, we expect AOSL’s content per PC to decline. Gross margin expansion is also likely to slow as the company approaches its prior peak and tailwinds from its Oregon fab transition diminish. We remain Neutral due to high PC exposure and risks associated with a transition from a fabless to fab-lite business model.Key Questions:• The pace of new product introduction is important for the

company’s future; how will new products impact the com-pany’s mix and/or margin?

• How has owning a fab changed the way you run the company? • What is the current inventory situation in the distributor

channel?• How are your diversification efforts going? In what markets

are you gaining traction?• With increasing content in PCs, can that part of your busi-

ness be flat year-over-year?

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Description: Alpha and Omega Semiconductor is a global suppli-er of MOSFET and power IC products typically used in notebooks, netbooks, flat panel displays, mobile phones and set-top boxes.Gus Richard, Sr. Research Analyst, 415 616-1711

Altisource Asset Management (AAMC) – $129.75 Market Cap: $304.00MAltisource Residential Corporation (RESI) – $19.04Market Cap: $148.70MDescription: RESI purchases non-performing mortgages to either be modified and resold, sold through a short sale, or foreclosed and used as single family rental properties. AAMC provides man-agement services and oversees RESI’s relationship with vendors.Key Questions:• Help investors understand the business model and relation-

ship between the two companies.• What are your top priorities for 2013?• With your base business model plan of 5,000 homes in 2013

and 10,000 in 2014, what are your projected dividends in 2013 and 2014 for each company?

Altisource Portfolio Solutions S.A. (ASPS) – $81.54 Market Cap: $1.91B Rating: Overweight 12-mo. Price Target: $130 (sum-of-the-parts analysis)Thesis: ASPS is levered to OCN’s servicing portfolio growth, a pri-mary benefactor of the secular wave of servicing being transferred from large banks and originators to specialty servicers. We also believe ASPS’s diversification initiatives in origination services, Hubzu and supporting RESI/AAMC will be drivers of long-term value.Key Questions:• Some believe ASPS is just a foreclosure play. How much

runway is left for the core business, and help investors un-derstand your efforts to diversify into origination services, Hubzu and supporting RESI/AAMC and how are these progressing?

• ASPS has highlighted flat margins for 2013. Talk about mar-gin tailwinds and headwinds for 2013 and where they can go in 2014.

• What are ASPS’s top priorities for 2013?Description: Using data-driven processes, Altisource provides real estate mortgage portfolio services and related technology prod-ucts, credit card collections and customer relationship manage-ment services.Michael Grondahl, Sr. Research Analyst, 612 303-6788

Amazon.com, Inc. (AMZN) – $264.27 Market Cap: $120.12B Rating: Overweight 12-mo. Price Target: $329 (40x 2014E PF EPS of $8.23)Thesis: With eCommerce still representing less than 10% of retail sales and Amazon continuing to grow its share of eCommerce, we believe that Amazon will continue to earn robust multiples. Key Questions:• What is the long-term goal for operating margins?• How has the competitive nature changed with traditional re-

tailers focusing on eCommerce, physical retailers offering price matching and the emergence of verticalized online retailers?

• How large is the opportunity for AWS?

Description: Amazon.com, Inc. is a leading eCommerce destination.Gene Munster, Sr. Research Analyst, 612 303-6452

Anaren, Inc. (ANEN) – $19.35Market Cap: $245.67MDescription: Anaren is a supplier of high-frequency electronics used primarily in military and wireless communications applica-tions. Anaren’s customers include leading OEMs in the wireless infrastructure, wireless consumer products, satellite, defense electronics and other sectors utilizing complex microwave and RF technology. Key Questions:• With the war in Afghanistan winding down and potential cuts

to military budgets looming, do you see a slowing of military spending?

• Anaren’s space business has been growing as a percentage of revenue—what is driving that business?

• What drives your wireless business? How much is infrastruc-ture and how much is consumer?

• Do you see strong demand for LTE base stations?• What is your content in small cell base stations?• The company is starting to pursue the Internet of Things with

your partnership with TXN. How is this effort ramping? What sort of applications are you getting into?

Appirio, Inc. – PrivateDescription: Appirio is a global technology-enabled services provider, helping companies power their business with cloud, social and mobile technologies from companies like salesforce.com, Google, Workday and Cornerstone OnDemand. Appirio has worked with more than 400 enterprise customers including organizations like the City of Los Angeles, Facebook, Flextronics, International Hotels Group, Japan Post Network, Ltd., L’Oreal, NetApp, NYU, Starbucks, Thomson Reuters and VMware. Appirio’s technology-enabled professional services are supported by a team of 600 cloud experts and CloudSpokes, a more than 70,000 person-strong global cloud developer community. Appirio has offices that span the U.S., Europe and Asia Pacific.Key Questions:• What are some key criteria for selecting a software company

for which Appirio will provide services?• How large is the services opportunity around cloud comput-

ing and how quickly is it growing?• How attractive is acquiring smaller service providers versus

building out your own competencies?

AppSense Limited – PrivateDescription: AppSense is a leading global software provider of user virtualization solutions that transform organizations into productive mobile workforces, securely governed by IT. AppSense works with customers to reduce IT complexity and enable enter-prise consumerization with independent management of the user experience across all mobile devices and desktops. User virtual-ization improves the deployment, management and migration of multi-platform desktop and mobile environments.Key Questions:• How are you positioned relative to Citrix or VMware?• What sort of cost savings can AppSense provide, and how

quickly is that ROI realized?

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• Have we already reached the tipping point in BYOD (bring your own device) to the workplace? What sort of opportuni-ties does this open for AppSense?

Aquantia Corp. – Private Description: Aquantia provides high-speed Ethernet connectivity solutions for cloud computing and large-scale data center deploy-ments. The company recently acquired 10GBASE-T assets and patent portfolios from PLX Technologies. The acquisition added marquee customers such as Intel and Cisco to an already large OEM customer base. Key Questions:• Describe the role of connectivity solutions within the data

center and cloud environment.• What are the biggest trends in cloud computing in terms of

connectivity?• 10GBASE-T is seeing an uptick in adoption with Intel’s

Romley server launch. How big could that market be?• Describe the competitive landscape.

Arcam AB (ARCM SS) – 285.500 SEKMarket Cap: 1.02B SEKDescription: Arcam is an additive manufacturing company lo-cated in Gothenberg, Sweden. The company was founded in 1997 and is listed on the NASDAQ OMX Stockholm exchange. As of mid-2012, Arcam had 40 employees and more than 100 system installations worldwide. The company designs and manufactures additive manufacturing systems that utilize electron beam melt-ing (EBM) technology. The EBM process is carried out in a vac-uum at elevated temperatures, and involves melting electrically conductive powders layer by layer using electron beams. Arcam currently offers two printers in their product portfolio (Arcam A1 and A2), which are primarily sold into the aerospace, automotive and medical industries. Key Questions:• What are the major applications that your systems are cur-

rently being utilized for?• 3D metal printing has received a lot of attention as of late,

how has the technology changed over the last few years and where do you anticipate it going?

• What materials are you currently developing for use on the Arcam A1 and A2?

• What percent of your sales do you believe go to direct digital manufacturing applications?

• What do you believe will drive the majority of growth for the industry over the next few years?

Arista Networks, Inc. – PrivateDescription: Arista is a leading supplier of high-speed data center switching solutions. The company delivers software-defined cloud networking solutions for large data centers, high performance computing environments and specializes in low latency and high speeds. Arista’s portfolio includes 1, 10 and 40 GbE switches that redefine network architectures and dramatically change the price performance of these large-scale data centers. Key Questions:• Can you discuss the rollout of software-defined networks

with legacy switching and routing architectures?• Can you discuss the timeline for when software-defined net-

works will start getting deployed more broadly and is this a

significant risk to the established hardware suppliers?• Arista has had great success penetrating the financial ser-

vices vertical. Has the company been able to duplicate this success in non-financial verticals?

• Arista has historically been thought of as the leader in one-tier data center switching architectures, but the company’s positioning now appears to be more of an SDN supplier. How were you able to make this transition so quickly?

Ascent Capital Group, Inc. (ASCMA) – $68.59Market Cap: $968.90MDescription: Ascent Capital Group, through its subsidiary, Monitronics International, Inc., provides security alarm monitor-ing and related services to residential and business subscribers in the United States and Canada.Key Questions:• Late last year, you completed a sizable acquisition of custom-

er accounts. What’s the decision process you use in evaluat-ing the economics of such a deal?

• How scalable is your business to digest an influx of customer accounts?

• When you look at future acquisitions, are you primarily looking to add subscribers to the existing Monitronics busi-ness or are there other businesses in which you might be interested?

• We’ve been hearing a lot about the connected home from AT&T lately, and we know that cable MSOs like Comcast are getting into the smart home area as well. How active is Monitronics in this space and how big of an opportunity is it? What is the competitive threat of cable and phone?

ASML Holding NV (ASML) – €54.52 Market Cap: €24.83B Rating: Overweight 12-mo. Price Target: €57 (19x CY14E EPS)Thesis: As the leading lithography equipment supplier, ASML remains a key beneficiary of increasing litho spending from one node to another. The company is on the cusp of the next new product momentum—extreme ultraviolet (EUV) lithography tool where it has virtually no competition. By acquiring its critical sup-plier Cymer, we believe ASML de-risks itself on EUV given that Cymer is a mission-critical path in terms of adoption. By minimiz-ing duplication efforts and focusing on technology development, we think ASML could potentially accelerate EUV even further for greater adoption and into production. With overall gross margins >50% for Cymer, we see that in year two after the acquisition clos-es and assuming a nominal 10% savings in SG&A and 5% in R&D, ASML’s earnings could be accretive by $0.10.Key Questions:• What are the key areas of savings from Cymer acquisition?

Will Cymer help in accelerating any EUV shipments to cus-tomers next year?

• How should one think of Litho re-use amongst foundry/logic customers in 2013?

• Progress in terms of EUV at existing customers? What are the roadblocks and where do you expect you will be by YE13?

Description: ASML Holding is the leading provider of lithography solutions to the semi industry.Jagadish Iyer, Sr. Research Analyst, 212 284-5038

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AT&T Inc. (T) – $35.91 Market Cap: $197.20B Rating: Overweight 12-mo. Price Target: $40 (DCF to 2017, 9.7% NT WACC, 7.9% ter-minal WACC, 2% terminal growth rate)Thesis: AT&T is a leading integrated telecom provider in the United States. AT&T’s wireless business, of which the company owns 100%, is one of the top two wireless providers. AT&T also operates a substantial wireline network that services residential voice, data and television needs, as well as provides business connectivity and services. While AT&T’s cloud and data center operation is relatively small compared to these two businesses, it is a formidable competitor in the data center, cloud and hosting industry.Key Questions: • Investors are familiar with AT&T overall—its wireline and

wireless operations—but probably not with its hosting and cloud efforts. Can you size up how big that business is, say in comparison to AT&T overall or in relation to other public players?

• How does AT&T look at cloud and hosting? Is this a loss leader/necessary offering to bring in more wireline business contracts, an add-on to existing customers to bring in extra revenue, a separate side business or something else?

• A few years ago, AT&T had a ‘measured’ approach to invest-ing in data centers while every other data center player could not pour enough money into the space. How would you characterize the availability of capital and the desired pace of growth from Dallas?

• How does AT&T overcome the fact that its data centers are not network neutral?

• What types of customers are coming to your cloud? Are they using a hybrid approach, where your cloud is for peak use, or are they fully running in your cloud?

Description: AT&T Inc. is the leading telecommunications com-pany in the U.S. with 35 million access lines, the second largest wireless network by subscribers, and one of the world’s most ad-vanced and powerful global backbone networks.Christopher Larsen, Sr. Research Analyst, 212 284-9339

athenahealth, Inc. (ATHN) – $93.79 Market Cap: $3.41B Rating: Overweight 12-mo. Price Target: $100 (5x EV/2014E revenue; net cash of $180M and 37M shares out)Thesis: athenahealth entered the physician market with disruptive cloud-based solutions and continues to out-innovate the tradi-tional players. While the company is strengthening its position in the revenue cycle management (RCM) and EHR market, it is also looking at new solutions that will expand its offerings. The com-pany’s announced acquisition of EPOC will add pharma diversi-fication and, more importantly, access to a large physician base to cross-sell its solutions. We expect the new physician additions to accelerate into 2013 and 2014 along with new solutions. Piper Jaffray is advising EPOC on this transaction. Key Questions:• Why is the cloud a better delivery platform for software in

healthcare?• What is the technology stack you use to deploy athenanet?• What are the greatest challenges to using the cloud in

healthcare?

• What are your plans to employ big data algorithms, and how do you thing about that opportunity?

• How does the cloud improve your ability to promote interoperability?

Description: athenahealth, Inc. is a leading provider of revenue cycle automation and EHR solutions to physician market in the United States.Sean W. Wieland, Sr. Research Analyst, 415 616-1710

Axcelis Technologies Inc. (ACLS) – $1.14Market Cap: $123.02MDescription: Axcelis Technologies provides ion implantation equipment to the semiconductor industry and also supplies tools to the MEMS, LED and chip packaging companies.Key Questions:• Discuss your roadmap in terms of profitability? • Discuss the traction of your high dose ion implanters with

customers. How are you able to compete with AMAT?• What are your growth paths?

Backflip Studios, Inc. – PrivateDescription: Backflip Studios is a mobile game studio, based in Boulder, Colo., that develops mobile games for a multitude of mobile app platforms including the Apple App Store and Android Marketplace. The company’s games have been downloaded more than 200 million times. Top games include DragonVale, Gizmonauts, Paper Toss, NinJump, Strike Knight, Army of Darkness Defense and ShapeShift. In total, the company’s games are played by more than 4 million users per day and over 30 mil-lion users per month.Key Questions:• What have been the monetization trends in the free-to-play

mobile game industry over the past 12 months and how do you expect this to change over the coming 12 months to two years?

• There is a lot of talk about Google Play growth outpacing that of Apple’s App Store. What are the dynamics at play for you between the two platforms currently and how do you expect this to change?

• How do you look to keep players engaged in your games as the mobile games market becomes increasingly competitive with new games releasing each day from a growing range of developers from relatively small studios to multibillion tradi-tional console focused studios?

• What kind of adoption of mobile games have you seen in the tablet market and do you see this as an incremental growth opportunity going forward or more of a cannibalizing effect from the smartphone market?

• Would you expect successful players in the market to focus on a strategy of gaining a substantial download/user base or rather looking to monetize a relatively smaller user base at higher rates in the future?

Batanga, Inc. – Private Description: Batanga operates two businesses: the leading Hispanic ad network, which reaches more than 15 million U.S. Hispanics, according to comScore, and an online music portal that offers content on Latin music and entertainment, includ-ing an online streaming radio service with more than 50,000 user-generated stations. Batanga is positioned to benefit from the growing Latin population both in the United States and globally.

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Key Questions:• What types of strategies are advertisers using to reach

Hispanic customers that are unique to the demographic?• How can Batanga continue to expand its reach of Latin

American Internet users?• What important trends are you noticing about the usership of

the Internet around Latin American users?• How are mobile and video specifically impacting how adver-

tisers are reaching consumers online?

Boxee, Inc. – PrivateDescription: Boxee provides an Internet-connected set-top box (STB) that connects to a user’s TV and allows users to search, find and watch TV shows and movies available on the Internet. The STB is sold for a flat fee and does not require a monthly fee. The box also allows users to download their favorite apps includ-ing many of the most popular video, music and photo services and utilize them on their TV. Boxee is poised to benefit from the growing trend of “TV Everywhere,” which makes content available on every screen that is connected to the Internet.Key Questions:• How are devices enabling easier consumption of Internet-

delivered content impacting potential for cable cutting?• Is there a long-term market for peripheral hardware that

enables consumption of Internet-delivered content through the TV or will this shift to acquiring content directly through Internet-enabled TVs?

• Will Apple’s rumored entry into the TV space change the landscape for connected devices in the living room or will it be no more impactful than the existing Apple TV STB?

Brocade Communications Systems, Inc. (BRCD) – $5.61 Market Cap: $2.56B Rating: Neutral 12-mo. Price Target: $6 (8.5x FY14E EPS)Thesis: Brocade’s storage networking demand continues to largely outpace overall storage market growth due to its first-to-market advantage for 16Gb Fibre Channel, though we believe the industry is slowly migrating toward a converged network based on Ethernet. If this trend plays out, the Fibre Channel storage mar-ket will remain in a slow and steady decline over the next two to three years. As such, Brocade’s longer-term growth will be depen-dent on traction within the Ethernet market, particularly from the campus LAN and Fabric market segments. Despite the improving growth trends of the Ethernet segment, we see minimal oppor-tunities for operating margin expansion over the next two years and therefore little room for earnings growth. As such, we remain Neutral on BRCD shares.Key Questions:• Brocade is participating in the Software Defined Networking

panel, so most questions will be focused on this topic.• How does the trend toward software-defined networks im-

pact Brocade?• Which vendors do you typically compete against in the SDN

market?• What are the competitive advantages of Vyatta and how is it

different than the others?Description: Brocade is a leading provider of data center network-ing solutions.Andrew Nowinski, Sr. Research Analyst, 612 303-6933

CareCloud Corporation – PrivateDescription: CareCloud is a provider of cloud-based practice man-agement, electronic health record and medical billing software and services. The company’s products are connecting physicians in more than 45 states to their patients and each other through a fully integrated digital healthcare ecosystem that can be accessed on any browser or device.Key Questions:• Why is the cloud a better delivery platform for software in

healthcare?• What is the technology stack you use to deploy athenanet?• What are the greatest challenges to using the cloud in

healthcare?• What are your plans to employ big data algorithms, and how

do you think about that opportunity?• How does the cloud improve your ability to promote

interoperability?

Ciena Corporation (CIEN) – $15.24Market Cap: $1.53BDescription: Ciena Corporation is a leading supplier of optical transport equipment to service providers around the globe. The company leverages deep expertise in packet and optical network-ing along with advanced software functionality and is the founda-tion to some of the leading next-generation networks at numerous tier one service providers. Ciena is viewed by many in the industry as the leader in 100G coherent optical systems and is well-posi-tioned to benefit from the upcoming 100G coherent upgrade cycleKey Questions:• Expand on your pipeline of 100G coherent wins and when do

you expect to see a more material inflection in service pro-vider deployments?

• Can you discuss the process for carriers releasing capex budgets and when during the year does this typically start to happen?

• Can you size the market for optical equipment for core net-works, metro networks, wireless backhaul and FTTX?

• Can you discuss your supplier relationships—specifically with respect to dual sourcing, concerns regarding the finan-cial strength of some of your suppliers and your recent imple-mentation of vendor-managed inventory?

Cisco Corporation (CSCO) – $20.86 Market Cap: $111.20B Rating: Overweight 12-mo. Price Target: $25 (9x fully taxed FY14E op income + cash)Thesis: Cisco is our top pick for 2013. Despite lagging demand for core networking gear (switching and routing), Cisco has ef-fectively ramped up product offerings across additional areas of the network, which we believe will help reaccelerate product growth throughout the year. Through various acquisitions and internal development, the company continues to expand its prod-uct footprint to adapt to cloud, SDN and BYOB industry trends, which we anticipate will help Cisco remain on top of the IT sec-tor. Moreover, as the company begins to shift to a more software and service centric model, we believe better revenue visibility will likely occur, driving sustainable bottom-line growth over the next several years. Key Questions:• Can you discuss why the collaboration space has declined so

much in 2012?

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• Is the video conferencing market moving more toward soft-ware and services? What does this mean for the hardware vendors?

• Is the set-top box, EMTA and WLAN likely to evolve into one platform? Or is the set-top functionality likely going to be a feature delivered from a cloud?

• How does the NDS acquisition fit with everything going on in the video delivery market?

• Will you discuss your VCE joint partnership with EMC and where you see the partnership headed?

Troy Jensen, CFA, Sr. Research Analyst, 612 303-6291

Cogent Communications Group Inc. (CCOI) – $25.14Market Cap: $1.14BDescription: Cogent is one of the lowest cost IP service providers in North America, Europe and Asia. The company’s longhaul and fiber networks extend to over 180 markets in 34 countries. Key Questions:• Describe the competitive environment and strategies to

compete effectively.• Where is demand coming from? How long is this level of

demand or growth in demand sustainable?• Is metro viable without long-haul? Vice versa?• What are the challenges of entering a new market? Is it typi-

cal to acquire an anchor tenant(s) before a new deployment?

Coherent (COHR) – $57.76Market Cap: $1.40BDescription: Coherent is a key provider of lasers and laser-based solutions for scientific, commercial and industrial customers.Key Questions:• What is the expected timing of recovery in the display

segment? • How is Coherent positioned in terms of OLEDs?• What progress has been made in fiber lasers? What is the

value proposition against IPGP? Where do you think your contribution from fiber lasers would be by YE13?

comScore, Inc. (SCOR) – $15.94 Market Cap: $537.32M Rating: Suspended Description: ComScore is a leading third-party digital marketing intelligence and measurement platform, providing proprietary measurement of digital activity (i.e., online digital usage and buy-ing patterns). The comScore solution is differentiated through its proprietary panel of 2M opt-in users, which combined with tag-ging data can provide customers with insight necessary to drive appropriate business model and strategy decisions, as well as help drive advertising effectiveness. comScore has evolved into the recognized independent industry leader, with its data often quoted as the standard for digital marketing success.Key Questions:• Following multiple delays in converting the ancillary product

pipeline, what gives you confidence in driving meaningful revenue growth from these channels?

• Do you subscribe to the prophecy of an ultimate “death of Web sites?” How does comScore evolve if less interaction is taking place on Web sites and more interaction moves to mobile, apps, social media platforms, etc.?

• comScore operates a margin structure well below its syndi-

cated measurement peers. What is the long-run margin po-tential for the business and how does it develop over the next couple years?

Cornerstone OnDemand, Inc. (CSOD) – $33.86 Market Cap: $1.71b Rating: Overweight 12-mo. Price Target: $36 (8.6x EV/2014E revenue + net cash)Thesis: Cornerstone OnDemand is a leading global provider of a comprehensive learning and talent management solutions delivered as software-as-a-service (SaaS). Cornerstone leverages its pure cloud architecture and also enjoys strong differentiation versus its peers because thus far, its enterprise suite is 100% homegrown and fully integrated. Competitors are racing to de-velop a broader suite of offerings, but struggling to integrate dis-parate, acquired piece-parts that can’t interoperate smoothly. We believe Cornerstone’s organically developed product set makes it extremely attractive to customers, and its industry-leading growth sets it apart as one of the highest-quality SaaS names.Key Questions:• How has the acquisition of several of your competitors by leg-

acy software companies given you a competitive advantage?• What are your biggest growth constraints?• How do you balance growth versus your timeline to

profitability?Description: Cornerstone OnDemand is a leading SaaS based Learning and Talent Management solution vendor.Mark Murphy, Sr. Research Analyst, 415 616-1705

Cumulus Media Inc. (CMLS) – $3.27 Market Cap: $570.26M Rating: Overweight 12-mo. Price Target: $4.50 (5-Yr DCF using 10.2% WACC and 6.5x terminal EBITDA multiple)Thesis: Despite the obvious growth challenges of the broadcast radio industry, we believe Cumulus can generate attractive equity returns driven by double-digit FCF growth. We think this growth can be achieved even if revenue growth is modest as costs are managed and the balance sheet is optimally levered. The story is more compelling if CMLS is successful in redeploying FCF and leveraging its substantial scale to conjure up some growth from new initiatives. We recommend the shares based on potential eq-uity returns of the core business alone, but a call option also exists to create even more value.Key Questions:• Network: We expect the recently announced partnership with

CBS Sports to help Cumulus capture a significant share of the $150M sports market through their new revenue share model. Discuss the opportunity in the network business and next milestones.

• SweetJack: Management expects daily deal site SweetJack to have some 300 dedicated employees and to operate in 200 markets by year-end. We expect CMLS to use their unsold in-ventory on-air talent to efficiently promote the service which could generate ~$30M in revenue and $10-12M in EBITDA by 2014. Update us on current tracking of this business segment.

• iHeartRadio: Cumulus has joined Clear Channel to push ra-dio streaming and playlist site iHeart.com, providing its own 525 radio stations. The iHeartRadio platform adds 30 mil-

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lion ad units to Cumulus’ advertising inventory, and has no revenue share agreement with Clear Channel. Management highlighted on the call that they have already seen ‘meaning-ful’ increases in their streaming traffic in just a few weeks and expects over time to expand its digital ad revenue from 1% to 5%. Discuss current market share and expectations for this business given new entrants (Microsoft, Apple, etc)?

Description: Cumulus Media is the No. 3 radio broadcaster in the United States by revenue.James Marsh, CFA, Sr. Research Analyst, 212 284-9304

Datawatch Corporation (DWCH) – $10.88Market Cap: $69.77MDescription: Datawatch is a leader in providing information op-timization products and solutions that allow organizations to deliver the greatest data variety possible into their big data and analytic applications. Datawatch provides organizations the abil-ity to integrate structured, unstructured and semi-structured sources such as reports, PDF files and EDI streams into these applications to provide a 360 degree perspective of the issues and opportunities that exist in their businesses. More than 40,000 organizations worldwide use Datawatch’s products and services, including 99 of the Fortune 100. Datawatch is headquartered in Chelmsford, Mass. with offices in London, Munich, Singapore, Sydney and Manila.Key Questions:• How is Datawatch leveraged to the big data trend?• Which industries or markets are most suited to Datawatch’s

products?• Who else does what you do, and how does Datawatch do it

better?

DHX Media Ltd. (DHX CN) – C$2.65Market Cap: C$140.64MDescription: DHX Media produces, distributes and licenses television and film programming in Canada and internationally. It focuses primarily on children, family and youth programming. The company has approximately 15 children’s series including Yo Gabba Gabba. It also maintains a content library of approximately 2,550 half-hours of programming and approximately 60 individual titles.

Digital River, Inc. (DRIV) – $14.25 Market Cap: $466.70M Rating: Overweight 12-mo. Price Target: $18 (10x 2014E PF EPS + $9cash/sh)Thesis: Digital River is a leader in providing eCommerce solu-tions. One of its specialties is helping eCommerce sellers global-ize operations as it operates in more than 160 countries and has call center support in over 15 languages. Overall, it helps to man-age more than $10B in global online sales. One of Digital River’s recent pushes has been into payments. Currently, it can display sites in over 150 currencies and more than 30 languages, and it re-cently acquired LML Payment Systems, which provides electronic payment processing.Key Questions:• How big can the payments business become and how will

the LML acquisition be integrated into the existing Digital River payments business?

• Much of the concern regarding DRIV shares is the transition

away from the traditional software download business. How is Digital River transitioning to the SaaS and app world?

• What revenue opportunities are presented from the release of Windows 8, outside of the Windows store?

• What is the timeline for the rollout of standalone modules?Description: Digital River, Inc. provides technology and infrastruc-ture that enables software publishers and consumer electronics manufacturers to sell online.Gene Munster, Sr. Research Analyst, 612 303-6452

DigitalGlobe, Inc. (DGI) – $26.08 Market Cap: $1.23B Rating: Overweight 12-mo. Price Target: $32 (8.9x 2014 EBITDA)Thesis: We view the just completed acquisition of competitor GeoEye as a “game-changer” for DGI, with the potential to drive meaningful improvement in key financial metrics. Equally impor-tant, this transaction is another step in the transformation of DGI from a satellite/defense business into a higher-growth, higher-margin information services firm. We believe this transaction can drive meaningful valuation upside in the shares over the next several years.Key Questions:• Provide updated thoughts on cost and capital synergies as-

sociated with the acquisition.• What are the drivers of growth in the commercial business?• Discuss risks around further cuts in federal funding for sat-

ellite imagery; successes in reducing government exposure.Description: DigitalGlobe operates a collection of satellites used to provide commercial high resolution earth imagery.Peter Appert, Sr. Research Analyst, 415 616-1709

DreamWorks Animation SKG Inc. (DWA) – $16.60 Market Cap: $982.75M Rating: Neutral 12-mo. Price Target: $18 (5 yr DCF, 6.5% WACC, 7.0x terminal EBITDA multiple)Thesis: DWA shares lack catalysts for 2013 so we see little reason for investors to jump into the shares. Fundamentals look shaky, valuation is not compelling and upcoming films could present some headline risk. Accordingly, we suggest investors re-evaluate the shares as we approach 2014 when the slate improves (and moves to three releases per year), film production costs decline (from the current $145M to $120M), and ancillary revenue streams from Netflix and others start to hit the income statement.Key Questions:Discuss the upcoming slate and what actions are you taking to prevent Guardians-like results?Discuss the merchandizing opportunity and what are you doing differently to drive higher sales?What are you expectations for the DVD and digital sales trends over the next few years?Description: DreamWorks develops and produces computer-gen-erated animated feature films.James Marsh, CFA, Sr. Research Analyst, 212 284-9304

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Dun & Bradstreet Corp. (DNB) – $80.60 Market Cap: $3.59B Rating: Neutral 12-mo. Price Target: $80 (11x 2013E EPS)Thesis: An attractive, sector-dominant franchise plus an appeal-ing business model add to DNB’s long-term investment appeal. However, near-term results have been constrained by soft revenue trends in the core risk business and heavy investment spending designed to accelerate revenue growth. Until the returns on this investment become visible, which we do not anticipate before mid-to-late 2013, the stock will likely be range-bound.Key Questions:• What are the catalysts to improved revenue growth in the

core risk business and when might we expect to see im-proved revenue trends?

• Comment on progress in the “MaxCV” technology invest-ment program. Can you quantify the potential returns?

• Discuss competitive dynamics in the risk business.Description: Dun & Bradstreet is a leading provider of commercial credit data and marketing information.Peter Appert, Sr. Research Analyst, 415 616-1709

eMagin Corp. (EMAN) – $3.18 Market Cap: $74.81M Rating: Overweight 12-mo. Price Target: $6.00 (12x CY14E diluted proforma EPS0.50)Thesis: We expect eMagin to grow its revenues at least 20% YOY for the next two years given the secular industry growth for mi-crodisplays. We see the company benefiting from share gains against LCD microdisplays. In addition, we hope to see leverage in the company’s operating model that is likely to unfold on ris-ing revenues, which translates into 1500 bps of operating margin improvement by 2014. Emerging applications in military and con-sumer devices as well as disruptive technologies such as Google Glass position eMagin for revenue and earnings upside over the next 12-24 months.Key Questions:• Provide an update on the new deposition tool, and any color

on yield or yield targets.• Any new military contracts, and discuss your view of how

CY13 is shaping up given potential cuts to defense spending?• Discuss any wins on the consumer side for electronic view

finders, gaming applications, etc. When can we see this in the numbers? Give the activity in Google Glasses, where do you expect the next action in terms of OLED microdisplays?

Description: eMagin is the leading supplier of OLED-based microdisplays.Jagadish Iyer, Sr. Research Analyst, 212 284-5038

EMCORE Corporation (EMKR) – $5.83Market Cap: $154.08MDescription: EMCORE offers a broad portfolio of compound semiconductor-based products for the fiber optics and solar pow-er markets. EMCORE’s fiber optics business segment provides optical components, subsystems and systems for high-speed telecommunications, cable television (CATV) and fiber-to-the-premises (FTTP) networks, as well as products for satellite com-munications, video transport and specialty photonics technolo-gies for defense and homeland security applications. EMCORE’s solar photovoltaics business segment provides products for

space power applications including high-efficiency multi-junction solar cells, covered interconnect cells (CICs) and complete satel-lite solar panels. Key Questions:• Are service provider capital expenditure plans shifting more

toward optical equipment in 2013?• Is vertical integration by system manufacturers going to con-

tinue to eat into the optical component market?• How much of a lead do you have before more competitors

introduce ITLAs?• After reaching profitability, what do you think is a reasonable

near-midterm operating margin target? • What is the next catalyst for the optical component industry?

Emulex Corporation (ELX) – $6.45 Market Cap: $584.35M Rating: Neutral 12-mo. Price Target: $8 (10x FY14E EPS)Thesis: Emulex’s core market (Fibre Channel HBA) has been in a secular decline for the last few years, which has prompted management to search for new growth opportunities in the Ethernet market. While we are confident Emulex can succeed in the Ethernet market, the ongoing patent litigation, coupled with the pending closure of the Endace acquisition, keeps us on the sidelines. If revenue and cost synergies from this acquisition start to play out sooner than expected, we would be inclined to re-eval-uate our overall thesis on shares of ELX. We are maintaining our Neutral rating.Key Questions:• What drives 10GB Ethernet adoption? • Does Ethernet switch pricing have to fall before we see a

ramp in 10GB Ethernet products?• What are the next catalysts for your 16Gb Fibre Channel

products?• Update us on the Endace acquisition.Description: Emulex is a global provider of Fibre Channel and Ethernet interconnect products that facilitate the transmission of data between servers, switches and storage systems.Andrew Nowinski, Sr. Research Analyst, 612 303-6933

Equinix Inc. (EQIX) – $211.55 Market Cap: $10.30B Rating: Overweight 12-mo. Price Target: $245 (DCF to 2017; 10.4% NT WACC, 8.7% Terminal WACC and 3% terminal growth)Thesis: We’ve highlighted Equinix as a top pick for 2013. While the stock appreciated materially in 2012 and into 2013, we believe there are a number of positive fundamental reasons the business will continue to perform. The secular trend to outsourced IT is not changing, enhanced by the cyclical trend to asset-light, and supply/demand trends are favorable. Equinix’s conversion to REIT process could act as a catalyst, and we believe the company is set up for continued positive estimate revisions.Key Questions:• How have “ecosystems” enabled you to grow? What new

ecosystems are you targeting today?• Europe has been an area of concern for some investors.

What are you seeing in Europe today and how do you feel about the next 12 months?

• Equinix just reported near-record bookings in the fourth

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quarter. Can you talk about the conversion of bookings to revenues, the length of the sales cycle and how adding new sales representatives impacts your growth?

• What types of supply and demand trends are out there (pric-ing, booking pipeline, changes in RFPs)?

• Can you walk us through the REIT conversion process, where you stand today and the benefits of converting to a REIT?

• How can Equinix benefit from the shift to cloud computing as a colocation services provider?

Description: Equinix is a global provider of network-neutral data centers and Internet exchange services for enterprises, content companies and network services providers.Christopher Larsen, Sr. Research Analyst, 212 284-9339

Euronet Worldwide, Inc. (EEFT) – $24.14 Market Cap: $1.21B Rating: Overweight 12-mo. Price Target: $27 (9x 2013E EV/EBITDA, assuming $110M net debt and 52.5M shares out)Thesis: We believe robust ATM unit growth over the past 12 months is set to continue as EEFT benefits from growing out-source trends in Europe, and expansion opportunities in India. Money transfer transaction volume has been strong, and FX has recently turned into a tailwind after being a headwind for three consecutive quarters. epay is also set to show year-over-year im-provement after 1Q13.Key Questions:• What are you most excited about for 2013? What are your top

priorities for 2013?• What can you do to jump start growth or improve margins

at epay?• What is new in Europe?• Is your end customer/consumer feeling better or worse in

2013? Your leverage is extremely low—any plans to deploy more capital?

Description: Euronet owns and operates the largest independent ATM network in Europe, and offers prepaid wireless top up and money transfer services.Michael Grondahl, Sr. Research Analyst, 612 303-6788

Evidon, Inc. – PrivateDescription: Evidon, headquartered in New York, is a technology solutions provider providing businesses and consumers unique insight into the collection, control and usage of online data. Its technology solutions include the Ghostery browser extension, enabling businesses and consumers to identify data collection (cookies) and tracking activity on accessed Web sites, helping to protect sensitive personal data, improve Web performance, and maintain transparency in the control/use of online information. Evidon’s solutions also enable businesses to remain compliant with privacy laws and self-regulation across North America and Europe. Evidon was founded in 2009 by Scott Meyer (CEO).Key Questions:• How would Do Not Track (DNT) of third-party cookie block-

ing default setting on Web browsers impact both the adver-tising ecosystem as well as consumers’ Web experience?

• Will the FTC be forced to step in and regulate online data privacy, or will industry participants come to a consensus on hotly debated topics including DNT, third-party cookie data collection and behavioral ad targeting?

• How might the U.S. online privacy environment converge/diverge with more conservative European privacy regulation?

Exar Corp. (EXAR) – $11.75Market Cap: $542.80MDescription: A new CEO and new management at EXAR have refo-cused this 40 year-old mixed signal company away from legacy ap-plications toward mobile and server technologies. The company currently serves five major end markets: networking and storage, computing and peripherals, industrial and embedded systems, communications, and consumer products. The company’s prod-ucts address compression and security, connectivity, power man-agement and analog mixed signal. Key Questions:• What end markets do you expect to see the biggest growth

from?• After taking over the company recently, where are you invest-

ing your time?• What product areas are key to the company going forward?• Is compression in the data center a growing market? Where

and how are your compression chips used?• How big is the UART business? Can this business grow? • The company has some power management designs in serv-

ers. Can you talk about how your product is different and where you are winning?

• What are your plans for the cash on the balance sheet?

Expedia (EXPE) – $63.90 Market Cap: $8.65B Rating: Neutral 12-mo. Price Target: $73 (20x 2013E PF EPS)Thesis: Expedia is a leading online travel agency with several large global online travel brands under ownership including Hotels.com, Venere.com, Egencia, Hotwire.com and the Expedia brand itself. Expedia has had an eventful and extraordinarily successful last 12-18 months. While gaining momentum after the spin-out of TripAdvisor in late 2011, Expedia has had a more focused, core strategy emphasizing platform upgrades, international expansion and conversion enhancements.Key Questions:• To what degree are new offerings like travel metasearch im-

pacting traditional OTA bookings? Is there potential these services push consumers to book direct with hotels and airlines?

• As occupancy rates continue to improve in the United States, is there potential for inability to access attractive in-ventory? Do OTAs prefer a strong travel environment or an environment where higher occupancy makes more inventory available?

• Are emerging markets ready for a major shift in travel book-ings from offline to online? Which markets are most critical and does a company like Expedia face significant competi-tion from existing local competitors?

Description: Expedia, Inc. is a leading online travel agency with brands including Expedia, Hotels.com, Venere, Hotwire and Egencia.Michael Olson, Sr. Research Analyst, 612 303-6419

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Fabrinet (FN) – $16.41 Market Cap: $567.36M Rating: Overweight 12-mo. Price Target: $18 (10x taxed FY14E net op income + cash)Thesis: Fabrinet recently reported impressive December quarter results, exceeding consensus estimates on both the top and bot-tom lines. Although management provided cautious guidance, our longer term thesis remains intact, and we believe the optical industry will see a material uptick in demand throughout 2013. Service provider budgets are typically released in late February, and we believe management’s tone and demand forecasts will improve throughout the year. We believe recent carrier capex an-nouncements will materialize into accelerating demand for opti-cal equipment in H2 of this year, and we recommend investors own shares of FN heading in to the upgrade cycle.Key Questions:• Are service provider capital expenditure plans shifting more

toward optical equipment in 2013? • Has Fabrinet recaptured some of the share the company lost

post market floods?• When will the industrial lasers and sensors business be as

big as the optical component business and are profit mar-gins in this segment similar to those in the optical segment?

• What will be the next catalyst for the optical component industry?

• Is vertical integration by system manufacturers going to con-tinue to eat into the optical component market?

Description: Fabrinet is a leading outsourced manufacturer of op-tical components and industrial lasers and sensors.Troy Jensen, CFA, Sr. Research Analyst, 612 303-6291

Financial Engines, Inc. (FNGN) – $32.68 Market Cap: $1.57B Rating: Overweight 12-mo. Price Target: $32 (21x 2013E EV/adj EBITDA, assumes $181M net cash and 50.8M shares outstanding)Thesis: Financial Engines is a play on the retirement demographic tailwind, and the growing need for affordable financial advice among middle-income citizens. Continuous improvement of en-rollment campaigns should help improve AUC penetration, while Income+ keeps FNGN relevant post-retirement. Lastly, its IRA strategy doubles its total addressable market.Key Questions:• Describe your strategy for entering the IRA market and how

you foresee this driving growth during 2013 and 2014?• What are your top priorities for 2013? • What is new on the competitive front?• How would you handicap the Income+ initiative? What did

you learn that you can apply to the IRA strategy?Description: Financial Engines provides independent, personal-ized investment advice and portfolio management services to par-ticipants in employee-sponsored DC plans in the United States.Michael Grondahl, Sr. Research Analyst, 612 303-6788

Fingerprint Cards AB (FINGB SS) – 27.9000 SEKMarket Cap: 1.18B SEKDescription: Fingerprint Cards develops, produces and markets fingerprint sensors used to verify a person’s identity. The tech-nology consists of sensors, processors, algorithms and modules. Fingerprint Cards’s technology can also be used in smartphones

and smart cards as well as IT application, Internet security and access control.Key Questions:• What are you seeing in terms of interest in fingerprint sensors?• How has the purchase of Authentec by Apple changed the

market?• Are you seeing other handset manufacturers adopting bio-

metric fingerprint identification?• Can you talk about the company’s technology and barriers

to entry?

Finisar Corporation (FNSR) – $14.65 Market Cap: $1.36B Rating: Overweight 12-mo. Price Target: $16 (15x FY14E op income + cash)Thesis: Recent announcements from some of the largest global carriers leaves us incrementally more upbeat with regards to sec-ond half comeback for the optical space, and believe Finisar is uniquely positioned to capitalize most off of a reversal in demand trends. Moreover, the 10G upgrade cycle within the data center should also help boost revenue upside heading in to Q1/2, and we expect meaningful revenue growth later in the year. Moreover, now that macro trends seem to be improving, we believe pric-ing environments may become slightly less disruptive to margins, which may translate to earnings upside.Key Questions:• What are your expectations for a ramp in carrier capex in 2013?• Is vertical integration by system manufacturers going to con-

tinue to eat into the optical component market?• Can you discuss the risk of silicon photonics and what this

means to your data center components?• When will the inflection in Tunable-XFPs and ROADMs hit?• What will be the next catalyst for the optical component

industry?Description: JDS Uniphase is a global provider of broadband test and measurement solutions and optical products for communica-tions, commercial and consumer markets.Troy Jensen, CFA, Sr. Research Analyst, 612 303-6291

Freescale Semiconductor, Inc. (FSL) – $15.43 Market Cap: $3.87B Rating: Neutral 12-mo. Price Target: $13.50 (15x CY14E EPS)Thesis: Freescale underperformed the semiconductor market in CY12, expects to narrow the gap in CY13, stabilize share in CY14 and grow share in CY15. Most of company’s revenue is tied to long design cycle programs. There is opportunity for the company to expand operating margins through mix, factory closures and opex reductions. We remain Neutral awaiting signs of a pick-up in growth.Key Questions:• Freescale has a relatively new CEO and has recently em-

barked on a re-alignment of resources; can you talk about some of the areas where the firm is re-allocating resources to jump start revenue growth?

• On the gross margin side, what are some of the things Freescale is doing to further drive costs down?

• How would you characterize the overall demand environ-ment? Any end markets stand out more than others?

• Automotive has been a bright spot for Freescale; can you talk

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about the content per vehicle that you are seeing and design win momentum?

• The networking business represents ~25% of total revenue; how is the momentum for the QorIQ processor?

• What is the timeline for transitioning to ARM-based processors?

Description: Freescale is a leading supplier of semiconductor so-lutions to automotive, networking, industrial and consumer end markets.Gus Richard, Sr. Research Analyst, 415 616-1711

Gartner Inc. (IT) – $49.76 Market Cap: $4.65B Rating: Neutral 12-mo. Price Target: $52 (22x 2013E cash EPS)Thesis: Gartner dominates the IT research and advisory business with an attractive business model and strong secular earnings growth prospects. Strong wallet retention rates, healthy growth in contract value and strong attendance trends at key events suggest positive underlying demand trends in Gartner’s business. We be-lieve margin expansion to the mid-20% level (from 19.5% in 2012) can drive mid-20% EPS growth for the company. We view Gartner as a way to have tech exposure, tech beta and tech growth without any of the product-specific risks of tech companies.Key Questions:• Salesforce productivity improvement will be a key driver of

contract value and sales growth. What are the prospects for productivity improvement in 2013? What is the company do-ing to drive this improvement?

• The consulting business has been a weak link in recent re-sults. What steps can be taken to improve results here?

• The company has seen strong margin improvement in recent years. What’s the upside limit? Can margins approach the high 20% level achieved historically?

Description: Gartner is a leading provider of IT research and ad-visory services.Peter Appert, Sr. Research Analyst, 415 616-1709

Global Eagle Entertainment Inc. (ENT) – $9.75; Market Cap: $534.71M Rating: Overweight 12-mo. Price Target: $14 (blended 10x EV/2014 EBITDA)Thesis: Global Eagle is well-positioned in the in-flight space. The company’s recently closed transaction provides access to both content and the in-flight broadband technology. We are bullish on ENT as the new company becomes a substantial player in the in-flight entertainment and connectivity market ($3B) that is growing at a 20% CAGR.Key Questions: • Discuss the differences in technology currently available in

the in-flight connectivity space (capacity, scale, required ca-pex, etc.)

• Highlight differences and similarities between the wide-body and narrow-body jet opportunity.

• Discuss the current fragmentation of the in-flight entertain-ment and connectivity sector. What companies are best posi-tioned for consolidation?

Description: Global Eagle is an in-flight entertainment company providing in-flight connectivity and content.James Marsh, CFA, Sr. Research Analyst, 212 284-9304

Glu Mobile, Inc. (GLUU) – $2.26 Market Cap: $148.43M Rating: Neutral 12-mo. Price Target: $3 (2.0x CY13E revenue)Thesis: Glu Mobile, the only public mobile gaming pure-play, was one of the first companies to transition from pay-to-play games to the free-to-play gaming model for mobile games. As such, the company is now one of the top game developers on both Apple’s App Store and Google Play. Glu continues to benefit from the ris-ing trend in smartphone ownership, especially as the iOS ecosys-tem goes through its upgrade cycle with the recent launch of the iPhone 5. We believe investors are taking a wait-and-see approach as to the company’s ability to improve monetization of games that were delayed from late 2012 into 2013. Ability to show improve-ment of monetization of these games will likely have a significant impact on GLUU shares in the next 6-12 months.Key Questions:• What tactics can work to maintain or increase monetization

of free-to-play games and do certain genres monetize better than others?

• Can you describe the strategy in more detail of developing a consistent release slate of relatively solid performing games rather than looking for a few “homerun” titles?

• Should the weakness seen recently in the online social games market be a warning sign for mobile social games? Or is this actually a positive for mobile gaming?

• How is the increasingly competitive nature of the mobile gaming space affecting your business? How do you see the competitive nature of the industry changing in the next 12-18 months?

Description: Glu Mobile is a leading developer of mobile games.Michael Olson, Sr. Research Analyst, 612 303-6419

Green Dot Corporation (GDOT) – $14.02 Market Cap: $504.64M Rating: Overweight 12-mo. Price Target: $18 (12x 2013E adj. EPS + cash and equiv.)Thesis: Shares are attractively valued as we believe the increas-ingly competitive landscape is being reflected, and several cata-lysts exist. Specifically, deals with Sallie Mae, Dollar Tree, Rush Card and the new checking account product (GoBank) should help support GDOT in 2013. GDOT also has scarcity value post TSYS acquiring NTSP.Key Questions:• Update investors on the competitive front including Wal-

Mart versus non Wal-Mart distribution? Can GDOT get its share in the market? What is GDOT doing to get its share?

• How are some new initiatives including SLM, Rush Card, DollarTree Stores and Go Bank progressing in 2013? What is GDOT investing in each initiative and do you expect any revenues in 2013?

• What other priorities does GDOT have for 2013?Description: Green Dot is a leading U.S. prepaid financial services provider.Michael Grondahl, Sr. Research Analyst, 612 303-6788

Grupo redIT – PrivateredIT supports the global IT community with private, customiz-able cloud services and data centers in the southwestern U.S. and Latin America. redIT enables its clients to focus resources on

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what drives their competitive advantage—not the distractions of owning and managing IT. For clients such as Oracle, McDonald’s, Bloomberg and Carl Zeiss, among others, redIT customizes an IT strategy that’s scalable for the long term, delivering a lower total cost of ownership. Key Questions:• What is your view on the role of fiber connectivity in a data

center-centric world? To what extent is the availability of mul-tiple connectivity options a factor in choosing a colocation or hosting provider?

• What types of supply and demand trends are out there (pric-ing, booking pipeline, changes in RFPs)?

• What is your outlook on growth of bandwidth demands? What technological advances are meeting these demands?

• How do you compete? Is price a leading factor, service, reli-ability or existing customers for peering? Or some combina-tion of them all? Do your customers look for total cost of ownership analysis (that is, build versus buy or on-premise location of their equipment)?

• How do you enter a new market? What are the challenges of expanding your footprint? Do you require anchor customers for new builds?

• When competitors compete on price, what is the customer reaction? Do you see higher churn? Is it more difficult to win new business?

• When customers churn, what reasons do they most often give?

Higher One Holdings, Inc. (ONE) – $8.94 Market Cap: $455.92M Rating: Underweight 12-mo. Price Target: $8 (12x 2013E adj. EPS)Thesis: We believe enrollment and disbursement trends remain weak, and present a risk to ONE’s 2013 guidance. Furthermore, we believe competition will increase in 2013 as the GDOT/SLM partnership could be compelling to schools as its GPR card does not charge NSF fees and offers greater surcharge-free ATM access (22,000 versus 700 at ONE).Key Questions:• What are ONE’s priorities for 2013? Will ONE try anything

new to drive penetration at existing schools in 2013?• Clearly ONE’s customer retention rates have been stellar.

However, the GDOT/SLM partnership, coupled with US Bank’s entry into the market, could challenge this track re-cord. Have you seen any shift in the competitive landscape?

• How do you expect revenue per card to trend going forward?• Is regulatory pressure increasing or decreasing in the

marketplace?• How would you rate the quality of your visibility for the next

2-4 quarters?• What is the biggest opportunity for ONE?Description: Higher One provides payment products and services to the U.S. higher education industry.Michael Grondahl, Sr. Research Analyst, 612 303-6788

Hitachi Data Systems, Inc., wholly owned subsidiary of Hitachi Ltd. (HTHIY) – $56.22; Market Cap: $26.49BDescription: Hitachi Data Systems was founded in 1989 and is headquartered in Santa Clara, Calif. Hitachi Data Systems has over

5,900 employees located in more than 100 countries. Customers include more than 70% of the Fortune 100 and more than 80% of the Fortune Global 100. Key Questions:• There is a notion that Hitachi Data Systems is primarily just

a high-end storage vendor. What other segments do you par-ticipate in?

• You participate in the scale-out NAS market by way of your BlueArc acquisition. Who do you typically compete against and why are you wining?

• What are your plans for participating in the all-flash market?

Home Loan Servicing Solutions, Ltd. (HLSS) – $22.56 Market Cap: $1.28B Rating: Neutral 12-mo. Price Target: $23.50 (1.5x 2013E book value)Thesis: We believe HLSS’s portfolio has a long runway of opportu-nities at OCN, and could grow flow purchases during 2013. Lower funding costs have been very positive and underscore HLSS’s early success. HLSS declared $13.7M of dividends during 4Q12 ($0.35/share) and recently declared a $0.38/share 1Q13 dividend. We continue to believe HLSS provides a consistent and stable dividend stream.Key Questions:• What are HLSS’s top priorities for 2013?• Can funding costs go much lower and what needs to happen

to increase the dividend from recent levels?• When do you envision financing MSRs/advances for some-

one other than OCN?Description: Home Loan Servicing Solutions finances and acquires mortgage servicing rights and associated servicing advances.Michael Grondahl, Sr. Research Analyst, 612 303-6788

HomeAway, Inc. (AWAY) – $29.50Market Cap: $2.45BDescription: HomeAway is the world’s largest vacation property rental site with ~750,000 properties in more than 150 countries. HomeAway has created a ‘network effect’ that enables the com-pany to grow by virtue of its already massive size; consumers want to use the site with the most properties and property owners want to list their offerings on the site most visited by consumers. While HomeAway’s end market can be challenged by underlying travel trends, the company is well-positioned competitively and has a significant head start in this category.Key Questions:• HomeAway is the clear market leader and has massive foot-

print of vacation rental properties; what is the total address-able market and is international a way to grow that address-able market?

• Would international growth for the company likely come through additional acquisitions or organic growth of existing brands in new markets?

• The vacation rental space is evolving competitively; to what degree will bigger players (OTAs, Google, etc.) increasingly focus on these peripheral online travel opportunities?

Hotel Tonight Inc. – PrivateDescription: Hotel Tonight is a hotel discovery service that helps consumers find hotels at the last-minute on a mobile device. The app has been downloaded >3 million times. Hotel rates quoted

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on the service are typically discounted; however, they are not an-nounced until noon on the day of check-in. Hotel Tonight provides a valuable service to hotels by helping to drive occupancy growth by filling otherwise vacant rooms. The hotel business is character-ized by high fixed costs and hoteliers are incentivized to fill rooms that would otherwise go unsold. Hotel Tonight offers inventory in more than 50 U.S. markets, as well as the three largest markets in Canada and five markets in the United Kingdom.Key Questions:• Is there a significant market for hotels looking to unload

excess inventory for same-day bookings or is this a niche market?

• OTAs (like Priceline’s “Tonight Only” deals) will likely enter this market to a greater degree as an additional service along-side traditional bookings; how important will first mover ad-vantage be for companies like Hotel Tonight?

• Is mobile drastically changing the online travel landscape? How has it enabled companies like Hotel Tonight to carve out a niche missed by other players in the space?

iBiquity Digital Corporation – Private Description: iBiquity is the developer and licenser of HD Radio Technology, which is transforming AM and FM broadcasting with vastly increased numbers of channels, drastically improved sound quality and an array of new data services. HD Radio Technology upgrades broadcast radio from analog to digital. Broadcasters that upgrade to HD Radio Technology can provide consumers listening with HD Radio enabled receivers many benefits that improve their listening experience including CD-like digital audio quality and useful data services such as real-time traffic, iTunes Tagging and Artist Experience. There are more than 2,100 stations serving local markets across the country with HD Radio Broadcast Technology. In addition to the upgrades to the original primary channel – the HD1 – HD Radio Technology enables broadcasters to create extra FM channels on the radio dial. These channels are called HD2/HD3 and today more than 1,400 HD2/HD3 channels are available in radio markets across the country, thereby provid-ing consumers more diverse listening options.

IMAX Corporation (IMAX) – $25.70 Market Cap: $1.71B Rating: Overweight 12-mo. Price Target: $32 (5-Yr DCF using 6.6% WACC and 7.0x terminal EBITDA multiple)Thesis: We remain optimistic about the performance of IMAX shares ahead of the holiday season. Our investment thesis re-mains on track and hinges on the strong box office performance combined with robust screen growth. As we get closer to 2013, we expect investors to start to focus on the magnitude of the laser opportunity, which is substantially larger than investors currently believe. And second, investors still underestimate the power of the IMAX model to drive free cash flow growth. We expect both to be major themes going forward.Key Questions:• Can you discuss the impact of IMAX DNA on box office and

earnings? • What are the expectations for growth in Latin America and

Asia next year?• When do you believe your new laser technology will start to

drive meaningful returns?

Description: IMAX is a pioneer and leader in the large-format film industry.James Marsh, CFA, Sr. Research Analyst, 212 284-9304

Impinj, Inc. – PrivateDescription: Impinj provides RFID solutions for identifying, locat-ing and authenticating items. Founded in 2000, the company sup-plies tags and reader chips as well as software and antennas for a broad range of end markets. The company currently targets re-tail, manufacturing, transportation/baggage and pharmaceutical markets. Impinj focuses on UHF RFID solutions which currently support the global industry standard, UHF Gen 2. UHF solutions allow for identification without line of sight and over very long distances.Key Questions:• What applications are driving RFID demand?• How many tags do you see a year? How penetrated is RFID?• What retailers are using your product today?• What are the obstacles to adoption? • What does the current competitive landscape look like for

RFID?• How is Impinj’s solution differentiated?• Does the company have any patents to protect its technology

around UHF RFID?

inContact, Inc. (SAAS) – $6.79 Market Cap: $362.65M Rating: Overweight 12-mo. Price Target: $10 (5.3x CY13E software rev + 1.5x CY13E tele-com rev + net cash)Thesis: inContact is a leader in cloud-based contact center software solutions. Feedback shows inContact has become the premier player in the space based on its size, expertise, growth and technology portfolio. Industry contacts sense momentum and runway for the cloud software portion of inContact’s busi-ness, and we expect shares to outperform as investors begin to recognize the transformation of the business and financial model.Key Questions:• What key partnerships will you look to forge in 2013?• How difficult is it to provide a cloud-based contact center so-

lution versus an on-premise solution, and what technological lead do you have over premise-based vendors?

• What does your long-term operating model look like?Description: inContact is a provider of cloud-based contact center solutions which allow its customers to improve contact center call routing, self-service and agent optimization.Mark Murphy, Sr. Research Analyst, 415 616-1705

Informatica Corp. (INFA) – $35.01 Market Cap: $3.77B Rating: Overweight 12-mo. Price Target: $42 (22x 2014E EPS + net cash/sh)Thesis: Informatica is the undisputed leader in the ETL data in-tegration market—the industry standard for extracting data from multiple databases, transforming and cleansing the data, and reloading it for analysis. Our recent survey work shows that cus-tomers overwhelmingly feel that Informatica is increasing rather than losing its technology differentiation (48% versus 5%) and that Informatica will become more widely deployed rather than

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less widely deployed in the next one to two years (43% versus 8%). Surprisingly, spending intentions for INFA licenses are stronger now than they were in our 2010 survey, suggesting growth may surprise to the upside in 2013.Key Questions:• What is Informatica’s opportunity around big data, and what

don’t investors understand about it?• What allows Informatica to stay ahead of up-and-coming

vendors in the open source space, or tools offered by larg-er vendors, like Microsoft’s SSIS (SQL Server Integration Services)?

• How comfortable are you that license growth can accelerate throughout the year? What would cause upside or downside to license growth in 2013?

Description: Informatica delivers data integration and data quality software and services.Mark Murphy, Sr. Research Analyst, 415 616-1705

Inphi Corporation (IPHI) – $9.66 Market Cap: $276.84M Rating: Overweight 12-mo. Price Target: $12 (2.0x EV/CY14E revenue)Thesis: There has been a significant pause in infrastructure spend-ing due to the fiscal cliff as well as a regime change in China. This has impacted Inphi’s major end markets: servers and opti-cal networking. However, we think channel inventories are very lean, which will likely drive a strong inventory replacement cycle in 1H13. Moreover, the company is expected to launch a steady flow of new 100G optical networking products in CY13. We expect this to drive earnings momentum over the next 24 months. With more than $4/share in cash, we believe valuation remains compelling.Key Questions:• Do you see a recovery in the server market? • What is your expectation of the uptake of LRDIMM? If

LRDIMM uptake remains slow, how quickly will RDIMM grow?• The company has indicated that it expects to do $10M in op-

tical SerDes revenue in CY13. Is that on track? • How is demand for the 40G products? • Can you describe when you expect to sample your clock data

recovery chip and driver chips for 100G?• Given current consensus, what do you expect the mix to be

between optical and server? Description: Inphi provides high-speed analog products for com-munications and computing marketsGus Richard, Sr. Research Analyst, 415 616-1711

Internap Network Services Corporation (INAP) – $8.68 Market Cap: $451.23M Rating: Overweight 12-mo. Price Target: $9.50 (DCF-based: 11.4% NT WACC, 8.7% terminal WACC, and 2.5% terminal growth rate)Thesis: We believe Internap is at a point where we will start see-ing the benefits of recent strategic initiatives such as voluntarily churning off low-profit customers and investing in company-owned data centers. The company is now well-positioned to capi-talize on significant demand/supply imbalance in the market. We rate Internap Overweight with a $9.50 target.Key Questions: • Is the company seeing the benefit of recent strategic initia-

tives—better growth, profitability—and what type of im-

provement can we expect to see going forward?• What types of supply and demand trends exist (pricing, book-

ing pipeline, changes in RFPs)?• How does Internap’s cloud offering and development com-

pare to competitors? What are customers looking for? How does Bare Metal fit in?

• How do IP services fit into Internap’s future plans? What are the benefits of continuing to offer IP? How do you manage the pressures from the IP business?

Description: Internap offers data center colocation, managed and cloud hosting along with IP connectivity solutions.Christopher Larsen, Sr. Research Analyst, 212 284-9339

Interpublic Group of Companies, Inc. (The) (IPG) – $12.78 Market Cap: $5.29B Rating: Neutral 12-mo. Price Target: $11 (6x CY13E EV/EBITDA)Thesis: IPG has narrowed its operating performance gap versus agency peers, but still has ~300 bps of improvement to be on par (~13% average industry operating margins). Near-term headwinds from key client losses and global macro uncertainty likely pauses near-term margin expansion; however, we believe this dynamic is likely priced into the stock as estimates already sit below initial FY12 guidance of 3% organic growth and at least 50 bps year-over-year margin improvement. While a strong balance sheet will al-low IPG to de-lever and buy back shares, supporting near-term double-digit EPS growth, we continue to wait for visible signs of a potential recovery in organic revenue to get constructive on the stock, which could come with easier compares beginning in 2Q13.Key Questions:• How is the traditional agency business model being disrupt-

ed by greater emphasis on project-based work versus retainer and how is IPG positioning its agency portfolio in reaction?

• How does IPG’s unique approach to digital—rent (part-ner with best ad tech offerings) versus own (acquire latest technology or digital agency)—allow it to compete against agency peers with greater concentration of digital offerings?

• What levers are available to drive ~300 bps margin improve-ment (to come in line with agency peers at ~13%) and how dependent is margin improvement on an acceleration in or-ganic revenue growth?

Description: Interpublic Group (IPG) is an advertising agency holding company.James Marsh, CFA, Sr. Research Analyst, 212 284-9304

Interxion Holding N.V. (INXN) – $24.73 Market Cap: $1.68B Rating: Overweight 12-mo. Price Target: $28 (DCF-based, 12.6% NT WACC, 3% termi-nal growth rate)Thesis: Interxion is a leading data center operator in Europe that we have named a top small-cap pick for 2013. Given its strong rep-utation, high-quality facilities and established customer base, the company should continue to benefit from a significant demand versus supply imbalance. We believe it is poised to benefit from the secular trend to outsourced IT and cyclical trend to asset-light. Given its expansion in 2012, after being capacity constrained, we believe revenue growth should accelerate in 2013.Key Questions: • How has the macro environment in Europe impacted Interxion?

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• Has management seen a material change in pricing or demand?

• How important is it to build a global footprint, and are there critical locations where the company needs to have a pres-ence that it doesn’t today?

• Have there been any significant changes in the competitive environment? How has the emergence of cloud computing affected Interxion?

Description: Interxion is a market leader in the European multi-tenant data center (MTDC) market. It operates the most facilities in the most countries in Europe with 32 secure, high-quality facili-ties located throughout 11 countries.Christopher Larsen, Sr. Research Analyst, 212 284-9339

InvenSense, Inc. (INVN) – $12.02 Market Cap: $1.01b Rating: Overweight 12-mo. Price Target: $27 (25x CY14E EPS)Thesis: We favor InvenSense as an investment given its tablet and smartphone exposure and believe the company’s design wins will drive continued revenue momentum in CY13. We believe 28nm constraints are starting to ease and the Apple/Samsung litigation will have little to no impact on the company. We believe market share at Samsung will increase to ~50% from ~30% by the end of the March quarter. Additionally, we believe InvenSense will likely be designed into Apple in 2013 and think that the company is po-sitioned to gain share with Nokia’s Windows 8 Phones. In our view, the recently announced CEO transition should be seamless.Key Questions:• Discuss the company’s plans for future capacity additions at

your fabs.• How has the competitive landscape evolved over the past

year and what is INVN’s differentiation in the marketplace? • InvenSense is designed into the reference designs of virtually

all major chip manufacturers; what are you seeing in terms of seasonality this year?

• How does the macro environment impact your outlook?Description: InvenSense is a fabless supplier of MEMS-based gyroscopes and other sensors used to detect motion in gaming devices, smartphones, tablets and other consumer products.Gus Richard, Sr. Research Analyst, 415 616-1711

IPG Photonics Corporation (IPGP) – $59.29 Market Cap: $3.05B Rating: Overweight 12-mo. Price Target: $68 (20x FY13E EPS)Thesis: IPG Photonics is a clear beneficiary of the secular growth in fiber lasers, as the market could reach $1.4B by 2015 from $600M in 2011 (~25% CAGR) given early-stage adoption in cutting and various material processing segments. We believe the threat from competition remains overblown given the learning curve for any new entrant is quite daunting both from yields and cost parity compared to IPGP. We expect IPGP to sustain its gross margins of 50–55% and maintain its 75–80% market share and likely increase its revenues to $180–$200M/quarter from ~$150M/quarter pres-ently, which could result in $1.00 in quarterly EPS exiting 4Q13.Key Questions:• Provide greater details on gross margin sustainability in

2013? Where do you see the threats?• Any update on the cost reduction plan for laser diodes?

Where will you be at the end of 2013? And where do you think by the end of 2014?

• How will the mix of various products change in 2013 versus 2012?

Description: IPG Photonics manufactures fiber lasers and ampli-fiers for use in materials processing, advanced technologies, tele-com and medical applications.Jagadish Iyer, Sr. Research Analyst, 212 284-5038

Iris Mobile Corporation – PrivateDescription: Iris Mobile is an ad technology company most rec-ognized for pioneering “rich media messaging.” Iris’s technology enables advertisers to deliver rich media mobile communication via text messaging. Mobile ad campaigns utilizing Iris’s technolo-gy can go beyond standard character “text” limitations to delivery of rich media content such as images, audio and video—right-sized to any type of handset. According to comScore 2011 find-ings, redemption rates are nearly twice as a high when customers are presented with a “rich media message” versus a simple SMS message.Key Questions:• Given the nascent stage of mobile advertising filled with trial

and error, what is/is not working?• How effective are mobile ads today? What type of campaigns,

formats and locations are driving effectiveness?• What potential technology hurdles remain that prevent the

scaling of mobile advertising for advertisers?

JasperSoft Corporation – Private Description: JasperSoft provides a flexible, cost-effective, open-source business intelligence (BI) suite, which enables better deci-sion-making through interactive reports, dashboards and analyt-ics. Leveraging a commercial open source business model and a community of over 250,000 registered members, JasperSoft’s open source BI software has been downloaded more than 14.5 million times. JasperSoft production deployments, in excess of 175,000, power 100,000 data-driven applications spanning 14,000 commercial customers. JasperSoft is headquartered in San Francisco.Key Questions:• What advantages does open source BI provide over propri-

etary BI solutions?• How does JasperSoft benefit from the big data trend?• How does JasperSoft fend off competitors such as IBM

(Cognos), SAP (Business Objects) and TIBCO (Spotfire)?

JDS Uniphase Corporation (JDSU) – $14.16 Market Cap: $3.33B Rating: Overweight 12-mo. Price Target: $18 (14x CY14E op income + cash)Thesis: JDSU has done a spectacular job of taking share in the op-tical component market, which we expect will continue throughout CY13. Telco spending on optical equipment is currently at three-year lows, but we believe the growing use of bandwidth-thirsty de-vices, video applications and recent carrier capex announcements will drive further growth within the optical sector. JDSU also of-fers revenue diversification with exposure to test and measure-ment equipment and other advanced optical technologies. The company has a variety of new platforms and technologies in the T&M segment that should drive market share gains and margin

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expansion. We believe 2013 will be a significantly better year for the optical sector and this should translate into better top line growth and expanding margins. Key Questions:• Are service provider capital expenditure plans shifting more


tinue to eat into the optical component market?• Can you explain how JDSU has captured so much share in

pluggables this year and is it sustainable?• Can you discuss the traction JDSU has had with developing

more software capability in the CommTest segment?• What will be the next catalyst for the optical component

industry?Description: JDS Uniphase is a global provider of broadband test and measurement solutions and optical products for communica-tions, commercial and consumer markets.Troy Jensen, CFA, Sr. Research Analyst, 612 303-6291

Kinetic Social, Inc. – Private Description: Kinetic Social is an online advertising platform fo-cusing on the opportunities in social and mobile. Kinetic utilizes proprietary data and algorithms to serve advertising customers including multiple Fortune 500 companies. Key Questions:• Aside from the growing importance of social, what trends are

you seeing from performance advertisers heading into 2013?• What trends from brand advertisers?• What about your platform unique positions Kinetic to deliver

a better product to your customers?

Level 3 Communications, Inc. (LVLT) – $19.98 Market Cap: $4.35B Rating: Neutral 12-mo. Price Target: $22 (DCF to 2017, 8.9% NT WACC, 9.3% ter-minal WACC, 2% terminal growth rate)Thesis: Level 3 is a global operator of local and long distance fiber and fiber-based services. While the company had stumbled in the final years of the last decade, recently the company has found itself on a better footing. The integration of Global Crossing is progressing well, helping the company to both de-lever the busi-ness and realize enough expense synergies to become free cash flow positive in 2013. While the core business continues to im-prove, recent disappointment in margins and management’s 2013 outlook has weighed on the stock.Key Questions:• How and when do you think you can return to your goal of

2% sequential CNS revenue growth?• What is the current competitive environment like and how is

it affecting pricing?• Now that you’re essentially over the hump in integrating

Global Crossing, are you ready to take additional acquisi-tions? After much activity in recent years, what is your out-look for future industry consolidation?

Description: Level 3 offers facilities-based integrated communica-tions services.Christopher Larsen, Sr. Research Analyst, 212 284-9339

LinkedIn Corporation (LNKD) – $168.18 Market Cap: $18.34B Rating: Overweight 12-mo. Price Target: $176 (40x CY14E EV/EBITDA + cash)Thesis: LinkedIn is still in the relatively early stages of fully mon-etizing its professional network asset and we believe the company has the path to continue to grow in the mid-double-digit range for at least the next three years. We believe LinkedIn may provide one of the best, if not the best, growth profiles for the $10 billion+ market cap companies under our coverage. As a result, we believe shares of LNKD will trade at a healthy multiple for the foreseeable future and deserve to trade at a larger premium than that already assigned.Key Questions: • How big is LinkedIn’s market opportunity and what can

realistically be captured with the current suite of products? We’ve seen $25B as the market for hiring services, but does LinkedIn really serve all $25B of the markets?

• What percentage of total inventory is mobile and how fast is it shifting to mobile? When they turn mobile on, will there be a noticeable change to the marketing services business?

• In terms of the pricing increase in Q2 for the talent solutions product, is this something that will be evaluated on a yearly basis or how should we think about pricing changes going forward? How underpriced is the product currently?

• Given stated investment intentions from Facebook and Yahoo, did that change plans for LinkedIn’s level of invest-ment, particularly in engineering, in 2013?

• What is the timeframe around additional international roll-outs of the recruiter product?

Description: LinkedIn is a leading global digital network amassing the largest professional database.Gene Munster, Sr. Research Analyst, 612 303-6452

Lionsgate Entertainment Corp. (LGF) – $20.97 Market Cap: $2.83B Rating: Overweight 12-mo. Price Target: $25 (5-Yr DCF, 8.0x term EBITDA mult and 6.2% WACC)Thesis: Hunger Games is admittedly a substantial catalyst, but we see a number of positive initiatives across the company. The slate is looking deeper and distribution deals are improving. Television has plenty of momentum following Anger Management (with possible extension) and Nashville (ABC’s new TV series). Lastly, EPIX’s recent deal with Amazon highlights how the joint venture is making headway. The overarching theme to these initiatives are moderating cash flow volatility and building out profitability in out years.Key Questions:• Discuss the reasons behind recent success in Lionsgate U.K.• Comment on your TV segment: what is the pipeline and re-

cap recent success with FX and ABC.• Can you discuss the impact on the Hunger Games franchise

post acquisition of Summit?Description: Lionsgate Entertainment is an independent producer /distributor of film and TV content.James Marsh, CFA, Sr. Research Analyst, 212 284-9304

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LivePerson Inc. (LPSN) – $14.47Market Cap: $808.76MDescription: LivePerson is a market leader in real-time intelligent customer engagement. It provides online engagement solutions that facilitate real-time assistance and expert advice through online interactions such as chat, voice/click-to-call, e-mail, and self-service/knowledgebase for corporations of various sizes. The company is headquartered in New York City.Key Questions:• What are either new or higher-growth areas where LivePerson

is making investments?• What kind of opportunities does your platform, LiveEngage,

create?• Which vendors are you most often replacing, and how has

that changed in the last year?

LTX-Credence Corporation (LTXC) – $5.80Market Cap: $275.06MDescription: LTX is a leading provider of automated test solutions to the wireless, computing, automotive and entertainment market segments. It competes with Teradyne and Advantest. Key Questions:• Provide an update in terms of timing on the recovery of the

microcontroller market.• Where is the opportunity for the new DiamondX testers to

gain share against the competition?• How much do you play in the mobility and connectivity seg-

ment? Where is the biggest opportunity to grow?• What are your views on industry consolidation?

Majesco Entertainment Co. (COOL) – $0.53Market Cap: $21.45MDescription: Majesco is primarily a console video game publisher, but has recently developed plans to venture into the high growth online social and mobile gaming markets. Most recently, the com-pany has had success in the dance/fitness video game segment with its Zumba Fitness franchise, which currently accounts for just under 90% of overall revenues, on the Wii and Kinect.Key Questions:• The social and mobile gaming space has changed significant-

ly in the last 12 months; what can we learn from the broad underperformance we’ve seen in social gaming and increas-ing focus on mobile?

• There are a couple of business models in the space, with the trend skewing toward free-to-play. Will that continue to be the case and ultimately will console gaming shift that way as well or at least will pricing on console games come down in favor of more purchases of DLC, with lower upfront cost?

• How do you create a consistent pipeline of solid games vs. having a home run followed by a strike out; is more consis-tency possible?

MakerBot Industries, LLC – PrivateDescription: MakerBot is a leading supplier of 3D printers for hob-byist and consumers. The company was founded in 2009 and as of the end of 2012, had shipped well over 15,000 MakerBot 3D printers to engineers, designers and researchers. The company recently introduced the fourth generation of 3D printers called the Replicator 2. In addition to making 3D printer systems, MakerBot has also developed the Web site Thingverse that consists of more

than 28,000 projects, models and things that are available to be downloaded and printed on the MakerBot Replicator 2 3D printer. MakerBot is also the first company to establish a retail presence with a store located in New York City.Key Questions:• When do you believe the consumer 3D printing market will

start to drive meaningful revenue growth for the industry?• Can you discuss how MakerBot is helping to grow the con-

sumer market by developing libraries of 3D content?• Can you touch on the launch of MakerBot’s retail store

launch in New York?• How does your product compare to competitors such as 3D

systems, Formlabs and others?

Marchex, Inc. (MCHX) – $3.78 Market Cap: $128.92M Rating: Overweight 12-mo. Price Target: $7 (9x 2013E EV/EBITDA + the domain port-folio and cash)Thesis: We believe that investors will begin to pay greater atten-tion to Marchex shares as the company nears the spinout of its slower growth non-call business. We believe that call revenue will be able to grow at ~10% in 2013.Key Questions:• Are there any recent partnerships that should be expected to

drive revenue growth?• What is the timeline for selling the non-call assets?• Is there a potential use for any cash that would be generated

from non-call assets?Description: Marchex, Inc. is the leading provider of call-based advertising products.Gene Munster, Sr. Research Analyst, 612 303-6452

MDC Partners Inc. (MDCA) – $13.75 Market Cap: $427.43M Rating: Overweight 12-mo. Price Target: $16 (~6.7x CY13E EV/EBITDA)Thesis: MDC continues to capture digital mindshare in the ad market and its industry leadership continues to yield growth well above peers. With digital exposure >50% of sales, MDC is highly levered to a digital advertising market growing 3x traditional me-dia. We expect investor confidence in the scalability of the busi-ness model to be restored over the next several months as mar-gins continue to recover from some missteps in 4Q11 into 4Q12. Restored growth and confidence in margin expansion should drive the multiple back toward the high end of the peer range (7x-8x EV/EBITDA).Key Questions:• Margin expansion is anticipated to return to the model in

2013; what is required for MDC to sustain consistent margin expansion and what is the timeline to long-term targets of 15-17% EBITDA margin?

• Questions remain over the long-run ability for a digital-cen-tric agency to scale margins; what drives your confidence in the model’s ability to scale?

• How will the leverage ratio trend over the next year and what is the company’s appetite for further acquisitions given the robust activity of the past two to three years? With the acqui-sition of a media agency under the MDC umbrella, are there any meaningful holes in the portfolio?

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Description: MDCA is a holding company with expertise in digital interactive services. Its partner firms provide advertising, interac-tive, direct marketing, database and customer relationship man-agement, public relations and other marketing services.James Marsh, CFA, Sr. Research Analyst, 212 284-9304

Medidata Solutions, Inc. (MDSO) – $52.12 Market Cap: $1.30B Rating: Overweight 12-mo. Price Target: $54 (4x EV/2014E revenue + net cash)Thesis: Medidata uprooted clinical trial market with its cloud-based Rave platform, which provides EDC and related solutions. The company saw tremendous growth with its innovative SaaS offering and is getting into the next leg of growth with non-EDC solutions. Because of its unique cloud-based offering, the com-pany is in a unique position to monitor, analyze and offer solu-tions to clients regarding their clinical trials, which can have far reaching impacts in optimizing and expediting trials. We believe the company can support 20%+ top-line growth given the traction in the backlog and investments in new offerings.Key Questions:• Why is the cloud a better delivery platform for software in

pharma?• What’s the TAM you are going after? What’s your market

share today?• How are you beginning to use big data algorithms in your

solutions, and how do you think about that opportunity lon-ger term?

• Competitive landscape – what is being used in the market-place today, and who are you running up against?

Description: Medidata Solutions is a leading provider of SaaS-based software solutions for the clinical trial market. Sean W. Wieland, Sr. Research Analyst, 415 616-1710

Mellanox Technologies, Ltd. (MLNX) – $52.73 Market Cap: $2.24B Rating: Overweight 12-mo. Price Target: $52 (15x CY14E EPS)Thesis: Our thesis on shares of MLNX remains unchanged, though we significantly lowered our estimates on January 24 on disappointing Q1 guidance. We were disappointed by the Q1 guid-ance, attributable to the excessive inventory build at the OEM cus-tomer. We were also surprised management did not understand the magnitude of this inventory build until after the preliminary Q4 earnings call, but remain confident in the market opportunity that lies ahead for Mellanox. We continue to believe Mellanox will hold a competitive advantage via its FDR technology and due to management’s decision to accelerate R&D spending this year, will maintain its lead over the competition with the launch of EDR (100GB/s) products in 2014. As such, we reiterate our Overweight rating.Key Questions:• Despite the inventory burn-off at your primary OEM partner

in Q1, do you think 2013 could be a growth year?• RDMA is a low-latency alternative to InfiniBand. How do you

effectively compete against it and what are your large Web/cloud customers deploying?

• What are your growth expectations for the HPC market in 2013?• Since you are essentially protocol agnostic due to your VPI

technology, where have you seen more growth—InfiniBand or Ethernet?

Description: Mellanox is a leading provider of high-performance InfiniBand and Ethernet interconnect products for servers, switch-es and storage systems.Andrew Nowinski, Sr. Research Analyst, 612 303-6933

Millennial Media Inc. (MM) – $9.37 Market Cap: $742.72M Rating: Neutral 12-mo. Price Target: $16 (8-year DCF, 12% WACC, 6% Terminal Growth)Thesis: We believe Millennial remains well-positioned as the top “independent” platform with scale to capitalize on the larger and growing mobile ad market. While the opportunities to partici-pate in the growing mobile business are attractive, the risks are substantial, including heightened competition and challenges to monetizing its business model.Key Questions:• Discuss your plans to grow your market share in the U.S.

mobile market?• Discuss mobile ad trends in 2013 and what direction you see

the market heading to.Description: Millennial Media is a first mover within mobile adver-tising and the leading “independent” mobile advertising network offering scale of nearly 340 million unique users. The company is riding the wave of mobile connectivity as more and more individu-als consume content through mobile devices (both smartphones and tablets), which will be accompanied by an estimated $10B tailwind of ad dollars allocated towards mobile platforms over the next four years (according to MagnaGlobal). Being (mobile) operating system and device agnostic, Millennial can provide advertisers, agencies, publishers and app-developers with the necessary tools and services to navigate an extremely diversified and fragmented mobile advertising market by delivering engaging and targeting advertising based on demographics, behavior and potentially location.James Marsh, CFA, Sr. Research Analyst, 212 284-9304

Monolithic Power Systems Inc. (MPWR) – $24.59 Market Cap: $877.20M Rating: Neutral 12-mo. Price Target: $23 (20x CY14E EPS)Thesis: Monolithic Power is in the midst of several transitions from consumer-driven revenue growth to communication in-frastructure and industrial-driven growth. MPWR is shifting its revenue mix from consumer (45% of revenue) and PC (19% of revenue) to more industrial (12%) and communication infrastruc-ture (19%). In addition, the company is ramping its new BCD3 process, but BCD3 currently only accounts for 3-5% of revenue. We believe these transitions will take more time than the mar-ket generally anticipates. In addition, based on the weak TV and consumer electronics demand, we expect lackluster consumer electronics demand, increasing revenue risk. For these reasons, we remain Neutral until revenue momentum re-accelerates or a more attractive entry point emerges.Key Questions:• What are the biggest growth drivers for the company over the

next several years?• Can you discuss how your power module business for com-

munication infrastructure is ramping?• Consumer is a large percentage of revenue. Do you expect

that business to decrease over time?

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• What do you expect BCD3 to be as a percentage of revenue next year?

• Your SSD business has seen significant growth. What is driv-ing it?

• What kind of traction are you getting in the server market?• Can you talk about how you are doing in power management

in notebooks?Description: Monolithic Power is a fabless supplier of highly in-tegrated, high performance analog/mixed-signal power manage-ment and audio ICs for a range of end markets.Gus Richard, Sr. Research Analyst, 415 616-1711

Moody’s Corporation (MCO) – $48.06 Market Cap: $10.73B Rating: Overweight 12-mo. Price Target: $59 (17x 2013E EPS)Thesis: Exceptionally robust 2012 operating results and strong 2013 guidance serve to reinforce our enthusiasm for the MCO investment story. Strong near-term earnings momentum, attrac-tive secular revenue growth prospects, potential for margin up-side, fading regulatory concerns and manageable legal risks make MCO one of our favorite investment ideas.Key Questions:• Debt issuance volumes have been very robust. Is this sus-

tainable? How much is pull-forward from 2013-14?• The 2012 operating margin of 39.9% was well below the

50%+ peak achieved in 2006-07. Recognizing that the world has changed and regulatory costs are higher, what are the limits to further recovery in margins?

• Moody’s Analytics accounts for about 15% of MCO earnings. Recent growth has been impressive. What’s the upside for this unit? Are further acquisitions likely?

Description: Moody’s Corp. provides credit ratings and related research and software services.Peter Appert, Sr. Research Analyst, 415 616-1709

MoSys, Inc. (MOSY) – $3.47Market Cap: $138.65M Description: MoSys is a provider of high-density memory and high-speed interface (I/O) as well as intellectual property. The company markets a Bandwidth Engine memory solution that reduces network bottlenecks for 100G networking equipment. End market applications include networking, consumer products, graphics systems, general computing and storage systems.Key Questions:• How is the transition from an IP company to a product com-

pany going?• What network processor companies are you working with?• What kind of performance improvement does your product

provide over existing solutions? • What types of communication equipment are you designed

into and when do you expect these products to ramp into production?

Nanometrics Incorporated (NANO) – $14.75 Market Cap: $342.94M Rating: Neutral 12-mo. Price Target: $13.50 (1.5x CY14E revenue)Thesis: Near-term visibility for Nanometrics is likely to be limited in 1H13 as spending from its top customers has slowed. We be-lieve spending will pick up in 2H13 as Samsung invests in capacity

and Intel transitions to 14nm in 2013 and 2014. The company is also leveraged to the growing use of FinFET technology. Based on this assessment, we expect revenue to be down slightly in CY13 and return to growth in CY14. We maintain our Neutral rating and would expect to become more constructive as the company nears an inflection in demand.Key Questions:• What is the primary driver of growth near-term? • When do you see VNAND ramping in terms of demand?• Can you talk about your penetration at TSMC with 20nm and

16nm?• What is driving the adoption of OCD in a fab?• Beyond FinFETs and DRAM capacitors, where is OCD used? • Can you talk about your competitive positioning in OCD ver-

sus Nova Measurement and KLA?Description: Nanometrics is a supplier of advanced process con-trol metrology systems.Gus Richard, Sr. Research Analyst, 415 616-1711

NeoPhotonics Corporation (NPTN) – $5.02 Market Cap: $152.68M Rating: Overweight 12-mo. Price Target: $7.00 (0.5x EV/CY13E sales)Thesis: NeoPhotonics has been an outperformer in the optical component market and one of the only suppliers showing se-quential and year-over-year growth more consistently. The com-pany’s success has been due to better product positioning with significant exposure to fiber-to-the-home deployments in China and throughout the world in addition to share gains in the ITLA product category. NeoPhotonics also has a significant amount of content in some of the leading 100G coherent systems, and we anticipate all of these factors will help drive market share gains into the future. We believe 2013 will be a significantly better year for the optical sector and this should translate into better top-line growth and more sustainable profits for NPTN.Key Questions:• Are service provider capital expenditure plans shifting more


tinue to eat into the optical component market?• How much of a lead do you have before more competitors

introduce ITLAs?• After reaching profitability, what do you think is a reasonable

near-mid-term operating margin target? • What will be the next catalyst for the optical component

industry?Description: NeoPhotonics manufactures PIC components and subsystems for use in optical communications networks.Troy Jensen, CFA, Sr. Research Analyst, 612 303-6291

NetApp, Inc. (NTAP) – $33.84 Market Cap: $12.17B Rating: Overweight 12-mo. Price Target: $39 (15x FY14E EPS)Thesis: Our long-term thesis on NetApp remains unchanged. The company continues to improve its execution and is now deliver-ing more consistent results. We believe the ramping demand for ONTAP 8.1 cluster-mode, the company’s expanding flash port-folio and increasing penetration of the telco/service provider market will drive margin expansion and market share gains over the course of FY14 (April fiscal year-end). If NetApp continues to

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narrow the gap in terms of product revenue growth with industry leader EMC, we believe the P/E multiple could drift back toward the company’s three-year average P/E multiple of 18.8x (currently 14-15x). We maintain our Overweight rating.Key Questions:• OEM revenue was down 19% year-over-year last quarter.

When should we expect growth to resume in this segment?• FlashRay is a purpose-built all-flash array, but not expected

until 2014. How will you compete against the all-flash ven-dors in 2013, particularly with EMC’s XtremIO expected to hit the market in the second half of 2013?

• Update us on the pending launch of ONTAP 8.2.• Update us on Flash Accel. Description: NetApp is a provider of storage and data manage-ment solutions for managing, protecting and archiving data.Andrew Nowinski, Sr. Research Analyst, 612 303-6933

NetSuite, Inc. (N) – $69.79 Market Cap: $5.02B Rating: Neutral 12-mo. Price Target: $65 (11.8x EV/CY13E revenue)Thesis: NetSuite is a leader in comprehensive on-demand offer-ings that enable customers to run their entire business opera-tions. Because all elements of NetSuite’s application suite share the same transaction and customer data in a single database, cus-tomers can run their entire business without facing a burdensome integration task. Therefore, NetSuite represents a fundamentally new concept. Many small- and medium-sized entities struggle to automate their business due to the complexity and inefficiency of traditional client-server software. If NetSuite can eventually make it easy for SMBs and subsidiaries of much larger organizations to run their businesses by simply “plugging into the cloud,” then we believe it will be able to address a very real need for tens of thousands of customers or more.Key Questions:• What is insulating NetSuite from the weakness that has

plagued several on-premise software companies over the last couples of quarters?

• How do products like SuiteCommerce and Retail Anywhere change your addressable market and influence the uptake of existing products?

• Over the last year, you’ve brought on several new partners. How does this benefit you in terms of offloading services, and how do you resolve channel conflict with your resellers?

Description: NetSuite is a leading on-demand ERP provider.Mark Murphy, Sr. Research Analyst, 415 616-1705

Newport Corp. (NEWP) – $16.35Market Cap: $626.47MDescription: Newport offers equipment for three product groups: photonics, optics and lasers. Products include wafer positioning equipment, laser measurement systems, night vision technology and lasers used in medical technologies such as ophthalmic sur-gery applications. End markets include microelectronics, health-care, defense and industrials.Key Questions:• How would you size your growth opportunities across the

various end markets you serve?• What are the new end markets you believe you can penetrate

in the next 2-3 years?

• Can you give us update on your strategy in terms of geo-graphic end markets? Where do you see the most opportu-nity and how do you plan to execute in those markets?

Nimble Storage, Inc. – PrivateDescription: Nimble Storage is a storage vendor that combines primary and backup storage systems into a single solution. Nimble’s solution was designed to specifically leverage the perfor-mance benefits of flash, while enabling customers to benefit from the price/capacity of hard disk drives. Their first flash-optimized system was launched in 2010 and the company now has systems deployed worldwide in a wide range of applications and industry verticals. Key Questions:• Why does Nimble win against the larger industry players and

what differentiates Nimble from the all-flash vendors?• What applications/use cases do you have the most success

in and why?

Nimbus Data Systems, Inc. – PrivateDescription: Nimbus Data Systems is a storage vendor, providing one of the industry’s only all-flash storage arrays. The company’s systems are engineered for server and desktop virtualization, da-tabases, HPC and next-generation cloud infrastructure. Nimbus combines the use of flash memory hardware with robust data protection software, enabling customers to achieve greater per-formance at a significantly lower operating cost than conventional disk-based primary storage arrays. Nimbus sold its first system in 2006 and now has more than 200 active customers in 18 coun-tries, one of which is eBay. Key Questions:• Why does Nimbus win and who are you winning against the

most?• How do you effectively compete against hybrid arrays, which

leverage both flash and hard disk drives?

NQ Mobile Inc. (NQ) – $6.92 Market Cap: $325.58M Rating: Overweight 12-mo. Price Target: $17 (19x FY13E EPS)Thesis: NQ Mobile is a leading SaaS provider of consumer-centric mobile Internet services focusing on security and productivity. We expect NQ Mobile to grow rapidly as it leverages its freemium business model with a sizeable installed base of more than 85M monthly active users against a backdrop of strong multi-year growth in global smartphone shipments.Key Questions:• How have retailer and carrier partnerships been ramping in

the United States, and what kind of revenue could we see from them?

• How do you think about maintaining high operating margins versus investing for growth?

• What plans to you have to increase conversion rates in over-seas (non-Chinese) markets?

Description: NQ Mobile is a leading SaaS provider of mobile se-curity and productivity services.Mark Murphy, Sr. Research Analyst, 415 616-1705

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Oclaro, Inc. (OCLR) – $1.32Market Cap: $121.20MDescription: The combination of Oclaro and Opnext has created one of the largest providers of lasers and optical components, modules and subsystems for the optical communications, in-dustrial and consumer laser markets. The company is a global leader dedicated to photonics innovation, with cutting-edge re-search and development (R&D) and chip fabrication facilities in the U.S., U.K., Italy, Switzerland, Israel, Korea and Japan. It has in-house and contract manufacturing sites in China, Malaysia and Thailand, with design, sales and service organizations in most of the major regions around the world.Key Questions:• Are service provider capital expenditure plans shifting more


tinue to eat into the optical component market?• Can you discuss the benefits and risks of combining with

Opnext?• After reaching profitability, what do you think is a reasonable

near-midterm operating margin target? • What is the next catalyst for the optical component industry?

Ocwen Financial Corporation (OCN) – $39.42 Market Cap: $5.32B Rating: Overweight 12-mo. Price Target: $47 (10x 2013E core EPS)Thesis: Ocwen is positioned to benefit from the secular wave of ser-vicing being transferred from large banks and legacy mortgage origi-nators to specialty servicers. We believe OCN has the liquidity neces-sary to actively pursue its $350B pipeline, and its low-cost servicing platform and principal-reduction modification core competency are key differentiators. Lastly, its recent Homeward and ResCap acquisi-tions are very accretive, and include an origination platform which will help support portfolio growth and reduce run-off.Key Questions:• Help investors see past the next deal.• What does OCN look like in a few years?• What does mortgage servicing look like in a few years?• How big is the pipeline really?• How big can OCN be?• What are OCN’s top priorities for 2013?• With OCN’s low-cost operations, how does it lose deals? • After NSM’s refinances its servicing portfolio, would OCN

ever acquire the company and consolidate the industry?Description: Ocwen specializes in the servicing and special servic-ing of nonprime and prime, residential and commercial mortgage loans. Ocwen is also expanding into mortgage originations in a measured way.Michael Grondahl, Sr. Research Analyst, 612 303-6788

OCZ Technology Group, Inc. (OCZ) – $1.77 Market cap: $119.74M Rating: Overweight 12-mo. price target: $6 (12x CY13E EPS)Thesis: OCZ has yet to file 10-Q reports for the August and November quarters of 2012, due to an ongoing investigation into its customer incentive programs. We will review our thesis on OCZ shares when the company becomes current with its SEC fil-ing requirements, now expected on April 8, 2013.

Key Questions:• What is the new revenue break-even level on a quarterly

basis?• What is the status of your working capital and inventory

balance?• What is the new operating expense level going forward on a

quarterly basis?• What kind of traction has the new Vertex 3 received?Description: OCZ Technology was founded in 2002 and today is one of the largest pure-play SSD providers in the industry.Andrew Nowinski, Sr. Research Analyst, 612 303-6933

ON24, Inc. – PrivateDescription: ON24 is a virtual communications platform for the global enterprises. ON24 offers a broad product portfolio, includ-ing Webcasting, virtual events and virtual environments, acces-sible from any device and supported by reporting and analytics. Applications for the ON24 platform include demand generation, partner enablement, training, product launches, company town hall meetings and user conferences. More than 700 organizations use ON24, including IBM, CA Technologies, Merck, Unilever, JPMorgan Chase, Deloitte, Credit Suisse, Ernst & Young, Amazon and New York Life. The company is headquartered in San Francisco with offices throughout the world.Key Questions:• What differentiates ON24 versus a service like WebEx or Live

Meeting?• What is the market’s perception of Web-only events as re-

placements of in-person events?• What is the market growth rate and size of virtual environ-

ments relative to traditional Webcasting?

Pandora Media, Inc. (P) – $12.20 Market Cap: $2.07B Rating: Neutral 12-mo. Price Target: $11 (5-Yr DCF using 6.3% WACC and 12.5x terminal EBITDA multiple)Thesis: We remain on the sidelines for now on P shares until we get better clarity on the ability of management to monetize its rapidly growing listenership. Improved monetization would help resolve concerns about relatively high music licensing costs and worries about new competitors, but could be challenging as mix shift moves toward mobile that has been harder to monetize than desktop. We like the listenership growth trajectory, but need to see some business model improvements to get more constructive.Key Questions:• Discuss recent listenership trends and your expectations for

2013.• Comment on the growth of the local sales force and its im-

pact on ad rates.• What is the likely impact of the recently introduced The

Internet Radio Fairness Act?Description: Pandora is a leader in online radio.James Marsh, CFA, Sr. Research Analyst, 212 284-9304

Power Integrations, Inc. (POWI) – $40.94 Market Cap: $1.17B Rating: Neutral 12-mo. Price Target: $42 (19x CY14E EPS)Thesis: Power Integrations delivered a strong Q4 and outlook,

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finishing out CY12 with renewed momentum. The company is once again seeing strength in the cell phone market with growth coming from new Chinese handset OEMs as well as an improv-ing position at Samsung and renewed strength at Blackberry and Nokia. While the PC market is weak, the company is increasing its content in desktops in main power supplies as well as picking up share in stand-by power. The improving industrial demand in China is fueling growth from its recent acquisition of CT Concept. Finally, the company expects to launch a number of sub 50W products that should start to ramp in 2H. We remain at Neutral as we see limited upside in the shares given the recent run. We look to a pull-back to become more constructive.Key Questions:• What power management markets does your company ad-

dress and what is unique about your solution?• It looks like you are winning back some share in cell phones.

Can you talk about the impact to margins?• What is your outlook for LED this year? What is the competi-

tive landscape?• How is the integration of CT Concept going?• It seems like you are picking up some share at Samsung at

the low-end. Who is your competitor at the account?• What is the impact of the yen on your gross margin?Description: Power Integrations is a power management IC com-pany, focused primarily on high-voltage AC-DC and DC-DC inte-grated solutions for applications that are sensitive to size, porta-bility, energy efficiency and time-to-market.Gus Richard, Sr. Research Analyst, 415 616-1711

Proto Labs, Inc. (PRLB) – $46.49 Market Cap: $1.14B Rating: Overweight 12-mo. Price Target: $51 (30x CY14E net op income + cash)Thesis: We continue to view Proto Labs as an attractive long-term investment. As more companies turn to rapid manufacturing to speed up design cycles, we think Proto Labs is extremely well po-sitioned to capitalize on this changing industry trend. Proto Labs is also the leader in quick-turn, low-volume production, and we believe the introduction of new materials will help accelerate the company’s growth rate. Proto Labs has recently expanded manu-facturing capacity, which lowered the company’s operating mar-gin from 32% (achieved twice in 2011) to 27%, so we believe Proto Labs can show impressive top-line growth and margin expansion.Key Questions:• What is the status of some of your new R&D investments and

new material introductions?• Can you size up the market opportunity for metals such as

magnesium and steel?• How do you plan on accelerating growth in Japan and turning

that geography into a profit center from a loss generator?• Can you discuss how Proto Labs plans on maintaining its

competitive differentiation if other large competitors start to target this market?

Description: Proto Labs is a leading provider of CNC machined and injection molded parts. The company’s Firstcut and Protomold services utilize proprietary technologies and automated manufac-turing to provide prototypes and short-run production parts.Troy Jensen, CFA, Sr. Research Analyst, 612 303-6291

QLogic Corp. (QLGC) – $11.38 Market Cap: $1.03B Rating: Neutral 12-mo. Price Target: $11 (13x FY14E EPS)Thesis: Despite the solid Q3 (Dec.) results and in-line guidance for the March quarter, we are not convinced that this momentum will continue into FY14. QLogic continues to lag Emulex in the 10Gb Ethernet space, which we believe is the largest growth op-portunity for the company. That said, valuation remains relatively attractive, particularly with shares trading at ~2x cash. If we are wrong in our assessment of Mt. Rainier and the company actually experiences modest incremental revenue growth from this prod-uct, without affecting the company’s existing OEM relationships, then valuation would look much more interesting. As such, we recommend taking a “wait and see” approach and are maintain-ing our Neutral rating.Key Questions:• Update us on Mt. Rainier; compare and contrast it to the

competition.• What use cases are you targeting with Mt. Rainier and what

competitive advantages does it have over the competition?• Why has growth in 16Gb Fibre Channel lagged your

competition?• What are the next catalysts for your 10 Gb Ethernet segment?Description: QLogic designs and provides high-performance Fibre Channel and Ethernet interconnect products that facilitate the transmission of data between servers, networks and storage systems.Andrew Nowinski, Sr. Research Analyst, 612 303-6933

Rackspace Hosting, Inc. (RAX) – $55.86 Market Cap: $7.66B Rating: Overweight 12-mo. Price Target: $71 (DCF to 2018, 13.2% WACC, 5.25% growth)Thesis: Rackspace is a leading hosting and cloud service provider. The trend toward more outsourced hosting, managed cloud com-puting is likely to continue, and we believe that Rackspace’s domi-nant, best-in-breed, thought-leader position affords the company the opportunity to increase share. Rackspace wants to be “the IBM” of cloud—the trusted name for managing reliable, scalable cloud computing. Fresh off its introduction of OpenStack, we’ll discuss with the company how customers are responding to the new operating platform. While the core dedicated server business continues to grow, we’ll discuss how the company may transform its business by supporting off-site OpenStack installations and what that means for its fundamentals.Key Questions: • What kind of traction are you seeing to-date with OpenStack?

What OpenStack offerings do you have today? Who is adopt-ing OpenStack and what is their feedback so far?

• How do you differ from your competitors?• What is off-premise cloud support and what could it mean

for your business?• What do you see as the biggest drivers or determinants of

your future growth?• What was the impetus for the recent cloud price cut? Is this

something we’d expect to continue?• How can you reaccelerate growth in your cloud business?

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Description: Rackspace is a world leader in hosting. The company delivers Web sites, Web-based IT systems and computing as a service.Christopher Larsen, Sr. Research Analyst, 212 284-9339

Raydiance – PrivateDescription: Raydiance is a California-based leading developer of femto-second laser technology, including software and solutions for a variety of applications. These ultrafast lasers are fast enough and generate little or no heat during processing, and are used to process heat-sensitive materials, bio-absorbable polymers as well as consumer electronics. Key Questions:• How do you fit in the value chain? What is the value proposi-

tion you bring to customers?• View of overall fiber laser market through their prism? What

are the opportunities that lie ahead and how can margins be sustained?

ReachLocal, Inc. (RLOC) – $12.53 Market Cap: $354.09M Rating: Overweight 12-mo. Price Target: $17 (13x FY13E EBITDA + cash)Thesis: ReachLocal is an online marketing tool for local busi-nesses that is in the process of adding new products to help con-vert leads and facilitate booking and buying. The company is also rolling out a new sales process and expanding in TAM through international and call center rollouts.Key Questions:• What is the potential for the booking and buying products?• How can sales 2.0 impact the bottom line and leverage in

the model?• How are the call centers in smaller markets trending? • How is mobile impacting the way you acquire leads for your

customers?Description: ReachLocal acts as an outsourced Internet market-ing arm for small local businesses to deliver business leads to customers.Gene Munster, Sr. Research Analyst, 612 303-6452

RealD Inc. (RLD) – $11.64 Market Cap: $579.96M Rating: Overweight 12-mo. Price Target: $15 (5-Yr DCF using 8.1% WACC and 7.5x term EBITDA multiple)Thesis: We continue to like the long-term prospects for theatrical 3D and continue to recommend RLD shares over the longer term (12 months). We expect a robust FY14 film slate, which includes blockbusters like Iron Man 3, Star Trek 2 and Man of Steel (an-choring the summer slate) and Hobbit 2 (anchoring the holiday season). We recently raised our 3D box office expectations by ~1.5% for FY14.Key Questions:• Discuss recent 3D trends domestically and abroad. What are

your expectations for 3D share?• Can you comment on your growth opportunities in Russia

and China?• Provide an update on your recently created team to focus on

the industry’s creation of additional 3D content.

Description: RealD designs, manufactures, and licenses 3D technology.James Marsh, CFA, Sr. Research Analyst, 212 284-9304

Rentrak Corporation (RENT) – $20.90Market Cap: $247.81MDescription: Rentrak is an emerging digital media measurement firm tracking, reporting and analyzing consumer media consump-tion across multiple screens, including a primary focus on box office, TV and Video OnDemand (VOD). Census-level measure-ment data collected by Rentrak provides proprietary insight into where media is consumed (what screen) and how consumers are obtaining that media (e.g., purchased, rented, recorded, down-loaded, streamed). The fusion of Rentrak’s measurement data and third-party consumer segment data can help primary clients, including broadcasters, advertisers and ad agencies, better under-stand audience viewing and consumption behavior, helping drive programming and targeted advertising initiatives.Key Questions:• How has recent competitive responses in local TV audience

measurement impacted your progress with converting new contracts wins?

• What is the timeline of new product releases for box office and what are proper expectations for revenue contribution?

• Video OnDemand (VOD) represents a $1 billion advertising market opportunity; how does Rentrak leverage its unique position as the sole provider of census measurement of VoD content to capitalize on this emerging, robust opportunity?

Retail Solutions, Inc. – PrivateDescription: Retail Solutions develops and delivers a comprehen-sive suite of award-winning software-as-a-service (SaaS) solutions that turn downstream data, such as point-of-sale (POS), supply chain, merchandiser feedback and category data, into actionable visibility into the store and onto the shelf. Retailers and consumer product goods (CPG) companies trust Retail Solutions to grow sales, reduce out-of-stocks, improve promotion execution and ef-fectiveness, maximize retail operation productivity and foster col-laborative relationships in the retail industry to improve product availability for the end-consumer. Retail Solutions serves more than 300 CPG companies, including nine of the top ten global consumer goods companies, and processes data from more than 30 leading retailers in the Americas and Europe. Retail Solutions is headquartered in Mountain View, CA and has offices in Cranston, RI, Bentonville, AR, Paris, France and Shanghai, China.Key Questions:• How has the rapid growth of cloud, mobility and social net-

works impacting the retail execution management space?• How would you characterize this space in terms of

competition?• What differentiates you from the competition?

Rimini Street, Inc. – PrivateDescription: Rimini Street operates as a third-party provider of enterprise software support and maintenance services for Siebel, PeopleSoft, JD Edwards, Oracle and SAP licensees. Its support program features premium services, including a primary support engineer for each account, guaranteed 30-minute response time, and support for customizations, interoperability and performance

34


tuning. Rimini says that some customers have seen up to a 50% reduction in maintenance costs.Key Questions:• What does third-party support offer, and what doesn’t it do,

or what can’t it offer?• Describe typical scenarios where a company would move

from vendor maintenance to support from Rimini. What per-centage of companies using vendor maintenance falls into this category?

• What specifically do you do to reduce the cost of mainte-nance by as much as 50% versus the vendor? What is the typical cost savings?

Rofin-Sinar Technologies, Inc. (RSTI) – $26.57 Market Cap: $747.65M Rating: Neutral 12-mo. Price Target: $20 (13x CY13E EPS of $1.55)Thesis: We believe Rofin-Sinar is on a path to improve its target gross margin to 40% in 2014 from 35.3% in the December 2012 quarter as it improves the profitability of fiber lasers (~10% of its sales) which have gross margins of less than 10% presently. While the company continues to move on a path similar to IPGP in terms of vertical integration in fiber laser, execution remains the key in enabling lower cost fiber laser which can address the profitability in this segment.Key Questions:• What kind of roadblocks do you envision for your captive fi-

ber laser production? What kind of cost/watt do you expect in your first iteration of your laser diode?

• What is the biggest reason customers have come to you for your fiber laser (excluding price)?

• Where do you think the traditional CO2 market is heading (market size, growth)? Is it in a secular decline? Would you consider an acquisition for fiber laser to improve your portfo-lio? Which geographies do you think you may be at an advan-tage with your products?

Jagadish Iyer, Sr. Research Analyst, 212 284-5038

Rovi Corporation (ROVI) – $17.80 Market Cap: $1.79B Rating: Neutral 12-mo. Price Target: $19 (9x CY13E EPS)Thesis: Rovi’s core business, its IPG licensing business, contin-ues to be strong driver for top-line growth and while this business may be less exciting from a standpoint of potential upside, it is highly recurring and offers a high level of visibility. The company’s growth initiatives, specifically TotalGuide, Rovi Entertainment Store (being divested) and a new stream of revenue from Internet content service licensees remain challenged, but could create up-side to estimates if any significant inroads are made.Key Questions:• Why are consumers not connecting their “connected” TVs

and how does that impact pace of adoption for Total Guide?• Is Total Guide adoption “on hold” or have TV manufacturers

determined that developing technology for next generation guides in-house is the direction they want to take?

• When do you expect to see service providers increasingly wanting to incorporate enhanced data, advertising and other next gen components into their interactive guides? Will the opportunity for Rovi in service provider be primarily with small- to medium-sized operators?

Description: Rovi offers solutions to search, manage, and protect digital media.Michael Olson, Sr. Research Analyst, 612 303-6419

salesforce.com, inc. (CRM) – $169.22 Market Cap: $24.03B Rating: Overweight 12-mo. Price Target: $208 (36.7x CY13E OCF of $5.46/sh + $8.07 net cash/sh)Thesis: Customers are embracing on-demand offerings over lega-cy client-server products because they can save money by forego-ing complex on-premise technology deployments. Salesforce.com handles the complex infrastructure, while customers only need a Web browser and an Internet connection to be up-and-running. We believe salesforce.com’s combination of corporate culture and its on-demand business model should enable it to outflank its competitors in the coming years and win the high stakes on-demand war. If salesforce.com can continue to succeed in rapidly forming an ecosystem around its platform, then its corporate mo-mentum is more likely to persist because the ecosystem’s efforts will further augment the breadth of offerings available to sales-force.com’s customers. Platforms win in the software industry.Key Questions:• How does the trajectory of the marketing cloud compare

to the trajectory of the service cloud at a similar point of its product lifecycle?

• What needs to be done so that the market understands sales-force.com’s vision of a “customer company”, and are there any product holes that CRM is looking to fill while bringing this vision to its customers?

• What has to happen so that salesforce.com maintains its rev-enue growth of mid-20s?

Description: Salesforce.com is a leading provider of on-demand applications and infrastructure.Mark Murphy, Sr. Research Analyst, 415 616-1705

ServiceSource International, Inc. (SREV) – $6.34 Market Cap: $475.69M Rating: Overweight 12-mo. Price Target: $11 (2.8x EV/FY13E rev + net cash)Thesis: ServiceSource uses a combination of cloud-based ap-plications, dedicated service sales teams and its intelligent data warehouse platform to optimize the service contract renewals business. ServiceSource offers a compelling value proposition because customers do not have to pay any start-up costs or im-plementation fees. It employs a pay-for-performance model that creates a very low-risk proposition for the customer. In the longer term, we expect ServiceSource will behave relatively “uncyclically,” like an ETF consisting of maintenance revenue streams.Key Questions:• Can you talk about Renew OnDemand and the opportunities

for both SREV and your customers?• How big is the renewal market outside of technology, and

what successes are you having renewing non-tech recurring revenue?

• How penetrated are you into your existing customer base?Description: ServiceSource is a leader in service revenue management.Mark Murphy, Sr. Research Analyst, 415 616-1705

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Shapeways, Inc. – PrivateDescription: Shapeways is a leading service bureau for 3D print-ed products. Shapeway’s mission is to “enable people to make whatever they can buy” and the company has already produced well over 1 million objects in its state-of-the art 3D printing ser-vice bureau. The company has targeted the consumer market by developing readily available content on the company’s Web site that allows consumers to customize products to their individual desires. Shapeways has also partnered with more than 6,000 designers and artists to help visualize artistic renderings and de-signs. Shapeways recently raised $6.2 million in a series B round of financing with the lead investor being Lux Capital, a New York venture capital firm.Key Questions:• When do you believe the consumer 3D printing market will

start to drive meaningful revenue growth for the industry?• Can you discuss how Shapeways is helping to grow the con-

sumer market by developing libraries of 3D content?• Can you discuss the go-to-market strategy for working with

retailers for customized products?• What are the barriers from preventing other companies from

offering similar services?

Silver Peak Systems, Inc. – PrivateDescription: Founded in 2004, Silver Peak is in the wide area networking (WAN) optimization market. Silver Peaks’s products improve backup, replication and recovery between data centers and facilitates branch office server and storage centralization by improving application performance over the WAN. Silver Peak’s products are sold through channels such as Dell, EMC and Hitachi Data Systems and the company has an impressive list of customers including VMware, Google, EBay, Autodesk and oth-ers. Silver Peak is also one of the first suppliers of virtual WAN op-timization products and has won numerous awards for its Virtual Acceleration Open Architecture (VXOA). Key Questions:• Can you explain why the WAN optimization controller market

has experienced decelerating growth rates?• What do you think the short- to mid-term growth rate is for

this industry?• Can you explain the advantages and disadvantages of Silver

Peak’s products versus some of your larger competitors?• How is the virtual WAN optimization offering ramping and

do you have any competition for this new offering?

Sirius XM Radio Inc. (SIRI) – $3.11 Market Cap: $20.40B Rating: Overweight 12-mo. Price Target: $3.40 (5-Yr DCF using 10.2% WACC and 6.5x terminal EBITDA multiple)Thesis: We are bullish on SIRI shares as the company continues to deliver strong subs growth and generate substantial FCF, while concerns of a potential macro slowdown over the moderate term ease. Auto sales continue to drive subs and we see an upward bias throughout 2013. We continue to like the solid growth and lower risk profile of the company and we see upside from here.Key Questions:• Auto sales could move back to pre-2007 levels; can you dis-

cuss the trends you are seeing and the sustainability of the strength of U.S. consumer?

• Discuss management’s used car strategy as its satellite radi-os are now installed in more than 50M vehicles and SiriusXM units are now factory installed in close to 70% of all new ve-hicles sold in the U.S.

• In mid-January, Liberty Media has taken majority control of SIRI; can you discuss any expected changes over the next 12 months?

• GM announced significant commitment to the connected car; how do you plan to differentiate and grow your market share in the car?

Description: Sirius XM Radio Inc. provides satellite radio services in the United States and Canada. James Marsh, CFA, Sr. Research Analyst, 212 284-9304

Slacker Radio – privateDescription: Slacker Radio is an interactive Internet radio service available in the United States and Canada. Listeners can access the service on the web through mobile apps on multiple smart-phones as well as on Slacker Personal Radio Players and other devices. It allows users to create and share customized music sta-tions. Slacker works directly with record labels to offer a music library that’s more than 10 million songs deep. Listeners can also personalize the experience with the best in talk, sports, news, and entertainment from ABC, ESPN, and others. Additionally, Slacker has more than 200 expert-programmed stations covering most genres. Slacker is available on most platforms from the web to smartphones to cars, smart TVs and game consoles. Slacker also has relationships with most North American wireless carriers, so a Slacker subscription can simply be added to a monthly phone bill. Slacker accounts also can be connected to Facebook and Twitter accounts.

Solera Holdings Inc. (SLH) – $56.30 Market Cap: $3.88B Rating: Neutral 12-mo. Price Target: $57 (20x CY13E cash EPS)Thesis: We like Solera’s business model, including relatively pre-dictable, subscription-based revenues, a strong record of margin upside, attractive free cash flow conversion and rising ROIC. An impressive record of execution and leverage from potential M&A add to the stock’s appeal. Near-term macro challenges in Europe create an earnings headwind, which may keep the stock in a trad-ing range until we see a reacceleration in organic revenue growth.Key Questions:• Organic revenue growth is a key investor focus. What are the

prospects for improvement over the next several quarters?• Competitive pressures in the relatively mature U.S. market

have also been a headwind. What is the status of the State Farm contract renewal?

• M&A has been a source of upside for Solera. How big is the opportunity here?

Description: Solera is a global provider of software and services to the auto insurance industry.Peter Appert, Sr. Research Analyst, 415 616-1709

STEC, Inc. (STEC) – $4.82Market Cap: $225.22MDescription: STEC is a leading global provider of enterprise-class solid state drives that are designed specifically for systems and applications that require high input and output capabilities (I/O)

36


with low latencies for fast access to critical user data. The com-pany is headquartered in Santa Ana, Calif. and has operations in Penang, Malaysia. STEC also has sales and engineering offices in the United States, Europe and Asia. Key Questions:• Please update your progress transitioning from an OEM

sales model.• Are you still expecting enterprise customers to account for

more than half your business in the second half of 2013?• How far along are you in terms of reaching your hiring plans?• Is a 40% gross margin achievable in 2013?

Stratasys, Inc. (SSYS) – $63.11 Market Cap: $1.38B Rating: Overweight 12-mo. Price Target: $97 (36x 2014E op income + cash)Thesis: We believe the market for 3D printers is in a secular growth phase and the growing adoption of 3D CAD usage coupled with price elasticity and increased awareness will continue to drive im-pressive 3D printer unit growth for the industry. This ultimately will create a growing annuity of high-margin consumable sales into this captive audience of 3D printing users. Stratasys has had great success with the higher-end Fortus systems and anticipates demand will remain robust throughout 2013. Moreover, we be-lieve the recent merger with Objet will be a successful combina-tion and allow the combined companies to leverage channels and drive earnings accretion throughout the year. We are bullish on the long-term growth prospects of the 3D printing space and recom-mend investors have exposure prior to a market inflection. Key Questions:• Why have Fortus sales outperformed the market over the

past year and is this sustainable in 2013 and beyond?• Can you discuss the benefits of the Stratasys/Objet merger

and the risks of this combination?• Why did the Hewlett Packard OEM relationship fail?• Any estimate regarding how much of your system sales are

going into direct digital manufacturing applications?• How is Stratasys/Objet protecting the material sales from

third-party suppliers?Description: Stratasys is a leading provider of rapid prototyping systems and 3D printers.Troy Jensen, CFA, Sr. Research Analyst, 612 303-6291

SugarCRM, Inc. – PrivateDescription: SugarCRM provides open source customer relation-ship management (CRM) software for SMBs, large enterprises and government organizations. The company offers solutions that enable customers to organize and share customer informa-tion, measure and report, analyze and collaborate with customers and employees, and develop applications and collaborate with the community. SugarCRM provides its products in various deploy-ment options, including on-demand, on-site and public cloud, and is used by more than 7,000 customers and half a million users.Key Questions:• How have large wins, such as with IBM last year, elevated

your ability to land increasingly large customers with com-plex requirements?

• How does providing both a hosted and on-premise offering help your competitive position? Don’t customers want to move to a vendor-hosted model?

Teradyne, Inc. (TER) – $16.76 Market Cap: $3.15B Rating: Overweight 12-mo. Price Target: $20 (12x CY13E PF EPS$1.65)Thesis: We expect Teradyne’s semi test to continue to gain share at least 200-300 bps this year in its SOC market which could likely shrink to $2.3B from $2.5B in 2012. We expect a recovery in semi test orders after a cyclical bottom in 4Q12. In the system test segment, we expect the rollout of new products for HDD to drive year-over-year revenue growth of 10% in 2013. New Wi-Fi standards and growth in mobile devices drive 16% year-over-year growth in cellular test revenues (LitePoint). With $1B in cash on its balance sheet, we expect a tangible action in terms of use of cash for dividends or M&A.Key Questions:• What are some inflections in SOC test and memory test that

you see in the horizon that could drive the overall market this year?

• How should we think of order seasonality in 2013? Can mem-ory test ever bounce back despite NAND demand strong? What is Teradyne’s strategy for testing in the fast growing SSD market?

• How do you see the LitePoint market shaping up this year and what kind of share gains are we looking at? Can the sea-sonality trend be bucked this year?

• Use of cash: will buybacks accelerate or are dividends being given serious thought?

Description: Teradyne supplies automatic test equipment for wa-fer and device level testing.Jagadish Iyer, Sr. Research Analyst, 212 284-5038

Tessera Technologies Inc. (TSRA) – $17.84Market Cap: $931.71MDescription: Tessera Technologies develops and licenses min-iaturization technologies and products for next-generation electronic devices. The company’s micro-electronics solutions enable smaller devices with higher functionality through chip-scale and wafer-level packaging, silicon-level interconnect and 3D packaging, as well as silent air cooling technology. Tessera’s imaging and optics solutions provide cost-effective, high-quality camera functionality in consumer electronic products through technologies that include extended depth of field (EDOF), zoom and MEMS-based auto-focus. Through the acquisition of Digital Optics, the company also offers custom micro-optics for semi-conductor lithography, communications, medical, industrial and other applications. Key Questions:• The company is in the process of renegotiating licenses with

some customers. How are these negotiations going?• Some of your patents are starting to expire—is this affecting

your ability to renew contracts? • How is the litigation at Amkor going? Do you expect to see

catch-up revenue this year?• Where are you in commercialization of the MEMS autofocus

product?• Are you gaining any traction with customers?• Are camera modules something Tessera is going to build

itself or license?• XLNX has just started to commercialize interposer technol-

ogy. Do you see any high-volume customers adopting the technology?

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• How do you see adoption of 3D packaging going? When do you think it will hit the mass market? What are the impedi-ments to adoption?

The McGraw-Hill Companies, Inc. (MHP) – $46.55 Market Cap: $12.94B Rating: Overweight 12-mo. Price Target: $58(18.3x 2013 EPS)Thesis: With the pending sale of its education unit, MHP be-comes a “pure-play” information services firm with the potential for mid-teens sustainable EPS growth, impressive free cash flow and 25%+ ROIC. While litigation risk creates a near-term over-hang, we like the risk/reward.Key Questions:• While numerous suits related to the 2007-2008 financial cri-

sis have been favorably resolved, a recent suit by the Dept. of Justice has refocused investor attention on legal risk. How do you quantify this risk? What are the prospects for settlement?

• Debt issuance has been exceptionally robust in the past year. How sustainable is this strength?

• How much further room is there for cost reduction? What are realistic long-term margin targets?

Description: McGraw-Hill provides benchmarks, data and analyt-ics to the financial and business information markets.Peter Appert, Sr. Research Analyst, 415 616-1709

The Trade Desk, Inc. – PrivateDescription: The Trade Desk is an advertising technology compa-ny utilizing data-driven analytics to understand and target digital ad space across mediums. Combining strengths in algorithmic functions, dynamic data analytics and an innate understanding of social media, Trade Desk drives statistically maximized buy-side decisions for advertisers. Founded by Jeff Green and Dave Pickles in October 2009, The Trade Desk is headquartered in Ventura, Calif.Key Questions:• What are the primary drivers behind the shift in online/mo-

bile/video display to exchanges (real-time bidding) and how will ad networks, agencies, publishers and private exchanges be impacted?

• How will Facebook’s exchange (FBX) impact supply/demand dynamics in the exchange marketplace? How much demand can Facebook ultimately capture and who are the winners/losers in the ad ecosystem?

• Given the abundance of “big data,” how do participants in the rapidly evolving digital advertising landscape differenti-ate in delivering performance for advertisers?

TiVo Inc. (TIVO) – $12.38Market Cap: $1.56BDescription: TiVo allows its users to aggregate, search and play broadband, cable and broadcast content. The company has also recently begun offering interactive advertising solutions and audi-ence research and measurement ratings services. TiVo offers its services and its DVRs directly to consumers as well as through third-party retailers. The company also provides its services and licenses its technology through solutions catered toward cable, satellite and broadcasting companies.Key Questions:• How is advertising changing with content consumption in-

creasingly being ‘on demand’? Should content owners be nervous that investors are skipping ads or encouraged that advertising can be more targeted than ever?

• Will TV operators increasingly outsource creation of next generation guide technologies to third parties or attempt to build in-house?

• Does the increasing availability of content via mobile devices change TiVo’s business and how should advertisers think about a shift in traditional video consumption to mobile?

TripAdvisor, Inc. (TRIP) – $45.54 Market Cap: $6.51B Rating: Overweight 12-mo. Price Target: $45 (26x CY13E EPS)Thesis: TripAdvisor is well positioned as a leader in the early stages of the transition of travel advertising spend from offline to online. What will have proven to be recently controversial is a significant effort the company will make in 2H13 to extend the footprint of the TripAdvisor brand. Specifically, TripAdvisor will begin an of-fline brand campaign that is expected to impact EBITDA growth by more than 1,000 bps (2013 EBITDA growth outlook with offline spend is high single digits, without offline spend would be low 20s). We are confident given our belief that the company is well-positioned to benefit from the ongoing shift of travel advertising spend toward online channels and believe management is making the appropriate investments to grow the footprint and maintain a differentiated offering.Key Questions:• When will the impact on monetization from the transition to

a metasearch interface subside and is it possible monetiza-tion could ultimately stabilize at a higher level?

• Why is now the right time to invest heavily in an offline mar-keting campaign? Do you expect a fairly immediate impact on revenue growth?

• How do recent acquisitions of Trivago and KAYAK impact TripAdvisor’s competitive position?

Michael Olson, Sr. Research Analyst, 612 303-6419

Turn Inc. – PrivateDescription: Turn is an advertising technology company offering client insight into cross-channel marketing initiatives, leveraging an incredibly scalable analytics platform making 30 billion+ adver-tising decisions daily via analysis of some 1.5 trillion+ customer attributes. Its ad solutions help maximize brand engagement, multi-channel targeting, retargeting, audience discovery and man-agement and loyalty development. Turn Inc. was co-founded in 2004 by Jim Barnett and is headquartered in Redwood City, Calif.Key Questions:• What are the primary drivers behind the shift in online/mo-

bile/video display to exchanges (real-time bidding) and how will ad networks, agencies, publishers and private exchanges be impacted?

• How will Facebook’s exchange (FBX) impact supply/demand dynamics in the exchange marketplace? How much demand can Facebook ultimately capture and who are the winners/losers in the ad ecosystem?

• Given the abundance of “big data,” how do participants in the rapidly evolving digital advertising landscape differenti-ate in delivering performance for advertisers?

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Ultimate Software Group, Inc. (The) (ULTI) – $98.27 Market Cap: $2.67B Rating: Neutral 12-mo. Price Target: $90 (6.1x EV/CY13E Rev + net cash)Thesis: Based on our research, the ability to reduce costs while improving employee efficiency leads to a relatively quick payback and significant ROI for most Ultimate deployments. According to our customer conversations, if you include headcount reduc-tions, elimination of service bureau fees and efficiency gains, a significant ROI can be obtained within 1-2 years. Lastly, we believe the company enjoys reasonably high barriers to entry, as there are more than 14,000 local tax jurisdictions in the U.S. that change frequently, and the Fair Labor Standards Act (FLSA) regulates minimum wage, overtime, equitable pay, recordkeeping and other labor laws for employees. We are optimistic about ULTI’s outlook as it is exposed to the attractive SaaS HR market, but believe ULTI shares are fairly valued for now.Key Questions:• How frequently do you see Workday in competitive situa-

tions, and how much could that change over time?• Last year you closed a 70,000-seat deal with a restaurant

chain. Do you see closing deals that large as a trend or an anomaly?

• What does your target operating model look like and when could you get there?

Description: Ultimate Software is a software provider of SaaS-based payroll and workforce management solutions.Mark Murphy, Sr. Research Analyst, 415 616-1705

Ultra Clean Holdings, Inc. (UCTT) – $5.90 Market Cap: $164.34M Rating: Neutral 12-mo. Price Target: $5.50 (11x CY13E EPS0.50)Thesis: We remain in a “wait and see” mode as the company has yet to demonstrate meaningful margin improvement to attain its target gross margin level of 15%. We view the company’s recent closure of the AIT acquisition as a long-term positive. AIT grew its revenues from $50M in 2009 to $170M in 2011 with 1H12 revenues of $66M. Gross margins for AIT have averaged 18-20% for the past three years which is better than UCTT’s standalone performance of under 15%. As synergies from the AIT acquisition unfold in 2013, and given minimal customer overlap, we expect overall GMs for UCTT to be accretive and rise in YE13 while execu-tion remains key. Given that Lam, AMAT and ASMI are three 10% customers and likely contribute more than 75-80% of revenues, we see the company exposed to typical semi cyclicality.Key Questions:• As customer consolidation happens, how does it affect pric-

ing with their core customers i.e. AMAT and LRCX who con-tribute more than 70% of quarterly revenues as these end customers have indicated savings from supply chain?

• When can we see meaningful savings from the AIT closure in terms of synergies? Is there anything next year?

• What are some growth opportunities for the non semi busi-ness? Where is the biggest opportunity? Where is the biggest risk for 2013?

Description: Ultra Clean is a supplier of critical subsystems and process modules to semiconductor equipment suppliers.Jagadish Iyer, Sr. Research Analyst, 212 284-5038

ValueVision Media, Inc. (VVTV) – $2.62 Market Cap: $128.62M Rating: Overweight 12-mo. Price Target: $3 (15x FY16E EPS, disc. 20%)Thesis: As brands and retailers seek to better engage with their customers beyond the four walls of their stores, content-driven digi-tailers like ValueVision Media will increasingly become a part-ner of choice. Key Questions:• Merchandising Strategy. Over the course of the past two

years, VVTV has embarked on a journey to elevate its product assortment through both private and exclusive label goods as well as becoming a partner to such brands and retailers as Macy’s, Brooks Brothers, Sur La Table and Calvin Klein. Discuss the quality and content of the pipeline of brands and goods as 2013 unfolds. Similarly, discuss your partnership with these brands and why more brands are seeking out your business.

• Distribution Costs. Distribution and selling expenses can amount to nearly 34% of sales. Given the fee structure of dis-tribution expenses and the recent expiration of cumbersome contracts, we anticipate this line item to ease, providing more opportunity for profitability. Discuss your prospects for this line item this year and in the years to come. Comment on the returns you see when deploying to better channel posi-tions on the “dial” or even the investments in HD cameras and broadcasting.

Description: ValueVision Media is a multi-channel retailer of dis-cretionary goods. Merchandise is featured on its 24/7 television network, ShopNBC, which is broadcast to 81 million homes in the U.S. Approximately 45% of VVTV’s sales are transacted via eCommerce.Neely Tamminga, Sr. Research Analyst, 612 303-1537

Verifone Systems, Inc. (PAY) – $18.97 Market Cap: $2.05B Rating: Overweight 12-mo. Price Target: $42 (13x FY13E non-GAAP EPS)Thesis: While we believe VeriFone Systems survives disintermedi-ation threats over the long term, the litany of reasons that caused a weak pre-announced January quarter. These issues included an over-emphasis on services to the detriment of systems, which cre-ated a sales air pocket. Due to the magnitude of PAY’s challenges, we are on the sidelines until the dust settles.Key Questions:• What are your top priorities for 2013?• Is PAY losing its edge and/or market share?• How would you handicap the Hypercom and Point acquisi-

tions at this time?• What are you seeing in end markets and on the competitive

front right now?Description: VeriFone provides secure electronic payment tech-nologies and services in over 110 countries. Michael Grondahl, Sr. Research Analyst, 612 303-6788

Verizon Communications Inc. (VZ) – $46.53 Market Cap: $133.03B Rating: Overweight 12-mo. Price Target: $50 (DCF Analysis, NT cost of capital of 9.2%, term cost of capital of 8.2% and term growth rate of 2.25%)

39


Thesis: We recently upgraded Verizon to Overweight on February 1 based on a number of factors that bode well for 2013 results: Verizon’s best-in-class wireless network continues to help the company win share even with a price premium; the weaker 4Q print could set the company up well to beat reset 2013 expecta-tions; we expect the company to have financial flexibility (read: returning cash to shareholders) in 2013; and wireline margins could improve. Because of these factors, we expect Verizon to outperform over the next 12 months.Key Questions:• What is Verizon’s view on cloud and hosting? What are the

merits of the merger of Terremark with Verizon?• How does Verizon corporate position its data center/host-

ing/cloud business? Do they see it as a loss leader/necessary offering to bring in more wireline business contracts, an add-on to existing customers to bring in extra revenue, a separate side business or something else?

• What types of customers are coming to Verizon cloud and what services are they purchasing?

• As an independent, Terremark highlighted its network neu-trality. How has this changed under Verizon?

• Now that Terremark has greater access to capital, has any-thing changed—pace of builds, areas of investment?

Description: Verizon is one of the world’s leading telecommunica-tion companies. Its comprehensive list of services include video, voice, broadband and other wireline and wireless services, as well as data center and hosting services.Christopher Larsen, Sr. Research Analyst, 212 284-9339

Volterra Semiconductor (VLTR) – $15.35 Market Cap: $385.45M Rating: Overweight 12-mo. Price Target: $25 (18x CY14E proforma EPS)Thesis: Volterra Semiconductor is navigating a tough environment with recent server weakness driving down its outlook. We expect the next few quarters to be choppy as the first half of the year is typically a seasonally soft period. However, we remain buyers at current levels as we expect to see some revenue momentum in 2H13 as designs for next generation notebooks pick up, Brickland ramps and the company starts to recognize revenue from its solar products. Key Questions:• Servers turned out to be a weak last year; what is your outlook

for this market? Do you expect pent-up demand to provide a snap-back or stabilization?

• Solar is a new area for the company; what is the update in terms of design wins and product launches?

• The company is re-allocating resources from notebooks to microservers. Are you too late at this point?

• VLTR is investing in products for communication infrastruc-ture. Revenue from this market has been in the low double digits for awhile. Do you expect growth to accelerate? What sorts of products are you getting designed into?

Description: Volterra is a leading fabless supplier of high perfor-mance power management ICs for servers, storage, communica-tion, graphics and notebook markets.Gus Richard, Sr. Research Analyst, 415 616-1711

Walter Investment Management Corp. (WAC) – $45.92 Market Cap: $1.64B Rating: Overweight 12-mo. Price Target: $58 (9x 2013E cash EPS)Thesis: We believe Walter Investment Corp. continues to benefit from banks looking to exit servicing. This paradigm shift is the major driver for WAC. In addition, it has invested in its mortgage origination and reverse mortgage businesses.Key Questions:• What will 2013 be about for WAC; what are you most excited

about for 2013 and what are your top priorities for 2013?• What will WAC look like in a few years and just how big is

your pipeline?• Talk about your progress on your origination strategy and the

Harp II opportunity?Description: Walter Investment provides third-party residential mortgage servicing. It utilizes a high-touch servicing methodol-ogy which improves the performance of high-risk mortgage as-sets. Furthermore, WAC is creating a meaningful presence in the mortgage origination space.Michael Grondahl, Sr. Research Analyst, 612 303-6788

Web.com, Inc. (WWWW) – $17.08 Market Cap: $803.92M Rating: Overweight 12-mo. Price Target: $25 (13x FY13E PF EPS)Thesis: Web.com focuses on providing small businesses with easy-to-use products to create an online presence. Last year, the company acquired Network Solutions, which added 2 million customers to its sub-million customer base. The company is fol-lowing a strategy with Network Solutions that it had previously used with success to convert a previous acquisition’s customers (Register.com) into higher paying subscribers through attractive online value-added services.Key Questions:• How will Web be able to continue to drive growth in ARPU?• What have you seen as far as customer acquisition rates from

television advertisements?• How do you think about competition from Google longer

term?Description: Web.com, Inc. develops websites and other online marketing communications primarily for small businesses.Gene Munster, Sr. Research Analyst, 612 303-6452

WEX Inc. (WXS) – $75.01 Market Cap: $2.91B Rating: Neutral 12-mo. Price Target: $74 (16.5x 2013E adjusted EPS)Thesis: WEX is making solid progress in its OPS business seg-ment. While the core business only grows modestly, 2013 is clearly a year of investment to drive long-term growth.Key Questions:• What are your top priorities for 2013?• What strategies do you have to drive the core business and

highlight the investments you are making to drive growth overall?

• With the OPS division, update investors on priorities for 2013.Description: WEX operates a proprietary fuel payment processing network for commercial fleet vehicles. The WXS fuel card is ac-cepted at more than 90% of U.S. gas stations.Michael Grondahl, Sr. Research Analyst, 612 303-6788

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WhipTail Technologies, Inc. – PrivateDescription: Whiptail was founded in 2008 and is based in Whippany, N.J. The company provides all-flash storage arrays designed for big data, virtualization and cloud computing en-vironments. Whiptail software was purpose-built to leverage flash, enabling it to deliver higher performance at a lower price than systems that rely on hard disk drives. Typical use cases in-volve VDI deployments and other applications that require high performance. Key Questions:• Why does Whiptail win and who are you winning against the

most?• How do you effectively compete against hybrid arrays, which

leverage both flash and hard disk drives?

WildTangent, Inc. – PrivateDescription: WildTangent provides a cross-device platform for the distribution and monetization of mobile, social and online games. Through the company’s platform users can access thousands of premium games through various methods including ad-support-ed free play, game rental using micro-currency and digital pur-chase. The company’s studio, WildTangent Studios, also develops original mobile-focused games.Key Questions:• What are the strategic differences between your service ver-

sus just publishing a game on an OS-based storefront (i.e. Apple’s App Store and Google Play)?

• What are the monetization benefits for publishers that dis-tribute through your games portal?

• What form of game monetization do you expect to come out on top as users increasingly shift to mobile? Specifically, do you expect ad-supported free-to-play to become a larger part of the mobile gaming market versus being dominated by games focusing on micro-transactions currently?

Wisdom Tree Investments, Inc. (WETF) – $9.10 Market Cap: $1.14B Rating: Overweight 12-mo. Price Target: $9.50 (5.8% 2013E avg. AUM)Thesis: We continue to believe Wisdom Tree Investments is well-positioned in the growing ETF market.Key Questions:• What are your top priorities for 2013?• What are you seeing on the competitive front and can you

highlight what differentiates WETF for others?• Recently, inflows have been very strong, obviously driven by

DXJ’s success and seasonality. What are your thoughts be-hind the strength of inflows?

Description: Wisdom Tree Investments is an ETF sponsor using its proprietary, fundamentally weighted index methodology.Michael Grondahl, Sr. Research Analyst, 612 303-6788

Yelp, Inc. (YELP) – $22.19 Market Cap: $1.40B Rating: Neutral 12-mo. Price Target: $25 (7x FY13E EV/revenue)Thesis: Yelp is a leading participant in the local commerce oppor-tunity with ~80M monthly unique users and a strong mobile pres-ence. Its platform features user-generated reviews, which helps to connect customers with local businesses. At present, Yelp has

more than 30M cumulative reviews ranging from restaurants to plumbers. The company has roughly 78M unique visitors and has impressive traction in mobile with 7.2M unique mobile devices. We expect Yelp to continue its strong growth as it begins to ex-pand internationally.Key Questions:• While early, what are the key takeaways from the Apple Maps

partnership?• How will the acquisition change the revenue and earnings

profile?• How do you view mobile monetization? Description: Yelp is the leading online service for local business customer reviews.Gene Munster, Sr. Research Analyst, 612 303-6452

Zayo Group Inc. – Private Description: Zayo Group, through its subsidiaries, provides fiber-based bandwidth, voice and managed services to carrier, enterprise, SME and government customers in the U.S. It offers private line, Ethernet, wavelength, Internet connectivity, SS7, long distance, tandem switching, operator, TDM voice, VoIP, videocon-ferencing and Web hosting services; solutions for carrier, wireless, multisystem operator, healthcare, education, content, disaster recovery and local exchange carrier customers; voice and private data network services; consulting services, such as IP telephony, wireless network design and deployment, wireless applications, network maintenance and cabling; equipment installation ser-vices; managed security services, including firewall reporting, and monitoring and management; Web content filtering; anti-spam and anti-virus services; intrusion prevention services; and coloca-tion facilities.Key Questions:• How do you compete versus the incumbents? What chal-

lenges do the local incumbents pose?• Where do you see demand coming from? What types of ver-

ticals? Ethernet? Fiber to the tower? Waves?• How do you decide where you’ll expand next? How does that

factor into your go to market strategy?• How do you enter a new market? What are the challenges of

expanding your footprint? Do you require anchor tenants for new markets?

• How long does it take to convert bookings to sales? Are cus-tomers understanding of waiting several weeks or months for fiber service?

Sources: Piper Jaffray, company reports and Web sites, and FactSet Research Systems, Inc.

Price and market capitalizations reflect closing prices on February 28, 2013.

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BUSINESS & FINANCIAL SERVICES AND BUSINESS & LEARNING SERVICES

Peter Appert John Crowther George TongSr. Research Analyst Research Analyst Research AnalystPiper Jaffray & Co. Piper Jaffray & Co. Piper Jaffray & Co.415 616-1709 612 303-8273 415 [email protected] [email protected] [email protected]

Peter Appert is a managing director and senior research analyst at Piper Jaffray specializing in the business and information services sectors.

Prior to joining Piper Jaffray in 2009, Appert spent six years at Goldman Sachs covering the publishing and information services sectors. He previously was affiliated with Alex. Brown, where he was among the first analysts to cover the education industry. Appert began his career at C.J. Lawrence as a media analyst, also serving as the firm’s director of research for five years.

Appert has received wide recognition in the investment and business communities, including 22 designations in the annual Institutional Investor “All-America Research Team” survey.

He received a Master of Business Administration degree from Stanford, a master’s degree from New York University, and a bachelor’s degree from Lafayette College. Appert is a member of Media and Entertainment Analysts of New York and holds a Chartered Financial Analyst designation.

DIVERSIFIED FINANCIAL SERVICES & TECHNOLOGY

Michael Grondahl Adam LetsonSr. Research Analyst Research AnalystPiper Jaffray & Co. Piper Jaffray & Co.612 303-6788 612 [email protected] [email protected]

Mike Grondahl is a managing director and senior research analyst at Piper Jaffray covering financial and business services companies. Grondahl had worked as a senior research analyst at Piper Jaffray from 1997 to 2002 covering financial services companies.

Prior to re-joining Piper Jaffray in 2011, Grondahl was director of equity research at Northland Securities where he also covered financial and business services companies. Prior to Northland, Grondahl worked on the buy-side for Key Colony Fund and Redsky Partners. Previously, Grondahl worked for Ernst & Young and for Deloitte & Touche.

Grondahl graduated summa cum laude from the University of St. Thomas.

PIPER JAFFRAY TECHNOLOGY, MEDIA & TELECOMMUNICATIONS INVESTMENT RESEARCH TEAM

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SEMI EQUIPMENT AND INDUSTRIALS, SEMICONDUCTOR CAPITAL EQUIPTMENT - MEMORY AND DISPLAY

Jagadish Iyer Shawn LockmanSr. Research Analyst Research AnalystPiper Jaffray & Co. Piper Jaffray & Co.212 284-5038 212 284-9330 [email protected] [email protected]

Jagadish Iyer is a principal and senior research analyst at Piper Jaffray covering the semi equipment, display, material, memory and industrial technology segments.

Prior to joining Piper Jaffray in 2011, he was at Arete, a technology research boutique covering the semicap, LED and materials companies. Iyer began his Wall Street career at UBS in 2005 covering the semiconductor equipment and alternate energy sectors. He worked in the industry for more than 10 years at leading companies such as Applied Materials, in various roles including engineering, product management and marketing.

Iyer has a master’s degree in material science and engineering from the University of Texas and a Master of Business Administration degree from California State University.

TECHNOLOGY, MEDIA & TELECOM: NETWORKING STORAGE TECHNOLOGIES

Troy Jensen Joshua KozbergSr. Research Analyst Research AnalystPiper Jaffray & Co. Piper Jaffray & Co.612 303-6291 612 [email protected] [email protected]

Troy Jensen is a managing director and senior research analyst at Piper Jaffray, specializing in networking technologies including application traffic management, networking equipment, 3D printing and video conferencing sectors.

Prior to joining Piper Jaffray in 2005, Jensen spent seven years in equity research at ThinkEquity Partners and RBC Capital Markets.

Jensen received a bachelor’s degree in management science and mathematics with an emphasis in finance from the University of Minnesota. He holds the Chartered Financial Analyst designation.

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TECHNICAL RESEARCH

Craig Johnson Leah WilliamsSr. Technical Analyst Research AnalystPiper Jaffray & Co. Piper Jaffray & Co.612 303-6428 312 [email protected] [email protected]

Craig Johnson is a managing director and senior technical research analyst at Piper Jaffray. He joined the Piper Jaffray private client research group in 1995 as associate analyst. Johnson offers frequent technical commentary on the broader market and individual stocks.

Prior to joining the firm, Johnson worked as a consultant for the Drake Small Business Development Center in Des Moines, Iowa.

Johnson earned a bachelor’s degree with an emphasis in finance and marketing and a Master of Business Administration degree from Drake University. He holds the Chartered Financial Analyst and Chartered Market Technician designations, is an active member of the Twin Cities Society of Securities Analysts, and is a co-chapter chair of the Market Technicians Association Minnesota Chapter. He is also on the board of directors for the Market Technicians Association.

TECHNOLOGY, MEDIA & TELECOM: TELECOMMUNICATIONS SERVICES

Chris Larsen Bradley Korch Joseph MastrogiovanniSr. Research Analyst Research Analyst Research AnalystPiper Jaffray & Co. Piper Jaffray & Co. Piper Jaffray & Co.212 284-9339 212 284-9402 212 [email protected] [email protected] [email protected]

Chris Larsen is a managing director and senior research analyst following telecommunication services.

Larsen has followed the telecommunication services sector for more than 18 years, most recently at Credit Suisse and prior to that at Prudential Securities and NatWest Securities.

Larsen was named on the Institutional Investor All-Star team for five years and has been ranked in The Wall Street Journal “Best On The Street” survey and the NASDAQ/Starmine survey for both stock picking and estimate accuracy.

Larsen earned a bachelor’s degree in business from Cornell University and holds the Chartered Financial Analyst designation.

44


TECHNOLOGY, MEDIA & TELECOM: MEDIA & ENTERTAINMENT

James Marsh Stan MeyersSr. Research Analyst Research AnalystPiper Jaffray & Co. Piper Jaffray & Co.212 284-9304 212 [email protected] [email protected]

James Marsh is a managing director and senior research analyst at Piper Jaffray, following entertainment, radio and television broadcasting, outdoor advertising and publishing companies.

Before joining Piper Jaffray, Marsh co-founded Hanover Square Capital Management, LLC., a hedge fund focused on the consumer and media sectors. Prior to that, he covered the radio and television broadcasting, publishing and outdoor advertising sectors at Cowen & Co., Robertson Stephens and Prudential Securities.

In 2004, Marsh ranked third in stock picking for the broadcasting and entertainment sector in The Wall Street Journal’s “Best on the Street” analyst survey, also ranking in the survey for forecasting in 2001 and for publishing in 2000.

Marsh has a Master of Business Administration degree in finance and international business from New York University and a bachelor of business administration degree in accounting from John Carroll University. He holds the Chartered Financial Analyst designation and is a Certified Public Accountant.

TECHNOLOGY, MEDIA & TELECOM: INTERNET

Gene Munster Douglas Clinton Matthew LeboSr. Research Analyst Research Analyst Research AnalystPiper Jaffray & Co. Piper Jaffray & Co. Piper Jaffray & Co.612 303-6452 212 284-9488 212 [email protected] [email protected] [email protected]

Gene Munster is a managing director and senior research analyst at Piper Jaffray, specializing in Internet. He joined Piper Jaffray in 1995. Munster’s Internet focus includes the U.S., Europe, China and Latin America. His coverage includes Google, Yahoo!, Amazon, Baidu, and MercadoLibre. In addition, Munster has covered the digital media space since 1995, including Apple. He has authored several key industry reports on technology and is quoted frequently in key financial and technical news journals.

Munster holds a bachelor’s degree in financial management and new venture strategies from the University of St. Thomas.

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TECHNOLOGY, MEDIA & TELECOM: ENTERPRISE SOFTWARE

Mark Murphy Pinjalim Bora Matthew CossSr. Research Analyst Research Analyst Research Analyst Piper Jaffray & Co. Piper Jaffray & Co. Piper Jaffray & Co.415 616-1705 415 616-1703 415 [email protected] [email protected] [email protected]

Mark Murphy is a managing director and senior research analyst at Piper Jaffray, focusing on the enterprise software sector.

Prior to joining Piper Jaffray, Murphy covered enterprise software for First Albany, and before that he worked in equity research at B.T. Alex Brown and Bankers Trust. Murphy has written software applications in various programming languages including BASIC, Pascal and COBOL.

Murphy has also been recognized in The Wall Street Journal’s “Best on the Street” survey and was recently recognized by Forbes Magazine as the No. 1 sell-side stock picker in the software industry for the prior five years, with returns of 115% versus 26% for the software industry.

Murphy graduated from Cornell University with a degree in business management and economics.

IT STORAGE AND NETWORKING SECTORS

Andrew Nowinski Daniel GarofaloSr. Research Analyst Research AnalystPiper Jaffray & Co. Piper Jaffray & Co.612 [email protected]

Andrew Nowinski, vice president and senior research analyst, returned to Piper Jaffray in 2011 to cover the IT storage and networking sectors.

Nowinski was previously a senior research associate at Raymond James and authored an extensive industry report on the IT storage sector. Prior to Raymond James, he spent more than three years at Piper Jaffray covering the storage and networking sectors. Before joining the sell-side, Nowinski spent 10 years in the industry doing software development for various companies, including Accenture and IBM (formerly PriceWaterhouseCoopers).

Nowinski earned an Master of Business Administration degree from the University of Minnesota.

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TECHNOLOGY, MEDIA & TELECOM: ONLINE CONTENT

Mike Olson Andrew Connor Ryan WrightSr. Research Analyst Research Analyst Research AnalystPiper Jaffray & Co. Piper Jaffray & Co. Piper Jaffray & Co.612 303-6419 415 616-1712 612 303-6498 [email protected] [email protected] [email protected]

Mike Olson is a managing director and senior research analyst at Piper Jaffray covering online media, online travel and video games.

Olson has been with Piper Jaffray covering companies in these industries since 2001 and has authored numerous industry reports, including “Internet Video: Field of Dreams or Nightmare on Elm Street,” “The Next Leg of Online Travel,” and “Pwned: How Casual Games Changed The Gaming Landscape.” Olson was recognized as the No. 2 stock picker and earnings estimator in the 2011 Financial Times/StarMine Internet & catalog retail category and was ranked in the Wall Street Journal‘s 2010 “Best On The Street” survey for the leisure goods & services category.

Olson has a bachelor’s degree in finance, investment and banking from the University of Wisconsin–Madison.

SPECIALTY RETAIL: WOMEN’S APPAREL & ACCESSORIES; PERSONAL PRODUCTS

Neely Tamminga Alex Fuhrman Senior Research Analyst Research AnalystPiper Jaffray & Co. Piper Jaffray & Co.612 303-1537 212 [email protected] [email protected]

Neely Tamminga is a managing director and senior research analyst at Piper Jaffray, focusing on specialty retailing: women’s apparel & accessories, and personal products. Tamminga ranked as a top sell-side analyst in The Wall Street Journal’s “Best on the Street” analyst survey in 2006 and 2011 for her coverage in broadline and apparel retailers. In 2010, FT/Starmine ranked Tamminga No. 2 in Stock Picking for her 2009 coverage in Specialty Retail. In 2009, FT/Starmine ranked Tamminga No. 2 Industry Estimator for her 2008 coverage in Personal Products. Tamminga has also received recognition by Institutional Investor magazine for her coverage in the apparel & footwear, department stores and hardlines retailing sectors.

Prior to joining Piper Jaffray in 2002, Tamminga worked at A.G. Edwards & Sons, Inc. in St. Louis, where she covered specialty apparel retailing companies.

Tamminga holds a bachelor’s degree in economics from Calvin College in Grand Rapids, Mich. and a Master of Business Administration degree from Saint Louis University.

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SEMICONDUCTORS AND ENABLING TECHNOLOGIES

Gus Richard Jennifer BaxterSr. Research Analyst Research AnalystPiper Jaffray & Co. Piper Jaffray & Co.415 616-1711 212 [email protected] [email protected]

Gus Richard is a managing director and senior research analyst at Piper Jaffray, focusing on the semiconductor sector.

Prior to joining Piper Jaffray in 2007, Richard worked in equity research at First Albany Capital, Hambrecht & Quist, Alex Brown, and Robertson Stephenson & Company. Richard also spent several years on the buyside as a technology analyst/portfolio manager at EGM Capital. Richard’s semiconductor industry experience includes work experience in R&D, manufacturing and marketing at Intel and PMC Sierra.

Richard holds a bachelor’s degree in physics from the Rochester Institute of Technology and a master’s degree in physics from Purdue University.

HEALTHCARE SERVICES: INFORMATION TECHNOLOGY, CONTRACT RESEARCH

Sean Wieland Mohan NaiduSenior Research Analyst Research Analyst Piper Jaffray & Co. Piper Jaffray & Co. 415 616-1710 312 267-5083 [email protected] [email protected]

Sean Wieland is a managing director and a senior research analyst at Piper Jaffray, focusing on healthcare information technology and health care services. Wieland has 20 years’ experience in healthcare information technology, including direct industry experience and more than 12 years on the sell-side. He is a three-time Wall Street Journal “Best on the Street” winner and StarMine award winner for earnings accuracy.

Prior to joining Piper Jaffray in 2005, Wieland was a senior research analyst at WR Hambrecht and Prudential Securities. Before joining the sell-side, he spent seven years in the industry, working in multiple roles at IDX Systems Corporation, most recently as a senior sales executive, where he learned firsthand about the need for technology in the healthcare setting.

Wieland earned his Master of Business Administration degree and his bachelor’s degree in electrical engineering from the University of Vermont.

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T E C H N I C A L C H A R T S F O R P A R T I C I P AT I N G P U B L I C C O M P A N I E S (charts are alphabetical by ticker)

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IMPORTANT RESEARCH DISCLOSURES

Report footer (beginning of conf book): Piper Jaffray does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decisions. This report should be read in conjunction with important disclosure information, including an attestation under Regulation Analyst Certification, found at the end of this report or at the following site: http://www.piperjaffray.com/researchdisclosures. Disclosure pages at end of book: Important Research Disclosures

Distributions of Ratings/IB Services Piper Jaffray

IB. Serv./Past 12 Mos. Rating Count Percent Count Percent Buy (OW) 320 55.75 62 19.38 Hold (N) 227 39.55 10 4.41 Sell (UW) 27 4.70 0 0.00

Note: Distribution of Ratings/IB Services shows the number of companies currently in each rating category from which Piper Jaffray and its affiliates received compensation for investment banking services within the past 12 months. FINRA rules require disclosure of which ratings most closely correspond with “buy,” “hold,” and “sell” recommendations. Piper Jaffray ratings are not the equivalent of buy, hold or sell but instead represent recommended relative weightings. Nevertheless, Overweight corresponds most closely with buy, Neutral with hold and Underweight with sell. See Stock Rating definitions below. Figures above are from February 28, 2013. Analyst Certification – Peter Appert, Michael Grondahl, Jagadish Iyer, Troy Jensen, Craig Johnson, Chris Larsen, James Marsh, Gene Munster, Mark Murphy, Andrew Nowinski, Mike Olson, Gus Richard, Sean Wieland, Neely Tamminga, Senior Research Analysts The views expressed in this report accurately reflect my personal views about the subject company and the subject security. In addition, no part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report. Piper Jaffray research analysts receive compensation that is based, in part, on overall firm revenues, which include investment banking revenues. Complete disclosure information, price charts and ratings distributions on companies covered by Piper Jaffray Equity Research can be found on the Piper Jaffray website: http://piperjaffray.com/researchdisclosures or by writing to Piper Jaffray, Equity Research Department, 800 Nicollet Mall, Minneapolis, MN 55402

Ratings and Other Definitions Stock Ratings: Piper Jaffray ratings are indicators of expected total return (price appreciation plus dividend) within the next 12 months. At times analysts may specify a different investment horizon or may include additional investment time horizons for specific stocks. Stock performance is measured relative to the group of stocks covered by each analyst. Lists of the stocks covered by each are available at www.piperjaffray.com/researchdisclosures. Stock ratings and/or stock coverage may be suspended from time to time in the event that there is no active analyst opinion or analyst coverage, but the opinion or coverage is expected to resume. Research reports and ratings should not be relied upon as individual investment advice. As always, an investor’s decision to buy or sell a security must depend on individual circumstances, including existing holdings, time horizons and risk tolerance. Piper Jaffray sales and trading personnel may provide written or oral commentary, trade ideas, or other information about a particular stock to clients or internal trading desks reflecting different opinions than those expressed by the research analyst. In addition, Piper Jaffray technical research products are based on different methodologies and may contradict the opinions contained in fundamental research reports. Overweight (OW): Anticipated to outperform relative to the median of the group of stocks covered by the analyst. Neutral (N): Anticipated to perform in line relative to the median of the group of stocks covered by the analyst. Underweight (UW): Anticipated to underperform relative to the median of the group of stocks covered by the analyst.

Other Important Information The material regarding the subject company is based on data obtained from sources deemed to be reliable; it is not guaranteed as to accuracy and does not purport to be complete. This report is solely for informational purposes and is not intended to be used as the primary basis of investment decisions. Piper Jaffray has not assessed the suitability of the subject company for any person. Because of

Report footer (beginning of conf book): Piper Jaffray does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decisions. This report should be read in conjunction with important disclosure information, including an attestation under Regulation Analyst Certification, found at the end of this report or at the following site: http://www.piperjaffray.com/researchdisclosures. Disclosure pages at end of book: Important Research Disclosures

Distributions of Ratings/IB Services Piper Jaffray

IB. Serv./Past 12 Mos. Rating Count Percent Count Percent Buy (OW) 320 55.75 62 19.38 Hold (N) 227 39.55 10 4.41 Sell (UW) 27 4.70 0 0.00

Note: Distribution of Ratings/IB Services shows the number of companies currently in each rating category from which Piper Jaffray and its affiliates received compensation for investment banking services within the past 12 months. FINRA rules require disclosure of which ratings most closely correspond with “buy,” “hold,” and “sell” recommendations. Piper Jaffray ratings are not the equivalent of buy, hold or sell but instead represent recommended relative weightings. Nevertheless, Overweight corresponds most closely with buy, Neutral with hold and Underweight with sell. See Stock Rating definitions below. Figures above are from February 28, 2013. Analyst Certification – Peter Appert, Michael Grondahl, Jagadish Iyer, Troy Jensen, Craig Johnson, Chris Larsen, James Marsh, Gene Munster, Mark Murphy, Andrew Nowinski, Mike Olson, Gus Richard, Sean Wieland, Neely Tamminga, Senior Research Analysts The views expressed in this report accurately reflect my personal views about the subject company and the subject security. In addition, no part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report. Piper Jaffray research analysts receive compensation that is based, in part, on overall firm revenues, which include investment banking revenues. Complete disclosure information, price charts and ratings distributions on companies covered by Piper Jaffray Equity Research can be found on the Piper Jaffray website: http://piperjaffray.com/researchdisclosures or by writing to Piper Jaffray, Equity Research Department, 800 Nicollet Mall, Minneapolis, MN 55402

Ratings and Other Definitions Stock Ratings: Piper Jaffray ratings are indicators of expected total return (price appreciation plus dividend) within the next 12 months. At times analysts may specify a different investment horizon or may include additional investment time horizons for specific stocks. Stock performance is measured relative to the group of stocks covered by each analyst. Lists of the stocks covered by each are available at www.piperjaffray.com/researchdisclosures. Stock ratings and/or stock coverage may be suspended from time to time in the event that there is no active analyst opinion or analyst coverage, but the opinion or coverage is expected to resume. Research reports and ratings should not be relied upon as individual investment advice. As always, an investor’s decision to buy or sell a security must depend on individual circumstances, including existing holdings, time horizons and risk tolerance. Piper Jaffray sales and trading personnel may provide written or oral commentary, trade ideas, or other information about a particular stock to clients or internal trading desks reflecting different opinions than those expressed by the research analyst. In addition, Piper Jaffray technical research products are based on different methodologies and may contradict the opinions contained in fundamental research reports. Overweight (OW): Anticipated to outperform relative to the median of the group of stocks covered by the analyst. Neutral (N): Anticipated to perform in line relative to the median of the group of stocks covered by the analyst. Underweight (UW): Anticipated to underperform relative to the median of the group of stocks covered by the analyst.

Other Important Information The material regarding the subject company is based on data obtained from sources deemed to be reliable; it is not guaranteed as to accuracy and does not purport to be complete. This report is solely for informational purposes and is not intended to be used as the primary basis of investment decisions. Piper Jaffray has not assessed the suitability of the subject company for any person. Because of

Note: Distribution of Ratings/IB Services shows the number of companies currently in each rating category from which Piper Jaffray and its affiliates received compensation for investment banking services within the past 12 months. FINRA rules require disclosure of which ratings most closely correspond with “buy,” “hold,” and “sell” recommendations. Piper Jaffray ratings are not the equivalent of buy, hold or sell but instead represent recommended relative weightings. Nevertheless, Overweight corresponds most closely with buy, Neutral with hold and Underweight with sell. See Stock Rating definitions below. Figures above are from February 28, 2013.

ANALYST CERTIFICATION — Peter Appert, Michael Grondahl, Jagadish Iyer, Troy Jensen, Craig Johnson, Chris Larsen, James Marsh, Gene Munster, Mark Murphy, Andrew Nowinski, Mike Olson, Gus Richard, Sean Wieland, Neely Tamminga, Senior Research Analysts

The views expressed in this report accurately reflect my personal views about the subject company and the subject security. In addition, no part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report.

Piper Jaffray research analysts receive compensation that is based, in part, on overall firm revenues, which include investment banking revenues.

Complete disclosure information, price charts and ratings distributions on companies covered by Piper Jaffray Equity Research can be found on the Piper Jaffray website: http://piperjaffray.com/researchdisclosures or by writing to Piper Jaffray, Equity Research Department, 800 Nicollet Mall, Minneapolis, MN 55402

RATINGS AND OTHER DEFINITIONS

Stock Ratings: Piper Jaffray ratings are indicators of expected total return (price appreciation plus dividend) within the next 12 months. At times analysts may specify a different investment horizon or may include additional investment time horizons for specific stocks. Stock performance is measured relative to the group of stocks covered by each analyst. Lists of the stocks covered by each are available at www.piperjaffray.com/researchdisclosures. Stock ratings and/or stock coverage may be suspended from time to time in the event that there is no active analyst opinion or analyst coverage, but the opinion or coverage is expected to resume. Research reports and ratings should not be relied upon as individual investment advice. As always, an investor’s decision to buy or sell a security must depend on individual circumstances, including existing holdings, time horizons and risk tolerance. Piper Jaffray sales and trading personnel may provide written or oral commentary, trade ideas, or other information about a particular stock to clients or internal trading desks reflecting different opinions than those expressed by the research analyst. In addition, Piper Jaffray technical research products are based on different methodologies and may contradict the opinions contained in fundamental research reports.

Overweight (OW): Anticipated to outperform relative to the median of the group of stocks covered by the analyst. Neutral (N): Anticipated to perform in line relative to the median of the group of stocks covered by the analyst.Underweight (UW): Anticipated to underperform relative to the median of the group of stocks covered by the analyst.

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OTHER IMPORTANT INFORMATION

The material regarding the subject company is based on data obtained from sources deemed to be reliable; it is not guaranteed as to accuracy and does not purport to be complete. This report is solely for informational purposes and is not intended to be used as the primary basis of investment decisions. Piper Jaffray has not assessed the suitability of the subject company for any person. Because of individual client requirements, it is not, and it should not be construed as, advice designed to meet the particular investment needs of any investor. This report is not an offer or the solicitation of an offer to sell or buy any security. Unless otherwise noted, the price of a security mentioned in this report is the market closing price as of the end of the prior business day. Piper Jaffray does not maintain a predetermined schedule for publication of research and will not necessarily update this report. Piper Jaffray policy generally prohibits research analysts from sending draft research reports to subject companies; however, it should be presumed that the analyst(s) who authored this report has had discussions with the subject company to ensure factual accuracy prior to publication, and has had assistance from the company in conducting diligence, including visits to company sites and meetings with company management and other representatives.

Notice to customers: This material is not directed to, or intended for distribution to or use by, any person or entity if Piper Jaffray is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to such person or entity. Customers in any of the jurisdictions where Piper Jaffray and its affiliates do business who wish to effect a transaction in the securities discussed in this report should contact their local Piper Jaffray sales representative. Europe: This material is for the use of intended recipients only and only for distribution to professional and institutional investors, i.e. persons who are authorized persons or exempted persons within the meaning of the Financial Services and Markets Act 2000 of the United Kingdom, or persons who have been categorized by Piper Jaffray Ltd. as professional clients under the rules of the Financial Services Authority. United States: This report is distributed in the United States by Piper Jaffray & Co., member SIPC, FINRA and NYSE, Inc., which accepts responsibility for its contents. The securities described in this report may not have been registered under the U.S. Securities Act of 1933 and, in such case, may not be offered or sold in the United States or to U.S. persons unless they have been so registered, or an exemption from the registration requirements is available.

This report is produced for the use of Piper Jaffray customers and may not be reproduced, re-distributed or passed to any other person or published in whole or in part for any purpose without the written consent of Piper Jaffray. Additional information is available upon request.

© 2013 Piper Jaffray. All rights reserved.

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