17 May 2012 GLOBAL TECHNOLOGY OUTLOOK · GLOBAL TECHNOLOGY OUTLOOK: A LOOK AT THE THREE COLUMNS OF TECH INVESTING 2012 SECTOR UPDATE AND LONG-TERM OUTLOOK. Barclays | Global Technology

Barclays Capital Inc. and/or one of its affiliates 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 decision.

This research report has been prepared in whole or in part by equity research analysts based outside the US who are notregistered/qualified as research analysts with FINRA.

PLEASE SEE ANALYST CERTIFICATION(S) AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 127.

EQUITY RESEARCH 17 May 2012

GLOBAL TECHNOLOGY OUTLOOK:A LOOK AT THE THREE COLUMNS OFTECH INVESTING

2012 SECTOR UPDATE AND LONG-TERM OUTLOOK

Barclays | Global Technology Outlook

17 May 2012 2


17 May 2012 3

EXECUTIVE SUMMARY

� Near term choppy, but product cycles drive 2H12: The Barclays Global Technology Outlook

outlines our top picks and themes for 2H12 and beyond. Although concerns persist around

Europe, deceleration in China, and government spending, we still believe there are investment

opportunities tied to Apple, Samsung, and related customers, as well as to cloud computing and

Big Data. We are increasingly upbeat about certain product cycles in 2H12, especially those

around Apple, which could impact many companies in this sector – both positively and

negatively. Year-to-date, the S&P 500 Information Technology Index is up 13% (but down 6% in

the second quarter to date) vs the overall S&P 500 up 7% (or down 4% second quarter to date).

� Three columns in tech investing: We introduce a new way to look at investing in the tech

sector. Given its defiance of the law of large numbers, we believe it is as important as ever to pay

attention to companies impacted by Apple – and its extraction of profits and market cap from

several sectors. We are enthusiastic about the pending iPhone 5 product cycle and prospects for

the iPad. As a result, our first column of investing strategy into 2H12 and beyond is centered on

the potential winners from Apple’s product cycles. Here we also include the beneficiaries of

Samsung’s smartphone sales, since both companies are successful. The second column consists

of the companies challenged by Apple and Samsung, including those in the supply chain and

those in industries that have been disrupted by smartphones and tablets (e.g., printing). The

third column is what we call “Apple-safe,” including plays in cloud and Big Data.

� Emerging Four-Screen Scenario: We have examined the emergence of a Four-Screen Scenario

in consumer technology, which looks at the race to compete across four screens, including

smartphones, tablets, computers, and TV. Our conclusion is that Apple will be hard to beat,

especially since we believe it will launch a smart TV hub next year and continue to merge its Mac

OS with iOS. However, we assess the attributes of both Google’s and Microsoft’s approach and

how their strategies will impact several hardware companies, including Samsung.

� Still expect IT spending growth given product cycles, but Europe a big risk: We have a

relatively neutral outlook on the sector as a whole but believe certain players can see improved

fortunes in 2H12. We identify product cycles at Apple that could impact up to $1 trillion in

market cap, as well as the impact of Intel’s Romley server processor upgrade, Ultrabooks and

Windows 8 in more detail in sector-specific commentary. Despite growing concerns around

Europe, analysts forecast global IT spending growth in the low- to mid-single digits through

2012 with mid-single-digit growth in 2013, which is supported by our bi-annual CIO surveys for

the U.S. and Europe, as well as our regional analysis of key markets. Our estimates factor in

decelerating growth in developed markets, offset by stronger growth in Brazil, Russia, India, and

China (BRIC) countries. An emerging concern for tech is the weakness of the euro, which could

contribute to cautious earnings and revenue forecasts in May through July.

� Favor Apple food chain: Given the prospect for rapid revenue acceleration into Apple product

cycles this year (ranging from Macs to iPads to iPhones), we favor not only Apple but many

companies in its supply chain, especially given recent concerns around second-quarter sales.

Our teams highlight Qualcomm, Skyworks, Avago, Dialog Semiconductor, Imagination, Largan,

Simplo, LG Display, AAC, and Catcher, to name a few.

� Still like cloud and Big Data themes: Within column three, cloud and Big Data stand out as long-

term investment themes. We are particularly excited about certain cycles in virtualization and

new Big Data products in hardware and software. Our teams favor F5 Networks, NetSuite,

VMware and Citrix for cloud exposure and EMC, Teradata, Informatica and Mellanox for Big Data

exposure.


17 May 2012 4

CONTENTS

Summary of Investment Views and Key Recommendations ............................................................... 6

Introduction..................................................................................................................................... 11

The Three Columns of Tech ............................................................................................................. 11

Four-Screen Convergence ............................................................................................................... 24

Sector Performance, Models & Charts .........................................................................................................31

PORTFOLIO STRATEGY

U.S. Portfolio Strategy ...................................................................................................................... 43

Barry Knapp: Slowing growth and public policy uncertainty warrant near-term

defensive positioning

UNITED STATES

U.S. IT Hardware .............................................................................................................................. 48

Ben Reitzes: Focusing on major new product cycles for 2H12 – Apple and EMC

stand out

U.S. Software ................................................................................................................................... 53

Raimo Lenschow: Structural growth stocks poised to outperform

U.S. IT Consulting & Computer Services ........................................................................................... 56

Darrin Peller: Payment names continue to benefit from strong underlying drivers;

mixed trends in IT services

U.S. Communications Equipment ..................................................................................................... 59

Jeff Kvaal: Healthy 1Q handset shipments; networking solid

U.S. Semiconductors ........................................................................................................................ 62

C.J. Muse & Blayne Curtis: A return to growth; maintain 1-Positive

U.S. Semiconductor Capital Equipment ............................................................................................ 65

C.J. Muse: Orders may be peaking but appear sustainable

U.S. Internet ..................................................................................................................................... 70

Anthony DiClemente: Smartphones & Devices driving growth

U.S. Display and Lighting ................................................................................................................. 72

Amir Rozwadowski & Olga Levinzon: Incrementally more positive on the LED

market

U.S. Clean Technology & Renewables .............................................................................................. 74

Amir Rozwadowski: Focused on attractive cost/value propositions

EUROPE


17 May 2012 5

European Technology Hardware...................................................................................................... 78

Andrew Gardiner & Youssef Essaegh: Sector slowly turning, growth is in smart

mobility

European Software & IT Services ..................................................................................................... 81

Gerardus Vos: Tougher ‘12 but SW & processing provides shelter

Israel Technology ............................................................................................................................ 83

David Kaplan & Joseph Wolf: Well Positioned

ASIA EX-JAPAN

Asia Ex-Japan IT Hardware............................................................................................................... 86

Kirk Yang: Lenovo remains our top pick; prefer Asustek over Acer in the near term

Asia Ex-Japan Data Networking & Wireline Equipment..................................................................... 89

Jones Ku: Investment value emerging

Asia Ex-Japan Semiconductors......................................................................................................... 91

Andrew Lu & SC Bae: What to expect post 2Q/3Q12 recovery

Asia Ex-Japan Wireless Equipment and Products ............................................................................. 93

Dale Gai: Prefer players with exposure to new iPhone/MacBook

Asia Ex-Japan LCD Displays ............................................................................................................. 95

SC Bae, Sunwoo Kim & Jamie Yeh: Bottoming out

JAPAN

Japan Consumer Electronics/Display & Lighting .............................................................................. 98

Yuji Fujimori: Prefer Casio and car electronics in the near term

Japan Electronic Components ........................................................................................................101

Masaru Koshita: Relying heavily on smartphone demand, see benefits from PC-

related business

Japan Precision Instruments...........................................................................................................104

Masahiro Nakanomyo: Concerns over digital camera supply/demand gap

widening starting in May

VALUATION

Equity Valuation Tables..................................................................................................................106

CONTACTS

Barclays Global Technology Team and Other Contributors ............................................................125


17 May 2012 6

SUMMARY OF INVESTMENT VIEWS AND KEY RECOMMENDATIONS

Sector, Rating, Analyst Investment View Key Recommendations

U.S. IT Hardware

2-Neutral

Ben Reitzes

Key Picks: Apple, EMC

Maintain our neutral view on the sector given secular weakness in printers, PCs & services offset by strong demand for storage hardware and new product cycles in 2H12.

We continue to believe that two themes: The Consumerization of IT and The Utilization Era will drive investment trends in the sector for the rest of the year. We believe Apple is the winner from the consumerization of IT and also note that Big Data is an attractive opportunity for EMC.

We still favor share gainers AAPL and EMC. Apple's valuation is attractive and shares can benefit from new MacBook products, a new OS, the iPhone 5 refresh cycle and a deeper integration of iCloud across Apple products. Also, spending on storage remains relatively solid amidst a slow spending environment. For EMC, we expect the strength of new product cycles to deliver upside in 2H12. EMC remains well positioned to exceed its long-term targets and gain share.

U.S. Software

1-Positive

Raimo Lenschow

Key Picks: Citrix, Informatica, NetSuite

We hold a constructive sector view over the coming months because of 1) attractive valuation levels and 2) conservative guidance after 1Q earnings season that sets up a “beat and raise” environment, especially for many of the structural growth names in our universe.

We like Informatica, Citrix and NetSuite. The market was disappointed by Informatica’s conservative guidance. However, we see this correction as an opportunity given its strong Big Data exposure and risk is skewed to the upside. Citrix’s 1Q12 provided evidence of virtual desktop momentum, which should be ongoing throughout the year. NetSuite has corrected following very elevated expectations, but the underlying business remains healthy and the structural growth story unchanged.

U.S. IT Consulting and

Computer Services

2-Neutral

Darrin Peller

Key Picks: Visa, MasterCard, VeriFone Systems, Alliance Data Systems

We continue to believe the Payments sub-sector is an attractive area relative to other areas with greater macro risk. We consider Payment names well positioned to outperform even in an uncertain macro environment.

Our outlook remains more conservative for IT Services, which has shown mixed fundamental trends and some demand pressures in 1H12. While we believe the industry continues to have longer-term opportunities, we would focus selectively on names whose valuations now reflect a material discount to underlying revenue growth potential.

Key picks include Visa, MasterCard, VeriFone Systems and Alliance Data Systems. Visa’s strength in underlying volume/transaction drivers provide us with a high degree of confidence in its ability to sustainably achieve EPS growth of 20%+ for years to come. We view MasterCard as a secular growth story, with similar ability to drive EPS growth of 20%+. We view VeriFone as a key beneficiary of secular payment technology/security trends. We also favor ADS given solid momentum across lending and non-lending businesses.

U.S. Internet

1-Positive

Anthony DiClemente

Key Picks: Google, Priceline

We believe fundamental trends in online advertising and eCommerce remain solid, as companies are increasingly focusing on reallocating advertising dollars online and developing multi-channel sales platforms.

We maintain our stance that the continued proliferation of smarter mobile devices and higher bandwidth speeds will drive significant increases in internet usage, with monetization likely to follow.

Our top picks in the space are Google and Priceline. We continue to like Google’s dominant position in search, exposure to mobile via the Android platform, and increasing traction in display. We believe Priceline is the best levered online travel agency to the international and hotel markets. Given 60%+ growth in hotels on Booking.com in 2011 and fairly consistent triple-digit bookings growth at Agoda, we believe Priceline still has a very robust growth runway ahead.

U.S. Wireless Equipment

2-Neutral

Jeff Kvaal

Key Pick: Qualcomm

Following solid F1Q global handset shipments, we retain our full year 2012 and 2013 growth rates at 8%. The mix continues to move to smartphones, where we see ongoing share consolidation around Apple and Samsung. The mobile systems market remains at best a low-single-digit growth industry Pockets of investments in small cells and LTE are unlikely to drive sustainable material long-term growth.

Qualcomm remains our top pick in Wireless. Management's plan to expand its 28nm capacity is on plan and should allow the company to ease its supply shortages during F1Q (December). We expect QCOM to retain much of its market share. A healthy handset market should fuel upside to our QTL outlook.


17 May 2012 7


U.S. Data Networking

and Wireline Equipment

2-Neutral

Jeff Kvaal

Key Picks: F5 Networks, Aruba

Networking demand is stable, not deteriorating. Bright spots include data center (virtualization, 10G switching) and BYOD/mobility.

Our preferred names are F5 in large- and mid-cap, and Aruba Networks in small-cap on the BYOD theme.

U.S. Semiconductors

1-Positive

C.J. Muse

Blayne Curtis

Key Picks: Broadcom, Avago, LSI, NXP Semiconductors

We continue to want to own the group as we maintain that semis will grow faster than end markets as we head into June-October. Stocks will likely remain choppy over the near term (as investors potentially adhere to the old adage of “Sell in May and Go Away”), but with the SOX pulling back to below $400, we see risk-reward as favorable.

Our top ideas remain leveraged to Apple and Samsung: Qualcomm, Broadcom and Skyworks. We also prefer names with leverage to a 2H recovery in communications infrastructure, such as Altera and Cavium. We prefer NXP Semiconductors and Avago based on relative valuations and secular growth in analog, while Micron is our top name in memory as we anticipate DRAM consolidation. In SMID-cap we like LSI.

U.S. Semiconductor Capital Equipment

2-Neutral

C.J. Muse

Key Picks: ASML, Teradyne

We expect 2012 wafer fab equipment (WFE) to be flat year-over-year, with yield issues and supply constraints in 28nm production driving foundry players to raise capex budgets. Foundry/logic equipment spending is now flat (vs more muted Street expectations entering the year), and the outlook for memory is still subdued. Based on the 1Q12 results/2Q12 guidance from the majority of the semiconductor production equipment (SPE) space, we believe that shipments and bookings will be flat in 2012.

We highlight ASML in front-end processing for leverage to the extreme ultraviolet (EUV) secular growth story coupled with expectations for an Intel-driven rise in 3Q12 bookings. In back-end processing, our top pick remains Teradyne given its superior leverage to all of the top mobility OEMs coupled with emerging growth from the LitePoint acquisition.

U.S. Display and Lighting

2-Neutral

Amir Rozwadowski & Olga Levinzon

Key Picks: Corning, Veeco Instruments

Our outlook for the Display & Lighting sector remains Neutral given the tempered demand backdrop and continued challenges of oversupply. However, given recent data points suggesting that a potential improvement in LED end market demand may be on the horizon, we are incrementally more positive on the LED market as we expect increased penetration of LEDs among general lighting applications to pick up momentum in 2013 and beyond.

Our top picks are Corning and Veeco Instruments. Corning has been hit with challenges, but we believe that average selling prices (ASPs) have normalized. We expect the company's display business to begin tracking end market demand, which remains healthy. We consider Veeco best positioned to benefit from a cyclical recovery in end market demand and the need to supply additional capacity to support rising penetration of LEDs in general lighting applications.

U.S. Clean Technology

and Renewables

2-Neutral

Amir Rozwadowski

Key Picks: Tesla Motors, Ameresco, Elster

We believe investors in clean technology would be best positioned by maintaining exposure to those areas that are less reliant on incentives and provide comparatively more attractive cost/value propositions.

We favor the alternative fuel vehicle and energy efficiency markets and are becoming incrementally more positive on smart grids given the impending European growth cycle. We prefer to remain on the sidelines with solar until visibility on pricing stabilization and rationalization of the supplier base.

We prefer Tesla Motors in the alternative fuels market given its ongoing focus on execution and acceleration of its Model S launch in June. We like Ameresco in the energy efficiency market given its growing backlog against a backdrop of improving federal and municipalities, universities, schools and hospitals (MUSH) market activity. In the smart grid arena, we favor Elster as it will likely benefit from the impending European upgrade opportunity.

European Technology

Hardware

2-Neutral

Andrew Gardiner & Youssef Essaegh

Key Picks: ASML, ARM, Imagination, Dialog

The Technology sector continues to adapt to a world of low GDP growth: After a correction in mid-2011, ASML orders bottomed in 3Q11 and all our major semiconductor players called the trough at some point in 4Q11/1Q12. In hindsight what we have seen is a short and soft downtick, making this transitional period more of a correction than a full-fledged cycle. However, we believe later-cycle telecom equipment players are in a more difficult situation and could take a lot longer to recover.

Our preference is for structural growth stories. Our top picks are ASML, where orders continue to improve, and names like ARM and Imagination and Dialog, which have exposure to smartphone growth and to Apple.


17 May 2012 8


European Software &

IT Services

1-Positive

Gerardus Vos

Key Picks: SAP, Wirecard

We like Software on a relative basis within the Technology sector, supported by results from our CIO Survey and secular trends such as Big Data, cloud and mobility. We look for companies that can ride these trends or, at the opposite end, the well-worn restructuring stories.

Our top picks are SAP and Wirecard, two companies that have structural growth exposure; they should be more resilient vs the rest of the sector if the economic outlook worsens and are also better positioned to offer additional upside.

Israel Technology

2-Neutral

Joseph Wolf and David Kaplan

Key Picks: Nice Systems, Mellanox, Ezchip, CEVA

Israeli technology stocks appear well positioned for 2012. Storage, cloud computing, mobile handsets and security remain high priorities for IT managers globally and should continue to be areas of investment. Several companies participate in key technology trends including Big Data, cloud computing, the utilization era and Consumerization of IT.

Our top picks, Mellanox and Nice Systems, are not showing any signs of economic-related slowdown, and we expect 2H strength for Ezchip and CEVA as new servers and handsets enter the market.

Japan Consumer

Electronics

2-Neutral

Yuji Fujimori

Key Pick: Casio Computer

We expect the industry growth driver to shift from flat-panel TVs to smartphones and tablets. For components, heavy reliance on Apple is likely to continue. The set side is likely to face a shrinking domestic market given the termination of analog TV signals. Large-caps (Sony, Sharp and Panasonic) are likely to struggle at least during the first half of FY2012 due to Apple and Samsung’s dominance of smartphones and shrinking domestic TV demand.

Our top pick is Casio Computer, as we see 1) medium-term growth opportunities in the watch business, and 2) smaller losses as digital camera ASPs improve. Although car electronic players may face risks from declining demand, JVC Kenwood looks undervalued to us.

Japan Electronic

Components

1-Positive

Masaru Koshita

Key Picks: Nidec, TDK, Ibiden

We expect a summer rally in Japan’s electronic components sector with support from a heavy flow of new product rollouts and a recovery phase in the inventory cycle. Primary drivers are smartphone demand, led by the next-generation iPhone, GalaxyS III, and GalaxyNote products, and PC-related business offerings linked to Ivy Bridge, Ultrabooks, and Windows8. The smartphone business continues to rely on Apple and Samsung Electronics; Japanese component suppliers have significant opportunities with Apple.

Our key picks are Nidec and TDK for PC-related businesses and Ibiden as a smartphone beneficiary. Risks include HDD price trends, the timing of Apple’s new product releases, if suppliers can generate suitable profits from Apple’s business and smartphone chipset supply issues (TSMC’s 28nm line ramp-up).

Japan Precision

Instruments

2-Neutral

Masahiro Nakanomyo

Key Pick: Shimadzu

Despite the Thai flooding, production of digital cameras normalized by the second half of March. Production of mirrorless and single-lens reflect (SLR) cameras ramped up in April. However, global demand for compact digital cameras continues to decline and sales of SLR cameras could be hurt by the growth of mirrorless cameras. We expect connectivity will be an important feature in the mirrorless category. We think the ability to respond to this demand will impact market share trends of individual companies and the growth of the market as a whole.

We prefer Shimadzu. Given solid global demand for analysis and measuring instruments, the company’s earnings remain strong. With new product launches from May onward, we expect earnings to remain strong. Amid weak earnings momentum in the precision instruments industry, especially in the digital camera and OA sub-sectors, we view Shimadzu as one of the few companies with strong near-term earnings potential and a plausible medium-term growth story.

Asia Ex-Japan IT

Hardware

2-Neutral

Kirk Yang and Jones Ku

Key Picks: Lenovo, Asustek, Quanta, Hon Hai, Acer, Pegatron

Asia PC brand companies should continue to gain share globally thanks to 1) their higher exposure to China and 2) US PC companies’ reduced focus on low margin hardware businesses. We are now less negative on the Taiwan NB ODM space as we finally saw y/y margin improvement and more significant non-NB contribution, such as tablet PC, server/storage and smartphone.

Our top picks are Lenovo, Asustek, and Quanta for near-term momentum and Hon Hai, Acer, and Pegatron for the longer term. PC shipments should be above seasonality in 2Q12, which is second-half loaded this year, but the Apple supply chain should see bigger q/q drops in 2Q12, before the expected iPhone 5 components and shipments ramp in 3Q12.


17 May 2012 9


Asia Ex-Japan Wireless

Equipment and Products

1-Positive

Dale Gai

Key Picks: Catcher

We remain positive on the sector, but given that we have not heard of any significant changes in component order allocations, we expect some Apple component suppliers in Taiwan may see a broad-based sequential double-digit decline in 2Q12 revenues. The extent of the drop will vary depending on the company’s exposure to Apple. We would see any near-term share price weakness as an opportunity to accumulate shares of these new iPhone suppliers in 2H12.

We are positive on Catcher Technology based on three major catalysts: 1) stronger MacBook refresh demand; 2) metal casing orders for new iPhone and iPad form factors; and 3) increases in Ultrabook and Windows 8 projects. We still expect Catcher’s smartphone clients – HTC, RIM and Sony – to address their lower-than-expected sales in 2012-13, as we assume no order growth for Catcher in 2013.

Asia Ex-Japan

Semiconductors

2-Neutral

Andrew Lu

Key Picks: Samsung , Vanguard, Kinsus, VPEC, MediaTek, MStar, SPIL

Although most foundry/Outsourced Semiconductor Assembly and Test (OSAT)/substrate semi vendors guided to sales growth of 10-20% q/q in 2Q12, most of their customers guided to sales growth of 4-6% q/q, implying that recent strength cannot last into late 4Q12 if the mismatch continues in 3Q12. By adding more High K Metal Gate (HKMG) gate-last capacity from TSMC and Poly SiON or HKMG gate-first capacity from others, coupled with gradual yield rate improvement, we believe the shortage issue on 28nm could be resolved by 4Q12.

We favor higher-beta small-cap and strong cash flow/margin recovery names like Kinsus and Vanguard. We also like Samsung, Vanguard, Kinsus, VPEC, MediaTek, MStar and SPIL, but remain 2-Neutral on the cyclical sector and expect stocks under our coverage to trade at their average valuation for the past three years.

Asia Ex-Japan LCD

Displays

1-Positive

Jamie Yeh

Key Picks: LG Display, Novatek, AU Optronics, Samsung SDI

We believe the top-tier panel makers will see a stronger earnings recovery and leverage their capabilities to supply ultra-high-end display products, including ultra-high-resolution (Retina) OXIDE thin-film transistor (TFT) and in-cell touch-equipped panels. These products offer 4-5x higher ASP per area compared to commodity panels and the entry barriers are substantially higher. Also, mass production of flexible organic light emitting display (OLED) could drive further penetration into mobile while TV OLEDs are delayed. We think that significant volume production of flexible OLED will begin in 4Q12 or 1H13.

We are optimistic on LG Display, Novatek Microelectronics, AU Optronics and Samsung SDI. We believe LG Display will show a strong recovery path over the next couple of years. Novatek and AUO should benefit from high-resolution migration in 2H12. Also, we remain bullish on Samsung SDI given battery growth momentum and OLED business growth.

Asia Ex-Japan Data

Networking & Wireline

Equipment

1-Positive

Jones Ku

Key Picks: Comba Telecom

We see the sector benefiting from four key themes: 1) increasing demand for wireless data capacity and transmission speed that should drive wireless enhancement capex for the next two years; 2) telecom equipment providers tapping into the high-growth smartphone/tablet markets; 3) solid Chinese operators’ capex in the near term, with potential ramp of 4G/LTE capex after 2013; and 4) overseas operators undergoing substantial network upgrades.

Comba Telecom is our top pick as it is the industry leader in the fast-growing wireless enhancement space in China.


17 May 2012 10

We also bring attention to our Underweights

In addition to the tech sector’s top picks, we have a number of 3-Underweight-rated names

that we list below. Some of the companies below are also listed as “challenged” from Apple

later in this report.

Figure 1: Barclays Tech team’s 3-Underweight rated stocks

Sector 3-Underweight Rated Companies

U.S. Internet

Anthony DiClemente Pandora, Expedia

European Technology Hardware

Andrew Gardiner Kudelski, Logitech, TomTom

European Software and IT Services

Gerardus Vos Aveva, Indra Sistemas, Software

Asia Ex-Japan IT Hardware

Kirk Yang Everlight, Inventec, Ju Teng, Sunrex

Asia ex-Japan Wireless Equipment and Products

Dale Gai Compal Communications, Unimicron, Young Fast

Asia Ex-Japan Semiconductors

Andrew Lu Nan Ya PCB,

Asia Ex-Japan Data Networking & Wireline Equipment

Jones Ku China Communications Services

Asia Ex-Japan LCD Displays

SC Bae & Jamie Yeh Chimei Innolux, Coretronic, Wintek

Japan Consumer Electronics

Yuji Fujimori Panasonic

Japan Display & Lighting

Yuji Fujimori Nippon Sheet Glass

Japan Electronic Components

Masaru Koshita Taiyo Yuden

Japan Precision Instruments

Masahiro Nakanomyo Olympus, ULVAC

Source: Barclays Research


17 May 2012 11

GLOBAL TECHNOLOGY OUTLOOK

Identifying the three columns of tech: New product cycles to drive 2H12

Welcome to the Barclays Global Technology Outlook, where we outline our top picks and

key themes for the remainder of 2012 and beyond in each region. There seem to be even

more reasons to be concerned about the outlook for technology now than in our last

update, published in December 2011, given the crisis in Europe, some deceleration in China,

and pockets of weakness in the U.S. However, we believe there are several exciting new

product cycles in the second half of the year, with the biggest impact likely to be felt from

Apple’s iPhone 5 and another new iPad. Also, some companies are set to benefit from new

initiatives at Intel and other key products in storage and virtualization. Given mounting

concerns about the outlook for tech and what could be a volatile summer, we believe it is

best to focus on company-specific product cycles for 2H12.

The three columns

We are introducing a new way we look at the sector, which explains where we have been –

but also where we could be going. As a team, our checks indicate that both Apple and

Samsung should continue to dominate the smartphone arena. Smartphones are a

phenomenon reminiscent of the rise of the PC in the 1990s in terms of platform adoption

and innovation – with even broader appeal given the combination of voice, Internet and

applications. We estimate this market will top 1,090 million units by 2014 (up from 689

million units in 2012). The biggest innovator in the space, Apple, is now the largest

company in the world, with a market cap of about $530 billion. By 2013, we estimate

Apple’s revenues will approximate $200 billion, defying the “Law of Large Numbers.” In fact,

this estimate seems conservative given it doesn’t include a seven-inch tablet or a new smart

TV platform, which seem to be on their way. One could argue these iPhone estimates are

conservative given the potential of the yet-to-be-announced iPhone 5. Let’s add to that

Samsung, whose market cap is now about $148 billion: We estimate Samsung’s revenues

will approximate KRWbn 229,087 in 2013, including sales of 466 million handset units.

Let’s put the Apple figures alone in perspective. Apple just reported revenues of more than

$46 billion in C4Q11. Within three years, it is plausible that Apple could have an $80 billion

revenue quarter. This type of revenue in one quarter is about the size of both the enterprise

server and storage market combined – for an entire year. NPD has estimated that U.S.

consumer electronics sales reached $144 billion in 2011; we believe Apple's Americas

division alone could achieve 40% of this figure if it continues to be successful.

Our point is simple: Apple’s share of tech revenue, when combined with Samsung’s, is so

large globally that those who are allied with them can still win – and those that are not

(either in the supply chain or because of a technology disruption like printing) could face

some serious challenges. We do not believe that consumers or corporations will see

spending capabilities expand enough over the next five years to allow categories like PCs

and printers, for example, to grow significantly.

The first two columns of tech investing are rather simple: Companies aligned with the

sizeable Apple and Samsung product cycles in mobility are set to thrive. Those cannibalized

or obsolesced by the rise of smart mobility could see challenges. The sheer size of the

upcoming iPhone 5 and iPad cycles, when combined with strong share from Samsung in

Given possible economic

weakness, investing in company-

specific product cycles may be

the best approach to tech in

2H12

We have divided the technology

sector into winners from Apple

and Samsung; those that are

challenged by Apple and

Samsung; and those that are

isolated, or “Apple-safe”


17 May 2012 12

smartphones, has only increased the importance of identifying these companies. In fact, the

IT Hardware team recently published a report stating that smartphones and tablets were

cannibalizing printed pages, especially for inkjet printing done in the home (see Is My

iPhone Now My Printer? A Deeper Look into the Secular Challenges in Inkjet, March 22,

2012). If a company is in column two, there could be short-term opportunities into a major

product launch (Windows 8 and Romley come to mind), but the positive impact may be less

significant and shorter vs past cycles as spending shifts toward Apple and Samsung,

supporting the consumerization of IT.

Below we show these two columns.

We have identified several names besides Apple that could benefit from powerful

upgrade cycles in 2H12.

Figure 2: 1-Overweight rated winners from Apple product cycles

Winners from Apple

Sector Company Ticker

U.S. Semiconductors Avago AVGO

Broadcom BRCM

MagnaChip MX

Skyworks SWKS

U.S. Semiconductor Capital Equipment ASML ASML.AS

Teradyne TER

European Technology Hardware ARM Holdings ARMH

Dialog Semiconductor DLG-DE

Imagination IMG-GB

U.S. Display Corning GLW

U.S. Communications Equipment QUALCOMM QCOM

InterDigital IDCC

AEJ IT Hardware Cheng Uei 2392 TT

Darfon 8163 TT

Hon Hai 2317 TT

Largan 3008 TT

Pegatron 4938 TT

Simplo 6121 TT

AEJ LCD Displays AUO 2409 TT

LGD 034220 KS

AEJ Wireless Equipment & Products AAC 2018 HK

Catcher 2474 TT

Japan Electronic Components TDK 4062 TY

Ibiden 6762 TY


We also identified a few names that could benefit from continued success in

smartphones at Samsung.


17 May 2012 13

Figure 3: 1-Overweight rated winners from success at Samsung

Winners from Samsung


Asia ex-Japan IT Hardware Samsung SDI 006400-KS

U.S. Semiconductors Avago AVGO

Broadcom BRCM

Skyworks SWKS

U.S. Wireless Equipment QUALCOMM QCOM

European Technology Hardware ARM ARM.L

Israel Technology CEVA CEVA


We identified several names that are particularly challenged by Apple and the disruption

caused by the rise of tablets and smartphones overall.

Figure 4: 2-EW and 3-UW rated companies challenged by Apple and Samsung

Challenged by Apple and Samsung


U.S. IT Hardware Dell DELL

Hewlett-Packard HPQ

Lexmark LXK

Xerox XRX

U.S. Software Microsoft MSFT

U.S. Communications Equipment Research In Motion RIMM

Motorola Solutions MSI

European Technology Hardware Logitech LOGN-CH

Nokia NOK

AEJ IT Hardware Inventec 2356 TT

Wistron 3231 TT

AEJ Wireless Equipment & Products BYD Electronic 285 HK


Is your tech company ‘Apple-safe’?

Given the rise of Apple and its share of market cap and industry profits, it is important to

invest in what we call “Apple-safe” companies. This third column of tech includes cloud and

Big Data themes and other enterprise-related tech trends that Apple cannot really disrupt.

However, we don’t include enterprise PCs, which we believe are disrupted by the

consumerization of IT, where Apple leads. Column three is dominated by storage, software

and certain services. Outside of those with cloud, Big Data or virtualization exposure,

successful companies in this column often include those with strong maintenance streams

and a shareholder-friendly cash return policy. In the IT Hardware sector, for example, there

is a large discrepancy between the P/E multiples of those companies that are “Apple

challenged” and those that are “Apple safe.” For example, EMC trades at a forward P/E of

13.2x and IBM trades at 12.1x vs 5.2x for Hewlett-Packard, 7.0x for Dell, and 6.5x for

Lexmark. In short, being Apple-safe makes a difference.

Cloud and Big Data companies

can find themselves in the third

column, where Apple cannot

directly disrupt them


17 May 2012 14

Figure 5: Companies isolated from Apple’s performance (“Apple-safe”)

Isolated From Apple


U.S. IT Hardware EMC EMC

IBM IBM

U.S. Semiconductors LSI LSI

Altera ALTR

Cavium CAVM

U.S. Software Oracle ORCL

Teradata TDC

Salesforce.com CRM

Informatica INFA

Qlik Tech QLIK

VMware VMW

Citrix CTXS

NetSuite N

European Technology Hardware Ericsson ERIC

U.S. Communications Equipment Cisco CSCO

Juniper JNPR

F5 Networks FFIV

Israel Technology Mellanox MLNX

European Software SAP SAP

AEJ IT Hardware Digital China 861 HK

Quanta 2382 TT


Cloud computing – A thriving “Apple-safe” opportunity

The relatively recent emergence of cloud computing has created some attractive investment

opportunities in the third column of tech. As more companies look for ways to decrease

operating costs and leverage the rapid growth of server, networking, and computing

technologies, more CIOs are turning to cloud solutions. Companies that provide and

manage solutions for desktop and server virtualization as well as develop and provide

application services should be well positioned to take advantage of the defensive nature of

cloud computing. New business models such as IaaS (infrastructure as a service), PaaS

(platform as a service) and SaaS (software as a service) have all emerged as products of

cloud computing. Names like F5 Networks provide the networking infrastructure for cloud

computing. Most enterprise software companies are not impacted by Apple, specifically the

SaaS and virtualization names. SaaS companies isolated from Apple include NetSuite and

SalesForce.com, whose solutions and performance are not directly linked to Apple. We also

would point out companies with strong exposure to server and desktop virtualization like

VMWare and Citrix. In fact, Citrix seems like a big winner from the mobility trend as workers

increasingly “log-in” from smart devices.

Below we show how a cloud-based index has improved so far year to date after

underperforming in 2011. We believe the cloud theme appears real and not on a par with

the passing tastes of the internet bubble. Our so-called Cloud Composite consists of

Akamai, Citrix, EMC, Juniper, NetApp, Salesforce.com, F5 Networks, Riverbed, and VMWare.

We still see attractive

opportunities in the Cloud like

Citrix, F5 Networks and NetSuite,

to name a few


17 May 2012 15

Big Data moves mainstream and is an attractive opportunity in the third column of tech

We believe that Big Data is emerging as one of the most important trends in technology

today. More and more unstructured data is being created as a result of digital content

moving online, the rise of increasingly complex computing applications (genomics and oil

exploration are just a few examples), and the ascension of cloud computing. This rapid

growth in data has fuelled the need for more powerful, higher capacity, and faster

technology solutions capable of managing and analyzing this data, and helps support our

estimate for external storage capacity growth of 40%+ annually through 2014. Furthermore,

companies are finding it critical to manage and implement the massive amounts of data

they have accumulated. Companies that provide the solutions to manage, utilize, and

analyze should be well positioned for growth in 2012, as we noted in our biannual Barclays

CIO Survey from April 2012, in which the Big Data problems was expected to be the biggest

driver of spending decisions.

Figure 6: Barclays cloud composite indexed price

performance 2011

Figure 7: Barclays cloud composite indexed price

performance YTD

60

70

80

90

100

110

120

Jan

-11

Feb

-11

Ma

r-1

1

Ap

r-1

1

Ma

y-1

1

Jun

-11

Jul-

11

Au

g-1

1

Sep

-11

Oct

-11

No

v-1

1

Dec

-11

Cloud Composite Indexed Performance

80

90

100

110

120

130

140

Jan-12 Feb-12 Mar-12 Apr-12 May-12

Cloud Composite Indexed Performance

Source: FactSet, Barclays Research Source: FactSet, Barclays Research

Big Data offers plenty of

opportunity, in our view,

including companies like EMC,

Teradata, Informatica and

Mellanox


17 May 2012 16

Figure 8: CIO survey question: What are your biggest trends driving your spending

decisions in 2012?

0 10 20 30 40 50

Green computing (saving power)

Desktop virtualization

Storage virtualization

Off shoring labor/Labor optimization

Windows upgrade cycles

Security

Cloud computing

Server virtualization

"Big Data" problems

# of Respondents

Aug-11 Mar-12

Source: Barclays Research, CIO Survey, April 2012

We believe that companies focused on Big Data are safe from Apple’s market cap vacuum.

In fact, the rise of smartphones and tablets is fuelling data growth. Companies that take

advantage of the emergence of NAND Flash within the enterprise as a new storage tier and

companies with scale-out storage offerings should be well positioned in Big Data.

Furthermore, integrated data analytics appliances allow storage hardware companies to

leverage powerful new software designed for Big Data. We look at software companies that

offer data integration and data discovery solutions as best positioned to take advantage of

Big Data along with general data analytics software companies. In addition to storage

hardware and software, the rise of Big Data has created increasingly large demands on the

networking infrastructure that supports it, which should create opportunities for well-

positioned networking companies.

We have previously cited EMC with its hardware and software offers as a beneficiary of the

Big Data trend, along with IBM, with its analytics strategy. However, Teradata and

Informatica are data analytics companies that can capitalize on the Big Data trend within

software. In addition, Mellanox is well positioned to take advantage of the increased

networking demands of Big Data.

Tech companies face a challenge: How do they get out of column 2 and into column 3? Follow IBM’s lead?

Industrialization of IT – A way for some tech companies to mature into higher

multiples, not lower

Very few large-cap tech companies have been able to convince investors they can move out

of being secularly challenged (our column two) and into an advantaged position (our

column three). IBM is one of the only companies to successfully achieve this status. Our

team believes that other large-cap tech companies may be well-served to follow some of

their tactics. The key for IBM has been a realization that it had strategic advantages in

selling software and services with high recurring revenue streams, while divesting

commoditizing businesses like HDDs, PCs, Printing and now cash registers. This

transformation is very difficult to achieve, and not all hardware companies possess the


17 May 2012 17

strategic relationships to succeed. Our team believes it will be difficult for HP, Dell and

Microsoft, for example, to follow IBM’s lead given current strategies.

We believe IBM has started what will become a trend, leading the “Industrialization” of

large-cap technology. We believe that IBM compares quite favorably with most industrial

companies, which goes a long way toward explaining its five-year multiple expansion and

how its multiple may be sustained. IBM has distinguished itself from its comps like HP, Dell,

and Microsoft, and we expect other tech companies to follow suit. Being an “industrial

stock” is something many tech companies would like to be – the Industrials sector boasts

P/Es of around 16.5x on average vs our IT Hardware sector, which averages about 10x

excluding IBM. See IBM Corp.: Is IBM Leading the 'Industrialization' of Tech? May 7, 2012.

IBM has essentially taken on more of the characteristics of industrial stocks, culminating in

Warren Buffett’s purchase of a 5.5% stake last year. Our research suggests rising ROIC, core

growth, cash usage, margin expansion and balance sheet optimization are key factors that

influence performance and shareholder returns. Qualitative factors such as portfolio

management, cycle management, and investor outreach are also key. IBM has focused on

all these metrics with particular success in ROIC, cash return, margin expansion, and

investor outreach.

In IT Hardware, we believe EMC is well positioned to expand into higher-value revenue

streams given its legacy focus in high-end storage lends itself well to moving into cloud and

Big Data platforms. We also focus below on several software, networking, and other

businesses that have grown from the ground-up with a focus on these key areas, which are

not subject to profit and market cap degradation at the hands of Apple.

IBM has seen its PE multiple expand at a significantly faster rate than its nearest competitors

and over a 2 year horizon the divergence of IBM’s multiple compared to HP and Dell is even

more pronounced…

In our opinion many companies

may attempt to follow IBM in the

“Industrialization” of large cap

tech

Figure 9: IBM, Dell, HP forward P/E multiple –5 Yr

Figure 10: IBM, Dell, HP forward P/E multiple –2 Yr

0x

5x

10x

15x

20x

25x

May-07 Apr-08 Mar-09 Feb-10 Jan-11 Dec-11

IBM HPQ DELL S&P 500

0x

2x

4x

6x

8x

10x

12x

14x

16x

May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12

IBM HPQ DELL S&P 500

Source: Company Reports and FactSet Source: Company Reports and FactSet


17 May 2012 18

Figure 11: Two- and five-year forward P/E averages

IBM S&P 500 HPQ DELL

2 Year Average 12.6x 13.5x 7.6x 8.9x

5 Year Average 12.8x 14.7x 10.5x 11.9x

Current 13.3x 13.2x 5.7x 7.3x

Source: Company Reports and FactSet

Tech taking a short-term breather: The Information Technology Index has outperformed

the market year to date (up 13% vs up 7% for the S&P 500), but has accelerated to the

downside 2Q12-to-date (down 6% vs down 4% for the S&P 500) after a robust

performance in 1Q12 (up 21% vs up 12% for the S&P 500). This year, bright spots in tech

have included IT Hardware, helped by Apple’s strong C1Q performance, followed by Internet

and IT Services. We still believe there are investment opportunities in cloud computing and

the ongoing consumerization of IT. However, now that Apple and Samsung seem to be

winning the consumerization battle, we introduced the concept of the three columns of

tech. Apple has grown as big as an asset class (market cap of about $530 billion) – and is

defying the law of large numbers – that we believe it is wholly appropriate to manage a tech

portfolio this way.

Information Technology has

outperformed year to date, but

recent performance has been

fairly weak given macro

concerns

Figure 12: S&P 500 GICS sector performance – YTD

Figure 13: S&P 500 GICS sector performance QTD

15% 14% 13%

7% 6% 5% 5% 5%

-1%-2%

-10%

0%

10%

20%

Uti

liti

es

Fin

an

cia

ls

Ind

ust

ria

ls

En

erg

y

Info

rma

tio

n

Tec

hn

olo

gy

Ma

teri

als

Tel

eco

mm

un

ica

tio

ns

Ser

vice

s

Co

nsu

mer

Sta

ple

s

Co

nsu

mer

Dis

cret

ion

ary

Hea

lth

Ca

re

4%2%

0%

-2% -2%

-5% -5% -5% -6% -6%-10%

0%

10%M

ate

ria

ls

Co

nsu

mer

Dis

cret

ion

ary

Co

nsu

mer

Sta

ple

s

En

erg

y

Fin

an

cia

ls

Info

rma

tio

n

Tec

hn

olo

gy

Tel

eco

mm

un

ica

tio

ns

Ser

vice

s Uti

liti

es

Hea

lth

Ca

re

Ind

ust

ria

ls

Source: FactSet Source: FactSet


17 May 2012 19

Figure 16: Index performance summary

Barclays Global Technology Composites 1-Month % 3-Month % 6-Month % 1-Year % QTD YTD %

Hardware -5.2 8.4 27.7 24.6 -4.3 24.1

Internet 3.1 8.6 8.6 3.8 0.5 12.7

IT Services -3.5 2.9 9.9 1.2 -7.5 11.8

Semiconductors -3.4 2.1 12.0 4.6 -6.0 10.5Handsets -4.2 6.9 13.6 0.2 -5.4 10.3Electronic Components -6.3 -0.9 8.1 -17.1 -11.0 10.2

Software -4.3 -3.2 3.1 -0.2 -7.8 9.9

Semiconductor Capital Equipment -3.6 -2.0 8.3 -8.4 -7.6 9.5

EMS (Contract Manufacturing) -11.0 -8.2 12.4 -5.5 -14.0 8.1

Telecommunications 7.4 7.9 12.3 1.9 3.6 7.7

Distributors -2.2 -5.9 9.4 -9.5 -7.1 4.5

Precision Instruments -7.0 1.1 7.5 -11.9 -11.6 4.0

Display -4.6 -7.6 -2.9 -37.6 -7.1 0.6Enterprise Networking -12.1 -15.0 -9.1 -19.4 -18.9 -5.3

Carrier Equipment -11.6 -11.7 -12.1 -23.7 -15.9 -8.5

Clean Technology -5.6 -21.0 -19.1 -51.1 -14.7 -12.1

Figure 14: S&P 500 vs S&P 500 Information Technology,

1Q12

Figure 15: S&P 500 vs S&P 500 Information Technology, 2Q

to date

90

95

100

105

110

115

120

125

130

Jan-12 Feb-12 Mar-12

S&P 500 S&P 500: Information Technology

90

95

100

105

110

Apr-12 May-12

S&P 500 S&P 500: Information Technology



17 May 2012 20

1-Month % 3-Month % 6-Month % 1-Year % QTD YTD %

S&P 500 0.0 1.1 9.5 0.1 -3.6 8.0

Japan Nikkei 225 -5.5 0.7 6.0 -8.2 -8.0 6.6

Hong Kong Hang Seng Index -1.9 -4.3 5.4 -16.5 -2.4 8.9

Taiwan TWSE Index -2.1 -4.8 2.4 -17.1 -5.2 5.8

Korea KOSPI Index -2.5 -2.4 7.3 -9.1 -4.2 6.5Singapore Straits Times Index -2.6 -1.9 4.2 -8.0 -3.0 9.7

Shanghai Composite 4.5 2.5 -2.8 -16.6 6.2 9.6

UK FTSE 100 -0.9 -5.3 1.8 -7.9 -2.8 -0.5

Germany DAX Index -1.3 -2.6 11.1 -13.1 -8.7 10.5

MSCI Europe Index -1.7 -5.5 3.3 -14.6 -6.0 0.5

MSCI The World Index -1.2 -1.4 6.3 -6.9 -4.9 5.1Technology Indices 1-Month % 3-Month % 6-Month % 1-Year % QTD YTD %

NASDAQ Composite Index -1.9 1.0 11.8 2.2 -5.1 12.6

Semiconductor HOLDRs Trust (SMH) -3.0 -3.8 5.9 -10.0 -8.2 8.0

PHLX / Semiconductor Index (SOX) -4.4 -6.8 3.6 -11.9 -10.7 7.5

MSCI Global Technology Index -4.6 0.9 10.0 2.9 -7.1 11.7

S&P 500 GICS Sectors 1-Month % 3-Month % 6-Month % 1-Year % QTD YTD %

Utilities 4.6 3.0 3.2 6.3 2.2 -0.5

Consumer Staples 1.9 4.7 9.7 7.4 -0.1 4.6

Health Care 1.1 3.4 10.8 3.3 -1.7 6.6

Consumer Discretionary 1.9 4.7 15.3 8.6 -1.7 13.5

Energy -0.8 -6.4 -3.3 -10.6 -5.6 -2.5

Information Technology -4.4 1.5 12.3 8.2 -6.3 13.5

Industrials 0.3 -3.1 8.6 -7.2 -4.5 5.6

Telecommunications Services 8.2 8.1 9.2 0.3 4.4 5.1

Materials -0.3 -5.4 2.7 -11.4 -5.3 4.7Financials 0.0 2.8 15.9 -7.7 -5.3 15.0

Source: FactSet, Barclays Research Data as of 11 May, 2012

Still looking for modest IT spending growth: Despite growing concerns around Europe and

persistent disruptions near term in some supplies due to Thailand, our analysts forecast

global IT spending growth in the mid to lower single digits this year, which is supported by

our bi-annual CIO surveys for the U.S. and Europe, as well as our regional analysis of key IT

markets. Our colleagues in global economics research, led by Piero Ghezzi, now forecast

2012 global real GDP growth of 3.6% and 2013 growth of 4.1% (see Global Economics

Weekly: Where next for Europe?, published May 11, 2012). We continue to look for growth

in global IT spending to exceed global GDP modestly, especially since the IT spending

forecast doesn’t include some of the weaker consumer segments. Please see our updated

Barclays economic forecasts on Figure 27.

Barclays analysts are forecasting

mid to lower single digit IT

spending growth this year


17 May 2012 21

Figure 17: CIO survey question: What is your overall IT spending trend for 2H12 Y/Y?

0%

10%

20%

30%

40%

50%

Up 10%+ Up 5-10% Up 0-5% Flat Down 0-

5%

Down 5-

10%

Down

10%+

% o

f R

esp

on

den

ts

Overall US EU

Overall, 43% expect y/y

growth in 2H12Overall, 20% expect y/y

declines in 2H12

Source: Barclays Equity Research, Survey of 100 CIOs, April 2012

Recent industry checks as well as data points from our recent Annual Barclays CIO Survey in

April 2012 suggest that IT spending is growing, but modestly – and could be decelerating

slightly into mid-year, particularly in developed markets. We still believe that software,

services, and storage still show signs of stable demand. Indications from CIOs and our

checks also suggest that spending for storage could continue to grow, albeit at a slower

pace near term, while servers, networking and PCs could continue to be slow until year-end.

As a result, we see limited upside to our estimates for IT spending growth into next year,

but note that we expect growth to remain above average in emerging markets – even with

some deceleration in growth from China.

Recent industry checks suggest a

tougher near-term environment,

but product cycles could help in

2H12


17 May 2012 22

Services, application software & storage remain highly rated areas for tech investment...

Figure 18: CIO IT spending priorities – April 2012 CIO survey

PCsNo PrioritiesServersNetworkingOtherSW-Infrastructure

StorageSW-Applications

IT Services0%

5%

10%

15%

20%

25%

% o

f R

esp

on

den

ts

Mar-12 Aug-11

IT Services and Applications

remain top priorities; Storage

continues to rate well

Source: Barclays Equity Research, CIO Survey, April 2012

Some near-term cyclical challenges

On May 11, U.S. Portfolio Strategy Analyst Barry Knapp downgraded the technology sector

to Marketweight from Overweight (please see U.S. Portfolio Strategy Weekly: Monsoon

Season). Knapp notes that concerns around public policy and slowing growth merit

defensive positioning in the near term. The portfolio strategy team does not believe that we

will reach the market low until 2Q earnings season, and with the team’s expectation for a

further correction, it tactically scaled back its cyclical exposure, adding defensives and

dividend yield. The downgrade to a Marketweight rating for technology comes as

technology analysts’ earnings estimate revisions (relative to the 10 GICS sectors) have

declined and the team’s margin diffusion index, which was approaching a trough, is

showing signs of struggle. Knapp does not see much that will change the poor outlook for

worldwide growth. However, he believes that the secular story is intact, and in a low-growth

environment, technology should be the primary beneficiary of a reach for growth via

efficiencies and the substitution of capital for labor. Looking to 2H12, the U.S. portfolio

strategy team is much more optimistic and expects firming activity to boost corporate

revenues and margins. This view is consistent with our call around 2H product cycles.

In addition to the near-term concerns surrounding the growth of the technology sector,

Knapp notes that at the S&P 500’s high in 2012, Apple was the largest stock in the index by

a factor of 1.4x; was up 53% year to date, outperforming the index by 40%; and was

responsible for more than 14% of the S&P 500 YTD. Apple has had an outsized impact on

the sector, making the returns look a bit better than the reality excluding the juggernaut.

On May 11, Barclays’ strategist further reduced ratings for cyclical exposures to reflect

expectations for a mild correction.

U.S. Portfolio Strategy Analyst

Barry Knapp recently

downgraded the technology

sector to Marketweight from

Overweight


17 May 2012 23

Figure 19: Barclays U.S. investment strategy sector ratings

Energy

Health Care

Utilities ↑

Technology ↓

Industrials

Financials

Telecom

Staples

Discretionary

Materials

Underweight Marketweight Overweight

Note: ↑/↓ = increases/decreases on 5/11/12 to ratings in place since 3/16/12 or earlier.

Research Overweight: The performance of the S&P 500 sector is expected to outperform the performance of the S&P 500 index in the next 3–6 months. Marketweight: The performance of the S&P 500 sector is expected to perform in line with the S&P 500 index in the next 3–6 months. Underweight: The performance of the S&P 500 sector is expected to underperform the performance of the S&P 500 index in the next 3–6 months. Source: Barclays Portfolio Strategy Team. For more information please see the note: Monsoon Season 5/11/12

Barclays Global Technology, Media and Telecommunications Conference

We are eagerly anticipating our 13th annual Global Technology, Media and

Telecommunications Conference, which will take place on May 22-23 at the Sheraton New

York Hotel & Tower in New York City. This year’s conference will combine our Global

Technology Conference, typically held in December with our Global Communications,

Media and Technology Conference. This conference is a joint effort by teams from across

the U.S., Europe, Japan and Asia. We expect well over 200 speakers and officers from across

the difference sectors and we expect over 1,000 attendees. We also would like to highlight

our keynote roster of CBS, Deutsche Telekom (T-Mobile USA), DIRECTV, IBM, Texas

Instruments, Verizon and Yahoo!

For more information please refer to the information link below:

https://events.barcap.com/cm.esp?id=213&pageid=_3G011DZ0Z


17 May 2012 24

FOUR-SCREEN CONVERGENCE – AN OPPORTUNITY TO COMPETE?

The unification dream in consumer electronics

Below, our mobility teams discuss what companies are doing to create and capitalize on

the vision of a unified ecosystem – resulting in a “Four Screen Convergence.” We take an

in-depth look at the positioning of many consumer electronics companies within this

“Four Screen Scenario” and who is likely to succeed. Apple is hard to beat.

A vision for many consumer electronics companies over the past several decades has

been to offer consumers a range of options within a single product category. A well-

diversified product portfolio across multiple price and feature tiers allowed vendors to

preserve their customer base within the brand, up-selling at opportunities where customers

were looking to upgrade to a higher-end or more feature-rich product and thereby building

upon the company’s brand equity. Nokia had the 1100 entry level phone and the N95

premium device. Hewlett-Packard offered PCs for internet surfers and gamers. Samsung

had 32” and 60” TVs. Apple offered the iPod Touch and the Nano. A comprehensive

product portfolio meant dominance within different segments of the same product

category. Those companies that competed successfully in multiple product categories, such

as Samsung in TVs and PCs, were rare.

The past five years has brought an alternative vision of a comprehensive, unified product

portfolio. Apple’s vision of a single software suite across multiple devices began a trend

toward what we term the Four-Screen Scenario. In this vision, device vendors compete not

only within a single product category, but also across each of the smartphone, tablet, PC,

and TV categories. Vendors unify their products with a common operating system, user

interface, applications suite, and cloud service. We consider the several interrelated factors

that allowed the competitive landscape to shift and outline which vendors we believe will be

successful in this new environment.

� The rise of remotely programmable hardware: All major operating systems – iOS,

Android, BlackBerry, and Windows 8, provide over-the-air updates. This keeps the

devices that are in the hands of consumers current and compatible. Consumers can

easily migrate pictures from a three-year-old iPhone to a new MacBook.

� Rapid increases in processing power: The upgrade from single core to dual core and

now quad core 1GHz+ processors has enabled smartphones and tablets to run the same

operating systems as their more powerful brethren, the PCs.

� Proliferation of high-speed networks: The upgrade to 1 Mbps plus download speeds

with HSPA+ and LTE allows users to consume much of the same media content on their

phones and tablets as on their PCs. Having the vacation pictures on one’s tablet and the

candid camera video on one’s PC is proving to be a compelling sales proposition.

� Weaknesses of the hyper segmented sales approach: Nokia in particular found itself

segmenting the market too finely. It ended up with many products targeting similar

demographics. Motorola’s RAZR period also featured too many similar models.

� The introduction of the tablet: The tablet blurs the lines between PC and smartphone.

This contributes to a new consumer expectation – that the user experience will be

similar across devices. Apple’s success in both smartphones and tablets attracted its

Device vendors are starting to

compete across all four screens:

smartphone, tablet, PC and TV


17 May 2012 25

phone competition to do the same. We now see many of the traditional players with a

product, either existing or planned, in at least two of the four categories.

Technology leaders from diverse segments are pursuing this vision. Apple of course

emerged from the PC industry and is furthest along. Software leader Microsoft has

assembled pieces of the vision, alongside its cell phone partners Nokia and soon Samsung.

Outside of Apple, the Microsoft/Samsung partnership might be most able to mesh the

components mentioned above. Google, with its acquisition of Motorola Mobility, also has

the right pieces in place to make the four-screen scenario a reality. None of these

technology leaders, however, have yet to establish a consistent presence in all four

categories (although we anticipate a smart TV from Apple next year). Nor is a single

operating system or application ecosystem yet available that runs on all devices.

We believe the stakes are high in the race toward the four-screen scenario. Combined, these

four markets (handset, tablet, PC, and TV) represent approximately $600-700 billion in

revenues each year. Unsurprisingly, smartphone and tablet – albeit to a lesser extent –

annual revenues will likely continue to rise within the mix, while PC revenues will likely

decline. We therefore believe that vendors who are more closely aligned with these growth

industries are best positioned to realize the four-screen vision.

Each of our sector analysts reviews below the strengths and weaknesses of the respective

players in their space. We attribute a greater weighting of 2x to software as we believe the

long-term differentiation for the vendors in the space will be in software. We believe that

hardware vendors in general will be heavily dependent on the operating system and the

ecosystem surrounding it as well as the ability to integrate across the different hardware

pieces.

Figure 20: Vendor penetration by category

Total

Phone Tablet PC TV OS Apps Cloud Score

Apple 4 4 3 2 4 4 2 33

Google (MMI) 3 3 1 2 4 4 2 29

Microsoft 1 1 1 2 3 3 2 21

Samsung 4 3 2 4 1 1 - 17

RIM 3 2 - - 2 2 1 15

Sony 2 2 3 4 1 1 - 15

HP 2 2 4 - 2 - - 12

Toshiba 2 2 3 4 - - - 11

Acer 2 2 4 3 - - - 11

LG 2 2 2 4 - - - 10

ASUS 2 2 3 3 - - - 10

Lenovo 2 2 3 3 - - - 10

HTC 3 2 - - 1 1 - 9

Nokia 3 2 - - 1 1 - 9

Dell 2 2 4 - - - - 8

Amazon - 3 - - - - 2 7

Huawei 3 2 - - - 1 - 7

ZTE 3 2 - - - 1 - 7

Key Weighting

Market leader 4 Software 2x

Market player 3 Hardware 1x

Product in development or subscale 2

Presence via partnerships or minimal IP 1

HARDWARE SOFTWARE


Hardware vendors will be heavily

dependent on their software

ecosystem and ability to

integrate different devices


17 May 2012 26

The Four-Screen Scenario may never materialize for some

We realize that the vision laid out here may not come to fruition for any number of reasons.

First, the technical capabilities required to bring these together are quite disparate. They

include a range of expertise in hardware, software, and internet services. Second, the

market for four consumer electronic devices united by a common OS and cloud service may

not be as large as we imagine. Consumers may not prove overly compelled by the ability to

reach their music or photo collection on their TV or their movie library on their phone.

Third, the investments required to play and succeed in all four categories are large – and

many vendors’ pockets these days are not so deep. Finally, we consider the possibility that

the owner or aggregator of the content becomes the most critical brand. Netflix, Pinterest,

or Pandora might run on every platform, negating the value of our four-screen scenario.

Nevertheless, we believe the vision we present here is one shared by many of the leading

players today, including Apple, Microsoft, and Nokia. We consider the positioning of the

leading hardware, software, and internet players below.

Vendor implications: Apple, Google, and Microsoft the furthest ahead – Samsung, RIM not far behind

Apple (score = 33): The trailblazer of the four-screen ecosystem that is hard to beat

Apple is clearly a leader of the integrated four-screen system. We believe that what cements

Apple’s position is the integrated software ecosystem that ranges from personal media

players to tablets to mobile phones. The combination of the App store and iCloud makes

the Apple ecosystem very “sticky,” as it becomes highly advantageous to use these services

within all devices in the Four-Screen Scenario. For example, all the songs that are purchased

on an iPod nano or iPod touch can be transferred to an iPhone or Mac via iCloud or iTunes.

Furthermore, while Apple has not yet entered the consumer television space, its current

Apple TV offering allows users to access their content from an array of devices and to

mirror their iPads and personal computers wirelessly to their television. Therefore, although

Apple is not presently in the TV business, the Apple TV allows the company to infiltrate the

TV screen via its dominance of the other three screens. We believe any future Apple

television would be able to seamlessly access content from any Apple device (Macs, iPads,

iPhone, iPod Touch) and from iCloud and iTunes – and we expect this product to become a

reality at some point in 2013.

We believe that Apple’s leadership in devices, app development and software makes them

tough to beat in the Four-Screen Scenario. Apple has a content distribution platform that is

directly linked to its hardware – and seems to be working on major enhancements with new

partners. We look forward to hearing a lot more about Apple’s ecosystem at its WWDC on

June 11, 2012, where we expect the company to release innovations that keep it well ahead

of new Windows releases that are slated for the fall. It is important to note that new

Macbook Airs, the new Mac OS X Mountain Lion, a new iOS and a new iPhone 5 should all

ship before Windows 8 even gets off the ground.

Google (score = 29): Android and smart TVs driving a connected Google ecosystem

Through the proliferation of Android and smart TVs, we believe Google is one of the

companies best positioned to make the four-screen thesis a reality. It has a strong position

in smartphones and a growing position in the tablet market via Android, which we believe


17 May 2012 27

will build with continued adoption of Ice Cream Sandwich, an operating system that

facilitates easier development across tablets and phones. Google is also well-positioned in

PC via both its dominant share in desktop search and its Chrome web browser. Finally, as

smart TVs grow in popularity in the coming years, we expect that Google will be able to

extend its reach to the television market as viewers watch YouTube clips and browse the

web from their living rooms.

Microsoft (score = 21): Strength in software leveraged across all segments

Microsoft is one of the few competitors that could offer a complete four-screen experience

along with its hardware partners. With Windows Phone, the strong PC franchise, the

upcoming tablet offerings and TV connectivity through Xbox, combined with a cloud

offering to connect all devices via the new ‘Microsoft account’ (replacing Windows Live),

Microsoft has many pieces of the puzzle in place. Microsoft’s search engine, Bing, and

recent Skype acquisition are incremental offerings that can aid in bridging the different

devices and further enhance the unified user experience. With the exception of Xbox, the

company continues to be a pure software player that will work with hardware vendors like

Samsung or Nokia to create a broad ecosystem.

On paper many parts of Microsoft’s strategy are visible, but the company still needs to

deliver some key products before a true four-screen experience is possible. The main

product here is obviously Windows 8 and its new Metro style user interface. For the first

time, Microsoft will be enabled to make a bigger push into the tablet market, the fastest

growing of the four screens. The Metro style interface will be standard across phones,

tablets and PCs, and hence will represent an important step toward unifying the user

experience. However, just launching the new Windows 8 products will not be enough as

Microsoft’s experience in the mobile phone market demonstrates. The new generation of

Windows phones, including Nokia’s Lumia series, are innovative new products, but so far

have not managed to create the level of sales momentum required to compete effectively

against the dominance of the Android and Apple phones. Only post the launch of Microsoft

W8 tablets later this year will we see if the company has managed to deliver its vision on

time to be able to stage a comeback.

We would also expect a tighter integration between the various cloud services the company

is offering; this will likely be another feature of the Windows 8 launch later on this year.

Samsung (score =17): Windows 8 to strengthen position; software however behind

We believe Samsung Electronics (SEC) should be one of the global leaders in the multi-

screen convergence along with Apple. We think Samsung strength is based on strong

presence in hardware space, especially in TV (global No. 1 with market share of 22% but

much higher share in the smart TV segment), smartphone (global No. 1 with market share

of 31% in 1Q12). The company does not have a dominant presence in tablet PCs and PCs

yet; however, we expect upcoming Windows 8 will provide the company with the key

catalyst for penetration into the tablet PC market starting from 2013.

One notable change is that Samsung has finally started to focus on the software capability

in its flagship smartphone the Galaxy S III on top of continued strength in the hardware.

And the efforts include the significant improvement in user interface and the integration of

multi devices. For example, S-Beam, which is WiFi synchronized NFC (Near Field

Communication), makes the data transfer between smartphone and smartphone or

between smartphone and TV much easier and fast.


17 May 2012 28

However, relative weakness on the software side, especially in OS and content, remains the

bottleneck; therefore we expect it may consider a strategic alliance with OS or content

providers to overcome this issue. We think Microsoft would be one of the best partners for

SEC to play out the convergence between PC and handset on the PC side, while SEC should

be one of the best partners for Microsoft to strengthen its market status in smartphone.

RIM (score =15): Many puzzle pieces, but the whole is less than the sum of the parts

RIM has assembled many of the critical elements of the four-screen vision – the hardware,

the OS, and most interestingly a proto cloud service with the Network Operations Center

(NOC). We consider RIM’s NOC to be a key differentiator and while it is mostly used as a

means to push and compress data, its use can expand far beyond its current form as we

have initially seen with BlackBerry Music. Nonetheless, RIM has not been able to integrate

these elements into a cutting edge, compelling experience. The lack of competitiveness of

its hardware platform coupled with a stalling ecosystem has led to significant share loss

across its core smartphone business.

Management still faces many challenges ahead. Its BlackBerry 10 devices are not due to

launch until early fall, which leaves RIM caught between the Playbook OS and BB7. The

mediocre response to the Playbook looks unlikely to reverse itself in the near term.

Developer interest has declined, which makes it harder for RIM to shape a consistent and

compelling user experience. While RIM appears to have some of the right elements in place,

its whole is less than the sum of the parts. We believe the BlackBerry 10 phones are RIM’s

next opportunity to reclaim a position as a credible participant. However, we do not expect

RIM to participate in the PC or TV market.

Sony (score =15): Competitive position in hardware – though weakening, not enough

Sony has a well-established position in many of the hardware categories. It is a leader in TVs

and PCs, and now an established player in the smartphone market with the consolidation of

Sony Ericsson to core Sony. Sony's initial forays into the Android tablet market have been

well reviewed. However, we believe Sony is not well positioned to capitalize on its hardware

strengths. The company is struggling with profitability in the TV and mobile phones units,

and thus management may not have the focus to pursue the Four-Screen Scenario.

HTC (score =9): Transition in the process, but competition remains the issue

HTC has revamped its product line-up and brought its new “One” series models to the

market for a strong rebound in 2Q12. While we expect HTC to see strong revenue growth in

2Q12 as it is ahead of its competitors in terms of flagship models, we continue to believe

that more structural issues will cap the upside from there. First, competition in the high-end

smartphone market will intensify when its major competitors Samsung and Apple launch

their next flagship models in late 2Q12/3Q12. In addition, tier-two brands are catching up

quickly with similar hardware specs but at lower prices. Second, HTC management

indicated that they will try to diversify their revenues geographically, with more contribution

from Asia and less from the U.S. While this is a reasonable move in the face of emerging

market demand, the product mix for Asia is more skewed toward the mid- to low-end side.

Though we do not believe that HTC will completely lose its brand image, these two factors

will have a negative impact on either revenue or margins, and thus lead to our neutral

stance on the company.


17 May 2012 29

In the near term, we do not expect HTC to move beyond current smartphone and tablet

business due to its lack of competence and scale in making notebooks and larger screen

devices. Even in tablets, HTC has struggled with selling the product without attractive

hardware specs and prices. In addition, HTC's target in keeping current OPM (above 10%)

implied limited interests in expanding out of smartphones in light of industry competition.

In our view, it addresses the risks on HTC as a single product company, against the trend of

convergence which might change the landscape in the smartphone industry.

Nokia (score =9): Inability to translate its dominance in mobile phones leaves it poorly positioned

Nokia, up until 1Q12, has led the market in total handset shipments. It was also this quarter

last year that it last held the lead position in the smartphone market. Despite its historical

dominance, albeit declining, the company has not been able to translate this to current

success. The Lumia launch, while mostly on track, generated only a mediocre response

globally. We do not consider the two million units shipped in 1Q to be the hallmark of a

rising platform. This lack of progress extends to its OS, apps, and cloud. We believe Nokia

does have a tablet in development, but it is unlikely to launch before the end of the year.

Nokia’s recovery now appears to be wholly dependent on the success of the Windows

Phone platform. True success would likely require it to become the dominant player in the

Windows ecosystem as Samsung is in the Android ecosystem. We consider Nokia’s focus

on transforming its core phones business a barrier to pursuing the Four-Screen Scenario.

Amazon (7): Pieces beginning to fall into place

Amazon has many of the pieces in place to drive connectivity among the four screens via its

Kindle Fire, Amazon Prime streaming video offering, and App store. The Kindle Fire has

emerged as a popular, economical alternative to Apple’s iPad offerings in the tablet arena,

with a diverse suite of apps and games. Amazon’s Kindle e-reader, which perhaps could

even be considered a “fifth screen,” has also been a big success and has taken a dominant

share of the e-book market. In addition, Amazon’s partnership with Sony, which enables the

use of its Prime streaming video service on Bravia televisions and PS3s, has helped Amazon

extend its reach to the living room. Finally, Amazon has exposure to the smartphone market

via its App store for Android, which provides a marketplace for Android users to purchase

apps and games.

Huawei (score =7): Rising presence in the global devices market

We expect the launch of the latest Ascend D1 Q and the previously launched Ascend

P1/P1S models to strengthen Huawei’s high-end smartphone line-up starting from 2Q12

and this should lower its dependence on the low-end smartphone segment, which is under

intense pricing and margin pressure. Huawei’s overall smartphone shipments are expected

to post close to 100% y/y growth in 2012, up from close to 20mn units in 2011. Huawei

also launched some tablet models but they have not been successful. We expect Huawei

would still be an established low-priced smartphones player while it may not be able to

penetrate into another category at least in the near term. Its newly established Enterprise

division (focusing on cloud computing) has shown little progress over the past year.

In the near term, we do not expect Huawei to expand beyond smartphones and tablets,

with smartphones being their primary focus. Management has not cited any interest in

entering the PC or TV market. While the company has made some investments into cloud

computing, we have seen limited progress to date.


17 May 2012 30

ZTE (score =7): Focus remains on smartphones

Unlike Huawei, putting more focus on killing products, ZTE pursues a more balanced

smartphone portfolio by launching both Android and Windows Phone models of different

price ranges. The company is likely to focus on its brand awareness and we expect the

company to market more of its smartphones under its own brand names. We believe ZTE’s

refreshed smartphone line-up and marketing of its own branded products will help sustain

its shipment momentum and its position in the low-end smartphone segment. We expect

ZTE, same as Huawei, is likely to post close to 100% smartphone shipment growth in 2012,

up from around 13-15 million in 2011. However, the intense pricing and margin pressure in

the low-priced smartphone segment will still be an overhang for ZTE’s share price in the

near term. ZTE also launched some tablets but, like Huawei, the products were not well-

received by the market. ZTE has also announced its intention to invest in cloud computing

but so far it has shown little or none progress.

Similar to Huawei, we do not expect ZTE to expand beyond smartphones and tablets in the

near term. Again, management has not cited any interest in entering the PC or TV market.


17 May 2012 31

SECTOR PERFORMANCE, MODELS AND CHARTS

We highlight the performance of the tech sector as well as specific industries compared to

the market and relevant industries. We have also included some industry models along with

a list of some of the leaders and laggards in selected sectors of the technology industry.

Figure 21: The S&P 500 Information Technology sector has generally outperformed YTD

95

100

105

110

115

120

125

Jan

-12

Fe

b-1

2

Ma

r-1

2

Ap

r-1

2

Ma

y-1

2

S&P 500 S&P Small Cap 600 / Information TechnologyS&P 500 / Information Technology S&P 500 / FinancialsS&P 500 / Health Care S&P 500 / IndustrialsS&P 500 / Telecommunications Services

Source: FactSet

The figure below summarizes group valuations relative to historical averages across the

tech sector for both price to earnings and enterprise value to sales ratios. The majority of

the Barclays Global technology sectors are trading below their five-year P/E averages.

Figure 22: Barclays Global Technology composite valuations by sub-sector

Barclays Global Technology Composites P/E FY1 P/E FY2 5-Yr Avg.

EV/FWD

Sales 5-Yr Avg.

S&P 500 13x 12x 15x NM NM

Internet 20x 17x 20x 3.5x 4.3x

Telecommunications 17x 15x 13x 2.9x 2.7x

Electronic Components 15x 13x 20x 0.9x 0.9x

IT Services 15x 13x 14x 3.2x 2.8x

Software 14x 13x 14x 3.3x 3.6x

Semiconductor Capital Equipment 14x 12x 16x 1.8x 2.0x

Precision Instruments 14x 11x 16x 0.8x 0.8x

Display 12x 11x 11x 1.2x 2.7x

Semiconductors 13x 11x 14x 2.3x 2.8x

Handsets 12x 10x 13x 1.8x 2.3x

Carrier Equipment 11x 10x 13x 1.0x 1.8x

Enterprise Networking 11x 10x 14x 1.6x 2.2x

Hardware 11x 10x 12x 1.9x 1.6x

Clean Technology 9x 9x 13x 1.3x 2.4x

EMS (Contract Manufacturing) 11x 9x 11x 0.4x 0.5x

Distributors 8x 7x 9x 0.2x 0.2x

Source: FactSet, Barclays Research


17 May 2012 32

Expect IT spending growth in low single digits through 2012; still favor storage, software

The Barclays tech team forecasts global IT spending growth in the lower to mid single digits

for the remainder of 2012. Our estimate is supported by recent checks and the results from

our bi-annual CIO surveys for the U.S. and Europe, as well as our regional analysis of key

markets. Our colleagues in global economics research, led by Piero Ghezzi, forecast 2012

global real GDP growth of 3.6% and 2013 growth of 4.1% (see Global Economics Weekly:

Where next for Europe?, published May 11, 2012). We look for global IT spending growth to

be relatively in line with global GDP growth in the near term. However, we still expect IT

spending to outpace GDP growth over the long term. Recent industry checks suggest that

IT spending is relatively steady heading into the second half of 2012 with the first half

prospects weaker than those in 2H12 given prospects for new product cycles. Furthermore,

we are looking for some product refresh cycles to help boost general demand toward the

end of the year. We also see Big Data driving continued software demand, especially in data

analytics. For 2013, we believe IT spending can still grow in the mid single digits.

We have included key forecasts from our various teams on the following pages:

Figure 23: Worldwide PC unit model

Units in (000)

Calendar Year 2009 2010 2011 1Q12 2Q12E 3Q12E 4Q12E 2012E 1Q13E 2Q13E 3Q13E 4Q13E 2013E 2014E 2015E

Worldwide 315,117 358,157 364,527 89,066 90,176 98,470 98,423 376,135 90,411 91,030 99,929 100,897 382,267 388,216 392,785Y/Y 5.1% 13.7% 1.8% 4.6% 4% 2% 2% 3.2% 2% 1% 1% 3% 1.6% 1.6% 1.2%Q/Q -7.4% 1.2% 9.2% 0.0% -8.1% 0.7% 9.8% 1.0%

U.S. 71,395 75,333 71,650 16,424 17,673 18,152 18,561 70,810 16,383 17,637 18,099 18,493 70,613 70,011 69,241

Y/Y 9% 6% -5% 0% -1% -3% 0% -1% 0% 0% 0% 0% 0% -1% -1%Q/Q -12% 8% 3% 2% -12% 8% 3% 2%% of Total 23% 21% 20% 18% 20% 18% 19% 19% 18% 19% 18% 18% 18% 18% 18%

Western Europe 68,186 71,237 60,947 15,032 12,778 15,366 17,686 60,861 14,796 12,522 15,192 17,999 60,509 60,417 60,017

Y/Y 1% 4% -14% -1% 1% 0% -1% 0% -2% -2% -1% 2% -1% 0% -1%Q/Q -16% -15% 20% 15% -16% -15% 21% 18%% of Total 22% 20% 17% 17% 14% 16% 18% 16% 16% 14% 15% 18% 16% 16% 15%

Japan 13,920 16,321 15,750 4,354 3,590 3,639 3,639 15,221 4,231 3,559 3,505 3,596 14,892 14,358 13,878

Y/Y -4% 17% -3% 10% -8% -9% -7% -3% -3% -1% -4% -1% -2% -4% -3%Q/Q 11% -18% 1% 0% 16% -16% -2% 3%% of Total 4% 5% 4% 5% 4% 4% 4% 4% 5% 4% 4% 4% 4% 4% 4%

Asia Pacific 93,361 111,083 122,830 30,311 32,583 34,368 31,085 128,347 31,041 33,352 35,206 31,988 131,587 134,854 137,748

Y/Y 17% 19% 11% 6% 5% 4% 3% 4% 2% 2% 2% 3% 3% 2% 2%Q/Q 1% 7% 5% -10% 0% 7% 6% -9%% of Total 30% 31% 34% 34% 36% 35% 32% 34% 34% 37% 35% 32% 34% 35% 35%

Rest of World 68,256 84,182 93,350 22,945 23,553 26,944 27,453 100,895 23,959 23,959 27,926 28,821 104,666 108,575 111,902

Y/Y -5% 23% 11% 9% 10% 8% 7% 8% 4% 2% 4% 5% 4% 4% 3%Q/Q -11% 3% 14% 2% -13% 0% 17% 3%% of Total 22% 24% 26% 26% 26% 27% 28% 27% 27% 26% 28% 29% 27% 28% 28%

Source: IDC, Gartner and Barclays Research

The Barclays tech team forecasts

global IT spending growth in the

low-single digits through 2012


17 May 2012 33

Figure 24: Worldwide x86 server unit model (in ‘000)

Calendar Year 2009 2010 1Q11 2Q11 3Q11 4Q11 2011 1Q12 2Q12E 3Q12E 4Q12E 2012E 2013E 2014E 2015E

Worldwide 6,534 7,650 1,885 1,958 2,022 2,135 8,000 1,946 1,981 2,100 2,233 8,260 8,463 8,531 8,500Y/Y -16% 17% 4% 6% 6% 3% 5% 3% 1% 4% 5% 3% 2% 1% 0%Q/Q -9% 4% 3% 6% -9% 2% 6% 6%

U.S. 2,370 2,880 640 700 715 720 2,775 685 740 769 785 2,979 3,072 3,079 3,013

Y/Y -15% 22% -4% -5% -3% -3% -4% 7% 6% 8% 9% 7% 3% 0% -2%Q/Q -14% 9% 2% 1% -5% 8% 4% 2%

% of Total 36% 38% 34% 36% 35% 34% 35% 35% 37% 37% 35% 36% 36% 36% 35%

Western Europe 1,495 1,645 415 387 382 450 1,634 387 360 371 437 1,555 1,518 1,473 1,432

Y/Y -20% 10% 0% 2% -2% -2% -1% -7% -7% -3% -3% -5% -2% -3% -3%Q/Q -10% -7% -1% 18% -14% -7% 3% 18%

% of Total 23% 22% 22% 20% 19% 21% 20% 20% 18% 18% 20% 19% 18% 17% 17%

Japan 499 540 135 124 145 125 529 143 107 134 121 505 484 465 448

Y/Y -12% 8% -13% 8% 4% -4% -2% 6% -14% -8% -3% -5% -4% -4% -4%Q/Q 4% -8% 17% -14% 14% -25% 25% -10%

% of Total 8% 7% 7% 6% 7% 6% 7% 7% 5% 6% 5% 6% 6% 5% 5%

Asia Pacific 1,315 1,580 430 490 505 540 1,965 460 506 536 574 2,076 2,189 2,278 2,355

Y/Y -6% 20% 23% 29% 28% 19% 24% 7% 3% 6% 6% 6% 5% 4% 3%Q/Q -5% 14% 3% 7% -15% 10% 6% 7%

% of Total 20% 21% 23% 25% 25% 25% 25% 24% 26% 26% 26% 25% 26% 27% 28%

Rest of World 855 1,005 265 257 275 300 1,097 271 268 290 316 1,145 1,201 1,236 1,253

Y/Y -25% 18% 13% 12% 12% 2% 9% 2% 4% 5% 5% 4% 5% 3% 1%Q/Q -10% -3% 7% 9% -10% -1% 8% 9%

% of Total 13% 13% 14% 13% 14% 14% 14% 14% 14% 14% 14% 14% 14% 14% 15% Source: IDC, Gartner and Barclays Research

Figure 25: Worldwide printer unit model (in ‘000)

Calendar Year 2009 2010 1Q11 2Q11 3Q11 4Q11 2011 1Q12E 2Q12E 3Q12E 4Q12E 2012E 2013E 2014E 2015E

Worldwide 108,370 120,975 29,690 27,675 30,070 33,695 121,130 28,720 27,342 29,714 34,789 120,566 120,415 119,122 117,990Y/Y -12% 12% 7% -1% 1% -4% 0% -3% -1% -1% 3% 0% 0% -1% -1%Q/Q -16% -7% 9% 12% -15% -5% 9% 17%

U.S. 26,010 27,790 6,200 5,800 6,525 7,440 25,965 5,903 5,846 6,404 7,315 25,468 24,854 23,962 23,138

Y/Y -9% 7% -2% -11% -4% -9% -7% -5% 1% -2% -2% -2% -2% -4% -3%Q/Q -24% -6% 13% 14% -21% -1% 10% 14%

% of Total 24% 23% 21% 21% 22% 22% 21% 21% 21% 22% 21% 21% 21% 20% 20%

Western Europe 25,585 26,510 6,605 5,230 6,325 8,025 26,185 6,322 5,289 6,168 8,216 25,994 25,609 25,171 24,611

Y/Y -11% 4% 4% -6% 0% -3% -1% -4% 1% -2% 2% -1% -1% -2% -2%Q/Q -20% -21% 21% 27% -21% -16% 17% 33%

% of Total 24% 22% 22% 19% 21% 24% 22% 22% 19% 21% 24% 22% 21% 21% 21%

Japan 7,180 7,460 1,560 1,595 1,585 2,865 7,605 1,745 1,618 1,515 2,800 7,678 7,524 7,321 7,087

Y/Y -7% 4% -5% 1% 8% 3% 2% 12% 1% -4% -2% 1% -2% -3% -3%Q/Q -44% 2% -1% 81% -39% -7% -6% 85%

% of Total 7% 6% 5% 6% 5% 9% 6% 6% 6% 5% 8% 6% 6% 6% 6%

AP & ROW 49,595 59,215 15,325 15,050 15,635 15,365 61,375 14,750 14,589 15,628 16,458 61,425 62,428 62,668 63,154

Y/Y -15% 19% 13% 4% 3% -4% 4% -4% -3% 0% 7% 0% 2% 0% 1%Q/Q -5% -2% 4% -2% -4% -1% 7% 5%

% of Total 46% 49% 52% 54% 52% 46% 51% 51% 53% 53% 47% 51% 52% 53% 54% Source: IDC, Gartner and Barclays Research


17 May 2012 34

Figure 26: Worldwide external storage model

Value in $M ESTIMATES

Calendar Year 2009 2010 2011 2012E 1Q13E 2Q13E 3Q13E 4Q13E 2013E 1Q14E 2Q14E 3Q14E 4Q14E 2014E 2015E

Worldwide External Storage

Value 17,961$ 21,287$ 23,570$ 25,411$ 6,368$ 6,523$ 6,743$ 7,804$ 27,438$ 6,915$ 7,046$ 7,243$ 8,392$ 29,596$ 31,936$

Y/Y -10.6% 18.5% 10.7% 7.8% 7% 7% 8% 10% 8.0% 9% 8% 7% 8% 7.9% 7.9%

Q/Q -11% 2% 3% 16% -11% 2% 3% 16%

DAS 3,475$ 3,023$ 2,699$ 2,351$ 526$ 468$ 502$ 527$ 2,023$ 464$ 399$ 415$ 452$ 1,730$ 1,515$

Y/Y -16% -13% -11% -13% -16% -15% -13% -13% -14% -12% -15% -17% -14% -14% -12%

Q/Q -13% -11% 7% 5% -12% -14% 4% 9%

DAS % of $ Ttl 19% 14% 11% 9% 8% 7% 7% 7% 7% 7% 6% 6% 5% 6% 5%

SAN 9,146$ 10,357$ 11,841$ 13,006$ 3,322$ 3,355$ 3,455$ 4,077$ 14,209$ 3,576$ 3,612$ 3,720$ 4,390$ 15,297$ 16,425$

Y/Y -17% 13% 14% 10% 9% 9% 9% 9% 9% 8% 8% 8% 8% 8% 7%

Q/Q -11% 1% 3% 18% -12% 1% 3% 18%

SAN % of $ Ttl 51% 49% 50% 51% 52% 51% 51% 52% 52% 52% 51% 51% 52% 52% 51%

NAS 3,534$ 5,280$ 5,873$ 6,349$ 1,555$ 1,648$ 1,723$ 1,998$ 6,924$ 1,758$ 1,829$ 1,902$ 2,187$ 7,676$ 8,473$

Y/Y 4% 49% 11% 8% 5% 7% 9% 14% 9% 13% 11% 10% 9% 11% 10%

Q/Q -11% 6% 5% 16% -12% 4% 4% 15%

NAS % of $ Ttl 20% 25% 25% 25% 24% 25% 26% 26% 25% 25% 26% 26% 26% 26% 27%

iSCSI 1,806$ 2,627$ 3,157$ 3,706$ 965$ 1,052$ 1,063$ 1,201$ 4,282$ 1,117$ 1,206$ 1,206$ 1,363$ 4,893$ 5,524$

Y/Y 21% 45% 20% 17% 18% 13% 16% 16% 16% 16% 15% 13% 13% 14% 13%

Q/Q -7% 9% 1% 13% -7% 8% 0% 13%

iSCSI % of $ Ttl 10% 12% 13% 15% 15% 16% 16% 15% 16% 16% 17% 17% 16% 17% 17%



17 May 2012 35

Figure 27: Barclays Global Economic forecasts

4Q11 1Q12 2Q12 3Q12 4Q12 2011 2012 2013 4Q11 1Q12 2Q12 3Q12 2011 2012 2013

Global 2.9 3.5 3.7 4.2 4.4 3.8 3.6 4.1 3.9 3.3 3.0 3.0 3.9 3.1 3.2

Developed 0.8 1.2 1.5 2.0 2.0 1.3 1.4 1.9 2.7 2.3 1.9 1.8 2.6 2.0 1.9

Emerging 5.1 5.8 6.1 6.5 6.7 6.4 5.7 6.3 6.0 5.1 4.9 5.0 6.3 5.0 5.5

BRIC 7.4 6.1 7.2 7.6 7.8 7.5 6.9 7.4 5.9 4.6 4.1 4.2 6.7 4.3 5.2

America 2.6 2.6 3.1 3.6 3.4 2.5 2.8 3.0 4.4 3.9 3.3 3.3 ↓ 4.3 3.5 3.8

United States 3.0 2.2 2.5 3.0 3.0 1.7 2.4 2.5 3.3 2.8 1.9 ↓ 1.8 ↓ 3.2 2.2 ↓ 2.4

Canada 1.8 2.5 2.5 2.5 2.5 2.5 2.4 2.3 ↑ 2.7 2.3 2.0 ↑ 2.3 2.9 2.3 2.1 ↓

Latin America 1.9 3.5 4.9 5.3 4.7 4.4 3.8 4.2 8.3 7.8 7.6 7.9 8.1 7.8 8.4

Argentina 0.0 5.6 7.4 4.0 4.0 8.8 4.7 4.2 22.9 24.1 25.4 26.8 23.5 26.1 28.4

Brazil 1.4 2.8 5.5 6.8 5.3 2.7 3.3 4.7 6.7 5.8 5.1 5.4 6.6 5.4 6.0

Chile 4.0 5.9 3.2 2.5 3.9 6.3 4.0 4.7 4.0 4.2 4.0 4.6 3.3 4.2 3.3

Colombia 3.5 4.5 6.0 6.6 5.0 5.8 5.4 4.9 3.9 3.6 4.0 4.1 3.4 3.9 3.5

Mexico 1.7 2.7 2.9 3.8 3.9 3.9 3.2 3.3 3.5 3.9 4.0 4.1 3.4 3.9 3.9

Peru 4.3 4.9 6.0 6.3 5.8 6.9 5.8 6.0 4.5 4.1 3.7 3.2 3.4 3.5 2.7

Venezuela 4.9 3.8 4.8 5.3 5.4 4.2 4.9 2.2 27.4 25.5 25.4 25.5 26.1 26.3 31.4

Asia/Pacific 4.3 6.7 6.5 7.0 7.0 5.9 6.0 6.5 3.4 2.7 2.5 2.5 3.7 2.6 3.2

Japan -0.7 3.5 2.2 3.0 3.0 -0.7 2.5 1.9 -0.1 0.1 0.0 0.1 -0.2 0.1 0.1

Australia 1.7 1.6 2.4 2.8 2.4 2.0 2.4 2.8 3.1 1.6 1.3 1.3 3.4 1.5 2.5

Emerging Asia 5.4 7.5 7.5 7.9 8.0 7.4 6.9 7.5 5.0 4.0 3.8 3.7 5.6 3.9 4.5

China 8.9 6.3 7.4 9.5 10.4 9.2 8.1 8.4 4.6 3.8 3.0 2.9 5.4 3.2 4.5

Hong Kong 1.5 4.1 4.1 5.3 5.3 5.0 3.0 3.5 5.7 4.9 2.7 2.7 5.3 3.5 3.5

India 4.8 9.7 9.7 5.4 3.8 7.1 6.9 7.7 9.0 6.8 6.9 6.7 9.5 6.8 6.1

Indonesia 8.3 5.4 5.4 6.2 7.6 6.5 6.2 6.6 4.1 3.7 6.3 6.6 5.4 6.0 6.1

South Korea 1.3 4.1 3.6 4.9 4.5 3.6 3.5 4.5 4.0 3.0 2.9 3.0 4.0 3.2 3.2

Malaysia 6.6 4.0 5.0 6.0 6.0 5.1 5.0 6.5 3.2 2.5 2.2 2.3 3.2 2.4 2.0

Philippines 5.6 4.6 0.7 8.1 7.8 3.7 4.2 5.0 4.7 3.2 3.1 3.8 4.8 3.4 3.7

Singapore -2.5 5.0 5.4 6.2 7.2 4.9 3.0 4.8 5.5 4.8 4.7 3.0 5.2 3.7 2.3

Taiwan -0.6 1.6 8.4 9.7 6.3 4.0 3.5 6.0 1.4 1.3 1.9 2.6 1.4 2.0 2.0

Thailand -36.4 43.0 13.0 8.0 8.0 0.1 4.5 4.5 4.0 3.4 3.2 3.3 3.8 3.4 3.2

Europe and Africa 1.2 -0.1 0.5 0.9 1.5 2.3 0.8 1.9 3.7 3.2 3.1 3.1 3.6 3.1 2.6

Euro area -1.2 -0.7 -0.2 -0.1 0.3 1.5 -0.3 0.9 2.9 2.7 2.5 2.3 2.7 2.4 1.9

Belgium -0.3 1.1 0.6 0.3 1.0 1.9 0.5 1.0 3.4 3.2 2.8 2.5 3.5 2.7 2.0

France 0.6 0.4 0.2 0.6 0.8 1.7 0.5 1.2 2.6 2.6 2.4 2.2 2.3 2.2 2.0

Germany -0.7 0.3 1.2 1.2 1.8 3.1 0.8 1.8 2.6 2.4 2.1 1.9 2.5 2.0 1.7

Greece -20.7 -6.6 -4.5 -3.0 -0.9 -6.9 -7.7 -1.3 2.6 1.7 1.4 1.5 3.1 1.5 1.4

Ireland -0.8 0.7 1.8 3.2 2.5 0.7 0.7 2.2 1.5 1.7 2.1 2.0 1.2 1.9 0.9

Italy -2.6 -2.9 -0.6 -0.6 -0.4 0.5 -1.5 0.1 3.7 3.6 3.7 3.0 2.9 3.2 2.6

Netherlands -2.5 -0.9 -0.6 0.6 0.9 1.3 -0.9 1.1 2.6 2.9 2.7 2.5 2.5 2.8 ↑ 3.4 ↑

Portugal -5.0 -4.9 -4.0 -2.0 -2.1 -1.6 -3.7 -2.1 3.8 3.3 2.7 2.5 3.6 2.6 0.8

Spain -1.2 -1.4 -3.3 -4.5 -4.1 0.7 -2.0 -0.5 2.7 1.9 2.0 2.2 3.1 2.0 1.3

United Kingdom -1.2 -1.1 0.6 3.5 ↓ 1.6 ↓ 0.7 0.4 ↓ 2.1 ↓ 4.7 3.5 3.4 3.3 4.5 3.3 2.6 ↑

Switzerland 0.0 0.4 0.4 0.8 0.4 2.0 0.5 1.1 0.1 -0.5 -0.2 0.3 0.3 0.0 0.5

EM Europe & Africa 7.3 1.5 1.9 1.7 3.9 4.8 3.3 3.7 6.3 5.2 5.1 5.8 6.4 5.4 5.1

Czech Repub. -0.5 -0.1 0.7 1.2 1.4 1.5 0.3 2.0 2.1 3.0 3.5 3.5 1.9 3.4 2.0

Hungary 0.9 -1.4 -1.5 -0.5 0.6 1.7 0.1 1.7 3.6 4.8 5.3 5.8 3.7 5.3 3.4

Poland 4.6 3.5 1.7 -3.0 3.8 4.3 2.7 2.5 4.1 3.6 3.1 3.3 3.7 3.3 3.0

Russia 11.0 1.5 2.7 2.7 5.1 4.3 4.3 4.5 6.9 4.0 4.2 5.2 8.6 4.8 5.7

Turkey 7.2 0.3 0.8 2.7 3.0 8.4 3.2 3.8 9.2 10.5 9.6 10.1 6.5 9.4 6.4

Israel 3.2 1.9 1.8 2.3 2.9 4.9 2.5 3.7 2.5 1.8 2.0 2.3 3.4 2.2 2.2

South Africa 3.2 2.8 2.9 3.1 3.4 3.1 2.7 3.6 6.1 6.1 6.1 6.4 5.0 6.2 5.8

Consumer prices% annual chg

Real GDP% over previous period, saar

Consumer prices% over a year ago

Real GDP% annual chg

Note: Arrows appear next to numbers if current forecasts differ from that of the previous week by 0.5pp or more for quarterly annualized GDP, by 0.2pp or more for annual GDP and by 0.2pp or more for Inflation. Weights used for real GDP are based on IMF PPP-based GDP (5yr centred moving averages). Weights used for consumer prices are based on IMF nominal GDP (5yr centred moving averages). Source: Barclays Research Source: Barclays Global Economics Team. For more information please see the report published May 11, 2011, titled: “Global Economics Weekly: Where next for Europe?”


17 May 2012 36

Status quo: Still robust smartphone growth, tablets still led by iPad

We believe smartphones remain a standout in terms of growth prospects for 2012. Our

Wireless Equipment team is calling for a 46% increase in smartphone units in 2012 to more

than 688 million units, with total handset units still expected to expand 8% in 2012 to 1.71

billion units. Meanwhile, Apple's third-generation iPad has cemented the tablet as a vibrant

new growth category in computing, with some major upgrades possible in 2H12. We expect

Apple to increase its lead over the course of the year. We forecast 101 million tablet units

will be sold in 2012, which includes about 62 million iPad units (61% share). This tablet

forecast doesn’t even include prospects for Apple to launch a 7” tablet.

Figure 28: Worldwide tablet model

Units in (000) 2010 2011 1Q12 2Q12E 3Q12E 4Q12E 2012E 1Q13E 2Q13E 3Q13E 4Q13E 2013E 2014E 2015E

Apple iPad Forecast 14,789 40,497 11,798 14,158 15,857 20,138 61,950 16,110 20,138 22,152 26,582 84,981 101,492 116,716 q/q change -24% 20% 12% 27% -20% 25% 10% 20% y/y change - 174% 151% 53% 43% 30% 53% 37% 42% 40% 32% 37% 19% 15% % Unit Share 82% 62% 68% 68% 61% 55% 61% 64% 67% 64% 66% 65% 67% 69%Other Tablets 3,211 24,620 5,600 6,720 10,080 16,632 39,032 8,898 10,010 12,213 13,800 44,921 49,414 53,046

q/q change -47% 20% 50% 65% -47% 13% 22% 13% y/y change - 667% 220% 41% 34% 58% 59% 59% 49% 21% -17% 15% 10% 7%Total Tablet Forecast 18,000 65,117 17,398 20,878 25,937 36,770 100,982 25,008 30,148 34,364 40,382 129,903 150,906 169,762 q/q change -33% -68% 49% 76% -32% -70% 37% 34% y/y change - 262% 170% 49% 39% 42% 55% 44% 44% 32% 10% 29% 16% 12%

ASP ($) 2010 2011 1Q12E 2Q12E 3Q12E 4Q12E 2012E 1Q13E 2Q13E 3Q13E 4Q13E 2013E 2014E 2015E

Apple iPad Forecast 622$ 577$ 525$ 540$ 530$ 510$ 525$ 490$ 505$ 505$ 495$ 499$ 469$ 455$ q/q change -6% 3% -2% -4% -4% 3% 0% -2% y/y change - -7% -7% -12% -9% -9% -9% -7% -6% -5% -3% -5% -6% -3%Other Tablets 410$ 432$ 380$ 370$ 360$ 350$ 360$ 340$ 340$ 335$ 320$ 332$ 312$ 297$ q/q change -3% -3% -3% -3% -3% 0% -1% -4% y/y change - 5% -24% -30% -13% -10% -17% -11% -8% -7% -9% -8% -6% -5%Total Tablet Forecast 584$ 522$ 478$ 485$ 464$ 438$ 461$ 437$ 450$ 445$ 435$ 441$ 418$ 406$ q/q change -2% -7% -3% -10% 0% -2% 2% -3% y/y change - -11% -13% -17% -10% -11% -12% -9% -7% -4% -1% -4% -5% -3%

Value (in $ millions) 2010 2011 1Q12E 2Q12E 3Q12E 4Q12E 2012E 1Q13E 2Q13E 3Q13E 4Q13E 2013E 2014E 2015E

Apple iPad Forecast 9,194$ 23,383$ 6,193$ 7,644$ 8,403$ 10,269$ 32,510$ 7,893$ 10,168$ 11,185$ 13,157$ 42,403$ 47,640$ 53,143$ q/q change -28% 23% 10% 22% -23% 29% 10% 18% y/y change - 154% 134% 35% 30% 19% 39% 27% 33% 33% 28% 30% 12% 12%Other Tablets 1,315$ 10,627$ 2,128$ 2,486$ 3,629$ 5,821$ 14,064$ 3,025$ 3,404$ 4,091$ 4,416$ 14,936$ 15,395$ 15,732$ q/q change -48% 17% 46% 60% -48% 13% 20% 8% y/y change - 708% 143% -1% 16% 41% 32% 42% 37% 13% -24% 6% 3% 2%Total Tablet Forecast 10,509$ 34,010$ 8,321$ 10,131$ 12,032$ 16,090$ 46,574$ 10,918$ 13,572$ 15,277$ 17,573$ 57,340$ 63,036$ 68,875$ q/q change -35% -70% 45% 59% -32% -71% 40% 29% y/y change - 224% 136% 24% 26% 26% 37% 31% 34% 27% 9% 23% 10% 9%


Figure 29: Global smartphone market model

(in millions) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E

Feature & Basic Phones 512 660 758 909 1031 1086 1065 1136 1109 1025 947 864

Smartphones 8 20 54 82 122 140 179 283 470 689 908 1090

Total Handsets 520 680 812 991 1,153 1,226 1,244 1,419 1,580 1,714 1,854 1,954

31% 19% 22% 16% 6% 1% 14% 11% 8% 8% 5%

YoY Growth

Feature & Basic Phones 29% 15% 20% 13% 5% -2% 7% -2% -8% -8% -9%

Smartphones 150% 170% 52% 49% 15% 28% 58% 66% 46% 32% 20%

5yr Growth 55% 39% 42% 41% 45% 44%

Smartphones Penetration 2% 3% 7% 8% 11% 11% 14% 20% 30% 40% 49% 56% Source: Gartner and Barclays Research

Smartphones remain a standout and are expected to grow by

46% in 2012, to more than 688 million units.


17 May 2012 37

Hardware the top-performing sector YTD, thanks

to Apple

Since our last report in December 2011, the tech sector has outperformed the S&P 500 and

other broad market indices. The S&P Information Technology index is up about 13% year-

to-date (as of 11 May 2012), following about a 1% y/y gain in 2011.

Looking at our Barclays Global Technology Composites, many sectors outperformed the

market YTD, however lately there has been some weakness compared to the S&P 500.

Several sectors have underperformed broader markets in 2Q12 to date like Networking and

Carrier Equipment. However, there are a few bright spots, such as the Telecommunications

sector, which is up 3.6% QTD, vs the S&P 500 which is down 3.6%. We also highlight

performance across all tech areas identifying both sector leaders and laggards.

Figure 30: Index performance summary

1-Month % 3-Month % 6-Month % 1-Year % QTD YTD %

S&P 500 0.0 1.1 9.5 0.1 -3.6 8.0

Japan Nikkei 225 -5.5 0.7 6.0 -8.2 -8.0 6.6Hong Kong Hang Seng Index -1.9 -4.3 5.4 -16.5 -2.4 8.9

Taiwan TWSE Index -2.1 -4.8 2.4 -17.1 -5.2 5.8

Korea KOSPI Index -2.5 -2.4 7.3 -9.1 -4.2 6.5Singapore Straits Times Index -2.6 -1.9 4.2 -8.0 -3.0 9.7

Shanghai Composite 4.5 2.5 -2.8 -16.6 6.2 9.6

UK FTSE 100 -0.9 -5.3 1.8 -7.9 -2.8 -0.5

Germany DAX Index -1.3 -2.6 11.1 -13.1 -8.7 10.5

MSCI Europe Index -1.7 -5.5 3.3 -14.6 -6.0 0.5

MSCI The World Index -1.2 -1.4 6.3 -6.9 -4.9 5.1 Technology Indices 1-Month % 3-Month % 6-Month % 1-Year % QTD YTD %

NASDAQ Composite Index -1.9 1.0 11.8 2.2 -5.1 12.6

Semiconductor HOLDRs Trust (SMH) -3.0 -3.8 5.9 -10.0 -8.2 8.0PHLX / Semiconductor Index (SOX) -4.4 -6.8 3.6 -11.9 -10.7 7.5

MSCI Global Technology Index -4.6 0.9 10.0 2.9 -7.1 11.7

S&P 500 GICS Sectors 1-Month % 3-Month % 6-Month % 1-Year % QTD YTD %

Utilities 4.6 3.0 3.2 6.3 2.2 -0.5

Consumer Staples 1.9 4.7 9.7 7.4 -0.1 4.6

Health Care 1.1 3.4 10.8 3.3 -1.7 6.6Consumer Discretionary 1.9 4.7 15.3 8.6 -1.7 13.5

Energy -0.8 -6.4 -3.3 -10.6 -5.6 -2.5Information Technology -4.4 1.5 12.3 8.2 -6.3 13.5

Industrials 0.3 -3.1 8.6 -7.2 -4.5 5.6Telecommunications Services 8.2 8.1 9.2 0.3 4.4 5.1

Materials -0.3 -5.4 2.7 -11.4 -5.3 4.7Financials 0.0 2.8 15.9 -7.7 -5.3 15.0

Barclays Global Technology Composites 1-Month % 3-Month % 6-Month % 1-Year % QTD YTD %

Telecommunications 7.4 7.9 12.3 1.9 3.6 7.7

Internet 3.1 8.6 8.6 3.8 0.5 12.7

Hardware -5.2 8.4 27.7 24.6 -4.3 24.1

Handsets -4.2 6.9 13.6 0.2 -5.4 10.3Semiconductors -3.4 2.1 12.0 4.6 -6.0 10.5Distributors -2.2 -5.9 9.4 -9.5 -7.1 4.5Display -4.6 -7.6 -2.9 -37.6 -7.1 0.6

IT Services -3.5 2.9 9.9 1.2 -7.5 11.8

Semiconductor Capital Equipment -3.6 -2.0 8.3 -8.4 -7.6 9.5

Software -4.3 -3.2 3.1 -0.2 -7.8 9.9

Electronic Components -6.3 -0.9 8.1 -17.1 -11.0 10.2Precision Instruments -7.0 1.1 7.5 -11.9 -11.6 4.0

EMS (Contract Manufacturing) -11.0 -8.2 12.4 -5.5 -14.0 8.1

Clean Technology -5.6 -21.0 -19.1 -51.1 -14.7 -12.1

Carrier Equipment -11.6 -11.7 -12.1 -23.7 -15.9 -8.5

Enterprise Networking -12.1 -15.0 -9.1 -19.4 -18.9 -5.3 Source: FactSet, Barclays Research Data as of 11 May, 2012


17 May 2012 38

Figure 31: Technology sector leaders year to date

Sector Company and Price Return

Semiconductors Skyworks Solutions Inc. (57%), NXP Semiconductor (57%)

Semiconductor Capital Equipment Advantest Corp. (78%), Aixtron SE (34%)

Display & Lighting Veeco Instruments Inc. (78%), Cree Inc. (46%)

Software Misys PLC (49%), Teradata Corp. (47%)

Hardware Seagate Technology Inc. (90%), Apple Inc. (40%)

Carrier Equipment Technicolor (37%), Cogo Group Inc. (26%)

Telecommunications Equinix Inc. (60%), EchoStar Corp. (32%)

Enterprise Networking F5 Networks Inc. (19%), Arris Group Inc. (16%)

Handsets Samsung Electronics Co. Ltd. (23%), QUALCOMM Inc. (13%)

IT Services HiSoft Technology International Ltd. ADS (73%), Lender Processing Services Inc. (64%)

Internet AOL Inc. (73%), Alibaba.com Ltd. (66%)

Clean Technology Cree Inc. (46%), Aixtron SE ADS (33%)

EMS (Contract Manufacturing) ASUSTeK Computer Inc. (39%), Quanta Computer Inc. (28%)

Distributors SYNNEX Corp. (14%), Avnet Inc. (7%)

Precision Instruments Nikon Corp. (44%), Hitachi High-Technologies Corp. (14%)

Electronic Components Taiyo Yuden Co. Ltd. (32%), NHK Spring Co. Ltd. (32%)

Consumer Electronics Technicolor (37%), Logitech International S.A. (28%)

Source: FactSet. See Figure 16 for relative index performance. Data as of 11 May, 2012.

Figure 32: Technology sector laggards year to date

Sector Company and Price Return

Semiconductors Elpida Memory Inc (-100%), MEMC Electronic Materials Inc. (-43%)

Semiconductor Capital Equipment MKS Instruments Inc. (-7%), STATS ChipPAC Ltd. (-7%)

Display & Lighting Nippon Electric Glass Co. Ltd. (-28%), E Ink Holdings Inc. (-26%)

Software Software AG (-15%), JDA Software Group Inc. (-14%)

Hardware Lexmark International Inc. (-14%), Hewlett-Packard Co. (-10%)

Carrier Equipment Powerwave Technologies Inc. (-57%), Nokia Corp. (-33%)

Telecommunications Frontier Communications Corp. (0%), MetroPCS Communications Inc. (0%)

Enterprise Networking ShoreTel Inc. (-35%), Riverbed Technology Inc. (-28%)

Handsets InterDigital Inc. (-39%), Nokia Corp. (-33%)

IT Services Green Dot Corp. Cl A (-27%), Higher One Holdings Inc. (-20%)

Internet Gree Inc. (-46%), WebMD Health Corp. (-42%)

Clean Technology MEMC Electronic Materials Inc. (-43%), A123 Systems Inc. (-36%)

EMS (Contract Manufacturing) Foxconn International Holdings Ltd. (-29%), LARGAN Precision Co. Ltd. (-17%)

Distributors Arrow Electronics Inc. (-1%), Ingram Micro Inc. (Cl A) (3%)

Precision Instruments FUJIFILM Holdings Corp. (-10%), Seiko Epson Corp. (-10%)

Electronic Components Rohm Co. Ltd. (-7%), Nidec Corp. (-3%)

Consumer Electronics Sharp Corp. (-42%), Funai Electric Co. Ltd. (-25%)

Source: FactSet. See Figure 16 for relative index performance. Data as of 11 May, 2012.


17 May 2012 39

YEAR-TO-DATE COMPOSITE PERFORMANCE

100

105

110

115

120

Dec

-11

Feb

-12

Ma

r-1

2

Ap

r-1

2

Semiconductors Composite YTD Indexed Price Performance

Base = 100

99

104

109

114

119

124

129

Dec

-11

Feb

-12

Ma

r-1

2

Ap

r-1

2

Semiconductor Capital Equipment Composite YTD Indexed PricePerformanceBase = 100

Source: FactSet. Data as of 11 May, 2012. Source: FactSet. Data as of 11 May, 2012.

97

102

107

112

117

122

127

Dec

-11

Feb

-12

Ma

r-1

2

Ap

r-1

2

Display and Lighting Composite YTD Indexed Price Performance

Base = 100

100

105

110

115

120

Dec

-11

Feb

-12

Ma

r-1

2

Ap

r-1

2

Software Composite YTD Indexed Price Performance

Base = 100


100

105

110

115

120

125

130

Dec

-11

Feb

-12

Ma

r-1

2

Ap

r-1

2

Hardware Composite YTD Indexed Price Performance

Base = 100

100

102

104

106

108

110

112

114

Dec

-11

Feb

-12

Ma

r-1

2

Ap

r-1

2

Carrier Equipment Composite YTD Indexed Price Performance

Base = 100


Figure 33: Semiconductors Figure 34: Semiconductor Capital Equipment

Figure 35: Display & Lighting Figure 36: Software

Figure 37: Hardware Figure 38: Carrier Equipment


17 May 2012 40

100

102

104

106

108

110

112

114

116

118

Dec

-11

Feb

-12

Ma

r-1

2

Ap

r-1

2Enterprise Networking Composite YTD Indexed Price Performance

Base = 100

99

101

103

105

107

109

111

113

Dec

-11

Feb

-12

Ma

r-1

2

Ap

r-1

2

Handsets Composite YTD Indexed Price Performance

Base = 100


98

100

102

104

106

108

110

112

114

Dec

-11

Feb

-12

Ma

r-1

2

Ap

r-1

2

IT Services Composite YTD Indexed Price Performance

Base = 100

100

105

110

115

120

125

130

135

140

Dec

-11

Feb

-12

Ma

r-1

2

Ap

r-1

2

EMS (Contract Manufacturing) Composite YTD Indexed PricePerformanceBase = 100


99

101

103

105

107

109

111

113

Dec

-11

Feb

-12

Ma

r-1

2

Ap

r-1

2

Distributors Composite YTD Indexed Price Performance

Base = 100

98

103

108

113

118

Dec

-11

Feb

-12

Ma

r-1

2

Ap

r-1

2

Precision Instruments Composite YTD Indexed Price Performance

Base = 100


Figure 39: Enterprise Networking Figure 40: Handsets Composite

Figure 41: IT Services Figure 42: EMS (Contract Manufacturing)

Figure 43: Distributors Figure 44: Precision Instruments


17 May 2012 41

Important new global tech coverage added

We have expanded our coverage since the last Global Technology Outlook. We are excited

about our expanded coverage which should give us more insight into some of the biggest

trends in tech. Year to date we have launched coverage on 15 new companies.

Figure 47: New Barclays tech coverage

Sector Ticker Company Name

U.S. Software ELLI Ellie Mae

Raimo Lenschow TNGO Tangoe

U.S. IT Consulting & Computing Services EPAM EPAM Systems

Darrin Peller

U.S. Data Networking & Wireline Equipment BSFT Broadsoft

Jeff Kvaal

U.S. Semiconductors MTSI M/A-COM

Blayne Curtis

U.S. Semiconductor Capital Equipment IMI Intermolecular

CJ Muse

U.S. Clean Technology & Renewables TSL Trina Solar

Amir Rozwadowski YGE Yingli Green Energy Holding

European Technology Hardware IMG.L Imagination Technologies

Andrew Gardiner & Youssef Essaegh DLGS.DE Dialog Semiconductor

Japan Precision Instruments 6674.T GS Yuasa

Yoshihiko Nishizawa

Asia Ex-Japan LCD Displays 054620.KS Asia Pacific Systems

Sunwoo Kim 056190.KS SFA Engineering

001300.KS Cheil Industries

Asia Ex-Japan IT Hardware 006400.KS Samsung SDI

Sunwoo Kim

Asia Ex-Japan Wireless Equipment 8078.TW Compal Communications

Dale Gai & SC Bae 066570.KS LG Electronics


Figure 45: Electronic Components

Figure 46: Clean Technology

99

104

109

114

119

124

Dec

-11

Feb

-12

Ma

r-1

2

Ap

r-1

2Electronic Components Composite YTD Indexed Price Performance

Base = 100

84

94

104

114

124

134

Dec

-11

Feb

-12

Ma

r-1

2

Ap

r-1

2

Clean Technology Composite YTD Indexed Price Performance

Base = 100



17 May 2012 42

PORTFOLIO STRATEGY


17 May 2012 43

U.S. PORTFOLIO STRATEGY

Slowing growth and public policy uncertainty warrant near-term defensive positioning

� In early March, we highlighted five risks to the equity market that we believed would

lead to an April correction, with slowing global growth and public policy uncertainty

in an election year the most important for the Technology sector.

� If a correction materializes over the next couple of months, global growth stabilizes

(Europe and Asia) and the U.S. avoids market expectations of a double dip, we would

consider reducing exposure to defensive sectors and moving back into cyclicals.

� At the 2012 S&P 500 peak, Apple was responsible for 14% of the index’s

performance year to date. With a weight of 4.3% in the S&P 500 and 22% in the

Technology sector, it’s too big to ignore.

Slowing global growth and public policy uncertainty are the primary concerns for Technology investment

In early March, we highlighted five risks to the equity market (see April Showers, March 9,

2012) that we believed would lead to a correction in the second quarter: flattening U.S.

growth; monetary policy turning from tailwind to headwind; public policy uncertainty;

decelerating earnings growth; and European deleveraging and political risks. Within this

context, the most important risks to the Technology sector are slowing global growth and

public policy uncertainty.

After an impressive start to 2012, the equity market has come under pressure; similar to

last spring, the S&P 500 has had a shallow pullback, down around 5% since early April.

Global growth is off to a slow start and the recovery is being pushed beyond expectations,

as evidenced by a downturn in European data (i.e., the European Purchasing Managers

Index), China’s growth rebalancing and its struggling export sector. Election-related policy

uncertainty was on hold while the GOP candidate nomination process was extended, but

now debates have shifted to the fiscal cliff, fiscal responsibility, and entitlement reform, all

of which are negative for the equity markets.

Capital investment typically struggles in an election year due to elevated public policy

uncertainty; indeed, Julio and Yook (2010) find that corporate investment falls 5% in the

year leading up to elections relative to other years. Still, we expected technology spending,

the strongest part of the investment picture, to remain strong. However, management

commentary, the Barclays CIO survey and the equipment and software contribution to GDP

point to slowing technology spending; policy and growth uncertainty seem at the core. The

Barclays CIO survey in April 2012 showed little change from August 2011, the peak in the

policy uncertainty index. John Chambers said simply that if government issues aren’t

resolved, then “people are in this uncertain environment. And when they're uncertain,

unfortunately, they don't spend.” This suggests to us that the improvement in the U.S.

growth outlook wasn’t enough to alter confidence.

There is the potential for global growth to stabilize in July and August. In our view, it

begins with European PMIs, since European weakness permeates the rest of the world,

including Asian exports. Policy uncertainty should follow the election cycle; in the 2010

congressional elections, stabilization began in September. We expect public policy

Barry Knapp

+1 212 526 5313

[email protected]

BCI, New York

Eric Slover, CFA

+1 212 526 6426

[email protected]

BCI, New York

We recently downgraded

Technology to Marketweight

from Overweight


17 May 2012 44

uncertainty to continue to rise until we get closer to the election. However, in the near term

this suggests the trajectory for the market is down, not up, and we believe a near-term

bottom in equities is unlikely. In other words, even if valuations become more compelling,

we still struggle to see a catalyst that would convince investors to rethink their outlook.

-80-70-60-50-40-30-20-10

010203040506070

00 01 02 03 04 05 06 07 08 09 10 11 12

35

40

45

50

55

60

65

Analysts' EPS Revisions: S&P 500 Global PMI (R)

Diffusion IndexDiffusion Index

25

50

75

100

125

150

175

200

225

250

95 97 99 01 03 05 07 09 11 13

Index

5

15

25

35

45

55

65

Baker Uncertainty Index: Baseline (L) VIX (R)

%

Source: FacSet, Barclays Research Source: Baker et al (2011), Barclays Research

Tactically scaling back cyclicals, adding defensives

We don’t believe we’ll reach the market low until 2Q earnings season, and with our

expectation for a further correction, we have tactically scaled back our cyclical exposure,

adding defensives and dividend yield. We are Marketweight Technology, after reducing our

long-standing Overweight position (see Monsoon Season, May 11, 2012). Relative

technology analysts’ earnings estimate revisions (relative to the 10 GICS sectors) have

declined and our margin diffusion index, which was approaching a trough, is showing signs

of struggle.

We would likely reduce exposure to defensive sectors and move back to cyclicals if a

correction materializes over the next couple of months, global growth stabilizes (Europe

and Asia), and the U.S. avoids market expectations of a double dip,. Still, for the next two

months, we can’t see much that will change the deteriorating global growth outlook.

Longer term, however, we believe the secular story is intact, and in a low-growth

environment, technology should be the primary beneficiary of a reach for growth via

efficiencies and the substitution of capital for labor. Looking to 2H12, we are much more

optimistic and expect firming activity to boost corporate revenues and margins.

Figure 48: In the near term, weakening global growth …

,,,,,,,,,,,,,,,,,,,,,,,,,,,

Figure 49: … and public policy uncertainty should weigh on

sentiment and capital investment


17 May 2012 45

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

03 04 05 06 07 08 09 10 11 12

%

Equip & Software: Contribution to Real GDP Chg SAAR

-50

-40

-30

-20

-10

0

10

20

30

40

50

00 01 02 03 04 05 06 07 08 09 10 11 12

Index

TEC: Rel. revisions 13wk ma 4wk ma

Source: Barclays Research Source: FactSet, Barclays Research

Apple: Too big to ignore

At the 2012 S&P 500 peak, Apple, the largest stock in the index by a factor of 1.4x, was

up 53% year to date, outperforming the index by 40%. The company was solely

responsible for 14% of the S&P's performance year to date, more than 4x its weight in the

index at the beginning of the year, and also boosted S&P 500 and Technology sector 2012

EPS growth estimates by 100bp and 730bp, respectively.

It is not uncommon for a single stock to have an outsized contribution to a sizable rally, but

over the last 20 years, double-digit contributions in double-digit market return

environments have been rare. In fact, we have to look back to 1999 when another tech

giant, Microsoft, carried the weight. Still, Apple's 14% contribution this year is the largest in

our sample since 1991.

80

85

90

95

100

105

110

115

120

125

130

Jan-11 May-11 Sep-11 Jan-12 May-12

Index

S&P 500 TEC: Price S&P 500 TEC ex-AAPL: Price

95

97

99

101

103

105

107

109

111

113

Jan-11 May-11 Sep-11 Jan-12 May-12

Index = 100

S&P 500 TEC: EPS 2012E S&P 500 TEC ex-AAPL

Source: FactSet, Barclays Research Source: FactSet, Barclays Research

Figure 50: The technology capex cycle is slowing beyond our

expectations. With slowing relative sentiment …

Figure 51: … we’re tactically cautious in the near term, but

would look to add cyclical exposure as the outlook firms

Figure 52: Apple, the largest stock in the S&P 500, has had a

significant impact on index and Technology returns …

Figure 53: … and made an important contribution to

earnings growth ,,,,,,,,,,,,,


17 May 2012 46

Comparisons aside, it's not 1999. Valuations appear much more reasonable. The S&P 500's

trailing PE ratio is ~13.5x compared with ~27x in 1999, and Apple's trailing PE is ~13.5x

compared with Microsoft's ~70x in 1999. Still, the heavy reliance on one company for price

returns and earnings growth poses significant concentration risk and lays the groundwork

for disappointment if fundamentals falter or if prices run too far too fast. Apple's

disproportionate contribution to the most recent rally raises the question: is it rational to

expect a single stock to provide outsized contributions to the index price return? Moving

into 2Q12 and beyond, who's going to carry the weight? One thing is certain, with a weight

of 4.3% and 22% in the S&P 500 and Technology sector, respectively, it’s too big to ignore.

.


17 May 2012 47

UNITED STATES TECHNOLOGY


17 May 2012 48

U.S. IT HARDWARE

Focusing on major new product cycles for 2H12 – Apple and EMC stand out

� We continue to believe that two themes drive investment trends in IT Hardware: 1)

the Consumerization of IT and 2) the Utilization Era – a focus on doing more with less.

However, Big Data has emerged as one of the other major investment opportunities in

the sector.

� We maintain our Neutral view of the sector given secular weakness in some markets

like PCs, printers and services. However, we are still enthusiastic on a few of our

names: Apple is leading the Consumerization of IT wave and EMC is the best positioned

large-cap stock in Big Data, in our view.

Expecting Apple and storage to stand out in 2012

Based on our CIO and reseller surveys, as well as other research, we believe that IT spending

growth will remain relatively slow this year, in the low- to mid-single-digit range, given

global public sector trends, the uncertainty surrounding the pace of recovery in the U.S. and

the economic situation in Europe. Recent checks lead us to believe that segments like

storage and software should grow faster than the average. Given Apple’s rising wallet share,

we remain cautious about the prospects of the traditional PC even with the rise of

Ultrabooks (seeking to emulate the MacBook Air) and the pending launch of Windows 8

(Apple will have already launched iOS 6 and Mac OS X Mountain Lion prior to its arrival).

With strong iPhone and iPad sales and new products slated for the second half of 2012,

Apple is still gaining share and disrupting profit pools, driving the shift toward mobile

devices. We are anticipating a strong 2H12 for Apple as it can expand its lead in the

Consumerization of IT with new MacBook Airs, a possible new iPad and the iPhone 5

product cycles starting in September.

Given uncertainty in Europe and within the public sector, companies that have defensive

characteristics like revenues in services and software may see more limited downside near-

term – and benefit vs those that face secular challenges (IBM comes to mind). Also, we

believe companies with unique product cycles like Apple and EMC could fare well vs the

group and even outperform. Forward P/E multiples within the IT hardware space remain

well below historical ten-year averages, with most trading below 14x forward earnings.

Year to date, the Barclays IT Hardware sector index is up 24% versus 13% for the NASDAQ

and 15% for the MSCI Technology Hardware Index. However, without Apple and its large

weighting, our sector is up only 9% year-to-date. Given historically low multiples and

significant weightings toward Apple, as well as storage, we wouldn’t be surprised to see

some sector-specific outperformance in 2H12 – but our Neutral sector view reflects

unfavorable secular trends in other segments such as PCs, printers and parts of IT Services.

We highlight Apple and EMC as key picks once again given major new product cycles in

2H12.

Ben A. Reitzes

1.212.526.9517

[email protected]

BCI, New York

Eric Sterling

1.212.526.2912

[email protected]

BCI, New York

Matt Markezin-Press

1.212.526.6180

[email protected]

BCI, New York

Sector View

2-NEUTRAL


17 May 2012 49

Sector overview: ‘Big Data’ a big trend, but don’t forget the iPhone refresh cycle

Apple’s lead in the Consumerization of IT to be helped by iPhone 5 and new iPads: We

continue to believe we are in the early innings of the bring-your-own-device (BYOD) trend,

which is the premise for the Consumerization of IT theme that seems to be driving Apple.

Also, as companies try to manage growing amounts of data, Big Data will likely be an area

of focus for investors for years to come. While we expect a somewhat sequential slowdown

for Apple in the June quarter, we are enthusiastic about prospects for a new iPhone, iPad

and MacBook Air line to culminate in another record December quarter. Indeed, Apple’s

next iPhone cycle could last several quarters given several significant new features that

include a new form factor, a faster processor and integration of faster 4G LTE speeds.

The Consumerization of IT thesis stipulates that the consumer products used for everyday

living will be introduced into the workplace through apps and/or remote authentication. For

many organizations, these devices will likely replace the ones that used to be bought at the

corporate level. For some larger organizations, the focus may just be on allowing these

devices to access the network securely to enhance workforce productivity and morale. This

trend can save corporations money and shift investment dollars toward integration, back-

end systems, security and servers – and away from PCs and company-issued mobile

devices. The PC even sees threats on the consumer side as iPads and smartphones continue

to cannibalize more typical PC tasks. We even see Apple’s iCloud playing an increasingly

important role in the company’s iOS ecosystem, removing the need for the PC to act as a

hub. Long term, we believe smart TVs can also cannibalize PCs, with a potential iTV from

Apple in 2013 serving as the biggest disruptive force in computing and entertainment.

Figure 54: CIO survey question: What platform will be supported for your corporate

tablet?

0

10

20

30

40

50

60

70

80

90

Apple RIM Android Microsoft Unsure

# o

f R

esp

on

den

ts

Mar-12 Aug-11

(New answer this

survey)

(Aug-11 responses

include HP)

Source: Barclays CIO Survey, April 2012

Big Data theme rising: As corporations introduce new applications and grapple with social

media, we believe that they will struggle to manage data growth (both structured and

unstructured). As a result, demand for more efficient ways to manage Big Data should grow

rapidly with opportunities in hardware, software and services. We believe that EMC is set to

benefit from this trend given its investments in scale out storage, appliances, software and

security. In our April CIO survey, respondents noted that solving Big Data problems was the

biggest trend driving spending decisions. EMC should also benefit from a refresh of its


17 May 2012 50

largest product, the VMAX in 3Q12, which is likely to become more efficient and faster in

dealing with larger block data loads.

Figure 55: CIO survey question: What are the biggest trends driving your spending

decisions in 2012?

0 10 20 30 40 50






Security

Cloud computing


"Big Data" problems

# of Respondents

Aug-11 Mar-12

Source: Barclays CIO Survey, April 2012

Note: “Big Data” problems was a new category in the April 2012 survey

Leading Big Data solutions allow customers to add capacity and scale without sacrificing

performance. As a result, we see significant growth for scale-out storage that increases

both capacity and performance through node-based systems. EMC’s Isilon seems like one

of the best assets to take advantage of the opportunity presented by Big Data. We view IBM

as a leader in structured and unstructured data analytics as it has many well-positioned

solutions. In addition, we believe that EMC’s Greenplum asset will benefit from an increased

focus on data analytics.

We also see NAND flash making a larger push into the enterprise data center. The Big Data

trend increases the need for quick access to data and the need to record new information at

the pace it is created. The intensifying demands placed on data access and manipulation are

helping a new class of storage emerge utilizing NAND flash. Advances in analytics,

virtualization and cloud computing are accelerating the transition to higher-capacity

computing systems that need to access data faster and reduce latency. NAND flash is one

of the key enablers of this shift. We like companies that are integrating flash storage into

their product lines like EMC with their Project Thunder and VF Cache (Project Lighting).

Hardware sector driven by product cycles

As uncertainty about the pace of macroeconomic recovery and the health of the European

economy persists, we believe that many companies in the IT hardware sector could see a

pause in 2Q12 before a better second half. Frankly, our top picks – Apple and EMC – lead

this list ahead of the iPhone 5 and VMAX upgrades, respectively. However, IBM also faces a

potential pause in 2Q hardware sales ahead of new POWER 7+ servers coming in 2H12.

Both HP and Dell may also see a bit of a transition in the industry standard server category

as the server industry transitions product lines to those based on Intel’s new Romley

processor.

Another reason 2H12 could be better for the sector is the alleviation of the HDD supply

chain issues that stemmed from flooding in Thailand. Indeed, this issue is likely to largely

subside in the second quarter. In terms of PCs, the sector could benefit from a possible


17 May 2012 51

uptick in consumer sales due to Windows 8 in the holiday season and the launch of cheaper

Ultrabooks. That said, we believe that Apple’s product cycles and ongoing smartphone

momentum at Samsung may take too much “wallet” for the PC uptick to be as strong as

industry analysts believe.

The Industrialization of Tech, and especially IT Hardware, something to watch

We recently wrote a major thematic piece in collaboration with our colleague Scott Davis

(senior analyst, Multi-Industry) to explore how IBM may have started a trend that we are

calling the Industrialization of Tech (please see our report IBM Corp.: Is IBM Leading the

'Industrialization' of Tech?). In short, IBM has taken on more of the characteristics of

successful global industrial companies, expanding its multiple over the last five years rather

significantly. We believe that it will be difficult for HP and Dell to emulate IBM’s evolution

and see comparable results. However, EMC’s portfolio is also moving toward higher-value

solutions, with comparable consistency – and much faster organic growth. And at some

point Apple may need to take on more characteristics of an industrial company once its

growth begins to slow (not a near-term concern of ours). Near term, Apple has decided to

return cash to shareholders with its first dividend in 18 years and a share repurchase

program to offset option dilution. We believe that new CEO Tim Cook is off to a nice start

with a shareholder-friendly approach.

Key Picks remain Apple and EMC

Given ongoing economic volatility, we prefer to focus on companies gaining share with

attractive valuations. We believe companies that are well positioned in Big Data are likely to

gain share and be among the best performers (outside of Apple) in 2012. IBM has many

attractive characteristics, but shares have already outperformed the S&P 500 by more than

110% since 2007, which may be difficult to top from here especially given its valuation

premium to Apple.

Apple – For 2H12 we continue to believe that Apple's valuation is attractive and that the

shares can benefit from new MacBook Air products, a new iPad, the iPhone 5 refresh cycle,

the release of OS X Mountain Lion and a deeper integration of iCloud across Apple

products. We expect Apple to continue its international expansion and look to China to

drive growth in many segments. While we are not expecting a television unit next year,

there are many other catalysts for C2H12. All these cycles could power many stories in tech,

beyond Apple.

EMC – EMC remains one of our top picks and we believe the company will continue to make

its case as the next strategic IT solutions provider in our sector. Spending on storage

remains relatively solid amid a slow spending environment. Also, we expect the strength of

product cycles through 2012 (VMAX, Data Domain and Isilon) to deliver revenue upside in

2H12 and EMC remains well positioned to exceed its targets and accelerate growth. Further,

we expect EMC to continue to gain share at the low end with its VNX solution and at the

higher end with its Isilon scale-out NAS. EMC’s exposure to Big Data gives us another

reason to be optimistic as many of its products – like Greenplum, Project Thunder and VF

Cache (Project Lighting) – are well positioned to take advantage of growing data growth

trends. Risks include government exposure (about 8-10% of total), financial services (18-

20% of total) and any deceleration of VMware’s revenues (EMC owns 80% of VMW).


17 May 2012 52

Valuations in IT Hardware impacted by secular concerns in PCs and printing

The Barclays IT Hardware sector index historically trades at 12x consensus forward EPS

estimates using a five-year average. At present, we see the group trading at 10x forward

EPS versus a trough level of 8x in November 2008 and a peak level of 18x in October 2007.

Current valuation levels are outside 1 standard deviation from historical average valuation

levels. We believe the valuations of many names in the group (Dell, HP, Lexmark, Xerox,

Ingram Micro and Tech Data) are adversely impacted by secular concerns around PCs and

printers.

Figure 56: Barclays U.S. IT Hardware Coverage

Cur. Yr. Next Yr. Cur. Yr. Next Yr. Cur. Yr. Next Yr. Cur. Yr. Next Yr. Cur Yr. Next Yr.

AAPL 1-Overweight 566.71$ 45.81$ 52.00$ 12.4x 10.9x 0.7x 0.6x 159,709$ 190,451$ 3.1x 2.6xHPQ 2-Equal Weight 23.15$ 3.99$ 4.11$ 5.8x 5.6x 1.2x 1.2x 121,179$ 120,816$ 0.6x 0.6xDELL 2-Equal Weight 15.42$ 2.10$ 2.10$ 7.3x 7.3x 1.3x 1.3x 62,866$ 64,545$ 0.3x 0.3xIBM 2-Equal Weight 201.17$ 15.08$ 16.66$ 13.3x 12.1x 1.3x 1.2x 108,195$ 111,966$ 2.3x 2.2xNTAP 1-Overweight 36.08$ 2.38$ 2.77$ 15.2x 13.0x 1.0x 0.9x 6,219$ 6,974$ 1.5x 1.4xEMC 1-Overweight 26.36$ 1.74$ 2.01$ 15.2x 13.1x 1.1x 0.9x 22,162$ 24,706$ 2.3x 2.1xLXK 2-Equal Weight 28.31$ 4.35$ 4.35$ 6.5x 6.5x 1.0x 0.9x 4,013$ 3,900$ 0.4x 0.4xXRX 2-Equal Weight 7.63$ 1.13$ 1.23$ 6.8x 6.2x 0.6x 0.5x 22,879$ 23,375$ 0.8x 0.8xSTX 1-Overweight 31.14$ 6.92$ 9.67$ 4.5x 3.2x 0.1x 0.1x 15,298$ 19,335$ 0.9x 0.7xDDD 2-Equal Weight 27.45$ 1.20$ 1.50$ 22.9x 18.3x 1.2x 1.0x 353$ 422$ 4.2x 3.5xWDC 1-Overweight 40.30$ 7.75$ 9.80$ 5.2x 4.1x NA 0.3x 12,038$ 17,006$ 0.7x 0.5xTECD 2-Equal Weight 50.88$ 5.70$ 6.10$ 8.9x 8.3x 1.0x 0.9x 26,342$ 27,604$ 0.1x 0.1xIM 2-Equal Weight 18.66$ 2.02$ 2.20$ 9.2x 8.5x 0.7x 0.7x 36,767$ 38,247$ 0.1x 0.1x

AVERAGE 10.3x 9.0x 0.9x 0.8x 1.3x 1.2x

EPS EV/ Rev

Fiscal Fiscal Fiscal

P/E

PEG Revenue ($ mn)Ticker Rating Price

Source: FactSet, Barclays Research Estimates Prices as of 5/11/12


17 May 2012 53

U.S. SOFTWARE

Structural growth stocks poised to outperform

� Software fundamentals, especially for the structural growth names, remain healthy

and should support further strong results. The structural growth names continued to

deliver healthy numbers in Q1 despite a more constrained IT spending environment.

This outperformance should continue in 2012, in our view: First, these names benefit

from higher customer spending than their traditional counterparts, and second,

management teams have been conservative on guidance, creating room for upside.

� We like Informatica, Citrix and NetSuite for structural and company-specific

reasons. Informatica and Citrix showed a significant disconnect between the extent of

their positive surprise and guidance raise. NetSuite has undergone a correction that we

see as an opportunity given the unchanged structural story and strong growth.

� The major structural themes in the software space remain virtualization (server and

desktop), Big Data, and cloud computing, which ranked as the top three spending

priorities in our April CIO survey.

IT spending priorities should benefit structural growth names

We saw real evidence in the first quarter that enterprise IT departments are focusing

spending on software that will save them money and/or drive growth in their business. This

was illustrated by the resilience of growth at virtualization companies like Citrix and

VMware and Big Data companies like Teradata, Informatica and Qlik compared to

traditional software and non-mission-critical software providers (e.g., SAP, Symantec and

Parametric Technology). The results of our latest CIO survey confirm this trend, as Big Data

and server virtualization are the top two spending priorities for CIOs this year.

In the currently constrained IT budget environment, we expect these spending patterns to

continue for the rest of 2012, benefiting our structural growth names. We acknowledge that

valuations appear stretched, but we think the disruptive nature of these structural growth

stories is still not fully priced in by the market.

Figure 57: Top trends driving IT spending decisions in 2012

0 5 10 15 20 25 30 35 40 45 50






Security

Cloud computing


"Big Data" problems

# of Respondents

Aug-11 Mar-12

Note: "Big Data" problems was a new category this survey Source: Barclays Research March 2012 CIO Survey (published 4 April, 2012)

Raimo Lenschow

+1 212 526 2712

[email protected]

BCI, New York

Sector View

1-POSITIVE


17 May 2012 54

Second half of 2012 appears set for meaningful guidance raises

The strong Q1 performance for the majority of our coverage universe did not translate into

meaningful earnings upgrades. We are not particularly surprised by this given that

companies generally do not like to raise guidance after the first quarter, which typically

contributes the smallest percentage of annual revenue, and that the picture can change so

dramatically over three quarters, especially in this macro environment. Regardless, we think

that meaningful increases in full-year guidance after the seasonally larger second quarter

are more likely on the back of the better-than-expected first quarter.

We believe that Citrix, Informatica, Teradata and Ellie Mae are best set up for meaningful

full-year raises over the upcoming quarters. First, the level of earnings and revenue surprises

achieved in Q1 were not as highly correlated with changes to full-year consensus estimates

as we think is justified. Figure 58 and Figure 59 compare the percentage by which earnings

beat consensus estimates in the first quarter and the percentage change in full-year

earnings estimates. The charts clearly indicate a disconnect between the two.

Additionally, each of these companies has a presence in a structural growth sector of the

software market: Citrix in virtualization; Teradata and Informatica in Big Data, albeit in

different parts of it; and Ellie Mae in software as a service (SaaS). As such, these names

should continue to see momentum in their businesses (see below). Should management

teams raise their full-year guidance more meaningfully, the stretched valuations we

currently have in our coverage universe should start to ease.

Upcoming investor events should provide a catalyst

The second quarter is heavily weighted with technology conferences and company

user/investor events. These events should serve to attract increased investor attention to

the names we cover, particularly companies that have a tentacle into the Big Data theme.

Investors are just starting to digest the implications for the stocks that compete in a piece of

the Big Data market and we believe this conference season will provide further insight,

which also supports our constructive view on the sector heading into the second quarter.

Figure 58: Q1 earnings surprise % vs. full year guidance % change

Figure 59: Q1 earnings surprise % vs. full year guidance % change

-5%

0%

5%

10%

15%

20%

ARBA CTXS INFA TDC

Q1 Earnings Surprise % Full Year Guidance % Change

0%

25%

50%

75%

100%

ELLI N QLIK

Q1 Earnings Surprise % Full Year Guidance % Change

Source: Bloomberg, Company data, Barclays Research Source: Bloomberg, Company data, Barclays Research


17 May 2012 55

Key Picks

Following the most recent earnings season, our favorite names are NetSuite, Informatica

and Citrix, but we also like them from a long-term perspective because of their structural

growth exposure.

NetSuite: The share price has corrected recently following Q1 results after calculated

billings delivered “only” 27.5% y/y growth (after adjusting for a mix shift in services work)

against heightened expectations going into the numbers. We think that billings growth is

still healthy and that Q1 was impacted by a tough comparable. Additionally, the CEO has

talked of penetrating large enterprises, which, if realized, would be another significant long-

term positive to growth, although the initial ramp up would be slower. We favor using the

recent weakness as an opportunity to get involved as there is little evidence to suggest a

slowdown in NetSuite’s business or de-railing of its structural opportunity as the leading

SaaS ERP provider.

Informatica: Informatica enjoyed a good set of Q1 results with better revenue and EPS,

while license revenue was in line with consensus. However, there was no raise to guidance

as the company preferred to stay cautious after a weak Q1 performance in Europe,

suggesting a slower-than-expected reacceleration in license growth, which disappointed

the market. We see this correction as an interesting opportunity. In our view, the company

remains well positioned in the Big Data space and management’s conservative comments

are likely to keep market expectations in check. Again, given the structural exposure, we

think this leaves risks skewed to the upside over the coming months.

Citrix Systems: For the first time since 2008, Citrix’s desktop business grew more than 15%

YoY, while its web collaboration and cloud solutions businesses (primarily NetScaler) each

grew more than 20% as well. The desktop business is showing evidence of significant

momentum around virtual desktop infrastructure (VDI), which we expect to continue for

the remainder of the year. We attribute the momentum to the improved ROI proposition for

VDI, linked to the Windows refresh cycle. Looking into Q2, the total revenue comp is the

most attractive of the year (15.8%) and the desktop solutions comp looks even easier

(8.9%).


17 May 2012 56

U.S. IT CONSULTING & COMPUTER SERVICES

Payment names continue to benefit from strong underlying drivers; mixed trends in IT services

� We continue to believe the payments sub-sector of our universe is an attractive

area to invest for 2012 relative to sectors with greater macro risk. We consider

payments names well positioned to continue outperforming even in an uncertain

macro environment, given continued strength seen in volume and transaction metrics,

and opportunities from secular transformation of payments at the point-of-sale and

online.

� Our outlook remains more conservative for IT services names, which have shown

mixed fundamental trends across the space and some demand pressures in the first

half of 2012. While we believe the industry continues to have longer-term

opportunities, we would focus selectively on names whose valuations now reflect a

material discount to underlying revenue growth potential.

� Key picks include Visa, MasterCard, VeriFone Systems and Alliance Data Systems.

Payment names continue to benefit from strong fundamentals

Further strength seen in volume & transaction metrics; expect solid U.S. credit card trends to hold up

Within the payments industry, we continue to see strength in key underlying volume and

transaction drivers. MA has reported that cross-border volumes, total U.S. processed

volumes, total processed volumes outside the U.S., and processed transaction growth all

held up at healthy levels. V continues to see share loss in U.S. PIN debit as a result of Durbin,

weighing on the company’s overall debit volume and transaction growth, but PIN debit

represents only around 2% of total company revenue. We also highlight similar strength in

U.S. credit, rest-of-world and cross-border volumes through the end of April. While y/y

growth comparisons become more challenging relative to prior quarters, our analysis of

year-to-date metrics around the profitability of credit cards at the four largest Visa and

MasterCard credit card issuers in the U.S. continues to suggest that credit card growth has

remained strong year-to-date, and should remain healthy through much of the year.

Barclays Emerging Payments Forum in New York highlights industry opportunities

We hosted the second annual Emerging Payments Forum in New York on March 28-29,

which brought together almost 30 public and private global players to discuss emerging

trends in the payment industry, including mobile payments, eCommerce, payment

technology/security solutions, and prepaid services. We view VeriFone as a key beneficiary

of emerging trends in mobile commerce and retailing, as well as the U.S. payments

industry’s migration to EMV (~70% of U.S. terminals may be EMV- and NFC-enabled over

the next few years, driving an expansion in VeriFone’s addressable market and opportunities

for incremental managed services revenue). We see limited pushback on Visa and

MasterCard from issuers as a result of the EMV shift; as in the U.K., lower fraud under the

more secure EMV standard should offset a concern around lower interchange. V and MA

also continue to push ahead with new mobile wallet initiatives, with more ubiquitous

Darrin D. Peller

+1 212 526 7144

[email protected]

BCI, New York

Sector View

2-NEUTRAL


17 May 2012 57

electronic payment usage as their primary goal, and we see incremental revenue

opportunities from new payment technologies even amidst increased competition.

Regarding merchant acquirers, from a competitive standpoint, we continue to see a

number of new entrants in the electronic payments industry, and certain incumbents (e.g.,

Visa, MasterCard and VeriFone) have been moving up the value chain, potentially

threatening the traditional merchant acquirers/payment processors. That said, the

traditional strengths of acquirers/processors (including a strong knowledge of payments,

big investments in large, scalable networks, and a prevalent/long-standing distribution

channel) likely position these companies as valuable and necessary partners in the

payments ecosystem.

On the mortgage processing front, origination services revenue at the processors in our

coverage benefitted from higher industry volumes and share gains this quarter. While

origination activity remains at historical lows, the HARP 2 refinance program may provide

support, and we see potential longer-term upside driven by housing market normalization.

Meanwhile, CoreLogic and Lender Processing Services are both maintaining expectations

for slow default activity in their near-term guidance, leaving room for upside potential

should the industry begin to see initial signs of foreclosure activity later in the year.

Mixed IT Services trends, with certain vendors benefitting from relative share gains

Softer 1H12 for outsourcing contract awards, followed by greater bookings acceleration in 2H12; mixed earnings results from IT services names

We hosted ISG’s 1Q12 TPI Index Call, which provided initial insights on 1Q12 contract

award activity for outsourcing contracts valued at more than $25 million. Overall, data

directionally affirmed our checks and outsourcing industry commentary around a softer 1H

CY 2012, followed by somewhat greater bookings acceleration in 2H12. With industry

increasingly being driven by competitive restructuring activity, our checks continue to point

to share gains for Cognizant, with Accenture also showing meaningful success among the

multinational vendors in defending market share and growing with existing clients.

Earnings results from consulting/outsourcing names have been particularly mixed into

2012, with Accenture, IBM and TCS coming in in-line to better than market expectations

and Infosys, Wipro and Cognizant disappointing on revenue guidance. Cognizant will need

to take the next couple of quarters to prove to the market that it can deliver on its new

targets, but with P/E valuations today only marginally higher than peers growing at half

CTSH’s anticipated growth rate, we consider the shares oversold.

Key Picks

We favor companies with strong organic growth potential driven by sustainable secular

trends and proven business model resilience. Key picks include:

V: Strength in underlying volume/transaction drivers provide us with a high degree of

confidence in Visa’s ability to sustainably achieve EPS growth of 20%+ for years to come.

MA: Despite potential for some near-term regulatory headline risk, we view MasterCard as a

secular growth story, with similar ability driving EPS growth of 20%+ for years to come.


17 May 2012 58

PAY: We view VeriFone as a key beneficiary of secular payment technology/security trends,

and continue to see solid upside to consensus estimates and valuation.

ADS: Given solid momentum across ADS' lending and non-lending businesses, we continue

to see normalized earnings power well above consensus 2013 and 2014 estimates.


17 May 2012 59

U.S. COMMUNICATIONS EQUIPMENT

Healthy 1Q handset shipments; networking solid

� Handsets: Following a solid first quarter, we maintain our forecast of 8% global

handset growth in 2012 and 2013. Leading vendors Apple and Samsung continue to

dominate the market and we expect consolidation to continue to converge around

them. Our top pick in wireless is Qualcomm.

� Networking: We think networking demand is solid, but not spectacular. Bright spots

include data center (virtualization, 10G switching) and bring-your-own-device

(BYOD)/mobility. Given our broader mobility theme, our key pick is Aruba (ARUN).

Netgear (NTGR) should also benefit in the consumer market.

Solid 1Q handsets shipments; retain ‘12 and ‘13 growth rates at 8%

The global handset market saw solid shipments of approximately 398 million units and

smartphone shipments of approximately 145 million units in the first quarter, broadly in line

with our estimates. We therefore retain our 2012 and 2013 industry growth rates of 8%,

representing total unit volumes of 1.71 billion and 1.85 billion, respectively. We expect

industry growth to slow to 5% in 2014 with total units of 1.95 billion. As expected, the mix

within the market continues to shift to smartphones while feature phones remain on the

decline. The introduction of lower-priced smartphones, including many of the sub-$150

Android devices we have seen over the past year, has indeed drawn much of the interest

away from the feature phone segment. We saw solid sequential 1Q smartphone growth of

approximately 50% and expect these rates to continue through the remainder of the year.

Within smartphones, we also retain our 2012 and 2013 growth rates of 46% and 32%,

respectively, which represent total volumes of 689mn and 908mn. Our 2014 growth rate

declines to a still-solid 20%.

Figure 60: Global smartphone model (units in million)

Global Smartphone Shipments 2003-2014E

(in millions) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E

Feature & Basic Phones 512 660 758 909 1031 1086 1065 1136 1109 1025 947 864

Smartphones 8 20 54 82 122 140 179 283 470 689 908 1090

Total Handsets 520 680 812 991 1,153 1,226 1,244 1,419 1,580 1,714 1,854 1,954

31% 19% 22% 16% 6% 1% 14% 11% 8% 8% 5%

YoY Growth

Feature & Basic Phones 29% 15% 20% 13% 5% -2% 7% -2% -8% -8% -9%

Smartphones 150% 170% 52% 49% 15% 28% 58% 66% 46% 32% 20%

5yr Growth 55% 39% 42% 41% 45% 44%

Smartphones Penetration 2% 3% 7% 8% 11% 11% 14% 20% 30% 40% 49% 56% Source: Gartner, Barclays Research

Expect ongoing share consolidation around Apple and Samsung

During 1Q12, we saw ongoing share consolidation around Apple and Samsung and we

believe this trend is likely to continue through the remainder of 2012. Samsung has

demonstrated the most impressive share gains over the last two years; we estimate growing

from around 9% in 2010 to around 21% in 2011 and to 31% in 2012, finally replacing Nokia

as the dominant player in the market in 2011. The ongoing struggles at both Research In

Motion and Nokia, given their drastic transformations, have only strengthened demand at

Apple and Samsung.

Jeff Kvaal

+1 212 526 2216

[email protected]

BCI, New York

Sector View

2-NEUTRAL

*Sector view is for both the U.S. Data

Networking & Wireline Equipment

and U.S. Wireless Equipment


17 May 2012 60

Huawei, ZTE and other domestic Chinese vendors are also benefiting from strong demand

within the region and continue to raise their presence on a global scale. We expect this

trend to also continue - we estimate share gains to reach close to 20% of the overall market

this year from just over 10% in 2011. Both Huawei and ZTE have made impressive progress

in the export market as well, launching a range of device options across U.S. prepaid and

postpaid carriers.

Most other vendors, including Nokia, LG Electronics, Research In Motion and HTC,

unsurprisingly continue to lose share this year and next.

Networking: BYOD is driving healthy wireless LAN gear spending

Various checks and data points indicate that mobility and BYOD are a clear top theme in

enterprise networking. In fact, WiFi/mobility has emerged as the top spending priority in

our last three surveys of networking managers. We expect the proliferation of smartphones

and tablet devices, as well as the replacement of unused wired ports, to continue to drive

robust growth for wireless LAN gear. Please see our survey results note Seasonal 1H Should

Drive Solid Networking (April 17, 2012).

We also believe we are still in the early days of BYOD deployments, a point that Aruba

emphasized at its analyst day in March. The number of BYOD users and the number of

devices per user continue to rise and 802.11N still has a long way to go. For example, a

large enterprise may have only around 50% of its installed base upgraded from the prior

generation 802.11A/B/C. While the initial phase of the upgrade cycle was primarily about

providing wireless access in conference rooms, for example, the trend toward multiple

devices per user and more multimedia applications and services like Facetime is driving a

continued upgrade cycle. The 802.11A/C standard should start picking up in calendar 2013.

The first generation of 11A/C is expected to hit the enterprise market in 1H13, while

consumer class products should begin launching this year. Netgear, for example, launched

the first A/C consumer product in April 2012.

In terms of competition, Cisco has long been the leader in this market, but its share has

declined to around 50% from more than 60% over the past few years. Cisco recently

launched new products in this market, and we believe it is trying to win back lost share.

Meanwhile, Aruba has made strong traction as the number two player in this market. We

believe it is convincing in its view that the gap between its technology and that of larger

rivals like Cisco, Hewlett-Packard and Juniper is at least intact, if not wider than before. Its

new ClearPass software offers IT managers visibility into specific devices, users and

applications, and thus should drive further share gains. We are less clear on how far ahead it

is versus new private competitors.

Figure 61: Global handset vendor share

Figure 62: Global smartphone vendor share

Handset Production Estimates (units in millions)

1Q12 2Q12E 3Q12E 4Q12E 2012E 2013E

Nokia 83 80 84 96 343 340

Samsung 91 96 103 103 393 443

Apple 35 28 28 43 135 176

LG Electronics 14 15 16 18 62 82

HTC 8 11 13 14 45 56

RIM 11 8 7 7 33 34

Motorola Mobility 9 9 10 10 38

Sony Ericsson

Other vendors (Huawei, ZTE, Sony, others) 148 160 170 188 666 723

Total Handsets 398 407 430 479 1,714 1,854

YoY Growth 7% 10% 8% 10% 8% 8%

Smartphone Production Estimates (units in millions)

1Q12 2Q12E 3Q12E 4Q12E 2012E 2013E

Nokia 12 11 13 16 52 70

Samsung 44 52 58 61 216 292

Apple 35 28 28 43 135 176

HTC 8 11 13 14 45 56

RIM 11 8 7 7 33 34

LG Electronics 5 6 8 9 28 49

Motorola Mobility 5 6 6 7 24

Sony Ericsson

Other vendors (Huawei, ZTE, Sony, others) 25 32 42 58 157 230

Total Handsets 145 154 175 215 689 908

YoY Growth 50% 49% 50% 39% 46% 32% Source: Company reports, Barclays Research Source: Company reports, Barclays Research


17 May 2012 61

Key Picks: Qualcomm, Aruba

Qualcomm: Despite near-term capacity constraints, strong fundamental growth drivers intact

We are positive on Qualcomm (co-covered with CJ Muse, U.S. Semiconductor and

Semiconductor Capital Equipment) despite the company’s near-term challenge in procuring

supply of its 28nm chipsets, including the highly anticipated dual mode 3G/4G MSM8960.

We consider these capacity constraints a function of both better-than-expected demand –

management highlighted that demand for the 8960 has improved since the beginning of

the year – and lower-than-anticipated supply. Management is working on correcting this

bottleneck and expects to return to normalized production volumes by the end of

September or FY12. In the meantime, capacity constraints will limit our 2H Mobile Station

Modem (MSM) unit volume forecast; we had lowered our estimates post F2Q results.

However, we do not believe that delays on the MSM8960 all represent lost volumes. While

second sourcing typically fulfils much of the lost shipments, Qualcomm is fortunate that

most other vendors do not yet have a competitive solution in the market, offering both dual

mode 3G/4G LTE on one integrated chipset. This is Qualcomm’s first chipset on 28nm and

will also offer greater power and speed efficiency. While some customers are likely to

consider alternative solutions – QCOM is working on moving some demand into its Fusion

products – many will likely wait for the 8960. Qualcomm is partnering with its customers to

speed up delivery of its chipsets, which we consider a positive indication that MSM

shipments are mostly only delayed, rather than lost to competitors.

Longer term, we consider Qualcomm’s technology leadership and ongoing execution to

serve as a strong basis for maintaining its lead competitive position. Furthermore, a healthy

handset market continues to benefit Qualcomm’s licensing business and we still regard

management’s 2012 growth rate of 16% as conservative.

We estimate CY12 sales and EPS of $20.2 billion and $3.82, respectively, above the

consensus estimates of $19.3 billion and $3.76. We estimate CY13 sales and EPS of $23.8

billion and $4.45, respectively, above the consensus estimates of $22.0 billion and $4.19.

Aruba: Healthy markets support our above-consensus estimates

We are positive on Aruba and expect the company to be a primary beneficiary of healthy

BYOD trends. We think the primary questions on Aruba have centered on seemingly slower

revenue growth and the competitive environment, particularly smaller private vendors.

Although guidance for 23-25% year-over-year sales growth in the April quarter is less than

the well-above-30% growth achieved in prior quarters, management has reiterated that the

year-ago April and July quarters included roughly $5-6 million in China hotspot business

that the company is no longer pursuing. Excluding these sales, we think management

expects growth of more than 30%. Thus, we expect sales to accelerate in FY13 as Aruba

anniversaries this China revenue. We lifted our estimates on Aruba following its analyst day

in late March (please see our note Revenue Acceleration Lifts Our Estimates, March 29,

2012). We retain our above-consensus estimates with EPS of $1.00 in calendar 2013

(consensus is $0.90). We assume 30% sales growth in our estimate compared to consensus

of 21%. Aruba should report its April-quarter results in mid/late May.


17 May 2012 62

U.S. SEMICONDUCTORS

A return to growth; maintain 1-Positive

� We continue to want to own Semiconductors as we maintain that the group will

grow faster than end markets as we head into the June-October time frame. The

stocks will likely remain choppy over the near term as investors potentially adhere to

the old adage “Sell in May and Go Away,” but with the SOX pulling back to below $400,

we see the risk-reward as favorable. We reiterate our 1-Positive rating on the sector.

� Semis should command a premium multiple to Industrials as revenues track end-

market demand. Semiconductors in our universe are trading at 12.3x 2013E EPS, a

13% discount to Industrials, at 13.9x, and in line with the S&P 500, at 12.4x. We

continue to believe semis should command a premium multiple to Industrials given

continued solid cash generation, as most semiconductor vendors operate under a less

capex-intensive model than industrials.

� Given the backdrop of macroeconomic uncertainty, we recommend that investors

focus on the right product cycles and attractive relative valuation. Our top picks

remain Qualcomm, Broadcom, Altera and NXP Semiconductors in large-cap and

Avago, Cavium, LSI and Skyworks Solutions in small- to mid-cap.

1Q12 marks bottom, focus turns to if inventory replenishment drives better end-market growth in 2H12

After both the market and leading chipmakers called for a trough for the last three quarters,

1Q12 finally marked the bottom for semis (SIA revenues were down 2% Q/Q in 1Q12), with

most, if not all, companies guiding for sequential growth into 2Q (the average forecast for

semis is 6% growth in 2Q12). The focus from here turns to the rate of recovery for semis

and whether or not sufficient confidence in the end markets will support above-end-market

growth as we head into the second half of 2012. We continue to model semi revenue

growth of 2% in 2012, which suggests a quarterly CAGR of around 6% through 4Q12.

-60%

-40%

-20%

0%

20%

40%

60%

Nov-94 Nov-99 Nov-04 Nov-09

SIA Total Revs

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

1Q

06

2Q

06

3Q

06

4Q

06

1Q

07

2Q

07

3Q

07

4Q

07

1Q

08

2Q

08

3Q

08

4Q

08

1Q

09

2Q

09

3Q

09

4Q

09

1Q

10

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

0

10

20

30

40

50

60

70

80

90

Semiconductors Inventory Dollars ($M) Semiconductors Inventory Days

Source: SIA and Barclays Research Source: Company reports and Factset

Bright spots remain the autos and industrials end markets, and a potential 2H PC

recovery: By segment, we believe autos and industrials continue to be healthy end markets,

C.J. Muse

+1 212 526 8945

[email protected]

BCI, New York

Blayne Curtis

+1 617 342 4101

[email protected]

BCI, New York

Sector View

I-POSITIVE

.

Figure 63: WW semi revenue Y/Y growth 1994-2012

Figure 64: Semiconductor inventory dollars and DOI


17 May 2012 63

where we look for growth of 5-7%, and in-line with end markets. We also look for a 2H12

PC recovery led by normalization of the HDD supply chain and demand for new product

launches with Ultrabooks/Win8/EMG, and we think the debate from here revolves around

whether or not tablet cannibalization will continue to be a headwind.

Mobility is mixed due to Apple’s seasonality, with focus on whether we will see broader

recovery into communications infrastructure: For mobility, we see seasonality contributing

to mixed results as we await the ramp-up of iPhone 5, while we see Samsung smartphone

offerings continuing to perform in the near term with its Galaxy products. Lastly, we see the

focus shifting to communications infrastructure and whether carrier network upgrades will

support a broad-based recovery into 2H12.

Key Picks

Our top ideas remain levered to 3Q builds at Apple and Samsung, and encompass QCOM

and BRCM in our large-cap universe and SWKS in our small- and mid-cap universe. We also

favor names tied to a 2H recovery in communications infrastructure, such as ALTR and

CAVM. NXPI and AVGO remain our preferred stocks based on relative valuation and secular

analog growth. DRAM industry consolidation is supportive of MU, while LSI remains our

preferred name within our SMID universe.

We favor names tied to Apple and Samsung ahead of 3Q builds: With an iPhone 5 release

anticipated within the next six months, we favor names tied to AAPL ahead of a 3Q build.

Our top picks here remain QCOM, where we expect the new iPhone to feature the new

MDM9615 modem (LTE voice and data); BRCM, which is likely to provide connectivity with

the BCM4334 WLAN combo chip; and SWKS, which we believe will see the biggest content

increase among RF names. For names tied to Samsung, we believe BRCM has seen success

tied to the Galaxy Y on the low end, and believe most of the baseband revenues from

Samsung are now coming from 3G rather than 2G. At Samsung we also favor SWKS with

share gains in the Galaxy SIII and significant content in the Note.

2H communications infrastructure recovery: Semi vendors that see revenues from

communications infrastructure had mostly positive comments in 1Q, the most positive of

which came from TXN, as the company believes the inventory build for wireless

infrastructure has been depleted, though we still see communications infrastructure as

second-half weighted. Our preferred names here remain ALTR, where management noted

wireless and wireline demand picking up and depleted inventories driving 2Q up double

digits, and CAVM, where we see encouragement from NSN wins starting to ramp up, along

with revenue from base stations at Huawei, Samsung and Cisco on the way this year.

Relative value and secular analog growth: We favor NXPI and AVGO here, with leverage to

key end markets and discounted relative valuations versus peers. For NXPI, we believe that

the longer-term operating efficiency and debt reduction story is well understood by

investors, but that top-line growth is underappreciated. We also continue to favor AVGO, as

we believe it should benefit from a recovery in Industrial and Wired, is well positioned in the

iPhone 5 refresh (LTE and possibly Band 2), and should see a tailwind from LTE rollouts at

Verizon and AT&T. Layer in its cheap valuation of 11x CY13 EPS versus analog peers trading

at around 13.5x, and we see upside to the shares from here.

DRAM industry consolidation: Our positive thesis on Micron remains intact, namely that

DRAM ASPs have troughed in 1Q and meaningful cuts to commodity DRAM supply should

drive better supply/demand balance. While Elpida’s bankruptcy clouds the near-term


17 May 2012 64

picture a bit, we believe a strategic buyer will eventually win out, which would be positive

for the DRAM industry and in turn for MU. Layer in leverage to the Ultrabook product cycle

in 2H12 through its NAND business and leverage to improving PC order trends starting in

2Q12, and MU remains our favorite name in memory.

HDD recovery wrapping up, favor LSI for longer-term share gains: In HDDs, the desktop

market was the last to recover and is expected to make a full recovery by 3Q. We like LSI’s

position in the long term for share gains at Western Digital (likely 1TB desktop platter) and

we see that as the next major leg of growth in 3Q/4Q. While near-term HDDs continue to

carry the day, we believe several underappreciated secular drivers lie ahead (WD share

gains, SSDs, PCIe Flash, Multicore processor and DSP wins), contributing to the story in

2H12 and beyond.

Figure 65: Semiconductor CY12 PE vs Industrials, S&P 500

Figure 66: Semiconductor CY13 PE vs Industrials, S&P 500

17.2x 17.2x

15.9x

18.3x

13.2x 13.2x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

20.0x

PE (CY12) CY 12 PE ex cash

Semis Industrial S&P 500

12.3x

11.2x

13.9x

16.1x

12.4x 12.4x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

PE (CY13) CY13 PE ex cash

Semis Industrial S&P 500



17 May 2012 65

U.S. SEMICONDUCTOR CAPITAL EQUIPMENT

Orders may be peaking but appear sustainable

� We expect 2012 wafer fab equipment (WFE) to be flat year over year, with yield

issues and supply constraints in 28nm production driving foundry players to raise

capex budgets, foundry/logic equipment spending now flattish (vs more muted Street

expectations entering the year), and the outlook for memory still subdued. Based on

the 1Q12 results/2Q12 guidance from the majority of the semiconductor production

equipment (SPE) space, we believe that shipments and bookings will be flat in 2012.

� Shares of SPE names are likely to remain relatively range-bound as investors weigh

the likelihood of peaking orders against the view that current business levels are likely

sustainable not only through 2H12, but also through 2013.

� In this environment, we recommend leverage to product cycle stories with

attractive valuations. We highlight ASML as our top pick in front-end processing for

leverage to the extreme ultraviolet (EUV) secular growth story coupled with

expectations for an Intel-driven rise in 3Q12 bookings. In back-end processing, our top

pick remains Teradyne given its superior leverage to all of the top mobility OEMs

coupled with emerging growth from the LitePoint acquisition.

We see flattish WFE in 2012 and flat to +/-10% in 2013

While we had anticipated modest declines in 2012 WFE entering the year, rapid customer

migrations to 28nm and continued yield issues at the leading foundries have raised the

outlook for foundry capex. This has offset more muted NAND WFE, where oversupply and

depressed ASPs have delayed investment. We see 2012 WFE flattish at around $31.5 billion,

and while we anticipate some pullback in foundry spending in 2013, we believe the recovery

in NAND and logic spending should allow 2013 WFE to track flat to +/-10% Y/Y.

C. J. Muse

+1 212 526 8945

[email protected]

BCI, New York

Sector View

2-NEUTRAL


17 May 2012 66

Key drivers of 2013 spending – look for MPU and NAND to ramp up

Our 2012 WFE assumptions are based on: 1) flattish foundry capex, as Samsung and TSMC

vie for 28nm business, with UMC and GlobalFoundries also seeking to become more

competitive; 2) flattish to slightly down MPU spending, with a recovery in orders beginning

in 3Q12; and 3) still sluggish NAND and DRAM spending given more muted demand and

industry overcapacity.

For 2013, we look for: 1) Intel’s spending on equipment to rise in earnest as the company

ramps up 14nm production at various fabs; 2) NAND spending to recover given the secular

growth drivers in NAND adoption (SSD penetration into PCs, increasing demand for

handsets and tablets); and 3) foundry spending to decline from several years of peak-level

spending, though still supported by the substantially higher capital intensity at the 28nm

node coupled with initial investment in 20nm production.

Figure 67: Wafer fab equipment outlook

$22

$29-33$31

$15

$29

$16

$33

$12

$25

$37

$33

$0

$5

$10

$15

$20

$25

$30

$35

$40

1981198319851987198919911993199519971999200120032005200720092011

2013E

($ in Billions)

Source: Barclays Research, SEMI


17 May 2012 67

Figure 68: Spending by segment

$12 $12$9-11

$7 $7 $8 $7.5 $8 $8-9$5 $5 $5-6

$31.5 $31.5 $29-33B

0

5

10

15

20

25

30

35

Foundry/Logic MPU NAND DRAM Total

WFE Spending by Segment ($B)

2011 2012E 2013E


Orders tracking flattish through year-end, with potential for quarterly fluctuations based on seasonality and customer exposure

Following a stronger-than-anticipated order ramp for many equipment companies in 1Q12,

we believe the 1Q12 industry order run-rate has reached $30+ billion. And given our

expectations for 2012 WFE to total approximately $31.5 billion, we believe the order and

shipment trajectory will be flattish to modestly higher through year-end. This in turn will

likely keep the group range-bound with orders looking to peak, but a sell-off is unlikely

given expectations for these orders/shipments to be sustainable at least through year-end.

As a result, we expect SPE shares to remain range-bound until investors gain confidence

that capex will rise in either 2012 (representing upside to the consensus view that it will be

flat) or 2013.


17 May 2012 68

Figure 69: WFE bookings and billings trajectory

$-

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

$14.0

1Q033Q03

1Q043Q04

1Q053Q05

1Q063Q06

1Q073Q07

1Q083Q08

1Q093Q09

1Q103Q10

1Q113Q11

1Q12E

3Q12E

$ B

illi

on

s

Billings Bookings

4Q10 annualized WFE

run-rate = $40B

4Q11E annualized WFE

run-rate = ~ $28B

3Q05 annualized WFE

run-rate = $19B

3Q04 annualized WFE

run-rate = $30B

1Q09 annualized WFE

run-rate = $4B

3Q07 annualized WFE

run-rate = $36B

Source: Barclays Research, WWSEMS

Mobility providing support for $2.5 billion+ SOC test demand in 2012

Driven by strength in mobility-related system-on-chip (SOC) demand, tester demand has

been stronger than expected in the first half of 2012. Looking to 2H12, we believe tester

demand will continue to be supported by a recovery in spending from core analog and

automotive/industrial-related SOC demand. As a result, we see the 2012 SOC test market

trending flattish year over year at around $2.55 billion, with similar levels of spending likely

in 2013. Importantly, we believe SOC test spending will continue to be weighted toward

mobility-related integrated circuits, which should disproportionately favor Teradyne. We

estimate that Teradyne’s SOC test market share will ramp up from around 40% in 2011 to

47.5% in 2012 and 49% in 2013.

Figure 70: SOC test market and buy rate

2.3%

3.7%

1.8%

2.1%

1.2%1.3%

0.8%

$0.0B

$1.0B

$2.0B

$3.0B

$4.0B

$5.0B

$6.0B

1996 1998 2000 2002 2004 2006 2008 2010 2012E

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

SOC Test SOC Buy Rate

Source: WSTS, VLSI, Barclays Research


17 May 2012 69

Key Picks

In this environment, we recommend leverage to product-cycle stories with attractive

valuations.

� ASML is our top pick in front-end. First, it has spent heavily on EUV, an advance that

shortens the wavelength of light used in a lithography machine, which translates into

higher resolution and smaller features. Second, it stands to benefit from an Intel-driven

increase in 3Q12 bookings. This combination gives us increased confidence in the

company’s 2013-14 growth.

� In back-end, our top pick remains TER. Teradyne enjoys superior leverage to all of the

top mobility OEMs and to the emerging growth in wireless products thanks to its

September 2011 acquisition of LitePoint. Concerns of an order peak could prove to be a

headwind, but we point to still-underappreciated growth, share gains in SOC test, and

attractive valuation as reasons to support continued outperformance.


17 May 2012 70

U.S. INTERNET

Smartphones and devices driving growth

� We rate the Internet sector 1-Positive. We believe fundamental trends in online

advertising and eCommerce remain solid, and maintain our stance that the continued

proliferation of smarter mobile devices and higher bandwidth speeds will drive

significant increases in Internet usage, with monetization trends likely to follow.

� Our top picks in the space are Google and Priceline. We continue to believe Google’s

dominant position in search, exposure to mobile via the Android platform, and

increasing traction in display position the company well going forward. We believe

Priceline is the best levered online travel agency to the international and hotel markets.

Given 60%+ growth in hotels on Booking.com in 2011 and fairly consistent triple-digit

bookings growth at Agoda, we believe Priceline still has a robust growth runway ahead.

Mobile devices in early growth stage

Smartphones and devices are delivering Internet growth: We believe the impact of

mobile devices on Internet usage, advertising, and commerce is still in its early stages.

Internet connectivity is becoming a must have on the majority of devices, and we believe

network speeds, affordable data plans, and the devices themselves with full HTML browsers

are enabling this transition. Among our coverage group, we believe Google is the best

positioned to benefit. We are impressed with the Android’s momentum, which currently

has 47% share of domestic smartphone platforms and is activating ~850,000 devices a day.

In addition, Amazon has become a competitor in the tablet market via its low-priced Kindle

Fire offering, and we look for new tablet offerings in 2H12, which we believe could help

Amazon to win share in digital media as sales of physical media will decline over time.

We believe search ports better than display on mobile, and by extension local-focused

queries should monetize well on mobile devices. The limited screen size of mobile devices

drives higher click-through rates in search, while mobile ad formats such as “click-to-call,”

often associated with local ads, are more effective on mobile devices than on desktop, in

our view. We believe display will not monetize as well given the greater sense of intrusion on

the smaller screen and less overall space for ad placement. Given Google’s leverage to

search, and its higher share of queries on mobile, we believe it is among the best-positioned

companies in our coverage group for the shift toward smartphone and tablet usage. On the

other hand, we are more cautious on companies such as Yahoo! and AOL given their

reliance on display advertising and their relative lack of innovation and investment in

mobile.

We also think eCommerce converts well on mobile devices and helps to further blur the

lines between offline and online retailing. We believe Amazon, eBay and Priceline are

well-positioned here. All three companies have invested heavily in mobile and we believe

offer strong multi-screen experiences via their apps. Amazon’s Kindle family helps to

increase its exposure to digital media while allowing it to have a say in the direction of the

space via its investment on the hardware side. eBay has also seen strong traction to date in

mobile as its PayPal business saw 2011 Total Payment Volume (TPV) of $4 billion, and it

has guided to $7 billion of TPV in 2012, while its Marketplace segment saw mobile Gross

Merchandise Volume (GMV) of $5 billion in 2011, and guided to GMV of $8 billion by 2012.

Anthony DiClemente, CFA

+1 212 526 4008

[email protected]

BCI, New York

Perry Gold

+1 212 526 7827

[email protected]

BCI, New York

Sector View

1-POSITIVE


17 May 2012 71

Priceline’s largest brand, Booking.com, recognized $1 billion in bookings via mobile devices

in 2011.

Internet remains the fastest-growing category within advertising: Internet advertising

continues to benefit from secular tailwinds as the gap between U.S. Internet advertising

dollars as a percentage of total ad dollars (around 1/6) should close versus the Internet’s

percentage of overall media consumption time (more than 1/3). However, we do not

believe online advertising is totally insulated from a macro slowdown. We believe that any

macro softness will be more impactful on the display side than on the search side,

particularly as branded advertising budgets get trimmed. Of note, we believe that portals

like AOL, Microsoft, and Yahoo! have begun to face increased competition from the likes of

Google and social sites in display.

Content battles continue to heat up: Internet companies are increasing their clamor for

content, particularly streaming video content, as traditional media continues to migrate

toward new media distribution channels and the media consumption model increasingly

moves to rent from buy. As a result, we believe that streaming video content will be much

more expensive for Internet companies to acquire. In addition, there is now more

competition bidding up the value of this content; Amazon has been investing in content for

its subscription video-on-demand (SVOD) offering from Amazon Prime, bringing the total

number of advertised titles available to Prime members up to around 17,000. Comcast also

has entered the space with its February launch of Streampix, a standalone SVOD service

which could eventually be offered out of footprint as another direct competitor to Netflix.

Moreover, most Multi-System Operators have online platforms for on-demand content,

including Comcast’s XFINITY platform, AT&T’s U-Verse, Verizon’s Fios, Direct TV, DISH, and

others. It is our view that these distributors will continue to acquire digital content for on-

demand viewing in footprint, and longer-term we believe TV Everywhere threatens to

cannibalize users’ time spent on connected devices.

Key Picks

Google (1-Overweight; $750 Price Target): Despite market concerns around cost per click

(CPC) declines and the Motorola Mobility acquisition, we believe Google continues to be a

significant, well-positioned player and disruptor across the Internet. Google remains

dominant in Search, where it is benefitting from very strong volume growth (1Q12 paid

clicks grew 39% Y/Y). In addition, Google has strong exposure to mobile via its Android

platform, which is seeing ~850,000 daily activations; it is our view that the net effect of the

shift toward mobile devices and mobile search will be incremental net revenues and paid

clicks. Moreover, its emerging businesses continue to grow rapidly, and the company

continues to gain traction via its display initiatives across YouTube, the content network,

and the Ad Exchange.

Priceline (1-Overweight; $800 Price Target): We believe Priceline is the best positioned

online travel agency (OTA) to benefit from global travel trends and it is our top pick across

the OTA sub-sector. Priceline comprises the rare combination of strong top line growth at

scale and high EBITDA margins. As we believe global hotel and rental car online travel

penetration is in its relatively early days, we expect continued strong growth ahead. We do

retain some caution, however, as Priceline is the most exposed OTA to Europe.


17 May 2012 72

U.S. DISPLAY AND LIGHTING

Incrementally more positive on the LED market

� Our outlook for the Display & Lighting sector remains Neutral given the tempered

demand backdrop and continued challenges of oversupply. However, given recent

data points suggesting that a potential improvement in LED end market demand may

be on the horizon, we are incrementally more positive on the LED market as we expect

increased penetration of LEDs among general lighting applications to pick up

momentum in 2013 and beyond.

� Our top picks are Corning and Veeco Instruments. While Corning has been hit with a

number of challenges, including share loss and steeper-than-expected pricing declines

in its core display business, we believe that average selling prices (ASPs) have since

normalized. Coupled with low channel inventory, we expect the company's display

business to now more closely track end market demand, which remains healthy – albeit

at a much more mature pace. We consider Veeco best positioned to benefit from not

only a cyclical recovery in end market demand, but also the need to supply additional

capacity to support rising penetration of LEDs in general lighting applications.

LCD: Pricing adjustments now behind, look for more normalized glass demand

Over the past few quarters, the LCD glass supply chain has been negatively impacted by

questions around the pace of end market demand, pricing volatility and share

shifts. Moreover, as LCD TVs evolve, questions around the impact of technical innovation

(i.e., thinner screens, OLEDs) on glass manufacturers remain an overhang. In our view,

while some challenges persist, we believe that recent data points suggest that a number of

concerns impacting the industry have shown signs of bottoming, thus pointing to stability

and ultimately a higher probability of end market recovery. End market demand, while

maturing, is holding up comparatively well. Worldwide LCD TV unit sales growth has proven

to be resilient with regional strength in the U.S. and China offset by YoY declines in Europe

and Japan.

On the pricing front, recent commentary out of Corning suggests that while ASPs have

declined more steeply than expected in recent quarters, a more normalized level – i.e., in

the low to mid single range – has emerged in recent quarters. In our view, the primary

culprits for driving the accelerated pricing declines – share shifts and increased financial

pressure on the panel manufacturers – have now eased, which should enable more steady

declines in the coming quarters. Moreover, key suppliers including Corning and Asahi Glass

have cut back capacity, which should allow for more normalized channel inventory levels.

Lastly, technical innovation is clearly a longer-term variable affecting the end market and

could have a sustainable impact on glass manufacturers. However, in our view, the

evolution of the LCD TV industry should not be regarded as just a threat but also as a

potential opportunity. As OLEDs will take time to hit the mass market (the first large-format

TVs at the Consumer Electronics Show debuted to the tune of a $10,000 price tag), we

believe vendors are looking at opportunistic ways to capitalize on potential market

opportunities, and thus closely monitor end markets as they evolve.

Amir Rozwadowski

+1 212 526 4043

[email protected]

BCI, New York

Olga Levinzon

+1 212-526-9134

[email protected]

BCI, New York

Sector View

2-NEUTRAL


17 May 2012 73

LEDs: Industry overcapacity remains a headwind, beginning to see a light at the end of the tunnel

Our primary concern on the LED market remains industry overcapacity and the pace at

which LEDs would penetrate general lighting applications. We have consistently maintained

that LED penetration into General Lighting was a question of "when," not "if", though

visibility has been lacking on the progression of adoption. However, as industry data have

been increasingly pointing toward improved traction, with strong LED lighting revenue

growth among the top lighting conglomerates, we are now incrementally more positive that

the general lighting opportunity is beginning to gain some traction. Coupled with a recent

pullback in the shares, we would look more optimistically around the space as momentum

continues to build.

Specific to LED equipment, we’d note that while the LED industry started off the year with

~60% overcapacity, our estimates suggest that the combination of growing LED

penetration into TV backlighting coupled with steady growth in LED lighting should absorb

the excess capacity by the end of 2012. As a result, we anticipate metal organic chemical

vapor deposition (MOCVD) bookings to begin to accelerate in 2H12 as LED makers target

LED area demand growth in 2013 and beyond. As a result, we see MOCVD tool demand

picking up from the 2012 trough levels of ~315 tools.

Key Picks

Corning: Visibility on end-market demand remains limited, but we are encouraged that

Corning may reach trough quarterly earnings in 2Q. We believe that ASP declines have

normalized. Coupled with low channel inventory, we expect the company's display business

to now more closely track end-market demand, which remains healthy – albeit much more

mature. Thus, with stabilizing fundamentals and a high likelihood for an increased cash

return strategy in coming quarters, we retain our positive view on the shares.

Veeco Instruments: We believe Veeco is best positioned to benefit not only from a cyclical

recovery in end-market demand, but also new capacity additions in LED general lighting

applications. Veeco is poised for market share gains; we expect it to have 55% of the

MOCVD market by 2013. Moreover, we believe the Street is underestimating VECO’s more

streamlined business model and strong operating leverage. Our above-consensus 2012 and

2013 EPS estimates are $1.60 and $2.15, respectively, versus $1.28 and $1.93 for the Street.

We see “normalized” EPS of around $4.00 in the next 3-5 years, and see continued upside

potential in the shares.


17 May 2012 74

U.S. CLEAN TECHNOLOGY AND RENEWABLES

Focused on attractive cost/value propositions

� Rising energy demand is a long-term positive for clean technology and renewables.

Despite near-term broader market challenges, rising energy demand spurred by global

population growth and low market penetration suggests a large multi-year growth

opportunity. The need to fill the gap between energy needs and what fossil fuels can

provide, together with growing private sector investment even in a challenging macro

environment, supports our more sanguine view in the long term.

� We see pockets of opportunity in alternative-fuel vehicles and energy efficiency.

With less support from government stimulus and regulatory incentives, the clean tech

industry will need to drive demand with technologies that provide an attractive

cost/value proposition. We see pockets of opportunity in electric vehicles (EV), energy

efficiency and smart grids over markets such as LEDs and solar, which are still digesting

the dual challenges of overcapacity and tightening incentives.

� Diminishing incentives pose a major risk. The success of select sub-markets depends

on the ability to develop viable and competitive economic models. A prolonged global

macro recovery could derail opportunities for sector growth as select technologies

would be unable to build the scale needed to compete with incumbent solutions.

Demand growth to drive next phase of clean technology

In our view, the next phase of the clean technology sector’s evolution will be led by demand

rather than incentive-supported supply growth. As many of the supportive initiatives that

were in place have either disappeared or declined in size, we believe investors that are

focused on the clean technology arena will be best positioned by maintaining exposure to

those areas that are less reliant on incentives and provide more attractive cost/value

propositions. We recognize that the broader sector will continue to depend on government

support and regulatory incentives, particularly since the industry is still in the early stages of

development. However, we continue to believe that companies with less risk of further

consolidation are the ones that can provide differentiated value to specific end markets,

thus spurring ongoing and steady growth in demand.

By end market, we are thus relatively positive on the near-term outlook for the alternative

fuel vehicle market, particularly vendors that provide comparative performance metrics to

available internal combustion engine alternatives. We believe the increasing availability of

broader options by established automotive OEMs should raise consumer awareness, and

those vendors that cater to high discretionary income customers should be better

positioned to capitalize on early adopters in the market.

We believe the adoption of alternative fuel vehicles will continue to be driven by two

primary markets. The first is the premium market, where high discretionary income buyers

don’t need to take into account the total cost of ownership (TCO) argument for owning an

electric vehicle and will pay for innovation as they can afford to take on any risk associated

with a pure EV. The second market is where a TCO argument makes complete sense; i.e., in

the case of fleet vehicles which have defined driving plans and could benefit from a

reduction in fuel costs over multiple vehicles.

Amir Rozwadowski

+1 212 526 4043

[email protected]

BCI, New York

Shrenil Bhansali

+1 212 526 7570

[email protected]

BCI, New York

Sector View

2-NEUTRAL


17 May 2012 75

We also have a positive view on the energy efficiency market, which we believe is the low-

hanging fruit of the sector. We believe that the installation of newer, more energy-efficient

solutions (e.g., lighting, building management systems) is the easiest way to reduce energy

costs, particularly since residential and commercial energy use is one of the highest outlays

in the U.S. market. In our view, the energy service company (ESCO) market is an attractive

way to capitalize on broader energy efficiency trends, but also provides a stable longer-term

tailwind given exposure to long-term, highly visible, cash-generative contracts. Within the

market itself, channel checks indicate the municipality, university, school and hospital

(MUSH) market is recovering and federal RFPs continue to gain traction.

When we first began tracking the smart grid space at the end of last year, the principle

concern was the limited visibility on the timing of the international upgrade cycle (led by

Europe), making it difficult to assess when the gap left by decelerating investment in the

U.S. would be filled. However, we are now incrementally more positive on the pace of

European demand given conversations with utilities and meter vendors alike, and expect it

to increasingly serve as a key driver of stocks in the smart grid space over the next 12-24

months. We suggest that investors begin to take a second look at what could be a

significant multi-year cycle.

We believe the solar market is 1) facing the threat of profitless prosperity, where even tier-1

manufacturers are unable to generate profitability; 2) facing tempered demand given

diminishing incentives (i.e., German and Italian tariff cuts and the expiration of the U.S. 1603

cash grant; and 3) ripe for consolidation and, more likely, rationalization as select vendors

need to exit the market in order to support the longer-term health of each company. We still

do not consider it an opportune time to actively call the “survival trade” in the market just

yet, and would wait for further evidence of stable pricing trends – and more importantly

visibility on the ability to stabilize margins – ahead of looking for longer-term plays.

Key Picks

Tesla Motors (TSLA; 1-Overweight – co-covered by Global Autos and Auto Parts Analyst

Brian Johnson) is our top pick in the alternative fuel vehicle market as we believe the

company is well positioned to capture share in the EV market as a premium provider of

automobiles. Tesla has a number of factors working in its favor. First, demand is healthy.

We believe the company’s accelerating reservation trends, which currently stand at 9.7K by

our estimates, indicate that there is strong appetite for the Model S. We believe Tesla sits at

the right niche of the EV market, focused on high-end users willing to pay for innovation

and performance, and would be relatively less bothered by a tepid economic backdrop. On

the execution front, we have been impressed by the company’s ability to ramp up its

NUMMI facility, and thus believe it is well on track to meet its launch

deadlines with deliveries scheduled to begin in July. Given high short interest in the shares,

we believe management’s ability to achieve its targets could drive further appreciation.

Ameresco (AMRC; 1-Overweight) is our energy efficiency pick. While we recognize that

contract awards are likely to remain lumpy, particularly for the MUSH markets, we believe

longer-term trends for energy efficiency contracts are positive, particularly in the federal

market. We consider Ameresco’s ESCO business model comparatively defensible in the

current environment, and thus like its longer-term visibility and cash generative

characteristics.

Elster (ELT; 1-Overweight) emerges as our top pick in the smart grid sector, largely as it

generates close to 70% of revenues from international markets, 49% of which come from


17 May 2012 76

Europe where the next leg of spending should emerge in late 2012/early 2013. Most

recently, Elster’s award wins with Iberdrola and E.ON highlight the company’s incremental

share gain in the residential electricity market, a market Elster is beginning to penetrate.

This remains material as we expect market growth to remain steady, suggesting the

potential for further share gains.

Power-One (PWER; 1-Overweight) is our top relative solar sector pick as we believe the

company is well positioned to gain share in the growing North American and Indian

markets. While we believe 2012 serves as an investment year, and likely a trough year, we

believe the company’s sales and margins should gradually improve into 2H12. Additionally,

the inverter market is less likely to be commoditized versus other areas of the solar value

chain. That said, we recognize that the company’s performance is unlikely to be completely

divorced from broader solar market demand, where we continue to see downward

pressure.


17 May 2012 77

EUROPE TECHNOLOGY


17 May 2012 78

EUROPEAN TECHNOLOGY HARDWARE

Sector slowly turning, growth is in smart mobility

� The Technology sector continues to adapt to a world of low GDP growth: After a

correction in mid-2011, ASML orders bottomed in 3Q11 and all our major

semiconductor players called the trough at some point in 4Q11/1Q12. In hindsight

what we have seen is a short and soft downtick, making this transitional period more of

a correction than a full-fledged cycle. However, we believe later-cycle telecom

equipment players are in a more structurally difficult situation and could take a lot

longer to recover.

� There is still little good cheer for most companies that are not benefiting from

specific structural growth drivers: ASML is gaining market share and growing with its

customers’ tech upgrades, Infineon’s automotive semis end-market is continuing to

outgrow the sector with the ongoing electronification of cars, and the trio of ARM,

Imagination and Dialog is surfing the smartphone wave. The outlook is, however, still

muted in spaces with less obvious innovation (telecom equipment) or with direct

exposure to the consumer (Logitech, TomTom).

� Our preference is for structural growth stories, and our top picks are ASML (1-OW,

orders continue to improve with logic customers and extreme ultraviolet lithography

(EUV) into next year) and the smartphone and Apple eco-systems with ARM (1-OW,

high exposure to smartphones, entering new markets with tech lead on Intel),

Imagination and Dialog (1-OW, strong leverage to Apple while diversifying and growing

share and end-markets).

Prefer stocks with strong global positioning focused on key technology trends

Given the still weak economic environment and the ongoing sovereign debt crisis, we made

our key recommendations on stocks with a strong global positioning that play into key

technology trends. This means that we missed some of the strong risk-on trade during 1Q.

However, the past few weeks have shown that this can reverse rapidly and we remain of the

view that positioning for the aforementioned structural trends offers better risk-reward.

In addition to our recent upgrade of ARM, we remain strong proponents of Dialog

Semiconductor and Imagination given their gearing into the smartphone and tablet growth

and into Apple and Samsung in particular. ASML also remains one of our top picks. We

expect orders to continue to improve and positive EUV news flow to create momentum in

the shares. Historically, slowing order momentum has been a sell signal for ASML, but we

expect orders to remain strong in 2H12, driven by Intel’s 2013 plans for 14nm, and we think

any macro driven share price weakness would represent an enhanced buying opportunity.

In telecom infrastructure, we retain our cautious view, as weak trends are supported by

caution from both customers and suppliers. On the customer side, a muted snap-back from

the prolonged debate over AT&T/T-Mobile in the U.S. (small up-tick + network

modernisation), sluggish trends in Europe (mostly network modernisation) and lack of

significant upgrades in emerging markets suggest to us another year of lacklustre growth.

Andrew Gardiner, CFA

+44 (0)203 134 7217

[email protected]

Barclays, London

Youssef Essaegh

+44 (0)203 134 7250

[email protected]

Barclays, London

Tim Warren, CFA

+44 (0)203 555 2013

[email protected]

Barclays, London

Sector View

2-NEUTRAL


17 May 2012 79

Figure 71: European Technology Hardware – key recommendations

1-Overweight Rationale 3-Underweight Rationale

Imagination Tablets / smartphones / Apple TomTom Legacy pressures more than offset new growth areas

ASML Capex cycle bottomed, 2013 adds EUV and increased capital intensity Kudelski

Exposure to digital TV, downside to estimates forecast

Dialog Tablets / smartphones / Apple

ARM Tablets / smartphones, return to estimate & newsflow momentum Logitech

Consumer electronics exposure, restructuring continuing

Key Picks

ASML (1-Overweight/2-Neutral, €45 price target): ASML continues to be well positioned

for the long term, in our view. The correction in expectations for the macro outlook created

some lumpiness around 3Q11 but that is now stable and the company’s net bookings are

back to growth. In the medium term, we believe that ASML will be in an increasingly strong

position due to: 1) its importance to the industry (lithography as a percentage of semi

capex); 2) increasing capital intensity in lithography (cutting edge tools are getting more

expensive but those for the less critical layers too); and 3) market share gains (ASML’s

dominance in immersion and as the sole manufacturer of next generation EUV tool).

ASML is on track to deliver a FY2012 at €4.9-5bn revenue. We expect orders to remain

strong in the near term, led by increasing foundry spending on leading edge nodes (TSMC is

seeing shortages in its 28nm, Samsung continues to invest material amounts, and Intel,

which will soon start to build its 14nm fabs). NAND is also a driver, albeit of a smaller

magnitude, with demand continuing to increase, led by the rise of smart mobility devices

such as smartphones and ultra-thin and low-power laptops. We believe that orders will

remain strong in 2H12 and into next year. Such activity suggests quarterly sales of

c.EUR1bn+ in the next few quarters, supportive of Datastream consensus 2012 revenue

expectations of EUR4.9-5.0bn. ASML trades on 14/10x 2012/13E EPS, and we forecast

25%+ EPS growth in each of the next two years. While we acknowledge multiple de-risking

for EUV uncertainty, we expect ASML to continue to make progress on throughput and that

as EUV becomes more commercially viable, multiple pressure will recede, driving shares

toward our EUR45 price target or 16/13x P/E. We reiterate our 1-OW rating.

ARM (1-Overweight/2-Neutral, £7.25 price target) has performed weakly over the past

year as the market digested its prospects in the PC market and earnings momentum

slowed. We see more upside in the smartphone and tablet segments, and ARM retains its

strong position in both, despite threats from Intel. Our in-depth analysis of ARM vs Intel

concludes that while both sides are moving into one another’s market, there should be no

material shifts in smartphone or PC share. We forecast tablets to grow strongly and for ARM

to retain the upper hand. On Windows on ARM, Microsoft’s disclosure has resulted in a more

modest expectation of adoption of ARM in PCs, contributing minimally to 2012/13 estimates.

1Q12 was a mixed quarter, with the dominant highlight given the negative reaction of

shares being a small miss in royalty revenue due to the Thai floods. We believe the stock

price weakness since then to be overdone, and we continue to see significant value on a 12-

month view, with royalties set to trough in 2Q12. The stock still awaits positive earnings

momentum and improved news flow. We expect positive consensus estimate revisions to



17 May 2012 80

return this year, with continued strength in smartphones/tablets, operating leverage and

improving tax.

Shares are attractively valued given growth: ARM remains on premium multiples, but at

36x/30x 2013/14 P/E, we consider such multiples increasingly attractive for a company

generating 20% CAGR in EPS and with such a strong business model. Our DCF points to

£7.25 fair value for shares, implying +40% upside to current trading levels. We are 1-OW.

Imagination Technologies (1-Overweight/2-Neutral, £7.60 price target) is a

semiconductor IP licensing company focused primarily on the graphics chip market with its

successful Power VR product line. In a similar fashion to ARM, it sells licenses to customers

and generates royalties which provide a long-term stream of high-margin revenue with

good visibility into the future. Imagination is heavily exposed to smartphones, one of the

few areas of consumer electronics that has grown at double-digit rates over the past few

years despite the weakening macro economy.

Currently, more than 70% of Imagination’s royalties derive from graphics IP, with the bulk in

smartphones. We expect the category to grow at a CAGR of c40% through F2014,

supporting both licensing and royalty revenue growth. We continue to see Imagination as a

top pick and a structural winner due to its high exposure to smartphones and tablets. While

Imagination is highly leveraged to the Apple story (100% market share of iOS devices), it is

well diversified too: Strong exposure to the Android eco-system (c40% market share), and

to the rapid growth of the low-end smartphone (MediaTek 3G chipsets are 100%

Imagination). Imagination, unlike ARM, is also agnostic to the Intel vs ARM battle because it

provides its IP to both camps (Intel's Atom System-on-Chip uses Imagination's Graphics).

Recent major design wins and market share gains in the smartphone/tablet space include

Huawei, Qualcomm, MStar, Samsung and ST-Ericsson.

Given the strong long-term cash flow story, Imagination shares trade at high near-term multiples

of 60/41x 12/13 PE and the licensing business model makes a DCF more suitable for valuation.

Our forecasts support a DCF-driven valuation of £7.60. We rate the stock 1-Overweight.

Dialog’s (1-Overweight/2-Neutral, €19.50 price target) 1Q results and outlook

demonstrated that it remains one of the best positioned European plays on smartphone and

tablet growth. While the iPhone 4S/5 transition causes a slight pause in quarterly revenue

momentum, we believe Dialog is still on track to grow revenue at >20% and EPS at >30%

three-year CAGRs.

1Q12 revenue was largely in line, but Dialog guided sales flat to slightly down for 2Q, driven

by the iPhone 4S/5 transition. Following this pause, management have increased

confidence in achieving consensus expectations for the full year driven by "new product

launches from customers,” which we think includes iPhone 5, additional models from

Samsung and other Asian Android vendors. Our 2012 revenue estimate of $750mn is 4%

ahead of Datastream consensus and we expect the acceleration of growth in 2H to drive up

expectations and shares. Dialog has seen gross margins bottom in 4Q11 and expects

gradual improvement through 2012. This bottoming in gross margin and consistent opex

management should combine to drive margin expansion in 2H12 and into 2013. We

forecast adjusted EPS of 1.22 in 2012, growing by 50% to 1.83 in 2013.

Dialog is attractively valued, in our view, at 1.9x/1.5x 2012/13 EV/sales and 20/14x P/E,

which we believe fail to reflect the material growth prospects of the company. We reiterate

our 1-Overweight rating and €19.50 price target.


17 May 2012 81

EUROPEAN SOFTWARE & IT SERVICES

Tougher ’12 but SW & processing provide shelter

� Growth has been holding up well during the first part of 2012, but we forecast this

will slow into the second half of the year.

� We therefore prefer more defensible names and focus on product cycles (SAP),

restructuring/self-help (AtoS, Temenos, Micro Focus) and the processors

(Amadeus, Wirecard). We continue to avoid Indra (50% exposure to Spain), Software

AG (ETS in terminal decline) and Aveva (expensive and slowdown is not priced in, in

our view).

Decent global IT growth, but keep an eye on Europe

From a global perspective, we forecast growth of 3-5% for FY12, which equates to ~1-1.6x

Global GDP leverage, in line with the historical average. However, it should be no surprise to

investors to see a strong divide between the individual regions.

Europe is the weakest region and we forecast IT budgets will be flat to slightly down in this

region. From a top-down perspective, we would therefore avoid companies that derive their

earnings predominately in Europe. We continue to be neutral/bearish on most of the IT

sector that has a high exposure to Europe, but also on those with significant exposure to the

weaker verticals (like government and finance). Figure 72 shows that the top 4 IT Service

players have on average 80% of revenue exposure to Europe.

Figure 72: IT Services exposure to ‘risk’ verticals

Europe Financial

Services

Public

sector

Security &

Defence

Total "risk

verticals"

Atos 81%* 20% 26% 46%

Capgemini 74% 22% 23% 45%

Indra 77%** 14% 14% 23% 51%

Logica 89% 16% 28% 44%

* Excluding WorldLine, ** 50% Spain

Source: Barclays Research and Company Data

However, we believe there are places to hide in the sector, and we continue to prefer

Software and Processing over IT Services. The rationale behind our view is the more global

nature of the software industry and its proven ability to protect earnings in a downturn. The

Processing companies under coverage (WDI and AMS) also managed prior downturns well

while increasing earnings. In our note “Recession Proofing the Numbers”, 10 October 2011,

we calculated that in a 2008-09 recession scenario, there would be just ~5% downside to

our FY12 Software estimates (this excludes the 35% downside we calculated for AVV).

Similarly, under such a scenario we estimated there would be ~3% earnings risk to the

Processors. This is in sharp contrast to the IT Service industry where we calculated almost

20% downside. In addition, restructuring in European IT Services is extensive, resulting in an

even greater impact on reported earnings, as highlighted by Logica’s warning in December.

As a result, our ratings on the stocks are relatively defensive as shown in Figure 73.

Gerardus Vos

+44 (0)203 314 6690

[email protected]

Barclays, London

John King

+44 (0)203 134 7545

[email protected]

Barclays, London

Sector View

1-POSITIVE


17 May 2012 82

Figure 73: Stock Ratings in European Software & IT Services

1-Overweight 2-Equal Weight 3-Underweight

SAP Dassault Systemes Software AG

Micro Focus Sage Aveva

Temenos Capgemini Indra

AtoS Logica

Amadeus Steria

Wirecard Sopra

Tieto


Calls centred at product cycle, self-help and visibility (processing)

Product cycle

Following the acquisition of Misys we only have SAP in this space, and whilst it mis-

executed during Q1, the product cycle is intact in our view. This cycle is about the

development of a new technology platform (application infrastructure), based on in-

memory DB technology, mobility and cloud. This is a potentially disruptive change to the

industry and should bring it ahead of the competitors. We argue that this should drive

license growth of 10-15% through 2015 (vs 3% over the 2003-’09) cycle and double digit

revenue growth, and should continue to re-rate the stock toward 16-18x, versus the current

14x FY13E P/E.

Self-help/restructuring

Micro Focus, AtoS and Temenos are all in this group. We believe AtoS is the most developed

restructuring story and further re-rating will likely be based on growth and the undervalued

payment business (Worldline is the 4th largest European PSP by revenues).

Micro Focus reported initial stabilisation in December and we would expect further

improvement in the May results. In addition, we expect Loosemore to indicate whether he

will try to grow the business or will run it to be a cash generator.

Finally, we upgraded Temenos to 1-OW from 2-EW on 25 April, 2012 (see “Time to look

through cycle – upgrade to 1-Overweight”) as we argue that it is now a trough license

revenues and expect the turn in Q2. In addition, the new management team has brought

TEMN to a more professional setting and this should result in less volatility around the

licenses.

Visibility/processing

Both Amadeus and Wirecard have above-average visibility, which should carry a premium,

in our view. AMS is relatively cheap and following the US deals the next catalyst should be

the debt renewal, which could trigger a debate about greater cash returns to the

shareholders.

Wirecard’s secular growth in the online payment space is unlikely to be derailed by the weak

macro environment. In addition, following the equity raising in March, it is likely to

accelerate consolidation in this space, and we expect this company to emerge as one of the

leaders in Europe.


17 May 2012 83

ISRAEL TECHNOLOGY

Well positioned

� The Israeli technology stocks in our coverage universe continue to be well

positioned for 2012. MLNX and NICE are not showing any signs of economic related

slowdown and we expect 2H strength for EZCH and CEVA as new servers and handsets

enter the market.

� We believe that storage, cloud computing, mobile handsets and security remain

high priorities for IT managers globally and that these areas will continue to be

areas of investment. Several companies participate in key technology trends including

Big Data, cloud computing, the utilization era, and Consumerization of IT.

Prefer niche semis and software

Our preferred sectors in Israel Technology remain niche semiconductors and software. We

believe that trends toward merchant vendors will continue to drive the development

decisions at most large companies, and that the semi names in our coverage will benefit

from these trends. In software and hardware, we are biased toward companies with

growing exposure to Big Data and SaaS trends.

Key Picks

Mellanox is our top pick in Israel. 2012 is proving to be a breakout year for the company as

its mix of business moves from the niche high performance computing segment and into

more mainstream data center applications. Its core revenue run has jumped 35% since

4Q11. We expect MLNX to lead with Infiniband; its momentum in 10GB/s Ethernet, its

disproportionately positive Romely opportunity, and its emerging Web 2.0 opportunities

have it in the real sweet spot of the growing unstructured data segment of technology.

EZ Chip is exposed to the economically sensitive carrier equipment segment, but the CESR

market that it sells into remains an area of spending growth as mobile data and video traffic

continues to proliferate and we expect sales to improve beginning in 2Q12 and throughout

the year. We believe EZCH has exposure to 60-65% of the market given its relationships

with Cisco, ZTE, Hauwei, Tellabs, and Ericsson. With the new NP-4 slated for volume

production we see EZCH poised for strong growth as carrier pending resumes.

Ceva is well positioned in the two fastest-growing segments of the mobile handset market –

the high-end smartphone market and the low-end feature phone/inexpensive smartphone

markets. CEVA has a strong relationship with Samsung and has a solid base in the Android

segment globally and already has key design wins in 4G/LTE. It has introduced new

products for audio and video in the application specific processor market as designers

offload CPU resources to the DSP. In the low end, CEVA has 55-60% market share in the 1.1

billion unit emerging market segment. 1H12 is proving to be a transition period for mobile

carriers and devices – we expect growth to resume in 2H12. Given the weak stock

performance YTD, we expect that CEVA may have taken the opportunity to buy back

shares, something it has not done since 2010.

Nice is a leader in analyzing structured and unstructured data, a key area for 2012 and

beyond. NICE made four acquisitions in 2011 which together are likely to add upwards of

Joseph Wolf

+972.3.623.8746

[email protected]

Barclays, London

David Kaplan

+972.3.623.8747

[email protected]

Barclays, London

Tavy Rosner

+972.3.623.8628

[email protected]

Barclays, London

Sector View

1-POSITIVE


17 May 2012 84

$0.10 to EPS. We see these acquisitions and the share buy-back as good uses of its

significant cash balance. At the same time it continues to work toward a mid-term 20%

operating margin target and we believe that there may be some upside to that target.

Figure 74: Israel Technology – stocks’ performance LTM

-40

-20

0

20

40

60

80

100

120

26/04/11 26/06/11 26/08/11 26/10/11 26/12/11 26/02/12 26/04/12CEVA Elbit Systems EZchipMellanox NICE Systems CeragonAmdocs Comverse Nasdaq Composite

`

Source: Thomson Datastream, Barclays Research

Figure 75: Israel Technology – Valuation Sheet (Sector rating is 1-Positive*)

NON GAAP P/E NON GAAP EPS

Ticker Analyst Barclays

Rating

Closing

Price

5/11/12

Price Target

Potential

Upside/

downside

Market Cap

(US$m) 12E 13E 12E 13E

DOX Kaplan/Kvaal 1-OW $30.09 $35 16% 5,150 11.3 10.9 2.66 2.77

CEVA Wolf 1-OW $16.95 $30 77% 393 18.3 14.2 0.93 1.20

CRNT Wolf 1-OW $9.22 $11 19% 335 16.4 7.1 0.56 1.30

CMVT Kaplan/Kvaal 1-OW $6.49 $8 23% 1,422 58.5 5.7 0.11 1.14

ESLT Wolf 2-EW $35.43 $46 30% 1,536 9.8 8.1 3.60 4.39

EZCH Wolf 1-OW $40.46 $48 19% 1,095 32.4 21.7 1.25 1.87

MLNX Wolf 1-OW $58.02 $65 12% 2,353 26.4 25.1 2.19 2.31

NICE Kaplan 2-EW $37.69 $43 14% 2,384 15.9 14.3 2.37 2.64

Source: Company data, Barclays Research Stock rating: 1-OW = 1-Overweight; 2-EW = 2-Equal Weight; 3-UW = 3-Underweight *Sector rating for CMVT is 2-Neutral


17 May 2012 85

ASIA EX-JAPAN TECHNOLOGY


17 May 2012 86

ASIA EX-JAPAN IT HARDWARE

Lenovo remains our top pick; prefer Asustek over Acer in the near term

� We maintain our view that Asia PC brand companies will continue to gain share

globally thanks to: 1) their higher exposure to the China market; and 2) US PC

companies’ reduced focus on the low-margin hardware business.

� We are now less negative on the Taiwan NB ODM space as we finally saw y/y margin

improvement and more significant non-NB contributions, such as tablet PCs,

server/storage and smartphones.

� Our top picks in the Asia ex-Japan IT Hardware sector are Lenovo, Asustek and

Quanta for the near-term momentum, and we continue to like Hon Hai, Acer, and

Pegatron for the longer term (all rated 1-OW). PC shipments should be above

seasonality in 2Q12, which is second-half-loaded this year, but we expect the Apple

supply chain to see bigger q/q drops in 2Q12 before the expected iPhone 5 components

and shipments ramp in 3Q12.

Prefer brand PC companies; less negative on Taiwan NB ODMs

Among the Asia PC brand companies, all of which we rate 1-OW, Lenovo remains our top

pick, while we prefer Asustek over Acer in the short term, given Asustek’s stronger-than-

expected 1Q12 results and its above-industry growth momentum in 2Q12E.

According to IDC’s preliminary 1Q12 PC shipment data released on 11 April, Lenovo posted

+44% y/y shipment growth versus market growth of only 2.3%, being the fastest-growing

PC brand among the top five. Lenovo continues to firmly hold its position as the second-

largest PC vendor, and we think should become No. 1 in the next one to two years. We

expect this shipment strength is likely to continue given Lenovo’s high exposure to the

China PC market and aggressive share gains in emerging markets.

Asustek has also posted better-than-industry average growth in 1Q12 with PC shipments

up 22% y/y versus industry growth of +2% y/y. We expect new Ultrabook launches with

Intel’s new Ivy Bridge, and new MB products and new tablet PCs should help Asustek

continue its market share gains in Europe/emerging markets and on China exposure.

We have been negative on the ODM space since we initiated coverage in late 2010, due to

weak global NB PC demand, cost pressures, excessive competition and declining margins.

While we still prefer brand PC companies over NB ODM ones, we are now less negative on

the Taiwan NB ODMs for five main reasons: 1) more significant non-NB contributions are

expected to move the needle in 2013; 2) 1Q12 OPM finally improved y/y, the first time in

the past eight quarters; 3) NB shipments bottomed in 1Q12 and are likely above seasonality

for 2Q12; 4) potential 2H12 demand from Ultrabooks, Ivy Bridge and Windows 8; and 5)

attractive cash dividend yield and improving ROE.

Kirk Yang

+852 2903 4635

[email protected]

Barclays Bank, Hong Kong

Wayne Dong

+886 2 6638 4696

[email protected]

BCSTW, Taiwan

Jerry Wu

+886 2 6638 4685

[email protected]

BCSTW, Taiwan

Richard Cheng

+852 2903 0342

[email protected]


Sector View

2-NEUTRAL


17 May 2012 87

Figure 76: Global PC vendor shipment y/y and market share trend, 1Q09-4Q11

Worldwide PC Unit Share TrendsVendor 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4HP 19.7% 19.2% 19.6% 20.2% 18.8% 17.9% 17.8% 19.5% 18.6% 18.1% 17.9% 16.3%Lenovo 6.7% 8.3% 8.6% 8.8% 8.4% 10.2% 10.4% 10.2% 9.9% 12.2% 13.5% 14.0%Dell 13.1% 13.0% 12.6% 11.9% 12.6% 12.8% 12.6% 12.1% 12.6% 12.9% 11.8% 12.9%Acer Group 11.4% 12.4% 13.5% 12.8% 13.0% 12.4% 13.4% 11.5% 10.9% 10.7% 10.1% 10.5%ASUS 3.1% 3.4% 4.5% 5.1% 5.2% 5.0% 5.3% 5.3% 5.2% 5.2% 6.2% 6.6%Toshiba 5.4% 5.0% 5.0% 5.3% 5.6% 5.4% 5.2% 5.8% 5.9% 5.3% 5.3% 5.5%Apple 3.4% 3.9% 3.8% 3.7% 3.5% 4.2% 4.4% 4.5% 4.5% 4.7% 5.3% 5.3%

US PC Unit Share TrendsVendor 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4HP 27.2% 24.8% 24.6% 28.8% 24.7% 25.3% 24.9% 28.7% 26.5% 26.5% 28.3% 23.2%Dell 25.9% 23.8% 25.2% 22.0% 23.4% 23.7% 23.6% 22.0% 22.8% 22.4% 21.7% 22.6%Apple 6.9% 8.4% 8.9% 7.2% 7.0% 9.0% 10.5% 8.6% 9.7% 10.3% 11.9% 11.0%Toshiba 6.6% 7.3% 7.8% 8.2% 8.4% 8.4% 8.6% 9.9% 10.2% 9.1% 8.0% 10.3%Acer Group 10.4% 12.0% 10.7% 11.8% 12.7% 10.9% 10.4% 8.9% 8.3% 8.3% 6.7% 8.2%Lenovo 3.4% 4.1% 3.8% 3.4% 4.0% 4.8% 5.6% 4.9% 5.5% 6.8% 6.7% 7.3%ASUS 1.9% 2.4% 2.3% 3.7% 4.5% 3.5% 2.5% 2.8% 3.0% 2.8% 2.6% 3.8%

Source: IDC, Barclays Research

Key Picks

Asustek (2357 TT; 1-OW; PT NT$338): We continue to see Asustek’s 2012 shipments target

as achievable in NBs (both regular and netbooks), MBs and tablet PCs. We note that the

company aims to grow its regular NB shipments by 22% y/y to 18mn units in 2012, while

netbook (Eee PC) shipments should drop by 18% y/y to 4mn units. MB shipments were

guided at 23-24mn units (flat to slightly up). Tablet PC shipments guided at 3mn units (up

67% y/y).

Lenovo (992 HK; 1-OW; PT HK$8.5): We continue to see strong momentum in FY2013 on

multiple drivers including various launches of mass market smartphones in China,

Ultrabooks (eg, a well-received Yoga tablet/Ultrabook hybrid announced for 2H launch) and

smart TVs. We also expect Lenovo to continue to gain share with a more aggressive push

into non-China markets, especially the EMEA region. Acer’s ex-CEO Gianfranco Lanci

became head of EMEA on 2 April and set a goal of becoming the top-three PC brand in the

region with 10% market share in 2013 (it is ranked No.5 with 8.2% market share as of

4Q11), with the long-term goal to be the No.1 PC brand in the region. We also expect

Lenovo will be able to strongly “protect” its dominance in the China PC market with its

strength in the fast-growing tier 4-6 cities, where it holds a higher market share than overall

China.

Quanta (2382 TT; 1-OW; PT NT$92): We were encouraged by the y/y GP and OP margin

improvements (although partly helped by lower FX gains), now two quarters in a row and

for only the third time in the past 10 quarters, which was the main reason for our recent

upgrade of Quanta to 1-OW from 3-UW. We look for margins to remain stable in 2Q12 and

then improve for the rest of the year, helped by higher non-NB product mix, cheaper labour

rates with government incentives in Chongqing, more cloud computing sales contributions

and better NB pricing.

Valuations

Asustek (2357 TT; 1-OW; PT NT$338): Our price target of NT$338 for Asustek is based on a

P/E of 12x 2013E, which is higher than the multiples for the NB EMS/ODMs of 7-10x.

However, we believe it deserves to trade at 12x, which is still at the lower end of its

historical five-year trading range of 9-25x. We look for a re-rating of the stock as we expect

the company's operating profit growth to resume a double-digit CAGR for the next two


17 May 2012 88

years and we look for Asustek’s MB business, China share gains and Ultrabooks to provide

potential upside surprises to our earnings estimates.

Lenovo (992 HK; 1-OW; PT HK$8.5): Our 12-month price target of HK$8.50 for Lenovo is

based on a P/E multiple of 13x applied to our EPS forecast for FY2013/14, plus HK$1.50 per

share to account for excess cash. Our forward P/E target is in line with those of its brand

peers and already shows a de-rating from the historical trading range given concerns about

tablet PC growth and cannibalization.

Quanta (2382 TT; 1-OW; PT NT$92): Our NT$92 price target for Quanta is based on 10x

FY13E EPS, which is slightly above the average historical five-year trading range of 5-13x

forward EPS. The target multiple we apply is also the highest among the NB ODMs due to

Quanta’s promising margin outlook and successful diversification plan to other non-NB

products such as servers (cloud computing) and tablet PCs. We also expect Quanta to post

one of the highest EPS growth rates in 2012/13E among the NB ODMs.


17 May 2012 89

ASIA EX-JAPAN DATA NETWORKING & WIRELINE EQUIPMENT

Investment value emerging

� We believe near-term capex momentum remains strong, with overall capex growing

by 9% this year helped by a 3G capex increase at China Unicom and the additional

TD-SCDMA capex at China Mobile, delayed from 2011, on top of solid 2G capex

guidance.

� We expect wireless enhancement capex to grow by 15-20% over the next two years

to meet the increasing data demand.

� Comba Telecom stands out as a likely major beneficiary of this capex growth as it is

the leader in the wireless enhancement and optimization space in China, and its

investment in femto cell technology should make a meaningful contribution in 2013.

Overall capex poised for 9% growth in 2012

Capex momentum still solid in the near term: China Mobile guided for +15% 2G capex

growth in 2012 and said that Rmb18bn would be spent by the parentco on TD-SCDMA in

2012 on top of the delayed capex of Rmb24bn from 2011. China Unicom’s capex increase

should be the major growth driver for networking equipment companies. This has eased

previous concerns of declining 2G capex for Comba, which should also benefit from the 3G

capex ramp in 2012.

More capex spending on wireless enhancements: We expect total telco capex in China to

remain broadly flat over the next two to three years as 2G/3G “Phase 1” capex (base

stations and core transmission equipment builds) is largely complete and full nationwide

4G/LTE capex will only kick in after 2013 when the Chinese government issues 4G licenses.

We believe the capex spending of the three Chinese telco operators over the next two to

three years will mainly focus on network optimization and enhancement to meet the

increasing data demand. Wireless enhancement and optimization capex will grow by

around 15-20% in China over the next two years, while overall capex will grow by 9% in

2012E.

Figure 77: China telco operator capex forecasts, 2009-12E

Rmb bn 2009 2010 2011 2012E

China Mobile 129.4 124.3 128.5 131.9

China Mobile TD (parco) 58.8 25.0 24.0 23.0

China Unicom 78.1 75.6 77.9 100.0

China Telecom 40.3 41.6 49.5 54.3

China Telecom (parco) 54.0 27.0 22.0 19.0

Total 359.6 293.5 301.9 328.2

Growth -18.4% 2.9% 8.7%

Source: Company data, Barclays Research estimates

Jones Ku

+852 2903 3901

[email protected]


Kirk Yang

+852 2903 4635

[email protected]


Sector View

1- POSITIVE


17 May 2012 90

Key Pick – Comba

Comba Telecom (1-OW; PT HK$8.3): We believe the recent share-price pullback on the

2011 earnings miss and concerns that capex is slowing down were overdone. At only 7x

12-month forward P/E, and as an industry leader, Comba’s share price offers a very

attractive risk/reward profile, in our view.

Comba has been investing in its femto cell technology since last year, which, we believe, will

represent a future trend in the wireless enhancement space, given that it is less expensive

for telecom operators to build capacity within an indoor building than to use mini-base

stations. Comba is also able to provide its own gateway (on top of the femto cell), which is

the most expensive part and which also creates a high entry barrier from a technology

standpoint. Femto cell is expected to begin meaningful sales/earnings contribution in 4Q12

and make a full contribution in 2013E.

ZTE (2-EW; PT HK$24.7): While we like the company for its longer term strategies on its

network and terminals businesses, with limited Phase 1 capex growth both in China and

overseas markets before the strong 4G/LTE capex kicks in, we expect margin pressure on

the network and terminal businesses will continue to be an overhang for the stock.

However, at below HK$20, we believe some investors may find value in the stock from a

longer term perspective (probably with a two-year time horizon to include the global

4G/LTE capex roll out and more rationalized competition in the low-priced smartphones

market). In the near term we do not expect the stock to go beyond HK$24 (past nine-month

resistance level) until margins start to pick up.

China Communication Services (3-UW; PT HK$4.2): With more than 90% sales exposure

from China and 65% sales exposure from the three operators, we expect CCS to benefit

from the stable capex ramp-up from the three operators and the upcoming capex cycle.

However, with its exposure mainly to lower-end services, we expect its top line and bottom

line to grow at mid-teens rates, and these are mostly in the share price already. We do not

see any near-term catalysts for the stock, and we expect concerns on how the company will

use the proceeds from its rights issue to continue to be an overhang.

Valuation

Comba (1-OW; PT HK$8.3): Our HK$8.3 PT is based on a P/E of 13x average 2012-13E

EPS, which is at the lower end of the stock’s two-year historical trading range. Given the

company’s strong sales and earnings growth potential, and improved earnings visibility, but

acknowledging the low level at which the shares are trading currently, we view a P/E of 13x

as appropriate.

ZTE (2-EW; PT HK$24.7): Our HK$24.7 price target for ZTE is based on a P/E of 18x

average EPS of 2012-13E, which is in line with its five-year historical trading average. We

forecast earnings will grow at a CAGR of 38% during 2012-14E, which translates into a PEG

of 0.5x our target multiple of 18x.

China Communication Services (3-UW; PT HK$4.2): Our 12-month price target of

HK$4.20 for CCS is based on a target P/E of 7.5x applied to the average of our EPS forecasts

for 2012 and 2013. Our target P/E is below the two-year historical trading range as we

await more concrete details concerning its expansion plans after the rights issue. We

forecast earnings will grow at a CAGR of 14% through 2012-14E, which translates into a

PEG of 0.5x on our target multiple.


17 May 2012 91

ASIA EX-JAPAN SEMICONDUCTORS

What to expect post 2Q/3Q12 recovery

� While most of the foundry/Outsourced Semiconductor Assembly and Test

(OSAT)/substrate semi vendors are guiding to sales growth of 10-20% q/q in 2Q12,

we find most of their customers are guiding to growth of 4-6% q/q, implying recent

strength will not last into 4Q12 if the mismatch continues in 3Q12. By adding more

High K Metal Gate (HKMG) gate-last capacity from TSMC and Poly SiON, or HKMG

gate-first capacity from others, and with gradual yield rate improvement, we believe the

shortage in 28nm capacity will be overcome by 4Q12.

� We remain 2-Neutral on the cyclical sector and expect stocks under our coverage to

trade at three-year average valuations. We note top sector picks Samsung, Vanguard,

Kinsus and VPEC (all 1-OW) will likely stand out, along with 1-OW-rated MediaTek,

MStar and SPIL.

Why a mismatch?

Most global customers are guiding for sales growth of 4-6% q/q in 2Q12, while the

foundry/OSAT/substrate semi vendors are guiding for much stronger 10-20% q/q sales

growth. We attribute the mismatch to: 1) Customers building up new product inventory

starting 2Q12, ahead of their seasonally strong 2H12, despite still having 2.5-3 months of

inventory as of 1Q12 (vs 2.3-2.8 MOI in 1Q11 and 1.7-2.7 MOI in 4Q12). 2) IDM

outsourcing may accelerate again in the short term after nearly five years of consecutive

weakness. 3) 5% incrementally stronger sales growth for TSMC than peers might be driven

by 28nm ramp up. Given foundry/OSAT/substrate semi vendors are running ahead of

customers by 2-3 months, we believe recent strength may not be able to last into 4Q12 if

the growth mismatch continues through 3Q12.

Figure 78: IDM to total sales contribution for TSMC and UMC

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1Q99 2Q00 3Q01 4Q02 1Q04 2Q05 3Q06 4Q07 1Q09 2Q10 3Q11 4Q12

TSMC UMC


Andrew Lu

+8862-6638-4698

[email protected]

BCSTW, Taiwan

Seung Chul Bae

+822-2126-2932

[email protected]

BCSL, Seoul

Sector View

2-NEUTRAL


17 May 2012 92

Will the 28nm shortage continue into 2013? We believe the shortage on 28nm will be

overcome by 4Q12 as TSMC is adding an additional 10k per month 28nm HKMG gate-last

wafers to 68k per month capacity for customers, and yield rate is improving quarter by

quarter. Plus, another 20k per month is to be added by Poly SiON, or HKMG gate-first

capacity may be coming from Samsung, Globalfoundries and UMC, based on our channel

checks.

Rising capital intensity remains a key concern for foundries: Although foundry vendors

have guided for stronger sequential growth than OSAT, substrate and fabless vendors, we

believe rising capital intensity and depreciation will limit margin upside for foundries once

utilization reaches 100% for TSMC.

Key Picks

We highlight higher-beta small cap and strong cash flow/margin recovery names Kinsus

and Vanguard for their company-specific attributes.

Kinsus (3189 TT, 1-OW, PT NT$119): We expect three catalysts will drive near-term

outperformance: 1) A5x and A6 substrate orders to kick in; we estimate sales contribution

of 5-10% for 2H12 and 5% for 2012 from Apple; 2) 3G/4G LTE smartphone baseband, AP

and PA are driving a better product mix (to 35% of sales in 2012E from 27-28% in 2011)

and margin improvement of 2-3ppts in 2012-14E from 2010-11; and 3) Piotek and other

investment losses are likely to fall to less than 12% of profit in 2012E from 16% of profit in

2011, on our estimates.

Vanguard (5347 TT, 1-OW, PT NT$20): We expect a re-rating on Vanguard and estimate

its ROE will improve to 10-12% for 2Q12-14E from 7-8% over the past four years, driven by:

1) the completion of the Fab 2 conversion, which should benefit gross margin by 5ppts; 2)

lower depreciation costs, which should boost 2013/14E margins by 7.5-9ppts; 3) product

mix shift to higher-margin power management ICs; and 4) the return of cash to

shareholders.

Figure 79: Relative performance vs Taiwan Weighted Index

-50%

-30%

-10%

10%

30%

50%

70%

90%

Jan

-02

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Kinsus Vanguard

Source: TEJ, Barclays Research


17 May 2012 93

ASIA EX-JAPAN WIRELESS EQUIPMENT AND PRODUCTS

Prefer players with exposure to new iPhone/MacBook

� Most Apple component players are expected to suffer from Apple’s order cuts on the

product transition for iPhone, which we view as a short-term issue, and suggest

accumulating on weakness for those with exposure to the new iPhone orders.

� Apple is expected to launch its new generation MacBook series in late 2Q12,

including MacBook Pro and MacBook Air, and we expect relevant suppliers to see

strong order uptick in 2Q12 ahead of the launch.

� Catcher (1-OW, PT NT$230) is our top pick, as we believe that the company will

benefit from the MacBook refresh cycle and that the downside from the smartphone

clients has been priced in.

Weak Apple orders in 2Q12 offer good opportunity to accumulate shares of selective Apple plays

Some Apple component suppliers in Taiwan may see a broad-based sequential double-digit

decline for 2Q12 revenues, with the extent of the drop depending on their varying exposure

to Apple. While companies with a high reliance on Apple tend to be quite cautious when

making comments, we believe that they should see more of a revenue decline in 2Q12,

given that we have not heard of any significant changes in component order allocations. We

see the weakness among Apple component suppliers as a short-term issue on the new

product transition, and believe component inventory restocking will resume in 3Q12, ahead

of the new iPhone launch, bringing revenues back to their growth trajectory.

We would see any near-term share price weakness as an opportunity to accumulate shares

of these new iPhone suppliers in 2H12. Based on forecasts from our Apple analyst Ben

Reitzes, we forecast quarterly sell-in volume of 33/30/38/47mn units over 1Q-4Q12, while

our checks conclude 10-15% potential upside to orders from Apple in 3Q/4Q12 for the new

iPhone launch. We expect the new iPhone, carrying LTE/4G network and thinner form

factors, to drive component supplier momentum in 2012-13, and believe recent share price

softness offers a more attractive entry point. Companies that we believe follow this theme

include Tripod (PT NT$100), AAC (PT HK$25) and Largan (PT NT$660), all rated 1-OW.

MacBook refresh cycle to drive component suppliers’ 2Q12 business

We expect the refresh of the MacBook models to ship from 2Q12 with new features that

will likely include: 1) Ivy Bridge (paired with Intel HD 4000 graphics) and Mountain Lion OS;

2) a thinner form factor for the MacBook Pro; 3) possibly a 15-inch screen for the MacBook

Air; and 4) possibly a Retina display for MacBook Pro, which we believe will help boost

replacement demand. Catcher has been one of the major unibody casing suppliers for

Apple’s MacBook Air and Pro, holding the majority of the market share for the MacBook Air

(80-90%) and a significant, but smaller share (50%), for the MacBook Pro with Foxconn

Tech accounting for the remainder of both.

We believe Catcher’s CNC machines will be more heavily used because of the greater

number of aluminium unibody units in the new MacBook Pro. Although we expect

Catcher’s allocation for the Air to remain at 80-90% in 2012, we estimate increased

allocations for the Pro (from 30-40% in 2011 to 50% in 2012), which could push Catcher’s

Dale Gai

+886 2 6638 4697

[email protected]

BCSTW, Taiwan

Derrick Yang

+886 2 6638 4686

[email protected]

BCSTW, Taiwan

Sector View

1-POSITIVE


17 May 2012 94

sales up 20% q/q in 2Q12 and up 10% q/q in 3Q12 beyond the secular growth for Apple’s

MacBooks. Catcher’s focus on MacBooks should allow it to avoid the potential near-term

downside risks that other Apple supply-chain companies are facing following significant

order cuts for the iPhone and flattish orders for the iPad ahead of revamps.

Key Pick: Catcher

We are positive on Catcher (2474 TT, PT NT$230) due to three major catalysts: 1)

stronger MacBook refresh demand from 2Q12 with the new Air line-up and thinner form

factors for the Pro; our supply-chain checks indicate higher sell-in units on MacBook

component orders – 4.0mn/5.3mn in 2Q-3Q12E – and Catcher is gaining share in

allocations of metal casing parts for the Pro; 2) the possibility of metal casings orders in

2H12 for a prospective iPad Mini and iPhone 5 are not yet in our estimates or consensus

forecasts, which could represent 12-15% earnings upside in 2H12; and 3) increases in

Ultrabook and Windows 8 tablet projects in 2H12-1H13 based on our checks suggest

upside in sales and margins, with improved capacity utilisation rates and higher NRE gains.

Key risks are from smartphone clients: We still expect Catcher’s smartphone clients – HTC,

RIM and Sony – to address their lower-than-expected sales in 2012-13, as we assume no

order growth for Catcher in 2013. However, as Catcher’s sales exposure to HTC and RIM is

expected to fall to 15-16% and 5-6% in 2H12, respectively, from 20%-plus and 8-9% in

2011 (with consensus forecasts now lower) our base-case assumption is that the downside

risks from smartphones will be offset by Catcher’s diversification away from smartphones,

with market-share gains in PC and tablets for clients Apple, Amazon and PC brands in 2H12.

Valuation

Our 12-month price target for Catcher of NT$230 is based on a P/E of 13x applied to

12-month forward (3Q12-2Q13E) earnings. We adopt 12-month forward EPS into our

valuation, as we believe Catcher’s weak 1Q12 is now in the price and investors will now look

ahead to the next product cycle from 3Q12. Since 2006, when Catcher became the major

supplier of light metal casings for IT products, the stock has traded at forward P/Es of 7-25x

for an average of 13-14x. We set our target multiple at the mid-cycle of the past five years

vs 10x previously. Our PT implies a P/B multiple of 2.6x on the average for 2012-13E, in

light of our forecast ROE of 20-21% for 2012-13E, and considering the dilution from the

convertible bond conversion. Since 2006, Catcher’s P/B has ranged from 1.0-5.8x, with an

average of 2.1x, and an average ROE of 20% in 2006-11.

Figure 80: Catcher – forward P/E band Figure 81: Catcher – forward P/B band

0

50

100

150

200

250

300

350

400

Jan-04 Jan-06 Jan-08 Jan-10 Jan-12

Price 4x 8x 12x

16x 20x 24x

0

50

100

150

200

250

300

350

400

Jan-04 Jan-06 Jan-08 Jan-10 Jan-12

Price 0.5x 1.5x 2.5x

3.5x 4.5x 5.5x Source: Company data, Bloomberg, Barclays Research estimates Source: Company data, Bloomberg, Barclays Research estimates


17 May 2012 95

ASIA EX-JAPAN LCD DISPLAYS

Bottoming out

� We believe the top-tier panel makers will be on a stronger earnings recovery path

and will leverage their capabilities to supply ultra-high-end display products,

including ultra-high-resolution (Retina) OXIDE thin-film transistor (TFT) and in-cell

touch-equipped panels. We see this business opportunity as significant because these

products offer 4-5x higher ASP per area compared to commodity panels and the entry

barriers are also substantially higher. We think LG Display, Samsung Electronics (1-OW,

covered by SC Bae), Sharp (2-EW, covered by Yuji Fujimori) and potentially AUO will

obtain most of the benefits. Also we like Samsung SDI based on strong earnings growth

in Samsung’s small-size organic light emitting display (OLED) business.

� Driver IC makers should directly benefit from this trend since the resolution upgrade

will increase the number of driver ICs used on panels, while panel makers should

indirectly benefit as the upgrade will enhance product ASPs, boost entry barriers, and

lower supply after consuming more capacity. Our pick in this area is Novatek.

� From a mid- to long-term perspective, we see the supply/demand dynamics of the

commodity panel industry bottoming out based on supply discipline and slower but

steady demand growth. We think the potential for capacity in the global panel industry

to shrink amid line conversion to OXIDE TFT and OLED could create higher visibility for

the turnaround of the commodity panel industry. Accordingly, we recently upgraded AUO.

See global TFT-LCD supply tightening; steady increase in demand

Global TFT-LCD panel industry turnaround: We believe the amount of oversupply will ease

from 2H12 and that supply will tighten during 2Q13 or 3Q13 because of the ongoing

deceleration of supply increases resulting from limited new line building (except for Chinese

makers) and some capacity losses at first tiers amid line conversion to OXIDE TFT, OLED

and touch screen. On the demand side, we expect slow but steady demand increase to

continue until 2013, combined with size and mix improvements. In terms of ASP, we do not

expect significant upside or downside to panel prices during 2012 given the continuing

oversupply situation in 8G and larger fabs, and the tight supply in 7.5G and smaller.

However, from 2Q13 we expect overall ASP dynamics will show a more meaningful

recovery based on better supply-demand dynamics.

Specialty panels further expansion: Following Apple’s adoption of retina display in the new

iPad, we expect specialty panel adoption to expand to the larger than 10-inch segments,

including notebooks and monitors, starting with the Macbook series and iMac. This is

consistent with the evolution of the CPU (e.g., Ivy Bridge), whose graphics functions have

significantly improved from previous versions. We believe display is positioned as a core

device in the evolution of the product cycle of mobile devices and PCs. In addition to

horizontal expansion on increasing product adoption, the forthcoming Windows 8 will

provide horizontal expansion opportunity for panel makers that can produce an in-cell

touch screen-equipped panel in the long run. Apple’s adoption of in-cell in the iPhone5 will

likely be the catalyst.

Mass production of flexible OLED to drive further penetration into mobile, while TV

OLEDs delayed a little: In the OLED space, we remain optimistic about the current small size

SC Bae

+822-2126-2932

[email protected]

BCSL, Seoul

Sunwoo Kim

+822-2126-2934

[email protected]

BCSL, Seoul

Jamie Yeh

+886266384689

[email protected]

BCSTW, Taiwan

Sebastian Hou

+886266384687

[email protected]

BCSTW, Taiwan

Sector View

1- POSITIVE


17 May 2012 96

of the OLED industry as we believe that flexible OLED technology will offer un-matchable

advantages to regular OLED. We expect mass production will be seen in 4Q12 at the final

product level. On the other hand, TV OLED production could be delayed a little due to yields

and quality issues in oxide TFT panels and SMS (small mask scanning) technologies. We

think that significant volume production of flexible OLED will begin during 4Q12 or 1H13.

Key Picks

LG Display (1-OW, covered by SC Bae): We believe LG Display will show a strong recovery

path over the next couple of years given: 1) the expanding business opportunity from

specialty panels, which have a substantial price premium over commodity panels and

higher entry barriers, driven by Apple and Windows 8; and 2) the reduction of oversupply in

commodity panels due to disciplined capex and slower but steady demand growth.

Valuations remain attractive at 0.8x 2012E P/B vs the 10-year average of 1.6x and the

three-year average of 1.2x. Our price target of KRW36,000 is derived from the three-year

average of 1.2x, based on 2012E BVPS.

Novatek and AUO benefit from high-resolution migration from 2H12: We expect the trend

begun by smartphones to expand into tablets and NBs in 2013. Driver IC manufacturers

should benefit from this trend since the resolution upgrade will double the number of driver

ICs used on panels, while panel makers should also indirectly benefit from enhanced

product ASPs, higher entry barriers and lower supply by using more capacity. Our picks

from Taiwan include Novatek (3034 TT, 1-OW, covered by Jamie Yeh) and AUO (2409 TT,

1-OW, covered by Jamie Yeh). Novatek in 2012 should benefit from: 1) improving shipments

because of seasonality; 2) smartphone growth (higher ASPs and margins than on feature

phones); 3) the entry of local China panel makers; and 4) the high resolution trend.

Samsung SDI (1-OW, covered by Sunwoo Kim): We remain bullish on Samsung SDI given:

1) the company’s solid growth momentum in the battery business on the back of robust

demand for polymer batteries from tablets and prismatic batteries from Samsung

Electronics’ high-end smartphones; 2) the strong growth outlook for Samsung Display

Corp’s OLED business, which should be positive for SDI’s equity method income; and 3)

attractive valuation based on our SOTP methodology. Our price target of KRW220,000 is at

17x 2012E P/E, but is lower than the three-year average historical P/E of 22x.

Figure 82: LGD – OP breakdown by panel type

Figure 83: SDI - share prices and quarterly OP from battery

(1,500)

(1,000)

(500)

0

500

1,000

1,500

2,000

2010 2011 2012E 2013E

Specialty Commodity

(KRWbn)

0

50,000

100,000

150,000

200,000

250,000

Apr 09 Apr 10 Apr 11 Apr 12 Apr 13 Apr 14

0

20

40

60

80

100

120

140

160

Share price (LHS) Battery OP (RHS)

(KRW) (KRWbn

Source: Barclays Research estimates Source: Barclays Research estimates


17 May 2012 97

JAPAN TECHNOLOGY


17 May 2012 98

JAPAN CONSUMER ELECTRONICS/DISPLAY & LIGHTING

Prefer Casio and car electronics in the near term

� We expect the industry growth driver to shift from thin panel TVs to smartphones

and tablets. For components, heavy reliance on Apple is likely to continue. The set side,

on the other hand, is likely to face a shrinking domestic market, affected especially by

TV conditions.

� Our top pick is Casio Computer, where we see strong medium-term growth

opportunities for the watch business and smaller losses as digital camera ASPs

improve. At the car electronics makers (Pioneer and JVC Kenwood) there is a risk of the

industry environment changing due to decreasing demand and intensifying

competition, but JVC Kenwood still looks undervalued.

Near-term challenges to overcome

The Japanese consumer electrical sector is facing two key issues: 1) structural reform of the

TV business, which is becoming increasingly commoditized, and 2) how to achieve growth

in the smartphone and tablet PC sectors, where hardware is currently the main

differentiating factor.

However, the two main companies other than Sony, Panasonic and Sharp, do not have the

business base to allow them to compete on a global scale, and we expect Sony to face a

difficult environment in the smartphone business. In addition, we expect the domestic

consumer electrical market, particularly for TVs, to continue to shrink in 1H 2012 in reaction

to the demand driven by the termination of analog TV signals last year, and accordingly we

see no reason to be aggressive buyers of the large-cap consumer electrical stocks.

Continued reliance on Apple: On the component front, we expect reliance on Apple’s

supply chain to continue. Once the weak 1H results at Sharp have been discounted (with

the company expecting an operating loss of JPY45.0bn) and we start to see the benefits of

the alliance with Hon Hai and a move to higher-resolution panels coming through in 2H, we

believe there could be some upside for the share price over the medium term. We also

expect Sony to maintain a competitive advantage in the field of BSI-CMOS imagers.

Recognizing the risks in the car electronics subsector: In the car electronics subsector,

while we expect steady growth to continue through 1H 2012, in 2H we expect the market

to start factoring in the potential negatives. The main factors to consider are: 1)

expectations that the government subsidy on eco cars (worth around JPY300bn in total) will

be withdrawn in Aug-Sep; 2) the prospect of gradually intensifying competition in the

domestic dealer options market (with the full-scale participation of Panasonic from March);

and 3) a likely slowdown in the pace of yen appreciation against the dollar.

Top pick is Casio Computer (6952, 1-OW): The main reasons are: 1) medium-term growth

opportunities in the watch business, and 2) scope for reduction in losses on an increase in

digital camera ASPs. We also believe there is little cause for concern about a capital increase

for accelerated redemption of around JPY50bn in convertible bonds (announced by the

company on 13 March). In particular, we believe that for the six leading brands in the watch

business (G-Shock, Oceanus, etc.), the company should be able to increase ASPs by around

5% every year while achieving 10% growth in volumes. The company targets FY3/13 sales

of JPY100bn and OP of JPY20bn, but we believe these are merely transitional targets.

Yuji Fujimori

+813 4530 2973

[email protected]

BSJL, Tokyo

Makoto Bizen

+813 4530 2923

[email protected]

BSJL, Tokyo

Sector View

2-NEUTRAL


17 May 2012 99

Key Picks

Current focus stocks: Aside from Casio Computer (see above), among car electronics

companies, we see a risk of the business environment changing, but believe JVC Kenwood

(6632) still looks relatively undervalued. We maintain our 1-OW ratings on both stocks.

Among LCD glass stocks, while the stocks are looking less attractive for the medium term,

glass prices appear to be recovering, and we maintain our 1-OW rating on Nippon Electric

Glass.

Large-cap stocks still look like laggards but also better value: As Sony (6758, 2-EW)

shares have undergone a sharp adjustment, they no longer look particularly overvalued.

Whether the smartphone business succeeds is likely to remain the most important

determinant of any significant rally in the share price, and we expect the results of a full-

scale push in the US market in Apr-Jun to be the key indicator. At Sharp (6753, 2-EW), our

stance is to look for a medium-term entry point. We expect earnings recovery to be led by a

pickup in sales of panels for Apple and of next-generation tablet computers and high-

resolution notebook PCs. We also believe the alliance with Hon Hai should help reduce risks

at the 10G plant. However, we get the impression that the shift to a solutions driven

business at Panasonic (6752, 3-UW) may take some time (since new management may not

make a mark until the budgeting exercise from October 2012).

Figure 84: Long-term A/V product cycle: History of margin peaks at 30% proliferation rates

-5

0

5

10

15

20

25

19571960

19631966

19691972

19751978

19811984

19871989

19921995

19982001

20042007

2010

2013E

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

A

E

D

C

B

（％）Color TV penetration rate (rhs)

VTR penetration

rate (rhs)

Cell Phone

penetration rate (rhs)

FPD TV penetration rate (rhs)

Panasonic

OPM (lhs)

(%)Black and White TV


DSC

penetration

rate (rhs)

Panasonic, Sharp and

Sony cumulative

average OPM Smartphone




17 May 2012 100

Figure 85: Higher resolution trend spreading to notebook PCs

Maker -- --Sony

EricssonHTC Apple Apple -- Sony Samsung Samsung NEC Dell ASUS Apple Apple -- Apple Apple -- --

Panel Size QVGA VGAXPERIA

arcSensation iPhone4S

iPad 2

(XGA)HD720 Xperia NX Galaxy SIII

Galaxy

Tab

10.1"

MultiSyncL

CD-

EA191M

Inspiron

15"

K52F

15.6"iPhone5

MacBook

Pro 15"

(Upgrade)

FHViPad3

(QXGA)

MacBook

Pro 15"

(2012

model)

QFHD

(4K2K)

SHV

(4K8K)

diagonal 320X240 640X480 854X480 960X540 960X640 1024X768 1280X720 1280X720 1280X720 1280X800 1280X1024 1366X768 1366X768 1440X800 1680X1050 1920X1080 2048X1536 2880X1800 3840X2160 7680X4320

85 5 9 12 13 14 15 17 17 17 18 19 18 18 19 23 26 30 34 52 10465 6 12 15 17 18 20 23 23 23 23 25 24 24 25 30 34 39 45 68 13655 7 15 18 20 21 23 27 27 27 27 30 28 28 30 36 40 47 53 80 16046 9 17 21 24 25 28 32 32 32 33 36 34 34 36 43 48 56 63 96 19240 10 20 24 28 29 32 37 37 37 38 41 39 39 41 50 55 64 73 110 22032 13 25 31 34 36 40 46 46 46 47 51 49 49 51 62 69 80 91 138 27523 17 35 43 48 50 56 64 64 64 66 71 68 68 72 86 96 111 126 192 38320 20 40 49 55 58 64 73 73 73 75 82 78 78 82 99 110 128 145 220 44119 21 42 52 58 61 67 77 77 77 79 86 82 82 87 104 116 135 153 232 46417 24 47 58 65 68 75 86 86 86 89 96 92 92 97 117 130 151 171 259 518

15.6 26 51 63 71 74 82 94 94 94 97 105 100 100 106 127 141 164 186 282 56515.4 26 52 64 72 75 83 95 95 95 98 106 102 102 107 129 143 166 189 286 572

15 27 53 65 73 77 85 98 98 98 101 109 104 104 110 132 147 171 194 294 58713 31 62 75 85 89 98 113 113 113 116 126 121 121 127 152 169 197 223 339 678

12.1 33 66 81 91 95 106 121 121 121 125 135 130 130 136 164 182 212 240 364 72811.6 34 69 84 95 99 110 127 127 127 130 141 135 135 142 171 190 221 250 380 76010.1 40 79 97 109 114 127 145 145 145 149 162 155 155 163 196 218 253 288 436 872

9.7 41 82 101 114 119 132 151 151 151 156 169 162 162 170 204 227 264 299 454 9087.0 57 114 140 157 165 183 210 210 210 216 234 224 224 235 283 315 366 415 629 12594.8 83 167 204 229 240 267 306 306 306 314 341 326 326 343 413 459 533 605 918 18364.5 89 178 218 245 256 284 326 326 326 335 364 348 348 366 440 490 569 646 979 19584.3 93 186 228 256 268 298 342 342 342 351 381 364 364 383 461 512 595 676 1025 20494.2 95 190 233 262 275 305 350 350 350 359 390 373 373 392 472 525 610 692 1049 2098

4 100 200 244 275 288 319 366 366 366 376 409 391 391 411 494 549 638 724 1099 21973.5 114 229 280 315 326 366 420 420 420 431 468 448 448 471 566 629 731 830 1259 25183.2 125 250 306 344 361 400 459 459 459 472 512 490 490 515 619 688 800 908 1377 2754

Pixel per inch(ppi)

Feature phoneSmartphone

Tablet

Notebook PC

TV

Source: Company data, Barclays Research estimate


17 May 2012 101

JAPAN ELECTRONIC COMPONENTS

Relying heavily on smartphone demand, see benefits from PC-related business

� We expect a summer rally by Japan’s electronic components sector with support

from a heavy flow of new product rollouts through the summer and a recovery

phase in the inventory cycle. Primary drivers are smartphone demand, led by next-

generation iPhone, GalaxyS III, and GalaxyNote products, and PC-related products

linked to Ivy Bridge, Ultrabooks, and Windows8.

� While we think investors can select stocks broadly in this environment, our key

picks are Nidec (1-OW) and TDK (1-OW) for PC-related business and Ibiden (1-OW)

as a smartphone beneficiary. We also see Murata (2-EW) as likely to attract attention

for its smartphone exposure. Shinko Electric (2-EW) shares may strengthen if the yen

slips against other currencies.

� Risks include HDD price trends, the timing of Apple’s new product releases,

whether suppliers can generate suitable profits from Apple business, and

smartphone chipset supply issues (TSMC’s 28nm line ramp-up).

New product releases should lead to a summer rally

We foresee a summer rally from June-July, following orders adjustments and weaker share

prices in Apr-May, fueled by an upward phase in the two-year inventory cycle and heavy

flow of new product releases, and expect Japanese component firms, which have been

maintaining or enhancing their global competitiveness, to benefit from these conditions. We

will be focusing on new product releases ahead of the summer, including next-generation

smartphones, such as iPhone, GalaxyS III, and GalaxyNote, and PC-related offerings linked

to Ivy Bridge, Ultrabooks, and Windows8.

Smartphone business continues to rely on Apple and Samsung Electronics, and Japanese

component suppliers have significant opportunities with Apple. Devices supplied for the

iPhone include AnyLayer substrates and FC-CSP by Ibiden (top shares), ASMs, WiFi

modules, various filters, and MLCCs by Murata (top supplier), and batteries by TDK (leading

supplier). However, Apple-related business is challenging and tests management skills in

terms of scheduling (scale and volatility), aggressive use of new parts and devices, frequent

specification changes, and pricing pressure.

The second half of 2012 is a key juncture for the PC industry, which has seen growth rates

slump due to inroads by smartphones and tablets, because of upcoming rollouts of new

products and specifications, including Ivy Bridge, Ultrabooks, and Windows8. Market shares

have become increasingly concentrated at component firms with superior technologies and

volume production capabilities amid maturation of the PC industry. For HDD-related

business, Nidec and TDK have expanded their presences and reinforced positions as top

suppliers for spindle motors and heads respectively since flooding in Thailand. While HDD

pricing, which moved upward after the floods, is a key factor, we do not foresee a return to

past price competition because of industry reorganization. Ibiden and Shinko Electric

(particularly the latter) are raising their market shares for Intel’s MPU flip-chip packages due

to quality problems at Taiwan-based NanYa PCB that surfaced at the end of 2011. This

business is also benefiting from a generation change to Ivy Bridge processors.

Masaru Koshita

+81 3 4530 2937

[email protected]

BCJL, Tokyo

Sector View

1-POSITIVE

.


17 May 2012 102

Forex rates are a top earnings and share-price volatility factor for Japan’s electronic

components sector. We see the positive spiral spurred by a weaker yen as likely to support

strong share-price gains. Specific steps include 1) earnings upside linked to forex sensitivity,

2) improved trading terms and competitiveness versus rivals from other countries, 3)

prolongation of the inventory cycle recovery phase, and 4) higher share-price valuations

from a risk-off to risk-on shift. Stocks with high weak-yen gearing are Shinko Electric and

Taiyo Yuden (3-UW). However, investors should also pay attention to the negative spiral

from yen appreciation.

Key Picks

While we think investors can select stocks broadly in this environment, our key picks are

Nidec (1-OW) and TDK (1-OW) for PC-related business and Ibiden (1-OW) as a smartphone

beneficiary. We also see Murata (2-EW) as likely to attract attention for its smartphone

exposure. Shinko Electric (2-EW) shares may strengthen if the yen slips against other

currencies.

Risks include HDD price trends, the timing of Apple’s new product releases, whether

suppliers can generate suitable profits from Apple business, and smartphone chipset supply

issues (TSMC’s 28nm line ramp-up).

Figure 86: Japanese components monthly orders vs ISM mfg new orders

20

30

40

50

60

70

80

90

100

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

ISM mfg new orders (LHS) Orders: JPN components

ISM, Feb 54.9,Mar 54.5, Apr 58.2

Source: US Supply Chain Management Association, Barclays Research


17 May 2012 103

Figure 87: Japan’s electronic components and devices inventory cycle

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

-60% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% 70%

Production (% y/y)

Inve

nto

ry (

% y

/y)

2009Q1

2009Q4

2004Q1

2007

2005

2008

20062009

Ⅱ Ⅰ

Ⅲ Ⅳ

2010

2011Q1

2011

2011Q3

2011Q4

2010Q4

2010Q1 2012Q1

2012Q2

2012Q4

Source: METI, Barclays Research estimates


17 May 2012 104

JAPAN PRECISION INSTRUMENTS

Concerns over digital camera supply/demand gap widening starting in May

� Recent precision instrument results show continued slow growth in OA equipment

sales.

� Copier sales have increased slightly on a rebound from the impact of flooding in

Thailand, but the market for laser printers and inkjet printers is sluggish.

� While expectations for digital cameras are rising, we think demand for compact

models is losing momentum due to increasing smartphone proliferation. We are

concerned the growth potential of even interchangeable-lens cameras will shrink

unless they are made more appealing through improvement of connectivity

features.

Growth in mirrorless cameras could upset sales in SLR cameras

The impact of flooding in Thailand on digital cameras lasted until February, but production

at sector companies had basically normalized by the latter half of March. Production of new

mirrorless and single-lens reflect (SLR) cameras has ramped up in April. However, global

demand for compact digital cameras continues to trend lower than last year, and we are

concerned growth in sales of SLR cameras could be held back by growth in mirrorless

cameras. Makers are also increasing the supply of mirrorless cameras in FY2012, which we

think could upset the supply/demand balance. Nikon has launched a mirrorless model

featuring wireless LAN connectivity. With Samsung Electronics launching a model featuring

WiFi connectivity, we expect connectivity to become an important feature in the mirrorless

category as well. We think the ability of companies to respond to this demand will impact

market share trends of individual companies as well as the growth potential of the market

as a whole.

Key Picks

In the precision instruments sector, we focus on Shimadzu. The company's earnings remain

firm on strong global demand for analysis and measuring instruments and new product

launches. We expect earnings to remain firm on the launch of new products from May

onward. Amid weak overall earnings momentum in the precision instruments industry,

especially in the digital camera and OA subsectors, we view Shimadzu as one of the few

sector companies with strong near-term earnings potential and a plausible medium-term

growth story.

Masahiro Nakanomyo

+81 3 4530 2962

[email protected]

BCJL, Tokyo

Yoshihiko Nishizawa

+81 3 4530 2994

[email protected]

BCJL, Tokyo

Sector View

2-NEUTRAL


17 May 2012 105

Figure 88: Interchangeable lens cameras (supply/demand)

Figure 89: Compact cameras (supply/demand)

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

Jan-10 Mar-10 May-10

Jul-10Sep-10 Nov-10 Jan-11 Mar-11 May-1

1Jul-11

Sep-11 Nov-11 Jan-12 Mar-12 May-12

Shipments Sales (Domestic) Global Sales (estimates)

(YoY)

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

Jan-10Mar-10 May-1

0Jul-10

Sep-10 Nov-10 Jan-11 Mar-11 May-11Jul-11

Sep-11 Nov-11 Jan-12 Mar-12 May-12

Shipments Sales (Domestic)

(YoY)

Source: Barclays Research on CIPA data Source: Barclays Research on CIPA data


17 May 2012 106

EQUITY VALUATION TABLE – U.S. TECHNOLOGY U.S. IT Hardware (2-Neutral)

Price Market

Ticker Company Name Currency 5/11/2012 Rating Cap (USD M) 2011E 2012E 5Y Avg. 2011E 2012E 5Y Avg. 2011E 2012E Sales (M) EPS Sales (M) EPS

AAPL Apple USD 570.52 1-OW 533,472 3.2 2.7 2.6 12.5 11.0 12.7 47.54% 19.25% # 190,451 52.00 195,362 53.88

DELL Dell USD 15.55 2-EW 27,400 0.4 0.3 0.3 7.4 7.4 8.8 1.28% 2.67% # 64,545 2.10 63,491 2.21

EMC EMC USD 26.14 1-OW 54,886 2.4 2.2 2.5 15.0 13.0 14.6 10.77% 11.48% # 24,706 2.01 24,755 2.00

HPQ Hewlett-Packard USD 23.51 2-EW 46,487 0.6 0.6 0.7 5.9 5.7 6.7 -4.43% -0.30% # 120,816 4.11 124,621 4.42

IBM International Business Machines USD 200.60 2-EW 231,389 2.4 2.3 2.1 13.3 12.0 12.2 1.20% 3.49% # 111,966 16.66 111,926 16.61

IM Ingram Micro USD 18.72 2-EW 2,846 0.1 0.1 0.1 9.3 8.5 8.6 1.21% 4.03% # 38,247 2.20 38,241 2.25

LXK Lexmark International USD 28.44 2-EW 2,024 0.4 0.5 0.5 6.5 6.5 7.2 -3.83% -2.82% # 3,900 4.35 3,902 4.33

NTAP NetApp USD 35.70 1-OW 12,959 1.6 1.4 2.3 15.0 12.9 19.4 21.40% 12.13% # 6,974 2.77 6,943 2.72

STX Seagate Technology USD 31.47 1-OW 13,382 1.0 0.8 0.6 4.5 3.3 6.2 39.44% 26.39% # 19,335 9.67 19,523 9.42

DDD 3D Systems USD 27.66 2-EW 1,414 4.3 3.6 3.2 39.0 26.9 22.8 53.29% 19.55% # 422 1.03 417 1.32

TECD Tech Data USD 51.12 2-EW 2,111 0.1 0.1 0.1 9.0 8.4 9.2 -0.55% 4.79% # 27,604 6.10 27,222 6.20

WDC Western Digital USD 40.74 1-OW 9,571 0.8 0.6 0.5 5.3 4.2 2.7 26.37% 41.27% # 17,006 9.80 17,830 9.08

XRX Xerox USD 7.64 2-EW 10,297 0.8 0.8 0.9 6.8 6.2 7.8 1.12% 2.17% # 23,375 1.23 23,449 1.22

Ben Reitzes

EV/Sales, x Price/Earnings, x Sales Growth (%) Consensus FY2 Ests.FY2 Ests.

U.S. Software (1-Positive)

Price Market

Ticker Company Name Currency 5/11/2012 Rating Cap (USD M) 2011E 2012E 5Y Avg. 2011E 2012E 5Y Avg. 2011E 2012E # Sales (M) EPS Sales (M) EPS

ADSK Autodesk USD 36.18 2-EW 8,360 2.8 2.5 3.1 17.6 15.1 19.2 11.26% 12.66% # 2,777 2.40 2,698 2.41

ARBA Ariba USD 38.03 1-OW 3,809 6.7 5.7 5.4 38.4 32.2 32.6 19.86% 16.35% # 619 1.18 609 1.15

CRM Salesforce.com USD 135.44 1-OW 18,560 6.2 4.8 7.1 83.6 63.0 76.5 30.82% 27.82% # 3,790 2.15 3,677 2.08

CSOD Cornerstone OnDemand USD 18.73 2-EW 931 7.3 5.0 7.7 -74.9 -234.1 -262.7 50.95% 44.65% # 165 -0.08 160 -0.07

CTXS Citrix Systems USD 78.35 1-OW 14,588 5.4 4.8 5.4 28.4 24.1 27.0 16.01% 14.02% # 2,919 3.25 2,887 3.21

ELLI Ellie Mae USD 15.44 1-OW 333 4.0 3.1 2.2 34.3 23.8 20.2 40.56% 30.64% # 102 0.65 95 0.63

INFA Informatica USD 45.39 1-OW 4,908 5.0 4.3 4.9 27.7 22.1 29.6 14.76% 17.17% # 1,054 2.05 1,028 1.89

INTU Intuit USD 55.43 1-OW 16,347 4.0 3.7 3.6 18.7 16.3 17.2 10.10% 9.13% # 4,627 3.40 4,612 3.34

LOGM LogMeIn USD 32.40 1-OW 798 4.6 3.8 5.5 49.1 33.4 45.7 18.87% 23.24% # 175 0.97 173 0.90

MSFT Microsoft USD 30.74 2-EW 258,243 2.9 2.6 2.7 11.3 9.5 10.0 5.92% 11.39% # 82,527 3.25 80,629 3.04

N NetSuite USD 41.97 1-OW 2,946 9.2 7.3 9.7 199.9 119.9 201.1 27.11% 25.00% # 376 0.35 371 0.34

ORCL Oracle USD 27.02 1-OW 134,427 3.3 3.1 3.6 11.2 10.0 12.6 4.25% 6.16% # 39,425 2.69 39,583 2.63

PMTC Parametric Technology USD 20.09 1-OW 2,393 1.9 1.7 2.1 13.7 10.9 14.9 10.26% 10.41% # 1,421 1.85 1,393 1.75

QLIK Qlik Technologies USD 24.41 1-OW 2,084 4.5 3.6 5.7 55.5 41.4 67.6 29.16% 26.37% # 523 0.59 514 0.58

SAP SAP AG USD 61.80 1-OW 73,562 3.5 3.1 4.8 19.5 16.5 20.5 17.05% 12.23% # 17,944 3.74 17,254 3.53

SYMC Symantec USD 15.53 2-EW 11,328 1.5 1.4 1.8 9.6 8.2 9.3 2.85% 5.29% # 7,288 1.89 7,130 1.83

TDC Teradata USD 71.25 2-EW 12,020 4.2 3.4 3.7 26.0 21.7 22.9 15.77% 24.88% # 3,415 3.29 3,039 3.13

TIBX TIBCO Software USD 30.24 2-EW 4,988 4.6 4.0 4.5 25.2 21.8 25.0 15.73% 15.40% # 1,229 1.39 1,194 1.38

TNGO Tangoe USD 21.60 1-OW 803 5.8 4.7 5.5 52.7 36.6 48.3 37.22% 22.92% # 177 0.59 170 0.56

TRAK DealerTrack Holdings USD 31.64 2-EW 1,343 2.9 2.6 3.0 29.8 25.1 25.3 8.24% 13.68% # 435 1.26 426 1.28

VMW VMware USD 101.18 1-OW 43,229 8.5 7.1 8.2 37.1 30.8 38.6 22.64% 19.81% # 5,535 3.29 5,474 3.17

EV/Sales, x

Raimo Lenschow

Price/Earnings, x Sales Growth (%) FY2 Ests. Consensus FY2 Ests.

U.S. Display & Lighting (2-Neutral)

Price Market


AIXG Aixtron USD 17.00 2-EW 1,712 3.5 2.6 3.4 na 68.0 5.9 -51.88% 31.63% # 387 0.25 365 0.30

GLW Corning USD 13.32 1-OW 20,188 2.0 2.0 2.6 9.9 9.2 8.5 3.95% 3.63% # 8,500 1.45 8,816 1.52

CREE Cree USD 31.74 2-EW 3,687 na na 2.1 34.1 22.2 25.4 na na # na 1.43 1,406 1.36

IPGP IPG Photonics USD 46.33 2-EW 2,362 3.5 2.9 4.4 16.8 14.7 21.8 19.71% 18.49% # 673 3.15 652 3.24

ORBK Orbotech USD 10.23 2-EW 443 0.5 0.5 0.5 9.7 8.5 9.2 -11.38% 9.98% # 551 1.20 564 1.40

LEDS SemiLEDS USD 3.43 2-EW 94 0.9 0.5 1.3 -3.6 -18.1 5.9 15.04% 102.56% # 79 -0.19 55 -0.49

VECO Veeco Instruments USD 36.96 1-OW 1,433 1.7 1.4 1.2 23.1 17.2 15.5 -44.03% 16.97% # 641 2.15 654 2.09

Sales Growth (%) FY2 Ests. Consensus FY2 Ests.

CJ Muse and Olga Levinzon

EV/Sales, x Price/Earnings, x

Source: FactSet, Reuters, and Barclays Research estimates. Stock Ratings: 1-OW = 1-Overweight, 2-EW = 2-Equal Weight, 3-UW = 3-Underweight, RS = Rating Suspended. FY2 Estimates = Next Fiscal Year Estimates


17 May 2012 107

EQUITY VALUATION TABLE – U.S. TECHNOLOGY U.S. Internet (1-Positive)

Price Market


AMZN Amazon.com Inc. USD 226.69 2-EW 102,130 1.5 1.2 1.2 206.1 94.8 70.4 33.61% 31.68% # 84,581 2.39 81,415 2.54

AOL AOL Inc. USD 26.28 2-EW 2,457 1.1 1.1 0.9 93.9 45.3 30.9 0.44% -1.50% # 2,095 0.58 2,078 0.77

DMD Demand Media Inc. USD 8.65 1-OW 721 1.8 1.6 1.4 26.2 21.6 24.5 6.84% 14.29% # 397 0.40 396 0.43

EBAY eBay Inc. USD 41.21 2-EW 53,212 3.6 3.2 2.7 17.5 15.6 13.8 20.40% 13.40% # 15,908 2.65 16,028 2.72

EXPE Expedia Inc. USD 40.91 3-UW 5,199 1.3 1.2 1.6 15.0 13.2 12.0 11.37% 9.50% # 4,206 3.09 4,185 3.20

GOOG Google Inc. Cl A USD 613.66 1-OW 200,057 4.5 3.8 3.7 14.0 11.7 14.2 -6.15% 18.36% # 42,105 52.50 42,305 50.63

GRPN Groupon Inc. USD 9.87 1-OW 6,295 na na 6.1 61.7 11.2 77.4 40.46% 31.12% # 2,966 0.88 3,001 0.75

AWAY HomeAway Inc. USD 25.18 2-EW 2,067 6.6 5.5 7.6 48.4 40.0 55.0 40.38% 20.00% # 336 0.63 344 0.67

IACI IAC/InterActiveCorp. USD 48.75 1-OW 4,232 1.5 1.3 0.9 20.1 16.5 18.1 29.60% 9.18% # 2,914 2.96 2,952 3.36

LNKD LinkedIn Corporation USD 111.00 1-OW 11,466 13.1 9.1 9.8 179.0 68.9 221.9 71.36% 44.31% # 1,291 1.61 1,335 1.20

NFLX Netflix Inc. USD 72.42 2-EW 4,020 1.0 0.9 2.0 905.3 31.4 -146.9 13.81% 15.52% # 4,213 2.31 4,211 2.18

OPEN OpenTable Inc. USD 37.84 1-OW 854 5.4 4.6 5.9 25.4 22.7 29.5 15.11% 16.00% # 186 1.67 192 1.89

PCLN priceline.com Inc. USD 681.11 1-OW 33,915 6.0 4.8 4.2 21.6 16.7 17.1 27.00% 23.42% # 6,808 40.90 6,727 39.49

QNST QuinStreet Inc. USD 8.05 2-EW 363 1.0 1.1 1.1 28.8 38.3 23.8 -10.67% -6.39% # 337 0.21 366 0.34

RLOC ReachLocal Inc. USD 9.30 2-EW 264 0.4 0.4 0.3 -103.3 -465.0 -55.1 18.43% 16.22% # 517 -0.02 519 0.11

SFLY Shutterfly Inc. USD 27.12 1-OW 967 1.4 1.2 1.7 271.2 77.5 81.4 21.83% 17.59% # 678 0.35 669 0.49

TRIP TripAdvisor Inc. USD 40.79 2-EW 5,444 7.6 6.4 6.2 28.7 23.7 25.7 18.51% 18.01% # 891 1.72 921 1.82

VPRT Vistaprint N.V. USD 38.32 2-EW 1,418 1.5 1.3 1.4 22.2 21.3 20.7 25.69% 17.29% # 1,205 1.80 1,247 2.04

WBMD WebMD Health Corp. USD 21.87 2-EW 1,244 1.8 1.7 2.7 364.5 156.2 213.9 -10.45% 4.72% # 524 0.14 526 0.39

YHOO Yahoo! Inc. USD 15.44 2-EW 18,817 3.7 3.6 3.6 13.1 12.0 18.4 -8.35% 4.13% # 4,757 1.29 4,605 1.08

ZNGA Zynga Inc USD 7.82 2-EW 5,761 0.7 0.6 2.0 34.0 27.9 43.0 20.58% 15.49% # 1,588 0.28 1,754 0.37

EV/Sales, x Price/Earnings, x Sales Growth (%) FY2 Ests.

Anthony DiClemente

Consensus FY2 Ests.

U.S. IT Consulting & Computer Services (2-Neutral)

Price Market


ACTG Acacia Research Corp USD 38.31 2-EW 1,904 4.8 3.9 5.1 23.2 20.6 19.1 57.47% 24.37% # 337 1.86 333 2.05

ACN Accenture USD 58.70 2-EW 40,596 1.3 1.3 1.3 15.2 13.9 15.0 2.60% 6.40% # 29,859 4.22 30,179 4.28

ADS Alliance Data Systems USD 125.80 1-OW 6,335 3.6 3.3 3.2 14.8 13.0 12.2 16.22% 8.22% # 3,863 9.70 3,834 9.67

ADS Alliance Data Systems USD 125.80 1-OW 6,335 3.6 3.3 3.2 14.8 13.0 12.2 16.22% 8.22% # 3,863 9.70 3,834 9.67

CTSH Cognizant Technology Solutions USD 61.05 1-OW 18,585 2.2 1.9 2.5 18.1 15.1 20.2 20.14% 19.57% # 8,793 4.05 8,717 3.99

CSC Computer Sciences USD 27.00 2-EW 4,187 0.4 0.4 0.4 10.9 12.3 7.7 0.24% 0.16% # 16,106 2.20 15,834 2.81

CLGX CoreLogic USD 17.78 1-OW 1,899 1.8 1.7 1.5 16.2 14.2 13.7 5.75% 3.81% # 1,469 1.25 1,467 1.18

EPAM EPAM Systems Inc USD 17.62 1-OW 745 na na na 13.7 11.6 15.9 23.75% 21.98% # 505 1.52 508 1.53

FISV Fiserv USD 66.47 2-EW 9,072 2.7 2.6 2.6 12.9 11.7 12.1 5.79% 5.38% # 4,835 5.70 4,739 5.75

FLT FleetCor Technologies USD 39.53 2-EW 3,281 5.7 5.2 5.0 15.3 13.6 13.4 20.29% 8.16% # 676 2.91 684 2.93

GPN Global Payments USD 43.37 2-EW 3,407 1.6 1.4 1.8 12.3 11.0 14.6 18.10% 11.88% # 2,457 3.94 2,393 3.88

LPS Lender Processing Services USD 24.50 1-OW 2,099 1.6 1.6 1.4 10.2 9.2 7.7 -4.26% 1.25% # 2,026 2.65 2,066 2.67

MA MasterCard USD 422.98 1-OW 53,461 6.4 5.7 5.2 18.9 16.1 15.3 13.60% 12.53% # 8,583 26.35 8,629 26.21

RPXC RPX USD 15.20 1-OW 761 2.7 2.2 2.9 18.1 14.8 24.9 29.11% 21.55% # 242 1.03 244 1.03

TSS Total System Services USD 22.83 1-OW 4,317 2.2 2.1 2.0 17.6 15.5 15.6 6.07% 4.70% # 2,009 1.47 1,914 1.43

PAY VeriFone Systems USD 44.45 1-OW 4,743 3.1 2.8 2.9 16.7 13.2 17.9 46.89% 11.16% # 2,129 3.36 2,170 3.29

V Visa USD 118.17 1-OW 96,188 10.7 9.5 8.5 19.5 16.6 15.3 21.20% 12.23% # 11,607 7.12 11,453 7.07

WU Western Union USD 17.28 1-OW 10,592 2.3 2.2 2.3 10.2 9.1 10.6 4.96% 2.99% # 5,937 1.90 6,111 1.94

Darrin Peller

EV/Sales, x Price/Earnings, x Sales Growth (%) FY2 Ests. Consensus FY2 Ests.



17 May 2012 108

EQUITY VALUATION TABLE – U.S. TECHNOLOGY U.S. Wireless Equipment (2-Neutral)

Price Market


CMVT Comverse Technology USD 6.48 1-OW 1,419 1.0 na 1.0 58.9 na na 0.85% na # na na 1,749 0.65

ERIC Ericsson USD 9.05 2-EW 29,624 4.6 4.5 -0.3 16.5 11.8 13.6 -85.12% 2.82% # 34,719 0.77 35,847 0.79

IDCC InterDigital USD 26.84 1-OW 1,190 3.1 3.1 4.9 26.8 26.8 23.0 -11.85% -1.88% # 261 1.00 259 1.01

MMI Motorola Mobility Holdings USD 39.35 2-EW 11,952 0.7 0.6 0.5 77.2 44.7 31.5 0.70% 5.55% # 13,886 0.88 13,181 0.83

MSI Motorola Solutions USD 49.54 2-EW 14,469 1.6 1.5 1.2 16.3 14.2 15.8 6.22% 5.96% # 9,232 3.50 9,180 3.50

NOK Nokia Corp. USD 3.24 2-EW 12,134 0.2 0.2 0.4 -13.5 23.1 18.5 -19.05% 3.32% # 32,333 0.14 42,301 0.11

QCOM QUALCOMM USD 62.48 1-OW 107,108 4.9 4.2 5.0 16.8 14.5 16.3 28.33% 18.83% # 22,809 4.30 21,954 4.19

RIMM Research In Motion USD 11.80 2-EW 6,185 0.4 0.4 0.7 118.0 15.7 16.6 -35.83% 3.54% # 12,249 0.75 14,623 1.75


Jeff Kvaal

Consensus FY2 Ests.

U.S. Data Networking & Wireline Equipment (2-Neutral)

Price Market


APKT Acme Packet USD 25.13 1-OW 1,714 4.2 3.4 7.8 25.6 18.1 32.8 10.32% 24.00% # 420 1.39 414 1.27

ADTN Adtran USD 30.32 1-OW 1,937 2.3 2.0 2.8 18.3 13.8 15.7 12.05% 10.81% # 891 2.19 900 2.23

ARRS Arris Group USD 12.69 2-EW 1,464 0.9 0.8 0.9 13.2 11.5 12.4 23.54% 5.28% # 1,416 1.10 1,422 1.12

ARUN Aruba Networks USD 16.72 1-OW 1,835 2.9 2.3 4.9 25.7 19.0 36.5 31.40% 29.94% # 677 0.88 627 0.81

BSFT Broadsoft USD 29.30 1-OW 807 4.5 3.6 6.2 21.2 16.5 28.5 18.74% 23.00% # 202 1.78 195 1.65

CIEN Ciena USD 12.06 1-OW 1,190 1.1 1.0 1.2 60.3 17.7 23.8 5.48% 9.50% # 2,012 0.68 2,065 0.88

CSCO Cisco Systems USD 16.81 1-OW 90,538 1.3 1.2 1.5 9.2 9.1 10.0 6.40% 4.78% # 48,184 1.85 48,536 1.93

FFIV F5 Networks USD 124.08 1-OW 9,851 6.7 5.7 5.8 27.3 23.3 23.9 22.25% 18.09% # 1,663 5.32 1,664 5.44

JNPR Juniper Networks USD 18.07 1-OW 9,562 1.6 1.5 2.3 21.3 13.8 18.0 0.16% 10.00% # 4,901 1.31 4,943 1.17

NTGR NETGEAR USD 34.91 2-EW 1,278 0.7 0.6 0.8 11.8 10.6 13.4 18.00% 14.93% # 1,602 3.30 1,561 3.25

PLCM Polycom USD 12.01 2-EW 2,141 1.0 0.9 2.0 12.0 9.6 16.5 5.58% 10.43% # 1,744 1.25 1,672 1.13

RVBD Riverbed Technology USD 16.81 2-EW 2,665 2.8 2.5 5.1 17.7 14.1 27.7 13.80% 15.00% # 951 1.19 978 1.19

SHOR ShoreTel USD 4.16 1-OW 200 0.7 0.5 1.0 -138.7 20.8 146.8 21.52% 37.47% # 334 0.20 329 0.15

TLAB Tellabs USD 3.79 2-EW 1,388 0.4 0.4 0.4 -126.3 189.5 48.3 -12.89% 0.70% # 1,128 0.02 1,186 0.08

Jeff Kvaal


U.S. Semiconductor Capital Equipment (2-Neutral)

Price Market


AEIS Advanced Energy Industries USD 13.24 2-EW 531 0.9 0.8 0.7 18.9 11.0 10.7 -5.77% 10.27% # 537 1.20 546 1.19

AMAT Applied Materials USD 11.06 2-EW 14,280 1.6 1.5 1.4 12.4 11.5 11.2 -12.25% 1.97% # 9,411 0.96 10,047 1.12

BRKS Brooks Automation USD 10.67 2-EW 707 1.1 1.0 0.8 15.9 10.6 12.8 -21.67% 6.86% # 576 1.01 633 1.00

CYMI Cymer USD 51.41 1-OW 1,590 2.2 1.7 1.8 64.3 25.7 19.8 5.01% 31.57% # 821 2.00 774 2.04

FORM FormFactor USD 6.26 2-EW 311 0.2 0.1 0.3 -7.4 -13.9 -11.3 12.21% 17.89% # 224 -0.45 227 -0.38

IMI Intermolecular Inc. USD 6.97 2-EW 296 4.0 2.8 2.4 -53.6 23.2 -78.0 11.46% 45.00% # 87 0.30 85 0.39

KLAC KLA-Tencor USD 50.00 2-EW 8,366 2.2 2.0 2.2 11.2 10.2 11.0 -0.67% 6.53% # 3,360 4.88 3,379 4.84

LRCX Lam Research USD 40.45 1-OW 4,865 1.2 1.1 1.2 18.9 12.3 13.7 -18.68% 9.19% # 2,875 3.28 3,092 3.50

LTXC LTX-Credence USD 6.61 2-EW 324 1.3 0.9 1.4 -20.0 13.0 -2.7 -46.30% 48.51% # 199 0.51 205 0.58

MKSI MKS Instruments USD 25.82 1-OW 1,355 1.0 1.0 1.1 14.3 12.3 12.4 -5.17% 3.85% # 810 2.10 803 1.91

NVLS Novellus Systems USD 45.41 2-EW 3,277 2.3 2.3 1.8 13.0 12.4 11.0 3.49% 1.71% # 1,424 3.65 1,412 3.12

TER Teradyne USD 15.62 1-OW 2,914 1.7 1.6 1.7 8.7 7.6 8.7 26.38% 9.30% # 1,974 2.05 1,937 1.98

CJ Muse

Price/Earnings, x Sales Growth (%) Consensus FY2 Ests.EV/Sales, x FY2 Ests.



17 May 2012 109

EQUITY VALUATION TABLE – U.S. TECHNOLOGY U.S. Semiconductors (1-Positive)

Price Market


AMD Advanced Micro Devices Inc. USD 6.78 2-EW 4,755 0.8 0.8 0.8 8.5 8.0 10.1 4.74% 4.20% # 7,168 0.85 7,259 0.89

ALTR Altera Corp. USD 33.48 1-OW 10,802 4.2 3.6 4.5 17.8 14.2 16.4 -7.97% 15.79% # 2,200 2.35 2,174 2.17

ADI Analog Devices Inc. USD 37.13 2-EW 11,059 3.1 2.8 3.0 16.3 13.3 14.3 -6.69% 9.74% # 3,065 2.79 3,036 2.71

ATML Atmel Corp. USD 7.63 1-OW 3,386 2.0 1.8 2.3 23.1 13.4 17.8 -12.91% 10.83% # 1,740 0.57 1,790 0.64

AVGO Avago Technologies Ltd. USD 30.88 1-OW 7,532 2.8 2.5 3.1 12.1 10.5 12.5 3.84% 12.78% # 2,736 2.94 2,666 2.85

BRCM Broadcom Corp. USD 33.37 1-OW 18,387 2.3 2.1 2.2 10.9 10.0 12.1 11.26% 9.76% # 9,023 3.35 9,062 3.17

CAVM Cavium Inc. USD 24.46 1-OW 1,216 4.8 3.5 5.4 81.5 21.3 33.9 -8.07% 36.76% # 326 1.15 309 0.92

CY Cypress Semiconductor Corp. USD 13.43 1-OW 2,046 2.4 2.0 3.0 15.1 11.0 14.6 -13.08% 16.18% # 1,005 1.22 995 1.28

ENTR Entropic Communications Inc. USD 3.89 2-EW 342 0.5 0.4 1.6 16.2 10.5 10.7 27.00% 28.08% # 391 0.37 383 0.34

FSL Freescale Semiconductor Ltd USD 11.10 2-EW 2,738 2.0 1.9 2.0 18.5 8.5 14.1 -7.15% 8.13% # 4,590 1.30 4,534 1.54

IDTI Integrated Device Technology Inc. USD 5.89 2-EW 833 0.9 0.9 1.1 17.8 12.0 15.8 4.39% 10.20% # 606 0.49 619 0.53

INTC Intel Corp. USD 27.24 2-EW 137,044 2.4 2.3 2.1 11.0 10.4 9.7 5.54% 4.94% # 59,809 2.62 61,225 2.68

LLTC Linear Technology Corp. USD 30.76 2-EW 7,081 5.5 4.9 4.9 17.3 14.4 14.8 -14.65% 12.51% # 1,425 2.14 1,442 2.13

LSI LSI Corp. USD 7.71 1-OW 4,383 1.3 1.2 1.3 9.8 9.1 11.2 29.66% 6.38% # 2,819 0.85 2,809 0.85

MX MagnaChip Semiconductor Corp. USD 11.40 1-OW 420 0.6 0.5 0.5 6.2 5.8 5.8 10.45% 5.61% # 902 1.95 906 1.94

MRVL Marvell Technology Group Ltd. USD 13.56 2-EW 7,873 1.7 1.5 1.8 11.9 9.4 10.7 2.29% 10.51% # 3,836 1.44 3,904 1.46

MXIM Maxim Integrated Products Inc. USD 26.86 2-EW 7,849 3.1 2.9 2.6 17.7 14.9 14.2 -2.72% 7.60% # 2,588 1.80 2,603 1.84

MCHP Microchip Technology Inc. USD 31.93 2-EW 6,132 3.7 3.4 4.0 15.7 14.4 16.1 7.01% 8.49% # 1,606 2.22 1,656 2.29

MTSI MA-Com Technology Solutions Holdings Inc USD 16.23 1-OW 735 2.8 2.5 na 15.6 11.1 17.7 1.32% 14.73% # 361 1.46 360 1.47

MU Micron Technology Inc. USD 6.29 1-OW 6,225 0.9 0.9 1.1 -10.5 12.1 2.1 -5.66% 9.42% # 9,072 0.52 9,680 0.61

NVDA NVIDIA Corp. USD 12.42 2-EW 7,672 1.1 1.0 1.7 18.3 14.1 16.1 1.80% 7.62% # 4,380 0.88 4,494 0.91

NXPI NXP Semiconductors N.V. USD 23.53 1-OW 5,924 2.1 2.0 2.0 13.4 9.1 9.6 2.24% 6.81% # 4,580 2.60 4,598 2.77

RFMD RF Micro Devices Inc. USD 3.97 2-EW 1,097 1.1 1.0 1.6 26.5 12.4 14.9 2.71% 11.40% # 997 0.32 989 0.33

SLAB Silicon Laboratories Inc. USD 34.17 2-EW 1,465 2.2 2.1 2.8 17.0 17.1 18.8 8.09% 2.52% # 545 2.00 581 2.29

SWKS Skyworks Solutions Inc. USD 25.24 1-OW 4,787 2.9 2.5 2.8 13.2 11.0 12.8 10.79% 16.28% # 1,828 2.29 1,764 2.14

CODE Spansion Inc. Cl A USD 10.93 2-EW 654 0.9 0.8 0.9 11.5 7.3 11.2 -9.62% 6.83% # 1,033 1.50 1,048 1.71

TXN Texas Instruments Incorporated USD 30.78 2-EW 35,223 2.8 2.6 2.6 16.6 13.4 13.8 1.17% 5.25% # 14,625 2.30 14,961 2.39

TQNT TriQuint Semiconductor Inc. USD 4.99 2-EW 830 0.8 0.7 1.2 499.0 12.5 31.3 -5.14% 13.53% # 965 0.40 910 0.27

VLTR Volterra Semiconductor Corp. USD 30.12 1-OW 782 3.6 3.1 2.8 20.2 18.3 16.9 18.99% 14.17% # 212 1.65 210 1.82

XLNX Xilinx Inc. USD 33.33 2-EW 8,727 3.4 3.3 3.2 15.2 14.4 14.7 8.89% 2.46% # 2,500 2.31 2,637 2.36

CJ Muse and Blayne Curtis


U.S. Clean Technology (2-Neutral)

Price Market


AONE A123 Systems USD 1.03 2-EW 164 0.6 0.4 1.0 -0.8 -1.7 -31.4 60.86% 73.05% # 443 -0.65 417 -0.73

AMRC Ameresco USD 11.53 1-OW 509 0.9 0.8 1.0 13.6 11.5 14.2 12.61% 7.93% # 885 1.00 910 1.03

ELT Elster Group USD 14.33 1-OW 1,640 1.1 1.1 1.1 12.6 11.0 11.8 1.39% 5.49% # 1,999 1.32 2,079 1.39

FSLR First Solar USD 16.14 2-EW 1,395 0.4 0.5 1.8 3.8 3.9 10.7 27.97% -0.54% # 3,521 4.10 3,471 3.93

GTAT GT Advanced Technologies USD 5.52 2-EW 672 0.5 0.5 1.2 3.6 3.3 7.5 11.35% 8.29% # 1,084 1.71 1,043 1.55

ITRI Itron USD 40.20 2-EW 1,610 0.9 0.8 1.1 10.3 9.6 11.8 -9.29% 4.35% # 2,304 4.21 2,257 4.08

PWER Power-One USD 4.01 1-OW 451 0.3 0.3 0.6 7.1 5.9 7.6 -6.66% 4.53% # 992 0.63 1,036 0.56

TSLA Tesla Motors USD 32.25 1-OW 3,466 6.3 2.1 6.0 -12.8 38.3 -15.3 177.12% 201.59% # 1,707 0.86 1,699 0.89

TSL Trina Solar Ltd. ADS USD 7.24 2-EW 577 0.4 0.3 0.4 -10.1 14.5 -9.9 -10.54% 17.79% # 2,158 0.50 2,175 0.60

YGE Yingli Green Energy Holding Co. Ltd. ADS USD 3.45 2-EW 546 6.5 5.8 5.1 -5.0 -69.0 -5.2 -85.52% 13.46% # 2,411 -0.05 2,432 0.09

Consensus FY2 Ests.FY2 Ests.

Amir Rozwadowski

EV/Sales, x Price/Earnings, x Sales Growth (%)



17 May 2012 110

EQUITY VALUATION TABLE – EUROPE TECHNOLOGY

European Technology Hardware (2-Neutral)

Price Market


AIXA-DE Aixtron SE EUR 13.17 2-EW 1,721 3.5 2.7 2.9 -1317.0 54.9 -26.2 -51.81% 31.45% # 387 0.24 430 0.54

ALU-FR Alcatel-Lucent EUR 1.22 2-EW 3,591 0.2 0.2 0.4 -30.6 122.2 11.4 -2.66% 2.62% # 15,310 0.01 15,476 0.16

ARM-LON ARM Holdings GBP 5.08 1-OW 11,286 11.9 10.5 12.9 33.8 28.2 41.8 13.14% 13.88% # 634 0.18 630 0.17

ASML-NL ASML Holding EUR 36.85 1-OW 19,756 2.5 2.2 2.2 13.2 10.5 10.3 -11.82% 14.69% # 5,715 3.50 5,546 3.24

CSR-LON CSR GBP 2.23 2-EW 717 0.4 0.4 0.2 6.8 4.8 7.6 21.00% 1.86% # 1,042 0.46 1,037 0.35

DLG-DE Dialog Semiconductor PLC EUR 16.23 1-OW 1,432 1.7 1.4 1.4 13.3 8.9 13.6 43.57% 22.59% # 928 1.83 889 1.59

ERIC.B-SE Ericsson SEK 63.15 2-EW 29,278 0.7 0.7 0.9 17.3 12.2 13.5 -0.30% 2.82% # 232,618 5.17 242,273 5.73

IFX-DE Infineon Technologies EUR 6.78 1-OW 9,326 1.5 1.3 1.3 15.1 12.1 11.4 -1.70% 8.50% # 4,263 0.56 4,266 0.55

IMG-LON Imagination Technologies Group PLC GBP 6.32 1-OW 2,693 12.8 10.0 12.6 53.6 35.3 53.4 33.61% 27.48% # 167 0.18 158 0.15

KUD-CH Kudelski CHF 6.75 3-UW 389 0.6 0.6 0.8 16.1 9.4 11.6 -4.20% 3.21% # 864 0.72 866 0.66

LOGN-SWX Logitech International CHF 9.41 3-UW 1,757 0.5 0.5 0.5 16.8 14.5 10.4 0.22% 3.60% # 2,405 0.65 2,421 0.88

NOK1V-HELNokia EUR 2.47 2-EW 11,869 0.2 0.2 0.4 -13.7 22.4 11.8 -19.05% 3.32% # 32,333 0.11 32,793 0.10

PIC-GB Pace GBP 0.86 2-EW 422 0.3 0.3 0.3 3.2 2.6 2.4 -3.26% 1.34% # 2,264 0.33 2,312 0.30

STM-PAR STMicroelectronics EUR 4.12 2-EW 4,721 0.5 0.4 0.5 82.3 7.5 9.6 -4.84% 7.68% # 9,868 0.55 9,874 0.56

TCH-PAR Technicolor EUR 1.64 2-EW 474 0.4 0.4 0.4 10.3 5.5 10.5 -2.81% -0.92% # 3,322 0.30 3,349 0.33

TOM2-AMSTomTom EUR 3.49 3-UW 1,004 0.9 1.0 0.9 11.6 12.5 7.2 -15.25% -7.95% # 993 0.28 1,089 0.37

Consensus FY2 Ests.EV/Sales, x

Andrew Gardiner

Price/Earnings, x Sales Growth (%) FY2 Ests.

European Software & IT Services (1-Positive)

Price Market


AMS-MCE Amadeus IT EUR 15.40 1-OW 8,891 2.6 2.4 2.9 11.8 11.0 11.2 4.61% 5.64% # 3,049 1.40 2,980 1.32

ATO-PAR ATOS EUR 45.81 1-OW 4,949 0.5 0.5 0.4 11.6 9.5 9.5 28.23% 3.45% # 9,037 4.80 8,985 4.50

AVV-LON Aveva Group GBP 15.99 3-UW 1,757 5.5 5.0 5.5 25.4 21.3 24.3 9.78% 10.99% # 212 0.75 213 0.73

CAP-PAR Capgemini EUR 29.00 2-EW 5,772 0.4 0.4 0.6 12.2 10.3 12.0 3.51% 6.70% # 10,705 2.82 10,335 2.84

DSY-FR Dassault Systemes EUR 72.00 2-EW 11,425 3.7 3.5 3.3 20.7 19.4 18.7 13.96% 6.64% # 2,167 3.72 2,156 3.70

IDR-MCE Indra Sistemas EUR 8.16 3-UW 1,723 0.7 0.6 0.8 8.7 7.2 9.6 5.52% 4.93% # 2,977 1.13 2,951 1.05

LOG-LON Logica GBP 0.74 2-EW 1,924 0.4 0.4 0.5 6.6 6.3 7.6 -1.16% 2.17% # 3,960 0.12 3,956 0.12

MCRO-LON Micro Focus International PLC GBP 4.59 1-OW 1,215 3.1 3.0 1.7 6.7 6.2 6.4 0.43% 1.60% # 445 0.74 436 0.75

SGE-LON Sage Group GBP 2.66 2-EW 5,499 2.4 2.3 2.5 13.1 13.0 13.1 2.84% 5.90% # 1,453 0.20 1,409 0.22

SAP-DE SAP EUR 48.01 1-OW 74,056 3.5 3.1 3.2 15.1 12.8 13.6 12.35% 12.23% # 17,944 3.76 17,310 3.44

SOW-DE Software EUR 24.40 3-UW 2,744 2.0 2.0 2.5 11.4 10.7 12.0 -0.61% 1.20% # 1,100 2.29 1,126 2.33

SOP-FR Sopra Group EUR 42.00 2-EW 645 0.5 0.5 0.6 7.1 6.7 8.9 14.54% 8.73% # 1,308 6.23 1,257 6.14

RIA-FR Groupe Steria EUR 14.77 2-EW 589 0.3 0.3 0.4 6.1 5.0 6.9 1.73% 4.33% # 1,855 2.97 1,854 2.47

TEMN-CH Temenos Group CHF 15.95 1-OW 1,190 2.7 2.4 3.1 16.3 13.0 14.1 1.80% 9.75% # 529 1.23 508 1.21

TIE1V-HEL Tieto Oyj EUR 12.81 2-EW 1,187 0.5 0.5 0.5 9.9 8.0 9.6 1.74% 3.17% # 1,919 1.61 1,870 1.46

WDI-DE Wirecard EUR 13.45 1-OW 1,774 3.1 2.6 2.6 17.5 15.3 15.4 23.77% 16.67% # 469 0.88 468 0.85


Gerardus Vos

Consensus FY2 Ests.

Israel Technology (1-Positive)

Price Market


DOX Amdocs USD 30.12 1-OW 5,262 1.3 1.2 1.3 11.3 10.9 11.3 2.90% 4.65% # 3,422 2.77 3,428 2.89

CRNT Ceragon Networks USD 9.50 1-OW 335 0.7 0.6 0.7 17.3 7.3 12.0 11.03% 17.07% # 579 1.30 548 1.00

CEVA CEVA USD 17.24 1-OW 400 4.7 3.9 7.5 18.5 14.4 23.8 5.58% 20.74% # 72 1.20 67 1.10

ESLT-IL Elbit Systems ILS 136.70 2-EW 1,528 0.7 0.6 2.5 24.9 22.2 29.3 6.19% 11.23% # 3,328 6.15 3,142 5.06

EZCH EZchip Semiconductor USD 39.49 1-OW 1,028 na na 7.8 31.1 20.3 20.8 11.89% 49.15% # 106 1.95 101 1.90

MLNX Mellanox Technologies USD 57.16 1-OW 2,289 5.1 4.3 3.2 26.1 22.2 20.1 63.20% 18.29% # 501 2.57 500 2.58

NICE NICE-Systems USD 37.62 2-EW 2,410 na na 2.0 15.4 13.7 14.8 17.28% 13.96% # 1,061 2.74 1,042 2.74

Joseph Wolf and David Kalpan




17 May 2012 111

EQUITY VALUATION TABLE – JAPAN TECHNOLOGY

Japan Consumer Electronics (2-Neutral)

Price Market


6952-TKS Casio Computer JPY 492.00 1-OW 1,654 0.5 0.5 0.5 47.3 10.0 32.2 -11.61% 5.30% # 318,000 49.10 316,624 39.82

6839-OSE Funai Electric JPY 1455.00 2-EW 621 -0.1 -0.1 0.0 27.7 21.9 14.5 -1.28% -6.17% # 228,000 66.43 241,599 85.21

6632-TKS JVC Kenwood JPY 301.00 1-OW 522 0.2 0.2 0.2 5.4 4.6 9.9 2.69% 0.70% # 331,800 64.79 348,836 62.13

6752-TKS Panasonic JPY 579.00 3-UW 16,745 0.3 0.3 0.4 -1.8 12.8 30.4 -8.77% 0.13% # 7,940,000 45.25 8,030,257 45.46

6773-TKS Pioneer JPY 369.00 2-EW 1,482 0.3 0.3 0.3 9.3 7.6 9.9 9.44% 5.02% # 502,000 48.45 519,313 51.59

6753-TKS Sharp JPY 411.00 2-EW 5,656 0.5 0.5 0.5 -11.7 13.8 66.2 8.72% 6.37% # 2,840,000 29.74 2,722,567 27.01

6758-TKS Sony JPY 1213.00 2-EW 15,273 0.2 0.2 0.3 32.1 8.8 11.7 11.80% 0.70% # 7,200,000 137.36 6,907,698 109.80

Yuji Fujimori


Japan Display & Lighting (2-Neutral)

Price Market


5201-TKS Asahi Glass JPY 587.00 2-EW 8,487 0.9 0.9 1.1 10.6 12.6 9.4 0.03% -0.08% # 1,214,000 46.58 1,259,947 66.01

5214-TKS Nippon Electric Glass JPY 570.00 1-OW 3,546 0.7 0.7 1.4 9.5 6.9 8.4 12.62% -0.87% # 377,600 82.59 314,136 42.50

5202-TKS Nippon Sheet Glass JPY 101.00 3-UW 1,140 0.8 0.8 0.8 -9.2 10.8 21.7 0.99% 0.36% # 559,700 9.31 565,410 5.74

Yuji Fujimori


Japan Electronic Components (1-Positive)

Price Market


6806-TKS Hirose Electric JPY 7960.00 2-EW 3,445 1.5 1.4 1.9 17.2 16.2 20.5 6.34% 6.25% # 107,092 490.30 104,395 431.07

4062-TKS Ibiden JPY 1527.00 1-OW 2,733 0.5 0.5 0.9 9.8 8.7 13.3 15.37% 5.95% # 367,770 174.82 335,105 130.11

6971-TKS Kyocera JPY 7450.00 2-EW 17,094 0.7 0.7 0.9 16.3 15.3 23.5 11.89% 1.82% # 1,356,699 485.80 1,337,761 514.45

6981-TKS Murata Manufacturing JPY 4390.00 2-EW 11,590 1.2 1.2 1.3 17.1 16.2 22.0 15.34% 2.70% # 692,523 270.79 705,255 297.75

5334-TKS NGK Spark Plug JPY 1061.00 2-EW 2,889 0.7 0.7 0.8 10.4 8.4 27.9 -3.95% 2.17% # 279,430 125.90 289,385 106.34

5991-TKS NHK Spring JPY 810.00 2-EW 2,371 0.4 0.4 0.4 9.1 7.1 9.2 14.82% 6.26% # 537,778 113.32 522,780 104.69

6594-TKS Nidec JPY 6530.00 1-OW 11,176 1.2 1.0 1.4 13.2 11.5 14.3 36.00% 13.79% # 1,055,879 566.24 865,360 564.81

6963-TKS Rohm JPY 3515.00 2-EW 4,740 0.5 0.4 0.8 24.0 19.7 22.3 9.05% 5.15% # 349,327 178.86 337,378 151.74

6967-TKS Shinko Electric Industries JPY 687.00 2-EW 1,161 0.5 0.5 0.7 11.8 9.9 -1.7 15.93% 2.30% # 149,233 69.09 145,017 33.19

6976-TKS Taiyo Yuden JPY 774.00 3-UW 1,138 0.7 0.6 0.7 -4.5 14.5 0.9 -12.79% 7.26% # 196,815 53.36 195,575 22.08

6762-TKS TDK JPY 3740.00 1-OW 5,889 0.6 0.6 0.8 10.0 9.5 22.6 15.53% 1.14% # 951,691 393.38 932,784 384.88

Masaru Koshita

Consensus FY2 Ests.EV/Sales, x Price/Earnings, x Sales Growth (%) FY2 Ests.



17 May 2012 112

EQUITY VALUATION TABLE – JAPAN TECHNOLOGY


Price Market


6806-TKS Hirose Electric JPY 7960.00 2-EW 3,445 1.5 1.4 1.9 17.2 16.2 20.5 6.34% 6.25% # 107,092 490.30 104,395 431.07

4062-TKS Ibiden JPY 1527.00 1-OW 2,733 0.5 0.5 0.9 9.8 8.7 13.3 15.37% 5.95% # 367,770 174.82 335,105 130.11

6971-TKS Kyocera JPY 7450.00 2-EW 17,094 0.7 0.7 0.9 16.3 15.3 23.5 11.89% 1.82% # 1,356,699 485.80 1,337,761 514.45

6981-TKS Murata Manufacturing JPY 4390.00 2-EW 11,590 1.2 1.2 1.3 17.1 16.2 22.0 15.34% 2.70% # 692,523 270.79 705,255 297.75

5334-TKS NGK Spark Plug JPY 1061.00 2-EW 2,889 0.7 0.7 0.8 10.4 8.4 27.9 -3.95% 2.17% # 279,430 125.90 289,385 106.34

5991-TKS NHK Spring JPY 810.00 2-EW 2,371 0.4 0.4 0.4 9.1 7.1 9.2 14.82% 6.26% # 537,778 113.32 522,780 104.69

6594-TKS Nidec JPY 6530.00 1-OW 11,176 1.2 1.0 1.4 13.2 11.5 14.3 36.00% 13.79% # 1,055,879 566.24 865,360 564.81

6963-TKS Rohm JPY 3515.00 2-EW 4,740 0.5 0.4 0.8 24.0 19.7 22.3 9.05% 5.15% # 349,327 178.86 337,378 151.74

6967-TKS Shinko Electric Industries JPY 687.00 2-EW 1,161 0.5 0.5 0.7 11.8 9.9 -1.7 15.93% 2.30% # 149,233 69.09 145,017 33.19

6976-TKS Taiyo Yuden JPY 774.00 3-UW 1,138 0.7 0.6 0.7 -4.5 14.5 0.9 -12.79% 7.26% # 196,815 53.36 195,575 22.08

6762-TKS TDK JPY 3740.00 1-OW 5,889 0.6 0.6 0.8 10.0 9.5 22.6 15.53% 1.14% # 951,691 393.38 932,784 384.88

7731-TKS Nikon JPY 2279.00 2-EW 11,303 0.9 0.8 0.7 15.1 13.7 13.2 7.98% 3.53% # 1,027,000 166.44 1,076,380 193.13

7733-TKS Olympus JPY 1130.00 3-UW 3,772 0.8 0.8 1.1 12.6 8.6 21.4 4.89% 4.49% # 930,000 131.15 937,656 134.08

6645-TKS OMRON JPY 1695.00 1-OW 4,667 0.5 0.5 0.6 14.6 11.7 11.4 2.51% 4.41% # 663,000 144.46 669,227 154.20

7752-TKS Ricoh Co. JPY 641.00 2-EW 5,813 0.6 0.6 0.6 14.5 9.1 14.0 1.66% 2.33% # 1,980,000 70.34 2,004,216 74.49

6724-TKS Seiko Epson JPY 930.00 2-EW 2,081 0.3 0.3 0.3 11.5 9.2 9.2 -0.91% 1.72% # 885,000 100.62 909,954 116.15

6590-TKS Shibaura Mechatronics JPY 198.00 2-EW 122 0.4 0.4 0.4 98.0 5.4 13.6 2.90% 9.38% # 44,300 36.43 43,276 22.62

7701-TKS Shimadzu JPY 706.00 1-OW 2,605 0.8 0.7 0.7 12.6 10.7 11.6 3.28% 7.27% # 295,000 66.10 295,842 52.78

8035-TKS Tokyo Electron JPY 3995.00 2-EW 8,953 0.8 0.8 0.8 20.5 19.7 14.5 -2.07% 0.81% # 625,000 203.16 690,100 327.72

7732-TKS Topcon JPY 623.00 1-OW 722 1.0 0.9 0.7 14.4 10.5 14.3 3.20% 6.86% # 109,000 59.38 103,285 46.96

6728-TKS ULVAC JPY 515.00 3-UW 318 0.6 0.7 0.8 -0.5 13.4 16.8 -9.07% -17.06% # 175,000 38.50 181,113 10.68

Consensus FY2 Ests.Price/Earnings, x Sales Growth (%) FY2 Ests.

Masaru Koshita

EV/Sales, x



17 May 2012 113

EQUITY VALUATION TABLE – ASIA EX-JAPAN TECHNOLOGY

Asia Ex-Japan Semiconductors (2-Neutral)

Price Market


2311-TW Advanced Semiconductor Engineering TWD 29.15 2-EW 6,473 1.2 1.1 1.1 12.7 10.8 10.2 9.01% 11.04% # 224,359 2.69 219,675 2.80

000660-KRXHynix Semiconductor KRW 26600.00 1-OW 13,788 2.0 1.7 2.1 82.8 11.4 64.9 -0.33% 17.52% # 12,177,000 2,338.52 13,117,950 2,849.07

3189-TW Kinsus Interconnect Technology TWD 92.20 1-OW 1,400 1.4 1.4 1.5 13.4 11.8 13.6 10.69% 1.68% # 25,607 7.79 25,371 8.77

2454-TW MediaTek TWD 264.00 1-OW 10,244 2.4 2.0 2.3 23.0 18.6 16.2 7.12% 15.57% # 107,526 14.16 106,834 15.37

3697-TW MStar Semiconductor TWD 181.50 1-OW 3,271 1.9 1.6 1.6 14.0 12.2 12.4 9.14% 16.95% # 45,548 14.88 46,245 15.79

8046-TW Nan Ya Printed Circuit Board TWD 54.60 3-UW 1,201 0.5 0.4 0.8 6.6 5.7 10.3 39.35% 14.75% # 60,493 9.64 42,732 5.27

005930-KRXSamsung Electronics KRW 1327000.00 1-OW 151,449 0.8 0.7 0.8 9.0 7.7 10.2 24.07% 11.90% # 229,087,008 171,835.30 221,055,856 163,403.00

2325-TW Siliconware Precision Industries TWD 33.50 1-OW 3,511 1.4 1.3 1.3 18.0 15.2 16.7 10.66% 14.23% # 77,406 2.20 74,810 2.49

2330-TW Taiwan Semiconductor Manufacturing TWD 85.30 2-EW 75,277 4.3 4.0 3.8 14.3 14.9 13.2 15.50% 7.74% # 531,452 5.73 559,026 6.91

2303-TW United Microelectronics TWD 14.55 2-EW 6,247 1.6 1.4 1.3 14.1 11.2 12.0 0.45% 12.42% # 129,184 1.30 125,350 1.14

5347-TW Vanguard International Semiconductor TWD 15.15 1-OW 796 1.0 1.0 0.8 17.6 10.7 17.2 1.32% 7.17% # 16,495 1.42 16,803 1.53

2455-TW Visual Photonics Epitaxy Co. Ltd. TWD 51.90 1-OW 393 3.6 3.2 3.4 17.3 15.0 16.9 32.45% 11.12% # 3,168 3.45 3,351 3.75

3105-TW Win Semiconductors Corp. TWD 45.85 2-EW 1,013 na na na 15.0 13.8 15.9 na na # na 3.33 13,255 3.81

Andrew Lu & SC Bae


Asia Ex-Japan LCD Displays (1-Positive)

Price Market


054620-KRXAsia Pacific Systems Inc. KRW 13950.00 1-OW 263 na na na na na na na na # na na 355,153 1,706.17

2409-TW AU Optronics TWD 13.05 1-OW 3,922 0.8 0.7 0.6 -4.1 15.2 8.1 3.38% 10.50% # 433,770 0.86 419,131 0.14

001300-KRXCheil Industries Inc. KRW 104500.00 2-EW 4,626 1.0 0.9 1.0 19.1 15.8 18.5 10.12% 14.87% # 7,060,000 6,595.09 6,993,520 7,863.74

3481-TW Chimei Innolux TWD 12.20 3-UW 3,038 0.7 0.7 0.7 -3.1 23.5 5.5 -4.97% 5.48% # 511,318 0.52 520,027 -0.55

5371-TW Coretronic TWD 26.05 3-UW 642 0.2 0.2 0.2 10.1 9.7 10.0 0.55% 4.96% # 81,329 2.68 84,692 3.11

8069-TAI E Ink Holdings TWD 28.95 1-OW 1,064 1.1 0.8 1.3 11.3 6.4 9.4 -13.60% 30.51% # 43,334 4.51 33,250 2.81

3149-TW G-TECH Optoelectronics TWD 89.50 2-EW 718 na na na 17.5 na 17.6 na na # na na 13,419 6.81

034220-KRXLG Display KRW 22900.00 1-OW 7,172 0.4 0.4 0.4 13.5 6.3 12.5 17.40% 7.84% # 30,753,000 3,663.14 29,003,646 2,370.56

3034-TW Novatek Microelectronics TWD 88.00 1-OW 1,806 0.9 0.9 0.9 8.2 7.4 7.7 30.99% 9.93% # 50,500 11.97 41,831 8.44

6176-TW Radiant Opto-Electronics TWD 132.00 2-EW 1,970 0.7 0.7 0.7 10.5 10.1 9.3 29.49% 6.86% # 87,766 13.13 92,668 14.42

056190-KRXSFA Engineering Corp. KRW 56800.00 1-OW 879 na na na na na na na na # na na 1,079,381 6,290.33

3673-TW TPK Holding TWD 365.00 2-EW 2,924 0.7 0.7 1.0 7.5 7.2 11.2 19.32% -1.80% # 167,993 51.02 179,445 49.91

2384-TW Wintek TWD 18.75 3-UW 1,052 0.5 0.4 0.6 19.5 10.1 13.3 35.75% 5.11% # 132,752 1.85 107,482 1.16

Consensus FY2 Ests.

Jamie Yeh, SC Bae & Sunwoo Kim


Asia Ex-Japan Data Networking & Wireline Equipment (1-Positive)

Price Market


552-HK China Communications Services HKD 3.96 3-UW 3,533 0.2 0.2 0.3 9.4 8.3 9.8 17.00% 16.00% # 72,620 0.48 71,006 0.41

2342-HK Comba Telecom Systems Holdings HKD 4.16 1-OW 818 0.9 0.8 1.3 7.1 5.9 8.6 16.00% 15.00% # 8,477 0.70 8,636 0.65

763-HK ZTE HKD 17.96 2-EW 7,958 0.6 0.5 0.9 20.0 13.9 18.2 22.27% 19.26% # 125,777 1.29 124,550 1.28

Sales Growth (%) FY2 Ests. Consensus FY2 Ests.

Jones Ku

EV/Sales, x Price/Earnings, x



17 May 2012 114

EQUITY VALUATION TABLE – ASIA EX-JAPAN TECHNOLOGY

Asia Ex-Japan IT Hardware (2-Neutral)

Price Market


2353-TAI Acer TWD 32.20 1-OW 2,880 0.1 0.1 0.2 12.0 7.0 9.5 15.71% 12.73% # 620,000 4.60 581,335 3.02

2357-TAI ASUSTeK Computer TWD 313.00 1-OW 8,022 0.5 0.4 0.3 12.5 11.1 8.3 4.89% 11.69% # 450,000 28.20 484,063 30.25

2392-TAI Cheng Uei Precision Industry TWD 57.90 1-OW 940 0.3 0.3 0.4 7.6 6.9 7.2 49.10% 32.18% # 160,812 8.45 133,296 6.63

2385-TAI Chicony Electronics TWD 56.70 2-EW 1,177 0.6 0.6 0.6 9.5 9.0 9.2 7.81% 5.57% # 68,967 6.28 71,449 5.93

2324-TAI Compal Electronics TWD 33.75 2-EW 4,999 0.1 0.1 0.1 7.9 7.4 7.4 39.95% 7.22% # 1,040,000 4.55 889,168 3.93

8163-TAI Darfon Electronics TWD 19.65 1-OW 213 0.3 0.2 0.3 23.7 12.8 16.1 7.84% 13.26% # 33,439 1.54 33,439 1.54

861-HKG Digital China Holdings HKD 14.30 1-OW 2,012 0.2 0.2 0.2 12.0 9.8 11.8 24.99% 16.90% # 83,000 1.46 80,636 1.38

3211-TAI Dynapack International Technology TWD 159.50 2-EW 824 0.8 0.7 0.7 15.5 16.3 12.2 9.70% 5.51% # 27,214 9.79 34,865 12.84

2448-TW EPISTAR TWD 71.00 1-OW 2,076 3.2 2.7 2.5 87.7 24.7 40.1 -15.35% 16.89% # 21,732 2.88 21,518 2.75

2393-TW Everlight Electronics TWD 59.20 3-UW 845 1.9 1.6 1.8 19.8 18.0 16.0 -7.96% 14.48% # 19,643 3.28 20,484 3.89

2354-TW Foxconn Technology TWD 102.50 2-EW 4,092 0.7 0.6 0.8 10.8 9.0 11.7 14.83% 30.83% # 197,554 11.40 155,608 10.10

2317-TAI Hon Hai Precision Industry TWD 87.70 1-OW 31,916 0.2 0.2 0.3 8.7 6.9 8.8 17.30% 16.05% # 4,700,000 12.73 4,621,135 10.74

2356-TAI Inventec TWD 10.30 3-UW 1,215 0.1 0.1 0.1 7.3 7.2 9.1 12.62% 8.64% # 465,000 1.43 465,000 1.43

3336-HKG Ju Teng International Holdings HKD 1.64 3-UW 236 0.7 0.7 0.6 8.1 8.1 7.5 -10.79% 0.00% # 7,346 0.20 8,260 0.31

992-HKG Lenovo Group HKD 7.14 1-OW 9,504 0.2 0.2 2.0 162.3 121.0 117.4 34.66% 16.93% # 34,000 0.06 34,375 0.06

4938-TW Pegatron TWD 42.60 1-OW 3,270 0.2 0.2 0.2 11.3 7.1 9.1 8.34% 15.38% # 750,000 6.02 845,558 4.42

2382-TAI Quanta Computer TWD 80.00 1-OW 10,440 0.3 0.2 0.2 10.9 8.7 10.4 3.63% 19.13% # 1,370,000 9.24 1,322,758 7.69

006400-KRXSamsung SDI Co. Ltd. KRW 167000.00 1-OW 6,334 1.2 1.2 1.1 12.9 9.8 10.8 9.50% 0.86% # 6,012,000 17,116.80 5,995,363 11,851.63

3376-TW Shin Zu Shing Co. TWD 80.40 2-EW 434 1.1 1.1 0.9 16.6 16.6 13.9 20.38% 4.07% # 9,775 4.85 10,175 5.75

6121-TAI Simplo Technology TWD 217.50 1-OW 2,075 0.9 0.8 0.8 11.5 11.0 10.1 27.48% 15.44% # 70,805 19.80 73,934 19.24

751-HKG Skyworth Digital Holdings HKD 3.05 1-OW 1,041 0.4 0.3 0.4 6.3 4.8 7.5 18.12% 14.78% # 33,000 0.63 30,147 0.56

2387-TAI Sunrex Technology TWD 16.60 3-UW 206 0.4 0.4 0.5 8.3 8.0 9.5 6.72% 6.97% # 15,307 2.08 15,307 2.08

2347-TAI Synnex Technology International TWD 70.80 2-EW 3,800 0.4 0.3 0.3 14.0 12.3 13.2 9.60% 11.76% # 380,000 5.75 391,787 5.54

903-HKG TPV Technology HKD 1.72 2-EW 520 0.1 0.0 0.5 34.4 28.7 44.2 11.41% 7.32% # 13,200 0.06 13,573 0.06

3231-TAI Wistron TWD 42.45 2-EW 3,003 0.1 0.1 0.1 8.5 8.1 7.7 10.88% 8.22% # 790,000 5.25 813,322 5.77


Kirk Yang

Asia Ex-Japan Wireless Equipment & Products (1-Positive)

Price Market


2018-HK AAC Technologies Holdings HKD 23.95 1-OW 3,788 4.2 3.3 4.4 18.8 14.6 15.5 37.99% 27.01% # 7,115 1.64 6,863 1.53

285-HK BYD Electronic HKD 2.12 2-EW 615 0.1 0.1 0.2 6.4 5.4 6.5 10.00% 15.00% # 20,073 0.39 19,264 0.32

2474-TW Catcher Technology TWD 193.00 1-OW 4,933 2.9 2.5 3.0 11.4 10.7 10.9 24.43% 14.74% # 51,273 18.03 52,555 19.26

8078-TW Compal Communications TWD 40.95 3-UW 843 0.3 0.3 0.3 8.8 9.4 10.0 315.94% 11.00% # 84,608 4.34 71,270 3.78

2038-HK Foxconn International Holdings HKD 3.45 1-OW 3,249 0.3 0.2 4.3 na 345.0 287.5 -1.49% 26.07% # 7,892 0.01 7,926 0.02

2498-TW HTC TWD 449.00 2-EW 12,707 0.7 0.6 1.0 9.3 8.3 9.8 -3.37% 17.33% # 525,924 54.05 523,718 62.03

3008-TW LARGAN Precision TWD 490.00 1-OW 2,238 3.4 2.7 4.2 14.7 10.9 13.5 3.75% 25.37% # 20,791 44.86 19,266 41.25

066570-KRXLG Electronics Inc. KRW 74500.00 2-EW 10,622 0.3 0.3 0.3 12.4 9.4 21.1 -3.39% 10.38% # 57,859,000 7,910.05 58,780,652 8,126.49

2301-TW Lite-On Technology TWD 36.30 1-OW 2,783 0.3 0.3 0.5 9.8 8.4 8.1 8.96% 7.48% # 269,500 4.30 166,733 3.70

3311-TW Silitech Technology TWD 69.20 1-OW 426 0.7 0.7 0.7 9.7 8.9 9.5 -3.59% 8.77% # 14,294 7.80 13,506 7.03

3044-TW Tripod Technology TWD 91.70 1-OW 1,641 1.0 0.9 0.9 10.8 9.5 9.1 4.45% 15.19% # 49,206 9.66 47,587 9.28

3037-TW UniMicron Technology TWD 30.70 3-UW 1,608 0.8 0.8 1.0 11.1 8.3 9.1 5.62% 9.73% # 76,663 3.68 76,803 3.72

6285-TW Wistron NeWeb TWD 56.10 1-OW 552 0.4 0.4 0.5 9.4 8.1 9.3 14.54% 6.18% # 41,329 6.92 38,912 6.56

3622-TW Young Fast Optoelectronics TWD 63.00 3-UW 322 0.4 0.3 0.7 45.7 15.3 8.8 -19.43% 22.42% # 16,291 4.13 16,562 2.71


Dale Gai



17 May 2012 115

EQUITY PEFORMANCE TABLE – U.S. TECHNOLOGY U.S. IT Hardware (2-Neutral)

Price Market

Ticker Company Name Currency 5/11/2012 Cap (USD M) High Low High Low 1M 3M 6M 1Y 5Y YTD QTD

AAPL Apple USD 566.71 533,472 644.00 310.50 -12.0 82.5 -9.2 15.6 48.1 63.3 431.5 40.9 -4.8

DELL Dell USD 15.42 27,400 18.36 13.29 -16.0 16.0 -4.3 -12.4 3.9 -5.2 -38.9 6.3 -6.3

EMC EMC USD 26.36 54,886 30.00 19.84 -12.1 32.9 -7.5 -0.2 8.6 -4.7 71.9 21.4 -12.5

HPQ Hewlett-Packard USD 23.15 46,487 41.74 21.50 -44.5 7.7 1.0 -18.1 -12.1 -43.4 -47.4 -8.7 -1.3

IBM International Business Machines USD 201.17 231,389 210.69 157.13 -4.5 28.0 -0.9 4.3 9.4 17.7 91.6 9.1 -3.9

IM Ingram Micro USD 18.66 2,846 19.80 15.45 -5.8 20.8 2.6 -3.4 2.2 -0.7 -5.0 2.9 0.9

LXK Lexmark International USD 28.31 2,024 38.34 25.87 -26.2 9.4 -11.4 -23.8 -14.3 -9.4 -44.7 -14.0 -14.4

NTAP NetApp USD 36.08 12,959 56.49 33.00 -36.1 9.3 -15.0 -10.0 -14.8 -34.1 -6.6 -1.6 -20.3

STX Seagate Technology USD 31.14 13,382 32.55 9.05 -4.3 244.1 22.7 20.1 79.7 77.3 45.0 91.9 16.8

DDD 3D Systems USD 27.45 1,414 31.56 12.78 -13.0 114.8 23.3 36.5 69.5 38.7 162.9 92.1 17.5

TECD Tech Data USD 50.88 2,111 59.29 38.21 -14.2 33.2 -1.8 -3.4 7.8 -3.9 41.3 3.5 -5.8

WDC Western Digital USD 40.30 9,571 44.44 22.64 -9.3 78.0 6.5 5.6 58.0 4.7 125.1 31.6 -1.6

XRX Xerox USD 7.63 10,297 10.83 6.55 -29.5 16.5 -1.2 -3.5 -6.0 -27.0 -56.8 -4.0 -5.4

Ben Reitzes

52 Week Current vs. 52 Week (%) Historical Price Performance (%)

U.S. Software (1-Positive)

Price Market


ADSK Autodesk Inc. USD 36.25 8,360 46.15 22.99 -21.5 57.7 -8.3 -3.6 10.6 -19.9 -14.5 19.3 -14.5

ARBA Ariba Inc. USD 39.17 3,809 40.45 21.90 -3.2 78.9 16.3 28.6 19.1 8.1 332.7 35.4 16.3

CRM salesforce.com inc. USD 137.78 18,560 164.75 94.09 -16.4 46.4 -11.9 5.5 6.0 0.1 218.0 33.5 -12.3

CSOD Cornerstone OnDemand Inc. USD 18.82 931 23.50 11.50 -19.9 63.7 -8.4 3.5 27.5 -12.1 NA 2.7 -14.2

CTXS Citrix Systems Inc. USD 79.46 14,588 88.49 50.21 -10.2 58.3 6.3 9.6 10.2 -6.6 151.6 29.0 -0.7

ELLI ELLIE MAE Inc. USD 15.40 333 15.80 3.46 -2.5 345.1 43.1 136.4 177.2 125.1 NA 173.3 38.4

INFA Informatica Corp. USD 45.26 4,908 62.42 34.15 -27.5 32.5 -10.0 -2.1 0.8 -15.3 206.9 22.9 -14.2

INTU Intuit Inc. USD 55.83 16,347 62.33 39.87 -10.4 40.0 -5.4 -2.2 5.0 1.0 98.2 5.4 -7.9

LOGM LogMeIn Inc. USD 33.20 798 44.60 26.74 -25.6 24.2 -4.5 -17.8 -18.9 -23.9 NA -16.0 -8.0

MSFT Microsoft Corp. USD 31.16 258,243 32.95 23.65 -5.4 31.8 0.9 0.8 17.0 19.8 0.5 18.4 -4.7

N NetSuite Inc. USD 42.62 2,946 51.78 25.32 -17.7 68.3 -10.8 -7.6 2.5 19.2 NA 3.5 -16.5

ORCL Oracle Corp. USD 27.00 134,427 35.92 24.72 -24.8 9.2 -4.7 -5.2 -14.8 -24.1 46.1 5.3 -7.3

PMTC Parametric Technology Corp. USD 20.24 2,393 28.95 14.25 -30.1 42.0 -0.6 -25.8 -3.5 -13.4 11.5 10.0 -28.1

QLIK Qlik Technologies Inc. USD 24.80 2,084 35.62 19.59 -30.4 26.6 -18.6 -17.9 -17.3 -19.7 NA 0.9 -23.7

SAP SAP AG ADS USD 62.85 73,562 72.52 47.39 -13.3 32.6 -4.3 -1.7 3.5 -4.0 33.4 16.7 -11.5

SYMC Symantec Corp. USD 15.45 11,328 20.50 14.94 -24.6 3.4 -11.6 -12.7 -7.0 -20.6 -20.3 -0.8 -17.0

TDC Teradata Corp. USD 71.14 12,020 79.89 43.19 -11.0 64.7 7.7 14.8 28.7 30.2 NA 46.9 4.5

TIBX TIBCO Software Inc. USD 30.07 4,988 34.67 18.43 -13.3 63.2 -5.3 8.4 6.4 -0.9 231.6 26.5 -0.9

TNGO Tangoe Inc. USD 22.72 803 23.05 8.01 -1.4 183.6 26.7 43.9 57.9 NA NA 40.3 14.8

TRAK DealerTrack Holdings Inc. USD 31.36 1,343 31.98 14.01 -1.9 123.8 10.7 9.9 23.8 24.1 -5.1 16.1 4.6

VMW VMware Inc. USD 102.32 43,229 118.79 74.69 -13.9 37.0 -8.3 7.1 4.1 8.7 NA 21.6 -10.0

Current vs. 52 Week (%)52 Week

Raimo Lenschow

Historical Price Performance (%)

U.S. Display & Lighting (2-Neutral)

Price Market


AIXG Aixtron USD 16.89 1,712 40.81 11.18 -58.6 51.1 3.2 10.4 19.3 -58.2 120.8 33.9 -1.9

GLW Corning USD 13.31 20,188 21.14 11.51 -37.0 15.6 -0.5 -2.1 -8.6 -36.4 -42.8 2.6 -5.4

CREE Cree USD 32.07 3,687 44.83 20.25 -28.5 58.4 7.8 12.0 12.5 -19.1 65.1 44.0 0.3

IPGP IPG Photonics USD 46.76 2,362 78.59 33.33 -40.5 40.3 0.1 -16.4 -0.9 -33.5 140.1 36.8 -11.0

ORBK Orbotech USD 10.15 443 14.30 8.95 -29.0 13.4 -6.7 -7.4 -0.2 -17.5 -52.2 2.5 -11.7

LEDS SemiLEDS USD 3.46 94 11.45 2.60 -69.8 33.1 -2.3 -1.4 -7.5 -69.1 NA 0.6 -13.8

VECO Veeco Instruments USD 36.97 1,433 57.67 20.35 -35.9 81.7 39.3 30.3 34.8 -28.6 107.4 77.7 29.2

CJ Muse and Olga Levinzon




17 May 2012 116

EQUITY PEFORMANCE TABLE – U.S. TECHNOLOGY

U.S. Internet (1-Positive)

Price Market


AMZN Amazon.com Inc. USD 227.68 102,130 246.71 166.97 -7.7 36.4 21.2 22.2 7.5 11.2 272.1 31.0 11.9

AOL AOL Inc. USD 26.06 2,457 27.47 10.06 -5.1 159.0 5.9 43.2 74.5 37.3 NA 74.0 38.5

DMD Demand Media Inc. USD 8.46 721 16.82 5.24 -49.7 61.5 33.3 40.2 23.9 -46.7 NA 30.1 19.3

EBAY eBay Inc. USD 40.74 53,212 41.96 26.86 -2.9 51.7 16.2 24.8 34.0 21.5 21.7 35.9 11.7

EXPE Expedia Inc. USD 41.11 5,199 43.92 22.43 -6.4 83.3 29.0 22.0 58.4 71.6 78.6 41.0 22.3

GOOG Google Inc. Cl A USD 605.23 200,057 670.25 473.02 -9.7 28.0 -2.1 1.3 3.1 13.1 33.0 -5.0 -4.3

GRPN Groupon Inc. USD 9.90 6,295 31.14 9.82 -68.2 0.8 -27.2 -53.1 -59.6 NA NA -52.2 -46.3

AWAY HomeAway Inc. USD 25.35 2,067 45.75 19.77 -44.6 28.2 6.7 -4.3 -25.3 NA NA 8.3 -0.6

IACI IAC/InterActiveCorp. USD 48.52 4,232 52.78 33.89 -8.1 43.2 2.4 8.2 18.8 35.8 60.9 14.4 -0.7

LNKD LinkedIn Corporation USD 107.23 11,466 122.70 55.98 -12.6 91.6 13.3 23.4 44.2 NA NA 76.2 8.8

NFLX Netflix Inc. USD 77.38 4,020 304.79 62.37 -74.6 24.1 -28.9 -41.6 -14.9 -69.5 230.5 4.5 -37.0

OPEN OpenTable Inc. USD 37.27 854 97.83 31.54 -61.9 18.2 -3.8 -14.7 -0.9 -60.8 NA -3.3 -6.5

PCLN priceline.com Inc. USD 675.39 33,915 774.96 411.26 -12.8 64.2 -8.1 25.0 28.9 28.9 1105.1 45.6 -5.1

QNST QuinStreet Inc. USD 8.03 363 17.97 7.91 -55.3 1.5 -24.2 -23.7 -6.5 -54.7 NA -14.0 -23.3

RLOC ReachLocal Inc. USD 9.19 264 25.20 6.05 -63.5 51.9 42.4 9.3 -0.1 -62.3 NA 50.5 30.4

SFLY Shutterfly Inc. USD 26.60 967 64.45 21.34 -58.7 24.6 1.0 0.4 -26.4 -53.5 47.7 19.2 -13.4

TRIP TripAdvisor Inc. USD 41.73 5,444 44.46 23.99 -6.1 73.9 18.0 35.8 NA NA NA 61.8 14.4

VPRT Vistaprint N.V. USD 37.64 1,418 54.27 23.89 -30.6 57.6 6.3 -2.3 14.4 -27.9 3.2 25.2 -0.9

WBMD WebMD Health Corp. USD 21.82 1,244 52.12 21.54 -58.1 1.3 -3.9 -19.3 -32.5 -57.0 -58.5 -41.8 -14.5

YHOO Yahoo! Inc. USD 15.19 18,817 18.70 11.09 -18.8 37.0 3.0 -4.3 -3.2 -16.8 -48.0 -4.3 1.4

ZNGA Zynga Inc USD 7.48 5,761 15.91 7.58 -53.0 -1.3 -32.1 -41.3 NA NA NA -16.9 -40.5

Anthony DiClemente


U.S. IT Consulting & Computer Services (2-Neutral)

Price Market


ACTG Acacia Research Corp.-Acacia Technologies USD 38.27 1,904 47.24 28.32 -19.0 35.1 -1.6 -5.5 14.8 -4.2 171.3 4.9 -8.2

ACN Accenture PLC USD 58.61 40,596 65.89 47.40 -11.0 23.6 -7.0 3.1 3.0 3.1 53.1 10.3 -9.0

ADS Alliance Data Systems Corp. USD 127.20 6,335 130.66 80.38 -2.6 58.2 2.2 6.7 25.2 37.2 100.2 21.1 -0.1

CIS Camelot Information Systems Inc. ADS USD 2.42 111 19.44 1.75 -87.6 38.3 -25.7 -6.0 -3.1 -86.9 NA -12.6 -34.3

CTSH Cognizant Technology Solutions Corp. USD 61.29 18,585 78.75 53.54 -22.2 14.5 -18.4 -12.9 -9.3 -22.2 52.5 -5.1 -20.7

CSC Computer Sciences Corp. USD 27.11 4,187 45.14 22.80 -39.9 18.9 -4.2 -16.8 7.0 -40.0 -50.8 13.9 -9.8

CLGX CoreLogic, Inc. USD 17.49 1,899 19.20 7.64 -8.9 128.9 17.9 30.3 32.1 -3.7 -36.4 37.5 8.9

EPAM EPAM Systems Inc USD 17.36 745 23.61 13.25 -26.5 31.0 -19.2 26.2 NA NA NA NA -14.1

FISV Fiserv Inc. USD 66.56 9,072 71.74 48.75 -7.2 36.5 -1.7 3.5 16.2 6.5 26.8 13.2 -4.2

FLT FleetCor Technologies Inc. USD 39.68 3,281 41.30 24.28 -3.9 63.4 4.4 8.3 39.0 17.0 NA 32.3 2.0

GPN Global Payments Inc. USD 43.39 3,407 53.93 38.26 -19.5 13.4 -2.6 -15.7 -4.1 -18.4 12.1 -8.5 -8.7

LPS Lender Processing Services Inc. USD 24.69 2,099 29.55 12.91 -16.4 91.2 1.5 28.3 26.2 -11.9 NA 62.6 -5.8

MA MasterCard Inc. Cl A USD 422.40 53,461 466.98 258.34 -9.5 63.5 -0.4 6.8 17.5 50.5 204.7 13.5 0.6

RPXC RPX Corp. USD 14.74 761 31.41 11.02 -53.1 33.8 -5.8 -20.5 8.6 -44.7 NA 20.2 -10.4

TSS Total System Services Inc. USD 22.89 4,317 23.88 15.80 -4.1 44.9 1.9 6.6 16.0 18.8 -26.7 16.7 -1.0

PAY VeriFone Systems Inc. USD 44.27 4,743 55.89 30.25 -20.8 46.3 -13.6 -2.7 9.4 -14.3 18.5 25.1 -14.3

V Visa Inc. USD 117.92 96,188 125.35 73.11 -5.9 61.3 1.2 3.7 27.0 47.1 NA 16.4 0.1

WU Western Union Co. USD 17.12 10,592 21.20 14.55 -19.2 17.7 -0.2 -1.7 3.1 -17.8 -18.3 -5.4 -1.8


Darrin Peller



17 May 2012 117


U.S. Wireless Equipment (2-Neutral)

Price Market


CMVT Comverse Technology USD 6.49 1,419 7.99 5.90 -18.8 10.0 3.7 1.6 -4.4 -15.4 -71.6 -5.5 -5.7

ERIC Ericsson USD 9.06 29,624 15.44 8.58 -41.4 5.5 -5.4 -5.5 -9.0 -41.2 -50.9 -10.7 -12.2

IDCC InterDigital USD 26.76 1,190 82.50 25.50 -67.6 4.9 -20.1 -27.2 -39.0 -41.4 -13.8 -38.4 -23.0

MMI Motorola Mobility Holdings USD 39.23 11,952 39.81 20.77 -1.4 88.9 -0.1 -0.3 0.6 54.1 NA 1.4 0.3

MSI Motorola Solutions USD 49.83 14,469 52.78 38.36 -5.6 29.9 2.4 4.5 10.0 4.9 -32.6 7.0 -2.5

NOK Nokia Corp. USD 3.20 12,134 8.80 3.12 -63.6 2.6 -35.6 -34.7 -49.8 -62.9 -86.7 -32.8 -41.0

QCOM QUALCOMM USD 61.86 107,108 68.87 45.98 -10.2 34.5 -5.6 1.2 13.2 9.8 42.3 14.2 -8.2

RIMM Research In Motion USD 11.80 6,185 45.78 11.67 -74.2 1.1 -8.7 -23.6 -32.9 -73.9 -76.7 -18.6 -19.7

Current vs. 52 Week (%)52 Week

Jeff Kvaal


U.S. Data Networking & Wireline Equipment (2-Neutral)

Price Market


APKT Acme Packet USD 24.41 1,714 81.20 24.86 -69.9 -1.8 -1.6 -22.8 -32.4 -68.8 114.4 -18.7 -8.7

ADTN Adtran USD 30.24 1,937 43.58 25.46 -30.6 18.8 6.5 -18.3 -6.2 -29.0 18.3 0.5 -2.8

ARRS Arris Group USD 12.51 1,464 13.08 9.60 -4.4 30.3 16.4 6.2 18.7 12.5 -16.0 17.3 12.3

ARUN Aruba Networks USD 16.55 1,835 33.73 16.20 -50.9 2.2 -19.5 -29.1 -27.4 -48.9 16.8 -9.7 -25.0

BSFT Broadsoft USD 29.80 807 45.32 21.26 -34.2 40.2 -21.4 -9.6 -21.9 -28.2 NA -3.0 -23.4

CIEN Ciena USD 13.10 1,190 28.14 9.89 -53.4 32.5 -20.7 -25.7 -8.1 -56.8 -58.8 -0.3 -25.5

CSCO Cisco Systems USD 16.51 90,538 21.30 13.30 -22.5 24.1 -14.0 -15.5 -9.7 -5.5 -36.1 -7.0 -20.5

FFIV F5 Networks USD 125.91 9,851 139.46 69.01 -9.7 82.4 -3.3 0.1 16.0 18.9 222.7 16.9 -8.1

JNPR Juniper Networks USD 17.95 9,562 40.37 16.67 -55.5 7.7 -13.5 -20.5 -24.0 -52.2 -22.2 -11.5 -21.0

NTGR NETGEAR USD 35.19 1,278 45.31 23.45 -22.3 50.1 -1.6 -6.5 -3.1 -15.2 3.3 4.0 -8.6

PLCM Polycom USD 12.36 2,141 34.30 11.72 -64.0 5.5 -13.7 -42.3 -34.9 -59.2 -26.6 -26.3 -37.0

RVBD Riverbed Technology USD 16.99 2,665 41.83 16.75 -59.4 1.4 -34.0 -39.2 -40.4 -52.7 -5.1 -28.5 -40.1

SHOR ShoreTel USD 4.16 200 12.00 4.09 -65.3 1.7 -14.8 -27.5 -36.3 -65.1 NA -34.8 -26.8

TLAB Tellabs USD 3.73 1,388 4.82 3.63 -22.6 2.8 1.3 -1.0 -13.3 -20.2 -64.5 -6.2 -6.4

Jeff Kvaal


U.S. Semiconductor Capital Equipment (2-Neutral)

Price Market


AEIS Advanced Energy Industries USD 13.37 531 15.50 7.56 -13.7 76.9 10.9 22.1 46.8 -14.0 -44.2 23.4 0.9

AMAT Applied Materials USD 10.98 14,280 15.17 9.70 -27.6 13.2 -5.9 -14.6 -9.7 -26.6 -42.3 3.3 -11.1

BRKS Brooks Automation USD 10.36 707 12.65 7.40 -18.1 40.0 -8.1 -11.5 6.6 -14.1 -36.5 3.9 -13.5

CYMI Cymer USD 51.61 1,590 53.00 34.57 -2.6 49.3 10.0 3.8 18.3 2.8 25.7 3.3 2.8

FORM FormFactor USD 6.26 311 10.64 4.68 -41.2 33.8 19.2 18.6 0.2 -40.0 -85.1 23.7 12.2

IMI Intermolecular Inc. USD 7.00 296 10.01 5.01 -30.1 39.7 8.1 -21.0 NA NA NA -18.8 12.2

KLAC KLA-Tencor USD 50.03 8,366 55.43 33.20 -9.7 50.7 -4.0 1.2 7.9 11.1 -9.4 3.6 -8.1

LRCX Lam Research USD 41.42 4,865 48.99 34.81 -15.5 19.0 -2.3 -4.4 -4.4 -16.2 -23.6 9.3 -9.3

LTXC LTX-Credence USD 6.65 324 9.52 4.81 -30.1 38.3 5.9 -8.8 6.4 -26.7 -64.1 23.6 -8.1

MKSI MKS Instruments USD 25.86 1,355 34.99 20.01 -26.1 29.2 -4.9 -17.2 -3.0 -5.2 -1.8 -7.2 -12.6

NVLS Novellus Systems USD 46.44 3,277 50.54 25.95 -8.1 79.0 -1.8 -3.6 32.0 27.1 41.0 10.0 -9.0

TER Teradyne USD 15.71 2,914 18.01 10.37 -12.8 51.5 -0.3 -5.3 12.9 -6.1 -7.0 14.6 -7.5

CJ Muse




17 May 2012 118


U.S. Semiconductors (1-Positive)

Price Market


AMD Advanced Micro Devices Inc. USD 6.78 4,755 9.07 4.31 -25.2 57.3 -10.0 -3.8 19.8 -24.2 -51.7 25.6 -15.5

ALTR Altera Corp. USD 33.73 10,802 48.91 30.39 -31.0 11.0 -9.2 -16.5 -8.5 -30.5 44.1 -9.8 -15.9

ADI Analog Devices Inc. USD 37.33 11,059 43.28 29.23 -13.7 27.7 -1.3 -5.9 3.5 -10.2 -6.5 3.8 -8.1

ATML Atmel Corp. USD 7.68 3,386 15.40 7.12 -50.1 7.9 -14.1 -22.0 -20.1 -50.1 33.6 -5.8 -22.7

AVGO Avago Technologies Ltd. USD 30.94 7,532 39.45 26.42 -21.6 17.1 -16.1 -10.5 -6.7 -13.8 NA 7.0 -20.8

BRCM Broadcom Corp. USD 33.79 18,387 39.66 27.59 -14.8 22.5 -7.1 -9.8 -2.2 -1.5 2.0 13.7 -15.1

CAVM Cavium Inc. USD 24.19 1,216 47.29 22.84 -48.8 5.9 -14.5 -26.1 -29.9 -47.5 41.0 -14.0 -20.9

CY Cypress Semiconductor Corp. USD 13.69 2,046 23.95 13.10 -42.8 4.5 -4.9 -25.6 -27.2 -38.3 297.9 -20.5 -14.1

ENTR Entropic Communications Inc. USD 3.93 342 9.44 3.36 -58.4 17.0 -22.2 -45.2 -21.3 -58.5 NA -23.9 -33.3

FSL Freescale Semiconductor Ltd USD 11.20 2,738 20.97 9.43 -46.6 18.8 -18.4 -33.2 -10.2 NA NA -12.3 -27.9

IDTI Integrated Device Technology Inc. USD 5.86 833 8.74 4.70 -33.0 24.7 -11.6 -11.8 -0.8 -30.9 -60.7 7.9 -17.6

INTC Intel Corp. USD 27.63 137,044 29.27 19.16 -5.6 44.2 -0.8 2.0 13.2 18.3 22.6 12.3 -3.1

LLTC Linear Technology Corp. USD 30.65 7,081 35.30 25.41 -13.2 20.6 -2.4 -8.4 -3.0 -11.8 -18.5 2.4 -8.7

LSI LSI Corp. USD 7.74 4,383 9.20 4.75 -15.9 62.9 -3.9 -7.4 33.2 1.0 -8.2 29.6 -11.2

MX MagnaChip Semiconductor Corp. USD 11.16 420 15.25 5.10 -26.8 118.8 0.9 6.8 54.1 -24.2 NA 52.4 -5.0

MRVL Marvell Technology Group Ltd. USD 13.81 7,873 16.86 11.23 -18.1 23.0 -8.1 -15.5 -6.4 -9.9 -21.8 -2.1 -13.8

MXIM Maxim Integrated Products Inc. USD 26.85 7,849 30.00 20.62 -10.5 30.2 -1.2 -1.2 3.0 -5.2 -15.2 3.1 -6.1

MCHP Microchip Technology Inc. USD 31.90 6,132 41.50 29.30 -23.1 8.9 -9.0 -13.0 -10.7 -22.7 -21.0 -12.8 -14.2

MTSI MA-Com Technology Solutions Holdings Inc USD 15.75 735 22.43 14.80 -29.8 6.4 -21.6 NA NA NA NA NA -21.7

MU Micron Technology Inc. USD 6.36 6,225 10.93 3.97 -41.8 60.2 -12.0 -20.4 21.4 -40.8 -48.1 0.0 -22.3

NVDA NVIDIA Corp. USD 13.21 7,672 20.52 11.47 -35.6 15.2 -12.3 -21.9 -14.2 -37.2 -43.2 -10.4 -19.3

NXPI NXP Semiconductors N.V. USD 24.09 5,924 31.14 13.06 -22.6 84.4 -0.8 8.8 50.9 -21.9 NA 53.1 -11.6

RFMD RF Micro Devices Inc. USD 4.01 1,097 7.89 3.86 -49.2 3.9 -8.7 -22.3 -42.5 -34.9 -33.9 -26.5 -20.3

SLAB Silicon Laboratories Inc. USD 34.29 1,465 48.50 30.36 -29.3 12.9 -15.8 -23.2 -18.6 -20.6 2.2 -21.3 -20.5

SWKS Skyworks Solutions Inc. USD 25.39 4,787 30.31 13.72 -16.2 85.1 -2.0 7.6 32.3 -15.7 262.6 55.6 -8.7

CODE Spansion Inc. Cl A USD 10.96 654 21.02 7.21 -47.9 52.0 3.0 -16.4 11.8 -45.4 NA 32.0 -10.3

TXN Texas Instruments Incorporated USD 30.74 35,223 35.63 24.34 -13.7 26.3 -2.9 -7.7 0.5 -13.2 -15.9 5.7 -8.4

TQNT TriQuint Semiconductor Inc. USD 5.05 830 14.13 3.97 -64.3 27.2 -14.7 -19.5 -2.0 -64.1 -3.7 2.5 -27.6

VLTR Volterra Semiconductor Corp. USD 29.93 782 34.87 18.09 -14.2 65.5 -4.4 -3.4 27.5 15.5 83.8 17.6 -12.5

XLNX Xilinx Inc. USD 33.24 8,727 37.74 26.55 -11.9 25.2 -4.4 -8.2 4.2 -7.0 12.4 4.0 -8.6

CJ Muse and Blayne Curtis


U.S. Clean Technology (2-Neutral)

Price Market


AONE A123 Systems Inc. USD 1.03 164 6.25 0.82 -83.5 25.6 25.8 -44.7 -62.3 -81.7 NA -30.4 0.0

AMRC Ameresco Inc. Cl A USD 11.53 509 15.82 8.60 -27.1 34.1 -11.2 -17.7 11.0 -25.8 NA -16.5 -15.4

ELT Elster Group SE ADS USD 14.33 1,640 17.74 11.52 -19.2 24.4 -4.3 1.3 3.9 -10.9 NA 11.9 -8.1

FSLR First Solar Inc. USD 16.14 1,395 142.22 16.05 -88.7 0.6 -24.7 -63.4 -64.3 -87.5 -76.6 -52.3 -35.8

GTAT GT Advanced Technologies Inc. USD 5.52 672 17.50 5.53 -68.5 -0.2 -23.8 -40.8 -28.1 -50.6 NA -22.5 -32.2

ITRI Itron Inc. USD 40.20 1,610 55.59 26.90 -27.7 49.4 -4.2 -2.8 12.2 -25.2 -39.1 12.6 -11.3

PWER Power-One Inc. USD 4.01 451 9.15 3.56 -56.2 12.6 -8.9 -30.8 -28.8 -58.0 2.5 -5.4 -18.7

TSLA Tesla Motors Inc. USD 32.25 3,466 39.95 21.50 -19.3 50.0 1.5 6.0 5.2 16.3 NA 15.4 -11.5

TSL Trina Solar Ltd. ADS USD 7.31 577 27.00 5.28 -72.9 38.4 13.8 -28.7 3.1 -73.0 -73.9 8.4 1.5

YGE Yingli Green Energy Holding Co. Ltd. ADS USD 3.53 546 11.52 2.75 -69.4 28.4 3.6 -35.4 -1.4 -69.6 NA -9.2 -4.7

Amir Rozwadowski




17 May 2012 119

EQUITY PEFORMANCE TABLE – EUROPE TECHNOLOGY European Technology Hardware (2-Neutral)

Price Market


AIXA-DE Aixtron SE EUR 13.22 1,721 28.52 8.34 -53.6 58.5 2.5 13.3 26.8 -53.4 125.5 33.7 -1.9

ALU-FR Alcatel-Lucent EUR 1.22 3,591 4.43 1.08 -72.4 13.4 -20.1 -27.3 -17.9 -72.1 -87.4 1.2 -30.2

ARM-LON ARM Holdings PLC GBP 5.07 11,286 6.48 4.42 -21.7 14.6 -12.9 -10.6 -18.7 -14.4 265.8 -14.3 -13.3

ASML-NL ASML Holding N.V. EUR 37.74 19,756 39.26 21.22 -3.9 77.9 1.0 6.6 24.0 27.2 86.5 13.5 -4.3

CSR-LON CSR PLC GBP 2.24 717 3.91 1.53 -42.8 46.2 3.7 -5.7 27.3 -43.1 -70.5 21.4 -2.0

DLG-DE Dialog Semiconductor PLC EUR 17.26 1,432 18.84 9.82 -8.4 75.8 -7.5 0.7 24.9 9.3 801.7 29.0 -13.8

ERIC.B-SE Ericsson LM Shs B SEK 63.55 29,278 96.65 58.15 -34.2 9.3 -4.2 -0.9 -5.0 -33.9 -50.4 -10.3 -11.8

IFX-DE Infineon Technologies AG EUR 6.90 9,326 8.31 4.89 -17.0 41.0 -4.8 -9.1 4.1 -17.6 -32.1 16.6 -13.9

IMG-LON Imagination Technologies Group PLC GBP 6.17 2,693 7.34 2.85 -16.0 116.3 -5.7 0.2 36.4 34.8 412.8 15.1 -6.6

KUD-CH Kudelski S.A. CHF 6.86 389 15.80 6.17 -56.6 11.2 6.0 -19.2 -37.2 -56.9 -85.2 -20.6 1.9

LOGN-SWX Logitech International S.A. CHF 9.40 1,757 11.85 5.80 -20.7 62.0 33.4 20.3 25.7 -18.3 -71.0 28.2 30.3

NOK1V-HEL Nokia Corp. EUR 2.52 11,869 6.15 2.34 -59.1 7.8 -35.5 -34.6 -47.9 -59.0 -86.6 -34.6 -41.2

PIC-GB Pace PLC GBP 0.83 422 1.20 0.44 -30.8 90.8 22.1 -2.3 41.9 -8.1 8.6 18.8 15.7

STM-PAR STMicroelectronics N.V. EUR 4.10 4,721 8.28 3.94 -50.5 4.0 -22.8 -19.5 -21.1 -49.9 -71.6 -10.3 -34.6

TCH-PAR Technicolor EUR 1.59 474 5.24 0.98 -69.7 61.9 7.3 -20.8 26.2 -67.9 -98.5 41.1 -22.3

TOM2-AMS TomTom N.V. EUR 3.56 1,004 6.26 2.40 -43.2 48.6 18.9 -10.2 11.0 -43.7 -86.2 14.4 -1.6


Andrew Gardiner

European Software & IT Services (1-Positive)

Price Market


AMS-MCE Amadeus IT EUR 15.19 8,891 15.75 11.21 -3.6 35.5 12.5 7.5 22.8 9.5 NA 22.9 5.9

ATO-PAR ATOS EUR 45.98 4,949 49.07 28.86 -6.3 59.3 11.6 10.2 36.6 7.2 -12.4 35.1 3.1

AVV-LON Aveva Group GBP 16.00 1,757 18.01 12.90 -11.2 24.0 1.3 -7.8 -0.8 -2.7 85.7 11.8 -2.4

CAP-PAR Capgemini EUR 29.38 5,772 41.66 21.98 -29.5 33.7 -5.1 0.5 5.0 -30.0 -47.8 20.1 -15.9

DSY-FR Dassault Systemes EUR 72.03 11,425 76.76 49.07 -6.2 46.8 6.2 13.4 22.1 26.8 69.7 16.3 1.6

IDR-MCE Indra Sistemas EUR 7.66 1,723 15.98 7.36 -52.0 4.1 -0.8 -22.6 -29.6 -48.3 -54.6 -17.0 -13.5

LOG-LON Logica GBP 0.74 1,924 1.46 0.57 -49.2 28.7 -14.0 -9.2 -4.2 -48.4 -60.0 19.7 -25.0

MCRO-LON Micro Focus International PLC GBP 4.69 1,215 4.82 2.30 -2.7 104.2 -1.6 3.2 29.4 17.7 65.3 17.2 -1.8

MSY-LON Misys GBP 3.47 1,883 4.30 2.12 -19.3 63.9 0.2 20.2 24.6 0.1 34.2 50.1 -1.5

SGE-LON Sage Group GBP 2.62 5,499 3.13 2.25 -16.5 16.3 -8.6 -10.9 -3.7 -10.1 4.3 -9.6 -10.1

SAP-DE SAP EUR 48.87 74,056 54.85 32.88 -10.9 48.6 -4.1 0.3 9.9 8.5 37.6 17.5 -10.8

SOW-DE Software EUR 24.13 2,744 44.50 21.54 -45.8 12.1 -4.3 -8.8 -17.1 -41.9 13.9 -14.6 -15.4

SOP-FR Sopra Group EUR 42.00 645 64.78 34.28 -35.2 22.5 -14.3 -12.4 -6.7 -27.7 -17.1 17.6 -13.8

RIA-FR Groupe Steria EUR 14.66 589 22.75 10.00 -35.6 46.6 -2.6 -5.4 13.8 -34.8 -68.1 12.2 -15.8

TEMN-CH Temenos Group CHF 16.10 1,190 30.90 11.55 -47.9 39.4 2.9 -6.5 4.6 -47.4 -42.2 3.6 -6.9

TIE1V-HEL Tieto Oyj EUR 12.52 1,187 15.65 8.39 -20.0 49.2 -8.1 -5.1 10.1 -0.4 -45.3 16.5 -11.5

WDI-DE Wirecard EUR 13.45 1,774 15.03 9.43 -10.5 42.6 -3.5 -8.4 18.1 9.3 82.7 8.3 -8.3


Gerardus Vos

Israel Technology (1-Positive)

Price Market


DOX Amdocs USD 30.09 5,262 32.39 25.41 -7.1 18.4 -2.3 -0.8 0.2 0.8 -16.4 5.6 -4.6

CRNT Ceragon Networks USD 9.22 335 13.76 7.25 -33.0 27.2 -1.2 11.2 19.3 -20.8 21.8 23.4 0.1

CEVA CEVA USD 16.95 400 35.60 16.47 -52.4 2.9 -20.4 -33.7 -41.3 -44.4 136.5 -43.0 -24.1

ESLT-IL Elbit Systems ILS 136.70 1,528 185.60 125.90 -26.3 8.6 -4.0 -6.0 -11.4 -25.6 -21.9 -12.7 -7.6

EZCH EZchip Semiconductor USD 40.46 1,028 46.79 27.70 -13.5 46.1 -7.3 6.6 29.1 14.7 150.3 39.4 -8.9

MLNX Mellanox Technologies USD 58.02 2,289 67.20 25.81 -13.7 124.8 42.7 55.9 67.3 75.9 217.4 75.9 36.6

NICE NICE-Systems USD 37.69 2,410 40.04 27.17 -5.9 38.7 -2.3 5.0 11.9 0.3 0.7 9.2 -4.3


Joseph Wolf and David Kalpan



17 May 2012 120

EQUITY PEFORMANCE TABLE – JAPAN TECHNOLOGY

Japan Consumer Electronics (2-Neutral)

Price Market


6952-TKS Casio Computer JPY 499 1,654 655 427 -23.8 16.9 -11.7 0.6 13.6 -23.7 -79.7 5.4 -14.3

6839-OSE Funai Electric JPY 1394 621 2765 1376 -49.6 1.3 -9.6 -18.3 -12.4 -46.9 -84.4 -21.4 -19.3

6632-TKS JVC Kenwood JPY 299 522 459 249 -34.9 20.1 -13.8 -9.9 -2.6 -26.6 NA 13.2 -15.6

6752-TKS Panasonic JPY 570 16,745 1032 574 -44.8 -0.7 -13.7 -11.3 -16.0 -42.1 -76.4 -11.5 -21.7

6773-TKS Pioneer JPY 344 1,482 434 287 -20.7 19.9 -6.8 -2.9 19.4 8.2 -75.6 6.6 -10.2

6753-TKS Sharp JPY 390 5,656 788 403 -50.5 -3.2 -22.5 -24.0 -41.2 -44.6 -81.1 -38.9 -30.0

6758-TKS Sony JPY 1135 15,273 2353 1203 -51.8 -5.7 -23.5 -21.0 -8.2 -47.6 -81.5 -12.2 -26.7


Yuji Fujimori

52 Week Current vs. 52 Week (%)

Japan Display & Lighting (2-Neutral)

Price Market


5201-TKS Asahi Glass JPY 578 8,487 1036 582 -44.2 -0.7 -8.6 -9.0 -2.2 -43.0 -66.2 -9.1 -13.9

5214-TKS Nippon Electric Glass JPY 551 3,546 1166 553 -52.7 -0.4 -15.4 -14.9 -15.1 -50.5 -70.7 -25.2 -18.4

5202-TKS Nippon Sheet Glass JPY 99 1,140 270 100 -63.3 -1.0 -13.7 -24.1 -28.9 -58.1 -85.2 -29.9 -18.1

52 Week Current vs. 52 Week (%)

Yuji Fujimori



Price Market


6806-TKS Hirose Electric JPY 7840 3,445 8920 6510 -12.1 20.4 -4.0 3.4 13.9 -7.1 -44.1 17.9 -5.7

4062-TKS Ibiden JPY 1499 2,733 2759 1458 -45.7 2.8 -20.3 -13.8 -10.7 -43.4 -77.5 0.3 -25.8

6971-TKS Kyocera JPY 7370 17,094 8910 6060 -17.3 21.6 2.6 11.7 12.5 -14.7 -36.8 20.4 1.2

6981-TKS Murata Manufacturing JPY 4300 11,590 5680 3870 -24.3 11.1 -7.8 -3.7 7.1 -21.2 -48.4 11.0 -7.9

5334-TKS NGK Spark Plug JPY 1083 2,889 1231 907 -12.0 19.4 -4.2 6.5 9.6 -4.2 -46.5 11.1 -7.5

5991-TKS NHK Spring JPY 899 2,371 919 608 -2.2 47.9 -4.0 3.1 22.5 4.8 -24.1 18.8 -6.3

6594-TKS Nidec JPY 6470 11,176 7900 5660 -18.1 14.3 -9.2 -12.2 3.7 -11.4 -8.7 -2.4 -10.9

6963-TKS Rohm JPY 3340 4,740 5070 3345 -34.1 -0.1 -8.7 -8.2 -6.3 -29.1 -66.6 -2.1 -11.4

6967-TKS Shinko Electric Industries JPY 679 1,161 850 492 -20.1 38.0 -11.9 12.3 34.7 -15.6 -69.5 31.1 -12.5

6976-TKS Taiyo Yuden JPY 757 1,138 1134 484 -33.2 56.4 -4.1 5.6 27.3 -30.4 -69.4 34.8 -9.7

6762-TKS TDK JPY 3690 5,889 4840 2404 -23.8 53.5 -13.8 0.1 14.9 -11.5 -62.8 9.7 -17.9


Masaru Koshita



17 May 2012 121

EQUITY PEFORMANCE TABLE – JAPAN TECHNOLOGY


Price Market


7751-TKS Canon JPY 3465 51,370 4015 3230 -13.7 7.3 -7.7 1.3 2.8 -8.5 -50.9 1.5 -8.9

8060-TKS Canon Marketing Japan JPY 972 1,694 1075 828 -9.6 17.4 0.9 3.6 14.5 10.4 -59.1 9.7 -4.2

7762-TKS Citizen Holdings JPY 469 1,913 537 352 -12.7 33.2 -4.6 8.3 10.5 -3.5 -55.1 5.6 -7.3

7735-TKS Dainippon Screen Manufacturing JPY 665 1,998 787 434 -15.5 53.2 -7.9 15.6 24.6 -11.0 -33.1 3.7 -7.0

4901-TKS FUJIFILM Holdings JPY 1635 9,857 2536 1622 -35.5 0.8 -9.1 -10.5 -5.9 -31.8 -68.3 -10.3 -13.2

6674-TKS GS Yuasa Corp. JPY 360 1,921 565 326 -36.3 10.4 -11.8 -10.4 -7.0 -33.6 43.1 -10.1 -15.7

8036-TKS Hitachi High-Technologies JPY 1898 3,308 2064 1322 -8.0 43.6 2.9 14.3 18.6 14.4 -39.9 15.1 0.2

6856-TKS Horiba JPY 2908 1,543 2963 2204 -1.9 31.9 6.9 19.9 21.7 16.9 -31.8 25.7 5.9

7741-TKS Hoya JPY 1788 9,746 1942 1546 -7.9 15.7 0.4 1.3 10.6 3.5 -51.3 8.9 0.0

6951-TKS Jeol JPY 224 229 273 190 -17.9 17.9 3.5 9.3 13.6 2.6 -73.0 21.2 -0.9

4902-TKS Konica Minolta Holdings JPY 634 4,079 741 484 -14.4 31.0 -6.4 0.8 9.2 -9.7 -63.9 7.1 -12.4

7731-TKS Nikon JPY 2474 11,303 2555 1560 -3.2 58.6 -4.1 11.4 32.6 36.4 -24.5 33.0 -6.6

7733-TKS Olympus JPY 1130 3,772 2835 424 -60.1 166.5 -13.7 -11.5 133.5 -52.7 -74.5 11.7 -14.1

6645-OSE OMRON JPY 1734 4,667 2323 1381 -25.4 25.6 3.4 7.4 5.3 -23.9 -48.6 9.6 -2.0

7752-TKS Ricoh Co. JPY 642 5,813 938 588 -31.6 9.2 -14.8 3.9 2.2 -28.1 -76.1 -4.5 -18.0

6724-TKS Seiko Epson JPY 922 2,081 1436 881 -35.8 4.7 -14.8 -9.7 -2.0 -34.5 -73.6 -9.1 -17.5

6590-TKS Shibaura Mechatronics JPY 190 122 344 191 -44.8 -0.5 -10.0 -12.8 -7.9 -39.1 -72.7 2.6 -18.5

7701-TKS Shimadzu JPY 712 2,605 755 555 -5.7 28.3 0.1 5.4 7.3 0.4 -33.3 8.3 -2.7

8035-TKS Tokyo Electron JPY 3960 8,953 4950 3325 -20.0 19.1 -12.9 -3.3 1.7 -12.4 -52.5 2.0 -13.2

7732-TKS Topcon JPY 606 722 675 338 -10.2 79.3 15.2 33.7 56.9 38.4 -68.6 75.5 16.6

6728-TKS ULVAC JPY 451 318 2147 504 -79.0 -10.5 -34.6 -52.2 -45.8 -71.4 -86.9 -45.4 -41.7

Masaru Koshita




17 May 2012 122

EQUITY PEFORMANCE TABLE – ASIA EX-JAPAN TECHNOLOGY

Asia Ex-Japan Semiconductors (2-Neutral)

Price Market


2311-TW Advanced Semiconductor Engineering Inc. TWD 29 6,473 33 23 -10.6 26.4 0.3 2.3 8.4 -3.8 7.7 12.5 -1.4

000660-KRX SK hynix Inc KRW 25400 13,788 35200 15500 -27.8 63.9 -4.1 -1.5 23.7 -20.1 -16.9 21.2 -9.8

3189-TW Kinsus Interconnect Technology Corp. TWD 90 1,400 133 71 -32.3 26.6 0.7 0.3 -4.9 -12.2 -18.8 14.7 -2.1

2454-TW MediaTek Inc. TWD 263 10,244 362 221 -27.3 19.0 -4.2 -9.4 -14.7 -25.1 -40.2 -4.9 -6.1

3697-TW MStar Semiconductor Inc. TWD 179 3,271 220 110 -18.6 62.7 4.3 -6.9 0.8 -16.2 NA 14.9 1.0

8046-TW Nan Ya Printed Circuit Board Corp. TWD 53 1,201 117 52 -55.0 1.9 -11.8 -26.5 -31.8 -46.9 -70.1 -11.2 -15.1

005930-KRX Samsung Electronics Co. Ltd. KRW 1303000 151,449 1418000 672000 -8.1 93.9 1.2 25.0 41.9 48.9 130.8 25.4 3.2

2325-TW Siliconware Precision Industries Co. Ltd. TWD 34 3,511 39 23 -14.4 46.2 -3.7 1.5 17.3 -11.8 -49.5 23.6 -6.0

2330-TW Taiwan Semiconductor Manufacturing Co. Ltd. TWD 86 75,277 90 62 -4.8 37.5 4.0 10.9 17.5 14.7 26.4 12.5 1.0

2303-TW United Microelectronics Corp. TWD 15 6,247 16 10 -6.7 44.8 2.8 -3.0 15.9 -3.6 -35.8 14.6 1.2

5347-TW Vanguard International Semiconductor Corp. TWD 14 796 16 9 -11.9 52.6 13.9 20.2 35.9 1.3 -49.5 43.6 19.4

2455-TW Visual Photonics Epitaxy Co. Ltd. TWD 51 393 64 27 -19.2 87.9 0.4 8.8 23.6 -13.0 80.5 57.3 -4.0

3105-TW Win Semiconductors Corp. TWD 44 1,013 53 18 -16.5 142.3 1.1 6.4 56.5 25.4 NA 56.0 1.6

Andrew Lu & SC Bae


Asia Ex-Japan LCD Displays (1-Positive)

Price Market


054620-KRX Asia Pacific Systems Inc. KRW 13750 263 17050 10100 -19.4 36.1 19.2 5.3 8.6 5.7 328.6 7.3 6.0

2409-TW AU Optronics Corp. TWD 13 3,922 24 12 -46.0 11.5 -11.2 -20.7 -4.7 -45.4 -72.8 0.4 -3.9

001300-KRX Cheil Industries Inc. KRW 104000 4,626 139500 70800 -25.4 46.9 12.6 6.6 3.5 -15.7 204.7 3.5 8.2

3481-TW Chimei Innolux Corp. TWD 12 3,038 30 11 -59.8 9.1 -13.5 -25.2 -9.0 -57.1 -86.4 0.0 -10.8

5371-TW Coretronic Corp. TWD 26 642 49 17 -47.7 48.6 0.8 -2.8 3.2 -41.6 -49.8 27.1 -3.8

8069-TAI E Ink Holdings Inc. TWD 29 1,064 73 28 -60.2 5.2 -24.1 -33.1 -54.5 -49.4 42.8 -26.7 -24.6

3149-TW G-TECH Optoelectronics Corp. TWD 87 718 145 51 -39.9 72.5 -4.4 -3.8 24.0 -24.8 283.7 40.9 -13.5

034220-KRX LG Display Co. Ltd. KRW 22200 7,172 41100 17300 -46.0 28.3 -13.6 -21.0 6.0 -42.4 -43.3 -6.5 -14.3

3034-TW Novatek Microelectronics Corp. TWD 88 1,806 101 61 -13.4 43.4 -1.3 2.7 18.4 -0.2 -45.8 15.9 -1.6

6176-TW Radiant Opto-Electronics Corp. TWD 127 1,970 140 71 -9.3 78.6 7.3 11.9 45.5 39.6 197.1 52.6 1.3

056190-KRX SFA Engineering Corp. KRW 56900 879 67600 45200 -15.8 25.9 6.8 2.2 -6.1 -2.1 174.4 -6.9 5.3

3673-TW TPK Holding Co. Ltd. TWD 356 2,924 914 325 -61.1 9.4 -17.0 -18.7 -14.4 -57.3 NA -7.5 -23.2

2384-TW Wintek Corp. TWD 19 1,052 39 18 -52.3 1.1 -16.3 -25.6 -5.3 -50.5 -24.0 -12.8 -17.7


Jamie Yeh, SC Bae & Sunwoo Kim

Asia Ex-Japan Data Networking & Wireline Equipment (1-Positive)

Price Market


552-HKG China Communications Services Corp. Ltd. HKD 4 3533 5 3 -20.8 34.6 0.8 1.3 23.4 -17.6 -15.8 15.7 5.6

2342-HKG Comba Telecom Systems Holdings Ltd. HKD 4 818 9 4 -54.6 2.0 -3.3 -20.2 -34.3 -53.3 93.1 -33.5 -3.2

763-HKG ZTE CORP H HKD 18 7958 30 17 -40.2 3.4 -10.2 -18.5 -19.6 -34.0 64.3 -26.2 -14.1

Jones Ku




17 May 2012 123

EQUITY PEFORMANCE TABLE – ASIA EX-JAPAN TECHNOLOGY

Asia Ex-Japan IT Hardware (2-Neutral)

Price Market


2353-TAI Acer Inc. TWD 32 2,880 58 27 -44.3 17.2 -16.6 -24.9 -7.2 -39.9 -47.4 -8.3 -17.4

2357-TAI ASUSTeK Computer Inc. TWD 300 8,022 327 184 -8.3 63.2 15.7 27.5 52.7 45.7 15.6 45.2 12.9

2392-TAI Cheng Uei Precision Industry Co. Ltd. TWD 57 940 90 52 -36.6 9.8 -12.7 -18.1 -9.5 -13.6 -28.8 -2.2 -17.6

2385-TAI Chicony Electronics Co. Ltd. TWD 56 1,177 62 41 -9.5 38.3 1.6 -6.3 15.0 5.0 51.6 14.2 -1.8

2324-TAI Compal Electronics Inc. TWD 33 4,999 38 26 -14.0 28.3 2.3 -0.7 23.6 4.3 15.7 11.8 2.1

8163-TAI Darfon Electronics Corp. TWD 19 213 36 13 -47.0 44.4 -6.9 -10.7 6.5 -43.0 -70.6 24.4 -11.1

861-HKG Digital China Holdings Ltd. HKD 14 2,012 17 8 -14.9 75.2 -6.4 0.3 19.6 -7.0 355.4 18.8 -7.3

3211-TAI Dynapack International Technology Corp. TWD 159 824 189 91 -15.9 74.9 0.9 -1.8 50.5 61.3 220.7 38.1 0.2

2448-TW EPISTAR Corp. TWD 70 2,076 96 48 -27.1 45.4 1.0 -3.7 17.5 -20.8 -38.2 10.4 -5.3

2393-TW Everlight Electronics Co. Ltd. TWD 59 845 82 46 -28.6 28.9 0.9 -2.0 6.5 -26.7 -48.8 12.3 -4.1

2354-TW Foxconn Technology Co. Ltd. TWD 98 4,092 145 86 -32.5 13.9 -7.2 -21.8 -1.4 -25.5 -47.7 6.1 -15.6

2317-TAI Hon Hai Precision Industry Co. Ltd. TWD 86 31,916 117 62 -26.2 40.5 -20.3 -14.0 10.9 -11.5 -28.9 5.8 -23.0

2356-TAI Inventec Corp. TWD 10 1,215 16 10 -34.9 7.7 -14.5 -20.8 -3.7 -32.5 -46.0 -7.2 -20.1

3336-HKG Ju Teng International Holdings Ltd. HKD 2 236 3 1 -36.7 88.5 -18.8 14.7 15.5 -32.5 -15.5 84.3 -18.0

992-HKG Lenovo Group Ltd. HKD 7 9,504 8 4 -6.5 75.4 -2.5 6.2 28.0 63.8 145.4 37.8 2.2

4938-TW Pegatron Corp. TWD 43 3,270 48 25 -11.0 73.3 -2.4 12.4 41.5 39.9 NA 29.3 -6.9

2382-TAI Quanta Computer Inc. TWD 81 10,440 86 48 -5.9 69.0 6.2 12.7 33.1 39.6 75.0 25.6 4.0

006400-KRX Samsung SDI Co. Ltd. KRW 165500 6,334 211000 99900 -21.6 65.7 27.5 10.2 30.0 -10.2 207.6 25.1 20.9

3376-TW Shin Zu Shing Co. Ltd. TWD 80 434 90 49 -11.1 63.9 5.5 4.7 50.6 18.1 -41.4 37.4 2.8

6121-TAI Simplo Technology Co. Ltd. TWD 218 2,075 265 148 -17.6 47.3 -0.2 -1.4 24.3 11.5 114.2 22.9 -1.8

751-HKG Skyworth Digital Holdings Ltd. HKD 3 1,041 5 2 -42.8 29.7 -15.7 -23.8 -24.7 -40.0 187.7 12.1 -16.0

2387-TAI Sunrex Technology Corp. TWD 16 206 27 16 -40.2 2.2 -6.7 -11.7 -19.8 -37.8 -51.1 0.9 -15.5

2347-TAI Synnex Technology International Corp. TWD 71 3,800 80 62 -11.1 15.0 -1.7 -2.6 -0.1 -1.8 132.4 -3.1 -2.9

903-HKG TPV Technology Ltd. HKD 2 520 5 1 -69.7 23.9 -10.4 -19.6 -24.9 -60.7 -70.5 21.1 -7.0

3231-TAI Wistron Corp. TWD 43 3,003 54 30 -20.5 40.5 -2.2 -11.2 14.1 -14.0 9.9 10.7 -4.1


Kirk Yang

Asia Ex-Japan Wireless Equipment & Products (1-Positive)

Price Market


2018-HK AAC Technologies Holdings Inc. HKD 24 3,788 25 13 -4.2 79.9 1.3 14.3 39.6 13.5 222.3 37.3 13.5

285-HK BYD Electronic (International) Co. Ltd. HKD 2 615 5 2 -55.0 20.8 -12.4 -24.3 -18.8 -49.0 NA -4.1 -9.4

2474-TW Catcher Technology Co. Ltd. TWD 186 4,933 278 120 -33.0 55.6 -4.0 -1.8 24.1 3.8 10.6 37.4 -7.0

8078-TW Compal Communications Inc. TWD 41 843 73 23 -43.4 77.2 -10.6 -40.7 -6.1 72.1 -54.2 -10.0 -19.6

2038-HK Foxconn International Holdings Ltd. HKD 4 3,249 6 3 -41.0 10.6 -36.7 -39.6 -31.8 -22.8 -85.7 -31.1 -37.6

2498-TW HTC Corp. TWD 430 12,707 1224 403 -64.9 6.7 -14.6 -20.1 -29.3 -60.0 59.4 -9.7 -24.4

3008-TW LARGAN Precision Co. Ltd. TWD 472 2,238 1005 451 -53.0 4.7 -10.4 -23.2 -17.8 -45.3 19.4 -13.4 -15.1

066570-KRX LG Electronics Inc. KRW 71600 10,622 116761 52592 -38.7 36.1 -4.9 -14.3 25.1 -28.4 11.8 0.1 -10.8

2301-TW Lite-On Technology Corp. TWD 36 2,783 40 27 -9.8 34.8 6.1 -0.8 25.2 -0.1 -30.9 6.5 2.2

3311-TW Silitech Technology Corp. TWD 69 426 90 62 -23.9 11.2 3.7 -13.0 -21.3 -1.1 -43.6 0.9 2.6

3044-TW Tripod Technology Corp. TWD 91 1,641 127 64 -27.8 41.9 -2.8 4.2 16.7 -22.3 -4.1 25.6 -6.9

3037-TW UniMicron Technology Corp. TWD 30 1,608 56 31 -46.7 -1.8 -13.8 -22.7 -16.0 -37.3 -31.2 -13.8 -15.7

6285-TW Wistron NeWeb Corp. TWD 56 552 121 43 -53.6 32.0 -11.8 -11.5 -13.2 -44.4 10.9 13.3 -13.3

3622-TW Young Fast Optoelectronics Co. Ltd. TWD 61 322 211 51 -71.0 20.6 -11.6 -23.5 -21.7 -64.0 NA 1.3 -12.8

Dale Gai




17 May 2012 124

EQUITY PEFORMANCE TABLE – INDICES

Indices

Price Market


SP50 S&P 500 USD 1353 12,277,194 1422 1075 -4.9 25.9 0.0 1.1 9.5 0.1 -8.9 8.0 -3.6

SP701 S&P 500 / Information Technology -SEC USD 465 2,448,616 502 358 -7.4 29.9 -4.4 1.5 12.3 8.2 23.4 13.5 -6.3

SP704-SPX S&P Small Cap 600 / Information Technology -SECUSD 255 90,609 282 191 -9.6 33.9 -0.5 -4.8 8.2 -9.3 9.9 6.2 -6.0

UKX-FTX FTSE 100 GBP 5576 2,321,154 6084 4791 -8.4 16.4 -0.9 -5.3 1.8 -7.9 -15.0 -0.5 -2.8

E1TEC-DJX Dow Jones Euro / Technology USD 180 242 156 -25.7 14.9 -7.1 -5.9 -4.3 -25.4 -39.9 3.4 -13.0

NIK-NKX Japan Nikkei 225 JPY 8953 10255 8136 -12.7 10.0 -5.5 0.7 6.0 -8.2 -49.2 6.6 -8.0

HSI-HKX Hang Seng Index HKD 19965 786,639 23708 16170 -15.8 23.5 -0.6 -2.7 6.7 -13.3 -2.5 9.7 -1.6

P1TEC-DJX Dow Jones Asia Pacific / Technology USD 198 220 166 -9.9 19.3 -3.0 1.4 9.7 -8.1 -9.7 10.1 -5.1




17 May 2012 125

BARCLAYS GLOBAL TECHNOLOGY TEAM AND OTHER CONTRIBUTORS U.S. Technology

Ben Reitzes Global Sector Coordinator U.S. IT Hardware +1 212 526 9517 [email protected]

Raimo Lenschow, CFA U.S. Software +1 212 526 2712 [email protected]

C.J. Muse U.S. Semiconductors; U.S. Semiconductor Capital Equipment +1 212 526 8945 [email protected]

Blayne Curtis U.S. Semiconductors +1 617 342 4101 [email protected]

Darrin Peller U.S. IT Consulting & Computer Services +1 212 526 7144 [email protected]

Jeff Kvaal U.S. Data Networking & Wireline Equipment; U.S. Wireless Equipment +1 212 526 2216 [email protected]

Olga Levinzon U.S. Display & Lighting +1 212 526 9134 [email protected]

Amir Rozwadowski U.S. Clean Technology & Renewables; U.S. Display & Lighting +1 212 526 4043 [email protected]

Anthony DiClemente U.S. Internet +1 212 526 1341

[email protected]

European Technology

Andrew Gardiner, CFA European Technology Hardware +44 20 313 47217 [email protected]

Gerardus Vos European Software & IT Services +44 20 313 46690 [email protected]

David Kaplan Israel Technology +972 3 623 8747 [email protected]

Joseph Wolf Israel Technology +972 3 623 8746 [email protected]

Youssef Essaegh


+44 203 134 7250

[email protected]

Japan Technology

Yuji Fujimori Japan Consumer Electronics; Japan Display & Lighting +81 3 4530 2973 [email protected]

Masaru Koshita Japan Electronic Components +81 3 4530 2937 [email protected]

Masahiro Nakanomyo Japan Precision Instruments +81 3 4530 2962 [email protected]

Yoshihiko Nishizawa Japan Precision Instruments +81 3 4530 2994 [email protected]

Asia ex-Japan Technology

Kirk Yang Asia ex-Japan IT Hardware +852 290 34635 [email protected]

Jones Ku Asia ex-Japan Data Networking & Wireline Equipment, IT Hardware, and Wireless Equipment & Products +852 290 33901 [email protected]

Dale Gai Asia ex-Japan Wireless Equipment & Products +886 2 6638 4697 [email protected]

Andrew Lu Asia ex-Japan Semiconductors +886 2 6638 4698 [email protected]

Jamie Yeh Asia ex-Japan LCD Displays +852 290 34670 [email protected]

SC Bae Asia ex-Japan Semiconductors; LCD Displays and Wireless Equipment & Products +82 2126 2932 [email protected]

Derrick Yang Asia ex-Japan IT Hardware +886 2 663 84686 [email protected]

Wayne Dong Asia ex-Japan IT Hardware +886 2 6638 4696 [email protected]

Jerry Wu Asia ex-Japan IT Hardware +886 2 6638 4685 [email protected]

Sunwoo Kim Asia ex-Japan IT Hardware & LCD Displays +822 2126 2934 [email protected]

Other Contributors

Barry Knapp U.S. Portfolio Strategy +1 212 526 5313 [email protected]

Eric Slover, CFA U.S. Portfolio Strategy +1 212 526 6426 [email protected]


17 May 2012 126


17 May 2012 127

ANALYST(S) CERTIFICATION(S)

We, Ben A. Reitzes, Barry Knapp, Raimo Lenschow, CFA, Darrin D. Peller, Jeff Kvaal, C.J. Muse, Blayne Curtis, Amir Rozwadowski, Olga Levinzon, Anthony DiClemente, CFA, Andrew M. Gardiner, CFA, Youssef Essaegh, Gerardus Vos, David Kaplan, Joseph Wolf, Kirk Yang, Wayne Dong, Jerry Wu, Jones Ku, CFA, Andrew Lu, SC Bae, Dale Gai, Derrick Yang, Sunwoo Kim, Jamie Yeh, Yuji Fujimori, Masaru Koshita, Masahiro Nakanomyo and Yoshihiko Nishizawa, hereby certify (1) that the views expressed in this research report accurately reflect our personal views about any or all of the subject securities or issuers referred to in this research report and (2) no part of our compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this research report.

IMPORTANT DISCLOSURES CONTINUED

When an equity research report covers six or more subject companies, Barclays generally does not include specific conflict of interest disclosures regarding the subject companies and instead provides the reader with instructions about how to view or obtain the applicable conflict of interest disclosures. In order to comply with the requirements of the Korea Financial Investment Association, specific disclosures about subject companies with securities listed on the Korea Exchange are included herein. To access important disclosures, including, where relevant, price targets, regarding other companies that are the subject of this research report, please send a written request to: Barclays Research Compliance, 745 Seventh Avenue, 17th Floor, New York, NY 10019 or refer to http://publicresearch.barcap.com or call 1-212-526-1072.

The analysts responsible for preparing this research report have received compensation based upon various factors including the firm's total revenues, a portion of which is generated by investment banking activities.

Research analysts employed outside the US by affiliates of Barclays Capital Inc. are not registered/qualified as research analysts with FINRA. These analysts may not be associated persons of the member firm and therefore may not be subject to NASD Rule 2711 and incorporated NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst’s account.

Analysts regularly conduct site visits to view the material operations of covered companies, but Barclays policy prohibits them from accepting payment or reimbursement by any covered company of their travel expenses for such visits.

In order to access Barclays Statement regarding Research Dissemination Policies and Procedures, please refer to https://live.barcap.com/publiccp/RSR/nyfipubs/disclaimer/disclaimer-research-dissemination.html.

The Corporate and Investment Banking division of Barclays produces a variety of research products including, but not limited to, fundamental analysis, equity-linked analysis, quantitative analysis, and trade ideas. Recommendations contained in one type of research product may differ from recommendations contained in other types of research products, whether as a result of differing time horizons, methodologies, or otherwise.

Materially Mentioned Stocks (Ticker, Date, Price)

AAC Technologies Holdings (2018.HK, 11-May-2012, HKD 24.10), 1-Overweight/1-Positive

Acer Inc. (2353.TW, 11-May-2012, TWD 32.00), 1-Overweight/2-Neutral

Alliance Data Systems Corp. (ADS, 11-May-2012, USD 127.20), 1-Overweight/2-Neutral

Altera Corp. (ALTR, 11-May-2012, USD 33.73), 1-Overweight/1-Positive

Amadeus (AMA.MC, 11-May-2012, EUR 15.19), 1-Overweight/1-Positive

Amazon.com, Inc. (AMZN, 11-May-2012, USD 227.68), 2-Equal Weight/1-Positive

Amdocs Ltd. (DOX, 11-May-2012, USD 30.09), 1-Overweight/1-Positive

Ameresco Inc. (AMRC, 11-May-2012, USD 11.53), 1-Overweight/2-Neutral

AOL Inc. (AOL, 11-May-2012, USD 26.06), 2-Equal Weight/1-Positive

Apple, Inc. (AAPL, 11-May-2012, USD 566.71), 1-Overweight/2-Neutral

ARM Holdings PLC (ARM.L, 11-May-2012, GBP 5.07), 1-Overweight/2-Neutral

Aruba Networks Inc. (ARUN, 11-May-2012, USD 16.55), 1-Overweight/2-Neutral

ASML Holding NV (ASML.AS, 11-May-2012, EUR 37.74), 1-Overweight/2-Neutral

Asustek Computer Inc. (2357.TW, 11-May-2012, TWD 299.50), 1-Overweight/2-Neutral

AtoS (ATOS.PA, 11-May-2012, EUR 45.98), 1-Overweight/1-Positive

AU Optronics Corp. (2409.TW, 11-May-2012, TWD 13.05), 1-Overweight/1-Positive

Avago Technologies Ltd. (AVGO, 11-May-2012, USD 30.94), 1-Overweight/1-Positive

Aveva (AVV.L, 11-May-2012, GBP 16.00), 3-Underweight/1-Positive

Broadcom Corp. (BRCM, 11-May-2012, USD 33.79), 1-Overweight/1-Positive

Capgemini (CAPP.PA, 11-May-2012, EUR 29.38), 2-Equal Weight/1-Positive

Casio Computer Co., Ltd. (6952.T, 11-May-2012, JPY 499), 1-Overweight/2-Neutral

Catcher Technology Co., Ltd. (2474.TW, 11-May-2012, TWD 186.00), 1-Overweight/1-Positive


17 May 2012 128


Cavium Inc. (CAVM, 11-May-2012, USD 24.19), 1-Overweight/1-Positive

Ceragon Networks Ltd. (CRNT, 11-May-2012, USD 9.22), 1-Overweight/1-Positive

CEVA, Inc. (CEVA, 11-May-2012, USD 16.95), 1-Overweight/1-Positive

China Communications Services (0552.HK, 11-May-2012, HKD 3.95), 3-Underweight/1-Positive

Cisco Systems, Inc. (CSCO, 11-May-2012, USD 16.50), 1-Overweight/2-Neutral

Citrix Systems (CTXS, 11-May-2012, USD 79.46), 1-Overweight/1-Positive

Comba Telecom (2342.HK, 11-May-2012, HKD 4.18), 1-Overweight/1-Positive

Corning Inc. (GLW, 11-May-2012, USD 13.31), 1-Overweight/2-Neutral

Cypress Semiconductor Corp. (CY, 11-May-2012, USD 13.69), 1-Overweight/1-Positive

Dassault Systèmes (DAST.PA, 11-May-2012, EUR 72.03), 2-Equal Weight/1-Positive

Dialog Semiconductor (DLGS.DE, 11-May-2012, EUR 17.25), 1-Overweight/2-Neutral

eBay, Inc. (EBAY, 11-May-2012, USD 40.74), 2-Equal Weight/1-Positive

Elbit Systems Ltd. (ESLT, 11-May-2012, USD 35.43), 2-Equal Weight/1-Positive

Elster Group SE (ELT, 11-May-2012, USD 14.33), 1-Overweight/2-Neutral

EMC Corp. (EMC, 11-May-2012, USD 26.36), 1-Overweight/2-Neutral

EZchip Semiconductor (EZCH, 11-May-2012, USD 40.46), 1-Overweight/1-Positive

Google Inc. (GOOG, 11-May-2012, USD 605.23), 1-Overweight/1-Positive

Hon Hai Precision Industry Co., Ltd. (2317.TW, 11-May-2012, TWD 86.40), 1-Overweight/2-Neutral

Ibiden Co., Ltd. (4062.T, 11-May-2012, JPY 1499), 1-Overweight/1-Positive

IBM Corp. (IBM, 11-May-2012, USD 201.17), 2-Equal Weight/2-Neutral

Imagination Technologies (IMG.L, 11-May-2012, GBP 6.17), 1-Overweight/2-Neutral

Indra Sistemas (IDR.MC, 11-May-2012, EUR 7.66), 3-Underweight/1-Positive

Informatica Corp. (INFA, 11-May-2012, USD 45.26), 1-Overweight/1-Positive

JVC KENWOOD Corporation (6632.T, 11-May-2012, JPY 299), 1-Overweight/2-Neutral

Kinsus Interconnect Technology (3189.TW, 11-May-2012, TWD 90.00), 1-Overweight/2-Neutral

Largan Precision Co., Ltd. (3008.TW, 11-May-2012, TWD 472.00), 1-Overweight/1-Positive

Lenovo Group Ltd. (0992.HK, 11-May-2012, HKD 7.21), 1-Overweight/2-Neutral

LG Display (034220.KS, 11-May-2012, KRW 22200.00), 1-Overweight/1-Positive

Logica (LOG.L, 11-May-2012, GBP 0.74), 2-Equal Weight/1-Positive

LSI Corp. (LSI, 11-May-2012, USD 7.74), 1-Overweight/1-Positive

MasterCard Inc. (MA, 11-May-2012, USD 422.40), 1-Overweight/2-Neutral

MediaTek Inc. (2454.TW, 11-May-2012, TWD 263.00), 1-Overweight/2-Neutral

Mellanox Technologies (MLNX, 11-May-2012, USD 58.02), 1-Overweight/1-Positive

Micro Focus (MCRO.L, 11-May-2012, GBP 4.69), 1-Overweight/1-Positive

Misys (MSY.L, 11-May-2012, GBP 3.47), RS-Rating Suspended/1-Positive

MStar Semiconductor, Inc. (3697.TW, 11-May-2012, TWD 179.00), 1-Overweight/2-Neutral

Murata Manufacturing Co., Ltd. (6981.OS, 11-May-2012, JPY 4300), 2-Equal Weight/1-Positive

Netflix Inc. (NFLX, 11-May-2012, USD 77.38), 2-Equal Weight/1-Positive

NetSuite Inc. (N, 11-May-2012, USD 42.62), 1-Overweight/1-Positive

Nice Systems (NICE, 11-May-2012, USD 37.69), 2-Equal Weight/1-Positive

Nidec Corp. (6594.OS, 11-May-2012, JPY 6470), 1-Overweight/1-Positive

NIKON Corp. (7731.T, 11-May-2012, JPY 2474), 2-Equal Weight/2-Neutral

Nippon Electric Glass Co., Ltd. (5214.T, 11-May-2012, JPY 551), 1-Overweight/2-Neutral

Novatek Microelectronics Corp. (3034.TW, 11-May-2012, TWD 87.50), 1-Overweight/1-Positive

NXP Semiconductors NV (NXPI, 11-May-2012, USD 24.09), 1-Overweight/1-Positive

Panasonic Corporation (6752.T, 11-May-2012, JPY 570), 3-Underweight/2-Neutral


17 May 2012 129


Pegatron Corp. (4938.TW, 11-May-2012, TWD 42.80), 1-Overweight/2-Neutral

Pioneer Corporation (6773.T, 11-May-2012, JPY 344), 2-Equal Weight/2-Neutral

Power-One Inc. (PWER, 11-May-2012, USD 4.01), 1-Overweight/2-Neutral

Priceline.com Inc. (PCLN, 11-May-2012, USD 675.39), 1-Overweight/1-Positive

QUALCOMM, Inc. (QCOM, 11-May-2012, USD 61.86), 1-Overweight/2-Neutral

Quanta Computer Inc. (2382.TW, 11-May-2012, TWD 81.30), 1-Overweight/2-Neutral

Sage Group Plc (SGE.L, 11-May-2012, GBP 2.62), 2-Equal Weight/1-Positive

Samsung Electronics (005930.KS, 11-May-2012, KRW 1303000.00), 1-Overweight/2-Neutral

Samsung SDI (006400.KS, 11-May-2012, KRW 165500.00), 1-Overweight/2-Neutral

SAP AG (SAPG.DE, 11-May-2012, EUR 48.87), 1-Overweight/1-Positive

Sharp Corporation (6753.T, 11-May-2012, JPY 390), 2-Equal Weight/2-Neutral

Shimadzu Corp. (7701.T, 11-May-2012, JPY 712), 1-Overweight/2-Neutral

Shinko Electric Ind. (6967.T, 11-May-2012, JPY 679), 2-Equal Weight/1-Positive

Siliconware Precision Industries (2325.TW, 11-May-2012, TWD 33.70), 1-Overweight/2-Neutral

Skyworks Solutions, Inc. (SWKS, 11-May-2012, USD 25.39), 1-Overweight/1-Positive

Software AG (SOWG.F, 11-May-2012, EUR 24.13), 3-Underweight/1-Positive

Sony Corporation (6758.T, 11-May-2012, JPY 1135), 2-Equal Weight/2-Neutral

Sopra (SOPR.PA, 11-May-2012, EUR 42.00), 2-Equal Weight/1-Positive

Steria (TERI.PA, 11-May-2012, EUR 14.66), 2-Equal Weight/1-Positive

TDK Corp. (6762.T, 11-May-2012, JPY 3690), 1-Overweight/1-Positive

Temenos (TEMN.S, 11-May-2012, CHF 16.10), 1-Overweight/1-Positive

Teradyne Inc. (TER, 11-May-2012, USD 15.71), 1-Overweight/2-Neutral

Tesla Motors Inc. (TSLA, 11-May-2012, USD 32.25), 1-Overweight/2-Neutral

Tieto (TIE1V.HE, 11-May-2012, EUR 12.52), 2-Equal Weight/1-Positive

Tripod Technology Corp. (3044.TW, 11-May-2012, TWD 91.40), 1-Overweight/1-Positive

Vanguard International Semiconductor (5347.TWO, 11-May-2012, TWD 14.45), 1-Overweight/2-Neutral

Veeco Instruments Inc. (VECO, 11-May-2012, USD 36.97), 1-Overweight/2-Neutral

VeriFone Systems Inc. (PAY, 11-May-2012, USD 44.27), 1-Overweight/2-Neutral

Visa Inc. (V, 11-May-2012, USD 117.92), 1-Overweight/2-Neutral

Visual Photonics Epitaxy Co., Ltd. (2455.TW, 11-May-2012, TWD 51.30), 1-Overweight/2-Neutral

Wirecard (WDIG.DE, 11-May-2012, EUR 13.45), 1-Overweight/1-Positive

ZTE Corporation (0763.HK, 11-May-2012, HKD 17.70), 2-Equal Weight/1-Positive

Other Material Conflicts

The Corporate and Investment Banking Division of Barclays is providing investment banking services to Dell Inc. in relation to its acquisition of Wyse Technology.

GOOG: The Corporate and Investment Banking Division of Barclays is providing investment banking services to Motorola Mobility in the potential sale of the company to Google.

MSY.L: The Corporate and Investment Banking Division of Barclays Bank PLC is acting as corporate broker to Misys PLC.

The Corporate and Investment Banking Division of Barclays is Corporate Broker, and providing investment banking services to Misys plc in connection with the potential approaches by Magic Bidco Limited (an investment vehicle indirectly ownded by Vista Funds) for Misys plc. All ratings, estimates and price targets on Misys plc previously issued by the firm's Research Department have been temporarily suspended due to Barclays role in this potential transaction.

Guide to the Barclays Fundamental Equity Research Rating System:

Our coverage analysts use a relative rating system in which they rate stocks as 1-Overweight, 2-Equal Weight or 3-Underweight (see definitions below) relative to other companies covered by the analyst or a team of analysts that are deemed to be in the same industry sector (the "sector coverage universe").


17 May 2012 130


In addition to the stock rating, we provide sector views which rate the outlook for the sector coverage universe as 1-Positive, 2-Neutral or 3-Negative (see definitions below). A rating system using terms such as buy, hold and sell is not the equivalent of our rating system. Investors should carefully read the entire research report including the definitions of all ratings and not infer its contents from ratings alone.

Stock Rating

1-Overweight - The stock is expected to outperform the unweighted expected total return of the sector coverage universe over a 12-month investment horizon.

2-Equal Weight - The stock is expected to perform in line with the unweighted expected total return of the sector coverage universe over a 12-month investment horizon.

3-Underweight - The stock is expected to underperform the unweighted expected total return of the sector coverage universe over a 12-month investment horizon.

RS-Rating Suspended - The rating and target price have been suspended temporarily due to market events that made coverage impracticable or to comply with applicable regulations and/or firm policies in certain circumstances including where the Corporate and Investment Banking Division of Barclays is acting in an advisory capacity in a merger or strategic transaction involving the company.

Sector View

1-Positive - sector coverage universe fundamentals/valuations are improving.

2-Neutral - sector coverage universe fundamentals/valuations are steady, neither improving nor deteriorating.

3-Negative - sector coverage universe fundamentals/valuations are deteriorating.

Below is the list of companies that constitute the "sector coverage universe":

Asia ex-Japan Data Networking & Wireline Equipment

China Communications Services (0552.HK) Comba Telecom (2342.HK) ZTE Corporation (0763.HK)

Asia ex-Japan IT Hardware

Acer Inc. (2353.TW) Asustek Computer Inc. (2357.TW) Cheng Uei Precision Industry Co., Ltd. (2392.TW)

Chicony Electronics (2385.TW) Compal Electronics Inc. (2324.TW) Darfon Electronics (8163.TW)

Digital China Holdings Ltd. (0861.HK) Dynapack International Technology Corp. (3211.TWO)

Epistar Corporation (2448.TW)

Everlight Electronics (2393.TW) Foxconn Technology Co., Ltd. (2354.TW) Hon Hai Precision Industry Co., Ltd. (2317.TW)

Inventec Inc. (2356.TW) Ju Teng International Co., Ltd. (3336.HK) Lenovo Group Ltd. (0992.HK)

Pegatron Corp. (4938.TW) Quanta Computer Inc. (2382.TW) Samsung SDI (006400.KS)

Shin Zu Shing Co., Ltd. (3376.TW) Simplo Technology Co., Ltd. (6121.TWO) Skyworth Digital Holdings Ltd. (0751.HK)

Sunrex Technology (2387.TW) Synnex Technology International Corp. (2347.TW)

TPV Technology Ltd. (0903.HK)

Wistron Corporation (3231.TW)

Asia ex-Japan LCD Displays

Asia Pacific Systems (054620.KS) AU Optronics Corp. (2409.TW) Cheil Industries (001300.KS)

Chimei InnoLux Corp. (3481.TW) Coretronic Corporation (5371.TWO) E Ink Holdings Inc. (8069.TWO)

G-TECH Optoelectronics Corp. (3149.TW) LG Display (034220.KS) Novatek Microelectronics Corp. (3034.TW)

Radiant Opto-Electronics Corp. (6176.TW) SFA Engineering (056190.KS) Taiwan Surface Mounting Technology (6278.TW)

TPK Holding Co., Ltd. (3673.TW) Wintek Corporation (2384.TW)

Asia ex-Japan Semiconductors

Advanced Semiconductor Engineering (2311.TW)

Kinsus Interconnect Technology (3189.TW) MediaTek Inc. (2454.TW)

MStar Semiconductor, Inc. (3697.TW) Nan Ya Printed Circuit Board (8046.TW) Samsung Electronics (005930.KS)

Siliconware Precision Industries (2325.TW) SK Hynix (000660.KS) TSMC (2330.TW)

United Microelectronics Corp. (2303.TW) Vanguard International Semiconductor (5347.TWO)

Visual Photonics Epitaxy Co., Ltd. (2455.TW)

Win Semiconductors Corp. (3105.TWO)

Asia ex-Japan Wireless Equipment & Products

AAC Technologies Holdings (2018.HK) BYD Electronic (0285.HK) Catcher Technology Co., Ltd. (2474.TW)

Compal Communications Inc. (8078.TW) Foxconn International Holdings (2038.HK) HTC Corp. (2498.TW)


17 May 2012 131


Largan Precision Co., Ltd. (3008.TW) LG Electronics (066570.KS) Lite-on Technology Corp. (2301.TW)

Silitech Technology Corp. (3311.TW) Tripod Technology Corp. (3044.TW) Unimicron Technology Corp. (3037.TW)

Wistron NeWeb Corp. (6285.TW) Young Fast Optoelectronics Co., Ltd. (3622.TW)

European Software & IT Services

Amadeus (AMA.MC) AtoS (ATOS.PA) Aveva (AVV.L)

Capgemini (CAPP.PA) Dassault Systèmes (DAST.PA) Indra Sistemas (IDR.MC)

Logica (LOG.L) Micro Focus (MCRO.L) Misys (MSY.L)

Sage Group Plc (SGE.L) SAP AG (SAPG.DE) Software AG (SOWG.F)

Sopra (SOPR.PA) Steria (TERI.PA) Temenos (TEMN.S)

Tieto (TIE1V.HE) Wirecard (WDIG.DE)


Aixtron AG (AIXGn.DE) Alcatel-Lucent (ALUA.PA) ARM Holdings PLC (ARM.L)

ASML Holding NV (ASML.AS) CSR plc (CSR.L) Dialog Semiconductor (DLGS.DE)

Ericsson (ERICb.ST) Imagination Technologies (IMG.L) Infineon Technologies AG (IFXGn.DE)

Kudelski S.A. (KUD.S) Logitech International SA (LOGN.VX) Nokia (NOK1V.HE)

Pace plc (PIC.L) STMicroelectronics NV (STM.PA) Technicolor S.A. (TCH.PA)

TomTom NV (TOM2.AS)

Israel Technology

Amdocs Ltd. (DOX) Ceragon Networks Ltd. (CRNT) CEVA, Inc. (CEVA)

Elbit Systems Ltd. (ESLT) EZchip Semiconductor (EZCH) Mellanox Technologies (MLNX)

Nice Systems (NICE)

Japan Consumer Electronics

Casio Computer Co., Ltd. (6952.T) Funai Electric Co., Ltd. (6839.OS) JVC KENWOOD Corporation (6632.T)

Panasonic Corporation (6752.T) Pioneer Corporation (6773.T) Sharp Corporation (6753.T)

Sony Corporation (6758.T)

Japan Display & Lighting

Asahi Glass Co., Ltd. (5201.T) Nippon Electric Glass Co., Ltd. (5214.T) Nippon Sheet Glass Co., Ltd. (5202.T)

Japan Electronic Components

Hirose Electric Co., Ltd. (6806.T) Ibiden Co., Ltd. (4062.T) Kyocera Corp. (6971.T)

Murata Manufacturing Co., Ltd. (6981.OS) NGK Spark Plug Co., Ltd. (5334.T) NHK Spring Co., Ltd. (5991.T)

Nidec Corp. (6594.OS) Rohm Co., Ltd. (6963.OS) Shinko Electric Ind. (6967.T)

Taiyo Yuden Co., Ltd. (6976.T) TDK Corp. (6762.T)

Japan Precision Instruments

Canon Inc. (7751.T) Canon Marketing Japan Inc. (8060.T) Citizen Holdings Co., Ltd. (7762.T)

Dainippon Screen Mfg. Co. Ltd. (7735.T) FUJIFILM Holdings Corp. (4901.T) GS Yuasa Corporation (6674.T)

Hitachi High-Technologies Corp. (8036.T) HORIBA Ltd. (6856.T) Hoya Corp. (7741.T)

JEOL Ltd. (6951.T) Konica Minolta Holdings Inc. (4902.T) NIKON Corp. (7731.T)

Olympus Corp. (7733.T) OMRON Corp. (6645.OS) Ricoh Co., Ltd. (7752.T)

Seiko Epson Corp. (6724.T) Shibaura Mechatronics Corp. (6590.T) Shimadzu Corp. (7701.T)

Tokyo Electron Ltd. (8035.T) TOPCON CORP. (7732.T) ULVAC Inc. (6728.T)

U.S. Clean Technology & Renewables

A123 Systems Inc. (AONE) Ameresco Inc. (AMRC) Elster Group SE (ELT)

First Solar Inc. (FSLR) GT Advanced Technologies Inc. (GTAT) Itron Inc. (ITRI)

Power-One Inc. (PWER) Tesla Motors Inc. (TSLA) Trina Solar Ltd. (TSL)

Yingli Green Energy Holding Co., Ltd. (YGE)

U.S. Data Networking & Wireline Equipment


17 May 2012 132


Acme Packet, Inc. (APKT) Adtran Inc. (ADTN) ARRIS Group, Inc. (ARRS)

Aruba Networks Inc. (ARUN) BroadSoft Inc. (BSFT) CIENA Corp. (CIEN)

Cisco Systems, Inc. (CSCO) F5 Networks, Inc. (FFIV) Juniper Networks (JNPR)

NETGEAR, Inc. (NTGR) Polycom, Inc. (PLCM) Riverbed Technology, Inc. (RVBD)

ShoreTel Inc. (SHOR) Tellabs, Inc. (TLAB)

U.S. Display & Lighting

Aixtron SE (AIXG) Corning Inc. (GLW) Cree Inc. (CREE)

IPG Photonics (IPGP) Orbotech (ORBK) SemiLEDs Corp. (LEDS)

Veeco Instruments Inc. (VECO)

U.S. Internet

Amazon.com, Inc. (AMZN) AOL Inc. (AOL) Demand Media, Inc. (DMD)

eBay, Inc. (EBAY) Expedia, Inc. (EXPE) Google Inc. (GOOG)

Groupon, Inc. (GRPN) HomeAway, Inc. (AWAY) IAC/InterActiveCorp (IACI)

LinkedIn Corporation (LNKD) Millennial Media Inc. (MM) Netflix Inc. (NFLX)

OpenTable, Inc. (OPEN) Pandora Media Inc. (P) Priceline.com Inc. (PCLN)

QuinStreet, Inc. (QNST) ReachLocal, Inc. (RLOC) Shutterfly, Inc. (SFLY)

TripAdvisor (TRIP) Vistaprint N.V. (VPRT) WebMD Health Corp. (WBMD)

Yahoo! Inc. (YHOO) Zynga Inc. (ZNGA)

U.S. IT Consulting & Computer Services

Acacia Research Corp. (ACTG) Accenture Plc (ACN) Alliance Data Systems Corp. (ADS)

Camelot Information Systems (CIS) Cognizant Technology Solutions (CTSH) Computer Sciences Corp. (CSC)

CoreLogic, Inc. (CLGX) EPAM Systems Inc (EPAM) Fiserv Inc. (FISV)

FleetCor Technologies, Inc. (FLT) Global Payments Inc. (GPN) Lender Processing Services, Inc. (LPS)

MasterCard Inc. (MA) RPX Corporation (RPXC) Total System Services Inc. (TSS)

VeriFone Systems Inc. (PAY) Visa Inc. (V) Western Union Co. (WU)

U.S. IT Hardware

3D Systems Corp. (DDD) Apple, Inc. (AAPL) Dell Inc. (DELL)

EMC Corp. (EMC) Hewlett-Packard (HPQ) IBM Corp. (IBM)

Ingram Micro Inc. (IM) Lexmark International (LXK) NetApp, Inc. (NTAP)

Seagate Technology (STX) Tech Data Corp. (TECD) Western Digital Corp. (WDC)

Xerox Co. (XRX)

U.S. Semiconductor Capital Equipment

Advanced Energy (AEIS) Applied Materials (AMAT) Brooks Automation (BRKS)

Cymer, Inc. (CYMI) FormFactor, Inc. (FORM) Intermolecular Inc. (IMI)

KLA-Tencor (KLAC) Lam Research (LRCX) LTX-Credence Corp. (LTXC)

MKS Instruments (MKSI) Novellus Systems (NVLS) Teradyne Inc. (TER)

U.S. Semiconductors

Advanced Micro Devices (AMD) Altera Corp. (ALTR) Analog Devices (ADI)

Atmel Corp. (ATML) Avago Technologies Ltd. (AVGO) Broadcom Corp. (BRCM)

Cavium Inc. (CAVM) Cypress Semiconductor Corp. (CY) Entropic Communications Inc. (ENTR)

Freescale Semiconductor Holdings (FSL) Integrated Device Technology, Inc. (IDTI) Intel Corp. (INTC)

Linear Technology (LLTC) LSI Corp. (LSI) M/A-COM Technology Solutions Holdings, Inc. (MTSI)

MagnaChip Semiconductor (MX) Marvell Technology Group, Ltd. (MRVL) Maxim Integrated Products (MXIM)

Microchip Technology (MCHP) Micron Technology, Inc. (MU) NVIDIA Corp. (NVDA)

NXP Semiconductors NV (NXPI) RF Micro Devices (RFMD) Silicon Laboratories, Inc. (SLAB)


17 May 2012 133


Skyworks Solutions, Inc. (SWKS) Spansion Inc. (CODE) Texas Instruments, Inc. (TXN)

Triquint Semiconductor (TQNT) Volterra Semiconductor Corp. (VLTR) Xilinx, Inc. (XLNX)

U.S. Software

Ariba, Inc. (ARBA) Autodesk Inc. (ADSK) Citrix Systems (CTXS)

Cornerstone OnDemand Inc. (CSOD) DealerTrack Holdings (TRAK) Ellie Mae Inc. (ELLI)

Informatica Corp. (INFA) Intuit Inc. (INTU) LogMeIn, Inc. (LOGM)

Microsoft Corp. (MSFT) NetSuite Inc. (N) Oracle Corp. (ORCL)

Parametric Technology (PMTC) Qlik Tech (QLIK) Salesforce.com Inc. (CRM)

SAP AG (SAP) Symantec Corp. (SYMC) Tangoe Inc (TNGO)

Teradata Corp. (TDC) TIBCO Software (TIBX) VMware Inc. (VMW)

U.S. Wireless Equipment

Comverse Technology, Inc. (CMVT) Ericsson (ERIC) InterDigital, Inc. (IDCC)

Motorola Mobility Holdings (MMI) Motorola Solutions, Inc. (MSI) Nokia (NOK)

QUALCOMM, Inc. (QCOM) Research In Motion (RIMM)

Distribution of Ratings:

Barclays Equity Research has 2299 companies under coverage.

43% have been assigned a 1-Overweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Buy rating; 55% of companies with this rating are investment banking clients of the Firm.

42% have been assigned a 2-Equal Weight rating which, for purposes of mandatory regulatory disclosures, is classified as a Hold rating; 48% of companies with this rating are investment banking clients of the Firm.

13% have been assigned a 3-Underweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Sell rating; 41% of companies with this rating are investment banking clients of the Firm.

Guide to the Barclays Research Price Target:

Each analyst has a single price target on the stocks that they cover. The price target represents that analyst's expectation of where the stock will trade in the next 12 months. Upside/downside scenarios, where provided, represent potential upside/potential downside to each analyst's price target over the same 12-month period.

Barclays offices involved in the production of equity research:

London

Barclays Bank PLC (Barclays, London)

New York

Barclays Capital Inc. (BCI, New York)

Tokyo

Barclays Capital Japan Limited (BCJL, Tokyo)

São Paulo

Banco Barclays S.A. (BBSA, São Paulo)

Hong Kong

Barclays Bank PLC, Hong Kong branch (Barclays Bank, Hong Kong)

Toronto

Barclays Capital Canada Inc. (BCCI, Toronto)

Johannesburg

Absa Capital, a division of Absa Bank Limited (Absa Capital, Johannesburg)

Mexico City

Barclays Bank Mexico, S.A. (BBMX, Mexico City)

Taiwan

Barclays Capital Securities Taiwan Limited (BCSTW, Taiwan)

Seoul


17 May 2012 134


Barclays Capital Securities Limited (BCSL, Seoul)

Mumbai

Barclays Securities (India) Private Limited (BSIPL, Mumbai)

Singapore

Barclays Bank PLC, Singapore branch (Barclays Bank, Singapore)


17 May 2012 135


LG Display (034220 KS / 034220.KS) Stock Rating Sector View

KRW 22200.00 (11-May-2012) 1-OVERWEIGHT 1-POSITIVE

Rating and Price Target Chart - KRW (as of 11-May-2012) Currency=KRW

Date Closing Price Rating Price Target

Closing Price Target Price Rating Change

Jul- 09 Jan- 10 Jul- 10 Jan- 11 Jul- 11 Jan- 12

16,000

18,000

20,000

22,000

24,000

26,000

28,000

30,000

32,000

34,000

36,000

38,000

40,000

42,000

44,000

46,000

48,000

28-Nov-2011 24450.00 1-Overweight 36000.00

Link to Barclays Live for interactive charting

Barclays Bank PLC and/or an affiliate is a market-maker and/or liquidity provider in securities issued by LG Display or one of its affiliates.

Barclays Bank PLC and/or an affiliate trades regularly in the securities of LG Display.

Barclays Bank PLC and/or an affiliate has received non-investment banking related compensation from LG Display within the past 12 months.

LG Display is, or during the past 12 months has been, a non-investment banking client (securities related services) of Barclays Bank PLC and/or an affiliate.

Valuation Methodology: We use the cyclical context of historical P/B and apply the mid-cycle (three-year average) P/B of 1.2x to set our target price of KRW36,000, given our expectation of an upcycle in specialty panels (accounting for 25% of revenue) combined with a recovery cycle in commodity panels (accounting for 75% of revenue). We use a relatively shorter range for historical valuation as the company has shown a de-rating trend since 2006 when global LCD TV penetration started to exceed 50% on an annual basis.

Risks which May Impede the Achievement of the Barclays Research Price Target: The key risks that could keep our price target from being achieved, in our view, include the following: 1) weaker-than-expected TV demand in China after the market reaches a saturation point as well as in Europe due to concerns about the macro economy in that region and 2) execution risks in manufacturing specialty panels, especially for the New iPad and iPhone 5.


17 May 2012 136


Samsung Electronics (005930 KS / 005930.KS) Stock Rating Sector View

KRW 1303000.00 (11-May-2012) 1-OVERWEIGHT 2-NEUTRAL



30-Apr-2012 1390000.00 1800000.00

15-Mar-2012 1250000.00 1500000.00

30-Jan-2012 1115000.00 1300000.00



0.4M

0.6M

0.8M

1.0M

1.2M

1.4M

1.6M

1.8M

2.0M

08-Nov-2011 970000.00 1-Overweight 1250000.00


Barclays Bank PLC and/or an affiliate is a market-maker and/or liquidity provider in securities issued by Samsung Electronics or one of its affiliates.

Barclays Bank PLC and/or an affiliate has received compensation for investment banking services from Samsung Electronics in the past 12 months.

Barclays Bank PLC and/or an affiliate trades regularly in the securities of Samsung Electronics.

Barclays Bank PLC and/or an affiliate has received non-investment banking related compensation from Samsung Electronics within the past 12 months.

Samsung Electronics is, or during the past 12 months has been, an investment banking client of Barclays Bank PLC and/or an affiliate.

Samsung Electronics is, or during the past 12 months has been, a non-investment banking client (securities related services) of Barclays Bank PLC and/or an affiliate.

Valuation Methodology: Our 12-month price target of KRW1.8mn for SEC is based on a cyclical context historical P/B valuation. In our valuation, we apply a target P/B multiple of 2.3x to our estimate for the average BVPS of 2012 and 2013. Our target multiple is higher than the stock's historical average for the past 10 years as the expected ROE for 2012 of 22% exceeds the 10-year average of 20%. Our new price target of KRW1.8mn is applicable to 12.5 x 2012 P/E, which is in line with the 10-year average of 12.0x.

Risks which May Impede the Achievement of the Barclays Research Price Target: Key risks to our price target and, thus, our positive call on SEC include 1) a double dip in global economy, which might impact demand across the board; 2) much slower-than-expected (flexible) OLED ramp-up, which is the key to market share gains in smart devices, in our view; and 3) materially negative results from any kind of lawsuit.


17 May 2012 137


Samsung SDI (006400 KS / 006400.KS) Stock Rating Sector View

KRW 165500.00 (11-May-2012) 1-OVERWEIGHT 2-NEUTRAL



30-Apr-2012 163000.00 220000.00



80,000.00

0.10M

0.12M

0.14M

0.16M

0.18M

0.20M

0.22M

0.24M

10-Feb-2012 151500.00 1-Overweight 180000.00


Barclays Bank PLC and/or an affiliate is a market-maker and/or liquidity provider in securities issued by Samsung SDI or one of its affiliates.

Barclays Bank PLC and/or an affiliate trades regularly in the securities of Samsung SDI.

Barclays Bank PLC and/or an affiliate has received non-investment banking related compensation from Samsung SDI within the past 12 months.

Samsung SDI is, or during the past 12 months has been, a non-investment banking client (securities related services) of Barclays Bank PLC and/or an affiliate.

Valuation Methodology: Our 12-month price target of KRW220,000 for Samsung SDI is set using a P/B-based SOTP valuation, which is equivalent to 16.9x 2012E EPS and 1.6x 2012E BPS. We apply a SOTP valuation to reflect different profitablilty of each division.In valuing SDI's investment assets, we reflect a 15% discount to the listed companies and a 30% discount to the unlisted companies.

Risks which May Impede the Achievement of the Barclays Research Price Target: Key risks to our KRW220,000 PT for Samsung SDI are: 1) aggressive capacity expansion at battery competitors that could create pressure on product ASP and 2) continued delay in commercialisation of Ex batteries. General risks to the OLED sector include: 1) worse-than-expected execution of OLED development, especially for TV applications; 2) a lower-than-expected ASP premium over LCD; and 3) the emergence of an alternative technology such as crystal LEDs that could have a competitive edge in initial investment cost and power consumption.

DISCLAIMER:

This publication has been prepared by the Corporate and Investment Banking division of Barclays Bank PLC and/or one or more of its affiliates (collectively and each individually, "Barclays"). It has been issued by one or more Barclays legal entities within its Corporate and Investment Banking division as provided below. It is provided to our clients for information purposes only, and Barclays makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to any data included in this publication. Barclays will not treat unauthorized recipients of this report as its clients. Prices shown are indicative and Barclays is not offering to buy or sell or soliciting offers to buy or sell any financial instrument.

Without limiting any of the foregoing and to the extent permitted by law, in no event shall Barclays, nor any affiliate, nor any of their respective officers, directors, partners, or employees have any liability for (a) any special, punitive, indirect, or consequential damages; or (b) any lost profits, lost revenue, loss of anticipated savings or loss of opportunity or other financial loss, even if notified of the possibility of such damages, arising from any use of this publication or its contents.

Other than disclosures relating to Barclays, the information contained in this publication has been obtained from sources that Barclays Research believes to be reliable, but Barclays does not represent or warrant that it is accurate or complete. Barclays is not responsible for, and makes no warranties whatsoever as to, the content of any third-party web site accessed via a hyperlink in this publication and such information is not incorporated by reference.

The views in this publication are those of the author(s) and are subject to change, and Barclays has no obligation to update its opinions or the information in this publication. The analyst recommendations in this publication reflect solely and exclusively those of the author(s), and such opinions were prepared independently of any other interests, including those of Barclays and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the clients who receive it. The securities discussed herein may not be suitable for all investors. Barclays recommends that investors independently evaluate each issuer, security or instrument discussed herein and consult any independent advisors they believe necessary. The value of and income from any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results.

This communication is being made available in the UK and Europe primarily to persons who are investment professionals as that term is defined in Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion Order) 2005. It is directed at, and therefore should only be relied upon by, persons who have professional experience in matters relating to investments. The investments to which it relates are available only to such persons and will be entered into only with such persons. Barclays Bank PLC is authorised and regulated by the Financial Services Authority ("FSA") and a member of the London Stock Exchange.

The Corporate and Investment Banking division of Barclays undertakes U.S. securities business in the name of its wholly owned subsidiary Barclays Capital Inc., a FINRA and SIPC member. Barclays Capital Inc., a U.S. registered broker/dealer, is distributing this material in the United States and, in connection therewith accepts responsibility for its contents. Any U.S. person wishing to effect a transaction in any security discussed herein should do so only by contacting a representative of Barclays Capital Inc. in the U.S. at 745 Seventh Avenue, New York, New York 10019.

Non-U.S. persons should contact and execute transactions through a Barclays Bank PLC branch or affiliate in their home jurisdiction unless local regulations permit otherwise.

Barclays Bank PLC, Paris Branch (registered in France under Paris RCS number 381 066 281) is regulated by the Autorité des marchés financiers and the Autorité de contrôle prudentiel. Registered office 34/36 Avenue de Friedland 75008 Paris.

This material is distributed in Canada by Barclays Capital Canada Inc., a registered investment dealer and member of IIROC (www.iiroc.ca).

Subject to the conditions of this publication as set out above, Absa Capital, the Investment Banking Division of Absa Bank Limited, an authorised financial services provider (Registration No.: 1986/004794/06), is distributing this material in South Africa. Absa Bank Limited is regulated by the South African Reserve Bank. This publication is not, nor is it intended to be, advice as defined and/or contemplated in the (South African) Financial Advisory and Intermediary Services Act, 37 of 2002, or any other financial, investment, trading, tax, legal, accounting, retirement, actuarial or other professional advice or service whatsoever. Any South African person or entity wishing to effect a transaction in any security discussed herein should do so only by contacting a representative of Absa Capital in South Africa, 15 Alice Lane, Sandton, Johannesburg, Gauteng 2196. Absa Capital is an affiliate of Barclays.

In Japan, foreign exchange research reports are prepared and distributed by Barclays Bank PLC Tokyo Branch. Other research reports are distributed to institutional investors in Japan by Barclays Capital Japan Limited. Barclays Capital Japan Limited is a joint-stock company incorporated in Japan with registered office of 6-10-1 Roppongi, Minato-ku, Tokyo 106-6131, Japan. It is a subsidiary of Barclays Bank PLC and a registered financial instruments firm regulated by the Financial Services Agency of Japan. Registered Number: Kanto Zaimukyokucho (kinsho) No. 143.

Barclays Bank PLC, Hong Kong Branch is distributing this material in Hong Kong as an authorised institution regulated by the Hong Kong Monetary Authority. Registered Office: 41/F, Cheung Kong Center, 2 Queen's Road Central, Hong Kong.

This material is issued in Taiwan by Barclays Capital Securities Taiwan Limited. This material on securities not traded in Taiwan is not to be construed as 'recommendation' in Taiwan. Barclays Capital Securities Taiwan Limited does not accept orders from clients to trade in such securities. This material may not be distributed to the public media or used by the public media without prior written consent of Barclays.

This material is distributed in South Korea by Barclays Capital Securities Limited, Seoul Branch.

All equity research material is distributed in India by Barclays Securities (India) Private Limited (SEBI Registration No: INB/INF 231292732 (NSE), INB/INF 011292738 (BSE), Registered Office: 208 | Ceejay House | Dr. Annie Besant Road | Shivsagar Estate | Worli | Mumbai - 400 018 | India, Phone: + 91 22 67196363). Other research reports are distributed in India by Barclays Bank PLC, India Branch.

Barclays Bank PLC Frankfurt Branch distributes this material in Germany under the supervision of Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin).

This material is distributed in Malaysia by Barclays Capital Markets Malaysia Sdn Bhd.

This material is distributed in Brazil by Banco Barclays S.A.

This material is distributed in Mexico by Barclays Bank Mexico, S.A.

Barclays Bank PLC in the Dubai International Financial Centre (Registered No. 0060) is regulated by the Dubai Financial Services Authority (DFSA). Principal place of business in the Dubai International Financial Centre: The Gate Village, Building 4, Level 4, PO Box 506504, Dubai, United Arab Emirates. Barclays Bank PLC-DIFC Branch, may only undertake the financial services activities that fall within the scope of its existing DFSA licence. Related financial products or services are only available to Professional Clients, as defined by the Dubai Financial Services Authority.

Barclays Bank PLC in the UAE is regulated by the Central Bank of the UAE and is licensed to conduct business activities as a branch of a commercial bank incorporated outside the UAE in Dubai (Licence No.: 13/1844/2008, Registered Office: Building No. 6, Burj Dubai Business Hub, Sheikh Zayed Road, Dubai City) and Abu Dhabi

(Licence No.: 13/952/2008, Registered Office: Al Jazira Towers, Hamdan Street, PO Box 2734, Abu Dhabi).

Barclays Bank PLC in the Qatar Financial Centre (Registered No. 00018) is authorised by the Qatar Financial Centre Regulatory Authority (QFCRA). Barclays Bank PLC-QFC Branch may only undertake the regulated activities that fall within the scope of its existing QFCRA licence. Principal place of business in Qatar: Qatar Financial Centre, Office 1002, 10th Floor, QFC Tower, Diplomatic Area, West Bay, PO Box 15891, Doha, Qatar. Related financial products or services are only available to Business Customers as defined by the Qatar Financial Centre Regulatory Authority.

This material is distributed in the UAE (including the Dubai International Financial Centre) and Qatar by Barclays Bank PLC.

This material is distributed in Saudi Arabia by Barclays Saudi Arabia ('BSA'). It is not the intention of the publication to be used or deemed as recommendation, option or advice for any action (s) that may take place in future. Barclays Saudi Arabia is a Closed Joint Stock Company, (CMA License No. 09141-37). Registered office Al Faisaliah Tower, Level 18, Riyadh 11311, Kingdom of Saudi Arabia. Authorised and regulated by the Capital Market Authority, Commercial Registration Number: 1010283024.

This material is distributed in Russia by OOO Barclays Capital, affiliated company of Barclays Bank PLC, registered and regulated in Russia by the FSFM. Broker License #177-11850-100000; Dealer License #177-11855-010000. Registered address in Russia: 125047 Moscow, 1st Tverskaya-Yamskaya str. 21.

This material is distributed in Singapore by the Singapore branch of Barclays Bank PLC, a bank licensed in Singapore by the Monetary Authority of Singapore. For matters in connection with this report, recipients in Singapore may contact the Singapore branch of Barclays Bank PLC, whose registered address is One Raffles Quay Level 28, South Tower, Singapore 048583.

Barclays Bank PLC, Australia Branch (ARBN 062 449 585, AFSL 246617) is distributing this material in Australia. It is directed at 'wholesale clients' as defined by Australian Corporations Act 2001.

IRS Circular 230 Prepared Materials Disclaimer: Barclays does not provide tax advice and nothing contained herein should be construed to be tax advice. Please be advised that any discussion of U.S. tax matters contained herein (including any attachments) (i) is not intended or written to be used, and cannot be used, by you for the purpose of avoiding U.S. tax-related penalties; and (ii) was written to support the promotion or marketing of the transactions or other matters addressed herein. Accordingly, you should seek advice based on your particular circumstances from an independent tax advisor.

© Copyright Barclays Bank PLC (2012). All rights reserved. No part of this publication may be reproduced in any manner without the prior written permission of Barclays. Barclays Bank PLC is registered in England No. 1026167. Registered office 1 Churchill Place, London, E14 5HP. Additional information regarding this publication will be furnished upon request.

Documents

17 May 2012 GLOBAL TECHNOLOGY OUTLOOK · GLOBAL TECHNOLOGY OUTLOOK: A LOOK AT THE THREE COLUMNS OF TECH INVESTING 2012 SECTOR UPDATE AND LONG-TERM OUTLOOK. Barclays | Global Technology