Bill BradyBill BradyHead of Global Technology Corporate FinanceHead of Global Technology Corporate FinanceCredit Suisse First Boston Technology GroupCredit Suisse First Boston Technology GroupNovember 9, 2001November 9, 2001

Plop, Plop, Fizz, Fizz, Oh What A Relief It Is!Plop, Plop, Fizz, Fizz, Oh What A Relief It Is!

TeleSoft Annual MeetingTeleSoft Annual Meeting

AgendaAgenda

1. Changing Leaders in the Technology Market

2. Taming the Volatile Equity Markets

3. The New M&A Environment

4. What to Expect in the Future

5. Implications for Liquidity Options

6. CSFB Technology Group - The Clear Leader

Source: Factset based on data from 4/9/90 and 10/31/2001.

Category

> $1 Bn

$100MM - 1Bn

< $100MM

33

118

134

$194

$38

$5

322

582

759

$2,807

$210

$23

# Companies# Companies Market Cap ($Bn)Market Cap ($Bn)

# Companies# Companies

19901990 20012001AllAll

Market Cap ($Bn)Market Cap ($Bn)

285 $237 $3,0401663

Dramatic Growth in New Companies and Market CapDramatic Growth in New Companies and Market CapTechnology Companies and Market Cap by Size Now vs. 1990Technology Companies and Market Cap by Size Now vs. 1990

16.5% CAGR 24.7% CAGR

The Mighty Have Fallen…The Mighty Have Fallen…Top 40 US-Traded Technology Companies 1 year agoTop 40 US-Traded Technology Companies 1 year ago

* Companies not included in 2001 top 40 list.Technology Group

$54.552.351.851.351.348.746.044.243.241.238.235.734.033.232.731.330.330.129.928.1

$3867.4

Cisco Systems Microsoft

IntelNokiaEMCOracleSun MicrosystemsIBMNortel Networks AOL Time WarnerEricsson

Hewlett-PackardTexas InstrumentsLucent TechnologiesJDS UniphaseDellSiemens

* Juniper NetworksVeritas Alcatel

Motorola* Broadcom

CompaqTSMC

PhillipsQualcommSTMicroelectronics

* Siebel Applied Materials

Automatic Data Processing* Network Appliance* Marconi PLC* I2 Technologies

NEC* Yahoo* Ariba* Palm* Ciena SAP * GemstarTOTAL

$387.4366.1302.9186.3216.9220.4178.5174.8136.6117.0110.9

90.684.978.978.376.475.561.957.657.5

Market Value ($BN)Market Value ($BN)

$123.9313.2164.3

96.227.275.433.0

187.718.6

209.034.432.648.522.910.562.643.1

7.111.316.1

(68.0)(14.4)(45.7)(48.4)(87.5)(65.8)(81.5)

7.4 (86.4)

78.6(69.0)(64.0)(42.9)(71.0)(86.6)(18.1)

(42.9) (88.5)(80.4)(72.0)

10/31/2000 10/31/2001 %Change

$36.28.6

14.842.329.637.425.0

7.527.832.2

4.41.22.0

15.26.20.81.45.3

18.28.4

$1862.2

(33.6)(83.6)(71.4)(17.5)(42.3)

(23.2)(45.7)(83.0)(36.6)(21.8)

(88.5) (96.6)(94.1)(54.2)(81.0)

(97.4) (95.4)(82.4)(39.1)(70.1)(51.8)

10/31/2001 10/31/2000 %Change

% %

Market Value ($BN)Market Value ($BN)

$313.2187.7164.3137.8123.9

96.275.462.6

48.5 43.142.337.436.2

34.4 33.032.632.230.229.627.8

$27.225.825.022.918.718.618.217.816.115.215.114.8

14.3 14.113.713.713.612.411.310.5

10/31/200110/31/2001Market ValueMarket Value

($BN)($BN)

10/31/200110/31/2001Market ValueMarket Value

($BN)($BN)

Microsoft IBMIntelAOL Time Warner Cisco Systems NokiaOracleDellTexas InstrumentsSiemensTSMCQualcomm MotorolaEricssonSun MicrosystemsHewlett-PackardAutomatic Data ProcessingElectronic Data SystemsPhilipsApplied Materials

EMC* First Data Corp

STMicroelectronicsLucent Technologies

* UMCNortel Networks

SAP* Computer Associates

AlcatelNEC

* Maxim Integrated ProductsCompaq

* Ebay* Accenture* Concord EFS* Analog Devices* Micron Technology* Linear Technology

Veritas JDS Uniphase

This Year’s Leader BoardThis Year’s Leader BoardTop 40 US-Traded Technology Companies NowTop 40 US-Traded Technology Companies Now

* Companies not included in 2000 top 40 list.

*

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

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Moore’s Law of Nasdaq Ran Out of Gas in Y2KMoore’s Law of Nasdaq Ran Out of Gas in Y2K

January 1983 - Present

Doubles in 8 years

Doubles in 4 years

Doubles in 2 years

Doubles in 1 year

$40.1

$18.1 $17.4

$149.6

$92.0

$58.3

$49.5$40.9$33.2

0

20

40

60

80

100

120

140

160

1993 1994 1995 1996 1997 1998 1999 2000 2001YTD

ConvertiblesFollow-OnsIPOs

Equity New Issue MarketEquity New Issue MarketTechnology Equity & Equity-Related Offerings, 1993-2001Technology Equity & Equity-Related Offerings, 1993-2001

Source: Securities Data Company as of 10/31/01.

US and Int’l Technology transactions completed.

100

168

410

44

366

240

51

27

66

57

49

60

111

221

124

6135

145

226

40206295

1457830

14796

$ Billions$ Billions

Performance of Top IPOs of 1999 and 2000Performance of Top IPOs of 1999 and 2000

Top 50 IPOs of 1999Top 50 IPOs of 1999 Top 50 IPOs of 2000Top 50 IPOs of 20001805%

78%-6%

-92%-72%

1004%

-200%

0%

200%

400%

600%

800%

1000%

1200%

1400%

1600%

1800%

2000%

IPO Priceto

12/31/99

IPO Priceto High

High to5/23/00

5/23/00 to7/17/00

7/17/00 toCurrent

IPO Priceto Current

328%

103%

-32%

-66%-62%

84%

-100%

-50%

0%

50%

100%

150%

200%

250%

300%

350%

400%

IPO Priceto

12/29/00

IPO Priceto High

High to5/23/00

5/23/00 to7/17/00

7/17/00 toCurrent

IPO Priceto Current

Continued Volatility Results in Short Market WindowsContinued Volatility Results in Short Market Windows

# of Negative Pre-Announcements (1)

(1) 3 weeks into each quarter

1Q 2001 2Q 2001 3Q 2001 4Q 2001

61 110 118 161

1/2/01 4/4/01 6/19/01 9/23/01- - - -

1/24/01 5/22/01 7/2/01 10/16/01

# Days 22 48 13 23 27 23

Trough to Peak 24.8% 41.2% 7.8% 21.0% 23.7% 22.9%

1/24/01 5/22/01 7/2/01 10/16/01- - - -

4/4/01 6/19/01 9/23/01 10/23/01

# Days 70 28 83 7 47 49

Peak to Trough -42.7% -13.9% -33.8% -1.0% -22.8% -23.8%

PEAKS Average Median

TROUGHS Average Median

$153.0 $123.2

$318.9

$691.0

$33.8$10.0 $16.6

$111.1$97.3

$0.0

$100.0

$200.0

$300.0

$400.0

$500.0

$600.0

$700.0

$800.0

1993 1994 1995 1996 1997 1998 1999 2000 2001

M&A MarketM&A MarketTechnology Mergers & Acquisitions, 1993-2001Technology Mergers & Acquisitions, 1993-2001

$ Billions$ Billions

YTD

Source: Securities Data Company as of 10/31/2001.Incl. Domestic and Int’l transactions, pending or completed,

with transaction value >$50MM, excl. share repurchases.

95 95 228228 833833

289289

120 120 164 164 48748765 65 3535# of

Deals

Perceptions Towards Strategic Transactions Have Perceptions Towards Strategic Transactions Have Changed in This Difficult Market Environment…Changed in This Difficult Market Environment…Perceptions Towards Strategic Transactions Have Perceptions Towards Strategic Transactions Have Changed in This Difficult Market Environment…Changed in This Difficult Market Environment…

THEN: MAY 1999 NOW: OCTOBER 2001

Accretion/DilutionAccretion/Dilution

Acquirors willing to accept significant earnings dilution for promise of significant growth opportunity

Acquirors typically accept zero to small amount of earnings dilution in exchange for growth prospects

Little tolerance for cash burn

ValuationValuation

Many bidders drove up valuation Public market offered liquidity

events for startups, driving up valuation

Few acquirors in this market Public market more stringent;

therefore, fewer startups obtaining liquidity

Time to revenueTime to revenue

Revenue could be more than one year away

Clear path to revenue and profitability

Must be at least in customer trial phase of development

Customer baseCustomer base

Potential for customers Small base, many in trial stage Highly concentrated revenue

Quality, well-financed and diversified customer base with recurring revenue stream

Consolidation activity has slowed significantly from the torrid pace of early 2000

Operating issues have forced many traditional acquirers to focus internally

Market volatility has created uncertainty as to “true values” and hesitancy to make commitments

Current Status

Public MarketScrutiny

Public equity markets have become less forgiving of ill conceived or poorly executed transactions

Heightened scrutiny of both long term strategic and near term financial implications of any transaction

Integration plans must be well thought out and expertly communicated to the market at time of announcement

Earnings dilution is a major concern

……Resulting in a Challenging Near-Term EnvironmentResulting in a Challenging Near-Term Environment……Resulting in a Challenging Near-Term EnvironmentResulting in a Challenging Near-Term Environment

Valuation

Uncertainty over proper valuation levels remains

Many sellers focused on last year’s valuations

Valuation analysis has returned to traditional earnings and cash flow based methodologies

Consolidators no longer playing with “funny-money”

(90%) (90%)

(68%)(74%)

(100%)

(75%)

(50%)

(25%)

0%

Many Potential Buyers Have Seen Their Share Many Potential Buyers Have Seen Their Share Prices Plummet Over the Last YearPrices Plummet Over the Last YearMany Potential Buyers Have Seen Their Share Many Potential Buyers Have Seen Their Share Prices Plummet Over the Last YearPrices Plummet Over the Last Year

PERCENTAGE CHANGE IN STOCK PRICE SINCE MARCH 1, 2000

Comm. Equipment eBusiness Internet Infrastructure

Semiconductors Optical Internet

Nortel Lucent Alcatel Cisco

(94%) (98%) (98%)

(72%)

(100%)

(75%)

(50%)

(25%)

0%i2 Ariba C1 Siebel

(96%) (99%)

(80%)

(99%)(100%)

(75%)

(50%)

(25%)

0%Inktomi Akamai VeriSign InfoSpace

(56%)

(83%)(91%) (88%)(100%)

(75%)

(50%)

(25%)

0%Intel BroadcomPMC-SierraConexant

(94%) (98%) (94%)(85%)

(100%)

(75%)

(50%)

(25%)

0%

JDSUniphase Sycamore Corvis

New Focus

(88%) (93%)

(44%)

(23%)

(100%)

(75%)

(50%)

(25%)

0%Amazon Yahoo! AOL eBay

Note: Corvis and New Focus data is from IPO Pricing of $36.00 and $20.00, respectively.

Let’s not forget the companies that have gone bankrupt:

As a Result, Companies Have Begun to Use Cash As a Result, Companies Have Begun to Use Cash ToTo Fund Their AcquisitionsFund Their AcquisitionsAs a Result, Companies Have Begun to Use Cash As a Result, Companies Have Begun to Use Cash ToTo Fund Their AcquisitionsFund Their Acquisitions

With stock prices at record lows, the notion that cash is king is being reinforced

In particular, large cap companies with depressed P/Es are using cash as their preferred acquisition currency

Sellers prefer liquidity in these uncertain times

Interest rates are at unprecedented lows

Many companies are taking advantage of the convertible market’s tremendous appetite for technology issues to build “war chests”

Premium PaidAnnc. FD Equity NTM 1-Day 30-Days

Date Target / Acquiror Value ($MM) P/E Prior Prior Acquisition Currency

2/22/01 1,492 NM 89.9% 121.2% Cash

6/11/01 1,208 54.9 91.5% 101.9% Stock/Cash

4/24/01 1,000 - NA NA Cash

3/30/01 400 - NA NA Cash

10/2/01 200 - NA NA Cash

SELECTED ACQUIRORS USING CASH AS ACQUISITION CURRENCY

VC Returns Under PressureVC Returns Under PressureCumulative Vintage Year Performance of U.S. Venture Capital Funds Cumulative Vintage Year Performance of U.S. Venture Capital Funds

Source: Venture Economics Information Services

Pooled IRR average % (09/30/00)Pooled IRR average % (03/31/01) Pooled IRR average % (12/31/00)

Market Rallies and Subsequent DownturnsMarket Rallies and Subsequent Downturns

(1) Trailing P/E multiples.

MARKET RALLIES8/1/82 - 6/22/83

12/13/84 - 8/21/87

10/28/87 - 10/9/89

10/11/90 - 3/18/94

12/9/94 - 7/20/98

10/8/98 - 3/10/00

Length 11 33 24 42 44 17

Trough to Peak:NASDAQ 96% 91% 66% 147% 180% 256%S&P 500 60% 108% 54% 59% 165% 45%

Range of S&P

500P/E Multiples(1)

11x – 13x 10x – 22x 11x – 15x 14x – 26x 15x – 29x 28x - 34x

AND SUBSEQUENT DOWNTURNS

6/22/83 - 12/13/84

8/21/87 - 10/28/87

10/9/89 - 10/11/90

3/18/94 - 12/9/94

7/20/98 - 10/8/98

3/10/00 - 10/31/01

Length 18 2 12 9 3 20

Peak to Trough:NASDAQ -27% -36% -33% -11% -30% -67%S&P 500 -5% -31% -18% -5% -19% -24%

Range of S&P 500

P/E Multiples(1)

9x – 13x 15x – 20x 14x – 16x 15x – 20x 24x – 28x 23x – 29x

Net Market Move Net Market Move% CAGR % % CAGR %

NASDAQ 95% 8.5% 419% 16.1%S&P 500 176% 13.2% 259% 12.3%

Recessions Are Followed by Market RalliesRecessions Are Followed by Market Rallies

There have been 5 recessions in the U.S. since 1969

The average recession lasted for 12 months and resulted in a 2% contraction in GDP

During recessionary times, the S&P 500 has not demonstrated significant drops, except in ‘73 - ’75 (-23%)

Markets begin to recover one quarter before the trough and gain an average of 23% in the following 6 months

CSFB Technology Research anticipates that tech sectors should experience a recovery in the next 6 quarters, with a concentration during Q2 - Q3 of 2001

Expected Timing of Recovery by Sector

Overviews of Previous Recessions

Peak-to-Trough3M Pre - 3M Post

Trough

RecessionLength of

RecessionDecline in

GDPPerformance Of

S&P500Performance Of

S&P500

Dec-69 - Nov-70 12 Months -0.6% -7.0% 18.7%

Nov-73 - Mar-75 16 Months -3.0% -23.0% 38.8%

Jan-80 - Jul-80 7 Months -2.2% 12.7% 19.9%

Jul-81 - Nov-82 17 Months -2.9% 5.6% 23.9%

Jul-90 - Mar-91 9 Months -1.5% 4.8% 12.4%

Average 12 Months -2.0% -1.4% 22.7%

Q4'01 Q1'02 Q2'02 Q3'02 Q4'02 Q1'03

Comm. Equipment

Semiconductors

IT Services

Internet Infrastructure & Services

PC & Hardware

Electronics & Contract Manufacturing

Software

ImplicationsImplications

Return to “irrational exuberance” any time soonReturn to “irrational exuberance” any time soon

Indefinite losses will be bankableIndefinite losses will be bankable

Me-too, undifferentiated companies will be bankableMe-too, undifferentiated companies will be bankable

Valuations on private financings will hold upValuations on private financings will hold up

Don’t Count On:Don’t Count On:

Focus on business model, sponsorship, uniqueness, barriersFocus on business model, sponsorship, uniqueness, barriers

Develop alternative financing plans, merger partnersDevelop alternative financing plans, merger partners

Shift business models to accelerate profitability and cash flowShift business models to accelerate profitability and cash flow

Finance ahead of needs when windows present themselvesFinance ahead of needs when windows present themselves

Plan To:Plan To:

The Bar is Set Higher for IPOsThe Bar is Set Higher for IPOs

2000 2001

$2 - 5MM $10MM

Time to Profitability 6 - 8 Quarters 2 - 3 Quarters

Valuation Metrics Revenue Multiples P/E Multiples

Revenue Base (in quarter going public)

Equity Private Placement Market OverviewEquity Private Placement Market Overview

Flat to down rounds

Months, not weeks to complete

Fully-funded business plans only

Fewer buyers

3-5x returns to IPO within 1-2 years

Current M&A EnvironmentCurrent M&A Environment

Strategic rationale for M&A stronger than everStrategic rationale for M&A stronger than ever

Few deals near-term due to “reality distortion field”Few deals near-term due to “reality distortion field”

Strategic buyers’ currency and confidence reducedStrategic buyers’ currency and confidence reduced

Sellers’ value expectations need to adjustSellers’ value expectations need to adjust

Financial buyers’ interest growingFinancial buyers’ interest growing

Expect strong rebound in M&A as reality sets inExpect strong rebound in M&A as reality sets in

2000- 2001 Total TechnologyFinancing and M&A (Number of Deals)

The Clear Leader in Technology Investment BankingThe Clear Leader in Technology Investment Banking

2000- 2001 Total Technology Financing and M&A (Dollars in Billions)

Notes:Transactions announced 1/1/00 through10/31/01. Includes private placement deals.(1) JP Morgan deals include deals completed by H&Q.

402

240 238

197

166146

101 100

0

50

100

150

200

250

300

350

400

CSFB MS GS JPMCIT/SSB ML DBAB RS

$382.8

$352.2

$238.9

$192.8$185.0

$132.7$103.4

$81.1

$0

$50

$100

$150

$200

$250

$300

$350

$400

CSFB MS GS CIT/SSBJPM ML LEH BofA

CSFB: Clear Winners Do Not Need RecountsCSFB: Clear Winners Do Not Need Recounts

Reuters’ Survey of Fund Managers*

* In a survey dated July 19, 2000, Reuter’s surveyed 75 of the largest institutional managers of active US equity funds. Responses have been weighted by fund size.

Ranking

Category 1st Place 2nd Place

Investment Bank 2000 1999

Credit Suisse First Boston 23% 11%

Goldman Sachs 17 14

Morgan Stanley Dean Witter 16 14

Merrill Lynch 9 12

Salomon Smith Barney 6 12

Quality of new equity issues

Pricing of new equity issues

Quality of research product and service in the aftermarket

Aftermarket performance of equity issues

Equitable allocation of new issue product

Due diligence on new issues

Morgan Stanley

DLJ

Goldman Sachs

Morgan Stanley

Morgan Stanley

Morgan Stanley