3/22/2010 tonight's agenda
DESCRIPTION
TRANSCRIPT
3/22/2010
TONIGHT'S AGENDA
Portfolio Update Sell Research in Motion Today in Tech Elevator Pitches
PORTFOLIO UPDATEAnthony Vitiello
RECENT TRANSACTIONS
Sell 300 Shares of IBKR @ $16.30 on 3/16/2010 Sell 100 Shares of ADP @ 44.45 on 3/16/2010
ALL-STARS
3.81%
3.05%
2.04%
2.10%
1.68%
DOGS
5.75%
3.83%
3.03%
1.29%
2.31%
LARGEST HOLDINGS
Winn Dixie Stores:5.40%
Research in Motion5.12%
USG Corporation:4.89%
jetBlue Corporation:4.86%
Waters Corporation:4.56%
RESEARCH IN MOTION (RIMM)
WHO ARE THEY?
Research in Motion (RIMM) is Blackberry Hardware- Blackberry Phones Software- Operating system, Browsers etc. Service- EDGE network
STRENGTHS Dominant player in the “smart phone”
sector at about 40%Smart phones are gaining market share in
the Cell Phone market
No encroachment on core market - BusinessRoom to grow
Majority of Sales are US/Canada
WEAKNESSES
Recent trends have shown iphone higher growth ratesBlackBerry Storm is closest competitor but
not as Dynamic
< 1% Market Share in Asia
Less dynamic interface
Margin strength lossesPotential for margin compression
WHY SELL RIMM?
Primary Impetus: 20% gains Purchase price $61 Sell Price 73.50
(Guarantee a strong return and put the capital to use on a less precarious position)
Vulnerability to tech sector volatility Rapid product replacement tempo Unpredictability of competition Physical Capital exposure ( vs. intellectual)
TODAY IN TECHMichael Polark
AGENDA
Tech Trek The Cloud Social Media Mobile Revolution Elevator Pitches
3 Slides, 3 Minutes
TECH TREK
2nd semester course ending with spring break field study in Silicon Valley Professor Gallaugher How does a firm go from start-up to blue chip?
Built through BC alum network Highly recommended, fall application
deadline
FIRMS VISITED
• Intuit• Digg• Salesforce.com• GigaOm/True Ventures• Socialtext• Jay Hoag/Technology
Crossover Ventures• Hewlett-Packard• eBay• Apple
• WePay.com• Smule• Google• Facebook• Tallwood Venture
Capital• Equinix• Electronic Arts• Intel• Yahoo!• Sequoia Capital
THE CLOUD Old Software Model
Updates Periodically; Hosted on own ServersLarge Infrastructure Build outNot Broken, Few Big Players
Oracle, SAP, New Software Model
Applications exist ‘in the cloud’ Software as a Service (SaaS)
Startup Costs Virtually Zero—Multi-TenancyContinuous RedesignAdoption Accelerated by RecessionSalesforce.comGreen?
SOCIAL MEDIA
• Facebook, LinkedIn, Twitter• Value in Network
– Monetization of User Base Difficult• Advertising Model Sustainable?
– Search vs. Social• Social Gaming
– Zynga (Hottest Potential IPO After Facebook)• Playfish Purchased by Electronic Arts
– Facebook: Cash Flow Positive?
MOBILE REVOLUTION
Smaller Devices, Smaller Chips Faster, More Energy Efficient
Smartphone Platforms Spur Development App Economy; OS X vs Android $17.5 billion industry in two years ($5bln –CNBC)
Location Based Marketing Search Alliances
Will Apple Partner with Bing to Block Google?
A FEW MORE TO MENTION…
Infrastructure Buildout How will all this data travel and connect?
PC Cycle (~4 years) Tracks new releases of Windows Recent momentum behind semiconductors
(INTC) Big Data?
How will new influx of data be managed/stored? Netbooks, Tablets, iPad
EQUINIX, INC. (EQIX)
Connecting the World’s Information
Andrew Moore
21
22
Network-Neutral Colocation Network-Neutral Colocation ProviderProviderColocation
• Multiple companies’ servers in the same data center• Interconnection (interaction) among clients• Scalability and performance benefits• Efficiency and cost improvements
Network Neutral• Access to several network service providers• Unhindered, competitive bandwidth pricing• Facilitates Peering, a synergistic networking benefit
Overall Purpose• Connect providers and users of the internet in
efficient ways that save time and money while increasing performance and providing a uniform hardware platform for data management
23
Revenue and Margin Growth 2004-Revenue and Margin Growth 2004-20092009
Acquisition of Switch & DataAcquisition of Switch & DataKey Facts•October 21, 2009 – Acquisition announced
• $689 million for 80% EQIX stock and 20% cash•Expected to close in Q2, 2010•6 U.S. markets 16 U.S. markets (inc. Top 10)⇒
Noteworthy Benefits•Avert creation of a global competitor•Provide natural growth while opening doorways to Cloud Computing and SaaS markets•Additional capacity for currently strained IBX centers (New Jersey, Silicon Valley, and Dallas)•Expansion to secondary U.S. markets including Atlanta, Denver, Miami, Seattle, and Toronto
24
ELEVATOR PITCHMichael Polark
A TURNAROUND STORY
Will Not Take Down Google New Management + Renewed Focus on Core
Competencies = Continued Margin Expansion
Bing Partnership 10 years $650 Million in Cost Savings Back End (Crawl) Outsourced Focus on Search Experience
2005 2006 2007 2008 2009
21.1% 14.6% 10.0% 0.2% 6.0%
Yahoo!
Microsoft
65.7% 17.3% 10.7%
VALUE February 2008 Unsolicited Offer by MSFT to buy
YHOO for $44.6 Billion Rejected Current Market Cap of $23 Billion
Strong Balance Sheet Supported with $3.2 Billion in Cash and No Long Term Debt
Research & Development 2005: 10.4%; 2009: 18.7%
Trades at 1.8x Book Value Google Trades at 5x Book 3.5x Gives Us a $40+ Billion Valuation
ADVERTISING IN THE US…
…Is a $550 Billion a Year Business Internet has 30% of Viewership But just 10% of the Revenue Move to Mobile still Unsolved
Yahoo is #1 in Display Advertising New Management Led by Carol Bartz
New Regime = Operators Focused on Execution 41 year old CFO Tim Morse (BC ‘91)
Old Regime= Creatives and Engineers
ELEVATOR PITCHAnthony Vitiello
CONSTANT CONTACT: BACKGROUND
CTCT is an diversified email marketing services provider
Helps companies outsource mass emails Direct Marketing, Surveys, New Updates
Key Numbers: Market Cap:$658.2MM Gross Margins 71%; Recent EPS $0.00 to $0.05 35% Top line growth forecasted for : Combination
Volume + ARPU growth
CONSTANT CONTACT: THESIS
Economics work for CTCT and customer Cheap direct marketing; ancillary revenue drives
ARPU growth Huge untapped Market for email marketing
2% of email marketing is outsourced; CTCT size “Noise” reduction in company earnings
Higher S&M spend, VC unwinding holding
CONSTANT CONTACT: THESIS
Massive short ratio: 67.9% float currently short 25> to cover, considerable short squeeze
potential Recurring Revenue stream = stable annuity
biz Managing churn rates down going forward
Highly scalable model—adds at no marginal cost Operating leverage as economy turns
ELEVATOR PITCHMario Morales
What they do:
• CDMA chips. Superior frequency utilization on wireless cellular products.
•Wireless Networks
• Smart-phone interface, small electronics software
•Snapdragon
•Licensing Partnerships (about 33% of Revenue)
•Motorola, Nokia, Panasonic, Samsung, Sony
•Royalties from smart-phone sales worldwide
QUALCOMM (QCOM)
BUSINESS OVERVIEW Share Price $40.47
21% oper. Margin Historically around 30%
19B in cash (roughly $12/share)
3 times book 30x earnings
D/E 1:3
• 68% of CDMA chip market
•70% of the chipset revenue came from cellular baseband market
•$3b buybacks, company sees its own stock as cheap
• 2009 drop in earnings
•Margin compressions (one time costs, other costs constant)
POTENTIAL PROBLEMS Samsung and Nokia have begun to enter
contracts with other CMDA suppliers to limit exposure
Average Price per device is declining (Potential for Margin Compression)
Growth in iphone and therefore infineion (iphone chip supplier)
Revenue dependency on cellular device
ELEVATOR PITCHWilliam Berkery
ELEVATOR PITCH: QUALITY SYSTEMS INC. (QSII)
Designs and markets healthcare information systems to Dental and Medical practices
Under subsidiary NextGen the company provides electronic medical records software
Provides exposure to both tech and healthcare sector with a stable company in a growing industry
AT A GLANCE
Market Cap: 1.75 Bn, 1,250 employees
P/E: 37.6 No debt 28.79% ROE All medical records
computerized by 2014
FAST GROWING INDUSTRY Only 8% of hospitals, 17% of
doctors now use electronic medical records
Concern over valuation: 10x book? P/E of 37.6? However industry P/E is 62, closest competitor MDRX at 54 times earnings
Little evidence to support cost savings Obama claims, but QSII stock has excellent potential
