52 declaration of mark p. kindall supporting plaintiffs - securities

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Before: Honorable Susan Illston

DECLARATION OF MARK P. KINDALL

LIONEL Z . GLANCY, ESQ . # 134180PETER A. BINKOW, ESQ . #173848MICHAEL GOLDBERG #188669GLANCY BINKOW & GOLDBERG LLP1801 Avenue of the Stars, Suite 31 1Los Angeles, California 90067Telephone: (310) 201-9150Facsimile: (310) 201-9160

JOSEPH STERNBERGJONATHAN M. PLASSECHRISTOPHER J . KELLERLABATON SUCHAROW & RUDOFF LLP100 Park AvenueNew York, New York 10017-5563Telephone: (212) 907-0700Facsimile : (212) 818-0477j stemberg@labaton . com

ANDREW M. SCHATZJEFFREY S . NOBELMARK P. KINDALLSCHATZ & NOBEL, P .C .20 Church Street, Suite 1700Hartford, Connecticut 06103Telephone: (860) 493-6292Facsimile: (860) 493-629 0

Attorneys for Plaintiffs

UNITED STATESNORTHERN DISTR

DISTRICT COURT[CT OF CALIFORNIA

Civil Action No . : C 04-5222 SI

CLASS ACTION

DECLARATION OF MARK P. KINDALLSUPPORTING PLAINTIFFS ' MOTIONFOR CLASS CERTIFICATIO N

Date : April 21, 2006Time : 9:00 amPlace : Courtroom 1 0

In re SUPPORTSOFT, INC . SECURITIESLITIGATION

This document relates to :

ALL ACTIONS

DECLARATION OF MARK P . KINDALL

Civil Action No . C 04-5222 SI

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I, Mark P . Kindall, declare as follows :

1 . I am counsel at the firm of Schatz & Nobel, P .C., which is co-lead counsel for the

Plaintiffs .

2. I make this declaration in connection with Plaintiffs' Motion for Clas s

Certification .

3. Attached hereto as Exhibit A is a true and correct copy of Plaintiff Jay Young's

December 20, 2004 declaration concerning his purchases and sales of shares of common stock i n

I SupportSoft, Inc.

4. Attached hereto as Exhibit B is a true and correct copy of the Firm Resume of

Schatz & Nobel P .C .

5. Attached hereto as Exhibit C is a true and correct copy of a chart obtained fro m

the Bloomberg financial wire service showing the price and volume of sales of SupportSoft

on a weekly basis from November of 2003 to October of 2004 .

6. Attached hereto as Exhibit D is a true and correct copy of the cover page of the

Form S-3 Registration Statement filed on behalf of SupportSoft, Inc . on October 16, 2003 .

7. Attached hereto as Exhibits E-P are true and correct copies of reports prepared by

stock analysts during and immediately following the proposed Class Period discussing

SupportSoft, Inc . and analyzing the company and its prospects . Included are reports from

ThinkEquity partners (Exh . E), Lehman Brothers (Exh . F), Deutsche Bank Securities, Inc .

(Exh. G), Investext (Exh . H), Miller Johnson Steichen Kinnard (Exh . 1), C .E. Unterberg, Towbin

(Exh. J), RBC Capital Markets (Exh . K), and Citigroup Smith Barney (Exh. L-P) .

8. Among the steps taken by Schatz & Nobel, P .C. to prosecute this action and to

identify and investigate potential claims in this action to date are : (a) research on the company,

including analysis of press releases, forms filed with the SEC, reports prepared by analysts,

transcripts of SupportSoft's conference calls with analysts; (b) analysis of price and volume

information and reports of insider selling ; (c) research into claims and the regulations governing

defendants' actions and revenue recognition ; (d) legal research supporting the lead counsel

motion and the causes of action in the complaints ; (e) analysis of the legal issues raised by two

DECLARATION OF MARK P. KINDALL

Civil Action No. C 04-5222 SI

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motions to dismiss ; (f) preparation of opposing papers and assembling evidence for use in

opposing those motions ; (g) court appearances in connection with motions ; (h) co-operation with

defendants' counsel in negotiating and preparing the Joint Case Management Statement ; and (i)

preparation of the motion to certify the class .

I declare under penalty of perjury that the following is true and correct.

Executed this 7day of , 2006 .

X/Mark P . Kindall

DECLARATION OF MARK P . KINDALL

Civil Action No . C 04-5222 Sl

2

Plaintiffs' Motion for Class CertificationKindall Declaration

EXHIBIT A

CERTIFICATION OF NAMED PLAINTIF F

I, Jay Young, hereby certify that the following is true and correct to the best of m y

knowledge, information and belief-

I have reviewed the complaint (the "Complaint") and would be willing to serve a s

a lead plaintiff on behalf of the class (the "Class") as defined in the Complaint, including

providing testimony at deposition and trial, if necessary .

2. I did not purchase the security that is the subject of this action at the direction o f

Plaintiffs' counsel or in order to participate in this private action .

3 . My transactions in the securities of SupportSoft, Inc . during the Class Perio d

defined in the Complaint were as set forth on Schedule A .

4. During the three years prior to the date of this Certificate, I have not sought to

serve, nor have I served , as a representative party on behalf of a class in any private actio n

arising under the federal securities laws .

5. I will not accept any payment for serv ing as a representative party on behalf of

the Class beyond my pro rata share of any possible recovery, except such reasonable costs and

expenses (including lost wages) directly relating to the representation of the Class as ordered o r

approved by the Court .

I declare under penalty of perjury that the foregoing is true and correct. Executed this

rv2 ¢ day of December, 2004.

Ja g

SCHEDULE A - TRANSACTIONS IN SUPPORTSOFT . INC .

Date

Purchases in SupportSoft, Inc.

Transactions Price per share

1/28/04 400 $14 .8 8

1/28/04 100 $14.78

1/28/04 100 $14.90

1/28/04 1,900 $14.79

1/28/04 1,300 $14.89

1128104 1,200 $14.9 1

2/03/04 4,000 $13.08

210 .3104 1,000 $13.04

5/10/04 3,110 $9.70

5/10/04 100 $9.72

5/10/04 600 $9.73

5/10/04 100 $9.74

5/10/04 400 $9.7 5

5/10/04 690 $9.78

Sales in SupportSoft, Inc.

Date Transactions Price per share

9/03/04 400 $10.05

9/03/04 100 $10.05

9/03/04 100 $10.05

9/03/04 1,900 $10,05

9/03/04 1,300 $10.05

9/03/04 1,200 $10.05

11/8/04 4,000 $ 5 .1 8

11/8/04 1,000 $5 .1 8

11/8/04 3,110 $5.1 8

11/08/04 100 $5.18

11/08/04 600 $5 .18

SCHEDULE A - TRANSACTIONS IN SUPPORTSOFT, INC .

Sales in SupportSoft, Inc.

Date Transactions Puce per share

11/08/04 100 $5.18

11/08/04 400 $5.18

11/08/04 690 $5.18


EXHIBIT B

SCHATZ & NOBEL, P .C.

ATTORNEYS AT LAW

One Corporate Center20 Church Street , Suite 1700

Hartford , CT 0610 3Phone : (860) 493-6292 Email: [email protected]

Fax: (860 ) 493-6290 Web Site: SNLAW .net

RESUME OF SCHATZ & NOBEL, P .C.

Schatz & Nobel, P .C. is one of the premier firms engaged in class action

litigation on behalf of investors alleging misrepresentations in connection with the

purchase or sale of securities . We are currently lead or prima ry counsel in many large

securities or ERISA class actions, including cases against AT&T, AOL Time Warner,

JDS Uniphase , Cable & Wireless, Merck, Sprint, and Tyco International . In the

securities fraud class action against Campbell Soup Company, we represented the

pension funds of the State of Connecticut as lead plaintiff . We recently se tt led the

securities fraud class action on behalf of investors in Smallworidwide plc, for over 85%

of the total losses claimed by class members .

Schatz & Nobel, P.C. has been formally appointed by many cou rts as lead

counsel or co-lead counsel for investors in securities class actions , including

Pa anikoiaou v. Value-Added Communications , et al ., No . 3-95CV0346-H (N .D. Tex .),

Gor a v . Uniroyal Chemical Corporation et al., No . CV-96-0132014-S (Conn . Super.) ;

David v. Simware, Inc . et al. No . 96/602143 (N .Y . Sup.), Butler et al . v. Northstar Health

Services, Inc. et al ., No. 96-701 (W.D. Pa .), Allen, et al v. Johansson, et al .,

397CV02172 (RNC) (D . Conn .), Feiner v. SS&C Technologies, Inc . et al ., 397CV0656

(D . Conn.), Berti, et al . v. Videolan Technologies Inc., et al . , No.3:97CV296H (W .D.

Ky.), Ganino et al v . Citizens Utilities Company . et al, No . 398CV00480 (JBA) (D .

Conn .), Bunting, et al v . HealthCor Holdings, Inc ., et al . , No. 398CV0744-D (N .D. Tex.),

Hirsch, at al . v. PSS World Medical, Inc ., et al . , No. 98 502 Civ. J20A (M .D. Fla.),

Kenneth Blau, et al v. Douglas Murphy, et al , No . H 99 0535 (S .D. Tex.), Angres v .

Smallworldwide plc , No. 99-K-1254 (D. Colo.), In re Complete Management, Inc . Sec .

Litig . , No. 99 Civ. 1454 (S .D.N .Y.), Allain Roy v . dElia*s, Inc., et al ., No. 99 Civ. 3951

(JES) (S .D.N .Y.), Russo, et al v . KTI, Inc ., et al . , No. 99-1780 (JAG) (D.N.J .) ; Laborers

Local 1298 Pension Fund v. Campbell Soup Company, et al . , No. 00-152 (JEI) (D .N.J.) ;

Hart v . Internet Wire, et al . , No. 00 Civ. 6571 (S.D.N.Y.), Ottmann v. Hanger Orthopedic

Group, Inc ., at al . , Civil Action No. AW 000V3508 (D . Md .), In re PolyMedica Corp .

Sec. Liticj . , No. 00-12426-REK (D . Mass .), Karl L. Kapps,et al . v. Torch Offshore, Inc .,

et al . , Case No. 02-CV-0582 (E .D. La), In re Cable and Wireless, PLC, Securities

Litigation, Civil Action No . 02-1860 (E .D . Va), In re Alloy, Inc . Securities Litigation, Case

No. 03-CV-1597 (S .D.N.Y.), In re Surebeam Corporation Securities Litigation , Case No.

03-CV-1721 (S .D. Cal) ; In re Primus Telecommunications Group . Inc. Securities

Litigation , Master Case No . 04-970-A (E .D. Va.) ; In re Netopia Securities Litigation ,

Case No. C 04-3364 (N.D . Cal) ; Malasky v. IAC/InterActive Corp ., et al . , Case No. 04-

CV-7447 (S .D.N .Y.) ; In re Supportsoft, Inc . Sec . Litig . , C 04-5222 SI (N .D.Cai .) ; and

Berson v. Applied Signal Technology Inc . at al , 4 :05-cv-01027-SBA (N .D.Cal.) .

We have also been responsible for many important decisions which hav e

advanced the cause of shareholder protection through the federal securities laws,

including in Ganino, at al v . Citizens Utilities Company, et al , 228 F .3d 154 (2d Cir .

2000), In re Campbell Soup Securities Litigation , 145 F . Supp.2d 574 (D.N .J . 2001), In

re Complete Management, Inc . Sec. Litig . , 153 F.Supp. 2d 314 (S.D.N .Y. 2001), Angres

v. Smallworldwide, plc , 94 F . Supp.2d 1167 (D. Colo. 2000), and Feiner v.S&C

Technologies, Inc., 47 F . Supp.2d 250 (D . Conn. 1999) .

In ERISA cases, Schatz & Nobel has been formally appointed as co-lead

counsel in Overby v . Tyco International, Ltd . , No. 02-CV-1357-B (D,N .H .) ; Furstenau v .

AT&T, Case No. 02 CV 8853 (D .N .J.) ; In re Reliant Energy ERISA Litigation ., No. H-02-

2051 (S .D. Tex.) ; In re AOL Time Warner, Inc . Securities and ERISA Litigation , MDL

Docket No . 1500 (S .D.N.Y.) ; In re AEP ERISA Litigation , Case No. C2-03-67

(S .D.Ohio) ; Pettit v. JDS Uniphase Corporation, Civil Action No . 03-4743-CW

(N.D .Cal .) ; In re Sprint Corporation ERISA Litigation , Master File No . 2:03-cv-02202-

JWL (D.Kan.) ; In re Cardinal Health, Inc . ERISA Litigation , Case No. C 2-04-642

(S .D.Ohio) ; Spear v . Hartford Fin . Svcs Group. Inc . , No. 04-1790 (D .Conn .) ;

and In re Merck & Co ., Inc. Securities, Derivative and ERISA Litigation , MDL No. 1658

(D.N .J .) ; and to the Steering Committee in Tittle v. Enron Corp . , No. H-01-3913 (S .D .

Tex.) ; In re Electronic Data Systems ERISA Litigation , 3:02-cv-1323 (E.D.Tex.) ; and In

re Marsh ERISA Litigation , Master File No. 04 cv 8157 (S .D.N .Y.) . We are also

responsible for the seminal decision in Vivien v . Worldcom, Civil Action No . 2-01329

(N .D.CaI.) in which the Court in denying a motion to dismiss affirmed the legal theory

upon which these cases are based .

PARTNERS

Andrew M. Schatz is a graduate of Cornell University, with honors, and

graduated from Harvard Law School (J .D ., cum laude) in 1976. Mr. Schatz joined the

Chicago firm now known as Sachnoff & Weaver, and he became a partner of that firm

in 1979 . While at Sachnoff & Weaver, Mr . Schatz primarily handled plaintiffs class

action litigation and was involved in the prosecution of major securities class actions,

including cases against Equity Funding Corp . of America and the Washington Public

Power Supply System .

In 1987, Mr. Schatz joined Schatz & Schatz, Ribicoff & Kotkin in Hartford,

Connecticut, where he headed that firm's corporate and securities litigation practice .

While at Schatz & Schatz, Ribicoff & Kotkin, Mr. Schatz represented publicly-held

corporations and their directors and officers as defendants in securities class actions,

including North American Holding Corporation, Gateway Financial Corporation, Ames

Department Stores and All For A Dollar .

Mr. Schatz is a member of the Securities Advisory Council to the Connecticut

Department of Banking, a member of the Connecticut and American Bar Associations

and a speaker on panels relating to the duties of directors of publicly held corporations .

Jeffrey S . Nobel graduated from Albany Law School in 1989, where he was

Associate Editor of its Law Review. Following his graduation from law school, Mr .

Nobel joined Schatz & Schatz, Ribicoff & Kotkin . While at Schatz & Schatz, Ribicoff &

Kotkin, Mr . Nobel represented the officer defendants in the Ames Department Stores

class actions and also represented corporations and their officers and directors in other

federal securities fraud litigation .

Robert A . Izard, Jr., former chair of the Commercial and Business Litigatio n

Committee of the Litigation Section of the American Bar Association, received his B .A .

from Yale University and his J .D ., with honors, from Emory University, where he was

elected to the Order of the Coif, and was an editor of the Emory Law Journal. From

1987 until 2001, Mr . Izard practiced law with the firm of Robinson & Cole, primarily in

the areas of securities and corporate litigation, representing issuers, brokers, law firms

and underwriters in a wide range of actions under both federal and state securities laws

and RICO, as well as representing shareholders and directors in proxy contests and

intracorporate disputes. He has also represented clients in investigations and

enforcement actions by the Securities and Exchange Commission and the State of

Connecticut Department of Banking, and in various arbitration and disciplinary actions .

Mr. Izard has substantial jury and nonjury trial experience, including a seven-

month jury trial in federal district court . He is experienced in various forms of alternative

dispute resolution, including mediation and arbitration, and is also a Distinguished

Neutral for the CPR Institute for Dispute Resolution . Mr. Izard is the author of Lawyers

and Lawsuits: A Guide to Litigation published by Simon and Schuster .

COUNSE L

Barbara F. Wolf graduated from the University of Chicago with a B .A. with

honors in Economics, and from Northwestern Law School in 1979, where she was a

member of the Law Review . Formerly a partner at Sachnoff & Weaver in Chicago,

Illinois, Ms . Wolf is experienced in antitrust, securities and other complex litigation .

Mark P. Kindall is a 1988 graduate of the University of California at Berkeley' s

Boalt Hall School of Law, where he served as Book Review Editor of the California Law

Review and was elected to the Order of the Coif . Prior to joining Schatz & Nobel as

counsel in 2005, he was an associate at Covington & Burling in Washington, D .C .

(1988-1990), an Attorney Advisor at the United States Environmental Protection Agency

(1990-1994), and an Assistant Attorney General for the State of Connecticut (1994-

2005). He has been lead counsel in numerous cases in federal and state court, and

has taught courses in appellate advocacy and administrative law at the University of

Connecticut School of Law .

ASSOCIATES

William Bernarduci received a Bachelor of Science in Business Administration

from Bucknell University and graduated magna cum laude from New York Law School

in 1995, where he was a member of the New York Law School Law Review . Upon

graduation, he served as a law clerk for the Honorable Nina Gershon, District Judge,

United States District Court Eastern District of New York. Prior to joining the firm, he

represented numerous clients in complex securities litigation at the New York offices of

Skadden, Arps, Slate, Meagher & Flom LLP and Dornbush Mensch Mandelstam &

Schaeffer, LLP. Mr. Bernarduci is admitted to the Connecticut and New York bars .

Seth R. Klein graduated cum laude from both Yale University and, in 1996, from

the University of Michigan Law School, where he was a member of the Michigan Law

Review and the Moot Court Board and where he was elected to the Order of the Coif .

After clerking for the Hon . David M. Borden of the Connecticut Supreme Court, Mr.

Klein served as an Assistant Attorney General for the State of Connecticut, where he

focused on consumer protection matters, and as an associate with the reinsurance

litigation group at Cadwalader, Wickersham & Taft LLP in New York .

Wayne T. Boulton graduated from Colgate University cum laude in 1993 and

from the University of Connecticut School of Law, with honors, in 1997 . Mr. Boulton

has focused his practice on litigating complex commercial cases .

Justin S . Kudler graduated from Harvard University cum laude in Government in

1995 and from the University of Virginia School of Law in 1999, where he served as

Executive Editor of The Virginia Journal of Law and Technology. Before joining Schatz

& Nobel in 2002, Mr. Kudler handled securities litigation and other matters at Mintz ,

Levin, Cohn, Ferris, Glovsky, & Popeo, P.C. in Boston , Massachusetts .

Eric L . Palmauist graduated from Cornell Law School magna cum laude in 1999 ,

where he was a member of the Cornell Law Review and was elected Order of the Coif.

Before joining Schatz & Nobel in 2004, Mr . Palmquist worked at Dewey Ballantine LL P

in New York and at Axinn Veltrop & Harkrider LLP in Hartford .

Nancy A. Kulesa graduated from Fordham University with a B .A. with honors in

International Politics, and from the University of Connecticut School of Law in 2001 .

Ms. Kulesa also studied International Law at the University of London .


EXHIBIT C

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EXHIBIT D

-3 1 tltii hint FORM S- 3

'fn hle of ( r, ufeals

As filed with the Securities and Exchange Commission on October 16, 2003Registration No, 33 :1

UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D .C . 20549

FORM S-3REGISTRATION STATEMEN T

UnderTHE SECURITIES ACT OF 1933

SUPPORTSOFT, INC .(Exact name of registrant as specified in its cha rter)

Delaware 7389 94-3282005

(Stale or other jurisdiction of incorporation or (Prima ry Standard Industrial Classification (I .R .S . Employer Identification No .)

organization) Code Number)

575 BroadwayRedwood City, California 9406 3

(650) 656-944 0{ Address . includinu zip code, and telephone number . Including area code, of registrant 's principal executive offices)

RADHA R . BAS UChief Executive Officer

SUPPORTSOFT, INC.

575 BroadwayRedwood City, California 94063

(650) 556-944 0(Name, address , including zip code, and telephone number, Including a rea code, of agent for se rv ice )

Copies to :

JORGE DEL CALVO JEFFREY D. SAPE RDAVINA K. KAILE ROBERT G. DA Y

Pillsbury Winthrop LLP JACK HELFAN D

2550 Hanover Street Wilson Sonsini Goodrich & Rosati ,Palo Alto, California 94304 Professional Corporatio n

650 Page Mill Roa dPalo Alto, California 9430 4

Approximate date of commencement of proposed sale to the public : As soon as practicable after this Registration Statement becomes effective .

If the only securities being registered on this Fonn are being offered uir:'uanl 10 dividend or interest reinvestment plans, please check the following box❑

If any of the securities being registered an this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of1933, other than securities offered only In com+eclion with dividend or interest reinvestment plans, check the following box ❑

if this Form is filed to . egisler additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the folio,+inl ; box and listthe Securities Act regislrxlion statement number of the earlier effective registration statement for the same offering 0

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Actregistration statement number of the earlier effective repislrali,m statement for the same offering ❑

If delivery of the prospectus is expected to be made pursuant to Rule 434. please check the following box . ❑

CALCULATION OF REGISTRATION FE E

Title of each class ofsecurities to be registere d

Common Stock . $0 0001 liar value

Proposedmaximumofferin g

Amount priceto be per

registered I l) share(z )

6 .900,000 Shares 5 12 13

Proposedmaximumaggregate Amount of

offering prfce42 ) registration fee

S 83.697,000 5 6,772

Plaintiffs' Motion for Class CertificationK.indall Declaratio n

EXHIBIT E

ThinkEquity

Support automation pure playWe have initiated coverage of SupportSoft with an equal weight rating and $10price target. SupportSoft helps companies automate critical customer serviceand IT support functions and proactively resolve software problems . In additionto enterprise customers, the company has built a strong niche in the broadbandservice market, and we are bullish on its potential to expand on this franchise tocapitalize on new digital video and Vo1P opportunities over time . While we areupbeat on the long term story, we believe enterprise sales cycles havelengthened in recent quarters and plans to expand its footprint in the endpointmanagement market, likely through acquisitions, are not without risk. Our $10target is 25x our 2005 BPS excluding cash ,

p 04 F_ .9 " A , ~ .. Mb .Revenue(Current$) $53.27 $67.71 $83,00 $16.71 $16.30 $12 .61Revenue Prevloue ~ - -. -EPS(Current$) $0.26 $0.34 $0 .31 $0.05 $D. 0e $0.08EP5 Previous S - - -PI8(curr ontl 0.8 6.3 4.3 - - -P!ECurrent 31 .2 22 .9 25.1 - -

Unique opportunity Its the digital service provider market. SupportSoft'scustomer and technical support automation products have found particularinterest among broadband and digital cable service providers . The companyalready has seven of the top ten domestic broadband service providers ascustomers, and we believe it can leverage this dominant position expandinternationally and capture new opportunities in digital video and VoIP .

Enterprise business has some challenges. We believe enterprise sales cycleshave lengthened in recent quarters and SupportSoft must balance sales focusbetween direct corporate sales and sales to IT outsourcers. Additionally, thecompany needs to invest more in its endpoint management products, whichcould lead to fhture acquisitions in a hotly competitive market . While we areconfident that management can execute on its enterprise agenda, we thinkthere are some near term risks through which to navigate .

Shift frotrt .terin to perpetual deals is mixed blessing. Historically, many ofSupportSoft's larger deals have been done on term license contracts,providing visibility into future revenue streams. In recent quarters, a growingnumber of customers are opting for perpetual deals, which results in lessvisibility but better upside potential on a quarterly basis.

Reasonable valuation. SupportSoft trades at a reasonable 20x multiple on our2005 BPS estimate of $0.31 (which we note is fully taxed) excluding theimpact of roughly $2 .75 per share in cash .

We like the story, but need to get past near tern issues . SupportSoft is wellpositioned over the long term, but we would like to get more clarity on itsacquisition strategy and see the company gain more traction in its enterprisebusiness before getting aggressive on the stock .

Please see the last page of this report for important disclosures .

Exh. E Page 1

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SupportSoft has carved a substantial opportunity in support automation, an attractive niche sector of the infrastructuresoftware market which we estimate to be a $4-6b opportunity . Its products provide companies with a reliable platformto support their customers and employees, unlike manual customer and IT support (e .g. phone and personal visits)which are expensive, inefficient and difficult to scale . On average, typical companies spend $20 per incident for phonesupport and $120-200 per deskside visit for IT support . If we multiply this by an average of 5-6 incidents per employeeeach year, the costs can add up quickly. This is one key reason why Gartner estimates that up to 70% of the total costof ownership of a personal computer goes to support and service costs . SupportSoft offers a full suite of automationsoftware and self-service portals, lowering support costs to $3-4 per incident or even lower.

SupportSoft has done a great job of transferring its domain expertise to the broadband and cable service providermarket and is well positioned to benefit from the "triple play" of data, voice and video services into the home . Thecompany is now helping seven of the nine largest U .S . broadband providers significantly reduce the costs of activatingand supporting their 20m+ data service subscribers . As with enterprise companies, the cost of phone support averages$20 per call and "truck rolls" to a users' house can cost an average of $150 per customer visit . Minimizing phone timeand in-house visits can result in substantial cost savings . For example, using SupportSoft, Comoast saw a 30%

:reduction in calls per subscriber while BellSouth saw a 40% drop . Similarly, Charter Communications experienced a50% reduction in cost per call. In addition to broadband installation and support, SupportSoft recently introduced newdigital video products which can help cable providers lower the cost of installing and supporting digital video service .We believe the company can see a substantial revenue opportunity from this segment in 2005 . The pending rollout ofvoice-based services (based on Vo1P) by cable and telcos will be the next leg of opportunity beyond 2005 . We believethe company is working closely with service providers to capture this opportunity .

Moklleplma Oroadbondaiodemr

DNA technologyRich datasetofendpoints • '

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- Mssahcallna tbrva ry targanumbcrsof and points

Customer acrvice antomattonAcquke Main Glow

Automate the tmtanallon endodtvatioa otnew wenAsalatuacrs through self-eervlceportalsSupport far ouatomara aerou multipleIcucbpolntu

Enterprise customers- For internal tech support staff- Via outsourcing contracts with 1DM,

CSC, HP. others- Via embedded software from OEMs

Tradilionet support coats $20-200 per incidentSuppotiSoft can reduce costs to S3 .4 per incident

June 15, 2004

Digltat service providersCable/DSL broadband providersVideokable providersWireless service providers

Broadband and aettop box support coats $20 (phone)to $100- 1 SO (truck ro lls)SuppattSoft can reduce costs to $3-4 per indiciden t

source: ThtnkRgnltyarnd company data

The secret sauce. SupportSoft's secret sauce is its patented DNA technology which allows highly granularmanagement of devices ranging from PCs, cable settop boxes, mobile phones and many others . SupportSoft can

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SupportSot June 15, 2004

catalog and track all the different versions of software and hardware on a device so that support personnel can easilydetermine where there is a potential problem and apply machine-specific fixes or patches in a way that won't conflictwith existing settings or programs.

W,at is It used for? This technology has three key applications: (1) endpoint management to manage hardwarecomponents and software programs loaded on devices, keep track of how devices are used, and ensure computers getthe latest patches or virus updates ; (2) technical support automation to diagnose and resolve technical issues, provideusers with web-based technical self-service portals, and empower support representatives with tools needed to resolvedifficult issues, and (3 ) customer service automation to automate the installation and activation of new services, helpcustomer service reps remotely guide users through various support tasks, and offer automated support to end users.

Who buys this software? SupportSofts software can be widely used by a number of target customers . Currently, thecompany is actively targeting enterprise customers (primarily Fortune 2000 corporations in key verticals such asfinancial services, government and retail) and digital service providers (cable and DSL broadband providers, videoproviders, and even telco and wireless carriers) . The company is also selling more aggressively to outsourced providerssuch as IBM, CSC and others that outsource support IT and customer support functions from other businesses. Whilesupport automation typically generates compelling ROI, we note that sales cycles can be lengthy . Often, customer andtechnical support automation projects are superceded by more immediate needs such as virus remediation, operatingsystem migrations, email migrations or compliance.

Number ordevices Pricing per seui Market opportunely

200m PCs worldwide $10-20 annual (via MSP)53-5 billion

3 Y r (10Dm In U.S . alone)$20.40 annual (term license)$70.90 perpetual license using $15-40 devic eg per

lm+BlackbenysIm+ corporate handhelds $10 .20 perdevice (eatlmatedf $300 ndlllon

30m retail POS terminals using midpoint

Data/broadband access209m broadband subs by 2007 3 1-5 per sub (perpetual or tern ) $630 million

(70-7Sm today) using $3 midpoint

Videoldigttal cable80m seltop boxes in U .S. $1 .3 per sub (estimated) StbO million

( 25m digllell55m analog) using $2 midpoint

Volce/voke-over-1 PMillions ofpotential households Too early to tell Unknown(traditional cable and lelco customers )

flat smarlphones by 20077bo early to tell unknownt1b+ total mobile phones)

Total market opportunity

Source: ThlakEquayand compsnydnin

IIow big Is flits opportunity? We estimate SupportSofft.'s products address a large opportunity in the $4-6b range . Onthe enterprise side, there are almost 150m civilian knowledge workers in the U .S . using an estimated 100m desktopPCs . Adding public sector and international employees brings this number to at least 200m by our rekoning : Enterprisecustomers typically buy direct from SupportSoft or indirectly use this technology through long term outsourcingcontracts with the likes of CSC, IBM, Hp, Accenture or others . SupportSoft charges an average of $20-40 per seat peryear for term licenses and $70-90 for perpetual licenses . Managed service providers are typically charged about $10-20per seat per year. Using $15-40, the lower end of these ranges, we estimate enterprise support automation to be a $3-5bmarket. We note this estimate does not include 30m+ POS terminals and the millions of corporate handheld device s

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SupportSoft June 15, 2004

(such as Blackberries) in use today . It also does not factor consumer PCs and laptops from IBM, Sony and others thatcome pre-configured with embedded SupporLSoft software that can help home users directly troubleshoot problems inthe event of an emergency.

On the digital service provider side, SupportSoft is becoming a key technology provider enabling the "triple play" ofnext-generation data, voice and video services . The company already has a substantial presence among cable and DSLbroadband service providers and is releasing new products that automate installation and support for digital video andupcoming VoIP services . On the broadband side, there are an estimated 70-75mn broadband Internet subscribersworldwide growing to an estimated 209m by 2007, according to IDC . SupportSoft typically generates between $1-5per subscriber (depending on which products are installed), yielding a market opportunity of $630m by 2007 . Thecompany also just released its first generation digital video products which help automate installation and support forScientific Atlanta settop boxes. We believe support for Motoroloa and other digital video box manufacturers willfollow later this year. This should address over 25m digital settop boxes and an additional 55m analog settop boxeswhich are projected to convert to digital over time . List pricing has been set at $1-3 per subscriber per year (priceranges likely depend on term or perpetual contracts), leading us to calculate a $50m opportunity today growing to apotential $160m market over time . Looking ahead, the next big opportunity is likely to come from next-generationvoice services (VoIIP) . As cable and traditional phone companies begin rolling out these services over the next fewyears, we believe SupportSoft will be primed to capture the bulk of this opportunity . While it is perhaps too early toestimate the potential for this market, we believe it could rival that of the broadband opportunity over time .

We note there is also a potentially huge opportunity in the mobile device market. While there are over 1 .3b mobilephones in use today, the "throwaway" cost of these devices makes it difficult to justify the use of support automationtools . There is a potential with the growing smartphone market ( estimated to be 72m units by 2007 with a much higherunit cost), but we believe it is probably too early to tell at this stage .

OPPORTUNITIES AND CHALLENGE S

While SupportSoft is addressing a big market, we believe it is critical to assess which areas are likely to be lowhanging fruit and which areas will be more challenging. We grade these areas based on how we view SupportSoft'smedium term revenue opportunities and competitive dynamics .

• Broadband service (A) : We believe SupportSoft sees a large opportunity in the digital service provider market withlimited competition. In broadband support (an area which the company already has substantial presence), we believethe company has reached a meaningful level of penetration in the U .S . market . Co:ncast, Time Warner, Charter,SBC, Cox and BellSouth have already made significant commitments to the core suite, and many of these customershave now purchased perpetual licenses. While there are ample cross-selling opportunites for smaller products (suchas the LiveAssist chat product), we believe Europe and Asia will be the primary growth engines for the broadbandside in the future.

• Digital video (A+) : Digital video is a relatively new opportunity but we believe the competitive dynamics are verypositive. Early penetration will be limited until the company releases support for a broader array of hardware(particularly Motorola boxes) and services (current products are for installation and support-related features are likelyto be added later this year) . However, we believe the company should see strong growth dynamics in the 2005timeframe. We believe digital video deals may start off relatively small, but similar to the growth dynamics on thebroadband side, these pilots can quickly expand into much larger deals over time.

• Enterprise support (B) : While few companies fail to see the cost savings associated with support automation(technical support and customer support), we believe support automation projects are often pushed to a lower priority

`purchase by more pressing endpoint management issues such as security management, operating system mi'gial1Ons, . : androther projects . Additionally, more and more companies are choosing to outsource their entire support oP , ctatiions,

which can halt deals or create entirely now sales cycles . Because of the combination of project delays and the need,for SupportSoft to shift its sales focus from corporate customers to IT outsourcers, we are moderately cautious on themedium term outlook.

• Endpoint management (B-): Many of the functions that SupportSoft automates on the support side has broaderapplications for endpoint management . We believe many customers have found creative ways to maximize its

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technology for uploading security updates, provisioning new users and updating applications . However, we believeSupportSoft lacks critical features and functionality and must do a better job of packaging and marketing its productsas a true "off-the-shelf' solution for endpoint management. We note that the company is pushing into an extremelycrowded space . Companies such as Altiris, Computer Associates, Microsoft, and Symantec are aggressively duking itout for dominance in this market and have already established mindshare among IT buyers . While we do not doubtSupportSofU s need to acquire more functionality in this area , we believe investors will closely monitor the associatedcosts of such an expansion strategy .

PRODUCTS AND SERVICES

SupportSoft has pioneered the concept of real-time service management to help businesses quickly and cost-effectivelyresolve IT issues. At the core of its platform is its patented DNA Probe technology that identifies and tracks thecharacteristics of each user's software application and operating system components . This schematic or blueprint canthen be used to determine what may be causing a problem and the best course of action to fix it . For example, a usermay have an outdated version of a program which conflicts with another application . A quick review of the DNAProbe dataset can quickly help IT personnel spot this problem and deliver a solution ,

sputum UhinkEquiry emnas

Upon this core technology, SupportSoft has built a number of product suites designed for enterprise and broadbandservice provider customers . The Knowledge Center Suite is a repository of known technical issues, answers to"how-to" questions and "one-click" fixes to automate common problems . It is a complementary product to ResolutionSuite, which pulls data from Knowledge Center Suite to populate portals for end user self-service or help tech support,slaff'for'ailisted service . Auto Discovery' and Metering collects data on computer or network hardware and so wardassefs ; stazes'this information, and tracks software usage and licenses . LiveAssist is a web-based chat product-thatreplaces phone or face-to-face communication, While Resolution Suite and Auto Discovery and Metering are designedprimarily for enterprise users, broadband service providers have a dedicated product suite called Service AutomationSuite for Broadband, This includes SmarlAccess for installation of broadband access and IfomeNet for homenetworking support . The recently released Service Automation Suite for Video is designed for cable TV serviceproviders to improve the provisioning and service of cable settop boxes. Much of the back-end systems are similar tothe existing suites . Over the next few months, we expect SupportSoft to expand its support for more manufacturer s

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SupportSoft June 15, 2100 4

(from Scientific Atlanta to Motorola and others) as well as add new features for post-installation troubleshooting andsupport .

On the enterprise support side, we believe SupportSoft delivers a strong suite of products for customer and technicalsupport automation . Over time, we would not be surprised to see these features packaged more appropriately to targetbig outsourcers such as CSC, Accenture and others . For the endpoint management market, we believe SupportSof t islooking to expand its product line to address functions that are of a more immediate concern among IT buyers today .Areas within endpoint management such as patch deployments (both on the client as well as server levels) andoperating system migrations are features that could help companies address both near term needs as well as supportfunctions. However, as mentioned earlier, these features are attacking a highly competitive space and we must closelywatch whether the costs will be worth the returns over the long term .

COMPETITIVE LANDSCAPE

From a field perspective, SupportSoft bumps into a number of competing products from a varie ty of vendors . On thebroadband side, Motive (which filed to go public in 2000 and re-filed in 2003) is the company's most significantcompetitor. With its acquisition of Broadjump in 2003 , Motive now provides a full suite of installation and supportsoftware. However, we believe it boasts a less impressive product line and list of broadband customers thanSupportSoft. Today, SupportSoft has four of the largest broadband providers - Comcast, Time Warner, Adelphia, andCharter - using its products on an end-to-end basis . Verizon uses Motive end-to-ond. SBC, Cox Communications andBellSouth use a combination of the two (typically Motive/Broadjump for installation and SupportSoft for support),Both SSG and Cox have exclusive contracts with these two vendors while BellSouth ' is non-exclusive. The figurebelow highlights competitive positioning between SupportSoft and Motive in the broadband market .

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In the enterprise support market, SupportSoft competes with a wide array of vendors . We note that many of the. -helpdesk verkdox' such as DMCIRemedy are more complementary than competitive . However, these companies could :becoh e. .morT'Oompetitive over time as they "close the loop" between support notification and final delivery : a . . 'solutions . Fot example, BMC's acquisition of Marimba's software delivery technology still lacks feature overlap butbrings them one step closer to SupportSoft . The enterprise endpoint management market is a highly competitive space .Microsoft is working on new products (to be released in 2005-7) that blend its SMS and MOM technologies forWindows desktop and server management . While a formidable opponent, clearly this is a toolset geared towardsMicrosoft products only . Altiris has a strong and growing presence in the client management market . UnlikeSupportSoft, Altiris has key 013M partners Dell and HP that cross-sell its solutions . Established systems management

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SupportSoft June l5, 2004

vendors such as Computer Associates and I3MC have long histories in the management area, Computer Associates hasa substantial product set for device management, but we believe the majority of its focus is on the server managementmarket, as well as a full line of products for technical support automation . BMC has similar technical support featuressuch as problem resolution and web-based self-service portals . Recently, Symantec acquired ON Technology andPowerQuest to complement its Ghost and pcAnywhere products . We believe Symantec is making a more aggressivepush into device management, albeit with a strong bent on security and patch management ,

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Problem Idenl caulonandseihealing f ✓

Problem resolution ✓ ✓ ✓ ✓ ✓ ✓

Real-time dlagnositce and mass healing ✓ 0 0 ORamie control 0 ✓ ✓ . ✓ ✓ ✓ ✓

Passwvo id and identity management ✓ ✓ ✓

Web-based self-service ✓

End Point Management

Vln,s remedlallon "" ✓ ✓ 0 ✓ ✓ yr

Change and ca figura lon management 0 ✓ ✓ 0 ✓ ✓ ✓

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SALES AND DISTRIBUTION

SupportSoft primarily sells on a direct basis in the U .S . and is looking to expand its distribution capacity overseasthrough more direct sales headcount and partnerships . The company sells to enterprises that may want to useSupportSoft to automate how it supports its internal employees and customers. Additionally, managed serviceproviders such as CSC, HP and others often buy software direct from the company to help them lower the cost ofsupporting their customers . In some cases, customers may require managed service providers to take over control ofexisting SuppoitSoit implementations . In the broadband space, SupportSoft sells direct to service providers versusconsumers. The same holds true for the emerging video opportunity, where cable providers will pay for use of thesoftware. E ;•

SupportSoft has approximately 25 quota-carrying sales reps today and plans to expand to 30-35 reps by the end of thi syear. Jed by John Van Siclen, the company has increased focus on certain vertical market segments such as financialservices, retail and government . We note that dedication of resources to these verticals is still in early stages, and thecompany will likely need some time before it reaps the benefits of its investments. On the international side, thecompany historically has received a relatively small portion of sales overseas (less than 10%). Its focus on digital

Page 7

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service providers in Europe has been a relatively recent effort, but we believe the company is doing very well in thisarea . Following Europe, we believe SnpportSoft is likely to turn more attention to Asia .

In general, we believe enterprise sales cycles tend to be lengthy given the size of transactions (average deal sizes rangefrom $500k to $1m) . Instead of leading with multi-million dollar Resolution Suite deals, the company is shifting itssales focus by first pushing smaller Knowledge Portal or other component products which are easy to digest($200-S00k in cost and roughly a month or so to implement) . Based on a rapid ROT, the company faces much shortercycles for larger commitments of Resolution Suite. While the ROI is typically very compelling, we note that salescycles still tend to drag . Often, it takes a catalyst such as a security breach, operating system migration or ann emailsystem migration to push customers to sign. With this in mind, we believe the company is likely to look foracquisitions (such as a patch management vendor) that can leverage these catalysts .

STRONG MANAGEMENT TEA M

We believe SupportSoft has assembled an impressive management team laser focused on customer care, high ROIs andcareful expense management. The company's performance and earnings growth during the technology downturn of2000-2004 is a testament to the management team, in our opinion .

Radha Basrr (CEO and Chairman) : Basu became SupportSoft's CEO in 1999 and Chairman in 2001 . Following a 21year career at Hewlett-Packard where she ran the electronic software division and opened its software center inBangalore during the 1980s, she helped grow SupportSoft from 35 employees to over 180 today and guided thecompany through two successful public offerings.

Brian Beattie (CFO): Beattie has served as CFO since 1999 . Previously, he was vice president of finance, mergers andacquisitions for Nortel Networks ,

John Van Siclen (SVP Worldwide Sales): Van Siclen joined SupportSoft in August 2003 from Interwoven .`Heconsolidated and now runs all direct sales, channel sales, international sales, and professional services.

Chris Greflak (SVP Products and Marketing) : Grejtak was hired in July 2003. Prior to SupportSoft, he was amarketing executive at Portal Software and Broadvision and chief executive at Viquity and Metaphor .

Scoll Dale (VP Engineering) : Dale was the co-founder and original CTO of SupportSoft since in 1997. He is currentlyvice president of engineering .

Cadir Lee (Chief Software Officer) : As co-founder and Chief Software Officer, Lee oversees product management andarchitecture as well as the strategic direction of the company.

Board of Directors: Includes Radha Basu, Manuel Diaz (retired VP, Hewlett-Packard), Casey Eichler (CFO, MIPSTechnologies), Claude Leglise (VP, Intel), Scott Russell (General Partner, Diamond Head Ventures), Jim Thanos(former EVP, Broadvision), Dick Williams (CEO, Wily Technology) .

FINANCIAL ANALYSIS

SupportSoft offers flexible licensing terms to its customers with many bigger deals sold as a mix of perpetual and termlicenses . Term based licenses are typically done on a three year commitment basis but invoiced yearly . As such,deferred revenue is understated and there is a substantial amount of off-balance sheet backlog available to the company(and additional 2-4x the deferred revenue balance) . It should not be a surprise that a significant portion of these newinvoices are released in the back half of the year. In general, enterprise customers tend to favor perpetual licenses while 'broadband service providers and IT outsourcers tend to buy term license contracts . For example, on the broadband side,Charter, Cox Communications, BellSouth are currently paying term deals . IT outsourcers such as IBM, HewlettPackard, Cap Gemini Ernst & Young and CGI are also on term contracts . While SupportSoft pushes hard for termlicense deals and finds success with first time or second time implementations (when the company's solutions are stillrelatively unproven to a customer), we have seen a growing number of instances where upon renewal, customers pushfor perpetual deals. In 2003 and early 2004, we saw Comoast, Time Warner, CSC and a few others sign largemulti-million dollar perpetual contracts . As a result, the mix between perpetual and ratable revenue has shifted fro m

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SupportSnfl June 15, 200 4

historical levels of 40160% to more like a 50150% split. Today, approximately 45-55% of revenue comes fromperpetual licenses, 25-30% come from term license deals and an additional 20-25% from services such as maintenanceand consulting .

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SupportSoft has executed well over the last few years, growing revenue at a steady rate while keeping a close eye onmargins . Sales increased 35% to $41 .2m in 2002 and grew 29% to $53 .3m in 2003 . We project revenue to grow 27%to $67.7m in 2004 and 23% to $83m in 2005 . From a profitability perspective, the company reached operatingbreakeven in 3Q02 . For seven straight quarters, the company has shown very strong operating margin expansion fromlow single digits to 23 .6% in the most recent quarter . As such, EPS rose from a loss of $0 .05 in 2002 to positive $0 .25in 2003 . We note that EPS growth appears anemic in 2004 and 2005 due to an increase in effective taxes . Tax rate was5% in 2003 due to not loss carryforwards but is projected to increase to 11-12% in 2004 and 35% in 2005 . As such, ourEPS estimates are $0.34 in 2004 and $0.31 in 2005 .

KEY RISKS TO CONSIDEJJ

As we noted earlier, we are upbeat on SupportSof's opportunity in the digital service provider market and its ability tocapture the "triple play" of data, voice and video. However, we believe there are some risks related to its enterprisebusiness . We highlight these risks and others below :

The enterprise opportunity is sizable, but sales cycles for bread-and-butter support automation projects are lengthy.Contracts with big IT outsourcers are lumpy and difficult to predict .

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1Q 2Q 3Q 4Q LQ 2Q 3Q 4Q IQ 2Q 3Q 4Q IQ 2Q 3Q 4Q 1Q 2Q 3Q 4Q

2001 2002 2003 2004 2005


The endpoint management market is red hot, and potential acquisitions of new technologies (such as patchmanagement) could be dilutive to shareholders ; we believe this market is already highly competitive .

■ Competition is heating up. Via acquisitions, BMC is getting closer to SupportSoft's functionality. ComputerAssociates also increasing focus on the support automation space . Systems management vendors, along with Altirisand many others, are also squaring off in a fierce battle for the desktop management space .The shift from term to perpetual creates deal lumpiness and reduces forward visibility ; company must increasinglyrely on large "elephant" deals .M&A activity among big cable companies and telcos could stop or lengthen sales cycles .Motive, SupportSoft's largest competitor in the broadband market, is currently tapping the public markets in an initialpublic offering. We believe this will undoubtly raise questions about competitive positioning and cloud investorperception over the near term.

VALUATION AND SUMMARY

From a valuation perspective, SupportSoft trades more in less in line with dnmparabie software stocks : We note thecompany has approximately $2 .75 per share in cash . If we exclude about $0 .0,1.- of intet`est related profit generated fromthis cash and apply a 25x multiple on our fully taxed 2005 .gPS;estimate of $0 .31 we:arrive at- a $10 price target. Aswe noted above, we believe SupportSoft has a bright fdture : .We believe investors must give the coinpaiiy more creditfor its dominance of the digital service provider market . However, the enterprise market has some risk related to salescycles and its focus on lumpier IT outsourcing deals . Additionally, we would like to get more clarity omits acquisitionstrategy relative to the endpoint management space . While we believe there is an opportunity to be more aggressive inthe future, we rate the stock a market perform for now .

Risks to Target Price and Investment Thesis• Enterprise sales cycles remain lengthy and IT outsourcer deals tend to be lumpy.■ Potential acquisitions could be dilutive, and the endpoint management market is already highly competitive ." Competition is heating up from systems management vendors . Additionally, SuppartSoft's largest competitor in the

broadband space is likely to raise capital and become more competitive .■ The shift from term to perpetual licenses creates deal lumpiness and reduces forward visibility. The company must

increasingly rely on large "elephant" deals .■ M&A activity among big cable companies and telcos could stop or lengthen sales cycles .

Company Description:

SupportSoft has carved out a substantial opportunity in support automation and is establishing a strong presence in thebroader infrastructure management market . In total, we conservatively estimate the company addresses a $4-6bopportunity . SupportSoft has a substantial base of over 200 blue chip customers and has a lock on the broadbandservice provider space with 7 of the 9 largest providers using its software . A growing number of outsourced serviceproviders such as CSC and HP are also using SupportSoft as a critical component of their offerings . Based in RedwoodCity, California, the company has just under 200 employees worldwide .

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Definition of Ratings

The 7hinkEquity rating system is based on a stock's expected total return over a 12-month Investment horizon, relative to acomparable universe of stocks in the sector covered by the analyst.

Strong Buy ("SB.i") "ThlnkEqulty expects non-systematic , absolute appreciation In this stock over next six months due tonear-term catalysts."

Overweight ("OW-2" 'ThinkEquity expects this stock to outperform the return of a comparable universe of stocks over the("0W-3") next 12 months."

Equal Weight ("EW4") 'ThlnkEqulty expects this stock to perform in-line with the return of a comparable universe of stocks("EW-5") over the next 12 months. "(°EWs")

Underweight ("UM 7 ") "ThinkEquity expects stock to underperform the return of a comparable universe of stocks over the next(""UW g"") 12 months."

Sell "ThinkEquity expects non-systemaifc depreciation In this stock expected over next six months ; use assource of funds."

ThinkEquity' s numerical scale (from highest value 1 to lowest value 9 ) functions as a relative gauge to provide greater clarity of erating, particularly within a rating category. T hinkEquity could adjust the numerical value assigned to a rating to reflect developingIssues andfor a change In valuation . However, only a numerical value adjustment outside of the rating category would denote anofficial change In rating.

Distribution of Ra tings, Rirmwide

IOSerydpost 12 Nes.

Rating Cou nt Percent Count Percen t

BW IOWIS111 102 58 .96 3 19 4HOLD JEW) 60 34,68 5 833SELL IUW/SELLI 11 6 .36 0 0.00

The views expressed In this report correspond to the analyst's personal views on the subject securities and Issuers, and no part of the analysts compensation was, is,orwill be ditcutly or indirectly related to the spevitie recommendations contained I n this research report .

7hiokEquily Partners LLC makes a market in Support8ott securities; and/or associated persons will sell to orbuy from customers on a principal basis.

The research analyst(s) principally reaponsiblo for preparation of this report receive(s) discretionary incentive compensation that includes (among other factors)TSP's investment barking revenues.soveatora should assume that Tbinkequity Partners is, or will be seeking to provide investment banking services to the subjectcompany within the next three months .

"Huy," "Hold," and "Sell" are not dcflaed ThlnkSgnity Partners LLC ratings and should not be construed as investment opinions . Rather, these ratings are usedillustratively to comply with applicable NASD and other securities regulatory organization regulatlons .771e report does not purport to be a complete statement of ailmaterial facts related to any company. Industry, or security mentioned. The information provided, white not guaranteed as to accuracy or completeness, has beenObtained from sources believed to be reliable . The opinions expressed reflect our judgment at thIs time and are subject to change without notice and may or may notbe updated. Not performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, Istrade regarding future performance . This notice shall not constitute an of veto sell or the solicitatlon of an offer to buy, nor shall there be any sale of these securitiesin any state in which said offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such state . This researchreport was originally prepared and distributed to institutional clients of ThInk&qulty Partners LLC. Recipients who are not market professionals or institutionalclients of Thinkliquity Partners LLC should seek the advice of their personal financial advisor betbre making any investment decisions based on this report .Additional Information on the securities mentioned Is available on request. Member NASD and SIPC.

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SupportSoft Reports EPS Upside,Announces Acquisitio nWe reiterate our Accumulate rating and $10 price target on SupportSoft. Thecompany reported BPS upside, offered solid guidance for .3Q, and announced astrategic acquisition which should have minor impacts on near term earnings .Most importantly, we were pleased to sea the company close severalmulti-million dollar enterprise deals in 2Q, particularly at a time when manylarger enterprise software vendors have reported sharp shortfalls . Theacquisition of Core Networks, which should solidify the its lead in the digitalservice provider market, should be another positive catalyst, in our opinion .

k : ca .Y. ei3i? `e`a! -.x°. -a 1~:F03A .v' tFfl4E =3 I: . Q 4VA'; ; _a0' __ ,? 3Q0iRevenue(Current 5) $63.27 $68.30 $ 83 .00 $16.89 $17 . 20 $13 .53Revenue Previous S) $53.27 $67.71 $83 .00 $16.30 $17 .20 $13 .53EP8(Current$) $0.25 $0 . 38 $0 .31 $0.11 $0.08 $0.07EAS PravIaus 5 $0.26 $0.34 $0.31 $0.09 $0.08 $0.0 7PJS(GurrenI) 6.3 4.9 4. 0 --- - --PIECurren) 29.4 19.3 23.7 - -- -

• Enterprise business bucks Industry trend . While many companiespreannounced weak enterprise sales, SupportSoft reported solid 2Q resultsand signed four large transactions over $1m (two of which were over $4m) .We note that three of these large transactions came from direct sales to bigcorporations .

• Shift to perpetual deals continue . Of its four big deals booked in 2Q, threewore for perpetual licenses with one large broadband customer renewing aterm contract as a perpetual deal. While not all of the revenue from theseperpetual transactions have been recognized (some deals have extendedpayment terms), we note that the ongoing shift from term to perpetual dealshelped drive a substantial 19% qlq decline in deferred revenue,

" Acquisition of Core Networks announced. SupportSoft announced that itwill acquire Core Networks for $17m in cash . Expected to close in earlySeptember, this acquisition offers complementary products and customers andfurther cements SupportSofVs dominance in the broadband market ,

• Guidance looks solid . Management's guidance for 3Q was right inline withStreet consensus . Operating margins are expected to drop from 30% in 2Q toa more sustainable 20-25% as the company invests more in its operations in2H'04 . While we are keeping are forward estimates intact, the Core Networkacquisition will lead us to add roughly $8m to our 2005 revenue estimate andkeep BPS more or less in line with our current estimate of $0 .32 .

% Reiterate Accumulate rating . Our $10 price target is based on a 23xmultiple on 2005 BPS, adding back $2.80/share in cash. We reiterate ourAccumulate rating on the shares .

Please see the fast page of this report for important disclosures.

Exh. E Page 1 3

7r ,ti .kF u . typ a r t n o r t

SupportSoft

2Q04 Highlights

July 21, 2004

SupportSolt reported EPS upside, offered solid guidance for 3Q, and announced a strategic acquisition . Revenues in2Q totalled $16.9m and compared to our estimate and Street consensus of $16 .3m. Software license fees were $11 .5xmversus our $11 .6m estimate. Services revenue of $ .5 .4m beat our expectations as consultant utilization and billingjumped ( the company now has over 45 ongoing customer projects and deployments) . Cost controls remain a brightspot. The company held off on headcount additions in 2Q until it evaluated Core Networks and its existing personnel .This fact, combined with higher than expected services margins and a high degree of perpetual license sales, droveoperating margins to a surprising 29.6% and allowed the company to handily beat our $0 .08 EPS estimate by threepennies . Cash flow from operations was $1 . 9m and the company ended the quarter with $128m of cash ($2.80/share).

Strong Perpetual Deal Flo w

SupportSoft closed a number of large enterprise deals in 2Q, including three multi-million dollar contracts withcorporate customers and one very large broadband service provider . These large deals were particularly impressive inlight of the swath of 2Q license misses by larger enterprise software vendors . Charter reupped its previous termcontract as a big perpetual deal and simultaneously purchased licenses for SupportSoft's new Express product. Thiswas a large deal valued at over $4m . A large corporate client purchased over $4m in perpetual licenses, with anothercompany signing a deal over $1m, SupportSoft also signed a seven figure enterprise deal on a 36 month term deal .However, we believe these larger terms contracts are getting more rare. While we note that not all of the bookings havebeen invoiced due to flexible payment terms, we estimate a significant portion was recognized in 2Q . The ongoing shiftto perpetual deals helped precipitate a substantial dropoff in deferred revenue . Deferred revenue shrank for the thirdstraight quarter to $15 .2m (a 19% q/q decline). The recognition of a large billing from IQ and amortization of ratabletransactions also helped spur the q/q decline .

SupportSoft to Acquire Core Networks

SupportSoft announced its intent to acquire Core Networks. Based in Nova Scotia, Core Networks adds "last mile"capabilities for digital service provider customers . Its software helps automate home and small business networks byallowing customer service reps to remotely access gateway devices and other endpoint equipment . It also offersnetwork monitoring and troubleshooting tools and products that automates subscriber usage policies . The acquisitionwill be made with $17m in cash and is expected to close in early September. While Core Network had a very smallrevenue base, we note its 26 customers (mostly lower tier service providers) have very little overlap with SupportSofesblue chip service provider customer base . SupportSoft will likely integrate the majority of its 50 employees whileincrementally adding capacity in critical areas . We applaud the acquisition as we believe this should help solidify thecompany's already substantial presence in this market . While the company has not ruled out the potential to acquireadditional software vendors (such as those in the enterprise endpoint management space), we believe an acquisitionsuch as Core Networks represents a lower risk move.

Guidance and Model Adjustments

Management provided guidance that was more or less in line with current consensus . ,Sales are expected to be in therange of $16.7-17.5m with BPS of $0.08-0.09 . Our 3Q estimates were $17 .2m and $0 .08 while Street consensus was$17.1m and $0.08. We are maintaining our forward estimates for the second half of 2004 . With the 2Qoutperformance, our 2004 estimates are now $68.3m and $0.38 from prior estimates of $67.7m and $0 .34, For 2005,we are maintaining our estimates of $83ni and $0 .31 . Following the close of the Core Network acquisition in earlySeptember, management expects to add roughly $8m for the future 12 months . Factoring a fixed expense base of under$2m per quarter and the loss of interest generated from $17m of cash, we believe there is some potential for a penny ofearnings dilution in 4Q'04 before turning earnings neutral for the majority of 2005 .

Reiterate Accumulate Rating and $10 Price Target

Our $10 price target represents a 23x multiple on our 2005 BPS estimate of $0.31, adding back roughly $2 .80 per sharein cash. With some of the near term risks of 2Q nbw off the company and its digital videoNolP revenue opportunitiesgetting closer, we believe the stock should recover into the $10 range over the next few months . We reiterate our

Page 2

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SupportSoft July 21, 20D4

Accumulate rating on the shares .

Risks to Target Price and Investment Thesi s]Enterprise sates cycles are lengthy and company will not be immune to broader IT slowdown.

' The shift from term to perpetual licenses creates deal lumpiness and reduces forward visibility.■ Company has revenue concentration in the digital service provider market .


SupportSoft has carved out a substantial opportunity in support automation and is establishing a strong presence in thebroader infrastructure management market . In total, we conservatively estimate the company addresses a $4-6bopportunity . SupportSofb has a substantial base of over 200 blue chip customers and has a lock on the broadbandservice provider space with 7 of the 9 largest providers using its software . A growing number of outsourced serviceproviders such as CSC and HP are also using SupportSoft as a critical component of their offerings. Based in RedwoodCity; California, the company has just under 200 employees worldwide .

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SupportSoft July 21, 2004

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Daflnltfnn ofRatings

The ThinkEqully rating system Is based on a stock's expected total return over a 12-month Investment horizon. Ratings oncoverage are defined as follows :

Buy "Appreciation potential of 20% or more over the next 12 months. Analyst has a high level of convictionthat the company's business fundamentals are intact and that the company will meet or exceedearnings projections. Valuation Is considered reasonable considering the company's potential . "

Accumulate "Appreciation potential greater than 0% and less than 20% over the next 12 months . Typically goodcompanies, with fundamentals and earnings visibility Intact, but current valuation limits upsidepotential . "

Source of Funds "Stock 1s expected to decline as much as 20% over the next 12 months, due to a single or combinationof factors Including excessive valuation, negative sector sentiment, and! or reduced earningsexpectations ."

Sell "Stock expected to decline 20% or more over the next 12 months. Company fundamentals aredeteriorating, leading to material downward revisions In earnings project io ns and valuation . "

tlrsirlbution ofRatinga , Firmwld e

trier Pwt1SMos.SIMON

rtaw% Count Percent Count Percen t

BUY IBi 69 46.94 2 2.90HOLD JAI 62 42 .18 0 0.00SELL ISELLISFI 16 10.88 2 12.5 0

The views expressed in this report correspond to the enalyat'a pcrsoeal views on the subject securi ties and Issuers , and no part of the onslyat'a compeneatlon was, Is,orwil€ be directly or €ndirceily related to the specific re co mmendations contained In this research report .

Thinkl3qulty Partners LLC makes a market in Supportsoftseeu ritias ; and/or associated persons will sell to or buy from customers on a principal basis.

The rescaroh analyse(s) principally responsible for preparation of this report recolve(a) discrellonary Incentive compensation that includes (among other factors)TEP'a investment banking revenues .lnvestors should assume that Thinkequtty Partners is, or will be seeking to provide Investment banking services to the subjectcompany within the noxt three months .

"Buy," "Hold," and "Sell" are not defined 111*13qutty Partners LLC ratings and should not be construed as Investment opinions . Rather, these ratings we usedillustratively to comply with applicable NASD and other securities regulatory organization regulations,'ilds report does not pwport to be a complete statement of allmaterial facts related to any company, industry, or security mentioned . The Information provided, while not guaranteed as to accuracy or completeness, has bee n

Page 4

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SlpportSoft July 21, 200 4

obtained from sources believed to be reliable. The opinions expressed reflect our judgment at this time and are subject to change without notice and may or may notbe updated. Post performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or Implied, ismade regarding future performance . This notice shall not constitute an offer to sell or the eolicitatlon of an offer to buy, nor shall there be any sole of these securitiesIn any state in which said after, solicitation, or sale would be unlawful prior to registration or qualification undor the securities Iowa of any such state . This researchreport was originally prepared and distributed to inslitullonal clients of 71inkEquity Partners LLC . Recipients who are not market professionals or institutionalclients of'FhlnkEquity Partners LLC should sock the advice of their personal financial advisor before making any investment decisions based on this report .Additional Information on the aecuritias montioncd is available on request . MembcrNASA and SlFC.

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ThinkEqui.ty

SupportSoft Closes Core NetworksAcquisition, Raising EstimatesWe are raising our estimates to reflect the Core Networks acquisition andmaintain our Accumulate rating on SupportSoft. While our revenue numbersedge up only slightly in the near term, we are increasing our 2005 revenue by$8m to $91 m and increasing BPS by $0.03 to $0.34. We believe the company isseeing a good pipeline of deals and have increasing confidence in its ability tohit 3Q numbers. Our price target moves from $10 to $12 and represents a 30xmultiple excluding cash .

V -g. L4,navenus(Current s) $63 .27 $69.80 $91 .00 $16 .89 $17 .70 $13 .63Rovsnus Previous s) $53 .27 $88.30 $83.00 $16 .89 $17.20 $13 .53EPS(CurrentS) $0 .25 $0.38 $0.34 $0 .11 $0.08 $0.07EP8(Prevloue S $0.25 $0.38 $0 .31 $0 .11 $0.08 $0.07PIS(Current) 8.8 6.7 6.1 - -PIE(Current) 41.0 27.0 30.1 --

Core Networks acquisition closes. SupportSoft closed the $17m cashacquisition of Core Networks, a specialized provider of broadband softwarefor cable and telco providers . Recall, this acquisition adds complementaryproducts and customers for the digital service provider market and will bringabout 40 (of original 50) employees into the fold .

Positive business trends in 3Q. While it is still early in the quarter, webelieve business trends are positive. The company is working on a healthypipeline of deal across its three major market segments : enterprise, managedservice providers and digital service providers . Feedback from our contacts isupbeat and opportunities such as Asia look to be ahead of expectations(senior management recently spent a week in this region) . We expect thecompany to add incremental sales capacity to drive international expansion .

Awaiting digital video deals . SupportSofi has been pilot testing and rollingout smaller implementations of its new digital video suite over the last fewmonths. We suspect the company could announce its first major transaction inthe near term and are hopeful that it can add support for Motorola settopboxes (currently, SupportSoft only has support for Scientific Altanta boxes)by the end of this year or early 2005 . In addition, some newer products suchas ServiceVerify launched in August should help further drive expansiondeals in the ditial service provider space .

Upcoming catalysts. Looking ahead, we believe the stock should see a fewpositive catalysts including announcement of 3Q results, its user conferencein late October, and more details on its digital video ro llouts.

Raising estimates and price target . Our new estimates for 2004 are$69.8m/$0.37 from $68,3m1$0.37 . For 2005, estimates increase to$91m/$0 . 34 from $83m/$0 .3 1 . Our price target rises from $10 to $12, whichrepresents a 30x multiple excluding roughly $2.50/share in cash .

Please see the last page of this report for important disclosures .

Excl . E Page 19

SupportSoft September 3, 2004

Risks to Target Price and Investment Thesi s• Enterprise sales cycles are lengthy and company will not be immune to broader IT slowdown .■ The shift from term to perpetual licenses creates deal lumpiness and reduces forward visibility .

Company has revenue concentration in the digital service provider market .


SupportSoft has carved out a substantial opportunity in support automation and is establishing a strong presence in thebroader infrastructure management market. In total, we conservatively estimate the company addresses a $4-6bopportunity. SupportSoft has a substantial base of over 200 blue chip customers and has a lock on the broadbandservice provider space with 7 of the 9 largest providers using its software, A growing number of outsouroed serviceproviders such as CSC and HP are also using SupportSoft as a critical component of their offerings . Based in RedwoodCity, California, the company has just under 200 employees worldwide .

Page 2

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Suppol'tSoft September 3,2-G04

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I Definition of Rating s

The ThlnkEqulty rating system Is based on a stock's expected total return over a 12-month Investment horizon . Ratings oncoverage are defined as follows :

Buy "Appreciation potential of 20% or more over the next 12 months Analyst has a high level of convictio nthot the company's business fundamentals are Intact and that the company will meet or excee dearnings projections. Valuation Is considered reasonable considering the company's potential. "

Accumulate "Appreciation potential greater than 0% and less than 20% over the next 12 months. Typically goodcompanies, with fundamentals and earnings visibility Intact, but current valuation limits upsidepotential . "

Source of Funds "Stock Is expected to decline as much as 20% over the next 12 months, due to a single or combinatio nof factors Including excessive valuation, negative sector sentiment, andf or reduced earning sexpectations . "

Sell "Stock expected to decline 20% or more over the next 12 months. Company fundamentals aredeteriorating, leading to material downward revisions In earnings projections and valuation,"

Distribution of Ratings, Firmwide

15 Ses eJPa,t l2 Me,.

Rating Count Percent Count percen t

BUY t9) 69 46.00 5 7.2 5HOLD [Al 61 40 .67 0 0.0 0

SELL ISSLLISBJ 20 1333 1 5.0 0

The views expressed in this report correspond to the analyst's personal vlews on the subject securities and issuers, and no part of the analyst's compensation was . is,or will be directly or indirectly related to the speaifio recommendations contained In this resesroti report.

77tinkEqulty Partners L C makes a market In Suppor(soAsocuritlca; and/or associated persons will sell to or buy from customora on a principal basis .

The research analyst(s) principally responsible for preparation of this report recalve (s) discretionary Incentive compensation that inoludes (among other fbctors)'1"8P'e investment banking ovonues . lnvestors should assume that Thinkequlty Partners is, or will be seeking to provide investment banking services to the subjectcompany within the next three months .

"Buy," "Hold," and "Sall " are not defined ThiakEquity Partners LLC ratings and should not be construed as investment opinions . !lather, these ratings are usedillustratively to comply with applicable NASD and other securities regulatory organization ragulations .This report does not purport to be a complete statement ofallmaterial theta related to any company, Industry, or securi ty mentioned. The information provided, while not guaranteed as to accuracy or completeness, has been

Page 3

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SupportSoft September 3, 2004

obtained from souses believed t6 be reliable. The opinions expressed reflect ourjudgmcni at this time and are subject to change without notice and may or may notbe updated . Post performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, Ismade regarding ibture performance . This notice shall not constitute an offer to sell or the solicitation of an offer to bay, nor shall there be any sale of these securitiesIn any state in which said offer, solicitation, or solo would be unlawful prior to registration or qualification under the secu rities laws of any such state . This researchreport was originally prepared and distributed to institutional clients of 7hlnkE. quitp Partners LLC. Recipients who are not market professionals or insthutionalclients of ThinkPquity Partners LLC should seek the advice of their personal flnoncial advisor before making any Investment decisions based on this repo rt.Additional infom information on the securities mentioned Is available on requaaL Member NASA and SIPC

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07 :05am EST 21-Jan-04 Lehman Brothers (Herman, Neil 212-526-6093) SPRT SPRT .OSupportSoft, Inc . : SPRT Hitting On All Cylinders (part 1 of 2 )

PRICE ; (USD 13 .50)

EPS (FY Dec )

2002 2003 2004 % ChangeActual Old New St. Est Old New St . Est 2003 2004

1Q (0 .05) 0 .04A 0 .04A 0 .04A 0 .07E 0 .07E 0 .07E 180 752Q (0 .03) 0 .06A 0 .06A 0 .06A 0 .07E 0 .08E 0 .07E 300 333Q 0 .01 0 .07A 0 .07A 0 .07A 0 .08E 0 .08E 0 .08E 600 144Q 0.03 0 .07E 0 .08A 0 .07E 0 .09E 0 .08E 0 .10E 167 0

Year (0 .05) 0 .24E 0 .25A 0,24E 0 .30E 0 .31E 0.31E 600 24- ------------------------------------------------------------------------------

P/E 54.0 43. 5Market Data Financial Summary-----------------------------------------------------------------------------

Market Cap 568.4M Revenue FY03 53 .30Shares Outstanding (Mi 42 .1 Five-Year EPS CAGR 22%Float 22 Return on Equity NA

Dividend Yield NA Current BVPS NAConvertible Debt To Capital NA52 wk Range 16 .40 - 1 .8 9-----------------------------------------------------------------------------

Stock Rating: Target:

-New : 2-Equal weight New ; 16 .00Old : 2-Equal weight Old : 16 .00Sector View :1-Positive

-----------------------------------------------------------------------------

INVESTMENT CONCLUSION :* SupportSoft posted strong 4Q03 results that came ahead of our estimatesfor revenue, op . inc and EPS, underscoring the company's solid execution andfocus .SUMMARY* We believe that both the backlog, as well as the pipeline of potentialbusiness are solid, and that SPRT will continue to benefit from an improvingIT spending environment . The co established '04 guidance above our existingnos ; however given the strength of the underlying business, we believe theguidance range may ultimately prove to be conservative .* we are extremely encouraged by SPRT's initiatives to lessen customerconcentration, purposefully driving down ave . deal sizes in order to broadenits business, increase opportunities and diminish concentration risk .Likewise, the business mix is more balanced between broadband providers (47%)and enterprise customers (47%) .* While we believe that the fundamentals are strong, we are maintaining our2-EW rating given SPRT's current valuation .

-- PLEASE SEE END OF DOCUMENT FOR IMPORTANT DISCLOSURES -

SummarySupportSoft posted strong 4Q03 results that were ahead of our estimates for

revenue, operating income and EPS . Revenue came in at $15 .1 million (+28 .1%)ahead of our estimate of $14 .2 million (+20 .1%) . Operating income was $3 .3million, compared to our estimate of $2 .6 million and $1 .0 million in 4Q02 .Operating income margin was 22 .1% versus our estimate of 18 .1%, up 270 basispoints sequentially . EPS came in at $0 .08, compared to $0 .03 in 4Q02 andbeating-our estimate (and Street consensus) of $0 .07 . The upside to our

estimates came from both license revenue, as well as services revenue .License revenue came in at $11 .2 million (+22 .9%), slightly ahead of our$11 .0 million estimate . The company indicated that it had signed a largeagreement with a broadband provider in 3Q03, with the corresponding revenue

being recognized in 4Q03 and throughout each quarter of 2004 . The companyposted service revenue of $3 .9 million (+45 .5%), beating our estimate of $3 .2million (+18 .1%) . Most of the upside to our estimates came from deployment,training and consulting services provided in connection with transactionssigned during 4Q03 . For instance, SupportSoft signed an agreement with Intuitto deploy its Resolution suite and Knowledge Center software . The transactionand the deployment both took place during 4Q03, underscoring SupportSoft'squick ROi to customers .

Figure 1 : SupportSoft 4Q03 Earnings Scorecar d

Source : Lehman Brothers estimates and corporate report s

SupportSoft's balance sheet , which was already solid, improved significantlyin 4Q03, with increased cash and cash-equivalent, lower DSOs and sequentiallyhigher deferred revenue . The company ended the quarter with $121 .4 million incash (including $77 .7 million in net proceeds from the secondary offering),up from $37 .4 million in 3Q03 . DSOs declined to 74 days, from 95 in 3Q03 andlower than the company's normal range of 80-100 . The decline in accountreceivable in part reflects the company's solid collection policy, as 87% ofthe receivables outstanding are less than 30 days old (up from 84% in 3Q03)and 9% are greater than 90 days (up from 3% in 3Q03) . Deferred revenue camein at $20 .9 million, up from $18 .2 million in 3Q03 and $14 .3 million lastyear . Cash from operations was $6 .3 million, up sequentially from $2 .9million and beating our estimate of $4 .1 million .

Strong pipelin eWe believe that both the backlog, as well as the pipeline of potential

business are strong . Management indicated that the order backlog representedapproximately 2-Sx quarterly revenue and is expected to be in the 2-4x rangegoing forward . In our opinion, SupportSoft, with its product innovation,rapid and tangible ROI to customers and strong execution, will be a primarybeneficiary of the current improvement in the IT spending environment . During4Q03, SupportSoft closed two transactions exceeding $1 million and signeddeals with 10 new customers and 20 existing ones . For the entire year 2003,SupportSoft signed 135 deals, including 12 transactions in excess of $1million and five transactions in excess of $5 million . The company added 30new customers, ended the year with a quota-carrying sales-force of 22 andexpects to add 15-20 more employees during 1Q04 .

Guidance will likely prove conservativeSupportSoft established guidance above our existing estimates and theStreet`s current expectations, however given the strength in the underlyingbusiness, we believe that the guidance range could ultimately proveconservative . SupportSoft's 1Q04 guidance calls for revenue of $14 .8 millionto $15 .2 million and EPS of $0 .07 to $0 .08 . Our revenue estimate remains$15 .2 million (+27 .0%) and our EPS estimate is $0 .07 . We expect the firstquarter to be fueled by continued growth across all segments and deeperpenetration of existing relationships . We believe the company will take theright steps to increase its international business, especially in Europe andJapan, but the results will take a few quarters to materialize . Likewise, therevenue opportunity from the Service Automation Suite for Video is more of asecond half story . On the other hand, we expect more immediate positiveresults from OEM/channel partner initiatives . This segment will probably bethe key growth driver during 1Q and 2Q 2004 . SupportSoft added HP managementservices during 4Q03, bringing its total number of relationships in themanaged services segment to five (including IBM Global Services, Accenture,HP and CJI) . With penetration of most of these relationships at less than 5%,we believe there is a lot of room for growth within this category and thatthe company will be focused on expanding existing relationships during 2004 .In the second half of 2004, we expect cable video and internationalinitiatives to begin kicking in . The video product (developed in partnershipwith Scientific Atlanta ) is currently being pilot-tested by CoxCommunications . The company is still fine tuning the pricing strategy andproduct features, and management expects the service to be rolled out during2H04 . On the international side, SupportSoft is close to hiring a general

manager in Western Europe, in order to begin building a local sales force andset-up an operation in the region . We believe the company will be initiallytargeting Northern Europe (including Germany) as well as the U .K ., where theeconomics of the cable industry are favorable . During 4Q03, SupportSoftsigned up Tiscali, an Italian-based internet communications company counting600k subscribers, and expanded its relationship with UPC, Europe's largestcable broadband providers with over 749k subscribers and 5 .7 million homespassed in 11 European countries .

Figure 2 : SupportSoft Summary of Estimate Changes($ in million )

Source : Lehman Brothers estimates and corporate reports

Improved risk profileWe believe that during 4Q03 SupportSoft's risk profile significantlydecreased . Note that in our initiation note published on January 13, we citedhigh ASPS and customer concentration as two key risk factors, which couldpotentially lead to earnings variability and decreased visibility . We arevery encouraged by the recent positive trends with respect to these two riskcategories . SupportSoft reported ASPs of $500k, down from $1 million lastquarter . Likewise, two broadband customers accounted for 16% and 12% of totalrevenue, down from a total customer concentration of 56% in 3Q03 .Furthermore, the revenue mix among the three customer segments is morebalanced, with broadband providers, enterprises and OEM/outsourcerscontributing 47%, 47% and 6% of total revenue, respectively, compared to 39%,57% and 4%, respectively, in 3Q03 . In 1Q04, the company is looking for arevenue mix of 40%-50% for broadband providers, 45%-55% for enterprises and50-10% for OEM/outsourcers .

ValuationOur price target is $16 and is derived using a DCF methodology . Ourassumptions include a cost of equity of 10 .3% and a perpetual growth rate offree cash flow of 5% . While we believe that the fundamentals are strong, weare maintaining our 2-EW rating given the current valuation . Based on ourforecasts, SupportSoft shares are trading at 8 .7x 2004E revenue and 52 .9x2004 EPS, compared to an average of 5 .5x and 40 .1x for our high revenuegrowth comps and 5 .2x and 46 .7x for our systems management comps .

Figure 3 : SupportSoft Comparable Metrics, as of January 20, 2004($, in million, except per share data )

Source : Lehman Brothers estimates and First Call estimates

SupportSoft Income Statement - 2000-2005 E($, in million, except per share data )

Source : Lehman Brothers estimates and corporate reports

Analyst Certification :I, Neil Herman, hereby certify (1) that the views expressed in this researchnote accurately reflect my personal views about any or all of the subjectsecurities or issuers referred to in this note and (2) no part of myFirst Call Corporation, a Thomson Financial company .All rights reserved . 688 .558 .2500

07 :04am EST 21-Jan-04 Lehman Brothers (Herman, Neil 212-526-6093) SPRT SPRT .OSupportSoft, Inc . : SPAT Hitting On All Cylinders (part 2 of 2 )

compensation was, is or will be directly or indirectly related to thespecific recommendations or views expressed in this note .

Company Description :SupportSoft provides real-time service management software designed toaccelerate and automate enterprise technical support, customer service and ITinfrastructure management .

Company Name : Disclosures Ticker Price (01/16) RatingSupportsoft, Inc. A,C,D SPRT 13 .50 2-Equal weight

Other Team Members :Nadia Zahmoul 1 .212 .526 .1112 nzahmoul@lehman .comJonathan M . Schick 1 .212 .526 .8708 jschick@lehman .comSam Pattanayak 1 .212 .526 .8706 spattana@lehman .com

Important Disclosures

Rating and Price Target Chart : SPRT

CHART IS NOT APPLICABLE

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FOR EXPLANATION OF RATINGS PLEASE REFER TO THE STOCK RATING KEYS LOCATED ATTHE END OF THIS DOCUMENT

Important Disclosures :The analysts responsible for preparing this report have received compensationbased upon various factors including the Firm's total revenues, a portion ofwhich is generated by investment banking activities .

A - Lehman Brothers Inc . and/or an affiliate managed or co-managed within thepast 12 months a public offering of securities for thi s

company .C - Lehman Brothers Inc . makes a market in the securities of this company .ID - Lehman Brothers Inc . and/or an affiliate has received compensation forinvestment banking services from the subject company within th e

past 12 months .

Risks Which May Impede the Achievement of the Price Target :SPRT: SupportSoft-s potential investment risks include high ASPS (above

$1M), customer concentration and competition from larger, more diversifiedcompetitors . We believe that the first two risks could be mitigated by thecompany's efforts to diversify into lower ASP products and a more balancedproduct mix between comprehensive solutions and lower priced componentproducts .

Key to Investment Opinions :

Stock Rating1-Overweight - The stock is expected to outperform the unweighted expectedtotal return of the industry sector over a 12-month investment horizon .2-Equal weight - The stock is expected to perform in line with the unweightedexpected total return of the industry sector over a 12-month investmenthorizon .

3-Underweight - The stock is expected to underperform the unweighted expectedtotal return of the industry sector over a 12-month investment horizon .RS-Rating Suspended - The rating and target price have been suspendedtemporarily to comply with applicable regulations and/or firm policies incertain circumstances including when Lehman Brothers is acting in an advisorycapacity on a merger or strategic transaction involving the company .

Sector View1-Positive - sector fundamentals/valuations are improving .2-Neutral - sector fundamentals/valuations are steady, neither improving nordeteriorating .3-Negative - sector fundamentals/valuations are deteriorating .

Stock Ratings From February 2001 to August 5, 2002 (sector view did notexist) ;

This is a guide to expected total return (price performance plus dividend)relative to the total return of the stock's local market over the next 12months .1-Strong Buy - expected to outperform the market by 15 or more percentagepoints .2-Buy - expected to outperform the market by 5-15 percentage points .3-Market Perform - expected to perform in line with the market, plus or minus5 percentage points .4-Market Underperform - expected to underperform the market by 5-15percentage points .5-Sell - expected to underperform the market by 15 or more percentage . points .

Stock Ratings Prior to February 2001 (sector view did not exist) :1-Buy - expected to outperform the market by 15 or more percentage points .2-Outperform - expected to outperform the market by 5-15 percentage points .3-Neutral - expected to perform in line with the market, plus or minus 5percentage points-4-Underperform - expected to underperform the market by 5-15 percentagepoints .5-Sell - expected to underperform the market by 15 or more percentage points .V-Venture - return over multiyear timeframe consistent with venture capital ;should only be held in a well diversified portfolio .

Distribution of Ratings :Lehman Brothers Equity Research has 1630 companies under coverage .39% have been assigned a 1-Overweight rating which, for purposes of mandatoryregulatory disclosures, is classified as a Buy rating, 39% of companies withthis rating are investment banking clients of the Firm .40% have been assigned a 2-Equal weight rating which, for purposes ofmandatory regulatory disclosures, is classified as a Hold rating, 10% ofcompanies with this rating are investment banking clients of the Firm .21% have been assigned a 3-Underweight rating which, for purposes ofmandatory regulatory disclosures, is classified as a Sell rating, 65% ofcompanies with this rating are investment banking clients of the Firm .

This material has been prepared and/or issued by Lehman Brothers Inc ., memberSIPC, and/or one of its affiliates ('Lehman Brothers') and has been approvedby Lehman Brothers International (Europe), authorised and regulated by theFinancial Services Authority, in connection with its distribution in theEuropean Economic Area . This material is distributed in Japan by LehmanBrothers Japan Inc ., and in Hong Kong by Lehman Brothers Asia Limited . Thismaterial is distributed in Australia by Lehman Brothers Australia PtyLimited, and in Singapore by Lehman Brothers Inc ., Singapore Branch . Thismaterial is distributed in Korea by Lehman Brothers International (Europe)Seoul Branch . This document is for information purposes only and it shouldnot be regarded as an offer to sell or as a solicitation of an offer to buythe securities or other instruments mentioned in it . No part of this documentmay be reproduced in any manner without the written permission of LehmanBrothers . We do not represent that this information, including any thirdparty information, is accurate or complete and it should not be relied uponas such . It is provided with the understanding that Lehman Brothers is not

acting in a fiduciary capacity . Opinions expressed herein reflect the opinionof Lehman Brothers and are subject to change without notice . The productsmentioned in this document may not be eligible for sale in some states orcountries, and they may not be suitable for all types of investors . If aninvestor has any doubts about product suitability, he should consult hisLehman Brothers representative . The value of and the income produced byproducts may fluctuate, so that an investor may get back less than heinvested . Value and income may be adversely affected by exchange rates,interest rates, or other factors . Past performance is not necessarilyindicative of future results- If a product is income producing, part of thecapital invested may be used to pay that income . Lehman Brothers may, fromtime to time, perform investment banking or other services for, or solicitinvestment banking or other business from any company mentioned in thisdocument . (c) 2004 Lehman Brothers . All rights reserved . Additional informationis available on request . Please contact a Lehman Brothers' entity in yourhome jurisdiction .

Complete disclosure information on companies covered by Lehman BrothersEquity Research is available at www . lehman .com/disclosuxes .8First Call Corporation, a Thomson Financial company .All rights reserved . 888 .558 .2500


EXHIBIT G

Deutsche Bank Securities Inc .

USApplications Software Deutsche Bank0

January 21, 2004 SupportSoft, Inc.Firing on all cylinders - SupportSoft deliversstrong Q4, raises guidance

RatingwawmmmmmmmBuy EPSfU SS l :2002A ($0 .09) {$0. 06) $0.00 $0 .03 1 110 .11 ) NM {$0.11) NM $41 . 2

Price at 1/20/04 2003A 0 .04 0.06 0.07 0.08 0 .25 65.9 0.25 65.9 53. 32004E 0 .08 0.08 0 .08 0.09 0 .33 49.9 0.33 49.9 67. 4

US$ 16 .47 Old 2004E 0.07 0.07 0.37 0.37 65 8Some : Deutsche Bank Securities estimates and company data

Target Price 52-Week Rarge- $1642 ROE : 24 %

US$ 18 Shares Outstanding:1MMI 37.90 Dio fYiatd: so. 00I0.oov.Market Cap : (MM) 5624 .21 3-5 Yr Grth Rate: 30 %

Exchange : Ticker Ftoat IMMI 1999 CY03P/E -1o-G,th, 2 .2e

NASDAQ: SPRT Avg Daily Volume: 626 .3 9

■ SupportSoft reported strong F04 results led by license upside anddeferred growth . License revenue of $11 .2mrn was ahead of our$11 .Omm estimate, and total revenues of $15 .1mm easily beat our$14.0mm estimate . EPS of $0 .08 was a penny ahead of our estimate andStreet consensus. Company books 10 new customers and 20 repeatdeals to finish off a strong 2003 .

Ill Q7 and 2004 guidance ahead of consensus . Q1 guidance calls for arevenue range of $14 .8-$15 .2mm and EPS range of $0 .07-0 .08, ahead ofpro-results consensus of $14 .7mm and $0.07 . 2004 guidance is revisedupward and is now $63-67mm and $0 .29-$0 .33, versus prior guidance of$63-66mm and $0.27-0 .31 . Pre-results 2004 consensus was $65.4 and$0.31 .

• Net Operating Loss (NOL) assumption affected by 382 study. Due tosignificant shareholder turnover, SupportSoft's tax rate should increasefaster than we anticipated . We now model a 2004 tax rate of 13% and a2005 tax rate of 32%. This adjustment reduces our 2005 EPS from $0.50to $0.40 .

■ Reiterate Buy rating. Our $18 price target is based on $3 cash per shareplus a 40x multiple (high-end of software) on our 2005 EPS estimate o f$0.40 (ex . $0.02 in interest expense) . Risks to our Buy rating include a

Br1an Skiha slowdown in corporate spending and customer-concentration risk .212-250-258 6brian [email protected] m

Matthew F. Kelly, [email protected]

Deutsche Bank does and seeks to do business with companies covered In its research reports . Thus,investors should be aware that the firm may have a conflict of Interest that could affect the objectivity ofthis report .Investors should consider this report as only a single factor In making their investment decision .DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED AT THE END OF THE TEXT OF THIS RESEARCH

January 21, 2004 Deutsche Bank Securities inc. Deutsche Bank

Investment thesis

Suppo rtSoft reported a bulletproof 04 to finish off an impressive 2003 . Q4was highlighted by the company 's the tenth consecutive qua rter ofsequential improvement in revenue , and deferred revenue growth (47% y/y,4% q/q ). The company delivered 01 guidance above pre-results consensusand raised its prior range for 2004 revenue and EPS guidance . Operatingmargins showed solid imp rovement , growing 300bps sequentially to 221/0,an all-time high for the company. License/services split was 74%/26%, inline with recent qua rters ( 03 was 77%/23%, 02 was 76%/24%) . Impo rtantly,management noted that the enterprise IT spending environment isimproving .

We are impressed with SupportSoft 's ability to scale the business , and notethat the company ' s operating margins have grown from breakeven just 5qua rter ' s ago to 22% last qua rter. 2004 remains a year of investment, andwe are still modeling only modest margin expansion (to 24%) in 2004 . Webelieve 2005 margins should reach into the low-30% range .

Section 382 impacts our tax assumption

Notably , SupportSoft just went through a significant "section 382" study,which evaluates the company's ownership over the past 3 years . This rulewas put into place to stop companies from avoiding taxes by simplyacquiring money losing companies for their NOL's ( net operating loss). Anancillary impact of this rule is that companies , like Suppo rtSoft, which haveseen significant share turnover are restricted from using their historical taxlosses to offset future gains , It essentially lengthens the time horizon overwhich SupportSoft can use its $35mm Not., and thus management isguiding its tax rate up to between 12-14% in 2004 and into the low-to-mid30% range in 2005 . This move alone causes our 2005 EPS to go from $0 .50to $0 .40 , however we retain our Buy rating as the company 's solutionsremain in high demand and underlying fundamentals remain solid . Webelieve management will further refine their guidance on 2004 and 2005 taxrates and current guidance will likely prove to be conservative .

Quarter highlights

SupportSoft reported strong 04'03 results with license revenue of$11 .2mm, ahead of our $11mm license estimate . Total revenue was$15 .1mm, well ahead of both our estimate ($14 .Omm) and consensus($14 .2mm) and GAAP EPS was $0 .08, ahead of our estimate and consensusof $0.07 . 0.4 results were ahead of management's guided revenue range of$14.0-14.2mm and guided EPS of $0 .07 . Operating margins showed 300bpsof sequential improvement, advancing to 22% from 19% last quarter and8% a year ago . Management noted that backlog remains about 2-5xquarterly revenue, however management expects this will move to 2-4x incoming quarters based solely on the fact that the revenue number isbecoming larger .

SupportSoft operating metrics

US Applications Software Page 2 of 8

21, 2004 Deutsche Bank Securities inc. Deutsche Bank

Q4'03 DB Est . Q4'02

License revenue $11 .2mm $11 .Omm $9 .1mm

Services $3.9mm $3.Omm $2 .7mm

Total revenue $15.1mm $14.Omm $11 .8mm

Operating Margin 22% 19% 8%

GAAP EPS $0.08 $0.07 $0.03

Source: Company data and DB estimates

Deal highlights

Suppo rtSoft added 10 new customers during the qua rter, up from 6 lastqua rter and inline with 10 from the year ago qua rter. Theratable/perpetuallservices mix was 40 %/34%126%, more skewed towardsperpetual versus last qua rter's 56%/21%/23% mix . Going forwardmanagement still expects that ratable revenue will still account for between45-55% of total revenues , in line with previous commentary . The companyhad 20 existing customer follow-on deals, up from 12 last qua rter and 15 inthe year ago quarter. Total customer count now stands at 201, up from 191last qua rter . The Enterprise/Broadband/OEM breakdown was 47 %147%/6%,versus 60%/39%/1% last quarter and 74%/20°10/6% a year ago . The ASP ondeals over $100K was only $500K, down from over $1mm (for the past 3qua rters) . Suppo rtSo ft emphasized its ongoing initiative to diversify awayfrom big deal exposure by increasing the total number of deals andsimultaneously reducing the ASP. The company repo rted 2 deals over$1mm versus 3 last quarter and none a year ago. There were two 10% +customers in the qua rter, one was 12 % and the other was 16%. These werenot the same customers that were over 10% of revenues in the priorqua rter. Direct/indirect mix was 73%/27%, versus 89%/11 % last quarter,reflecting continued success with the Suppo rtSoft 's MSP pa rtners .International revenues grew to 8%, up from 7% in Q3, but down from 16% ayear ago . International growth remains a key focus area for the companyand management expects that international should account for 20% ofrevenues by yearend 2004 and beyond. During Q4 the company signed up anew OEM partner in the Korean market , where Samsung will packageSupportSoft solutions . During the qua rter, the services organizationcompleted 17 go-live implementations, several of which were sold andwent into production in the same qua rter. We were pleased to see that thecompany had several services engagements that began and went live in thesame qua rter.

Update on new initiatives

During the qua rter the company introduced its first products on the RealTime Services Management ( RTSM ) platform . These include LiveAssist(support chat ) and Auto Discove ry and Metering. Over time, we expectSupportSoft will continue to expand its offering more into the systemsmanagement arena , specifically around PC refresh , virus remediation, andIT compliance. SupportSoft also made significant progress with its RIDprogram in India, where it now has 20 employees . The SFA pa rtnership for


January 21, 2004 Deutsche Bank Securities Inc . Deutsche Bank

cable television continues to make progress, as it began lab trials during thequarter. Notably, we do not expect this will deliver any meaningful revenueuntil 2H04, and even more likely into 1H05 .

Balance sheet updat e

Deferred revenue grew to $20 .9mm from $20.Omm last quarter 1+4% q/q)and $14.3mm a year ago (+47% y/y) . Total cash now stands at $121 .4mrn,up from $37mm last quarter, as the company raised approximately $78mrnin a secondary offering during the quarter . Quality of receivables remainshigh as 87% of receivables are under 30 days, (84% last quarter and a yearago) . Total headcount went up to 170 from 154 last quarter and 151 a yearago. Quota carrying reps now stands at 21, versus 23 last quarter, althoughmanagement has already hired 3 reps. Management noted it already hiredseveral sales people in the early part of Q1'04. DSO was 74 days, downfrom 95 last quarter and 59 a year ago. This marks the eighth consecutivequarter of positive cash flow for SupportSoft .

Updated guidanc e

Management provided Q1 and revised 2004 revenue and EPS guidance. ForQ1 the company expects a revenue range of $14.8mm-$15.2mm and EPS of$0.07-0.08. Prior to Q4 results we had been modeling $14.5mm in revenueand $0.07 in EPS for Q1 . The company also provided improved guidance for2004. Revenue is now expected to fall between $63mm and $67mm, whileEPS is expected to range between $0.29 and $0 .33 . Prior FY04 guidancecalled for a revenue range between $63-66mm and EPS between $0 .27-$0.31 . Prior to Q4 results our 2004 revenue and EPS estimates were$65.8mm and $0 .31, in line with consensus of $65.4mm and $0 .31 .

Our estimates

We are raising our Q1 revenue and EPS estimates to $15.2mm and $0 .08from $14.5mm and $0 .07. Our 2004 revenue and EPS estimate is now$67.4mm and $0.33, up from $65 .Bmm and $0 .31 . Our 2005 revenue andEPS estimate is now $87 .4mm and $0 .40, revised from $85 .4mm and $0 .50 .Recall, 2004 represents a year of investment for SupportSoft andaccordingly operating margin growth, which has been stellar, is expected toslow as the company invests for the future . For 2005, we had beenmodeling an 8% tax rate throughout the year, but are now increasing thistax assumption to 32% due to the aforementioned section 382 study, thusthe $0.10 EPS decline .

Valuation

We base our $18 price target on $3 in cash per share plus a P/E multiple of40x on our 2005 estimate of $0.40 (ex- $0 .02 of interest expense. This 40xmultiple is at the high - end of a 30 - 40x range for most software companies.We believe the highend is justified as SupportSoft has (1 ) a higher-than-average expected revenue ramp (2) sizeable operating margin expansionassumptions , and (3 ) a large chunk of ratable revenue .

Analyst certification


January 21, 2004 Deutsche Bank Securities Inc. Deutsche Bank0

The views expressed in this report accurately reflect the personal views ofthe undersigned lead analyst(s) about the subject issuer and the securitiesof the issuer. In addition, the undersigned lead analyst(s) has not and willnot receive any compensation for providing a specific recommendation orview in this report. Brian Skiba, Matt Kell y

For disclosures pertaining to recommendations or estimates made onsecurities other than the primary subject of this research, please visit ourglobal disclosure look-up page on our website athttp://equities .research.db.com .

Additional information available on reques t

The information and opinions in this report were prepared by DeutscheBank AG or one of its affiliates (collectively "Deutsche Bank") . Theinformation herein is believed by Deutsche Bank to be reliable and has beenobtained from public sources believed to be reliable, but Deutsche Bankmakes no representation as to the accuracy or completeness of suchinformation.

Deutsche Bank may engage in securities transactions in a mannerinconsistent with this research report and with respect to securities coveredby this report, will sell to or buy from customers on a principal basis .Disclosures of conflicts of interest, if any, are discussed at the end of thetext of this report or on the Deutsche Bank website athttp:l/eq uities . resea rch .db.com .

Opinions, estimates and projections in this report constitute the currentjudgement of the author as of the date of this report . They do notnecessarily reflect the opinions of Deutsche Bank and are subject to changewithout notice . Deutsche Bank has no obligation to update, modify oramend this report or to otherwise notify a reader thereof in the event thatany matter stated herein, or any opinion, projection, forecast or estimate setforth herein, changes or subsequently becomes inaccurate, or if research onthe subject company is withdrawn . Prices and availability of financialinstruments also are subject to change without notice. This report isprovided for informational purposes only . It is not to be construed as anoffer to buy or sell or a solicitation of an offer to buy or sell any financialinstruments or to participate in any particular trading strategy in anyjurisdiction . The financial instruments discussed in this report may not besuitable for all investors and investors must make their own investmentdecisions using their own independent advisors as they believe necessaryand based upon their specific financial situations and investmentobjectives . If a financial instrument is denominated in a currency other thanan investor's currency, a change in exchange rates may adversely affect theprice or value of, or the income derived from, the financial instrument, andsuch investor effectively assumes currency risk. In addition, income from aninvestment may fluctuate and the price or value of financial instrumentsdescribed in this report, either directly or indirectly, may rise or fall.Furthermore, past performance is not necessarily indicative of futureresults .


January 21, 2004 Deutsche Bank Securities Inc. Deutsche Bank C..#

Unless governing law provides otherwise, all transactions should beexecuted through the Deutsche Bank entity in the investor's homejurisdiction . In the U .S. this report is approved and/or distributed byDeutsche Bank Securities Inc ., a member of the NYSE, the NASD, NFA andSIPC. In the United Kingdom this report is approved and/or communicatedby Deutsche Bank AG London, a member of the London Stock Exchange .This report is distributed in Hong Kong by Deutsche Bank AG, Hong KongBranch, in Korea by Deutsche Securities Korea Co . and in Singapore byDeutsche Bank AG, Singapore Branch . In Japan this report is approvedand/or distributed by Deutsche Securities Limited, Tokyo Branch. Additionalinformation relative to securities, other financial products or issuersdiscussed in this repo rt is available upon request. This report may not bereproduced, distributed or published by any person for any purposewithout Deutsche Bank's prior written consent. Please cite source whenquoting .

Copyright (c) 2004 Deutsche Bank AG

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(1)212 250 250 0

Disclosures

Additional information is available upon request.

Within the past year, Deutsche Bank and/or its affiliate(s) has managed orco-managed a public offering for which it received fees for the followingcompanie(s) : SupportSoft, Inc. .

Deutsche Bank and/or its affiliate(s) was a member of a syndicate which hasunderwritten, within the last five years, the last offering of the followingcompanie(s) : SupportSoft, Inc . .

Deutsche Bank and/or its affiliate(s) holds a trading position, as that term isdefined by German law, in shares of the company whose securities aresubject of the research : SupportSoft, Inc . .

Deutsche Bank and/or its affiliate(s) makes a market in securities issued bythe following companie(s) : SupportSoft, Inc . .


January 21, 2004 Deutsche Bank Securities Inc. Deutsche Bank0

I Historical Recommendations and Target Price:

$18.00

S'S.00

MOO

w $12.00n

$1D.00

a $8 .00u

N $6.00

$430

$2.00

$000

Dec 03

Previgus Recommendations

Strong BuyBuyMarket PerformUnderperformNot RatedSuspended Ratin g

Current Recommendations

BuyHoldSerfNot RatedSuspended Ratin g

New Recommendation Structure asor September 9, 2002

Dat e

Ii . 1 21212 0 03 : Rating Initiated Buy, $18.00 2.

Buy: Total return expected to appreciate 10% or moreover a 12-month perio d

Hold: Total return expected to be between 10% to -10%over a 12-month perio d

Sell : Total return expected to depreciate 10% or moreover a 12-month period

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211020999-FCSGL•US


EXHIBIT H

InvestextIndustry and Market Intelligence

4650982

upportSoft, Inc .

~

The Investext GroupThe Investext Group22 Pittsburgh StreetBoston , MA 0221 0Copyright 0 1997, Tile Investext Group

Client Services : US & Canada 800-662-7878,

UK 0800-317-577, Europe +44 - 171-815-3860,

Germany 0130 -818-059 , France 0590-3759,

Hong Kong 852-2522-4159 , Japan 03-5213-7300

E

Investext

40Name , Address and Te ephoriY -4

SupportSoft, Inc .

PROFILE

ALT . NAMES : - SupportSoft, Inc .

FKA - Tioga Systems, Inc .ADDRESS : 575 Broadway St .

Redwood City , CA 94063-312 2TELEPHONE : ( 650) 556-9440 Toll Free : ( 877) 565-8600FAX: (650 ) 556-1195INTERNET: http ://www .support .com

info@support .com

s'''~~'n3~,s~.}d=T4'`T ~~"4. •" z

. ~i"-~`~~~' ~~-'~V ~ ~?F~1z` ~ "R~, ''s U-- u?~~ ~~~'rSS_°4"`:3

'~~~~~~ ~ ~'~~~

:„, iii a, x. ~i' y• +: z.

SALES : Annual sales of $41 million (12 months ending December 31,2002) ; includes sales from international business .

EMPLOYEES : 155 employees (as of April 3, 2003) ; company reported 21%employment reduction in the year prior to interview .

EXECUTIVES : Ms . Radha R . Basu - COB/President/CEO (COB, CEO)Mr . Brian M . Beatty - CFO/Senior VP of Finance and

Administration (Finance, Administration )Mr . Joseph D . Mccarthy - VP of Finance (Finance )Mr . Scott W . Dale - CTO (R&D, MIS or Data Processing, CTO)Mr . John Van Siclen - Senior VP of Worldwide Sales and

Services (Customer Service/Support, Sales )Mr . Bruce Mowery - VP of Marketing (Marketing )Ms . Lucille K . Hoger - VP of Operations (Operations)Mr . Cadir B . Lee - Chief Software Officer (Engineering)Ms . Jennifer Massaro - Senior Manager of Public Relations

(Public Relations )

Ownership and DescriptionOWNERSHIP : Public U.S . company (Ticker Symbol : SPRT). Formed in 1997 .Developer of the Self-Healing(tm) System for corporate informationtechnology managers . The software programmatically determines and track sall of an application's components and dependencies, or its workingstate . Based on this imprint, the system can identify and repai rsoftware problems automatically. The software runs on Windows platforms .Products are sold to multiple industries . This company was capitalizedby private investment .

(C) Copyright 2004, OneSource Information Services, inc .

Billable page The Investext Group 1

Investext(978) 318-4300 . All rights reserved.

Siliable page 1The Investext Group 2

Investex tV'N

2 -A1OdUGtS y} rs ~a'

PRIM . IND : Computer Software (SOF)PRIM . SIC : 737 2

PRODUCTS :

CORPTECH SIC DESCRIPTION

SOF-UT-C 7372 Troubleshooting software - Self-Healing(tm) SystemSOF-UT-Y 7372 Diagnostic software - Self-Healing(tm) System

CORPORATE HISTORY

The following corporate changes have been recorded since December 1998 .--------------------------------------------------------------------------Family

July 2000o Change indicated company became a public company .

Listed in or before December 1998 as an independent private companyName

o April 2003 : Changed to "SupportSoft, Inc ." .First Listed as "Support .Com" in November 1999 .

Location

November 1999o Location changed to Redwood City, CA

First listed on December 1998 in Palo Alto, CA

Executive History

EXECUTIVE HISTORY

Currently Listed Executives for whom changes have been recorded sinceDecember 1998, sorted as above, reflecting changes in the profil elisting in the months indicated.

Radha R. Basra, COB/President/CEOo April 2003 : Listing changed to COB/President/CEO (COB, CEO) .o First listed as CEO (CEO) in December 1999 .Brian M. Beatty, CFO/Senior VP of Finance and Administrationo April 2003 : Listing changed to CFO/Senior VP of Finance and

Administration (Finance, Administration) .o First listed as CFO (Finance) in April 2001 .Joseph D. Mccarthy, VP of Financ eo First listed as VP of Finance (Finance) in December 2003 .Scott W . Dale, CTOo April 2001 : Listing changed to CTO (R&D, CTO, MIS or Data Processing) .Listed in or before December 1998 as CTO (R&D, MIS or Data Processing) .John Van Siclen, Senior VP of Worldwide Sales and Service so First listed as Senior VP of Worldwide Sales and Services (Sales,Customer Service/Support) in August 2003 .

Bruce Mowery, VP of Marketing

Billable page 2 The Investext Group 3

Investexto First listed as VP of Marketing (Marketing) in April 2001 .Lucille K . Hoger, VP of Operationso First listed as VP of Operations (Operations) in April 2003 .Jennifer Massaro, Senior Manager of Public Relation so First listed as Senior Manager of Public Relations (Public Relations)in April 2003 .

(C) Copyright 2004, OneSource Information Services, Inc .(978) 318-4300 . All rights reserved .

Billable P0! - The Investext Group 4

InvestextPreviously Listed Executives for whom changes have been recorded sinceDecember 1998, sorted alphabetically by last name, and reflectingchanges in the profile listing in the months indicated .

Robert Amara lo Listing deleted: April 2001 .Listed in or before December 1998 as VP of Sales (Sales) .David Dougwitzo Listing deleted : April 2003 .o First listed as VP of Sales (Sales) in April 2001 .Mark Pincuso Listing deleted : April 2003 .o December 1999 : Listing changed to COB (COB) .Listed in or before December 1998 as Chief Executive Officer (CEO) .Tony Rodonio Listing deleted : April 2001 .Listed in or before December 1998 as VP of Marketing (Marketing) .Mark Vranesho Listing deleted: April 2001 .o First listed as VP of Finance in April 2001 .

PERFORMANCE ANALYSI S

Sales and employment figures have not necessarily been adjusted for

mergers , acquisition s---------------------

or divestitures .----------------------------- ----------------------

Sales(l) 1999 200 0-

2001 2002---------------------

Date :

-------- -

Dec 31

--- ----- ---

Dec 31

------ --------

- Dec 31Sales ($m) : $3 .300 $18 .7 - $41 . 2Year-to-year change : -13 .2% +466 .7% - -

Compound (4 .0-year) : + 80 .4 %1 Most recent years for which data are available indicates dat a

not provided) .

Employees(1 )

---------------------

199 9

----------

199 9

--------- ---

2001 2003

------ ---------Date : Mar 30 Dec 30 Jul 10 Apr 03Employees : 40 102 195 155Annualized rate of

change : +119 .3% +205 .7% +59.6% -11 .8%Compound (4 .3-year) : +46.6%

1 As of the most re cent updates ("-" indicates data not provided) .(C) Copyright 2004, OneSource Information Services, Inc .

(97 8) 318-4300 . All rights reser ved .

Billable p ` e 3 sThe Investext Group

Investext

Sales per Empl .(1) 199 9----------------------- ---------

200 0--------- ---

2001 2002------- -----

Date: Dec 31 Dec 31--- -

- Dec 3 1Sales ($m) : $3.300 $18 .7 - $41. 2Employees :(2) 102 163 - 161Sales/Employee ($) : $32,300 .2 $114,606 .7 - $256,081 . 8Industry Norm (SOF) : $134,034 $128,124 - $153,025Sales/Emp v . Ind Norm : 24 .1% 89 .4% - 167 .3%

1 Most recent years for which actual sales data are available("- "indicates data could not be calculated . Actual sales data are notavailable) .

2 Normalized to sales date .

Rankings(1) National Region Industr yNorthern Computer

(as of Jan 30, 2004 )

--------------------- ---

All U .S .------------ -

Californi a------------ -

Software

Ranked out of 49,215- -----

4,026-_---------

8,205Annual Sales : 7,050 471 613Employees : 8,955 602 88 7Employees Growth :

-Last Year 65 2 2 4-Projected 22,315 1,714 3,68 4Sales/Employee : 3,811 326 28 6

1 Figures selected from all companies providing relevant data .Companies who did not provide data receive the lowest ranking .

Data Currency

* DATA CURRENCY :* o The PROFILE data were confirmed by telephone on Apr . 3, 2003 .* o The data contained in the HISTORY and PERFORMANCE sections were ** collected when CorpTech updated this profile in the indicate d* months (between December 1998 and April 2003) .

From the OneSource CorpTech Profiles database (URI : 123V5S).(C) Copyright 2004, OneSource Information Services, Inc .

300 Baker Ave., Concord, MA 01742, USA . 978-318-4300 / www.corptech.com .All rights reserved .

Billable page 4 The Investext Group 6

InvestextIndustry and Market Intelligence

SupportSoft, Inc .

The Investext GroupThe lnvestext Group22 Pittsburgh StreetBoston, MA 0221 0C-opyrigbt 01997, The Jnvestext Group

40003843

Client Services : US & C anada 800-662-7878,UK 0800 -317-577, Europe + 44-171-815-3860,Germ any 0130-818-059 , France 0590-3759,Hong Kong 852-2522 - 4159, Japan 03-5213-7300

Investext

SupportSoft, Inc .

PROFILE

ALT . NAMES : - SupportSoft, Inc .

FKA - Tioga Systems, Inc .

FKA - Support .Com

ADDRESS : 575 Broadway St .

Redwood City, CA 94063-312 2

TELEPHONE : (650) 556-9440 Toll Free : (877) 565-8600

FAX: (650) 556-1195

INTERNET : http ://www .suppoztsoft .com

SALES : Annual sales of $53 million (12 months ending December 31,

2003) ; includes sales from international business .

EMPLOYEES : 170 employees (as of January 6, 2004) ; company reported 10%

employment growth in the year prior to interview .

EXECUTIVES : Ms . Radha R . Basu - COB/President/CEO (COB, CEO)

Mr . Brian M . Beatty - CFO/Senior VP of Finance and

Administration (Finance, Administration )

Mr . Joseph D. Mccarthy - VP of Finance (Finance )

Mr . Scott W . Dale - CTO (R&D, MIS or Data Processing, CTO)

Mr . John Van Siclen -- Senior VP of Worldwide Sales andServices (Customer Service/Support, Sales )

Mr . Chris Grejtak - Senior VP of Marketing (Marketing)

Ms . Lucille K . Roger - VP of Operations (Operations)

Mr . Cadir B . Lee - Chief Software Officer (Engineering)

Ms . Jennifer Massaro - Senior Manager of Public Relations

(Public Relations )

Ownership and DescriptionOWNERSHIP: Public U .S . company (Ticker Symbol: SPRT). Formed in 1997 .Developer of Real-Time Service Management (RTSM(tm)) software . Thesoftware ensures that the business processes and related technolog ycritical to the real-time enterprise, as well as services consumers relyon, work as planned . The software provides the ability to take problemsor questions when they occur, automatically put them into context, andresolve them in real-time. The software can also anticipate problems andhelp avoid them through proactive measures before they negatively affectindividual or corporate productivity. Software runs on Windows

B illable Page The Investext Group I

--~-- Investextplatforms. Products and services are sold to multiple industries . Thiscompany was capitalized by private investment.

(C) Copyright 2004, OneSource Information Services, Inc .(978) 318-4300. All rights reserved .

Billable pages'I '"' The Investext Group

Investext

PRIM . IND : Computer Software (SOF)

PRIM . SIC : 737 2

PRODUCTS :

CORPTECH SIC DESCRIPTIONSOF-GO-R 7372 Real-time service management software - Real-Time

Service Management(RTSM(tm) )

SOF-UT-C 7372 Troubleshooting software - Real-Time ServiceManagement (RTSM(tm) )

SOF-UT-Y 7372 Diagnostic software - Real-Time Service Management

(RTSM(tm) )

CORPORATE HISTORY

The following corporate changes have been recorded since December 1998 .------------------------------------------------------------------------

FamilyJuly 200 0

o Change indicated company became a public company .

Listed in or before December 1998 as an independent private company

Nameo April 2003 : Changed to "SupportSoft , Inc ." .

First Listed as " Support .Com " in November 1999 .

LocationNovember 1999

o Location changed to Redwood City, CA

First listed on December 1 998 in Palo Alto, CA

Executive Histor y

EXECUTIVE HISTORY

Currently Listed Executives for whom changes have been recorded sinceDecember 1998, sorted as above, reflecting changes in the profil elisting in the months indicated.

Radha R. Basu, COBIPresident/CE Oo April 2003 : Listing changed to COB/President/CEO (COB, CEO) .o First listed as CEO (CEO) in December 1999 .Brian M. Beatty, CFO/Senior VP of Finance and Administrationo April 2003 : Listing changed to CFO/Senior VP of Finance and

Administration (Finance, Administration) .o First listed as CFO (Finance) in April 2001 .Joseph D. Mccarthy, VP of Financeo First listed as VP of Finance (Finance) in December 2003 .Scott W. Dale, CTOo April 2001 : Listing changed to CTO (R&D, CTO, MIS or Data Processing) .Listed in or before December 1998 as CTO (R&D, MIS or Data Processing) .

Billablepage 2 The Investext Group 3

I InvestextJohn Van Siclen, Senior VP of Worldwide Sales and Service so First listed as Senior VP of Worldwide Sales and Services (Sales,Customer Service/Support) in August 2003 .

Chris Grejtak, Senior VP of Marketin go First listed as Senior VP of Marketing (Marketing) in January 2004.Lucille K, Hoger, VP of Operationso First listed as VP of Operations (Operations) in April 2003 .Jennifer Massaro, Senior Manager of Public Relation so First listed as Senior Manager of Public Relations (Public Relations)

in April 2003 .(C) Copyright 2004, OneSource Information Services, Inc .

(978) 318-4300 . A ll rights reserved .

Billablepage

2 The Investext Group

-- InvestextPreviously Listed Executives for whom changes have been recorded sinceDecember 1998, sorted alphabetically by last name, and reflectingchanges in the profile listing in the months indicated .

Robert Amara lo Listing deleted: April 2001 .Listed in or before December 1998 as VP of Sales ( Sales) .David Dougwitzo Listing deleted : April 2003.o First listed as VP of Sales (Sales) in April 2001 .Bruce Moweryo Listing deleted: January 2004 .o First listed as vP of Marketing (Marketing) in April 2001 .Mark Pincuso Listing deleted: April 2003.o December 1999 : Listing changed to COB (COB) .Listed in or before December 1998 as Chief Executive Officer (CEO) .Tony Rodon io Listing deleted: April 2001.Listed in or before December 1998 as VP of Marketing (Marketing) .Mark Vranesho Listing deleted: April 2001.o First listed as VP of Finance in April 2001 .

PERFORMANCE ANALYSIS

Sales and employment figures have not necessarily been adjusted for

mergers, acquisition s---------------------

or divestiture s----------------

.-------------------- ---------------

5ales(l)--

2000

---------- ----

2001

------ --

2002-------

2003_ .._------------------------

Date : Dec 31 -- Dec 31 Dec 3 1

Sales ($m) : $18 .7 - $41 .2 $53 . 3

Year-to-year change : +466 .7% - - +29 .4 %

Compound (4 .0-year) : +100 .5%

1 Most recent years for which data are available ('-" indicates data

not provided) .

Employees(1 )--°-------------------

1999--------- ---

2001------ --

2003-------

200 4---------

Date : Dec 30 Jul 10 Apr 03 Jan 0 6

Employees : 102 195 155 170

Annualized rate of

change : +205 .7% +59 .6% -11 .8% +12 .7%

Compound (4 .8-year) : +35 .4 %

1 As of the most recent updates ("- " indicates data not provided) .

(C) Copyright 2004, OneSource Information Services, Inc .

(97 8) 318-4300 . All rights reserved .

Bil lable page 3 The Investext Group 5

- Investext

Sales per Empl .(1) 2000

-------------------- ---------2001 2002

------2003

Date: Dec 31--- ---------- Dec 31

-------- -

Dec 3 1Sales ($m) : $18.7 - $41 .2 $53 . 3Employees :(2) 163 - 161 17 0Sales/Employee ($) : $114,606 .7 - $256,081 .8 $314,127 . 6Industry Norm (SOF) : $134,262 - $128,124 $159,78 4Sales/Emp v . Ind Norm : 85 .4% -- 199 .9% 196 .6 %

1 Most recent years for which actual sales data are available("- "indicates data could not be calculated . Actual sales data are no tavailable) .

2 Normalized to sales date .

Rankings(l) National Region IndustryNorthern Computer

(as of Sep 13, 2004 )--------------------- ---

All U .S .------------ -

California-- -

Software

Ranked out of 50,079

--- -------- ----

4,002

-----------

8,27 5Annual Sales : 5,851 396 492Employees : 9,095 598 90 7Employees Growth :-Last Year 0 0 0-Projected 21,085 1,571 3,367Sales/Employee : 3,419 292 223

1 Figures selected from all companies providing relevant data .Companies who did not provide data receive the lowest ranking .

Data Currency

* DATA CURRENCY : ** o The PROFILE data were confirmed in writing on Jan . 6, 2004 .* o The data contained in the HISTORY and PERFORMANCE sections were* collected when CorpTech updated this profile in the indicated* months (between December 1998 and January 2004) .

From the OneSource CorpTech Profiles database (URI: 123V5S).(C) Copyright 2004, OneSource Information Services, Inc .

300 Baker Ave ., Concord, MA 01742, USA . 978-318-4300 / www.corptech.com .All rights reserved .

Billable page 4The Investext Group 6

Plaintiffs' Motion for Class CertificationKindali Declaration

EXHIBIT I

Miller Johnson Sterche n Kinnard RESEARCH

Investment Securities TIPDATE

Chad Bennett (612) 455-5849 chenne tt®mjsk.com January 27, 2004

SupportSoft , Inc. (SPRT $6.40)BUY

MJSK - SPRT - Q4 RESULTS EXCEED EXPECTATIONS ; GUIDANCEIN-LINE

Market Capitalization :Price Range:Price Target :Shares Outstanding:Daily Volume :Institutional Ownership :Insider Ownership :Est. 3 - 5 Yr . Growth :

$285 .4 million$14 .93 - $4 .72$7.0044 .6 million862,71761 %38%20%

Source: Thomson Financial

r~fgihh~n4Mti•'~~ ' 1yp~v"'~''l~kn rNL ~~~1~5 ~~I {~~rhR~M1r"

k_liho

08)26104 05) 11(04 06)24)04 06108)04 09122/04 11/06)04 12/2110 4

Founded in 1997, SupportSoft is a leading provider of support automation software . Support automationsoftware allows en!erprises or service providers to remedy customer, employee, and partner support issues in anautomated fashion. SupportSoft s solutions are currently focused at corporate IT and broadband serviceprovider customers. The company's customers include six of the top seven broadband service providers. Thecompany went public in July of 2000. The company is based in Redwood City, California and has 182employees serving over 200 blue chip customers .

EPS Mar Jun Sep Dee E'Y P/E Growth2003 $0 .04 $0 .06 $0 .07 $0 .08 $0 .25A 25 .6x NM2004E $0 .09A $0 .11A $0 .03A* $0 .05A $0 .27A 23 .7x 8 %2005E $0 .03E $ 0 .04E $0 .07E $0 .08E $0 .23E 27 .8x (15% )

Rev(mil ) Mar Jun Sep Dec Ft P/S Growth

2003 $12 .0 $12 .6 $13 .5 $15 .1 $53 .3 5 .3x NM2004E $15 .7A $16 .9A $12 .2A $15 .8A $60 .6A 4 .7x 14%2005E $15 .7E $16 .8E $18 .7E $19 .7E $70 .9E 4 .Ox 17 %*pro-forma - excluding Core acq . Charge $1 .6 million ;

ESTIMATE CHANGES :FY05 $0 . 23 ; increased from $0 .2 1

HIGHLIGHTS• Q4 results exceed guidance : The company reported Q404 revenue of $15 .8 million, which was up 30% sequentially and

exceeded guidance of $14 .2-$14.9 million and our $14 million estimate . Reported EPS was $0.05, which includes tax-benefits and valuation allowance pull-downs equating to $0.02 per share. Assuming a full-tax rate (34%), BPS wouldhave been $0 .03, a penny above our estimate . Going forward, we will be consistent with the company's stated tax rate of5-10% for FY05 . License revenue of $9 .5 million was up 67% sequentially from $5 .7 million in Q3 and was the solereason for revenue outperfonnance . Service revenue down slightly sequentially to $6 .3 million and in-line with ourexpectations. Service revenue breakdown was evenly split between maintenance and professional services .

(SEE PAGE THREE FOR DISCLOSURES AND DISCLAIMERS)

60 South Sixth Street, 3 Floor, Minneapolis, MN 55402 612-455-5555 800-444-7884

Bounce back in orders results in second best booking quarter: The company received orders from 35 customers,including 12 enterprise customers, 18 digital service providers (DSP), and 5 managed service providers . This includesorders from six customers for $lmillion or more, of which two were greater than $4 million . One of the greater than $4million deals was perpetual, which led to two customer representing 48% of revenue in the quarter- The company addedfive new customers - 2 enterprise and 3 DSPs . Interestingly, the company added one U .S . DSI, provider, which webelieve is Earthlink . This now brings their U.S. market dominance to 8 out of 10 of the leading broadband providers .The company indicated that Q4 was the second best bookings quarter in two years, and third highest book-to-bill . Thisshould give investors confidence in near-term estimates .

Customer Product Interest and Pipeline remain solid: We believe customer interest on both the enterprise and digitalservice provider (DSP) business remains healthy . We believe the digital cable market is larger and can ramp quicker thanbroadband, which grew from $4 million to $24 million in two years (FY01-FY03) . The company finished and piloted thesecond version of its Digital Cable offering in Q4 . We believe an order announcement and modest revenue will berecognized in QI from this market . In FY05, the company is targeting an addressable market of between 5-10 milliondigital video subs . The company plans to introduce VOlP functionality mid- FY05 . On the enterprise side the company,end-point management and support products continue to gain traction in significant accounts within favorable verticalmarkets for IT spending, including financial services, high-tech, and government . We believe the company is seeingtremendous success in augmenting existing server/in-house centric infrastructure software solutions from companies likeMarimba, Altiris, and IBM for remote end-points .

• Balance sheet remains solid : The company generated roughly $4-$5 million in CFFO and ended the quarter withroughly $120 million ($2.60 per share) in cash, no debt . Deferred revenue increased $2 .4 million, or 17%, sequentially .

• Guidance in-line with expectations : The company provided Q1 guidance of $15 .7 to $16 million in revenue and EPS of$0 .02 to $0.03 . For FY05, the company expects revenue to be between $69-$72 million and EPS of $0 .20-$0 .23 . Thecompany's FY05 guidance assumes a tax rate between 5-10%, as opposed to mid-30's before .

• FY05 Estimate Revised : We are increasing our FY05 BPS estimate to $0 .23 from $0.21, primarily due to the lower tax-rate assumptions as the company releases its $24 mill ion valuation reserve . At our previously stated full-tax rate, our EPSwould have decreased $0.04 to $0.17 (fully taxed). Our $70.9 million FY05 revenue estimate increases by $900k .

• Maintain BUY rating : We believe the long-term growth prospects of the business remain compelling. Successfulpenetration into high growth digital cable, IPTV, and VOIP markets give SPRT a sizeable addressable market to go after .The company's historical execution bounced back quicker than we initially thought and solid bookings and book-to-billfigures during the quarter give us confidence the worst is behind the stock . We believe end-point management andsupport is one of the better growth segments in enterprise software and the company's newly focused intent to expand itsfunctionality in this area should improve enterprise growth prospects . We continue to believe SPRT could represent theentire end-point management and support functionality behind the triple play (Broadband, Digital Cable, and VOIP), allof which represent rapidly growing end-markets . Digital Cable has taken longer than expected, but we believe onceSPRT announces one customer order (Q105 target), this business segment ramps fairly quickly . At current levels, cashrepresents 42% of the company's market cap, leaving an enterprise value of roughly $165 million or 2 .3x FY05 revenueexpectations . This represents the low-end of the range (2x-4x EV/Sales) of its peer group .

ANALYST CERTIFICATIONI, Chad Bennett, hereby certify that the views expressed in this research report accurately reflect my personal views about thesubject securities and issuer . Additionally, no part of my compensation was, is , or will be directly or indirectly related to thespecific recommendations or views contained in this research report .

VALUATION METHODOLOGY FOR PRICE TARGE TAt current levels , th e company trades at 2x EV/FY05Sales . This represents the low-end of its peer-group 2x -4x EV/Forward Salesrange. In looking out over the next twelve months, we believe the ramp in digital cable bookings , exp anded functionali ty in end-point m an agement, build up in high visibility term license revenue , and in troduction VOIP products will allow the stock to tradecloser the mid point of its peer group EV/Sales multi ple. This leads us to a price target of $7 per share.

MAJOR RISKS TO ACHIEVEMENT OF PRICE TARGETThe recent acquisition of BroadJump by chief competitor Motive Communications complicates the competitive l andscape andcould factor into customer renewals .

For a company of its size , SupportSoft relies onhigh ASP deals to achieve projections . If IT spending or pri cing pressure worsens,lower ASPs could make forecasts difficult to achieve .

SupportSof; Inc. Page 2 Miller Johnson Steichen Kinnard

SupportSoft typically relies on at least on 10% customer in each quarter . Should large existing or large new customers delay orcancel purchases, the company's ability to reach our estimates could be impaired .

Further deterioration in IT spending, more specifically enterprise software spending would adversely affect our estimates .

Lower than anticipated broadband subscriber growth would have a negative affect on our estimates .

Low float could impact trading liquidity and share price volatility .

Readers should recognize that the risks outlined above do not represent a comprehensive list of all risk factors that may impactprice target achievement.

Disclosures and Disclaimer s

Disclosure for public companies mentioned in this report :Company Ticker Price (1/27/05) Rating DisclosureSupportSoft, Inc. SPRT 6.40 B F, DAltiris, Inc. ATRS 33.07 NRIHM IBM 91.60 NR

Disclosure key : A - The research analyst or a member of the research analyst'shousehold has a financial interest in the securities of the subject company . B - As ofthe end of the month preceding the date of publication of this report, Miller JohnsonSteichen Kinnard, Inc . ("MJSK") beneficially owned 1% or more of any class of commonequity securities of the subject company . C - MJSK has managed or co-managed a publicoffering of securities for the subject company in the past 12 months . D -- MJSK hasreceived compensation for investment banking services from the subject company in thepast 12 months . E - MJSK expects to receive or intends to seek compensation forinvestment banking services from the subject company in the next 3 months . F - MJSKmakes a market in the subject security at the date of publication for this report . Asa market maker, MJSK could act as principal or agent with respect to purchase or saleof those securities . G - A director, officer or employee of MJSK serves as an officer,director or advisory board member to the subject company . H - MJSK has served as abroker (either agent or principal) buying back stock for the subject company's account,as part of the subject company's authorized program, in the past 12 months . I - MJSKmay possibly serve as the company's broker (either agent or principal) to repurchasethe company's stock, as part of the company's authorized program, in the next 3 months .J - The research analyst has received compensation based upon MJSK's investment bankingservices revenue from the subject company in the past 12 months . K - As of the monthimmediately preceding the date of publication of this research report or to the extentthe research analyst or an employee of MJSK with the ability to influence the substanceof the research report knows, MJSK received compensation for products or services otherthan investment banking services from the subject company in the past 12 months . L - Asof the month immediately preceding the date of publication of this research report orto the extent the research analyst or an employee of MJSK with the ability to influencethe substance of the research knows, the subject company currently is, or during the12-month period preceding the date of distribution of the research report was, a clientof MJSK. MJSK received compensation for products or services other than investmentbanking services from the subject company in the past 12 months .

Definition of research ratings used by Miller Johnson Steichen Kinnard, Inc . : B :BUY -We believe the stock price is going to appreciate . Our current price target representswhat we believe is a reasonable valuation and subsequent return for the stock over thenext 12 months given our analysis and current expectations for the company . N :NEUTRAL- We believe that the stock price is reasonably valued given current expectations forthe company over the next 12 months . Accordingly, we recommend neither purchasing norselling the stock . Considering the underlying fundamentals of the company, we expectany price appreciation or depreciation to be a result of volatility in the stock pricefrom factors such as small market capitalization or stock illiquidity . S :SELL - Webelieve the stock price is going to depreciate . Our current price target representswhat we believe is a reasonable valuation and subsequent return for the stock over th e

SupportSoft, inc. Page 3 Miller Johnson Steichen Kinnard

next 12 months given our analysis and current expectations for the company . NR : Notrated - Stock is not followed by MJSK research .

Ratings distribution as of January 26, 2005 for companies followed by Miller JohnsonSteichen Kinnard, Inc .Rating it of Ratings % of Total Inv. Banking Relationships % of TotalBuy 30 67 4 80Neutral 12 27 1 20Sell 3 6 0 0Total 45 100 5 100

As of the date of publication of this report, the author of this report does not knowof any other actual, material conflict of interest nor has reason to know of any otheractual, material conflict of interest in regards to the author or MJSK . While MJSKdoes not compensate analysts for specific investment banking transactions, analysts mayreceive compensation on the firm's overall profitability, which might include netprofit from investment banking activity . This report is based on sources MJSK believesreliable . MJSK has not independently verified facts and assumptions underlying thisreport . Information contained herein is not guaranteed as to accuracy, and does notpurport to be a complete statement of all material facts related to any company,industry, or security . Opinions and estimates reflect the author's judgment and aresubject to change without notice . This report contains forward-looking statements,which involve risks and uncertainties . Actual results could vary significantly fromthose described in the forward-looking statements . Securities discussed are notsuitable for all customers due to different needs, objectives, and financial resources .MJSK and its officers, directors, agents, and their family members might have ownershipinterests in securities mentioned, and might engage in transactions inconsistent withthe recommendations contained herein . Nothing in this report shall be deemed asolicitation to buy or sell the subject securities . Securities discussed might not beregistered in every state, and cannot be sold to residents of states where thesecurities are not registered, unless a valid exemption exists . All rights reserved .Any unauthorized use, duplication, redistribution or disclosure is prohibited by lawand can result in prosecution . Additional information is available upon request .

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Miller Johnson. Steichen Kinnard RESEARCH

Investment Securities TJIPDATE

Chad Bennett (612) 455-5849 July 21, 2004L

SupportSoft, Inc. (SPRT $7.34)BUY

MJSK - SPRT -- RAISING RATING TO BUY - Q2 RESULTS EXCEEDEXPECTATIONS -- GUIDANCE INCREASED - ACQUISITIONEXPANDS DIGITAL SERVICE PROVIDER DOMINANC E

Market Capitalization : $339.1millionPrice Range : $17 .04 - $6 .50Price Target: $11 .0 0Shares Outstanding : 46.2 millionDaily Volume: 862,717Institutional Ownership: 61%Insider Ownership : 38 %Est . 3 - 5 Yr. Growth : 25%Book Value Per Share : $2.59

51FMT5ocr uaas of 20-Jul-200420I^-T

Founded in 1997, SupportSoft is a leading provider' of support' automation software. Support Wi tomationsoftware allows enterprises or service providers to remedy customer, employee, and partner support issues in anautomated fashion. SupportSoft's solutions are currently ,focused at corporate IT and broadband serviceprovider customers . The company 's customers include six of the top seven broadband service providers . Thecompany went public in July of 2000. The company is based in Redwood City, California and has 182employees serving over 200 blue chip customers.

EPS Mar Jun Sep Dec B'Y P/E Growth

2002 ($0 .05) ($0 .03) $0 .01 $0 .03 ($0 .05)* NM NM2003 $0 .03 $0 .64 $0 .05 $0 .06 $0 .18# 40 .8x NM2004E $0 .06A $0 .08A $0 .07E $0 .07E $0 .28E11 26 .2x 55 %200SE $0 .35E# 21 .Ox 25%

Rev(mil) Mar Jun Sep Dec T+7C P/S Growt h2002 $8 .8 $9 .5 $11 .1 $11 .8 $41 .1 8 .2x 35 %2003 $12 .0 $12 .6 $13 .5 $15 .1 $53 .3 6 .4x 30 %2004E $15 .7A $16 .9A $17 .5E $18 .5E $68 .6E 4 .9x 29%2005E $88 .OE 3 .9x 28 %*pro--forma ; #fully taxed @ 34 %

ESTIMATE CHANGES :FY04 $0.28; increased from $0.26PY05 $0 . 35; increased from $0.33

HIGHLIGHTS• Record Results Exceed Expectations : SPRT reported Q2 results of $0.08 EPS (fully taxed) on record revenue of $16.9

million , above our estimate of $0.06 on $16 .5 million. This represents the 12th consecutive quarter of sequential growthin revenue and EPS. The strong results were driven primarily by service revenue due to solid maintenance renewal anddeployment activity. Service revenue of $5 .4 million increased 22% sequentially and 83% yr/yr. The deploymentactivity is a mixture of deployments of previous purchased licenses and new service projections that could lead to future

(SEE PAGE THREE FOR DISCLOSURESAND DISCLAIMERS)

60 South Sixth Street, 30 Floor, Minneapolis, MN 55402 612-455-5555 800-444-7884

license opportunities . License revenue of $11 .5 million was slightly below our estimate of $11 .8 million, but stillrepresented solid 19% yr/yr growth . Operating margins improved to 30% from 23 .6% last quarter mainly due to betterthan expected top-line results, higher service gross margin, and lower than expected head count additions .

• ASPS Doubled Backed By Strong Bookings: The company recorded 40 transactions during the quarter, with 20different customers. The company added four new customers. ASPs doubled sequentially to $1 million, bouncing backto historical levels. The company received four orders for more than $1 million each, with two orders over $4 millioneach. Bookings levels compared to quarterly revenue were the strongest in two quarters . Backlog represents 2-.4xquarterly revenue and the company expects this range to remain intact for the remainder of FY04 . The company had itssecond best booking quarter ever on the Enterprise side of the business .

• License Mix Continues Shift Towards Perpetual : Term license revenue decreased to $3 .1 million from $3 .7 million inthe prior quarter, representing 27% of total license revenue, down from 33% . We believe the trend downward in termlicense revenue could be viewed as less concerning considering that recently multiple, large, perpetual deals have actedmore like term deals in that the company invoices the customer two or three times over 12 to 24 months but does notrecord the transaction in deferred revenue like a term license deal would, but still has won the contract and has visibilityon the revenue stream . Therefore, the backlog and bookings figures seem to be better metrics to focus on . Furthermore,term revenue could trend higher as digital cable customers begin signing deals similar to the initial ramp in broadband .

• Recurring Revenue Remains Half Of Revenue : Ratable/term revenue represented roughly $8 .5 million, or 50%, oftotal revenue in the quarter and the company maintains its target of between 45-55% of total revenue being ratable goingforward . Included in the ratable revenue line is 100% of service revenue of $5 .4 million . The maintenance anddeployment service mix was roughly 50150. Deployment based service revenue was up 29% sequentially. Deploymentrevenue entails both post license sale implementation and initial pilot projects at customers that could lead to futureorders. The company indicated it has good visibility on deployment based service revenue over the next couple quarters .

• Core Networks Acquisition Expands Functionality in Digital Service Provider Segment : SPRT announced it hassigned a definitive merger agreement with Core Networks Inc ., a privately held Canadian software company. CoreNetworks has four products developed that are geared towards network monitoring, management and activation ofadvanced digital services for DSL and cable broadband services . This essentially fills the last mile gap in SPRT's DigitalService Provider (DSP) product portfolio and allows for SPAT to offer key functionality that its broadband customers arelooking for including usage policy management, patch updates, remote management, and firmware updates . We believeSPRT worked closely with its large broadband customers when undergoing due diligence and has immediate salesopportunities with its large broadband customers base . SPRT will acquire all, or substantially all, of the assets of CoreNetworks for approximately US $17 million in cash . The transaction is expected to close in September of 2004 andshould be accretive to earnings per share within twelve months of closing . The company indicated that the Core mergershould generate $8 million in revenue over the next twelve months with the majority of revenue in FY05 . We haveadjusted our FY05 estimates to reflect the acquisition .

• Post Acquisition Balance Sheet Should Remain Strong : The end of quarter cash balance was $128.0 million ($2 .78per share). Post acquisition the company's cash balance should remain above $110 million . The company generatedroughly $2 .0 million in cash from operations. A $2 .7 million (11%) sequential increase in AIR was the primary reasonfor lower than expected cash flow from operations .

• Guidance Increased Again : The company gave Q3 guidance of $0.08-$0.09 EPS (12-14% tax rate) on $16 .7 to $17.5million in revenue . The company raised the top-end and bottom-end of its FY04 guidance range to $65-$69 million inrevenue from $64-$68 million from previously. FY04 EPS guidance of $0 .34-$0.37 is up from $0 .32-$0 .34 .

• FY04 and FY05 Estimates Raised : We are raising our fully taxed FY04 EPS estimate to $0.28 from $0.26 on $68 .6million in revenue, up from $68.1 . We are raising our FY05 EPS estimate to $0.35 (fully taxed) from $0 .33 on $88million in revenue, up from $81 million .

• Service Automation Suite for Video Generally Available (GA) and On Track For New Customer Announcementsand Revenue In 2H04 : The Service Automation Suite for Video, SPRT's product for the digital video market and beingdeveloped in conjunction with Scientific Atlanta, was released for General Availability (GA) in June . SPRT recordedminimal revenue from this product in Q2 . The pilot test results from two major cable providers have been extremelypositive and shown compelling ROI metrics . By using SPRT's Service Automation Suite cable providers have realized a40% improvement in digital set top box installation quality and a similar improvement in customer service call qualityand efficiency . The company anticipates that it will recognize between $3-$5 million from this product in the 21104, Thisis in-line with our estimate . While management is focused on execution and penetration into the digital video segment ,

SupportSoft, Inc. Page 2 Miller Johnson Steichen Kinnard

we believe the acquisition of Core Networks decrease time to market for SPRT's Voice over IP (VOIP ) solution fromearly FY05 to Q404.

Raising Rating to BUY : The management team once again executed in a challenging enterprise software environment .As we indicated in our Earnings Preview last Friday, we believed the majority of potential negative news was probablyalready reflected in the stock price . Also, an in-line quarter would have been enough to move the stock higher .Considering the company beat expectations, raised guidance, and bookings seem to be picking up steam again, we believethe stock will move appreciably higher near-term. Our concerns regarding a potential push-out of the Digital Cableopportunity have been dismissed with the company reaffirming 2H04 revenue expectations of $3-$5 million and webelieve the VOIP opportunity could come sooner than expected . Also, we believe the company could sign anotherManaged Service Provider partner in Q3 with a seven-figure order attached to it . At current levels, the company trades at21x our FY05 EPS estimate and 2 .5x EV(post cash payment for Core)/FY05Sales . This is roughly in-line withunderperforming peers the majority of which have non-existent revenue growth (potentially negative to flat licenserevenue growth), lower margins, and less appealing growth prospects over the next 18 months. We believe the stockshould trade closer to normalized software PIE and EV/Sales multiples of 30x PIE and 4-5x EV/Sales . This leads us to aprice target of $11 per share.

ANALYST CERTIFICATION1, Chad Bennett, hereby certify that the views expressed in this research repo rt accurately reflect my personal views about thesubject securities and issuer . Additionally , no part of my compensation was, is, or will be directly or indirectly related to thespecific recommendations or views contained in this research report .

VALUATION METHODOLOGY FOR PRICE TARGE TAt current levels, the company trades at 21 x our FY05 EPS estimate and 2.5x EV(post cash payment for Core)/FY05Sales . This isroughly in- line with underperforming peers, the majori ty of which have non-existent revenue growth (potentially negative to flatlicense revenue growth ), lower margins , and less appealing growth prospects over the next 18 months . We believe the stockshould trade closer to normalized software PIE and EV/Sales multiples of 30x P/E and 4 - 5x EV/Sales . This leads us to a pri cetarget of $11 per share .

MAJOR RISKS TO ACHIEVEMENT OF PRICE TARGE TThe recent acquisition of Broad]ump by chief competitor Motive Communications complicates the competitive l andscape andcould factor into customer renewals .

For a company of its size, SupportSof# relies on high ASP deals to achieve projections. If IT spending or pricing pressure worsens,lower ASPs could make forecasts difficult to achieve .

SupportSoft typically relies on at least on 10% customer in each quarter . Should large existing or l arge new customers delay orcancel purchases, the company's ability to reach our estimates could be impaired .

Further deterioration in IT spending, more specifically enterprise software spending would adversely affect our estimates.

Lower than anticipated broadband subscriber growth would have a negative affect on our estimates .

Low float could impact trading liquidity and share price volatility .

Readers should recognize that the risks outlined above do not represent a comprehensive list of all risk factors that may impactprice target achievement.

Disclosure for public companies mentioned In this report :Company Ticker Price 07/21/04 Ratin Disclosure

TSu ortSofl, Inc. SPRT 7 .34 B F D

Disclosure key : A -- The research analyst or a member of the research analyst'shousehold has a financial interest in the securities of the subject company . B - As ofthe end of the month preceding the date of publication of this report, Miller JohnsonSteichen Kinnard, Inc . ("MJSK") beneficially owned 1% or more of any class of commonequity securities of the subject company . C - MJSK has managed or co-managed a publicoffering of securities for the subject company in the past 12 months . D - MJSK hasreceived compensation for investment banking services from the subject company in thepast 12 months . E - MJSK expects to receive or intends to seek compensation for

SupportSoft, Inc . Page 3 Miller Johnson Steichen Kinnard

investment banking services from the subject company in the next 3 months . F - M TSKmakes a market in the subject security at the date of publication for this report . Asa market maker, MJSK could act as principal or agent with respect to purchase or saleof those securities . G - A director, officer or employee of MJSK serves as an officer,director or advisory board member to the subject company . H - MJSK has served as abroker (either agent or principal) buying back stock for the subject company's account,as part of the subject company's authorized program, in the past 12 months . I - MJSKmay possibly serve as the company's broker (either agent or principal) to repurchasethe company's stock, as part of the company's authorized program, in the next 3 months .J - The research analyst has received compensation based upon MJSK's investment bankingservices revenue from the subject company in the past 12 months . K - As of the monthimmediately preceding the date of publication of this research report or to the extentthe research analyst or an employee of MJSK with the ability to influence the substanceof the research report knows, MJSK received compensation for products or services otherthan investment banking services from the subject company in the past 12 months . L - Asof the month immediately preceding the date of publication of this research report orto the extent the research analyst or an employee of MJSK with the ability to influencethe substance of the research knows, the subject company currently is, or during the12-month period preceding the date of distribution of the research report was, a clientof MJSK . MJSK received compensation for products or services other than investmentbanking services from the subject company in the past 12 months .

Definition of research ratings used by Miller Johnson Steichen Kinnard, Inc . : B :BUY --We believe the stock price is going to appreciate . Our current price target representswhat we believe is a reasonable valuation and subsequent return for the stock over thenext 12 months given our analysis and current expectations for the company . N :NEUTRAL- We believe that the stock price is reasonably valued given current expectations forthe company over the next 12 months . Accordingly, we recommend neither purchasing norselling the stock . Considering the underlying fundamentals of the company, we expectany price appreciation or depreciation to be a result of volatility in the stock pricefrom factors such as small market capitalization or stock illiquidity . S :SELL - Webelieve the stock price is going to depreciate . Our current price target representswhat we believe is a reasonable valuation and subsequent return for the stock over thenext 12 months given our analysis and current expectations for the company . NR: Notrated - Stock is not followed by MJSK research .

Ratings distribution as of July 7, 2004 for companies followed by Miller JohnsonSteichen Kinnard, Inc .Rating # of Ratings % of Total Inv . Banking Relationships % of TotalBuy 29 68 4 80Neutral 13 30 1 20Sell 1 2 0 0Total 43 100 5 100

As of the date of publication of this report, the author of this report does not knowof any other actual, material conflict of interest nor has reason to know of any otheractual, material conflict of interest in regards to the author or MJSK. While MJSKdoes not compensate analysts for specific investment banking transactions, analysts mayreceive compensation on the firm's overall profitability, which might include netprofit from investment banking activity . This report is based on sources MJSK believesreliable . MJSK has not independently verified facts and assumptions underlying thisreport . Information contained herein is not guaranteed as to accuracy, and does notpurport to be a complete statement of all material facts related to any company,industry, or security . Opinions and estimates reflect the author's judgment and aresubject to change without notice . This report contains forward-looking statements,which involve risks and uncertainties . Actual results could vary significantly fromthose described in the forward-looking statements . Securities discussed are notsuitable for all customers due to different needs, objectives, and financial resources .MJSK and its officers, directors, agents, and their family members might have ownershipinterests in securities mentioned, and might engage in transactions inconsistent withthe recommendations contained herein . Nothing in this report shall be deemed asolicitation to buy or sell the subject securities . Securities discussed might not be

SupportSoit, Inc. Page 4 Miller Johnson Steichen Kinnard

registered in every state, and cannot be sold to residents of states where thesecurities are not registered, unless a valid exemption exists . All rights reserved .

Any unauthorized use, duplication, redistribution or disclosure is prohibited by law

and can result in prosecution . Additional information is available upon request .

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EXHIBIT J

SupportSoft, Inc . (SPRY''' $16.47)SHORT-TERM MARKET PERFORMLONG-TERM BUY

Craig Wond, CFA41R59,[email protected] m

SupportSoft Delivers Another Solid Quarter

Strong 4Q03 results. SupportSoft delivered another solid quarter, with upside Inlicenses, total revenues and BPS . The company continues to execute well,capitalizing on a healthy market for support automation software, a strongcompetitive position, and increasing traction with its direct and indirect channels .

Financial results beat eipeclations. Licenses of $11 .2 mm exceeded our $11nvn forecast . Total revenues of $15 .1 mm topped our and the Street's $14.2 mmestimate. And BPS of $0 .08 came in a penny ahead of the CEUT and consensus$0 .07 target, The balance sheet was clean, with a decline in DSOs (74 vs. 95 lastquarter) and a $900 K q!q increase in deferred revenues, from $20 min to $20.9mm . CFFO was 84.7 nun vs. $2 .9 mm. last quarter and 82 3 mm a year age .

Guidance modestly higher. SPRT also nudged up its 2004 guidance. Revenueguidance is now 363-67 nun (was $63-66 nun), with BPS guidance of $0 .29-$0 .33 (was 80.27-30 .31). Current nuldanco straddles prevailing Strgg,tcapeetations (365 mm and $0.31), so now numbers are unlikely to increasesignificantly this morning. But the positive bias In SPRT's outlook is tencouraging signal that the company doesn't see any near term slowing In end-market demand . And above-average visibility provides comfort that these targetsare within reach with the same execution that SupportSof delivered In 2003 .

Increasing estimates slightly . Our 2004 revenue estimate is now $66 mm (wax$64 .3 mm), up vs. the prior est . primarily due to higher services . BPS remains$0 .30. Our 2005 estimates are S78 mm and $0.31 . Note that the 2005 BPSestimate is based on a 35% tax rate vs. 13% be 2004, as SPRT expects minimalNOL benefits in 2005 . On a fully taxed basis, our 2004 BPS estimate is $0 .22 vs.$0 .17 in 2002 (sea the model at the end of this report).

Favorable mix of business. Importantly, the mix of term-to-perpetual licensesreversed Its recent trend . Term licenses were 46% of total licenses, up from 28%in 3Q. The higher term component is likely related to the AOL Time Warnercontract signed in 3Q, a $10 nun-plus deal with rev recognition spread across 5quarters beginning in 4Q03 .

Customer concentration not as acute. Two customers represented 29% of 4Qrevs vs . 2 customers representing 56% of 3Q revs, and I at 49% in 2Q.Consistent with prior quarters, the two 10%+ customers, both in the broadbandsegment, are new names (i .e., not the same largo clients as prior quarters) .Customer concentration will probably be part of the SPRT story throughout2004, with a gradual decline In the dependence on large transactions as thecompany grows and ramps up sales of lower-ASP components .

Deal metrics. SupportSoft signed the largest number of contracts in 3 years (30deals vs . 18 last quarter and 25 a year ago). Enterprise and broadband revenueswere balanced (both 47% of total), with OEM accounting for the other 6% .Headcount grow to 170 from 154 in 3Q . This is expected to Increase by another15-20 heeds in 2004

Maintain Market Perform ! Buy. We continue to recommend SPRT shares tolong-term investors, given SupportSolt's numerous growth initiatives and above-average visibility into future results . SPRT trades at a PEG of 2.1x C'YO4B BPSof $0 .31 .Our now S20 price target Is based on a PEG of 2 .Sx out-year earnings.

Risks . Risks Include (1) customer concentration ; (2) reliance on largedeals; and (3) uncertain IT spending.

Supporfsoft Is a leading vendor of support and sendcaeutomailon softwa re for cotpode enterprises andbroadband sendee providers The company has reaenllyexpended Its product por fofo to Include tools for thehome IT and home media ma ►kels. At December 31,2003, SupporiSon had 170 employees end 200 clients .

350 Madison Avenue 225Frsnllnsliest26 FIrer 120D JIM Sireet, SAO 500 FourQnbarcederoCeeter January It 2004NewYodt, NY 10017 Balton, MA 02110 nrnvsr,C0 20202 San Fr&Waco, CA 9411 1212.391900! Fax 212.3091020 617.217.21981Fax 917 217.2702 3034244101 Fax 303 .9924511 415159.22221 Fax 415.3994113

DIsclaimers regarding the content of this report as well as full disclosure of C.E. Unterberg, Towbin's ratings andInformation on the firm's position(s) in securities mentioned herein appear on the final page of this report .

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Suppoir#Soft, Inc. CretgWaod,CFA416450-2249

(SPRT1,l $10.15) Buy ewes unterberg.oom

SupportSoft Reports Solid IQ Result s

• IQ results. SupportSo ft delivered another clean quarter, with modestupside to revenue and BPS and a favorable outlook for 2Q and the balanceof the year. Broadband revenues grew 94% yly . Managed service provider(MSP) sales were tip 300 +% . The company is focused on improvingexecution In Its enterprise direct sales (down 25 .30% yly , by our est .) .Enterprise was the only blemish in an otherwise strong p erformance .Management indicated that a large enterprise deal in the high-tech sectorslipped out of the quarter, but remains in the pipeline for 2Q .

• Revenue and EPS beat estimates . Revs of $ 15 .7 mm beat our $15 mmestimate by 5%. The out-performance was balanced across licenses andservices . EPS was $ 0 .09 vs. our and the Street's $0.07 forecast. Originalguidance was $0 . 07-0,08 . A penny of the upside was due to the collectionof $360 Kin AR which was previously in arrears.

• Digital video update. 2 Service Automation Suite for Video ($VAS)pilots were completed in IQ . We believe TimeWarner was engaged in oneand Cox in th e other . SVAS is expected to go GA In 2Q, driving $3-S mmof sales in 2H (already reflected in guidance). SupporiSoft's productshave traditionally lent themselves to large deployments (and largecontracts) . SVAS also has the potential to drive multi -million-dollarcontracts into the cable installed base, which includes 5 of the top 6services providers in the US .

• Fundamentals remain strong . The strength in the business was evidentin the results. Although there ' s room for improvement in the enterprise,other areas (primarily MSPs) picked u p the slack. SupportSoft' s presencein multiple growth markets mitigates the risk ofa significant shortfall, Inour view. Inte rnational revenues were also strong, up 69% qlq, despite nohead of EMBA. Follow-on business drove the majori ty of revs, which Istypical since clients tend to do pilot p rojects initially. Repeat orders weresigned with Adelphia, Cox, Charter, Intuit and Fidelity, among others .

• Modestly raising estimates . We're raising our estimates slightly toreflect 1Q upside and a healthy outlook. Our 2004 rev estimate is now$67 .1 nun (was $66 mm) with BPS of $0.34 (was $0 .30). 200$ goes from$78 tam to $80 mm with EPS ( fully taxed) going from $0 .31 to $0 .34 .SPRT bumped up the midpoint of its 2004 guidance by 2 cents (from$0.31 to $0.33) and lifted the midpoint of its revenue guidance by $1 mm( from $65 mm to $66 mm).

• Other metrics. SupportSoft had 2 million- dollar plus bookings vs . 2 lastquarter and 4 a year ago. In total, the company signed 26 contracts vs . 30last quarter and 24 a year ago. The indirect channel contributed 38% ofrevenues, thanks to traction with MSPs Including HP, IBM and

C.

withsignificantly expand SupportSoft' s selling resources and represent a

key growth opportunity for the company in 2004 and beyond, in our view .

• Maintain Day rating. We continue to recommend SPRT shares to long-term Investors, given SupportSoft's numerous growth Initiatives, strongcompetitive position, and above-average visibility into future results.SPRT trades at a PEG of 1 .7x CYO4B fully taxed BPS of $ 0.25 . Our now$14-16 price target range up from ($12-$14) is based on a PEG of 1 .6-1 .9x CY05E earnings.

• Risks. Risks Include ( 1) customer concentration ; (2) reliance on largedeals ; (3) uncert ain IT spending ; and (4) uneven execution in enterprise.

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Disclaimers regarding the content of this report as well as full disclosure of C.E . Unterberg, Towbin's raueeg s anuInformation on the firm's positions) in securities mentioned herein appear on the final page of this report .

SvpportSoft is a leadIng vendor of support and seMcsautamailon software farcnrpoite enterprises end broadbandseMce provIdels, The company has recently expanded Itspmducf portfolio to Include fools for the home 1T and homemedlamerksts.AtMarch31, 2004, SupportSofihad 182employees and 200+ clients.

SupportSoft, Inc. CraTgWood,CFA

Income Statement C.E . Unterberg, Towbinisthousands) (415) 6$$2249

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%alNcensea 0.9% 09% 0096 0.9% 0 .8% 0.9% 0.9% 0.911 1

Cada[sev1c9e 1,690 1,824 1 .476 1,668 2.104 2,209 2,232 2 .346

fiolSSrvloss 70 .4% 60.6% 47.8% 472% 4 7 2% 47 .0% 48.6% 48.0 %

Total cost olrevanuo 1,780 1,914 1 .666 1,955 2,198 2,313 2,338 2.466

Grass p1o61 10,214 10,697 11 1966 13 .178 13,513 13,987 14,282 16.934

4ross 86 .2% 64 .8% 88.4% 87.1% 83.9% 86 .8% 83.9% 66.6 %

Research and devetopmant 2 .334 2.289 2,198 2,381 2,332 2,400 2.450 2,600

46oflWenuee 18-6% 182% 14.2% 157% 14.01A 14.7% 14.8% 13:6% '

Sslesand marketing 5.040 6,096 6,013 6,979 8,229 9,620 0,640 7.044

%ohevenuef 42.1% 40.4% 4 1 7% 39.6% 09.6% 40.0% 40.0% 41.0 %

(ienard and adn4n1e1fa6ve 1 .426 1,262 1,236 1,460 1,243 1,300 1,350 1,400

%O/rgyommy 11 .9% 16.0% 8.!% 9.6% 7.99 80% &!% 7.6%

LOW erell ens s 10.681 60 10812 11 .705 12,002 12833 2778 13 0

0 ratln Innnme Ices 1407 2948 620 3 339 3709 787 3,922 4,490

ppers6n8 n 1!•771 162% 1R4%i 2.21% 23.6% 23.1% 23.0% 24.4 %

Inlaest and othet Income, net 140 111 80 191 728 400 426 45 0

pre4a,ihloone 1,647 2,139 2.700 3,630 4,436 4,187 4,247 4,940

p1k 1e11 r1V90 12.0% 17.0% 20.0% 23.3% 26291 26.6% 26.6% 296%

Iacornoloxes, as reported 73 119 139 195 487 600 6l0 693

r oars 4.7% 6.6% 5.1% 4.791 10.2% 12.0% 1 2.0% 12.0

et ncame - 1" 2,02 66 3 939 3667 737 434 7

Not www" (lase}. u6Y leoed I .Quo 3 766 2,29510 f

3,29 1

NN lnaroHti w (axed 8A% 114% 13.0% 1612 % 18.3% 15.6% IR6% 17.6%

333, as reported $0.04 $848 $9 .07 90.08 $0.09 1 0.08 $0.06 10,0 1

EPS, 6dy taxed $0 .03 $0.04 60 .05 30.06 $0.08 $006 *0.00 $0.07

SharwwISIOW149 34,632 35,703 37,818 42,125 46.219 48.300 46,400 46,60 0

YsarZYeararowthManses 45.6% 37.87:' '224% 22.9% 17.3% 20.2% 13.6% 16.6%

6etvlcee 102% 20.1% 21 .0% 46.5% 856% 55.6% 56.5% 20.8%

revenue 86 .8% 33.2% 21 .8% 261% 31 .0% 29.3% 22.7% 21 .6%

Cos(o(OoenMes 38 .6% 38.6% 34.3% 7.6% 4.4% 16,0% 18.0% 20.0%

CwlofeeMcei 232% 16.6% 1 .9% 23.0% 24.6% 21 .1% 61 .2% 264%

General an dm(nhalaOva 54% -8A% -18.9% 1A% -12.8% 3.0% 9 .0% .6A%

OpwaVn9tncoma(Iosa) - - 1784.9% 234.6% 183.6% 83.9% 45 .9% 34.5%

not Income(ins),n,ly taxed 50619% 266.0% 1672% 94.8% 67.3% 40.0%OPS5.as reported - - 422.4% 192.6% 09 .9% 40.3% 193% 17.6%EPS,MVIKKed 450.6% 159.6% 1142% 50 .e% 28. 6% 26.%SharesouOalandrn9 7.9% 10.8% 162% 21 .2% 33.8% 29 .4% 224% 10A%

Osqusnltsl GrowlbLkeneee 63% 0.6% 8.3% 1.2% 0 .5% 3 .1% 1 .7% 12 .7%SwArw .11 2% 23.4% 4.1% 27.6% 13 12% 55% 2.1% 6 1%

Tote(rsvenue 1A% 6.1% 7.3% 11.0% 3 .6% 3.7% 1 .8% 10 .8%

Coetolucenees •22% a-011, 0.0% 10.0% 46.1% 11 .1% 1.7% 12 .7%

CostalseMas 12.7% 7.9% -10.1% 28.7% 134% 6.0% 1 .0% 611%

General andedmlydstrative •2A% •114% -1.9% 19.8% -16 .0% 4 .8% 3A% 3 .7%

Cpere0ngIncane(loss) 410% 45.6% 27.9% 27.4% 11 .1% 1 .8% 1 .0% 17.5%

Net(n%me(Icos],Sullytaxed 375% 38.2% 263% 30 .7% 26 .6% -0.1% 1 .9% 16 .3%

@PS,sereported 68.6% 32.2% 19.7% 193% 6.7% •7.1% 1.7% 10.1 %

9F8. fylexed 364% 39.4% 19.2% 17.7% 14 .5% .62% 1 .7% 16.1 %

Shores outstanding .0.6% 37% 59% 11.1% 9.7% 02% 02% 02%

6UPPolTe0FTIN C

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' SUPponTSOFT INCCtlrrensy UsoDias Croafn0Ylres RaeommendsIlw Ch■rge Ode C1uslrWPrlce PriaeT■ rad

11 20t13 TM l,UUY 15 hJd-2003 026 10.50!1 400E 7M 11 i~ fI

M

C.E. Untsrbera. Towbtn Retina s

0 .16. Unlatberg, Towbin salons research oquityretings of Buy, Madret Perform . end UnderPerform. Forlluy rated stocks, we w1A publish a 12-month pdea target for any stockWith an estimated appreciation potontlal of 20% or more . For Under Perform rated stocks,wawlll also publish a 124narA pdca target for any slack with an osllrnaled dedlnepotential of 2a% or more .

■ Sty . 12 months, estimated appredallonpotential of 20%or more .

■ bled stPadomr: Parfannanoa In bnawith the market averages anticipated.

■ Under Perform: 12 monihe, eatlmeled floclins Potential of 20% or Mor e

DisclaimersThis report Isforlnfomlalfonal purposes only, andthe Infonnellonheraln Is obtained from souroee thetwe bellave to be re liable, but Its aecuraoy and mmpteteneae, and that ofthe opinions based thereon, are not guaranteed. The aecudlfes described herein may nolbe etlgibtefor sate In ail judedtc fens erlo certain categories of Investors . Further, thisreport Is not Intended as an offer or sollcfledon to buy or 0011 any securities or related Instnsnents. The Irr asimeide dlccussed or recommended In [No repot may not besuitable for the specific Investment objeobYes, Anandsl slluatlan or needs of the reader, and should not be relied upon without conpullstlon with an Irwestment prolpsstonsl .Opinions enyroasedIn this repent am sabJeet Io change without notice . C.E. Unterberg, Tawh(n aooepta no IisbAiywhatsoaver for any loss or damage of any kind arising out ofthe use of any part, or all, of ihls report. 'This report Is for distribution on ly undn such dreumalances as may be permitted by applicable law, and may not be reproduced ordistributed in any form without the specific consent of QE. Unlerberyy Towbin. Redistribution of this, vie the Internal or otherwise, roped without permission Is specificallyprohibited, and C, IF. Unleibecg, Towbin accepts no ISabittyr for the actions of third portka In line regard .

From time to time, C .S. Unterberg, Towbin or Its employees mayhave a long or short posMon In the scourltlee of oompanypes) dleduaad herein end, at any Ilme, may makeputeheses andlor sales ev pdndpal or agar) .

o ° o f10

VMtHS,Ing p1lptkIad2Bs AM

Byr WA 60%M Fttfum 41% 4716ut oe r i 2516 CIA

The research anelystwho Is primarily responsible forth* research contained in this research report sndwhose name Is listed Ireton this report : 11) attests It:etellof the views expressed In this research report accurately MOW that research analyet'e personal views about any and all of t e aepurltree arid Issuem that are thesubjeetofNo researchrspor1 and(2)atlastathatnopeltafthatnsesrchanalyst'scomponsatlonwas,Is,orwMRbe,dlreoklyorIndirectly.relatedtotheeperileresommsndettone orvkwe expressed by the research enaiystln this research report

CEUPa reeearchanelysts receive compensation , including bonus compsnrsbon, based an CEUPsovomll operating revenues, Including revenues generated byCEUI'sInvestmentbanktng department.

FootnotesMoo Ora corresponding number keppsa :s next to lire aewrkysymbol . thetotomtnp d adoa re(s) eppyI C E Unlerbe :p, Towbin maes a market In lib manly.2 CA.Unterberg,Tavbtn actedasamenageroroomaneparotapubssoofferinpkrfhUCOmparywthtnthetwtihreeyeera .

ber,Towbinhsaperformedlmsslmenlbenklny eep11s1msrkatsorotheraervtce9Wr>hlacpmperdorIIsofAo rswtthinllwtsetlhrseysars .3 C.U .UNaer a householdfamily member clan oNfaer, of C E Unladxly, Taxdrfn, Is a diredor oran oMcer of hors company .4 qn oft{oer6918"T

5 C.E. Untelberg,Towbin,gealES2etesoreubsldealee,e~sctlorecekreorb+tertdtossakemnpensatlonion)nvestmentbsntdngstrvToasfmmlideaompmrywlihbtthenextIhree montl :e.

6 VNHdnthopaat12mont e,C.E.UMerbarg,Towbhl,itsathletesoreubs(dlerles,hssreceivedcompensationforInvestmenlbankingesn+kssfd► Ifdscompany.7 C.E. Untethery. Towbin, Its aIiVlates or subaldledes, Intend to eeekcolnpensetlon for Invosbmnl banking services from this company during the need three months and

thereeRer.

Sr erle .t?ep.2003

SupportSoft, Inc .

(SPRTI 7 $9 .82) Buy

Suppolrtsoft Business Updat e

• Company update . We met with SPRT mgmt for a business update . Webelieve the company remains well positioned within the serviceautomation market. SAS-V (Service Automation Suite for Video ) shippedin May and should generate sales In 2H . IQ results were good, but acouple of slipped deals in the enterprise segment limited upside . Thecompany Is addressing this with be tter messaging and by exp anding itssuite. This includes organic development and, potentially, M&A this year.

• SAS-V ships ; large installed-base opportunity. SAS -V shipped In earlyMay. The suite, which automates installation and service for digital cable,was jointly developed with Scientific Atlanta . Cox Communicationscertified the product following lab tests and field tests In San Diego andCincinnati . The top 5 digital cable providers in the US, with 88% marketshare and 20 mm subs, all use SPRT on the cable Internet side. Assuminga conservative $1lsubscriber term license pricing structure yields a $20mm annual opportuni ty in the installed base alone . Mgmt stated that thecontribution from SAS-V licenses should be around $3-5 mm in 2004 .

• International markets. The company has yet to hire a regional GM forEuropa, it search that's been ongoing since late last year. SVP of FieldOps John Van Siclen is acting head of Eu ropean sales. A new count rymanager was hired in France this quarter. Total headcount in Europe hasincreased from 4 to 10 since the beginning of the year . In Japan, apromisin g broadband market, mgmt sees revenues developing In 2H, withbusiness building In 2005. When it happens, the deals will probably belarge. Japan has -12 nun broadband Internet subs vs. 27 mm in the US.

• Demand Improving, but still challenging . Demand continues toimprove, but deals are still exposed to lengthy ap provals with numerouspotential vetoes . Although vulnerable to large-deal slippage, SPRT hasdiversified and expanded its business , which mitigates some of this risk.

• Near-term outlook . It's far too early to gat a read on 2Q . The enterprisedeals that slipped out of IQ remain in negotiation . SPRT hopes tostrengthen its marketing and products within 1-2 qua rters in order toImprove close rates In this segment . SPRT increasingly relies on perpetuallicenses (68% of 1Q licenses vs . 54% in 4Q and 59 % in 1Q03) to make itsnumbers. Large deals, whether perpetual or term, tend to close late In thequarter. CSC converted Its contract from term to perpetual in 1Q andexpanded Its relationship . No such conversions are expected In 2Q .Rmadband gets the attention , but the opportunity with managed serviceproviders (MSPs) like IBM, Aoeenture and HP may be even larger.

• Long- term outlook. SP1lT stands out as a company with one of the bestexecution track records and most favorable market opportunities In ourapace . A common question is how much runway remains a fter SPRT'ssuccess in broadband last year . Now products like SAS -V andVolceAssist (CA in late-May) provide a large opportunity in the Installedbase . Scaling roll- outs with MSPs provides further growth potential.Although the business Is lumpy, SPRT's growth potential appears to be asfavorable today as It was a year ago .

• Maintain Buy rating . We continue to recommend SPRT shares to long-term investors, given Suppnrt$olt's numerous growth Initiatives, strongcomp etitive position, and above-average visibility into future results.SPILT trades at a PEG of 1.6x CYO4H fully taxed EPS of $0.25 . Our $14-16 price target range is based on a PEG of 1 .6.1 .9x CYO5B earnings.

• Risks. Risks Include (1) customer concentration; (2) reliance on largedeals ; (3) uncertain IT spending; and (4) uneven execution in enterprise.

Craig Wood, CFA415-859 .2249cwoodaanlerberg.co m

SupparlSoft is a leading vendor of support and serviceautomation software for enterprises, MSPM andbroadband service providers . The company has recentlyexpended its product portfolio to include tools tosupport digital cable aubsoribns . At March 31, 2004,SupporiSoft had 152 employees and 200+ clkrds.

960 9stlMnAvenue 22$ Fmklfn Street 266 Pt 275ttlddteFleld Road 2'° Ft . 450 Alontgomery shee42 Fi. ,lone 1, 2dllrlNOW York, NY 10017 Beaten, MA 02115 Minlo Peck . CA94024 Ben frendsos, CA 94104212.38?.8000IFae :2s2.rn4928 617.217.210E1Fax017.2114702 050.2394205 450e5•22721Fax4154994ff3Disclaimers regarding the content of this report as well as full disclosure of C .E . Unterberg , Towbin' s ratings andinformation on the firm's position ( s) In securities mentioned heroin appear on the final page of this report.

SupportSDfts Inc Cra10W6od4.CFA

Inaama Statem4el C, S. Unl6rherg, TOW"

($ thousands) (418) 669.224 6

U001Kee 8,693 8,641 10.440 71,7av 17,tw 7i,cw i I . W 1 0,4w

%ot'rovenuea S8.0% 718% 77.2% 74. 0% 7 1.6% 71.2% 71.5% 723%SeMcas 2,401 2,864 3 1088 0938 4,438 4,700 4 ,800 8,100

%otlksnsee 0.9% 0.9% 0.8% 0.0% 0.8% 0.0% 0.9% 0.9%CoetafseMoso 1,890 1,824 1,478 1,856 2,104 2,209 2.232 2,346

%of6eMced 70.4% 01.6% 47, 8% 47.2% 472% 47.004 485% 48.0%

Total cost of revenw 1,700 1,914 1 .866 1,055 2,188 2,313 2,338 2,46 8

GmNspra$1 10,214 10,897 11,906 13,178 13,613 13,981 14,282 15,034margin 68.2% 84.6% 88.4% 81.1% 80.0% 68.6% 850% 88.6%

Research enddevekpment 2,334 2,208 ties 2,361 2,332 2,400 2,460 2,60 0

NOlrevenuea 195% td2% 18.2% 147% 14.8% 1A7% 54.8% 13.6%

6elea grid malkatlrp 6,048 6,088 6,913 6,970 8,228 8,620 8,640 7,64404of,m6rruea 42.196 40.4% 43.7% 30.59 80.654 40.0% 400% 41.08E

08neM end adml11shbUve 1,428 1,202 1,230 1,480 1,243 1,300 1,360 1,40 0

!{q/ievemrea 11.6% 1010% 0.1% 0.8% 7.9% 80% 8.1% 7.6%Met o rev expenses 10,687 1663 10,912 11 B6 2 002 2 678 779 13,91 0

•0 ere On Income (1061) 4407 040 2628 3839 3700 3787 872 4,400

0potg pmarg8I 11.7% 18.2% 10.4% 2ZI16 23.6% 29.!% 23.0 2 . %

Inlerasl and W w lnomne, not 140 91 80 181 728 400 426 480Pm•tmrleoome 1,547 2139 2,700 8,830 4,485 4,167 4.247 4,940P+e4exmer0ie 12.2% 27.0% 20.0% 23.8% 28.2% 28.6% 26. 696 20.8%

Income taxes, as reported 73 110 130 166 407 OD 610 693Texret eere ed 4.7% 5.67E A1% 4.7% 11 .2% 170% f2. !20 %

et lnwmw 1,474 0 3 66M

3,737 4,347

Hat no me Jim), flAV ex ,008 7 2, 8 OD 2,760 1 1

Nolmaq }U6y(a3ed 84% if .0% 13.0% 16.2% 18370 10.6% 566% 17.5%

EPS, as repowtcd $0.04 $0,08 $0.D7 10.00 $6.00 10 .06 10.08 $0.06EP8, 0* laxed $0.03 $0-04 $0.05 . t $0.06 20.08 60 .08 7006 $11 01SharesoutaIanSn5 34,632 86,703 37,016 ;,42,028 48,210 46,300 48,400 46,600

Y.er/Yur OPoWI BMews 46.611 37,8% 220% 22 .09E 17.3% 20.2% 13 .0% 18,6%Somm 1 8216 203% 21 .0% 46.6% 88.8% 66.6% 63 .65E 20.6%

70125 levenue 36.6% 331% 21 .91~ 28,1% 31 .0% 29.3% 22.7% 21 .6%Coalcfioemee 38.611 38.6% 84.3% 7.8% 4.4% 16.0% 18. 9% 20.081

Q,Omol*WAOa 2329E IBBK 1 .9% 230% 24.5% 21 .1% 51.2% 28AIA13et1wMendedndr9&h ve 6A% -3.4% -18.9% 1.4% -12.6% 3.0% 9 0% -5.4%

05818 5830 In oma (lose) - 1764.9% 23 44 .4% 1634% 83.0% 43.9% 34.614Netk1oema(Io04ILJIy]axed - 606.0% 265.0% 1107,2% 04.6% 67.3 400%OPS, as repoded - 422.4% 192,6% 00.6% 40,3% 10.3% 17.0%

FPS, my taxed - - 460,3% 1581% 114.2% 60.6% 20 .6% 28.8%Sheresoulrlatdr4 7,9% 10.85E 162% 21.2% 034% 29.4% 22 .4% 1DA%

Sequsellel Growthtk.etes 6LS% 0.6% B.S% 7.2% 0.6% 31% 1 .7% 127%SeMCes -11 .2% 23.4% 4.1% 27.6% 132% 6.60A 2.111 8.5%Totalreranue 1 .8% 81% 7.3% 11 .611 8.0% 3.7% 1 .6% 108%

Ceel611oalees -22% OAX 0.0% 10.0% •8.4% 11 .1% 1 .7% 1 2.7%CoatofaeMces 12.711 1.6% 4 011% 26.7% 13.4% 6.0% 1 .0% 5.1%Oanerelonded8'4e2al<va -2.4% 11.4% -1 .9% 10,6% -18.0% 4.611 3 .611 3.764OperellwkuomeVoss) 41 .0% 46.% 27.0% 21.4% 11 .111 1 .0% 1 .6% 17.6%

Nellnoama{166a~8xad 27.6% 382% 28.3% 80.7% 25.0% .8.111, 1 .9% I 9.8%EPA. asrapmkd 63.6% 322% 18.7% 18.3% 0.7% •7.1% 1,7% 16.1%EpS,Wtaxed 88.4% 33,4Y% 10.2% 17.7% 14.615 42% 1 .74E 18,1%8821es 0Uteloedng .0.6% 3.7% 6.9% 11 .1% 0.7% 0.2% 0.2% 0.2%

SUPPORT$OFT 1taC

V~P^D 4lree aARe we- P,1N TMNI-••RncoMnwnAe,w celeer • N•pw ow.u i

SUPPORTSOFT We

Curreney .USDwte CroatngPriee Raeommrnde1FcnClee a Olio Clnstnpprtee PrrmT .r O112003 7.50 WARTY 15,Iuly007 120 105411 700E 750

M+ 11 4l b50 750 a

C .F. Unleib►1o. Tewbtn Rathra t

C.E. Unterberg, Towbinasssgr15 rosearch equlry ratinge of guy, Merkot Perform, end Under Perform. For Buy rated stocks , we will publisha 12-month pri ce Inlget for any eterkwith an artlmoted eppredelon polonuat of 209E or more. For Under Perfo,m rated ,rocks, we wi ll also publish a 12-monlh piles target for airy stock vdIII an esgmated dadlnepotential of 20% or more.

• fry: 12 months . estimated appreciation polentlal of 20% or more.

• MarketPelfotm : Performance In one with it* marketavaraces anticipated.

• Under Perform 12 months, a timated decline potential of 20% or mar e

DleclelmeroThis report Is for Informations) purposes only, end too Information herein Is obtained thorn sources that we bellow to be relable, but Its accuracy and completeness, and that ofthe opinions based thereon. are not guaranteed.' The securities described h reln may not be eligible for sate to all Jurfadlctionsor to cedafneategories of hmeslors . Further, illsreport Is not Intended as an offer or solicitation to bury or tog any securities of related Instruments . The investments discussed or recommended In Ills report may not besellab le for the specific Investment oblecVves, linandei situation or needs of the roader, and should not be raped Upon without consultation with an Investment professional .Opinions eypleseed In We report are suhJedto ehanpewilhold notice . C.E . Unterberg,Tcwbfn accepts no Ilahllkywhatsoever for any lose arderneye olarpr kind arising out ofthe use of way part, or all, of We report This raped Is for dfsblbdtion only under such drctnbstances as may be permitted byapplkable few, and may not be reproduced ordistributed In any form Without the spadfio consent of C .E. Unterberg, Towbfn. RadisWbutlon of this. via the Internet or olheiwlee, report without permission Is spaciffoollypmhlbiied, and C.6 . Untarbarg, Towbfnaccopts notebblty forte intone of third padres In this regent .

From tune to time, O.E. Urdarberg,Tombtn or He employees may have a long or short position In the securities of oompary(les) dfscussod herein and, at any lime, may makepurchases andlorselesas principal aragent

a o 11OtatU1sf2Altng pnGluk10d78[ 1t1[e~r

6096a,, RP/0M Elam 41% 409roUI*PMM 274) CIA

The research analyst who is primarily responsible forth . raeeareh contained In thus research report and whose name Is Bated Niel . on this report, 11) attesb )hot allof the views expressed In this ressoreh report accurately reflect that research anetyst'e personal views shoat any and all of the securities and Issuer that are thesubject of this research report; and (2) aftests that no part of that research anatyats eompenntionwas, Is, orwill be, directly or Indirectly, rotated to the specificrecommendations or stows expressed byths research anstystln this research rspor t

CEUTs research analyst. reoetue compenssdon, I chiding bonus oompensatlon , based on CEUJ'soverati opereang revenues, indoding revenue. generated by CEIJVsIoveairnentbanklnp department.

Footnotes -When the cc responds g numbar eppems nerd to the aecufy eyntho ), the fob urlog disclosure (.) apph' ,I C.E. Unterberg, Towbin makes amarketin this ucudty. . ."2 CS. Unterbarp, Tcwbin acted es a manager or co-menagerof a pubio oifedrq lot thin company within the teat t ran years .3 QE. Unterberg, Towbinhaspedwmed Investment berddnp,capital markets or other eeMcesfor this aomperyarfso floerewMhfnNafestifireeyaep .4 Anon[ear, ors household Far" member of en oMleor, of D.E. Unterberg , Towhkr, Ism drectaroren offcer at pile company.s C.E. Unterberg, Towbh ; Its affiliates or sub sidlatka, e,ped to receive or Intend to cook compeneaton ro :Investment benldp senoes from t ie eamparpr within the nsxt

three months.5 Withbthe post 12 months, C.E. Unterberg , Towbin, Its a%Ilates crsubsldlarles, has remind aompeneellorforInvestment banking serdces for this oornparv.7 C.E. Unterberg. Towt Itseflifleles oreubafdlatlee , tnlelldtoseekcompensatkmforInvastmentbarddngservlceafr omHecompanyduringthenerdthrsemonthsand

thereafer.

Ae etdassp•2100Currency • HSP

SupportSoft, Inc .

(SPRTt .7 $7.34) Buy

SupportSoft Reports Solid Quarter; EPS Upside on

Craig Wood, CFA415.859 2248cwood®uniafterg.rom

Inline Licenses and Good Expense Controls• SupportSoft reports another stron g quarter. SupportSoft continued Its

string of good execution, with a Solid 2Q thanks to mline licenses, upsidein services, and light cost controls . Licenses of $11 .5 mm essentially me tour $11 .6 mm forecast . The 30 of BPS upside ($0 .11 vs . our $0 . 08 est. )was driven by $700 K of services upside and $650 K of expense savings .The enterprise direct segment bounced back (+47% q/q) from a soft 1Q ,white broadband delivered the second-best quarter ever . Management Ispositive about the 2H outlook, increasing full-year guidance slightly.

• AcquLiltfon of Core Networks announced . SupportSoft also announcedthe acquisition of Halifax-based Core Networks, Inc., for $17 mm in cash .Core Networks sells software to broadband Internet providers to suppor th k iome networ s (e.g., usage management, network mon toring) . Theacquisition is expected to add $8 mm of revs in 2005 and to be accretiv eto EPS after 12 months. Core Networks has 50 employees and 26customers, and almost no client overlap with StipportSoit . We think SPRTis attempting to entrench and differentiate itself in broadband, still a high -grrowth market with good opportunity for follow-on sales .

bT.MAIN

• Guidance raised . SPRT increased 2004 guidance slightly, bumping upthe mid-paint of revs by $1 nun (from $64-68 mm to $65 .69 mm) an dlifting the mid-point of EPS by 2 .50 (from $0.32-0.34 to $0.34-0.37). The2Q out-performance drives most of these deltas, so the 2H outlook doesn' tchange much. That said, giventhe recent fear and uncertainty In the space.

• Increasing estimates . 2004E BPS is now $0 .37 (was $0.34) on revenueof $67 .8 mm (was $67.Omm). We're increasing our 2005 BPS est ., whichis a fully taxed number, to $0.38 (was $0 .34) on $88 mm of revs (was $80mm). The $8mm of higher forecasted sales Is related to Core Networks .

• D, ferred revenues decline . Deferred revs fell by -'$3 .5 mm qq for th e2 ti rt Th AOL d l b k dconsecu ve qua er. e ea , oo e in 3Q03, is beingrecognized at about $2 .5 mm per quarter through the end of this year. In

ddi i i bl k da t on, a s zea e contract boo e In IQ was recognized in 2Q. Some of2Q's bookings were not fully invoiced and, therefore, are not reflected i ndeferred revs. It's possible that deferreds will fall again in 3Q and 4Q, due SupportSot Is a leading vendor of suppod andto AOL, with growth resuming In 2005 . sonise automeilon software for enletptises, MSPs an$

• New products begin to contribute. SASV, which shipped in Iate-2Q, broadband seivlce providers. The company hascontributed a small amount of revenues, perhaps $50 K. Managementreiterated its target of $3-5 mm of SASV revenues In 2H04, likely from 1-

recently expanded Its product portfol!o to Include toolsto supp,,t digits! cable subscribe s. At June 30, 200 42 perpetual license deals Into the installed base, in our view . SPRT also

,SuppcrlSolt had 185 employees and 2004' cfenls.sold its first 2 units of VoiceAssist, which shipped In May with an ASP o f

-$100-200 K. Early results with these new products are encouraging ,providing comfort that the growth strategy will continue to work.

• Large deals haven 't gone away. A dearth of large deals, which hurtother vendors, wasn't a problem at SPAT. ASP increased to $1 mm vs.$500 K last quarter. The company booked 4 deals > $1 mm vs . 2 last qtrand 3 a year ago. Included among these 4 large deals were 2 over $4 mm-1 In broadband and I in enterprise. The high ROI of its products mayhave helped SPRT take budget dollars away from other IT projects .

• Maintain Buy rating. We continue to recommend SPRT shares to long .term Investors, given SupportSoft's numerous growth initiatives, stron gcompetitive position, and above-average visibility into future results. Our$ I4-16 price target range is based on a PEG of 1 .5-1 .7x CYO5B BPS .

• Risks . Risks Include (1) customer concentration ; (2) reliance on largedeals ; and (3) Increasing dependence on perpetual licenses.

350 9 dtsen Avenue 223 Frentlln cheat 26a FL 271 MlddteFietd Road 2M la.New York, NY 19017 Boston, NA02110 Mento Park, CA94024

451 uoatnamery Shee122fa Ft. J uly 21, 2004Sanfrontleea, CA0410 4

2124 1940011'ax'212459.6 928 517.211.21u6 IFax61r•2172752 650259 .4200 415459.21201'ax415499.111 3

Disclaimers regarding the content of this report as well as full disclosureof C .E. Unterberg, Towbin's ratings andInformation on the firm's positionis) In securities mentioned herein appea r on the final page of this report .

SupportSoft, Inc. CraigW0o4,cPa

lneomo Slalemanl C.E. Iln1Ur9er9. TowbIn

($thousands) (416)664 49

Lkenrae 8,5` J 0,041 1UfrlS'W-8;

, .-

/tayanuaa 60.0% 76 .6% 77.2% 74.0% 716% 67.6% 67.6%

8ervk4e 2,401 2,964 3,068 3,938 4,450 5,438 6,700 6,860

%wwns ;;' 09% 0.9% 0.0% 019% 0.6% 0.6% 0.8% 06% ,

Caslofaervlaes 1,080 1.6244 1.476 1,658 2,104 2,271 2,451 2.845

%olstivWx 70.4% 61.6% 47.8% 47.2% 47.2% 41 .8% 4,10 9 45,6%

1ola! east of revenue 1,760 1,914 1,666 1,955 2,198 2,340 2,543 2,64 2

Grose profit 10,214 10,667 11,968 13,179 13,513 14,648 14,657 16,408

Gro samsown 602% 84.8% 084% 97.1% 80.0% 831% 85.2% 884%

Research and da9elop08n8 2,334 2,289 21190 2,381 2,332 2,103 2,400 2,600

%ofeavenuaa 19.8% 1&2% 19 2% 15,7% 14 .8% 110% 140% 168%

Seleaandmrrhewrp 5,048 5,008 8,913 5,979 6,229 8,794 6,162 8,688

%pfroYenues 42.1% 40.4% 43.7% 39.5% 39 .6% 34.3% 36.0% 396%

G8no h1 d 8d0infe1rouvs 1,426 1 .202 1,Y39 1,460 1,243 1,866 1,780 1.950

%ofrovanues 11 .9% 10.0% 9!.1% 98% 79% 0.292 91 9% 10.6 %

Total o ere8 m 68D 10 10912 11,706 12 00 2--

11 12.B36 3 96 1

0 eratM orna leasJ

07 R Q Z 020 33DD 109 6 006 4365 4 069

pporwyymwow 11 .7% 16 .2% 19.4% 221% 23.6% 29.8% 26.4% 22,6%

no tInlet a n d doUwrlncomo 140 91 60 191 720 460 400 450,

Pre-lnrlncams 1,547 2,139 2,700 3,630 4,435 5,465 4,765 4,510

Re-foxrnarp9r 12.9% 17.0% 20.0% 29.3% 28.2% 32.4% 27.7% 26.0%

Income taxes, as reported 73 319 139 165 407 692 87A 49 7

Tare a aam ed 4.7% G6% &1% 47% 11 .2% 10.8% 1.0% lf.

atineomo 1474 2,020 6 036 7 41 , 2

axed 7 ,x93

Not merg04 falyfared 94% 11 .0% 13.0% 16.9% 183% 21.0% 1&0% 1&3%

6PS, me reported 30.04 10 .66 40.07 $0.05 50 .09 $0.11 10 .09 We

8P8, My taxed 56.03 $0 .04 $0.05 $0 .05 10,06 50.08 5007 30.06

Sharesoulalaneng 34,532 35,703 37,910 42,128 40.219 46.620 48.000 46,20 0

1conswOrowlh11.kenrse 456% 37.8% 22.0% 22 .9% 17.3 96 18.7% 10.1% 8.911.

gorAce' 10.2% 20.1% 21 .0% 45.6% 66.6% 63 .6% 64.7% 40 .7%

Totalravaaue 36L8% 35,2% 21 .8% 211% 31 .0% 33 .9% 27.1% 18.3%Coelv(llwnsn 38.5% 38.5% 34 .3% 7.8% 44% -23 .3% 22% -1A%

Codofservtcsl 212% 10.0% 1.9% 23.8% 24,6% 24 .6% 68.1% 37.1 %

General and adr%nlst 5Ya 6 .4% -8.4% 16 .0% 1A% •12.8% 23.3% 37.3% 31.0%

OperalingIncome{toes) - - 1784 .0% 234.6% 163.8% 144.4% 68.0% 21.9'%

Net income Qass),0*18xsd - 508 .9% 266.0% 187.2% 141 .2% 78,8% 28.0%

EIB,e+repoded - 422 .4% 102.8% 99.6% 89 .7% 36.6% 8.9%

EPSju6ylaxsd 460.8% 158.8% 114.20A 100.9% 45 .6% 18 .8%6haresoul61am8n9 7 .9% 10.6% 18.2% 21 .2% 33 .8% 27.2% 21 .3% 0.8%

Soenreo e! [ltOW1hEkensas r x3% 8.3% 7.2% 0:6% 1 .7% 0A% 0.1%

SeMcas -112% 23,49 4,1 1A 274% 13.2% 22.0% 4,5% 2.691

Total revenue 1 .8% 5 .1% 7.3% 11.8% 3.6% 7.6% 1.8% 4,9 %

Coslorlkancas -2.2% 0 .0% 0.0% 10.0% - .l% -28.6% 333% 8.151

Coetorswvkes 12.7% 7.9% .19.1% 28.7% 13 .4% 7.9% 7.9% 8.8 %

0aneral and odminl5USOva -2.4% -11.4% -1 .9% 19.5% -10 .0% 262% 9.3% 14.714

OpsaUeOtncoms{lose) 41 .0% 45.6% 27,9% 27,4% 11.1% 34.9% -128% 4.89

Not Income (be4 foly taxed 37.5% 38.2% 28.3% 30 7% 25.6% 232% -12 .6% -6 211

EPS asreported 68.6% 32 .2% 107% 18 .3% 6.7% 28.6% -139% 4L711,Mylaxe dEPB 38A% 33 .4% 19.2% 17.7% 14 .5% 28.1% -13.7% .5.791,,

Shoresoulsiandin0 45% 3.7% 5.0% 11.1% 9.7% -1.6•% 1 .0% 0.611

9UPPOHTOOPT ]N O

-06ft"n P1k; TM .I•rnrme, menerea + 0Asee*az•dropCaw1 e

SIIPP(rnTSAFTINP.Currency • UsDnets ffouln Pllco Uacommondi11o1Chavo Bete C1otlnuFiIce Prfwlrrpet

~~~ 111 91He 41.9 16.1

C.t?. Untaflferm TowhlrtRettno a

C.E. Unterberg, Towbin eestgns research eqully radnge of Buy, Market perform, and Undot Palfbhn . For Bursted stacks, we will ptblleh a 112-month pdoo larget for any dockwIth an eeumaled appreciation poten11e1 of 20% or more. For Under Perform rated storks, we wit also publish a 12-month price target for any atock with an ostlmatad declinepotential of 20% or more .

• Buy: 12 months, esltme!ed appreciation potential of 20% ormore.

• Market Perform: PerfomlenceInline wldrthemarket everagoaantldpeled.

• Under Perform: 12 months, eslhneled decline polentfel of 20% or more

Atscla)naersThis report Is Iorlnfomlotlonat purposes only, and Iho Information hero in to obtained from sourc es that we believe lobs ratable, but its accura cy and completeness, and that ofthe optnlano based thereon, are notquerantead. The seoud0as doscrtbed hsretn may not be cEglbte for sots In all jurledktlaneorto certain categortea of trwastore . Further, Uricreport Is not Intended as an offer or solldtstlon to my or sell any seolelles or related Inetnanenls . The Inveslmonle dreausxed or tecommend .d In 11de report may not bec allable for the spedtto Imeehneet objactvaa. Onendei efluaBan or needs of No reader, and should not be rated upon without oon*attetlon with an Investment professional.Opinions expressed in this report are aubjeotto ctlan ge eMOwut noOcs. C .E. Unterberg, Towbin accepts no IloWtlgrwhakoeverfora lon or domage of trip kind edatnp out o f

not be reproduced orThe utodleblbi ed Inary Foorm witho

of thisut thespecific convei 1 o

Is for dIstribVilorl only underf C.EUnlerbarg, Tawbtn. Red elrlbutlon of this, via the he or otthherM rbeportwiUWtd may omlhslon to pacit oily

p rohlblted, and C .E. Unlerbarg , Tawhln accepts no Wily for the actions of third parties to this regard .

From tone to time, C.S. Untarherg, Towbin or Its employees may have a long or shod poe] Oon In the eacudtles of oompanypeo) discussed herein and, at any time, may makepurchases atxlrorealaa aspdndpal or agent

B70 O Universe % FDf rating ter Or w Cwith this rating p rovided YB services

Buy 58% 61%M. Perform 42% 39%Und9Tpertolm 0% 0%

The research analyst Who is primarily reoponslbTo forth* research centalned In this research repo rt and whose name Is Holed that on this report : (1) attests thatellof the views expressed In this research report accurately reflect that neeameh ' anetyat's personal views about enyand all of the seourtt tes and Is suers that are thesubject BMW research report; and (21 aIosts that no part of that research anatyare compansatton was, le, or will I», directly or Indirectly, related to the specificrooammendettoea orvlews expreaeed bytha raeearch andyst In this rasssrah repor t

CEUre research enstysle recohis compenselear, lnrleding irons compeaeedon , based on CEUrs overall opera ti ng revenues, Including ravehusa gahereted by CEUTMImeelmetnl banking deparlmerL

en the serraa panding number appears next to the security ayrnbal, the following dlsotosi e (a) apply-.I O.L . Unterberg, Towbfn makes amarket Ire this security.2 C,E, Urdetbefg. Towbin acted asa manager or camaregerol a p ubNcofedreg!artirt e companywlthtn the teatttree years.3 C,C. Unle,berg,7'owbtn has parrromeed b vaabnard Nanking , capital merkels or other eervieea Foethia compsIy or Its oMoerswlthtnttte teat three yeara .1 Moficer, armhoaaeholdhmtiyrnemtlaro f anoth er,oFC.B.Untetberr, Towbmn,isadheoiororenolrtowoft incompany.S C.E . Unterberg, TawbIn, its of lIates or subeidl edea, exiled to receive erMland to seek compensation rorhrvastment banMing seMces from We comparryw ithhr the next

thtea months.6 WNhtn the past 112monlhs, C,E .1lelerb erg, Towbfn, lie e160el e s oroubaldfedes, has roc" ved eompansallonfor Investment barldngaenleas for this company .7 C.E. Uraefberg TCvrtln, Its attUatas orsvbeldla rles, Intend to seek Compensauanfortnvesimant bankIngseMoesfrom ltdscompany during the next Utica months and

tlwreafter.

%W / "I / -:I.*? 4V


EXHIBIT K

I Yor M . FW Wry r.rsrRT

1 .11 ._ L A It

Cameron P . Steele(415) 633-8 501 cameron. [email protected]

Karen Haus, CPA(415) 633-3568 karen .haus@rbccm .co m

Price: 16.47

52-Wk High : 17 .04Float (MM): 22 .2

Shares Out (MM) : 37.9Dividend : 0.0 0

Ti. 12 ROE : 5 .00%Trading Vol . ( MM) : 0 .900Institutional Own .: 67%

Price Target : 18.0052-Wk Low: 1 .89

Debt to Cap : 0.0%Market Cap ( MM) : 624Yield : 0.0%

Est 3 -Yr EPS Gr : 30 .00 %

(FY Dec) 2003 2004 200 5EPS Cal 0 .25 0.30 0 34 --

Prev. 0.24 0.2 9PIE 65 .88x 54 .90x 48 .44x N ARevenue Net 53.30 64-70 76 .10 --(MM) Ca l

Prev 5240 6480MktCap/Rev 11 .71x 9 .64x 8.20x NA

EPS Cal Q1 Q2 Q3 Q 42003 004A 0 .06A 0 .07A 0 .06A2004 0 .07E 0 07E 0 .00E 0 09 E

Prey. 0 .06E 0 .07ERevenue Ne t(MM) Ca l2003 11 .90A 12 .60A 13 50A 15 .10A2004 15 .20E 15 . 80E 16 .30E 17 60E

Prey. 14 .80E 15 .70E 16 .60E 17 .70 E

All values in USA unless otherwise noted

SupportSoft(NASDAQ: SPRT)

Sector PerformSpeculative Risk

Company Update

EPS Revision

SupportSoft Exceeds Expectations : ReportsStrong Q4 Results

EventSupportSoft s Q403 Result s

Investment OpinionSupportSoft Exceeds Expectations : Total revenues of $15 .1 million andEPS of $0.08 exceeded our expectations of $14 .2 million and EPS of $0 .07_Operating and financial metrics were strong across the board . Overall, wewere impressed with the results and believe the company is carefully andmethodically executing on its initiatives . The company saw strength in allthree of its vertical markets ; corporate enterprises, digital service providers,and OEM/MSPs .

Slight Model Changes, Introducing 2005 Estimates : We are maintainingour 2004 revenue estimate of $64 .7 million and increasing our EPS estimateby a penny to $0 .30 . We are also introducing 2005 estimates of $76 . 1 millionand EPS of $0 .34. We recognize that the lack of EPS growth may b edisconcert ing to investors , but in our opinion this is a function of thelimitation on SupportSoff's ability to effectively utilize its tax loss carryforwards rather than an indication of the health of the underlying business.

Valuation : SPRT shares closed yesterday at 55x our 2004E EPS $0 .30,compared to 39x average multiple for its peer group . We continue to believethe company's growth prospects are excellent, and recommend adding topositions on weakness .Our price target is 60x our 2004E EPS, a premium toother software application vendors, but we believe warranted due toSupportSoft's solid track record of execution, strong financial positioning,and extensive growth opportunities .

For pertinent disclosure, see Disclosure section on page 3 of this report .

RBC Capital Markets SupportSoft

SupportSoft Exceeds Expectations : Total revenues of $15 .2 million and EPS of $0 .08 exceeded our estimates of $14 .2 millionand EPS of $0.07 . License revenues of $11 .2 million hit our targets, with services revenues of $3 .9 million beating out $3 .1 millionestimate as the company had strong maintenance renewals during the quarter . Operating expenses were lower than we expected, asthe company has not increased its headcount as quickly as we originally had anticipated . EPS of $0 .08 beat our estimate by apenny . Business metrics were strong across the board . Revenue from ratable sources (term agreements) was $9.1 million or 60% oftotal revenue with perpetual revenues accounting for the remaining $6 .0 million . Going forward management indicated that it

expects revenue from ratable agreements to account for 45%-55% of total revenues . International revenues were only $1 .2 million,

or 8% of the total and was primarily from broadband providers in Europe . Going forward, management is targeting 20% ofrevenues to come from international sources . The company signed 30 deals during the quarter, 10 with new customers . ASP for thequarter was $500K, with two deals being north of $1 million . There were two customers who contributed greater than 10% ofrevenues (one at 16% and one at 12%) . The company ended the quarter with 170 employees, up from 154 at the end of theSeptember quarter, including 22 quota-carrying reps . As of today, the company has 25 reps and we expect this number to continueto increase as the company builds out its sales infrastructure .

Balance Sheet Metrics : The company's balance sheet was exceptionally strong at December 31, highlighted by $121 million incash and equivalents, which includes $78 million from the company's recent secondary offering . In addition to the fundraising, thecompany also generated $6 million in cash flow during the quarter . DSOs fell to 74 days (down from 94 days in Q3) but we remindinvestors that due to the company's revenue recognition policies this metric will fluctuate a fair amount from quarter to quarter .Accounts receivable fell to $12 .4 million, down from $14 .2 million at the end of September. 87% of these were less than 30 days,with 9% greater than 90 days . Management indicated it collected $350K of over 90-day receivables in 2004 . Deferred revenue grewslightly to $20.9 million, up from $20 .0 million at the end of of September .

Our Take : Overall, we were impressed with the company's results this quarter, and believe the company is carefully andmethodically executing on its initiatives . Management outlined its five growth drivers for 2004 which include 1) expanding itspresence in the Fortune 500 companies 2) establishing itself in the IT infrastructure market 3) continuing its success in the digitalservice provider market (by helping them support new products such as VoIP and digital video) 4) expanding overseas and 5)improving relationships with managed service providers . We believe that here in North America SupportSoft's success will bedetermined by its ability to further leverage its relationships with existing customers through new products and services .Internationally, in our opinion the company's success hinges on its ability to penetrate new customers . We will be closely watchingthe company's progress all all these fronts but are particularly interested in its success with the new initiatives with the digitalservice providers (namely the digital video pilots the company currently has underway at two of its large customers) as well asinternational growth .

Model Changes : Management raised the high end of the guidance range for 2004 to revenues of between $63 - $67 million (highend of the range was $66 million previously) and EPS of between $0 .29 - $0 .33 (previous range was $0 .27 - $0 .29). We aremaintaining our revenue estimate of $65 million, but are increasing our EPS estimate by a penny to $0 .30 to reflect higher servicemargins offset somewhat by higher tax rates . After completing a review of its tax NOLs the company raised its effective tax rate for2004 to between 10% - 14% (we had been estimating 5% previously), and will become fully taxed in 2005 . We are also introducing2005 estimates of $76 .1 million and EPS of $0 .34 . We recognize that the lack of EPS growth may be disconcerting to investors, butin our opinion this is a function of the limitation on SupportSoft's ability to effectively utilize its tax loss carry forwards rather thanan indication of the health of the company's underlying business .

ValuationSPRT shares have had a nice run over the past two weeks and have continued to trade at a healthy premium to its peer group . At theclose of the market yesterday, SPRT shares were trading at 55x our estimated 2004 calendar estimate of $0 .30, compared to 39xaverage multiple for its peer group . We continue to believe the company's growth prospects are excellent, and recommend addingto positions on weakness . We reiterate our Sector Perform rating with Speculative Risk qualifier and $18 price target on SPRTshares . Our price target translates into a 60x PIE multiple on our estimated 2004 earnings of $0 .30 . This is a premium to othersoftware application vendors, but we believe this valuation is warranted due to SupportSoft's solid track record of execution, strongfinancial positioning, and extensive growth opportunities .

Price Target ImpedimentFailure of the company to meet published revenue and expense targets could prove to be an impediment to our price target .Additionally, any further weakening of the macroeconomic environment and/or deterioration in IT spending levels could alsoprevent SPRT shares from reaching our price target.

Company Descriptio n

January 21, 2004 Page 2

RBC Capitcll Markets SupportSoft

SupportSol, Inc, is a leading provider of support automation technologies which enable companies to more efficiently handle andmanage IT support requests .

Disclosures

ROC Cup1U1 M.rktu

Distribution orRe ings, Firmwide

19 S-JP.,t I! Mn .

Count Prreent Count Perron

BUY ITP/OJ 741 44.69 100 2931

HOLD ISP1 114 41 .15 60 191 ]SELL JUJ 108 14.15 9 7.4 1

A member company of RBC Capital Markets or one of its affiliates managed or co-managed a public offering of securities forSupportSoft, Inc . in the past 12 months . RBC Dain Rauscher Inc . makes a market in the securities of SupportSoft, Inc . and may actas principal with regard to sales or purchases of this security. The author(s) of this report has received (or will receive)compensation based in part upon the investment banking revenues of RBC Capital Markets (including RBC Dain Rauscher, RBCDominion Securities Inc., and RBC Dominion Securities Corp . or their affiliates) . The author is employed by RBC Dain RauscherInc ., a securities broker-dealer with principal offices located in Minnesota, USA . The author is employed by RBC Dain RauscherInc ., a securities broker-dealer with principal offices located in Minnesota, USA .

NASD/NYSE rules require member firms to assign all rated stocks to one of three rating categories--Buy, Hold/Neutral, orSell--regardless of a firm's own rating categories . Although RBCCM does not consider all stocks that its analysts rate as SectorPerform to be equivalent to a Hold/Neutral rating, for purposes of this ratings distribution disclosure, RBCCM automatically treatsstocks rated Sector Perform as Hold/Neutral .

In the event that this is a compendium report (covers more than six subject companies) RBC Capital Markets (RBC CM) maychoose to provide specific disclosures for the subject companies by reference . To access these disclosures, clients should refer tohttp ://rbc2 .bluematrix .com/bluematrix/Diselosure or send a request to RBC CM Research Publishing, P .O . Box 50, 200 Bay Street,Royal Bank Plaza, 29th Floor, South Tower, Toronto, Ontario M5J 2W7 .Analyst CertificationAll of the views expressed in this report accurately reflect the personal views of the responsible analyst(s) about any and all of thesubject securities or issuers. No part of the compensation of the responsible analyst(s) named herein is, or will be, directly orindirectly, related to the specific recommendations or views expressed by the responsible analyst(s) in this report .Explanation Of RBC Capital Markets Rating SystemDefinitions Of Rating Categorie sAn analyst's sector is the universe of companies for which the analyst provides research coverage . Accordingly, the rating assignedto a particular stock represents the analyst's view of how that stock will perform over the next 12 months relative to the analyst' s


RBC Capital Markets SupportSoft

sector, but does not attempt to provide the analyst's view of how the stock will perform relative to . (i) all companies that mayactually exist in the company's sector, or (ii) any broader market index .Ratings :Top Pick (TP) : Represents analyst's best ideas in Outperform category ; expected to significantly outperform sector over 12 months ;provides best risk-reward ratio ; approximately 10% of analyst's recommendations .Outperform (0) : Expected to materially outperform sector average over 12 months .Sector Perform (SP) : Returns expected to be in line with sector average over 12 months .Underperform (U) : Returns expected to be materially below sector average over 12 months .Risk Qualifiers :Average Risk (Avg) : Volatility and risk expected to be comparable to sector ; average revenue and earnings predictability ; nosignificant cash flow/financing concerns over coming 12-24 months ; and/or fairly liquid .Above Average Risk (AA) : Volatility and risk expected to be above sector ; below average revenue and earnings predictability ; maynot be suitable for a significant class of individual equity investors ; may have negative cash flow ; and/or low market cap or float.Speculative (Spec) : Risk consistent with venture capital ; low public float ; potential balance sheet concerns ; and/or risk of beingdelisted.Our Research Ratings Legend can be viewed athttp ://www.rbccmresearch .com/researchratings .References to a Recommended List in the recommendation history chart may include one or more recommended lists or mode lportfolios maintained by a member company of R13C Capital Markets or one of its affiliates . RBC Capital Markets recommendedlists include the Strategy Focus List and the Fundamental Equity Weightings (FEW) portfolios . RBC Dain Rauscher Inc .recommended lists include the Western Region Focus List (1), the Model Utility Portfolio (2), and the Prime Opportunity List (3)(formerly called the Private Client Selects), Private Client Prime Portfolio (4), a former list called Private Client Portfolio (5), andthe Prime Income List (6) . RL On: Date a security was placed on a recommended list ; RL Off: Date a security was removed from arecommended list .The information contained in this report has been compiled by RBC Capital Markets ("RBC CM") from sourcesbelieved to be reliable, but no representation or warranty, express or implied, is made by Royal Bank of Canada, RBC CM, itsaffiliates or any other person as to its accuracy, completeness or correctness. RBC Capital Markets is a business name used bysubsidiaries of the Royal Bank of Canada including RBC Dominion Securities Inc ., RBC Dominion Securities Corp., RBC DainRauscher Inc ., Royal Bank of Canada Europe Limited and Royal Bank of Canada - Sydney Branch . All opinions and estimatescontained in this report constitute RBC CM's judgement as of the date of this report, are subject to change without notice and areprovided in good faith but without legal responsibility . This report is not an offer to sell or a solicitation of an offer to buy anysecurities . RBC CM and its affiliates may have an investment banking or other relationship with some or all of the issuersmentioned herein and may trade in any of the securities mentioned herein either for their own account or the accounts of theircustomers . Accordingly, the entities constituting RBC CM or their affiliates may at any time have a long or short position in anysuch security or option thereon . Every province in Canada, state in the U .S ., and most countries throughout the world have theirown laws regulating the types of securities and other investment products which may be offered to their residents, as well as theprocess for doing so. As a result, the securities discussed in this report may not be eligible for sale in some jurisdictions . This reportis not, and under no circumstances should be construed as, a solicitation to act as securities broker or dealer in any jurisdiction byany person or company that is not legally permitted to carry on the business of a securities broker or dealer in that jurisdiction . Thismaterial is prepared for general circulation to clients and does not have regard to the particular circumstances or needs of anyspecific person who may read it. To the full extent permitted by law neither R13C CM or any of its affiliates, nor any other person,accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or the information containedherein. No matter contained in this document may be reproduced or copied by any means without the prior consent of RBC CM .The entities comprising RBC Capital Markets are wholly owned subsidiaries of the Royal Bank of Canada and are members of theRBC Financial Group .

Additional information is available on request.To U .S . Residents : This publication has been approved by RBC Dominion Securities Corp . ("RBCDS Corp .") and RBC DainRauscher Inc . ("RBC DRI"), both of which are U.S . registered broker-dealers, which accept responsibility for this report and itsdissemination in the United States . Any U.S . recipient of this report that is not a registered broker-dealer or a bank acting in abroker or dealer capacity and that wishes further information regarding, or to effect any transaction in, any of the securitiesdiscussed in this report, should contact and place orders with RBCDS Corp . or RBC DRI.To Canadian Residents : This publication has been approved by RBC Dominion Securities Inc. Any Canadian recipient of thisreport that is not a Designated Institution in Ontario, an Accredited Investor in British Columbia or Alberta or a SophisticatedPurchaser in Quebec (or similar permitted purchaser in any other province) and that wishes further information regarding, or toeffect any transaction in, any of the securities discussed in this report should contact and place orders with RBC DominionSecurities Inc ., which, without in any way limiting the foregoing, accepts responsibility for this report and its dissemination inCanada .To U .K. Residents : This publication has been approved by Royal Bank of Canada Europe Limited ("RBCEL") which is regulated


RBC CapitaI Markets SupportSoft

by Financial Services Authority ("FSA"), in connection with its distribution in the United Kingdom . This material is tot fordistribution in the United Kingdom to private customers, as defined under the rules of the FSA . RBCEL accepts responsibility forthis report and its dissemination in the United Kingdom .To Persons Receiving This Advice in Australia : This material has been distributed in Australia by Royal Bank of Canada - SydneyBranch (ABN 86 076 940 880) . This material has been prepared for general circulation and does not take into account theobjectives, financial situation or needs of any recipient . Accordingly, any recipient should, before acting on this material, considerthe appropriateness of this material having regard to their objectives, financial situation and needs . If this material relates to theacquisition or possible acquisition of a particular financial product, a recipient in Australia should obtain any relevant disclosuredocument prepared in respect of that product and consider that document before making any decision about whether to acquire theproduct.Copyright ® RBC Dain Rauscher Inc . 2004 - Member SIPC .Copyright © RBC Dominion Securities Inc . 2004 - Member CIPF .Copyright 0 RBC Dominion Securities Corp . 2004 - Member SIPC .Copyright © Royal Bank of Canada Europe Limited 2004 .All rights reserved .

January 21,2004 Page 5

SupportSoft, Inc.Pro Forma booms 0530nont

(dos in lhowands, except per shoo t

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91012 92141 2310; 99)30 RIM 93191 32101 9419.3 471 92149E 9 3414 24104E 2492 2.93E 2424E 2522ERaventpe $8, 765 59.468 $11,113 9 11,816 $11,994 $12,511 $13.532 $ 15,134 515,361 $15 .578 3 16.333 $ 17 ,626 941,160 553271 564.701 876,074

1.1comee 6,587 6,999 8 ,562 9,112 9,893 9,647 10,446 11 .199 11,320 11,576 12,013 13,103 31,260 40,885 48,012 56,620Sarvkes 2.178 2457 2 ,551 2,704 2,401 2,964 3,086 3,935 3,842 4,001 4.320 4 .525 9 ,900 12.358 16.669 19,454

Costal Revenues 1,437 1 ,629 1515 1591 11780 1 .914 1 .506 1,955 2,034 2,516 2,280 2,394 6,172 7215 8,824 9.7998Licensee 55 55 67 92 90 90 90 99 113 116 120 131 289 369 480 568Services 1,372 1,564 1,448 1,499 1 .690 1 .824 1 ,476 1 1856 1 ,921 2 ,001 2,160 2 .263 5 ,883 6,846 8,344 9,232

Gross FroSt 7,328 7,837 9,598 10,225 10,214 10,697 11,966 13,179 13,127 13,461 14,053 15,234 34,988 46,056 55,876 66.276Operating Expenses:

Ams i080n of pcadmaed machrol gy 598 598 385 0 0 0 0 0 0 0 0 0Sales and MarNatag 5,592 5,500 5,741 5,631 5,048 5 .098 5 .913 5 .979 5,913 6,231 8,288 6,558 22,464 22,030 24,990 27,452Researche11d Oevabpment 2.275 2,195 2,228 2,136 2,334 2 ,289 2,195 2,381 2 .350 2.440 2,532 2,644 8,834 9,199 9,972 11,075General and AchirissaIve 1 .339 1 .348 1990 1 .460 1 .425 1 .282 1 .238 1 .480 1,2 1419 1 .470 1 .567 2. 92 7 5 .405 5860 6.51 3

Operating Ineom6 (bus) (2,476 ) (1,804 ) (2461 990 1,407 2,848 2,520 3,339 3 .470 3.367 3,763 4,446 (1,9471 9 .414 15,046 21,235

Anwr8089o0 o1Da6ared Camp (470) (100 ) 0 0 0 0 0 0 0 0 0 0 (578) 0 0 0Bporaetard Other aroma (00e65e( 125 105 283 127 140 91 80 191 200 250 300 350 640 S02 1 , 100 2,900Rotas Tnwnlo 0m) (2,8211 (1,807 ) 37 1,125 1,547 2,139 2 ,700 3,530 3,670 3,617 4,053 4,798 (3,466) 9,915 16,148 24,13 6tnwme Texan (aemra) 2 Q 2 LtII.l 19 112 139 10 942 434 4931 925. 1.1121 3129 1231 7724Not aLmuM (bse) (2,821 ) (1,807) 37 1,302 1,474 2,020 2,561 3 ,365 3,229 3, 183 3 ,575 4 ,221 (3,289) 9,420 14208 18A1 3

50'8 (excluding nanceah charges) ($ 0 .03 ) (50 .06) 50,00 $0.04 58 .54 $ 0.05 $047 50.08 56.07 70.07 5 0 .88 $0. 09 {50,08( 9 0,25 $0 .30 $0.34RoportadrYS ($ 0 .09) (10,08) 90 ,00 $0.85 $0 .04 $0.06 $ 0.07 50,06 $0,07 50,07 30.0 6 $0.09 (50. 12) 3023 50,30 $0.34Fu9y 00LESd Shies Out,mnalrg 32003 32.318 32,643 34,749 34,632 35,793 37,918 42,125 45,125 47,125 47,375 47,825 32 .928 37.592 47,063 48,875

L7efertad Reyeaw 11,976 15,127 16,781 14255 14.865 15 ,0 67 20 .043 20,922Cash Balance (hlhousands ) 26,409 19,094 28.463 30,515 31 ,974 33 ,455 37,406 12141 4MrsutLts Recplvabla 12,097 12,152 14 ,262 7,895 12465 11,412 14,234 12 .421350 124 116 115 59 94 61 95 74

Ms Ins an R9 .04 9

License % aflauenre 752% 73.9% 77.0% 77.1% 80 .0 % 785% 77.2% 74.0% 74.7% 74.3% 73 .5% 74.3% 75,9% 76.7% 74 .2% 744%M0bbnance&Servka%olrunonuo 24 ,8% 20.1% 23 .0% 229 % 20 .0% 23,5% 22.8% 265% 25.3% 25.7% 26 .5% 25.7% 241 1% 23 3 % 25 .6% 25.6%Gross Margin 83 .6% 82.8% 864% 86.5% 85 .2% 84 .8% 88.4 % 87.1% 88.6% 59.4116 84 .0 % 86.4% 05.0% 66.5% 864% 87.1 %

Lloanaas 99 .0% 98 .1% 992% 99,0% 99,1 % 99,1% 99.1% 99.1% 990% 99.014 99 .0% 99,0% 99.1% 99.1% 99 .0% 99 .0%Maintenance e dSeivicea 37 .0% 3816% 432% 44.5% 29 .8% 38.5% 62,2% 5 18% 50.0% 50.0% 50.0% 50.0% 40.6% 44.7% 50, 0% 525%

Sales and Marlrefng 6 18% 58 .1% $1 .7 % 47.7% 42, 1% 40.4% 43.7% 39.5% 390% 40.0% 385% 37,2% 54.6 . 41.4% 38. 0% 38 .1 %R000uchand D.yebpment 26,0% 232% 20 .0% 16,1% 19.5% 18.2% 1621% 15,7% 155% 15.7% 15 .5% 15.0% 21. 5% 17,3 % 15.4% 14 .6%GeMralantAdlM16 traOve 15 .3% 142% 13,4% 12 .4% 11,9% 1010% 9.1 % 9.8% 92% 9 .1% 9.0% 910% 13.7% 10. 1% 9.1': 8 .6 %Opala8rpMer9h -28 .2% -19 .1% -22% 8 .4% 11.7% 162% 18.4 8. 22,1% 229% 21 ,5% 23 .0% 252% -0.7% 177% 23.3% 27 .9 %Other Incoma (E>peroe) 15% 2,0% 2 .0% 25% 13% 2.0% 2,0% 20% 15% 2 .0 % 2. 3% 2.5% 1.6% 0.9% 1.7% 3 .8 %Plsdxlrronr (loas) -02 2% -19 .1% 03% 9 .5% 12.9% 17.0% 20,05. 23.3% 24,2.4. 23 .2% 241 9% 27.2% .SA% 19.5% 25.0% 31,7 %Tax Rate 0.0% 0 .0% 0 .0% -15,7% 4.7% 5.6% 5. 1% 4.7% 12.0% 12 .0% 12. 0% 12.0% 5,1% 5.0% 12,0% 325 %Net Income (km) -322% -19 .1% 0.3% 11 .0% 12.3% 16 .0% 18.9% 22.2% 21 .3% 20 .4% 21.9% 23 .9% -8.0% 17.7 % 22494 21 .6 %% Changes 4uarterfQuartarRevenues 3.4% 8.0 % 17 .4 % 8,3% 15% 5.1% 7.3% 11,8% 0,2% 2 .7% 4.8% 7.9 % 3514 29% 21% 1854,

Licences 0.8% 8.3% 223% 6.4% 5.3% 0.6% 8.3% 72% 1 .1% 2 ,3 9. 3,8% 9 .1% 38% 31% 17% 18 %lAalnfananCa Sid Service 122% 133% 34% 65% -112% 29 .4% 4.1% 27 .5% -2A% 42 7. 8.0% 4 .7 % 254 25% 35% 17%

Reamies (ri5f 1 .9% 50.7% 57,3% 394% 36,8% 33 .2% 21 .6% 20 .1% 264% 235% 20.7% 16 .9 % NM NM NM N MLic4luoa (Y!Y) 1 .4% 57.8% 58.9% 394% 45,8% 37 .8% 220% 229% 18.0% 20.0% 15,0% 17 .0% NM NM NM N MMaNESrmne4 ON 3srv6e3 (YIY) 3.2% 33,6•,6 27.746 39.3% 10.2% 20 .1% 21 10% 45 .5% 60.7 % 35.0% 40.0% 15 .0% NM NM NM N MGassProfh 6.9% 8,5% 22.5% 6.5% -0.1% 4 .7% 11 .9% 10 .1% -0.4% 2.5% 4A% 6 .4 % 48% 32% 21% 19%

Saba and Marketi ng -2.9% -13% 4A% -1 .9% -104% 1 .0% 16 .0 % 1 .1% -1 .1% 5A% 0.9% 4 .3 % - 18% -2% 13% 10%Research and OSYabprunm - 183% -34% 1,5% -41% 9.3% -1 .9% -4 .1% 8 .5 % -1 .3% 4.1% 3.5% 4 .4% -30% 4% 8% 11%GoneralandAthNnia0etlye -5.4% 0.7% 105% -20% 4-4% -11 .4% -1 .9% 195% S,8% 1.6% 3.7% 75% -0% -4% 9% 11%Opsrallglrmu+9(4.a) 33.7% -27.1% -86.4% .505 .7% 41 .0% 45,6% 27 .9% 27 .4% 3 .9 % -3.0% 11 .8% 182% -91 % - 584% 8D% 41%Pretax lm-am(1083) 335% -35,9% -102.0% 28405% 37.5% 383% 26,2% 30 .7% 4,0% - 1.4% 123% 18 .0 % -86% -386% 63% 49%Net Income (loasl 435% 45954. -1024% 34189% 132% 37 ,0% 26 .8% 314 % -0.0 54 -1.4% 128% 16 .0% -57% 386% 51,12 16%

Comoros P, Steels

P839ucltain2 Charge Includes taxbereSt.R9G Capital Markets

(415) 633.850121-Jan-04

Plaintiffs ' Motion for Class CertificationKindall Declaration

EXHIBIT L

citigroupiSmith Barney

See page 16 for Analyst Certification and Important Disclosures

Initiating Coverage 0

SupportSoft I nc (SPRT) t `BS,Y 1Speculative (S)

SPRT: Automating Support Mkt Cap: $322 rail .

July 13 , 2004 SUMMARY

>- Initiating on SupportSoft with IS (13uylSpeculative) rating and $11 price targe t

> Through a challenging period for IT spending, company management and th eSDFrWARE product portfolio have been nimble and adaptable enough to create an enviabl e

track record with 11 quarters of consecutive growthMark Verbeck > The company's "Real Time Support Automation" software and messag e+1 (415) 951-1839 resonate with its broadband, enterprise and outsourcer customers that seek t omark. [email protected] reduce support costs and increase satisfaction level s

Alan Tikwart > The company has a good head start in the corporate market, includin g+1-415-951-1804 relationships with the "smart-money" outsourcers, yet our analysis suggests

that this market is becoming increasingly competetiv e

> The company faces challenges with the broadband mega-deals (and associate dcustomer concentration) fading, likely futher eroding the subscription revenu eit has had difficulty growing, and requiring higher spending levels .

FUNDAMENTALS SHARE DATA RECOMMENDATIO NPIE (12I04E).. .. . . . . . . . . . . .... . . .. . . . . . ...

PIE (120 E).... . . . . . . . . .. .... . . . . . . . . . ...

TEV/EBITDA (12/04E) .. .. . . . . . . . . . ...

TEV/EBITDA (12105E) . . .. . . . . . . . . . ...

Book Value/Share (12/04E) . . . . . ...

Price/6eok Value . . . . .. .. . . . . . . . . . . . . . ...

22.4x Price (7113104) . . . . ... . . .. . . .. .... . . .30.5x 52-Week Range . . .... . .

NA

NA

NA

NA

Revenue (12/04E) . .... . . . . . .. $66.1 mil .

Proj . Long-Term EPS Growth . . .... 20%

ROE (12104E) . .. .... . ... . . . . . .. . . .. . . ... . NALong-Term Debt to Capital(a) .. .... NA

(a) Data as of most recent quarter

Shares Outstanding(a) .... ... . . . .

Dlv(E) (Cur/Prey) . .. . . . . . . .... ... . . . .

FY ends 10 2R 3Q 40 Full Yea r12103A Actual $0.04A $0.06A $0.06A $0.09A $0.25A12/04E Current $0.09E $0.09E $0.08E $0.09E $0.34 E

Previous NA NA NA NA NA12105E Current $0.06E $0.06E $0 .06E $0.07E $0.25E

Previous NA NA NA NA N A12106E Current NA NA NA NA $0.29E

Previous NA NA NA NA NAFirst Call Consensus EPS :12104E $0.34 ;12/05E NA, 12106E NA

Expected Total Return . . . . . . .. . . .... . . . 44.2%

EARNINGS PER SHAR E

Smith Barney is a division of Citigroup Global Markets Inc. (the "Firm"), which does and seeks to do business with companiescovered in its research reports . As a result, investors should be aware that the Firm may have a conflict of interest that couldaffect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision .

$7.63 Rating (Cur/Prev) .. . . . . ... .. . . . . .. . . . . . .. IS/NA$16.47-$6.45 Target Price (Cur/Prey). .. $11 .00/NA

42.2 mil . Expected Share Price Return ... .. . 44 .2%$0.001NA Expected Dividend Yield . . . . . . . ...... . 0 .0%

W

I

U)

Citigroup Global Markets

citigroupASNIN

iSmith Barney

01 I'm I F1 1rtr. ffe?".COMPANY DESCRIPTIO NSupportSoft is a leading provider of software, collectively known as its "Real Time ServiceManagement" offering, that aids in the diagnosis and repair of software configurationproblems on end-point devices like PC's and FDA's . This capability reduces the total cost ofsupport for these devices by decreasing the number of support calls and reducing theoccurrence of support staff desk-side visits . The company's offerings also include softwarethat enables broadband customers to establish their connection without on-site support.

9 INVESTMENT THESISSupportSoft has nimbly navigated a treacherous landscape, surviving both the dot-comimplosion (the company was formerly Support.com) and the demise of the independentbroadband provider (Excite @ Home was an early large customer) and emerged with amany-faceted product footprint and a diverse addressable market . We don't believe the landmines have disappeared, but the company's proven execution and significant productportfolio should help it steer its way through .

SupportSoft is well positioned to continue its strong position in the broadbandprovider market . The company enjoys a strong broadband presence, particularly withUnited States cable providers . SupportSoft can leverage these relationships into an -expanded footprint and new customers, particularly outside the U.S. With only onecompetitor of note, Motive Communications, this market is fairly attractive andunpenetrated . Our cable team notes that the cable providers are stepping up efforts todecrease back-office costs and promote self-installs for their broadband business, twotrends that should benefit SupportSoft -

) The company is expanding its efforts to address the enterprise market . While thecompany has always had enterprise functionality, it is adding capabilities to betteraddress the market, including support for more platforms (PDA and wireless) and newfunctionality like voice-based assistance . In this market, we believe outsourcers likeAccenture and CSC are the smart money because support costs and customer satisfactionare key to their business models and therefore, we view their working with SupportSoftas a leading indicator of the SupportSoft opportunity in this market .

SupportSoft's target markets represent a large opportunity . The broadband market isestimated to be growing close to 20% annually in the U.S . and customer self-installs aregrowing as a percentage of the total with providers offering incentives for customers todo the self-install. The economics are compelling as our cable analyst, Niraj Gupta,estimates that a truck-roll for broadband installation costs the provider $100 . We estimatethat the base opportunity here is approximately a $75 million opportunity today, growingto $150 million in 2009 . In addition, if SupportSoft extends its solution (which webelieve it will) to address new requirements such as interactive TV and voice-over-IPtelephony, there should be additional upside. As there is limited competition in thismarket, SupportSoft has the opportunity to capture a significant percentage of thisrevenue. To quantify the corporate opportunity we based on data from IDC, we estimatethe total enterprise opportunity to be 180 million PC's worldwide in use at medium sizedor better organizations . Using a $10 license opportunity per unit gives us a $1 .8 billionopportunity. As we note in our report, there are a significant number of companieslooking to capitalize on this opportunity, but we believe SupportSoft is well positioned tocompete in this market .

>- Nascent market and valuation provide protection from software malaise. Despite therecent difficulties in the enterprise software market, we have confidence in ourrecommendation on SupportSoft because it has more revenue visibility than many othersoftware companies as a result of its ratable revenue, because the broadband providershave a sense of urgency about addressing their costs and because the nascent enterprise

2

citigroupSmith Barney

market is quite small in relation to its potential, offering protection from macro factors . Inaddition, recent weakness in the stock makes the valuation more compelling .

> We believe it is important to understand the company does have some challenges .The enterprise market is significantly more competitive than the broadband market .While SupportSoft has innovative product offerings for this enterprise market, it facesmore competitors than in the broadband market, including some that already have robustsales channels . In our opinion, SupportSoft will need to invest more in sales andmarketing in the near-term to adequately address this opportunity.Significant customer concentration must be managed . The company has done anexemplary job managing a very concentrated customer base . Nonetheless, this customer

concentration makes it more difficult for the company to predict its results . We expectthat as the company grows and the large deals become fewer, this will be less of an issue .

The subscription revenue model is unproven for SupportSoft. After initial success in

1999 and 2000 generating sequential increases in subscription revenue, the company hasnot been able to consistently deliver increases in its subscription revenue. While this

merely puts the company on par with the majority of software companies, it does exposethem more to the vagaries of the back-end loaded software license model.

We are initiating coverage of SupportSoft with a Buy/Speculative risk (IS) rating, and a $11price target.

MODEL ASSUMPTIONS AND ESTIMATE SWe expect that SupportSoft should be able to substantially exceed our estimated softwareindustry growth rate of 8%-10% during our 5 year forecast period . While the larger systemsmanagement market, of which we consider SupportSoft a member, has challenges withdeclining mainframe sales and high penetration of core functionality, SupportSoftdifferentiates itself from the group by addressing the management of end-points like PCs andPDAs. The management of end-points benefits from the move to distributed systems and haslittle penetration . Indeed, in the competitive section, we note that many of the traditionalsystems management vendors are looking to this area as an expansion opportunity.

For the company's 2Q04, ending June 30, 2004, we currently forecast revenues of $16 .4million (up 30% yfy) and EPS of $0 .09, inline with the company's guidance of $16-16 .4million in revenue and $0 .08-$0.09 EPS . Our revenue estimates for FY04, FY05, and FY06are $66 .1 million, $71 .5 million, and 84.1 million. The 7% revenue ramp in FY05 reflectsour conservative view on the company's ability to replace the revenue from an eight-figuredeal that it signed in Q3 FY03 and is recognizing over five quarters . Our revenue growthassumption rebounds in FY06. Our EPS estimates for FY04, FY05 and FY06 are $0.34,$0 .25 and $0 .29 . The decrease in EPS from FY04 to FY05 reflects our assumption that thecompany will be reporting taxes at a normalized tax rate in FY05 versus the 11 % tax ratebeing used this year. This implies the company will record a one-time gain in December2004 as it reverses the reserve on the deferred tax asset attributable to its remaining NOLs,which we estimate at $24 .5 million after Q104 . The company guided FY2004 revenue andEPS to $64-$68 million and $0.32-$0 .34 respectively.

VALUATIONFor SupportSoft , we used two primary methods to derive our valuation . The fi rst is

discounted cash flow (DCF) analysis . For our DCFs, we fully model the company's income

statements, balance sheets ;and cash flows to a terminal year , in excess of 20 years out, todetermine free cash flow in each of the years . At that point, we believe the company will beat terminal cash flow growth rates approximati ng GDP growth rates (generally 3%)_ For our

DCF analysis, we use a risk free rate of 4.5% and an equity risk premium of 5%. Our secondvaluation method is a PIE analysis based on a five-year forward business model , where weforecast a five-year revenue compounded annual growth rate (CAGR), normalized opera ti ng

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citigrou pSmith Barney

margins, and an expected PIE multiple in order to derive a valuation normalized for what webelieve is the company's mature operating model .

Our $11 price target for SupportSoft is based on both our DCF and PIE-basedmethodologies . To estimate beta , we analyzed the histo rical beta of a basket of softwarestocks for an eight-year peri od , excluding a period from 1999 to 2000, which we define as"The Bubble." This analysis suggested that a Beta of 2.0 was a reasonable value to use as aforward- looking number for many of our software stocks . Companies that are more mature,having slower growth rates and/or a higher percentage of recurring revenue , would have aBeta less than this typical number, For our DCF analysis, we employ a beta of 2.0, a terminalfree cash flow (FCF) multiple of 8 .7x, and a weighted average cost of capital (WACC) of14 .5%. This analysis suggests a value of $11 per share .

For our P113- based methodology, we first projected net income five years forward based on a5-year revenue (CAGR) of 20 %, a normalized operating margin of 25%, and a tax rate of32% . The 25% operating margin is typical for our software companies with a low percentageof professional services. We then applied a mul ti ple of 24x to this net income projection anddiscounted this number to the present, which suggests a stock price of $10 .21 . The 24xmultiple represents the L4x premium to S&P 500 market multiple . For our I .4x marketpremium, we compared a basket of software stocks' multiple to the S&P 500 multiple overan eight year period , excluding a period from 1999 to 2000 which we define as "TheBubble." Our conclusion from this analysis is that because of what we believe are at tractiveaspects of the software company business model , software companies trade at a 1 .4xpremium to the S&P 500 multiple. As our PE based valuation is based on full tax rates anddoesn ' t include an allowance for lower tax payments as a result of loss carryforwards, weadd $0 .55 to our price target to allow for the present value of the $25 mi llion deferred taxasset, giving a total price target of $11 .

Our price target represents a PIE of 32x 2004 earnings , 44x fully taxed 2005 earnings and anEN to sales of 3 .Ox and 2.7x 2004 and 2005 sales . As with m any companies with large cashbalances relative to market-cap (over of SupportSoft market cap is cash) , the PIE ratio c anlook quite high . If instead we look at EV/NOPAT, our target EV is 33x our 2005 number,signific an tly lower than the 44x PIE .

RISKSWe rate SupportSoft shares Speculative risk due to high share price volatility, mid capmarket capitalization, and significant customer concentration .

Risks to our price target for SupportSoft include :

• The company frequently has customers that account for more than 10% of itsrevenues . If the company were unable to close a sale of this magnitude in a givenquarter it could have a significant negative impact on the stock . We feel this risk ismitigated, however, as a significant portion of its revenue is not in the form ofperpetual license sales that are recognized as revenue in the quarter sold.

• The company gets a significant portion of its revenue from the broadband industry,particularly cable providers . As such, SupportSoft is exposed to the fortunes of thisindustry as well. We note that :there has been significant M&A activity in thisindustry, which can create additional exposure as well as opportunity .

• The company's target market on the corporate side has seen an increasing amount ofinterest from some larger and better-capitalized players, including Microsoft, HPand Symantec . Ifany of these players are effective at developing solutions, their

citlgroup" `Smith Barney

broad distribution channels and large product footprints could make it difficult forSupportSoft to expand this market .

Software companies traditionally have back-end loaded quarters, thus giving verylittle visibility to license revenues .

The company has a poor track record of maintaining and growing its subscriptionrevenue . To the extent a decline in this revenue stream decreases the company'svisibility, investors may not be willing to pay the same multiple for the company .

In the most recent quarter, the company added only 3 new customers . If thecompany is unable to increase the number of customers it is adding, it will likely bedifficult to continue to grow its revenue.

If the impact on the company from any of these factors proves to be greater than weanticipate, the stock could materially underperform our target .

INDUSTRYIt is difficult to size the market for support automation because of the fragmented market andmultitude of solutions including a lot of support still being provided with a manual approach .

To analyze the market opportunity for SupportSoft, we looked at the broadband serviceprovider market and the information, technology support market as the two demand driversfor the company's products. Based on our analysis, we believe the company can grow at20% over the next 5 years. .

BROADBAND SERVICE PROVIDER AND OEMS

While their businesses are quite different, broadband service providers and OEMs face asimilar challenge - managing the unmanaged . With no control over the software orconfiguration changes their customers are making , these organizations nonetheless oftenreceive the support calls to repair the damage . We found in our due diligence , this kind ofcomplexity was often the most important driver of SupportSoft adoption . For thesecompanies, customer support is business critical and thus, they have been willing to adoptsupport automation software even in a challenging spending envi ronment.

Since its inception, the broadband service providers have had a challenging business model,numerous competitors, falling prices and significant technology complexity. These providersneed solutions to help decrease the cost of installing and servicing their customers .Broadband subscribers growth , chu rn caused by the en trance of new options, andinternational expansion will drive th is business for Suppo rtSoft. In addition, SupportSoftcontinues to expand its product offering for these customers with func ti onality live assist,knowledge base capabilities , and more support channels . One challenge in this m arket is ourbelief that there is unit price pressure on solutions , and that new func ti onality is largelymaintaining pricing rather than expanding it. With the high -end of the US market seeminglyspoken for, US growth should largely mirror household broadband subsc riber growth, which

our internet analyst , Lanny Baker, es ti mates at 32% in 2004 and a 5-year CAGR of 17% .Additional momentum for broadband will be delivered by international markets, which arelargely unpenetrated . For this reason we peg the growth rate here at about 20% over the next5 years.

Aft

c tigroup 'Smith Barney

Broadband Subscriber Growth

0 120 0%70 . - .

60 .0 140 .4%

50 .0 •80.0%

4 0 .0

60.0°/O

30 .0

40.0%

20 .0

20 .0%10 .0

0 0%0 .0 .

2001 2002 2003 2004E 2005E 2006E 2007E 2008E

US Broadband Households•

~YIY Growth (REght Axfs}

s •

•

s

1011%I

Source: Smith Barney Estimates and Company Reports

INFORMATION TECHNOLOGY SUPPORT

While not as costly as sending a truck out to a customer's premises, sending an IT supportperson to visit an employees desk is still quite expensive . While support automation in theorganization has cost saving and productivity improving value, it is not business critical formany organizations we have spoken to, and thus we believe an improving IT spendingenvironment would be necessary to make dollars widely available for this type of solution .We found it interesting that the outsourcing firms like Accenture and ADP are adopting thistechnology when they are outsourcing the support of other firms IT infrastructure . In thiscase, productivity and customer satisfaction are business critical for the outsourcer . Webelieve this is a leading indicator of the value of the solution that will translate into broaderadoption with more plentiful IT spending . With a very under penetrated market, the growthpotential here could be quite large, yet we believe this market will be quite competitive, aswe discuss later. We believe with proper execution, SupportSoft could grow this business ata 20%-25%a CAGR for the next 5 years .

COMPANYSupportSoft, based in Redwood City, CA provides software that helps manage and evenautomate the resolution of software based technology issues for computers and computingdevices. The company's solutions have resonated with the cable broadband industry,outsourcers of corporate information technology and internal information technologydepartments that are seeking to minimize the expense associated with managing anincreasingly complex software landscape across all manner of devices .

Founded in 1997, the company went public in July 2000 at $14 per share . Despite an earlystumble, the company has demonstrated strong execution, meeting or exceeding its initial

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targets for cash-flow breakeven and profitability. The company has the enviable position ofgrowing license revenue sequentially for 11 quarters as of Q104, a feat achieved by onlythree other software companies in our screen of the software companies in the Russell 3000software companies .

TECHNOLOGY AND SOLUTION S

SupportSoft offers suites of products to address service and support automation for variousend-point computing devices like the PC, and the PDA . The SupportSoft Web site contains acomplete product and technology overview. In an attempt to distill this information intosomething more meaningful for investors, we look at the SupportSoft offerings by the endmarkets they address .

TECHNOLOGY

SupportSoft's products are built around the concept of Real-Time ServiceManagement (RTSM), which strives to reduce human interaction by proactively assessingand addressing problems/ situations as they arise, resulting in service and supportautomation . RTSM is built around the company's DNATM Architecture, which provides arecorded record of all changes, thus providing a consistent and reversible environment foraddressing support related issues as they happen . SupportSoft's products can be deployedas a stand-alone product or as an integrated suite . The products work together to promoteautomation of support services and support processes across support channels, thus requiringless human interaction and decreased human support interaction .

The company uses their SmartIssue Technology to collect personal informationabout the user, the system and the current incident . The Smartlssue Technology then relaysthis information to the support tools or personnel that are best equipped to handle thesituation. By using the internet and a unified, transactional metadata layer, SupportSoft isable to integrate their solution with any support provider. The Smartlssue technology iscomplemented by the company's DNA ProbeTM, which immediately identifies the users'software applications and operating system components and tracks them over a period oftime, The DNA Probe- technology also identifies all of the network settings, which helpssupport organizations provide a more personalized support solution .

SupportSoft uses their patented Software Vaults to effectively deliver solutionsupon diagnosis. The Software Vaults contain a large number of files and support actions,residing locally or in a network environment, which are made available to help address theproblem. The Software Vaults are unique in that they will address problems in a logicalsequence, providing the necessary replacement files in a timely fashion, thus allowing theservers to support thousands of users .

Other SupportSoft technologies include the StnartResult System, which is acontext sensitive platform that leverages the company's Smartlssue information withsolution retrieval technology in order to automate problem response resolution for "how to "

and "it doesn't work" questions. The SmartResult"" System provides the right answers bygathering and analyzing context-sensitive information and comparing it to defined datastructures, which in turn provides real-time solutions

SupportActions'a'' is a too] for quickly resolving support problems by enabling byproviding a point and click interface that supports multiple languages, including Java, Perl,and Visual Basic . SupportActionsm can be used for Virus Updates or patches acrossmultiple desktops .

SupportTdggers'h is a real-time support too] that enables the problem resolutionprocess to begin before the problem has been identified by the user. SupportTriggers areevents that reside within the application that provide an automatic support response .

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SOLUTIONSBROADBAND PROVIDER S

This is a large market for the company, regularly accounting for approximately 50% of thecompany's revenue . The company claims six of the seven largest broadband companies ascustomer and these customers deliver multi-million dollar transactions .

SUPPORT AUTOMATION

Because there is no standard PC configuration, broadband providers face tremendouschallenges in making sure their customers' computers can get on-line. This diverse,unmanaged environment is well suited to an automated support solution, and this is whereSupportSoft first gained traction with the broadband providers . By understanding theconfiguration change that may have caused a customer's connection problem, and enablingeither faster or completely automated resolution of the problem, SupportSoft reduces supportcosts .

AUTOMATED INSTALLATIO N

This is a newer addition to the company's product line . Formerly, it partnered withBroadJump, which was acquired by Motive, for this capability. Since developing its ownsolution, SupportSoft has been aggressively working to replace competitors in its supporttools installed base with its SmartAccess'M offering . In the early days of broadband in thehome, it was not unusual to have several trucks visit your house to install equipment and testthe connection . With continuing price pressure and no more equity dollars to fund that kindof madness, cost effective, automated installation is key to the provider's business model .

ADDITIONAL OPPORTUNITIES

The company is developing and marketing new products which it hopes will further itspenetration of the broadband provider wallet. Some of these initiatives include HomeNetT'"(a home networking installation product) and a development effort with Scientific Atlantic toembed support automation software in its digital video set-top box .

CORPORAT E ENTERPRISE

SUPPORT AUTOMATIO N

While based on the same underlying technology as the broadband support automationproducts, the corporate products leverage the more extensive configuration information andgreater control over the environment . Here there is more emphasis on resolving problemsbefore they occur with functionality like auto release and resolve which can also help withvirus remediation. Other functionality aids IT operations with auto discovery and meteringfunctionality, problem tracking and a knowledgebase .

ADDITIONAL OPPORTUNITIESWhile we believe the company's products are largely being used to manage PC's, we believethere will be a burgeoning opportunity to manage the prolifera tion of PDAs, smart phones,and wireless devices .

OEM

Somewhere between the enterprise and the broadband provider is the OEM that wants toimprove the customer service on its products . Here companies like IBM utilize theSupportSoft products to better diagnose and repair what-they don't control, namely thesoftware conflicts and errors that can cause the equipment to not perform as intended. Webelieve it is unlikely that new products will be developed for this market .

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BUSINESS MODELSupportSoft employs a traditional enterprise license, maintenance and services model, withone twist. In addition to selling a perpetual license, the company offers a variety of termoptions and payments plans to its customers . The term revenue has the advantage of givingthe company better visibility to its future revenues than most software companies . Themajority of the company's revenue comes from direct sales to end-users . Because thebroadband providers can enter into large contracts with the company, the company oftenexperiences significant customer concentration in its quarters . The company has little OEMproducts so license revenues run between 98% and 99% gross margin . Maintenancecontracts, which typically run 18% of the initial license annually, cover both support andupgrade rights . Maintenance is not charged separately on the subscription contracts becauseit is bundled into the subscription price . The company offers training and implementationservices as well.

As the company' s solutions have become more proven, and it expands its geographicfootprint and sells into the enterprise more frequently, the contribution from ratable licenserevenue has continued to fall: We view this as a natural evolution for the company. We notethat in Q4 of 2003 there was a break in this trend caused by the first of a series of 5payments to be made under a large contract, yet as we took at Q12004, the trend continues,and unless a new significant customer is signed to replace the revenue stream that ends in Q42004 there will be a significant fall off in the following quarter.

DISTRIBUTIONThe majority of license revenue is . delivered by SupportSoft's 24 quota carrying sales reps(as of Q1, 2004), but it also counts on channel relationships to help support its license

business . In recent quarters 10 -30% of SupportSoft's license revenues have come from itschannel . Channel partners include managed service providers like Accenture, CSC and IBMGlobal Services and other vendors that incorporate the SupportSoft product into their own,like Siebel which incorporates SupportSoft into its Employee Relationship ManagementProduct and IBM which has installed the software on its ThinkPad, NetVista and Netfinitylines.

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Channel Contribution

CUSTOMERS

We estimate the company has about 200 customers . Approximately 50% of its revenuecomes from its broadband provider customers, the majority of which are cable broadbandproviders, while the remainder comes from IT departments of large organizations, managedservice providers and OEMs . We estimate that OEMs account for less than 5% of revenues .

For a little more color, we analyzed the company's 2003 10K, which lists 45 customers thatgenerated revenue or orders for more than $100,000 in 2002 and 2003, Of these 1I arebroadband customers and the balance is enterprises and managed service providers . It isinteresting to note that if we apply the quarterly revenue splits over this time period thebroadband customers generated $40.9 million, $3 .7 million per listed customer, while theother customers contributed $53 .6 million, $1 .6 million per listed customer. Admittedly theactual numbers here are suspect as a result of timing issues and not accounting for smallercustomers among other things . Nevertheless, we believe the magnitude of the difference isilluminating.

The company has limited international exposure as it is just beginning to build up itscapabilities . In the most recent quarters, international revenue has contributed about 10% ofsales .

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Source: Smith tiamey and Company Filings

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Selected Customer Lis tEnterprise3M CompanyADP, Inc.Bank of America CorporationBritish Teleconumuiications pieCisco Systems, Inc.General Electric CompanyLockheed Martin CorporationMerrill LynchSchlumberger tnnoes, Inc.Siebel Systems, Inc.The Procter & (ramble CompanyThomson Financial Inc.Washington Mutual, Inc.

Source: Smith Barney and Company Filings

Outsourcers and OEMAccenture Limited

Affiliated Computer Services, Inc .

Automated Systems (W limitedCap Gemini Ernst & Young UK plcCG1 Group, Inc.CompuCom Systems, Inc.Computer Sciences CorporationEagle AllianceHewlett-Packard CompanyIBM CorporationPerot Systems Corporation

BroadbandAelphia Comnainications CorporationBelgacom NVBellSouth CorporationCharter Comnnnications, Inc .Conrast Corporation

Cox Communications, Inc .SBC Communications, Inc .

TeliaSonera, ABTime Warner CableTiscali S.p.A.UPC Nederlan d

COMPETITIONIn the broadband and OEM markets, SupportSoft faces little competition . We view Motiveas the primary competitor in these markets . It seems that these two competitors have largelysewn up the US market with Motive having the advantage with the DSL providers andSupportSoft having a commanding lead with the cable providers . Other than the periodictakeaway, that would likely be quite price competitive, we believe the opportunity in thismarket is one of footprint expansion .

The corporate market is quite a different story . The approaches to support automation rangefrom the brutish to the sophisticated and there are often a range of options that can be takento address the pain point a particular organization is experiencing . Beyond its core supportautomation technology, SupportSoft has extended its functionality with offerings that arecore to other vendors. Examples include asset discovery from Peregrine and MRO software,knowledge management from Primus Knowledge Systems and software patch managementfrom Marimba and Microsoft. In addition, while we believe SupportSoft's sophisticatedapproach to system recovery is vastly better than the brutish full system restore offered by asolution like Symantec's Ghost product, it doesn't prevent them from competing in themarketplace . To make the competitive landscape more challenging, a number of vendorshave recently been showing interest in directly competing in support automation . We believethat SupportSoft might also face Alteris, Microsoft, Symantec, Veritas, Motive, or Quest incompetitive situations, depending on the specifics of how the customer defines its problem .In the corporate market, we also believe that the decision to not prioritize support automationcould be the most challenging competition in a tight IT spending environment .

We can't ignore Microsoft's activities in and around this space . Windows XP, while stillgaining traction in the corporate market, offers a number of significant enhancements toautomate support activities including enhanced remote control functionality and a renewedfocus on patch management in order to stem the virus problem. XP SP2 is to include morepatch management functionality and the company has released an improved version of SMS,its software distribution product . In addition, it has expanded the capabilities of SUS(Software Update Server), its free distribution product to cover a larger problem set.

FINANCIALSOur revenue estimates for FY04, FY05, and FY06 are $66.1 million, $71 .5 million, and 84.1million. The 7% revenue ramp in FY05 reflects our conservative view on the company'sability to replace the revenue from an eight -figure deal that it signed in Q3 FY03 and is

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recognizing over five quarters . Our revenue growth assumption rebounds in FY06. Our EPSestimates for FY04, FY05 and FY06 are $0.34, $0 .25 and $0.29 . The decrease in EPS fromFY04 to FY05 reflects our assumption that the company will be reporting taxes at anormalized tax rate in FY05 versus the 1 I% tax rate being used this year. This implies thecompany will record a one-time gain in December 2004 as it reverses the reserve on thedeferred tax asset attributable to its remaining NOLs, which we estimate at $24 .5 millionafter Q104 .

We believe the company is running quite lean and will have difficulty improving operatingmargins in the near term . Sales headcount has not kept pace with the company's growth andwill need to expand in order to continue to grow and as the average deal size declines withhigher penetration of the corporate market . Research and development spending will need toincrease as the company competes against larger and better funded enterprises in thecorporate market .

CASH FLOW AND BALANCE SHEET

As with most software companies, cash flow modestly exceeds earnings as working capitalliabilities grow slightly faster than working capital assets and there is very little capitalinvested in the business . In addition, NOL's provided $20 million of cash flow improvementon GAAP results in 2005 and beyond. Our estimates for free cash flow in 2004-2006 are$16 .7 million, $14.7 million and $17 .6 million.

SupportSoft has $126 million in cash, and no debt .

RECENT RESULT S

In its fiscal first quarter of 2004 SupportSoft posted $15 .7 million of revenue, beatingguidance of $14.8 trillion to $15 .2 million . Revenue was up 31% year-over-year and thecompany continued its streak of sequential revenue gains, up nearly 4% sequentially. Off alarge increase in Q4 FY03, ratable licenses were off nearly 30% sequentially. EPS came in at$0 .09 versus consensus of $0 .07.

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Source : Smith Barney Estimates and Company Reports

citigroup 'iSmith Barney

FINANCIAL METRICS

There are several financial metrics that we believe are significant for investors to payattention to:

> DSO's have been erratic as a result of the timing of large payments and changes ininternational revenues . While we believe 64 days is lower than expected, we would alsoprefer not to see them spike back up to the I00+ range of 2002 .

> Customer concentration remains a concern with large deals being essential to makingeach quarters numbers. While ASP's have fallen as a larger number of small deals fill inthe bottom, the elephant deal remains essential . As the company continues to grow, theoccurrence of 10%-- customers should diminish .

> International business is largely an untapped market for the company, averaging less than10% of revenues over the last 4 quarters .

> Sales Productivity is likely unsustainably high, few companies have $2 million annualquotas, much less a team that is averaging this. In order to continue to grow, it is likelythis productivity will fall as the company expands the salesforce .

Financial Metricsa~-0_ J _n~d~~Se`~ 2De~02 Nlar-0 .rdn"~=b3.Se ~-03~ Fec"="0 , Af~?r:04 .

DSOs 124 116 116 59 94 81 95 74 64

# Transactions 21 1.5 25 25 24 25 18 30 26

Thereof Repeat 10 10 16 15 17 17 12 12 23

$5M+ Bookings 2 2

10% Customers 1 2 1 2 3 1 2 2 2

% Broadband 45% 25% 55% 37% 27% 66% 40% 47% 40%

% International 5% 16% 19% 5% 7% 8% 13 %

Headcount 150 156 151 151 151 151 154 170 182

% Channel 24% 14% 16% 24% 33% 14% 11% 27% 38%

S&M per Rep(k) 207 196 205 217 194 204 257 239 260

Source: Smith Barney Estimates and Company Report s. .x

CORPORATE GOVERNANC EWe believe SupportSoft is one of the more exemplary companies in the software industry onthe issue of corporate governance, especially for its size . Some of the factors that we point toin support of this conclusion include :

>- Majority of board members are independen t

>- Company refrained from repricing options when the stock fell substantially from its post-IPO levels

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W-11MIF131gawME=In 2002 when executive loans became a hot issue, the company moved to quickly havethese loans repaid

Option grants appear to be reasonable given the early stage in the company's life cycle

MANAGEMENTRadha R. Basu - CEO, President, and Chairman of the Board - President and CEO since1999, and was appointed Chairman of the Board in January 2001 . Previously, worked atHewlett-Packard from 1978-1999, where she held various general management positions,including most recently GM of the electronic business software organization .

Brian M . Beattie - CFO, EVP of Finance and Administration - Held these positionssince October 1999. From May 1998 to May 1999, he served as VP of finance, mergers, andacquisitions of Norte] Networks . From July 1996 to April 1998, Mr, Beattie served as groupVP of Meridian Solutions of Nortel Networks . From Feb. 1993 - June 1996, he served as VPof finance, Enterprise Networks, for Norte] Networks .

John Van Siclen - Senior VP of Worldwide Sales and Services - responsible forSupportSofY's worldwide sales and customer facing services operations, including directsales, channels and managed service provider business, and global services . Previously wasPresident and CEO at Interwoven Inc . Van Siclen has 25 years of sales and servicesexpertise in helping build global enterprise sales, field services, and business operations .

Chris Greitak - Senior Vice President of Products and Marketing - Previously the .SeniorVice President of Worldwide Marketing for Portal Software, where he was responsible forPortal's product, services and solutions strategy as well as marketing and corporatecommunications . Prior to Portal, Greitak was Chief Marketing Officer for Broadvision

Scott W. Dale - Vice President of Engineering - served as the Chief Technical Officer sincethe company's incorporation in 1997 and recently assumed the position of VP ofEngineering. Prior to SupportSoft, Mn Dale served a brief stint as a software consultant forM&I Data Services . From July 1992 to January 1997, he served as a software consultant toHewlett-Packard .

Cadir B. Lee - Chief Software Officer and founder- has served as the Chief SoftwareOfficer since the company's incorporation in 1997 . Primary responsibilities include productmanagement, strategic technical direction, and product architecture. From 1995-1997, Leeserved as a consultant to the Hewlett Packard Company.

Lucille K . Roger - Vice President of Operations - Has been VP of Operations sinceFebruary of 2000. From 1996 to 2000, she was the Chief Operating Officer atConnectInc.com. From 1992 to 1995, she was a principal for Gemini Consulting, an affiliatefor Cap Gemini .

BOARD OF DIRECTORSRadha R. Basu - President, Chairman, and CEO

Manuel Diaz - Retired Vice President, Hewlett - Packard Co .

Kevin C. (Casey) Eichler - Vice President and CFO, MIPS Technologie s

Claude M. Leglise - Vice President, Intel

Edward S . Russell - General Partner, Diamondhead Venture s

Jim Thanos - Former Executive Vice President and General Manager of Worldwide FieldOperations at Broadvision

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citigroup 'iSmith Barney

Dick Williams - President and CEO, Wily Technologies

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ANALYST CERTIFICATION APPENDIX A- 1I, Mark Verbeck, hereby certify that all of the views expressed In this research report accurately reflect my personal views about any andall of the subject Issuer(s) or securities . I also certify that no part of my compensation was, Is, or will be directly or indirectly related to thespecific recommendation(s) or view(s) in this report.

IMPORTANT DISCLOSURES

SupportSoft Inc (SPRT)Ratings and Target Price History

ti

ASONDJFMAMJJAS0NDJFMAMJJAS0NDJFMAMJJ2002 2003 2004

- ^ Covered See "Important Disclosures' at the end of this report for.. .. ..• Not covered a description of the lino's current and footer rating systems

Target ClosingA Date Rating P ri ce price1 : 6 Sap 02 Stock rating system changed2 : 12 Sep 03 Stock rating system charme d'Indicates change.

Within the past 12 months, Gitigroup Global Markets Inc. or its affiliates has acted as manager or co-manager of a public offering ofsecurities of Supporl Soh Inc.

Citigro up Global Markets Inc . or its affiliates has received compensation for investment banking se rvices provided within the past 12months from SupporlSoft Inc .Ciltgroup Global Markets Inc. currently has, or had within the past 12 months, the following company(les) as investment banking client(s) :SupportSoft Inc .

Citigroup Global Markets Inc . currently has, or had within the past 12 months, the following company(ies) as clients, and the servicesprovided were non-Investment-banking, securi ties-related: Suppo rtSott Inc.

Citigroup Global Markets Inc. or an affiliate received compensation in the past 12 m o nths from SupportS oft Inc.

Analysts' compensation is determined based upon activities and services Intended to benefit the Investor clients of Cltigroup GlobalMarkets Inc . and its affiliates ("the Firm") . Like all Firm employees, analysts receive compensation that Is impacted by overall firmprofitability, which Includes revenues from, among other business units, the Private Client Division, Institutional Equities, and InvestmentBanking .

Smith Barney Equity Research Ratings DistributionData current as of 30 June 2004 _ Buy Hold SellSmith Barney Global Equity Research Coverage (2402) 40% 43% 17%

% ofcompanies in each rating category that are investment banking clients 58% 56% 46%Software -- North America (110) 44% 56% 0%

% of companies In each rating category that are investment banking clients 14% 11% 0%Guide To Investment Ratings :Smith Bamey's stock recommendations Include a risk rating and an investment rating .Risk ratings, which take into account both price volatility and fundamental criteria, are : Low [L], Medium [M]. High [H), and Speculaltve[S] .Investment ratings are a function of Smith Barney's expectation of total return (forecast price appreciation and dividend yield within thenext 12 months) and risk rating.For securities in developed markets (US, UK, Europe, Japan, and Australia/New Zealand), Investment ratings are : Buy [1] (expected totalreturn of 10% or more for Low-Risk stocks, 15% or more for Medium-Risk stocks, 20% or more for High-Risk stocks, and 35% or more forSpeculative stocks) ; Hold [23 (0%-10% for Low-Risk stocks, 0%-15% for Medium-Risk stocks, 0%-20% for High-Risk stocks, and 0%-35%for Speculative stocks); and Sell [3] (negative total return) .Investment ratings are determined by the ranges described above at the time of initiation of coverage, a change in risk rating, or achange in target price. At other times, the expected total returns may fall outside of these ranges because of price movement and/orvolatility . Such Interim deviations from specified ranges will be permitted but will become subject to review by Research Management .Your decision to buy or sell a security should be based upon your personal investment objectives and should be made only afterevaluating the stock's expected performance and risk .

Between September 9, 2002, and September 12, 2003, Smith Barney's stock ratings were based upon expected performance over thefollowing 12 to 18 months relative to the analyst's industry coverage universe at such time . An Outperform (1) rating indicated that we

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Aft,citigroup iSmith Barney

expected the stock to outperform the analyst's industry coverage universe over the coming 12-18 months . An In-line (2) rating indicatedthat we expected the stock to perform approximately in line with the analyst's coverage universe . An Underperform (3) rating Indicatedthat we expected the stock to underperform the analyst's coverage universe . In emerging markets, the same ratings classifications wereused, but the stocks were rated based upon expected performance relative to the primary market index in the region or country . Ourcomplementary Risk rating system -- Low (L), Medium (M), High (H), and Speculative (S) -- took into account predictability of financialresults and stock price volatility . Risk ratings for Asia Pacific were determined by a quantitative screen which classified stocks into thesame four risk categories . In the major markets, our Industry rating system -- Overweight, Marketweight . and Underweight - took intoaccount each analyst's evaluation of their industry coverage as compared to the primary market index in their region over the following 12to 16 months.

Prior to September 9, 2002, the Firm's stock rating system was based upon the expected total return over the next 12 to 18 months . Thetotal return required for a given rating depended on the degree of risk in a stock (the higher the risk, the higher the required return) . A Buy(1) rating indicated an expected total return ranging from +15% or greater for a Low-Risk stock to +30% or greater for a Speculativestock. An Outperform (2) rating Indicated an expected total return ranging from +5% to +15% (Low-Risk) to +10% to +30% (Speculative) .A Neutral (3) rating indicated an expected total return ranging from -5% to +5% (Low-Risk) to -10% to +10% (Speculative). AnUnderperform (4) rating Indicated an expected total return ranging from -5% to -15% (Low-Risk) to -109/6 to -20% (Speculative) . A Sell (5)rating indicated an expected total return ranging from -15% or worse (Low-Risk) to -20% or worse (Speculative), The Risk ratings werethe same as In the current system .

OTHER DISCLOSURE SFor securities recommended In this report in which the Firm is not a market maker, the Firm usually provides bids and offers and may actas principal In connection with such transactions . The Firm is a regular issuer of traded financial instruments linked to securities that mayhave been recommended In this report . The Firm regularly trades in, and may, at any lime, hold a trading position (long or short) In . theshares of the subject company(les) discussed in this report . The Firm may engage in securities transactions in a manner inconsistent withthis research report and, with respect to securities covered by this report, will buy or sell from customers on a principal basis .

Securities recommended, offered, or sold by the Firm: (i) are not insured by the Federal Deposit Insurance Corporation; (ii) are notdeposits or other obligations of any Insured depository institution (Including Citibank) ; and (111) are subject to investment risks, includingthe possible loss of the principal amount Invested . Although Information has been obtained from and Is based upon sources SmithBarney believes to be reliable, we do not guarantee its accuracy and It may be Incomplete or condensed . All opinions, projections andestimates constitute the judgment of the author as of the date of the report and are subject to change without notice. Prices andavailability of financial instruments also are subject to change without notice- If this is a fundamental research report, it is the intention ofSmith Barney to provide research coverage of thislthese Issuer(s), Including in response to news affecting this issuer, subject toapplicable quiet periods and capacity constraints . This report Is for Informational purposes only and is not intended as an offer orsolicitation for the purchase or sale of a security . Any decision to purchase securities mentioned In this research must take Into accountexisting public Information on such security or any registered prospectus .

Investing in non-U.S . securities, including ADRs, may entail certain risks . The securities of non-U.S. Issuers may not be registered with,nor be subject to the reporting requirements of the U.S. Securities and Exchange Commission . There may be limited informationavailable on foreign securities . Foreign companies are generally not subject to uniform audit and reporting standards, practices andrequirements comparable to those In the U .S . Securities of some foreign companies may be less liquid and their prices more volatile thansecurities of comparable U .S. companies. in addition, exchange rate movements may have an adverse effect on the value of anInvestment in a foreign stock and its corresponding dividend payment for U .S . investors . Net dividends to ADR Investors are estimated,using withholding lax rates conventions, deemed accurate, but Investors are urged to consult their tax advisor for exact dividendcomputations. Investors who have received this report from the Firm may be prohibited in certain states or other jurisdictions frompurchasing securities mentioned in this report from the Firm. Please ask your Financial Consultant for additional details .

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The Citigroup Private Bank to Its clients, it is attributable to Citibank N .A., Citibank Tower, Citibank Plaza, 3 Garden Road, Hong Kong.This publication is made available in Singapore through Ciligroup Global Markets Singapore Pte . Ltd ., a Capital Markets ServicesLicence holder.

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EXHIBIT M

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i See page 5 for Analyst Certification and Important Disclosures

Target Price ChangeEstimate Change ICJSmith Barney

IN .%U/ ISupportSoft Inc (SPRT)

Speculative (S)SPRT: Company Beats Estimates and Announce sAcquisition Mkt Cap: $309 mil .

July 20, 2004 SUMMARY

SupportSoft demonstrated the strength of demand in the automated supportmarket by delivering its 12th consecutive quarter of sequential revenue growt h

SOFTWARE Revenue of $16.9M beat our $16.4 M and Street $16.3M while EPS of $0.1 1was ahead of our $0 .09 and Street $0 .08

Mark Verbeck > Company announced acquisition of Core Networks for $17 million to delive r-Fi (415) 951-1839 more networking functionality and to address smaller broadband providersmarkverbeck®citigroup.com ) Company modestly raised revenue and 13PS guidance for the year

Alan Tikwart > Some of the current quarter EPS upside was the result of curtailed spending i n

+1 (415) 951-1804 advance of the pending acquisition

We anticipate that the company will be increasing its sales capacity as a resul tof the acquisition, but details were not available as of the cal l

We are adjusting our estimates to reflect results, increasing our price targe tfrom $11 .00 to $11 .50 on the outperformance and reiterating our Buy (IS )

FUNDAMENTALS SHARE DATA RECOMMENDATION

WE (12(04E).... . . . . . . . . .. .. .. . . . . . . .. ....

PIE (12l05E). .... . . . . . . . . .. .. .. . . . . . . .. .. .

TEV/EBITDA (12/04E) .. . . . . . .. . .... . .

TEV/EBITDA (12/05E) . . . .. . . . . . ... .. .

Book Value/Share (12/04E) . .... . . .

Price/Book Value . . . . . . .. .. .. . . . . . . .. ....

Revenue (12/04E) . .... . . . . . . .

Proj . Long-Term EPS Growth .... . .

ROE (12/04E) . . . . . . .... . . . . . . . . . ... .. .. . .

Long-Term Debt to Capital( a). . . . . .

19 .8x Price (7/20/04) .. . . . . . . .. .. .. . . . . . . . .

25.3x 52-Week Range .. . . . . ..

NA Shares Outstanding(a) . . . . . . . . .. .

NA Div(E) (Cur/Prev) . . . . . .... .. . . . . . . . . .

NANA

$68.0 mil .

20%

NA

NA

$7.34 Rating (Cur/Prey) . . . . .... .. . . . . . . .. .. . . . . 1 S/1 S

$16 .47-$6.70 Target Price (Cur/Prev).. . $11.501$11 .0 0

42.2 mil. Expected Share Price Return . . . . . . 56.7 %

$0.001$0 .00 Expected Dividend Yield . . . . . .. .. . . . .. 0.0 %

Expected Total Return .. .. . .... . . . . . .. . 56.7%

EARNINGS PER SHAR E

FY ends 10 2Q 3R 40 Full Yea r12/03A Actual $0.04A $0 .O6A $0.06A $G.09A $0 .25A

12/04E Current $0.09A $0 .11A $0.09E $0.10E $0.37 EPrevious $0.09E $0.09E $0.08E $0.09E $0.34 E

12105E Current $0.0 7E $0.08E $0.07E $0.08E $0,29 EPrevious $0.06E $0.06E $0 .06E $0.07E $0.25 E

(a) Data as of most recent quarter 12/06E Current NA NA NA NA $0.34EPrevious NA NA NA NA $0 .29E

First Call Consensus EPS:12104E $0.34;12/05E $0 .33; 12/06E NA

OPINIONSupportSoft demonstrated the strength of demand in the automated support market bydelivering its 12th consecutive quarter of sequential revenue growth Revenue of $16 .9Mbeat our $16.4 M and Street $16 .3M while EPS of $0.11 was ahead of our $0.09 and Street$0.08 . This execution and out performance are reasons we continue to recommend the stoc k

Smith Barney is a division of Citigroup Global Markets Inc. (the "Firm"), which does and seeks to do business with companiescovered In its research reports . As a result, Investors should be aware That the Firm may have a conflict of interest that could affectthe objectivity of this report .Investors should consider this report as only a single factor In making their investment decision .

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AftkcitigroupiSmith Barney

Company announced it will buy the assets of Core Networks for $17 million to deliver morenetworking functionality and to address smaller broadband providers. By using cash insteadof equity to make this acquisition, it will quickly be accretive to shareholders . In addition,since the transaction is structured as a asset purchase, SupportSoft avoids legal exposure andobtains favorable tax treatmen t

SupportSoft modestly raised revenue and EPS guidance for the year from $64-$68M to $65-$69M and from $0 .32-$0 .34 to $0.34-$0.37 .

Some of the current quarter EPS upside was the result of curtailed spending in advance ofthe pending acquisition . This should allay some investor concerns over dilutive acquisitions .

We anticipate that the company will be increasing its sales capacity as a result of theacquisition, but details were not available as of the call . We believe increased sales capacityis required to effectively address the enterprise market and to land new customers .

We are adjusting our estimates to reflect results and some revenue upside from theacquisition in our 2005 numbers . We are increasing our price target from $11 .00 to $11 .50 asa result of our higher numbers and reiterating our Buy/Speculative (1S) rating . Our revenueestimates go from $66.1M to $68 .OM in 2004, from $7I .5M to $75 .6M in 2005, and from$84.1M to $88.7M in 2006 . Our EPS estimates go from $0.34 to $0 .39 in 2004, from $0.25to $0 .29 in 2005, and from $0 .29 to $0 .34 in 2006.

The company didn't publish a Statement of Cash Flows, but cash was up $1 .9 million fromlast quarter to $127 .9 million .

DSOs at 73 days were in-line.

Despite the great absolute performance, the results did little to moderate our risk factors :deferred revenues, which have a history of being quite volatile on a quarterly basis, weredown sequentially, subscription license revenue fell from $3 .7M to $3 .1M, although it wasoff much less than it had been in the prior quarter. New customers were weak at only 4 (upfrom 3 last quarter but off from 8 in the year-ago quarter and large customer concentrationremained high with four 10% customers accounting for 53% of revenue.

VALUATIONFor SupportSoft, we used two primary methods to derive our valuation . The first isdiscounted cash flow (DCF) analysis . For our DCFs, we fully model the company's incomestatements, balance sheets, and cash flows to a terminal year, in excess of 20 years out, todetermine free cash flow in each of the years . At that point, we believe the company will beat terminal cash flow growth rates approximating GDP growth rates (generally 3%). For ourDCF analysis, we use a risk-free rate of 4 .5% and an equity risk premium of 5% . Our secondvaluation method is a P/E analysis based on a five-year forward business model, where weforecast a five-year revenue compounded annual growth rate (CAGR), normalized operatingmargins, and an expected P/E multiple in order to derive a valuation normalized for what we

believe is the company's mature operating model .

Our $11 .50 price target for SupportSoft is based on both our DCF and PIE-basedmethodologies . To estimate beta, we analyzed the historical beta of a basket of softwarestocks for an eight-year period, excluding a period from 1999 to 2000, which we define as"The Bubble." This analysis suggested that a Beta of 2 .0 was a reasonable value to use as aforward-looking number for many of our software stocks . Companies that are more mature,having slower growth rates and/or a higher percentage of recurring revenue, would have aBeta less than this typical number . For our DCF analysis, we employ a beta of 2 .0, a terminal

2

I

citigroup,Smith Barney

. -free cash flow (FCF) multiple of 8.7x , and a weighted average cost of capital (WACC) of14 .5%. This analysis suggests a value of $11 . 60 per share, up from $11 .00

For our PIE-based methodology, we first projected net income five years forward based on a5-year revenue (CAGR) of 20%, a normalized operating margin of 25%, and a tax rate of32%. The 25% operating margin is typical for our software companies with a low percentageof professional services . We then applied a multiple of 24x to this net income projection anddiscounted this number to the present, which suggests a stock price of $11 . The 24x multiplerepresents the 1 .4x premium to S&P 500 market multiple. For our 1 .4x market premium, wecompared a basket of software stocks' multiple to the S&P 500 multiple over an eight yearperiod, excluding a period from 1999 to 2000 which we define as "The Bubble ." Ourconclusion from this analysis is that because of what we believe are attractive aspects of thesoftware company business model, software companies trade at a l .4x premium to the S&P500 multiple . As our PE based valuation is based on full tax rates and doesn't include anallowance for lower tax payments as a result of loss carryforwards, we add $0 .55 to our pricetarget to allow for the present value of the $25 million deferred tax asset, giving a total pricetarget of $11 .50(up from $11 .00)


Risks to our price target for SupportSoft include:

> The company frequently has customers that account for more than 10% of its revenues . Ifthe company were unable to close a sale of this magnitude in a given quarter it couldhave a significant negative impact on the stock . The risk is mitigated somewhat by thefact that a significant portion of its revenue is not in the form of perpetual license salesthat are recognized as revenue in the quarter sold .

- The company gets a significant portion of its revenue from the broadband industry,particularly cable providers . As such, SupportSoft is exposed to the fortunes of thisindustry as well . We note that there has been significant M&A activity in this industry,which can create additional exposure as well as opportunity.

The company's target market on the corporate side has seen an increasing amount ofinterest from some larger and better-capitalized players, including Microsoft, HP andSymantec . If any of these players are effective at developing solutions, their broaddistribution channels and large product footprints could make it difficult for SupportSoftto expand this market .

Software companies traditionally have back-end loaded quarters, thus giving very littlevisibility to license revenues .

The company has a poor track record of maintaining and growing its subscriptionrevenue . To the extent a decline in this revenue stream decreases the company's visibility,investors may not be willing to pay the same multiple for the company.

In the most recent quarter, the company added only 3 new customers . If the company isunable to increase the number of customers it is adding, it will be difficult to continue togrow its revenue.


INVESTMENT THESI SWe rate shares of SupportSoft Buy/Speculative(1S), with an $11 .50 12-month price target.SupporiSoft is well positioned to continue its strong position in the broadband provider

Aftk


market . The company enjoys a strong broadband presence, particularly with United Statescable providers . SupportSoft can leverage these relationships into an expanded footprint andnew customers, particularly outside the U .S. With only one competitor of note, MotiveCommunications, this market is fairly attractive and unpenetrated . Our cable team notes thatthe cable providers are stepping up efforts to decrease back-office costs and promote self-installs for their broadband business, two trends that will benefit SupportSoft . The companyis expanding its efforts to address the enterprise market. While the company has always hadenterprise functionality, it is adding capabilities to better address the market, includingsupport for more platforms (PDA and wireless) and new functionality like voice-basedassistance . In this market, we believe outsourcers like Accenture and CSC are the smartmoney because support costs and customer satisfaction are key to their business models andtherefore, we view the fact that these firms are working with SupportSoft to be a leadingindicator of the SupportSoft opportunity in this market . SupportSoft s target marketsrepresent a large opportunities . The broadband market is estimated to be growing close to20% annually in the U.S . and customer self-installs are growing as a percentage of the totalwith providers offering incentives for customers to do the self-install . The economics arecompelling as Smith Barney estimates that a truck-roll for broadband installation costs theprovider $100. We estimate that the base opportunity here is approximately a $75 millionopportunity today, growing to $150 million in 2009 . In addition, if SupportSoft extends itssolution (which we believe it will) to address new requirements such as interactive TV andvoice-over-IP telephony, there is additional upside . As there is limited competition in thismarket, SupportSoft has the opportunity to capture a significant percentage of this revenue .To quantify the corporate opportunity we Based on data from IDC, we estimate the totalenterprise opportunity to be 180 million PC s worldwide in use at medium sized or betterorganizations. Using a $10 license opportunity per unit gives us a $1 .8 billion opportunity.Despite the recent difficulties in the enterprise software market, we have confidence in ourrecommendation on SupportSoft because it has more revenue visibility than many othersoftware companies as a result of its ratable revenue, because the broadband providers havea sense of urgency about addressing these problems and because the enterprise market isquite small in relation to its potential, offering protection from macro factors . In addition thestock is off quite precipitously from its highs(it hit $17 in January), we believe partially insympathy to the woes of other software companies . This provides a measure of protectionfor buyers today.

COMPANY DESCRIPTIONSupportSoft is a leading provider of software, collectively known as its Real Time ServiceManagement offering, that aids in the diagnosis and repair of software configurationproblems on end-point devices like PC s and PDA s . This capability reduces the total cost ofsupport for these devices by decreasing the number of support calls and reducing theoccurrence of support staff desk-side visits . The company s offerings also include softwarethat enables broadband customers to establish their connection without on-site support .

crtigroup 'iSmith Barney

ANALYST CERTIFICATION APPENDIX A-1I, Mark Verbeck, hereby certify that all of the views expressed in this research report accurately reflect my personal views about any andall of the subject issuer(s) or securities . I also certify that no part of my compensation was, is, or will be directly or indirectly related to thespecific recomm endation(s) or view(s) in this report.


SupportSoft Inc (SPRT)Ratings and Target Price HistorAnalyse Mask Verheck (covered since Jul I

--------------------. ,r

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ASONDJFMAMJ .1ASONDJFMAMJJASONDJFMAMJJ2002 2003 2004

- Covered See 'Important Dfsdosuras ' at the end of this report for.. .. . .. Not cove red a description o11he firm 's current and former rating systems

Target Closing# Date Rating P rice Prfce

1 t

: 6 Sepp 02 Stack ratingg syystem changed2 So 03

8:_13 If 04 Stock m t1$oDem ~~~7 .60'Indicates change.

Within the past 12 months, Ciligroup Global Markets Inc . or its affiliates has acted as manager or co-manager of a public offering ofsecurities of SupportSoft Inc.

Citigroup Global Markets Inc . or Its affiliates has received compensation for investment banking services provided within the past 12months from SupportSoft Inc .

Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following company(les) as Investment banking client(s) :SupportSoft Inc.

Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following company(les) as clients, and the servicesprovided were non-investment-banking, securities-related : SupportSoft Inc.

Citigroup Global Markets Inc. or an affili at e received compensation i n th e past 12 month s from SupportS oft I nc.Analysts' compensation Is determined based upon activities and services Intended to benefit the investor clients of Citigroup GlobalMarkets Inc. and its affiliates ('the Firm") . Like all Firm employees, analysts receive compensation that is impacted by overall firmprofitability, which Includes revenues from, among other business units, the Private Client Division, Institutional Equities, and Investmen t

Smith Barney Equity Research Ratings Distributio n-04 wrcrrc oar viov,une 16vu # Buy Hold SellSmith Barney Global Equity Research Coverage (2402) 40% 43% 17%

% of companies In each rating category thatare investment banking clients 58% 56% 46%Software -- North America (16) 44% 56% 0%

% of companies in each rating category that are investment banking clients 14% 11% 0%Guide To Investment Ratings :Smith Barney's stock recommendations Include a risk rating and an Investment rating .Risk ratings , which take into account both price volatility and fundamental criteria, are : Low [L], Medium (M], High (H), and Speculative[S].Investment ratings are a function of Smith Barney's expectation of total return (forecast price appreciation and dividend yield within thenext 12 months) and risk rating .For securities in developed markets (US, UK, Europe, Japan, and Australia/New Zealand), Investment ratings are : Buy [1] (expected totalreturn of 10% or more for Low Risk stocks, 15% or more for Medium-Risk stocks, 20% or more for High•Risk stocks, and 35% or more forSpeculative stocks) ; Hold 121 (0%-10% for Low-Risk stocks, 0%-15% for Medium-Risk stocks, 0%-20% for High-Risk stocks, and 0%-35%for Speculative stocks); and Sell [3] (negative total return) .Investment ratings are determined by the ranges described above at the time of initiation of coverage, a change in risk rating, or achange In target price. At other times, the expected total returns may fall outside of these ranges because of price movement and/orvolatility. Such Interim deviations from specified ranges will be permitted but will become subject to review by Research Management .Your decision to buy or sell a security should be based upon your personal Investment objectives and should be made only afterevaluating the stock's expected performance a nd risk .

Between September 9, 2002, and September 12, 2003, Smith Barney's stock ratings were based upon expected performance over thefollowing 12 to 18 months rotative to the analysts industry coverage universe at such time . An Outperform (1) rating Indicated that we

citigroupi 'Smith Barney

expected the stock to outperform the analyst's Industry coverage universe over the coming 12-18 months . An In-line (2) rating indicatedthat we expected the stock to perform approximately in line with the analyst's coverage universe. An Underperform (3) rating Indicatedthat we expected the stock to underperform the analyst's coverage universe . In emerging markets, the same ratings classifications wereused, but the stocks were rated based upon expected performance relative to the primary market index in the region or country . Ourcomplementary Risk rating system -- Low (L), Medium (M), High (H), and Speculative (S) - took Into account predictability of financialresults and stock pdce volatility. Risk ratings for Asia Pacific were determined by a quantitative screen which classified stocks into thesame four risk categories. In the major markets, our Industry rating system -- Overweight, Marketweight, and Underweight - took intoaccount each analyst's evaluation of their Industry coverage as compared to the primary market index in their region over the following 12to 18 months .

Prior to September 9, 2002, the Firm's stock rating system was based upon the expected total return over the next 12 to 18 months . Thetotal return required for a given rating depended on the degree of risk in a stock (the higher the risk, the higher the required return) . A Buy(1) rating indicated an expected total return ranging from +15% or greater for a Low-Risk stock to +30% or greater for a Speculativestock . An Outperform (2) rating Indicated an expected total return ranging from +5% to +15% (Low-Risk) to +10% to +30% (Speculative) .A Neutral (3) rating indicated an expected total return ranging from -5% to +5% (Low-Risk) to -10°/6 to +101/ (Speculative). AnUnderperform (4) rating Indicated an expected total return ranging from -5% to -15% (Low-Risk) to -10% to -20% (Speculative) . A Sell (5)rating indicated an expected total return ranging from -15% or worse (Low-Risk) to -20% or worse (Speculative) . The Risk ratings werethe same as in the current system .

OTHER DISCLOSURE SFor securities recommended in this report in which the Firm is not a market maker, the Firm usually provides bids and offers and may actas principal in connection with such transactions . The Firm is a regular Issuer of traded financial instruments linked to securities that mayhave been recommended In this report . The Firm regularly trades in, and may, at any time, hold a trading position (long or short) in, theshares of the subject company(les) discussed In this report . The Firm may engage In securities transactions In a manner inconsistent withthis res e arch re port and, with respect to securi tie s covered by this report, will buy or sell from customers on a princip al basis.

Securities recommended, offered, or sold by the Firm : (1) are not insured by the Federal Deposit Insurance Corporation; (€€) are notdeposits or other obligations of any insured depository institution (including Citibank) ; and (iii) are subject to investment risks, includingthe possible loss of the principal amount Invested. Although Information has been obtained from and Is based upon sources SmithBarney believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed . All opinions, projections andestimates constitute the judgment of the author as of the date of the report and are subject to change without notice . Prices andavailability of financial Instruments also are subject to change without notice . If this Is a fundamental research report, it is the Intention ofSmith Barney to provide research coverage of thisithese Issuer(s), including In response to news affecting this issuer, subject toapplicable quiet periods and capacity constraints . This report Is for informational purposes only and Is not Intended as an offer orsolicitation for the purchase or sale of a security . Any decision to purchase securities mentioned In this research must take into accountexisting public Information on such security or any registered prospectus .

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ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST


EXHIBIT N

Aaftlk



- o a r7Y,ffi;ate'

71-

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Speculative (5

) Market cap: $337 m11 .

Software

Mark Varbeck416-951-1839=rk.verbOCkGClagroup.cam

Alan Tlkwart415-951-180 4

Smith Barney Is a division of Citlgroup Global Markets Inc. (the "Firm'), which does and seeks to do business with companies covered InIts research reports. As a result, Investors should be aware that the Firm may have a conflict of Interest that could affect the objectivityof this report. Investors should consider thIs report as only a single factor In making their investment decision .

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Citigroup Global Market s

FJuly 27, 2004

SupponSoh Ino --Jury 27, 2004

SupportSoft Inc . Mark Verbeck

(SPRT-AMEX) . +1(416) 951.1839

a nq: P ce (07/2612W41., arael pries: 52-Week Reage . .,_ . . biyidend: Yletd:Rome :

1S (Buy {1), Spaculatlve (3)) $7.98 $11.50 $16-$6.60 NO Nil

COMPANY ]D ESCRIPTION

SupporiSoft Is a leading provider of software, collectivelyknown as Its "Real Time Service Management" offering,that aids In the diagnosis and ropalrofsoltwareconfiguration problems on end-point devices Ake PCs andPDA& This capabAlryreducesthe total cost orsupport torthese devices by decreasing the number of support callsand reducing the occurrence of support staff desk-sidevisits. The company's offerings also Include software that -enables broadband customers to establish their connectionwithout on site support.

SALES AND EARNINGS ($ In millions, except per-share data)Nat Shnre e

FY antis: Rov e. E5 VDA laeome (MR4 EP8 CF/S DI .

1210(I (E) 888.7 NA 16.8 49.3 $0.34 $1 .60 012105(E) $76.8 NA 13.8 47.4 0.29 $1 .59 012104(E) $68 .0 NA 17.2 46.0 0.37 $1 .48 012/03(A) $53.3 NA 9.5 37.6 0125 $1 .42 012102{A)-- $41 .2 NA (1 .5) 33.8 (0.04) $1 .22 06,Year Growth Rates :04-00(E) 20% NA NA NA 20.0% NA NA99-03(A) 20% NA NA NA 20% NA NA

QUARTERLY EPSFY ends 19 24 30 4Q Total12/06(E) $ 0 .08 E $0 .09 E $ 0 .08 E $0.09 E ' $0.3412!05(6) $0,07 E $0 .08 E $ 0 .07 E $0.08 E $0 .2 912104(E) $0.09 A $0. 11 E. $0 .09 E $0.10 E $0 .3712/03(W $ 0 .04 A $0 .06 A $ 0.08 A $0.09 A $0 .25

VALUATIONPIE 12105(E) 27 .5x Pdce/BV 3.OxP/E12104(E) 21 .6x 7EVJE91TOA NARBI PIE 20046 1 .3% Beta 1. 2P11celrevs 12104(Ej 5-Ox Technical rallnq 5

SUPPORTSO PPRIG P.O DM007•t

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KEY RATIOS (%)

ESITDA Tax NotMajuIn Rata Mevgln P05

NA 32% 18.7% 9.3%NA 32% 18.0% 8.4%NA 11% 25 .4% 11.5%NA 3.4% 17.9% 8.4%NA 0% -3 .6% (0.4%)

BALANCE SHEET SUMMARY ($ In mil lions, as of 12/2003)Cunentessets $137.6 Currentfla611111es $23.6Flxad eesete 0.7 LonlI-teen debt 0.0Other assts 0.7 Other Ilebti les 1 .6

Total assets 139.0 Tatat Ifablllttae & equity 139.0L-T dehtlcepltal 0.0%

SHARE DATAMarketcap (mll.) $337 Comrartiblesharos NoPrimary Shares (nil.) 42.2 InotItutlonal Ownership 08 .8%Float (r Il .) 26.3 fneWer ownership 38 %Avg. da0y volume (mil.) 0.7 WeIghtin SAP 500 0 %

RA71NO CHANGES RECENT PUBLICATIONSram To Date Pdca 'nue Date No.

is 07/13/04 $7.03

2

Suppoit8oh Inc - July 27, 200 4

We Initiated coverage of SupportSoft with a Huy/Speculative risk

(7S) rating on July 13 at a price of $7.53 and with a target price of

$11.00. We raised our targetprice on July 20 to $11.50 after the

company reported a stronger-than-expected second quarter. The

company Is well positioned In an expanding marketplace, which

should allow It to exhibit continued revenue growth.

SupportSoft is well positioned to continue Its strongperformance in the broadband provider market .

The company enjoys a strong broadband presence, particularly with U .S. cableproviders. SupportSoft can leverage these relationships into an expandedfootprint and new customers, particularly outside the United States . With onlyone competitor of note, Motive Communications (Not Rated), this market isfairly attractive and unpenetrated . Smith Barney cable analyst, Niraj Gupta,notes that the cable providers are stepping up efforts to decrease back-officecosts and promote self installs for their broadband business -- two trends thatwill benefit SupportSoft. The company is adding capabilities to better addressthe market, including support for more platforms (PDA and wireless) and newfunctionality like voice-based assistance .

Broadband presents a significant opportunity for SupporiSoft.Niraj Gupta estimates the broadband market is estimated to be growing close to20% annually in the U .S . and customer self-installs are growing as a percentageof the total with providers offering incentives for customers to do the selfinstall. The economics are compelling as our cable analyst, Niraj Gupta,estimates that a truck-roll for broadband installation costs the provider $100 .We estimate that the base opportunity is approximately $75 million today,growing to $150 million in 2009 . In addition, if SupportSoft extends itssolution (which we believe it will) to address new requirements such asinteractive TV and voice-over-11? telephony, there is additional upside.

Nascent market and valuation should provide protection fromsoftware malaise .Despite the recent difficulties in the enterprise software market, we have

confidence in our reconunendatlon on SupporlSoft because it has more revenuevisibility than many other software companies as a result of its ratablerevenues, because the broadband providers have a sense of urgency aboutaddressing these problems, and because the enterprise market is quite small inrelation to its potential, offering protection from macro factors .

SupportSoft has some challenges ahead.

The enterprise market is significantly more competitive than the broadbandmarket. While SupportSoft has innovative product offerings, it facessignificant competitors in the enterprise market , Including some that already,have robust sales channels , resulting in the need for SupportSoft to invest moreIn'sales and marketing in the near term to adequately address the opportunity .The subscription revenue model is unproven for SupportSoft .

3

citigrouOSmith BarneyMINNA"

Suppc0810nkne --July 27, 2004

Table of Content s

Investment Summary ... .. . .. . ... . .. ..... . .. ... . .. ... . . . . .. . . . . . .. . . ... . . . ... ... . . .... . . ... . .. .. . . .. . . . . ... . . ... . . . .... . . ... ... . . . . .. . . ... . . . . . . .. . . . . 3Investment Overview . .. . ... .. . ... . .. . .... . .. . .. ... ... . . . . .. . . . . ... . . ... . . . ... ... . . .... . . ... . .. .. . . . . . . . . ... . . ... . . . .... . . ... ... . . . ... . . ... . .. . . . .. . . .. 5Model Assumptions and Estimates .. . . . . .. . . . . .. . . . . . . . . . . ... . . .. . . . . .. . . .. . . .... . . .. . . . . . .. . . . .. . . . . . . . .... . . . ... . . .. . . . . . .. . . . . . .. . . . . . . . . . . . . . SValuation .. . . . .. . . . . . . . . . . . . .. . . . . . .. . . . ... . . . . . ... .. . . . . .. . ... . . . . .. . . . . ... . . . . . . . . ... . .. . . . .. . . . .. . . . . . . . . . . .. . . . . . . . . ... . . . ... . . .. . . .. . .. . .. . . ... . . . . . . .. . . . . 5Risks . . .. . . ... . . ... . . . . . . .. . . . . . . . . . ... . . . ... . . . . . . . . ... . . . .. . . . . . . . . .. . . . . ... . . . . . . . . ... . .. . . . ... . . .. .. . . . . . . . . . . . . . . . . . . .. . . . . .. . . . ... . . . . .. . .. . . .. . . . . . . . . . . . . . 6Industry . . .. . . . . . . . . . . . . .. . . . . . . . . . ... . . . ... . . . . . .. . ... . . . .. . . . . . . . . .. . . . . ... . . . .. . . . .. . . . . . . ... . . . .... . . . .. . .. . . . . . .. . . . .. . . . . .. . . . ... . . . . .. . . . . . ... . . . . . . . . . . . . 7Company .. . . . . . . . . . . .. . . . . . . . . . ... . . . ... . . . . . .. . ... . . . .. . . . . . .. . .. . . . . ... . . . . . . . . ... . .. . . . .. . . . . . .. . . ... . . . ... . .. . . . . ... . . . ... . . ... . . . . .. . . . . . ... .. . . . . . . . . . . 9Technology and Solutions.. . . . ... . . . . . .. . ... . . . ... . . . . .. . .. . . . . ... . . . .. . . . ... . . . . . . .. . . . . . .. . . ... . . . .. . . ... . . .... . . . ... . . ... . .. . .. . . . . . .. . . . . . . . . . . . . . 9Business Model . . . . . . . . . . . . . . . ... . . . . .. . . . . . . . . ... . . . .. . . . . .. . . ... . . . ... . . . ... . . .... . . . . . ... . . . . .. . . . .. . . . . . . . . .. . . . ... . . . ... . . ... . . . . .. . . . . . . . .. . . . .. . . . . ] fDistribution . .. . . . . . . . .. . . . .. . . . . ... . . . ... . . . . . .. . ... . . . ... . . . .. . . .. . . . . ... . . . ... . . .. . . . . . . ... . . . . .. . . ... . . . . . . . . . . . . ... . . . ... . . .. . . . . . .. . . . . . . . .. . . . .. . .. . 1 2Customers . . . . .. . . . . . . . .. . . . . . . . . ... . . . .. . . . . . . . . . ... . . . ... . . . ... . ... . . . . .. . . . ... . . . ... . . . . . .. . . . . . .. . . . .. . . . . .. . . . . . . . ... . . . ... . . . . . . . . ... . . . . . . . ... . . .. . ... 1 3Selected Customer List . . . ... . . . ... . . . . . .. . . .. .. . .. . . . . . . . . ... . . . ... . . . ... . . . ... . . . . . .. . . . . . .. . . . .. . . . . .. . . . . . . . ... . . . ... . . . . .. . . .... . . . . . . ... . . .. . ... 1 3Competition . . . . . . .. . . . . . . . . . . . . ... . . . ... . . . . . .. . ... . . . ... . . . ... . ... . . . ... . . . . .. . . . ... . . . . . .. . . . . . .. . . . .. . . . . . . . . . . . . . .... . . .. . . . .. .. . . ... . . . . . . . ... . . .. . ... 1 3Financials . . . . . . . . . . . . . .. . . . . . . . . . ... . . . .. . . . . . . . . . ... . . . ... . . . ... . .. . . . . ... . . . ... . . . ... . . . . . .. . . . . . .. . . . .. . . . . .. . . . ... . ... . . . ... . . . . .. . . .. . . . . . . . . ... . . .. . ... 1 4Corporate Governance . . . . . ... . . .. . . . . . . . . . ... . . . ... . . . ... . . . . .. . .. . ... . .. . . . ... . . . . . .. . . .. . .. . . . .. . . . . .. . . . . .. . .. .. . . .. . . . . . .. . . ... . . . .. . . ... . . .. . ... 1 7Management .. . . . .. . . . . . . . . .. . . . ... . . . . . . . . . . . . . ... . . . . .. . . . ... :. . . . . . . . . ... . .. . . . ... . . . .. . . . . .. . .. . . . .. . . . . . . . . . . . . . ... . . . .. . . . . . .. . . . . .. . . . . . . ... . . .. . ... 1 7Board of Directors . . . . . . . . . . ... . . . .. . . . . . . . . . ... . . . ... . . . ... . . . . .. . . . . . .. . .. . . . ... . . . .. . . ... . . .. . . . ... . . . . . . . . . .. . ... ... .. . . .. . .. . . . . .. . . .. . . ... . . .. . ... € S

FIGUAESrFigure 1 . Household Broadband Subscriber Growth . . . . . . .... ... . . . . . . . . . . . . . . . . . . . . .. .... . .... .. .. . . .. . . . . . . . . . ... . ... . .. .. . . . . . . . . . . .... .. . .. .... ... ..... aFigure 2 . Supportsoft - Channel Contribution . . . . . . . . . . ... . .... ... . . . . . . . . . .. . . . . . . . .. .. .... ..... .. .. . . .. . . . . . . . . . .... ... . .. . . . .... .. . . . . .. . . . . .. . .... . ... . 1 2Figure 3 . SupporlSoft's Customers .. . . .... .. . . . . . . .. .... ... . . . .. . . . . . . . . . .. . . .... ..... .... .... . . . . . . . .. . . . . . . . . . .. . . .... .... . ... ... .. . . ... .. . . . . .. . . . . . . . ... ..... . 1 3Figure 4 . SupportSoft -- Revenue Breakdown (License vs . Subscription) . . . . . . . .. . . . ... .... . .. .. . . . . .. . . .... .... . . . . . . . . . . . . . . . . . . . . ... . . ... .1 6Figure 6 . SupportSoft - Financial Metrics .. . . . . .... ..... ... . . . . . . . . . .. . . . .. . . .... . ... .... . . . . . . . . . . . . . . . . . . .. .. .... . ... . . .. . . . .. . . .. . . . . . . . .. . . . . . . . ... ..... . 1 7Figure 0 . SupporiSoft - Pro Forma Income Statement .. .. . . . . . . . . . .. . . .. . . . .. . . .... .. .. . . ... . . . . . . . . . . .. . ... . ... . ... . . . . . . . . . . . .. . . . .. . . . . . . . ... .. ... .1 9Figure 7 . 8upportBoft - Income Statement Metrics ..... .. . . . . . . . . . . . .. . . .. .. . .. . . ... . . . .. . . .. . . . . . . . . . . . .. . ... . ... . ... . . . . . . . . . . . . . . . . . . . . . . . . . ... . . ... .20Figure S . Support8oft - QAAP Income Statement.. .. . . . . . . . . . . . . . ... . .... . . ... . .. . . . . . . . .. . . . . . . . . . . . .. . ... . ... . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . ... .2 1Figure 9. SupporlSoR -- Balance sheet .. . . . . . . . . .... .... . .. . . . . . . . . . . . . . . ..... . ... .... . ... . . . . . . . . . . . . . . .. . . .. ...... .. . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . .. . . ... .22Figure 10. SupporISott- OAAP Cash Flow Statement .. . . . . . . . . . . . .. . . .. .. . ... . ... . . . .. . . .. . . . . . . . . . . . .. .... .. .. . ... . . . . . .. . . .. .. . .. . . . . . . . . . . . . . . .. . .23Figure 11 . SupporiSofl - Veluallon Shee1 .. . . . . .... ..... . . . . . . . . . . . . .. .. .. . .. . ... .... .... . . . . . . . . . . . . . . .. . .. ... . ... .. . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . . . . ... . 24

4

8upportSoll Ino -July 27,2D04

Investment Overview

Supportsoft survived the SupporiSoft has nimbly navigated a treacherous landscape, surviving both the dot -dot-corn Implosion and com implosion (the company was formerly Support.com) and the demise of the

the demise of theIndependent broadband independent broadband provider (Excite 0 Home was an early, large customer) an d

provider. emerged with a many-faceted product footprint and a diverse addressable market .We do not believe the land mines have disappeared, but the company's prove nexecution and significant product portfolio should help it steer its way through .

Mode l Assumptions and EstimatesWe expect that SupportSoft should be able to substantially exceed our es timatedsoftware industry growth rate of 8%-l0% during our five-year forecast period .While the larger systems management market, of which we consider SupportSoft amember, has challenges with declining mainframe sales and high penetration of corefunctionality , SupportSoft differentiates itself from the group by addressing themanagement of end -points like PCs and PDAs . The management of end-points

benefi ts from the move to distributed systems and has little penetration . Indeed, inthe competitive section , we note that many of the traditional systems managementvendors are looking to this area as an expansion opportunity .

For the company' s third qua rter 2004, ending September 30, 2004, we currentlyforecast revenues of $17. 1 million (up 26% year over year) and BPS of $0 .09, in linewith the company 's guidance of $16 .7-$17.5 million in revenues and $0.08-$0.09BPS. Our revenue estimates for fiscal 2004 -06 are $68.0 million , $75.6 million, and

88.7 million , respectively. The 11 % revenue ramp in fiscal 2005 reflects ourconservative view on the company's ability to replace the revenues from an eight-figure deal that it signed in third quarter 2003 and is recognizing over Eve quarters .Our revenue growth assumption rebounds in fiscal 2006, Our BPS estimates forfiscal 2004-06 are $0.37, $0.29, and $0.34, respectively . The decrease in EIS fromfiscal 2004 to fiscal 2005 reflects our assumption that the company will be reportingtaxes at a normalized tax rate in fiscal 2005 versus the 11% tax rate being used thisyear. This implies the company will record a one- ti me gain in December 2004 as itreverses the reserve on the deferred tax asset attributable to its remaining NOLs,which we estimate at $24.5 million after first quarter 2004, The company guidedfiscal 2004 revenues and BPS to $66-$69 million and $0 .34-$0 .37 respectively .

Valuation

For SupportSoft , we used two primary methods to de rive our valuation . The first isdiscounted cash flow (DCF) analysis . For our DC? analysis, we fully model thecompany ' s income statements, balance sheets, and cash flows to a terminal year, inexcess of 20 years out, to determine free cash flow in each of the years . At thatpoint , we believe the company will be at terminal cash flow growth rates

approximating GDP growth rates (generally 3%). For our DCF analysis , we use arisk-free rate of 4.5% and an equi ty risk premium of 5%. Our second valuationmethod is a PIE analysis based on a five-year forward business model, where weforecast a five-year revenue compounded annual growth rate (CAGR), normalize d

cttigroupTSmith Barney

Suppori5oft [no -July 27, 2004

operating margins, and an expected PIE multiple in order to derive a valuationnormalized for what we believe is the company's mature operating model .

Our $11 .5 0 target price for SupportSoft is based on both our DCF and PIE-based

methodologies . To estimate beta, we analyzed the historical beta of a basket ofsoftware stocks for an eight-year period, excluding a period from 1999 to 2000,which we define as "The Bubble ." This analysis suggested that a beta of 2 .0 was a

reasonable value to use as a forward - looking number for many of our softwarestocks. Companies that are more matu re , having slower growth rates and/or a higherpercentage of recurring revenues, would have a beta less than this typical number .For our DCF analysis , we employ a beta of 2.0, a terminal free cash flow (FCF)multiple of 8.7x, and a weighted average cost of capita l (WACC} of 14. 5% . Thisanalysis suggests a value of $11 .60 per share.

For our P/&based methodology, we fi rst projected net income five years forwardbased on a rive-year revenue CAUR of 20%, a normalized operating margin of 25%,and a tax rate of 32% . The 25 % operating margin is typical for our softwarecompanies with a low percentage of professional services. We then applied amultiple of 24x to this net income projection and discounted this number to thepresent , which suggests a stock price of $11 . The 24x multiple represents a 1 .4xpremium to the S&P 500 market multiple . For our l Ax market premium, wecompared a basket of software stocks' multiple to the S&P 500 multiple over aneight year period, excluding a period from 1999 to 2000 which we define as "The

Bubble ." Our conclusion from this analysis is that because of what we be li eve are

attractive aspects of the software company business model , software companiestrade at a 1 .4x premium to the S &P 500 multiple. As our P!&based valuation isbased an full tax rates and does not Include an allowance for lower tax payments asa result of loss carryforwards, we add $0.55 to our targetprice to allow for thepresent value of the $25 million deferred tax asset, giving a total target price of$11 .50.

RisksWe rate SupportSoft shares Speculative risk due to high share price volatility, mid-cap market capitalization , and significant customer concentration .

Risks to our target price for SupportSoft include ;

The company frequently has customers that account for more than 10% of itsrevenues. If the company were unable to close a sale of this magnitude in agiven quarter it could have a significant negative impact on the stock . The riskis mitigated somewhat because a significant portion of its revenues is not in theform of perpetual license sales that are recognized as revenues in the quartersold.

SupportSoft Is exposed > The company gets a significant portion of its revenues from the broadban dto the fofunes of the industry, particularly cable providers. As such, SupportSoft is exposed to thebroadband Industry. foffuiies of this Industry as well . We note that there has been significant M&A

activity in this industry, which can create additional exposure as well asopportunity .

SupporiSoil Inc --,luty 27, 2004

D The company's target market on the corporate side has seen an increasing

amount of interest from some larger and better- capitalized players, includingMicrosoft , HP, and Symantec . If any of these players are effective at developingsolutions , their broad distribution channels and large product footprints couldmake it difficult for SupportSoft to expand this market .

Software companies traditionally have back-end-loaded quarters, thus givingvery little visibility to license revenues .

Y The company has a poor track record of maintaining and growing itssubscription revenues. To the extent a decline in this revenue stream decreasesthe company's visibility, investors may not be willing to pay the same multiplefor the company .

Lost qua rter, ) In the most recent quarter, the company added only three new customers . If thesuppartSatt added only . company is unable to increase the number of customers it is adding, it will b e

three now customers. difficult for it to continue to grow its revenues .

If the impact on the company from any of these factors proves to be greater than weanticipate, the stock could materially underperform our target.

Industry

It is difficult to size the market for support automation because of the fragmentedmarket and multitude of solutions including a lot of support still being provided witha manual approach . To analyze the market opportunity for SupportSoft, we lookedat the broadband service provider market and the information technology support

market as the two demand drivers for the company's products . Based on ouranalysis, we believe the company can grow revenues at an annual 20% rate over thenext five years .

Broadband Service Provider and OEMsWhile their businesses are quite different , broadband service providers and originalequipment manufacturers . (OEMs) face a similar challenge --- managing theunmanaged . With no control over the software or configuration changes theircustomers are making, these organizations nonetheless often receive the supportcalls to repair the damage . We.found in our due diligence , this kind of complexitywas often the most important driver of SupportSoft adoption. For these companies,customer support is business critical - thus they have been wil li ng to adopt supportautomation software even in a challenging spending environment .

Since its inception , the broadband service providers have had a challenging businessmodel, numerous competitors , falling prices, and significant technology complexity.These providers need solutions to help decrease the cost of installing and servicingtheir customers . Broadband subscriber growth, churn caused by the entrance of newoptions, and International expansion will drive this business for SupportSoft. Inaddition, SupportSoft continues to expand its product offering for these customerswith functionality live assist, knowledge base capabilities, and more supportchannels . One challenge in this market is our belief that there is unit price pressureon solutions , and that new functionality is largely maintaining pricing rather tha n

citigroup'''"Smith Barney

Support5ott Ino --July 27, 2004

expanding it. With the high end of the U.S . market seemingly spoken for, U .S .growth should largely mirror household broadband subscriber growth, which ourInternet analyst, Lanny Baker, estimates at 32% in 2004 and a five-year CAGR of

17%. Additional momentums for broadband will be delivered by international

markets, which are largely unpenetrated . For this reason we peg the subscribergrowth rate here at about 20% over the next five years .

FIGure 1 . Household Broadband Subscriber Growt h

70A ---- - 12 %0 .0

60.0100.0%

60 401

.80.0%

40.0

00.0%30 0 -.

20 0040.0%

..

90 0 20.0 %.

0 0 0 0%. .2004 2002 2003 2004E 2005E 2006E 2007E 2008 E

U8 Broadband l4ousehokis'.'YIY f3vewth (Right Axis)

f.

f 0

l

s !

~r

I

Smrex Canpanylepocu and SmiS Samey esOnsisa

Information Technology Suppor tW. think SupportSalt While not as costly as sending a trick to a customer's premises, sending an I T

could grow Ito IT support support person to visit an employee's desk is still quite expensive . Although supportbusiness at a 2D °.6 25%

CAQR for the next five automation in the organization has cost saving and productivity-improving value, i t

years, is not business critical for many organizations we have spoken to, and thus w ebelieve an improving IT spending environment would be necessary to make dollar swidely available for this type of solution . We found it interesting that th eoutsourcing firms like Accenture and ADP are adopting this technology when theyare outsourcing the support of other firms' IT infrastructure . In this case,productivity and customer satisfaction are business critical for the outsourcer . Webelieve this is a leading indicator of the value of the solution that will translate int obroader adoption with more plentiful IT spending. With a very underpenetrate dmarket, the growth potential here could be quite large, yet we believe this marke twill be quite competitive, as we discuss later . We believe that with properexecution, SupporiSoft could grow this business at a 20%a-25% CAGR for the nextfive years.

S ipportSott ono-Juiy27. 2004

company

SupportSofl, based in Redwood City, California, provides software that helpsmanage and even automate the resolution of software-based technology issues forcomputers and computing devices . The company's solutions have resonated wit hthe cable broadband industry, outsourcers of corporate information technology, and

internal information technology departments that are seeking to minimize theexpense associated with managing an increasingly complex software landscapeacross all manner of devices .

Supportsoithas grown Founded in 1997, the company went public in July 2000 at $14 per share . DespiteIra 110ens 8 revenues In an early stumble, the company has demonstrated strong execution, meeting or

each of thelast II exceeding its initial targets for cash flow breakeven and profitability. The companyquarrera

has the enviable position of growing license revenues sequentially for 12 quarters asof second quarter 2004, a feat achieved by only three other software companies Inour screen of the software companies in the Russell 3000 software companies.

Technology and Solution sSupportSoft offers suites of products to address service and support automation forvarious end point computing devices like the PC and the PDA . The SupportSoftwebsite contains a complete product and technology overview . In an attempt todistill this information into something more meaningful for investors, we look at theSupportSoft offerings by the end markets they address .

Technology

SupportSoft's products are built around the concept of Real-Time ServiceManagement (RTSM), which strives to reduce human interaction by proactivelyassessing and addressing problems/situations as they arise, resulting in service andsupport automation. RTSM is built around the company's DNAT' Architecture,which provides a record of all changes, thus providing a consistent and reversibleenvironment for addressing support-related issues as they happen. SupportSoft'sproducts can be deployed as stand-alone products or as an integrated suite . Theproducts work together to promote automation of support services and support

processes across support channels, thus requiring less human interaction anddecreased human support interaction.

The company uses its Smartlssue Technology to collect personal information aboutthe user, the system, and the current incident. The Smartlssue Technology thenrelays this information to the support tools or personnel that are best equipped to

handle the situation . By using the Internet and a unified, transactional metadatalayer, SupportSoft is able to integrate its solution with any support provider . TheSmartIssue technology is complemented by the company's DNA Probe-, whichimmediately identifies the user's software applications and operating systemcomponents and tracks them over a period of time . The DNA Probe- technologyalso identifies all of the network settings, which helps support organizations providea more personalized-support solution.

citigrou "'Smith Barney

SuppoitSoft I no -• July 27, 2004

SupportSoft uses its patented Software Vaults to effectively deliver solutions upondiagnosis. The Software Vaults contain a large number of files and support actions,residing locally or in a network environment, which are made available to helpaddress the problem . The Software Vaults are unique in that they will addressproblems in a logical sequence, providing the necessary replacement files in a timelyfashion, thus allowing the servers to support thousands of users .

Other SupportSoft technologies include the S'marfResultlM System, which is acontext-sensitive platform that leverages the company's SmartIssue informationwith solution retrieval technology in order to automate problem response resolutionfor "how to" and "it doesn't work" questions. The SmartResultTM System providesthe right answers by gathering and analyzing context-sensitive information andcomparing It to defined data structures, which In turn provides real-time solutions.

SupportActionsrM is a tool for quickly resolving support problems by providing apoint-and-click interface that supports multiple languages, including Java, Perl, andVisual Basic. SupportActionsIm can be used for Virus Updates or patches acrossmultiple desktops .

SupportTrlggers m is a real-time support tool that enables the problem resolutionprocess to begin before the problem has been identified by the user .SupportTriggers are events that reside within the application that provide a nautomatic support response .

Solutions

Broadband ProvidersOroedband compnntee This is a large market for the company, regularly accounting for approximately 50%

regularly eacount for of the company's revenues. The company claims six of the seven largest broadbandroughly

of companies as customers and these customers deliver multi-million-dollar6upporiSont s revoenues.

transactions.

Support AutomallonBecause there is no standard PC configuration, broadband providers face

tremendous challenges in making sure their customers' computers can get online.This diverse, unmanaged environment is well suited to an automated support

solution, and this Is where SupportSoft first gained traction with the broadbandproviders. By understanding the configuration change that may have caused acustomer's connection problem, and enabling either faster or completely automatedresolution of the problem, SupportSoft reduces support costs .

Automated Installation

This is a newer addition to the company's product line . Formerly, it partnered withBroadyump, which was acquired by Motive, for this capability . Since developing itsown solution, SupportSoft has been aggressively working to replace competitors inits support tools installed base with its SmartAccesOm offering . In the early days ofbroadband In the home, it-was not unusual to have several trucks visit your house toinstall equipment and to 1'the connection . With continuing price pressure and nomore equity dollars to fund that kind of madness, cost .effective, automatedinstallation Is key to the provider's business model .

10

SuppottSoit Ino-Judy 27, 2004

Additional OpportunilleaThe company is developing and marketing new products that it hopes will further its

penetration of the broadband provider wallet . Some of these initiatives includeHomeNetTM (a home networking installation product) and a development effort with

Scientific Atlantic to embed support automation software in its digital video set-topbox .

Corporate Enterprise

Support Automation

While based on the some underlying technology as the broadband supportautomation products, the corporate products leverage the more extensiveconfiguration information and greater control over the environment . Here there ismore emphasis on resolving problems before they occur with functionality like autorelease and resolve which can also help with virus remediation . Other functionalityaids IT operations with auto discovery and metering functionality, problem tracking

and a knowledge base .

Additional Opportunitie s

While we believe the company's products are largely being used to manage PCs, webelieve there will be a burgeoning opportunity to manage the proliferation of ?DAs ,smart phones, and wireless devices .

OEMSomewhere between the enterprise and the broadband provider is the OEM thatwants to improve the customer service on its products . Here, companies like IBMutilize the SupportSoft products to better diagnose and repair what they don'tcontrol, namely the software conflicts and errors that can cause the equipment to notperform: as intended . We believe it is unlikely that new products will be developedfor this market,

Business Made [SupportSoft employs a traditional enterprise license, maintenance, and services

model, with one twist. In addition to selling a perpetual license, the company offers

a variety of term options and payments plans to its customers . Term revenues havethe advantage of giving the company better visibility to its future revenues than mostsoftware companies. The majority of the company's revenues come from directsales to end users. Because the broadband providers can enter into large contractswith the company, SupportSoft often experiences significant customer concentrationin its quarters . The company has little OEM products so license levenues runbetween 98% and 99% of gross margin . Maintenance contracts, which typically runat 18% of the initial license annually, cover both support and upgrade rights .

Maintenance is not charged separately on the subscription contracts because it isbundled into the subscription price. The company offers training andimplementation services as well .

citigroupSmith BarneyITIMMINM 11

SupportSofl Inc--July 27, 2004

The contribution from As the company's solutions have become more proven, and it expands itsratableNaenan revenues geographic footprint and sells into the enterprise more frequently, the contribution

has continued to faH from ratable license revenues has continued to fall . We view this as a natural

evolution for the company. We note that in the fourth quarter of 2003 there was abreak in this trend caused by the first of a series of five payments to be made under alarge contract, yet as we look at first quarter 2004, the trend continues, and unless a

new significant customer is signed to replace the revenue stream that ends in thefourth quarter of 2004, there will be a significant drop in license revenues in thefollowing quarter.

DistributionThe majority of license revenues are delivered by SupportSoft's 24 quota-carrying

sales reps (as of first quarter, 2004), but the company also counts on channelrelationships to help support its license business . In recent quarters, 10%-30% ofSupportSoft's license revenues have come from its channel . Channel partnersinclude managed service providers like Accenture, CSC, and IBM Global Serv icesand other vendors that incorporate the SupportSoft product into their own -- likeSiebel, which incorporates SupportSoft into its Employee Relationphip ManagementProduct, and IBM, which has installed the software on its ThinkPad, NetVista, andNetfinity lines.

Figure 2. SupportSoft" Channe l Contribution

12

Source "arty iepodsandSmi[hBamgq

Suppo rtSoll Ina - July 27, 2004

I CustomersSupportsoft has about We estimate the company has about 200 customers . Approximately 50% of its

200 oustoinera revenues come from its broadband provider customers, the majority of which are

cable broadband providers, while the remainder comes from IT departments of largeorganizations , managed service providers, and OBMs . We estimate that OEMsaccount for less than 5% of revenues .

For a little more color, we analyzed the company's 2003 10-K, which lists 45customers that generated revenues or orders of more than $ 100,000 in 2002 and2003. Of these, I t are broadband customers and the balance is made up ofenterprises and managed service providers . It is interesting to note that if we applythe quarterly revenue splits over this time period the broadband customers generated$40.9 million, or $3 .7 million per listed customer, while the other customerscontributed $53 .6 million, or $1 .6 million per listed customer. Admittedly the actualnumbers here are suspect as a result of timing issues and not accounting for smallercustomers among other things . Nevertheless, we believe the magnitude of thedifference is illuminating.

The company has limited international exposure as it is just beginning to build up itscapabilities . In the most recent quarters, International revenues have contribute dabout 10% of sales .

Selected Customer ListFigure 3, Su purtseft 's Customers

Enterprise3MQmn er 'ADP, Ino .BanhofMrerka C.rnparioanrllWeTetecair~amicadaas ptaam sygm Ina.ckwel B1WWc CarnpaayLwmzcdMarlacorpomaonMadllrynnhSr31tnierW0Zncs, hasSWoe ISy ,im .ThePrader &C~a hto C ari4aiprTba m" 3 hw W Inc.weahingwnMmual,Tn%

oateourcer s and OEMAoaonliavtimitedAffiBated Compute Services, Hp,AutometedSyittmv (HK)LtMtcdCap Germs Hrnet & Yang UKploCMQULIATMCPS ,-Cmpft ScLi= Cop=tan

HWCtt-1 ect®MCompanyMMCbrpomtlon?ootSyntean Corporation

BroadbandAdclpblaCWnm loroCorpoaellon

BdUsV b cceporadonCarter c mmlesgone.Ina.o mcestCbrporntion0womnM cadmM, Ina.SflC(bi malc tloas,rno.iWIMmern, AB

ThoattSpAt}PCNlederlend

Snorer. Company repots and GTO Barney

CompetitionsupponSof tecee litUc In the broadband and OEM markets, SupportSoft faces little competition . We view

competition In the Motive as the primary competitor in these markets . It seems that these twobroadbandand OEM

competitors have largely sewn up the U.S . market with Motive having the advantagemarkets ..with the DSL providers and SupportSoft having a commanding lead with the cableproviders . Other than the periodic takeaway, that would likely be quite pricecompetitive, we believe the opportunity in this market is one of footprint expansion .

cltlgroup" 0'Smith BarneyEMIYAMEMnam 13

SupportSoa Inc - JVIy 27, 200 4

. . .But the corporate The corporate market is quite a different story . The approaches to supportmarket lee different automation range from the brutish to the sophisticated and there is often a range of

story .. options that can be taken to address the pain point a particular organization is

experiencing . Beyond its core support automation technology, SupportSoft hasextended its functionality with offerings that are core to other vendors . Examplesinclude asset discovery from Peregrine and MRO software, knowledge managementfrom Primus Knowledge Systems, and software patch management from Marimba

and Microsoft. In addition, while we believe SupportSoft's sophisticated approachto system recovery is vastly better than the brutish full system restore offered by asolution like Symantec's Ghost product, it does not prevent these other productsfrom competing in the marketplace . To make the competitive landscape morechallenging, a number of vendors have recently been showing interest in directly

competing in support automation, We believe that SupportSoft might also faceAlteris, Microsoft, Symantec, Veritas, Motive, or Quest in competitive situations,depending on the specifics of how the customer defines its problem . In thecorporate market, we also believe that the decision to not prioritize supportautomation could be the most challenging factor in a tight IT spending environment.

. . .And don 't forget We can't ignore Microsoft's activities in and around this space, Windows XP, whileMicrosoft. still gaining traction in the corporate market, offers a number of significan t

enhancements to automate support activities including enhanced remote controlfunctionality and a renewed focus on patch management in order to stem the virusproblem. XP SP2 is to include more patch management functionality and thecompany has released an improved versions of SMS (Systems Management Server),Its software distribution product. In, addition, it has expanded the capabilities ofSUS (Software Update Server), its free distribution product to cover a largerproblem set .

Financials

Our revenue estimates for 2004-06 are $68 .0 million, $7.5 .6 million, and 88.7million, respectively . The 11 % revenue ramp in 2005 reflects our conservative viewof the company's ability to replace the revenues from an eight-figure deal that it

signed in third quarter 2003 and is recognizing over five quarters . Our revenuegrowth assumption rebounds in 2006 . Our BPS estimates for 2004-06 are $0.37,$0.29, and $0 .34, .respectively. The decrease in EPS from 2004 to 2005 reflects ourassumption that the company will be reporting taxes at a normalized tax rate in 2005versus the 11 % tax rate being used this year. This implies the company will record aone-time gain in December 2004 as it reverses the reserve on the deferred tax assetattributable to its remaining NOLs, which we estimate at $24 .5 million after firstquarter 2004 .

14

Suppo1 1S011 no -July 27, 2004

FIBure 4. $upportsait- Revenue Breakdown (License vs . Subscription)

Supportso/t will likely We believe the company is running quite lean and will have difficulty improvinghave difficulty Improving operating margins in the near term. Sales headcount has not kept pace with theoperating margins In the

company's growth and will need to expand in order to continue to grow and as theneartelm.average deal size declines with higher penetration of the corporate market . Researchand development spend will need to increase as the company competes againstlarger and better funded enterprises in the corporate market ,

Cash Flow and Balance Shee tAs with most software companies, cash flow modestly exceeds earnings as workingcapital liabilities grow slightly faster than working capital assets and there is verylittle capital invested in the business. In addition, NOLs should provide $20 millionof cash flow improvement on GAAP results in 2005 and beyond . Our estimates forfree cash flow in 2004-06 are $37 .1 million, $14.3 million, and $17.6 million,respectively.

SupportSoft has $128 million in cash and no debt.

Recent Results

In Its fiscal second quarter of 2004, SupportSoft posted $16 .9 million of revenues,beating guidance of $16.0-$16 .4 million . Revenues were up 34% year over yearand the company continued its streak of sequential revenue gains, up 7 .5% versusfirst quarter 2004. EPS came in at $0.11 versus guidance of $0 .08-$0 .09 andconsensus of $0.08.

citigrou iSmith Barney

15

5awce: Comm rWft and Smllh Gamey ee5matoe

6 upporl,90 tw -July 27.2004

Financial Metric sThere are several financial metrics that we believe are significant for investors topay attention to:

DSOs have been erratic as a result of the timing of large payments and changesin international revenues. While we believe 64 days is lower than expected, wewould also prefer not to see them spike back up to the 100-plus range of 2002 .

Customer concentration remains a concern with large deals being essential tomaking each quarter's numbers . While ASPs have fallen as a larger number ofsmall deals fill in the bottom, the elephant deal remains essential . As thecompany continues to grow, the occurrence of 10%-plus customers should

diminish.

Y International business is largely an untapped market for the company, averagingless than 10 0 of revenues over the last four quarters.

Y. Sales productivity is likely unsustainably high -7 few companies have $2million annual sales quotas per rep, much less a team that is averaging this . Inorder to continue to grow, it is likely this productivity will fall as the company

expands its salesforce .

16

SuppoFtSolt Ira -July 27, 2OD4

Figure 5. tiu portSoft-. Fiaanciai Memos

4si

Sarre Company rapo0a and Smal Damey eallmales

Corporate GovernanceWe believe SupportSoft is one of the more exemplary companies in the softwareindustry on the issue of corporate governance, especially for its size . Some of thefactors that we point to In support of this conclusion include:

Y Majority of board members are independent .

Y Company refrained from repricing options when the stock fell substantially fromits post-IPO levels.

In 2002, when executive loans became it hot issue, the company moved toquickly have these loans repaid .

Y Option grants appear to be reasonable given the early stage in the company's lifecycle.

ManagementRadhe R. Basu- CEO, President, and Chairman of the Board

Ms. Basu has been SupportSoft's president and CPO since 1999, and was appointedchairman of the board in January 2001 . Previously, Ms . Basu worked at Hewlett-Packard from 1978-1999, where she held various general management positions,including most recently, general manager of the electronic business software

organization.

Brian M. Beattie --- CFO, EVP of Finance and AdministrationMr. Beattie has been CFO and BVP of Finance and Administration since October1999. From May 1998 to May 1999, Mr. Beattie served as VP of finance, mergers,and acquisitions of Norte] Networks . From July 1996 to April 1998, Mr . Beattie

citigroup'l'Smith Barney

17

Support3ott Inc - July 27, 2004

served as group VP of Meridian Solutions of Nortel Networks. From February 1993to dune 1996, Mr. Beattie served as VP of finance, Enterprise Networks, for NortelNetworks.

John Van Sicien - Senior VP of Worldwide Sates and Service sMr. Van Siclen is responsible for SupportSoft's worldwide sales and customer-facing services operations, including direct sales, channels and managed serviceprovider business, and global services . Previously Mr. Van Siclen was president andCEO at Interwoven Inc . Mr, Van Siclen has 25 years of sales and services expertisein helping build global enterprise sales, field services, and business operations.

Chris arettek -- Senior Vice President of Products and MarketingMr. Greitak was previously the senior vice president of Worldwide Marketing forPortal Software, where he was responsible for Portal's product, services, andsolutions strategy as well as marketing and corporate communications . Prior toPortal, Mr. Greitak was chief marketing officer for Broadvision .

Scott W. Dale - Vice President of Engineering

Mr. Dale has served as the chief technical officer since the company's incorporationin 1997 and recently assumed the position of VP of Engineering. Prior toSupportSoft, Mr. Dale worked briefly as a software consultant for M&I DataServices. . From July 1992 to January 1997, Mr. Dale served as a,,software consultantto Hewlett-Packard .

Cadir B. Lee - Chief Software Officer and Founde rMr. Lee has served as the chief software officer since the company's incorporationin 1997. His primary responsibilities include product management, strategictechnical direction, and product architecture . From 1995 to 1997, Mr. Lee served asa consultant to Hewlett-Packard .

l .uclife K . Hoger - Vice President of OperationsMs. Huger has been VP of Operations since February 2000 . From 1996 to 2000, shewas the chief operating officer at Connectlnc .com. From 1992 to 1995, she was aprincipal for Gemini Consulting, an affiliate for Cap Gemini .

Board of DirectorsRadha R . Basu - President, chairman, and CEO

Manuel Diaz - Retired vice president, Hewlett-Packard Co .

Kevin C. (Casey) Eichler- Vice president and CFO, MIPS Technologies

Claude M. Leglise - Vice president, Inte l

Edward S. Russell - General partner, Diamondhead Ventures

Jim Thanos - Former executive vice president and general manager of WorldwideField Operations at Broadvision

Dick Williams - President and CEO, Wily Technologies

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Notes

cipgroujSmith Barney

OMMORM 25

Suppo rl Solt Inc -- July 27, 2004

ANALYST CERTIFICATION Appendix A-1

1 . Mark Verbeck, hereby certify that all of the views expressed In this research report accurately reflect my personal views about any andall of the subject Issuer(s) or secu rities. I also certify that no part of my compensation was, is, or will be di rectly or Indirectly related to thespecific recommendallon (s) or view (s) In this report.


pportSoft Inc (SPRT)ngs and Target Price Historyet: Mark Verbock covereddnceJul 1d200 4

AOONDJ FMAMJJASONDJFMAMJJA80NDJFMAMJJ2002 2003 2004

-~- Covered aee' tmpwfant Dladosures' et the and of Ws repod for'•. ... . P or coversd adeacrtpUon of the Nm's ourrsnt and torrnsr raring syalems

Ta1gat1-11, 111120 Data Ftatng Price Pelee

1 : 6 Sep 02 Stook rating system changed2 : 12 Se p 03 S !ork r&Ingsystem changed3; 13 Jul 04 18 '11 ,fre 7.05

'rndlcates chang e

Within the past 12 months, Citigroup Global Markets Inc . or its affiliates has acted as manager or co-manager of a public offering ofsecurities of SupporlSolt Ina .

Cttlgroup Global Markets Inc . or its affiliates has received compensation for Investment banking services provided within the past 12months from SupportSoft Ina .Citlgroup Global Markets Inc . currently has, or had within IN past 12 months, the following company(Ies) as imvesiment bankingclient(s): SupponSoit Ina.

Cllig ro up Global Markets Ina . currently has , or had within the past 12 months , the following company(Ias) as clients, and the se rv icesprovided were non-Investment - banking, soourities- related : SupporlSoft Inc.

Cillgroup Global Markets Ina . or an affiliate received compensation In the past 12 months from SupportSol Inc.Analysts' compensation Is determined based upon activities and se rvices Intended to benefit the Investor clients of Citigroup GlobalMarkets Inc . and Its affiliates (°the Firm'). Like all Firm employees, analysts receive compensation that Is Impacted by overall firmprofitability. which includes revenues from, among other business units, the Privale Client Division, institulionat Equities , and InvestmentBanking.

The Finn Is a market maker In the publicly traded equity securities of SupporlSoft Inc .

Smith Barney Equity Research Ratings DistributionData current as of 5o June 2004 Buy Hold SellSmith Barney Global Equity Research Coverage (2402) 40% 43% 179/6

% of companlas in each mafing category that are lnvestmenl franking clients 68%_ 56% 46%Software -- North Amertoa (16) 44% 58% 0%

of companies In each rating category that are Investment banking clients 14% 11% 0°%Guide To Investment Ratings:Smith Barney's stock recommendations Include a risk rating and an Investment rating .Risk ratings, which take Into account both price volaitully and fundamental criteria, are : Low IL), Medium (M), High [H], and Speculative[S] .Investment ratings are a function of Smith Barney's expectation of total return (forecast price appreciation and dividend yell within thenext 12 months) and risk rating .For securities In developed markets (US, UK, Europe, Japan, and AusirellatNew Zealand), Investment ratings are : Buy [i] (expectedtotal return of 10% or more for Low-Risk stocks, 15% or more for Medium-Risk stocks, 20% or more for High -Risk stocks, and 35% ormore for Speculative stocks); I-told [21(0%-10%for Low-Risk stocks, 01/6-116% for Medium-Risk stocks, 0%-20% for High-Risk stocks,and 0-/.-W% for Speculative stocks); and Sell 13) (negative total return) ,Investment ratings are determined by the ranges described above at the time of Initiation of coverage, a change In risk rating, or echange in target price. At other times, the expected total returns may fall outside of these ranges because of price movement and/orvolatility. Such Interim deviations from specified ranges Will be permitted but will become subject to review by Research Management.Your decision to buy or sell a security should be based upon your personal Investment objectives and should be made only alterevaluating the stock's expected performance and risk,

26

Support5ofl Ina --July 27, 200 4

Between September 9, 2002, and September 12, 2003, Smith Barney's stock ratings were based upon expected performance over thefollowing 12 to 18 months relative to the analysts Industry coverage universe at such time . An Outperform (1) rating Indicated that weexpected the stock to outperform the analyst's Industry coverage universe over the coming 12-18 months . An In-line (2) rating Indicatedthat we expected the stock to perform approximately in line with the analysts coverage universe . An Underperlorm (3) rating Indicatedthat we expected the stock to underpetform the analyst's coverage universe . In emerging markets, The same ratings classifications wereused, but the stocks were rated based upon expected performance relative to the primary market Index In the region or country . Ourcomplementary Risk rating system - Low (L), Medium (M), High (li), and Speculative (S) -- took Into account predictability of financialresults and stock price volatility. Risk ratings for Asia Pacific were determined by a quantitative screen which classified stocks into thesame four risk categories. In the major markets, our Industry rating system - Overweight, Marketweight, and Underweight -- took Intoaccount each analyst's evaluation of their Industry coverage as compared to the primary market Index in their region over the following12 to 18 months.

Prior to September 9, 2002, the Firm's stock rating system was based upon the expected total return over the next 12 to 18 months . Thetotal return required for a given rating depended on the degree of risk In a stock (the higher the risk, the higher the required return) . ABuy (1) rating Indicated an expected total return ranging from +159'6 or greater for a Low-Risk stock to +30% or greater for a Speculativestock. An Outperform (2) rating Indicated an expected total return ranging from +5% to +15% (Low-RIsk) to+10°A 10 4,90% (Speculative) .A Neutral (3) rating Indicated an expected Iotel return ranging from -59re to +6°A (Low-Risk) to -10% to+10% (Speculative) . AnUnderperform (4) rating Indicated an expected total return ranging from -5% to -15% (Low-Risk) to -1095 to -20°x6 (Speculative) . A Sell (5)rating Indicated an expected total return ranging from -15% or worse {Low-Risk) to -20% or worse (Speculative) . The Risk ratings werethe some as in the current system.

OTHER DISCLOSURESFor securities recommended In this report In which the Firm is not a market maker, the Flnn usually provides bids and offers and may actas principal in connection with such transactions. The Firm Is a regular Issuer of traded financial Instruments linked to securities that mayhave been recommended In this report . The Firm regularly trades In, and may, at any time, hold a trading position (long or short) In, theshares of the subject compeny(les) discussed In this report . The Firm may engage In securities transactions In a manner Inconsistentwith this researc h report a nd, with respe ct to securities covered by this report , will buy or sell from customers on a principal basis.Securities recommended, offered, or sold by the Finn : (I) are not Insured by the Federal Deposit Insurance Corporation,, (II) are notdeposits or other obligations of any Insured depositary Institution (including Citibank) ; and (111) are subject to Investment risks, Includingthe possible loss of the principal amount Invested . Although Information has been obtained from and is based upon sources SmithBarney believes to be reliable, we do not guarantee Its accuracy and it may be Incomplete or condensed . All opinions, projections andestimates constitute the judgment of the author as of the date of the report and are subject to change without notice . Prices andavailability of financial Instruments also are subject to change without notice. It this Is a fundamental research report. It Is the Intention ofSmith Barney to provide research coverage of thle/Ihese Issuer(s), Including In response to news affecting this Issuer, subject toapplicable quiet periods and capacity constraints. This report Is for Informational purposes only and Is not Intended as an offer orsolicitation for the purchase or sate of a security . Any decision to purchase securities mentioned In this research must lake Into accountexisting public Information on such security or any registered prospectus .Investing In non-U .S. securities, Including ADRs, may entail certain risks . The securities of non-U.S. Issuers may not be registered with,nor be subject to the reporting requirements of the U.S. Securities and Exchange Commission . There may be limited Informationavailable on foreign securities. Foreign companies are generally not subject to uniform audit and reporting standards, practices andrequirements comparable to those in the U .S. Securities of some foreign companies may be teas liquid and their prices more volatilethan securities of comparable G.S . companies. In addition, exchange rate movements may have an adverse effect on the value of anInvestment In a foreign stock and Its corresponding r]ivldend payment for U .S. Investors. Net dividends to ADS Investors are estimated,using wfhhoiding tax rates conventions, deemed accurate, but investors are urged to consult their tax advisor for exact dividendcomputations . Investors who have received this report from the Firm may be prohibited In certain states or other jurisdictions frompurchasing securities mentioned In this report from the Firm. 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Subject to the natureand contents of this document, the Investments described herein are subject to fluctuations In price and/or value and Investors may getbackless than originally invested. Certain high•volattiity Investments can be subject to sudden and large falls in value that could equal orexceed the amount Invested . Certain Investments contained herein may have tax Implications for private customers In the UK wherebylevels and basis of taxation may be subject to change . If In doubt, Investors should seek advice from a tax adviser. This material mayrelate to Investments or services of a person outside of the UK or to other matters which are not regulated by the Financial ServicesAuthority and further details as to where this may be the case are available upon request In respect of this material . This report may notbe distributed to private clients In Germany. It this publication Is being made available In certain provinces of Canada by 01t1group GlobalMarkets (Canada) Inc. 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citigraup'°fL,Smith Barney

27

SupportSolt Inc - July 27, 2004

Plaza, 145 West Street, Sandown, Sandton, Johannesburg 2198 . The Investments and services contained herein are not available toprivate customers In South Africa . If this report Is made available In Hong Kong by, or on behalf of, Citigroup Global Markets Asia Ltd ., ItIs attributable to Citigroup Global Markets Asia Ltd ., Three Exchange Square, Hong Kong . If this report is made available in Hong Kongby The Cltlgroup Private Bank to Its clients, it Is attributable to Citibank N .A ., Citibank Tower, Citibank Plaza, 3 Garden Road, HongKong. This publication Is made available In Singapore through Ciligroup Global Markets Singapore Pte . Ltd. . a Capital Markets ServicesLicence holder.

02004 Citlgrotip Global Markets Inc . Member SIPC. Smith Barney Is a division and service mark of Ciilgroup Global Markets Inc. and Itsaffiliates and Is used and registered throughout the world. Ciligroup and the Umbrella Device are trademarks and service marks ofCiticorp or Its affiliates and are used and registered throughout the world . Nikko Is a sotvios mark of Nikko Cordial Corporation. All rightsreserved. Any unauthorized use, duplication, redistribution or disclosure Is prohibited by law and will result In prosecution . The Firmaccepts no liability whatsoever for the actions of third partios . The Firm makes no representations or warranties whatsoever as to thedata and Information provided In any third party referenced webelte and shall have no liability or responsibility ari sing out of, or Inconnection with, any such referenced webslte .

ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST U807MIO D

28


EXHIBIT 0

1

Afth

citi g rou pi See page 5 for Analyst Certification and Important Disclosure s

Rating Change l

Smith Barney

SupportSoft 1 tS firInc PRTjSpeculative (S)

SPRT: Lowering Rating Based On ValuationMkt Cap : $455 mil.

September 13, 2004 SUMMARY

>- We are downgrading shares of SupportSoft from IS to 28 on valuation an d- continuing concerns on the risk to street '05 numbers and issues such a s

SOFTWARE customer concentration, declining subscription revenues, and small numbers ofnew customers in recent quarters which argue in favor of caution .

Mark Verbeck ) While much of our original thesis remains intact, and we believe this quarter i s+1-415-951-1839 tracking, the stock is up over 55% since July, leaving little upside to our pric emark verbeck®cldgroup.com target .

Alan Tikwart > Admittedly, the company has executed extremely well and new opportunitie s

+1-415-951-1804 like VOW and set-top boxes could cause us to raise our numbers and revisit ou rtargets as these new opportunities become more visible . However, our recen tdata points on these businesses don't give us that visibility today .

Our estimates and $11 .50 price target remain the same. We anticipate the CoreNetworks acquisition will have little impact on our valuation .

FUNDAMENTALS

PIE (12104E).. . . . .... .. . . . . .. .... .. . . . . . . . 29.2x

PIE (12105E).. .. . .... . . . . . . .. .... . . . . . . . . . 37.2x

TEVIEBITDA (12/04E) . .. .... . . . . . . . . . NA

TEV/EBITDA (12105E) . .. ... . . . . . . .. .. NA

Book Value/Share (12/04E) . . . ... .. NA

Price/Book Value ... . . . . .... ... . . . . . ... . . NARevenue (12104E) . .. . . ... . . .. $68.0 mil .

Pro) . Long-Term EPS Growth . ... .. 20%ROE (12/04E) . .. .. . . . . . . .... . .. . . . . . ... . . NA

Long-Term Debt to Caplial(a) . ... . . N A

(a) Data as of most recent quarter

SHARE DATA RECOMMENDATIO NPrice (9/13/04) .. . . . . . .. . .... . . . . .. .. $10 .80 Rating (Cur/Prey) . . . . . . .... . . . . . .. . ..... . 2SII S

52-Week Range . . . . . ... $16 .47-$6.88 Target Price (Cur/Prey) .. . $11 .501$11 .5 0

Shares Outstanding(a) . . . . . . .. .. . 42 .2 mil . Expected Share Price Return .. . . .. 6.5%Dlv(E) (Cur/Prev) . . .. .... . . . . . . . .. .. . $0.00/$0.00 Expected Dividend Yield . . . . .... .. . . .. 0.0%

Expected Total Return . . . . . .. ... . . . . . .. 6.5%

EARNINGS PER SHAREFY ends i Q 2Q 3Q 40 Full Year12103A Actual $0.04A $0.06A $0.06A $0.09A $0.25A12104E Current $0.09A $0.11A $0.09E $0.1OE $0.37 E

Previous $0 .09A $0 .11A $0 .09E $0.101: $0 .37 E

12105E Current $0.07E $0.08E $0 .07E $0 .08E $0.291;Previous $0 .07E $0 .08E $0 .07E $0 .08E $0 .29E

12106E Current NA NA NA NA $0.34EPrevious NA NA NA NA $0.34E

First Calf Consensus EPS:12104E $0,37;12/05E $0.35; 12106E NA

OPINIONBased upon our limited upside to our $11 . 50 target price, we are downgrading shares ofSupportSoft to a (2S ) Hold rating. While there has been little change in the company'sbusiness and we are comfort able with our current estimates of $0.37 in FY04 and $0.29(fully taxed ) in FY05, our estimates are below consensus and we believe the significant riskfactors such as customer concentration (a couple of large customers regularly cont ributemore than 30% of revenue each quarter), a small number of new customers in the mos t

Smith Barney Is a division of Citigroup Global Markets Inc . (the "Firm"), which does and seeks to do business with companiescovered In its research reports. As a result, Investors should be aware that the f=irm may have a conflict of Interest That could affectthe objectivity of this report. Investors should consider this report as only a single factor in making their investment decision .

I

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C`-7!-J


Afth,citigroupSmith Barney

recent quarters (3 and 4 in the last two quarters) and a 2-year decline in subscription revenue(ex the large transaction the company is recognizing over 5 quarters) argue in favor ofcaution . Given these factors, we believe the stock could even trade down in the near term asthere is little upside to our 12-month $11 .50 price target .

THE EFFECTS OF THE CORE NETWORKS ACQUISITION ON OUR ESTIMATES

Street estimates are currently confusing right now due to the fact some analysts haveincluded the impact of the Core Networks acquisition and some have not . The acquisitionclosed last week . While the company has stated that the acquisition should contribute $8million of revenue, we anticipate updating our model to incorporate it after the earnings callas we have little ability to forecast the results of this previously private operation withoutadditional information . When we do model the acquisition, we believe it will have very littleimpact on earnings- When all is said and done, if the rest of the street increases their revenueestimates for the Core Networks acquisition, we are likely to still be $6-$8 million below theStreet's consensus estimates .

THE 20% GROWTH RATE AND 25% MARGINS

Although the Core Networks acquisition appears to be accretive, we believe these gains willbe offset with the needs to build out and expand the company's enterprise business . Becausethe company needs to invest in the enterprise business, our forecasted 25% operatingmargins will be difficult to increase over the upcoming quarters . Our current growth forecastof 20% organic growth excluding the one-time 8-figure transaction is not a modest target ina difficult IT spending environment . This view leaves little room for us to be moreaggressive in our outlook .

We believe the company has additional opportunities in enterprise, Voice-Over-Internet-Protocol (VOID) and set top boxes, but the timing and magnitude is not quantifiable at thistime . Indeed our recent customer checks suggest that despite the release of the ScientificAtlantic set-top box in which a joint SFAISPRT software offering will be available forcustomers, adoption may be a ways off.

MULTIPLE COMPARISIO N

The company is currently trading at an EV/ Sales multiple of 5 .2x FY04 and 4.7x FY05revenues, which is above industry competitor Motive's (MOTV-Not Rated) 2 .2x FY04 and a2.Ox multiple for FY05 . The company's 5 .2x EV/Sales multiple for FY04 is the highestmultiple in our small and mid cap universe .

VALUATIONFor SupportSoft, we used two primary methods to derive our valuation . The first isdiscounted cash flow (DCF) analysis . For our DCFs, we fully model the company's incomestatements, balance sheets, and cash flows to a terminal year, in excess of 20 years out, todetermine free cash flow in each of the years . At that point, we believe the company will beat terminal cash flow growth rates approximating GDP growth rates (generally 3%). For ourDCF analysis, we use a risk-free rate of 4 .5% and an equity risk premium of 5% . Our secondvaluation method is a PIE analysis based on a five-year forward business model, where weforecast a five-year revenue compounded annual growth rate (CAGR), normalized operatingmargins, and an expected PIE multiple in order to derive a valuation normalized for what webelieve is the company's mature operating model .

Our $11 .50 price target for SupportSoft is based on both our DCFand PIE-basedmethodologies. To estimate beta, we analyzed the historical beta of a basket of softwarestocks for an eight-year period, excluding a period from 1999 to 2000, which we define as"The Bubble." This analysis suggested that a Beta of 2 .0 was a reasonable value to use as aforward-looking number for many of our software stocks . Companies that are more mature,

AomkcitigroupSmith Barney

having slower growth rates and/or a higher percentage of recurring revenue, would have aBeta less than this typical number . For our DCF analysis, we employ a beta of 2 .0, a terminalfree cash flow (FCF) multiple of 8 .7x, and a weighted average cost of capital (WACC) of14 .5%. This analysis suggests a value of $11 .50 per share.

For our PIE-based methodology, we first projected net income five years forward based on a5-year revenue (CAGR) of 20%, a normalized operating margin of 25%, and a tax rate of32%. The 25% operating margin is typical for our software companies with a low percentageof professional services. We then applied a multiple of 24x to this net income projection anddiscounted this number to the present, which suggests a stock price of $10 .96. The 24xmultiple represents the 1 .4x premium to S&P 500 market multiple. For our 1 .4x marketpremium, we compared a basket of software stocks' multiple to the S&P 500 multiple overan eight year period, excluding a period from 1999 to 2000 which we define as "TheBubble ." Our conclusion from this analysis is that because of what we believe are attractiveaspects of the software company business model, software companies trade at a 1 .4xpremium to the S&P 500 multiple . As our PB based valuation is based on full tax rates anddoesn't include an allowance for lower tax payments as a result of loss carryforwards, weadd $0.55 to our price target to allow for the present value of the $25 million deferred taxasset, giving a total price target of $11 .50.


Risks to our price target for SupportSoft include;

> The company frequently has customers that account for more than 10% of its revenues . Ifthe company were unable to close a sale of this magnitude in a given quarter it couldhave a significant negative impact on the stock. The risk is mitigated somewhat by thefact that a significant portion of its revenue is not in the form of perpetual license salesthat are recognized as revenue in the quarter sold .

The company gets a significant portion of its revenue from the broadband industry,particularly cable providers . As such, SupportSoft is exposed to the fortunes of thisindustry as well. We note that there has been significant M&A activity in this industry,which can create additional exposure as well as opportunity .

> The company's target market on the corporate side has seen an increasing amount ofinterest from some larger and better-capitalized players, including Microsoft, HP andSymantec. If any of these players are effective at developing solutions, their broaddistribution channels and large product footprints could make it difficult for SupportSoftto expand this market.

> Software companies traditionally have back-end loaded quarters, thus giving very littlevisibility to license revenues.

> The company has a poor track record of maintaining and growing its subscriptionrevenue . To the extent a decline in this revenue stream decreases the company's visibility,investors may not be willing to pay the same multiple for the company.

> In the most recent quarter, the company added only 3 new customers. If the company isunable to increase the number of customers it is adding, it will be difficult to continue togrow its revenue.

If the impact on the company from any of these factors proves to be less than we anticipate,the stock could materially outperform our target . Conversely, if the impact on the company

citigroup `iSmith Barney

from any of these factors proves to be greater than we anticipate, the stock couldunderperform our target price .

INVESTMENT THESI SWe rate shares of SupportSoft Hold/Speculative (2S), with an $11 .50 12-month price target .Our rating is the result of on the limited upside to our price target despite a significantnumber of risk factors which lead us to our speculative risk rating . SupportSoft is wellpositioned to continue its strong position in the broadband provider market. The companyenjoys a strong broadband presence, particularly with United States cable providers .SupportSoft can leverage these relationships into an expanded footprint and new customers,particularly outside the U.S . With only one competitor of note, Motive Communications, thismarket is fairly attractive and unpenetrated . Our cable team notes that the cable providers arestepping up efforts to decrease back-office costs and promote self-installs for theirbroadband business, two trends that will benefit SupportSoft. The company is expanding itsefforts to address the enterprise market . While the company has always had enterprisefunctionality, it is adding capabilities to better address the market, including support formore platforms (PDA and wireless) and new functionality like voice-based assistance . In thismarket, we believe outsourcers like Accenture and CSC are the smart money becausesupport costs and customer satisfaction are key to their business models and therefore, weview the fact that these firms are working with SupportS oft to be a leading indicator of theSupportSoft opportunity in this market . SupportSoft s target markets represent a largeopportunities . The broadband market is estimated to be growing close to 20% annually in theU.S_ and customer self-installs are growing as a percentage of the total with providersoffering incentives for customers to do the self-install . The economics are compelling asSmith Barney estimates that a truck-roll for broadband installation costs the provider $100 .We estimate that the base opportunity here is approximately a $75 million opportunity today,growing to $150 million in 2009. In addition, if SupportSoft extends its solution (which webelieve it will) to address new requirements such as interactive TV and voice-over-1Ptelephony, there is additional upside. As there is limited competition in this market,SupportSoft has the opportunity to capture a significant percentage of this revenue . Toquantify the corporate opportunity we Based on data from IDC, we estimate the totalenterprise opportunity to be 180 million PC s worldwide in use at medium sized or betterorganizations . Using a $10 license opportunity per unit gives us a $1 .8 billionopportunity.That said, the company is stock has appreciated rapidly, leaving limited upsid eto our price target while risk factors have not diminished in recent quarters .

COMPANY DESCRIPTIONSupportSoft is a leading provider of software, collectively known as its Real Time ServiceManagement offering, that aids in the diagnosis and repair of software configurationproblems on end-point devices like PC s and PDA s . This capability reduces the total cost ofsupport for these devices by decreasing the number of support calls and reducing theoccurrence of support staff desk-side visits . The company s offerings also include softwarethat enables broadband customers to establish their connection without on-site support .

4

Aobcitigroup 'iSmith Barney

ANALYST CERTIFICATION APPENDIX A-I

I, Mark Verbeck, hereby certify that all of the views expressed in this research report accurately reflect my personal views about any andall of the subject issuer(s) or securlties . 1 also certify that no part of my compensation was, is, or will be directly or Indirectly related to thespecific recommendation(s) or view(s) In this report.

IMPORTANT DISCLOSURE S

SupporiSoft Inc (SPRT)Ratings and Target Price HistoryAnalyst Mark Verbeck (covered since Jul 14 2004)

Sl e4,

"VI

. . .} .` . . . . . . . . . . . . . . . . . . . . . . . . . . . .M1 . . -- . . . . . . . . . . . . . . . . . . .- . . . . . . . .. . . .

0NDJFMAMJ .1ASONDJFMAMJJASONIJFMAMJJAS2002 2003 2004

- Covered See 'important Disclosums - at the and of Nls repo rt for°•°-- Not covered a description of the firm's current and loaner rating systems

Target Closingtl Date Rating Price Price1 :

6Sep 02 Stock rati ng syslem changed

2: 12 Sep 03 Stock ratio 9 system changed3:13 Jul 04 '18 'i1.o0 7.sa4:20 Jul 04 15 •11.50 7.34

indicates change.

Within the past 12 months, Citigroup Global Markets Inc . or its affiliates has acted as manager or co-manager of a public offering ofsecu rities of SupportS~oft Inc.

Within the past 5 years, Citigroup Global Markets Inc . or its affiliates has acted as manager or co manager of a public offering of equitysecu rities of SupportSoft Inc.

Citigroup Global Markets Inc . or Its affiliates has received compensation for investment banking services provided within the past 12months from SupportSoft Inc.

Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following company(ies) as Investment banking client(s) :S upp ortSoft Inc.

Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following company(fes) as clients, and the servicesprovided were non-investment-banking, securities-related : SupporiSoft Inc.

Citigroup Global Markets Inc. or an affiliate received compensation in the past 12 months from SupportSoft Inc .Analysis' compensation Is determined based upon activities and services intended to benefit the investor clients of Citigroup GlobalMarkets Inc. and Its affiliates ("the Firm") . Like all Firm employees, analysts receive compensation that Is Impacted by overall firmprofitability, which Includes revenues from, among other business units, the Private Client Division, Institutional Equities, and InvestmentBanking.

The Firm Is a market maker in the publicly traded equity securities of SupporlSoft Inc .

Smith Barney Equity Research Ratings Distributio nData current asof 3DJune 2004 Hold SellSmith Barney Global Equity Research Coverage (2402) ~~ - 40% 43% 17%

% of companies in each rating category that are investment banking clients 58% 56% 46%Software -- North America (16) 44% 56% 0%

% of companies in each rating category that are investment banking clients 14% 11% 0%Guide To Investment Ratings :Smith Barney's stock recommendations include a risk rating and an Investment rating.Risk ratings, which take Into account both price volatility and fundamental criteria, are : Low [L], Medium [M[, High [H), and SpeculativeI$1.Investment ratings are a function of Smith Barney's expectation of total return (forecast price appreciation and dividend yield within thenext 12 months) and risk rating .For securities In developed markets (US, UK, Europe, Japan, and Australia/New Zealand), investment ratings are . Buy [1) (expected totalreturn of 10% or more for Low-Risk stocks, 15% or more for Medium-Risk stocks, 20% or more for High-Risk stocks, and 35% or more forSpeculative stocks) ; Hold [2) (0%-1(% for Low-Risk stocks, 0"/4-15% for Medium-Risk stocks, 00/-209/. for High-Risk stocks, and 0%-35%for Speculative stocks) ; and Sell [3] (negative total return) .Investment ratings are determined by the ranges described above at the time of initiation of coverage, a change In ri sk rating, or achange In target price . At other times, the expected total returns may fall outside of these ranges because of price movement and/orvolatility. Such interim deviations from specified ranges will be permitted but will become subject to review by Research Management .

citigroup `Smith Barney

Your decision to buy or sell a securi ty should be based upon your personal investment objectives and should be made only afterevaluating the stock 's expected performance and risk .

Between September B, 2002, and September 12, 2003, Smith Barney's stock ratings were based upon expected performance over thefollowing 12 to 18 months relative to the analyst's industry coverage universe at such time . An Outperform (1) rating Indicated that weexpected the stock to outperform the analyst's industry coverage universe over the coming 12 .18 months . An In-line (2) rating indicatedthat we expected the stock to perform approximately in line with the analyst's coverage universe. An Underperform (3) rating indicatedthat we expected the stock to underperform the analyst's coverage universe. In emerging markets, the same ratings classifications wereused, but the stocks were rated based upon expected performance relative to the primary market Index in the region or country . Ourcomplementary Risk rating system -- Low (L), Medium (M), High (H), and Speculative (S) -- took into account predictability of financialresults and stock price volatility. Risk ratings for Asia Pacific were determined by a quantitative screen which classified stocks Into thesame four risk categories. In the major markets, our Industry rating system -- Overweight, Marketweight, and Underweight - took intoaccount each analyst's evaluation of their Industry coverage as compared to the primary market index in their region over the following 12to 18 months.

Prior to September 9, 2002, the Firm's stock rating system was based upon the expected total return over the next 12 to 18 months. Thetotal return required for a given rating depended on the degree of risk in a stock (the higher the risk, the higher the required return) . A Buy(1) rating indicated an expected total return ranging from +15% or greater for a Low-Risk stock to +30% or greater for a Speculativestock . An Outperform (2) rating indicated an expected total return ranging from +5% to +15% (Low-Risk) to +10% to +30% (Speculative).A Neutral (3) rating indicated an expected total return ranging from -5%to+5% (Low-Risk) to -10% to +10% (Speculative) . AnUnderperform (4) rating Indicated an expected total return ranging from -5% to -15% (Low-Risk) to -10% to -20% (Speculative) . A Sell (5)rating indicated an expected total return ranging from -15% or worse (Low-Risk) to -20% or worse (Speculative) . The Risk ratings werethe same as in the current system.

OTHER DISCLOSURE SFor securities recommended In this report in which the Firm Is not a market maker, the Firm usually provides bids and offers and may actas principal In connection with such transactions . The Firm is a regular issuer of traded financial Instruments linked to securities that mayhave been recommended in this report. The Firm regularly trades In, and may, at any time, hold a trading position (long or short) in, theshares of the subject company(ies) discussed in this report . The Firm may engage in securities transactions in a manner inconsistent withthis research report and, wi th respect to secu ri ties covered by this report, will buy or sell from customers on a p rincipal basis .

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EXHIBIT P

citegroupJSmith Barney


Target Price Change 0Estimate Change 0

SupportSoft Inc (SPRT)

SPRT: Results Call Doesn't Improve Visibilit y

October 20, 2004

SOFTWARE

Mark Verbeck+1-415-951-1839mark.verbeck®cifigroup.com

AlanTikwart+1-415-951-1804

FUNDAMENTALSPIE (12104E) . . .... . . . . . . .. .. . . . . . . ... . . . . . 22.7x

PIE (12I05E) . . . ... . . . . . . .. .. . . . . . . .... . .. . 47.3x

TEVIEBITDA (12/04E) .. . . . . . . .... . .. . NA

TEV/EBI TTDA (12/05E) .. .. . . . . .... . .. . NA

Book Value/Share (12104E) .... . .. . NA

PricelBookValue . . . . . . . . .. . . . . . . .. .. ... . NA

Revenue (12104E) . . .... .. . . .. $59.6 mil .

Prof . Long-Term EPS Growth .. ... . 20%

ROE (12104E) .... . . . . .. .. .. . . . . . . ... . . . . . NA

Long-Term Debt to Capital (a) .. ... . NA

OE6Speculative (S)

Mkt Cap: $259 mi ll .

ySUMMARY W

Taking the continued decline in subscription and deferred revenue into r}iconsideration , the conference call gave us even more concern about thebusiness visibility than we had before . rilr

Given Q4 FY04 guidance , which implies perpetual license revenue of $6M, Nequal to an easy '03 compare, it is difficult to estimate what the appropriategrowth rate is at this time.

We believe given the virtual exhaustion of subscription revenue, the rebuildin gprocess could prove to be extended . As a result, we have trimmed our revenue ■ ~estimates, while increasing spending in-line with management 's plan to inves tin the business .

Based upon the current spending environment , the decreases in deferred an dratable revenue , as well as management's lowered guidance estimates, we aredecreasing our target price to $7 and maintaining our (2S) Hold rating .

SHARE DATA RECOMMENDATION

Price (10120104) . . ... .. .. . . . . ... . . . . $5.67 Rating (Cur/Prey) .. .. .. . . . . .... . . . . . . . ... 2S/2 S

52-Week Range . . . ... . . $16 .47-$5 .90 Target Price (Cur/Prev) . . . $7.O01$8 .0 D

Shares Outstanding ( a) .... . .. . . . . 45.7 mil. Expected Share Price Retu rn . . . .. . 23 .5%

Div(E) (Cu r/Prev) . .... . . . . .. .. ... . . . . $ 0.0131$0.00 Expected Dividend Yield .... . . . . . .. .. . 0 .0%

Expected Total Retu rn. . .... . . . . . . .. .. . 23 .5%

EARNINGS PER SHAR EFY ends 1 0 21111 30 4Q Full Yea r

12/03A Actual $D.04A $O .OGA $0.06A $0.09A $0.25A

12104E Current $0.09A $4 .11A $0.03A $0 .03E $0.25 EPrevious $0.D9A $0 .11A $0.01 E $0 .09E $0.29E

12105E Current $D.02E $ 0 .03E $0.03E $o .03E $0.12 EPrevious $0.04E $0 .06E $0.05E $0 .09E $0.25 E

(a) Data as of most recent qua rter 12/06E Current $0.04E $0.04E $0.04E $0.06E $0.19EPrevious $0.06E $0.08E $0.07E $D.12E $0.32E

First Call Consensus EPS:12104E $0,29 ;12/05E $0.27;12J06E NA

OPINIO N

SupportSoft reported results in-line with its pre-released results. The company lowered EPSand revenue guidance numbers for Q4, as well as FY04 . On October 4th, the company pre-announced that they would not meet management's prior guidance . This comes on the heelsof twelve straight quarters of revenue growth . The company attributed the significantdecline in license revenues (down 51% q/q and 46% y/y) to a more difficult environment fo r

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citigroupdOl k

Smith Barney

closing deals largely attributable to longer procurement cycles, as well as Sarbanes-Oxley.Management also cited poor execution as contributing to the shortfall . We believe that theseproblems could prove to be longer than expected due to the virtual exhaustion of thecompany's ratable revenue stream.

Today, the company's overall revenues were $12 .2M, down 28% q/q from $16 .9M, anddown 9.7% y/y from $13 .5M. License revenues were $5 .7M for Q3 FY04, compared to$11 .5M in Q2FY03 (down 50%) and $10 .4M YoY (down 45%) . The company reported netloss for the quarter of $332,000, which equates to a loss of ($0 .01) per share. Earlier thismonth, the company reduced Q3 revenue guidance to $11 .9M-$12.3M (versus our revisedestimate of $12 .IM) and our pro-forma EPS guidance of $0.00-$0 .03 (vs . our revisedestimates of $0 .01) . Prior to the company's revised guidance on Oct.4th, our estimates werefor $17 .1M in revenues and $0 .09 EPS for Q3 FY04 .

In Q3, the company closed three separate million-dollar deals, one of which was a $2 millionmaintenance renewal deal . The comapny attributed a majority of the license shortfallcoming from the enterprise side of the business. Management stated that they are prepared tospend money to provide better sales coverage for the enterprise side of the business . Wehave believed all along that this area has been neglected and welcome management's focuson correcting these problems .

THE DECLINE IN RATABLE REVENU E

Management provided guidance of $14.2M - $14 .9M for Q4 FY04 and EPS of $0.01-$0.03 . For FY04, management is guiding to $59-$59 .7M in revenues and $0 .20 - $0.22EPS . We believe the company will produce $14 .5M in revenues and $0 .02 for the quarter, aswell as $59.4M and $0.21 for FY04. We have made several adjustments to our model,which includes an adjustment of our CAGR from 17 .5% to 20%, as well as decreasing ouroperating margins from 22.5% to 20%. Given management's reduced guidance for thequarter, as well as our assessment of the company's ability to generate revenue in the currentsales environment, we are lowering our price target to $7, but maintaining our Hold (2S)rating. In the quarter ratable revenue decrease from $3 .1M to $2 .1M while deferred revenuewas also off sequentially, adding even more uncertainty to the outlook. The company stated adesire to rebuild the ratable revenue, yet this flies against the fact that over the past eightquarters (excluding a large five quarter term contract), the company's ratable revenue hasdecreased every quarter from $4.6M to $0 .5M. It should also be noted that license revenuethis quarter included a large broadband customer that paid a Q4 obligation early(which wasbeing booked under ratable revenue) . This payment expedited our expected fall off ofratable revenue in Q1 FY05, thus moving it forward into Q4 . In looking at the company'scurrent ratable revenue situation, as well as the difficulty of other industry players indelivering ratable revenues, we believe the company's ability to deliver on their ratablerevenue goals could be very difficult .

GUIDANCE AND VALUATION

Management provided guidance of $14.2M - $14.9M for Q4 FY04 and EPS of $0.01-$0 .03. For FY04, management is guiding to $59-$59 .7M in revenues and $0.20 - $0 .22EPS . We believe the company will produce $14 .8M in revenues and $0.03 for the quarter, aswell as $59.6M and $0.25 for FY04 . We have made several adjustments to our model ,which includes an adjustment of our CAGR from 17 .5% to 20%, as well as decreasing ouroperating margins from 22.5% to 20% . Given management's reduced guidance for thequarter, as well as our assessment of the company's ability to generate revenue in the currentsales environment, we are lowering our price target to $7, but maintaining our Hold (2S)rating.

2

Aftcitigroup 'Smith Barney

SupportSoft, Inc. Qtr Qtr Qtr QtrProforma Income Statement - Act vs Est Sep/03 JuN04 Sep/04 Sepl04 Var Var

LQ uarler Ending -0913012004 Act Act Est Act Amt Pc l

13 .5 16 . 16.4 12 .2 (4 .1) -25 .39'-3 .0% -27.5% (0 .2) 819 .6%21 .1% -9.5% (0.3) -145 .3%

2 .9 3.1 3.3 2 .1 (1 .2) -35 .4°/

8 .3% -30.1% (0 .4) -461 .6%13 .8% -26.5% (0 .4) -292 .0%

7 .5 8 . 8.0 3 .6 (4 .4) -55 .0%-4 .6% -57.1% (0 .5) 1134 .0%6 .2% -52.2% 0 .6 -940 .25

3 .1 5. 5.1 6,5 1 .4 28 .3°/

-6 .8% 19.5% 0 .3 -385 . 1

64 .2% 110.6% 0 .5 72 .4 %1 .6 2 . 2.5 2 .5 0 .1 3 .1 %

0 .1 0.1 0.1 0 .0 (0 .0) -44 .7%98 .8% 99.29 99 .0% 98.7% -0 .2% -0 .2 %

1 .5 2. 2.4 2 .5 0 .1 4 .8%

52 .2% 58.2* 52 .9% 61 .5% 8.6% 16 .3%12 .0 14 . 13.9 9 .7 (4.2) -30 .3 %

88.4% 86.1% 84 .9% 79.2% (0.1) -6 .7 %-1 .4% -B.1% (0 .1) 469 .4%-4 .0% -10.4% (0 .1) 163 .4°/

5 .9 5. 6.5 5 .4 (1 .1) -16 .2°/

43 .7% 34.3% 39.7% 44.5% 0 . 6 12 .1 %2 .2 2. 2.5 2 .3 (0 .2) -8 .4%

16 .2% 13.0% 15.3% 18.7% 0 .0 22 .6 %1 .4 1 . 1 .4 1 .7 0 .3 23 .0 %

10.3% 9.2 8 .2% 13.6% 0 .1 64 .6 %2 .5 5. 3.6 0 .3 (3 .3) -91 .6%

18.2% 29.64 21 .7°/ 2.4% (0.2) -88 .8 %-26 .6% -91 .6% (0 .7) 244 .8 %19.6% -86.6% 1 .1 -541 .2 °

0 .0 0 . 0.0 0 .0 0 .0 0 .0%0.0% 0.0% 0.0% 0.0% 0 .0 0 .0 %

0 .1 0. 0.5 0 .6 0 .1 24 .0%

0.6% 2. 2 .9% 4.9% 0 .0 65 .9 %0 .0 0. 0.0 0.0 0 .0 0 .0°%2.5 5 . 4 .0 0.9 (3.1) 77.8 °

18.8% 32.4% 24.7° 7.3% (0.2) 70.3 °-23.7% -77.4% (0.5) 226 .6 %31 .6% -61 .0% (0.9) -293 .1 %

0 .1 0 . 0.4 (0.5) (0.9) -208 .1 %5.5% 10.8% 11 .0% -53.6% (0.6) -587 .5 °

0 .0 0. 0 .0 0.0 0.0 0.0°i0.0% 0.0°/ 0.0% 0.0% 0.0 0 .0 °

2.4 4 . 3 .6 1 .4 (2.2) -61 .7%

17.7% 28.90 22.0% 11 .3% (0.1) -48.8%-23.8% -61 .0% (0.4) 156.0%23.9% -36 .5% 0.6 -253.1 °

37.9 45 . 46 .2 45.7 (0.5) -1 .1 %1 .5% 0.4% (0.0) -74.2°

21 .8% 20 .5% (0.0) -6.0%0 .06 0.11 0 .08 0.03 (0.0) -61 .3°

27.2% 71 .8% (0.4) 164.2%23.1% 52 .4% (0.8) -326.8%

MPkcitigroup'°Smith Barney

. ,Source : Co. reports and SB

I VALUATIO NFor SupportSoft, we used two primary methods to derive our valuation. The first isdiscounted cash flow (DCF) analysis. For our DCFs, we fully model the company's incomestatements, balance sheets, and cash flows to a terminal year, in excess of 20 years out, todetermine free cash flow in each of the years . At that point, we believe the company will beat terminal cash flow growth rates approximating GDP growth rates (generally 3%) . For ourDCF analysis, we use a risk-free rate of 4 .5% and an equity risk premium of 5% . Our secondvaluation method is a PIE analysis based on a five-year forward business model, where weforecast a five-year revenue compounded annual growth rate (CAGR), normalized operatingmargins, and an expected PIE multiple in order to derive a valuation normalized for what webelieve is the company's mature operating model .

Our $7.00 price target for SupportSoft is based on both our DCF and PIE-basedmethodologies . To estimate beta, we analyzed the historical beta of a basket of softwa restocks for an eight-year period , excluding a period from 1999 to 2000 , which we define asThe Bubble." This analysis suggested that a Beta of 2 .0 was a reasonable value to use as a

forward- looking number for many of our software stocks . Companies th at are more mature,having slower growth rates and/or a higher percentage of recurring revenue , would have aBeta less than this typical number . For our DCF analysis , we employ a beta of 2.0, a terminalfree cash flow (FCF) multiple of 8 .7x, and a weighted average cost of capital (WACC) of14.5% . This analysis suggests a value of $9 per share, down from $10 .

For our PIE-based methodology, we first projected net income five years forward based on a5-year revenue (CAGR) of 20%, a normalized operating margin of 20%, and a tax rate of32%. The 22.5% operating margin is typical for our software companies with a lowpercentage of professional services . We then applied a multiple of 24x to this net incomeprojection and discounted this number to the present, which suggests a stock price of $8.50.The 24x multiple represents the 1 .4x premium to S&P 500 market multiple . For our I .4xmarket premium, we compared a basket of software stocks' multiple to the S&P 500 multipleover an eight year period, excluding a period from 1999 to 2000 which we define as "TheBubble ." Our conclusion from this analysis is that because of what we believe are attractiveaspects of the software company business model, software companies trade at a 1 .4xpremium to the S&P 500 multiple . As our PE based valuation is based on full tax rates anddoesn't include an allowance for lower tax payments as a result of loss carryforwards, weadd $0.55 to our price target to allow for the present value of the $25 million deferred taxasset, giving a total price target of $9 . Due to the challenging business environment and therecent uncertainty associated with the company's business outlook, we are applying a 20%discount to our target price, thus giving us an $7 price target.


Risks we see to our price target for Suppor#Soft include :

The company frequently has customers that account for more th an 10% of its revenues. Ifthe company were unable to close a sale of this magnitude in a given quarter it couldhave a significant negative impact on th e stock. The risk is mitigated somewhat by thefact that a significant portion of its revenue is not in th e form of perpetual license salesthat are recognized as revenue in the qua rter sold.

4

citigroup `iSmith Barney

The company gets a significant portion of its revenue from the broadband industry,particularly cable providers . As such, SupportSoft is exposed to the fortunes of thisindustry as well . We note that there has been significant M&A activity in this industry,which can create additional exposure as well as opportunity.

>- The company's target market on the corporate side has seen an increasing amount ofinterest from some larger and better-capitalized players, including Microsoft, HP andSymantec . If any of these players are effective at developing solutions, their broaddistribution channels and large product footprints could make it difficult for SupportSoftto expand this market .

Software companies traditionally have back-end loaded quarters, thus giving very littlevisibility to license revenues .

- The company has a poor track record of maintaining and growing its subscriptionrevenue. To the extent a decline in this revenue stream decreases the company's visibility,investors may not be willing to pay the same multiple for the company.

In the most recent quarter, the company added only 3 new customers . If the company isunable to increase the number of customers it is adding, it will be difficult to continue togrow its revenue .


INVESTMENT THESI SWe rate shares of SupportSoft Hold/Speculative (2S) . Our rating is the result of the limitedupside to our price target despite a significant number of risk factors which lead us to ourspeculative risk rating . SupportSoft is well positioned to continue its strong position in thebroadband provider market. The company enjoys a strong broadband presence, particularlywith United States cable providers . SupportSoft can leverage these relationships into anexpanded footprint and new customers, particularly outside the U .S . With only onecompetitor of note, Motive Communications, this market is fairly attractive andunpenetrated . Our cable team notes that the cable providers are stepping up efforts todecrease back-office costs and promote self-installs for their broadband business, two trendsthat will benefit SupportSoft. The company is expanding its efforts to address the enterprisemarket . While the company has always had enterprise functionality, it is adding capabilitiesto better address the market, including support for more platforms (PDA and wireless) andnew functionality like voice-based assistance . In this market, we believe outsourcers likeAccenture and CSC are the smart money because support costs and customer satisfaction arekey to their business models and therefore, we view the fact that these firms are workingwith SupportSoft to be a leading indicator of the SupportSoft opportunity in this market .SupportSoft's target markets represent a large opportunities . The broadband market isestimated to be growing close to 20% annually in the U .S . and customer self-installs aregrowing as a percentage of the total with providers offering incentives for customers to dothe self-install . The economics are compelling as Smith Barney estimates that a truck-roll forbroadband installation costs the provider $100 . We estimate that the base opportunity here isapproximately a $75 million opportunity today, growing to $150 million in 2009. Inaddition, if SupportSoft extends its solution (which we believe it will) to address newrequirements such as interactive TV and voice-over-IP telephony, there is additional upside .As there is limited competition in this market, SupportSoft has the opportunity to capture asignificant percentage of this revenue. To quantify-the-corporate opportunity, based on datafrom ID C, we estimate the total enterprise opportunity to be 180 million PC's worldwide inuse at medium sized or better organizations . Using a $10 license opportunity per unit givesus a $1 .8 billion opportunity. We are maintaining our 2S Hold rating based upon th echallenges encounter in the most recent quarter, the significant uncertainty on the businessoutlook, as well as the aforementioned risks-

citigroup 'Smith Barney

COMPANY D ESCRIPTIO NSupportSoft is a leading provider of software, collectively known as its Real Time ServiceManagement offering, that aids in the diagnosis and repair of software configurationproblems on end-point devices like PC's and PDA's . This capability reduces the total cost ofsupport for these devices by decreasing the number of support calls and reducing theoccurrence of support staff desk-side visits . The company's offerings also include softwarethat enables broadband customers to establish their connection without on-site support.

6

citigroup' iSmith Barney

ANALYST CERTIFICATION APPENDIX A-1I, Mark Verbeck, hereby certify that all of the views expressed in this research report accurately reflect my personal views about any andall of the subject issuer(s) or securities . I also certify that no part of my compensation was, is, or will be directly or indirectly related to thespecific recommendation(s) or view(s) in this report .

HAPORTANT DISCLOSURES

SupportSoft Inc (SPRT)Ratings and Target Price HislorAnaiysb Mark Verbeck (covered since Jul 1

_ . .-Z- . . . . . . . . . . .. . . . . . . . . . . . . . . . ..1$

4 :20 Jul 04 1g 6 : 13 Sep 04 '2

s: 4Oct04 2"Indicates change.

N$

NDJFMAMJJASOND 3FMAMJJASO NO JFM AMJJAS02002 2003 2004

^ Covered See 'Important Disdosu re a' st the and of this report for-•-- - Not covered a descdptlon of the flaws current and fanner rating systems

closingPuce

Within the past 12 months, Citigroup Global Markets Inc . or its a ff iliates has acted as manager or co-manager of a public offering ofsecu rities of SupportSoft Inc.

Within the past 5 years, Citigroup Global Markets Inc . or Its affiliates has acted as manager or co manager of a public offering of equitysecu rities of SupporiSoft Inc.

Citigroup Global Markets Inc . or he affiliates has received compensation for investment banking services provided within the past 12months from SupportSoft Inc.

Citigroup Global Markets Inc . currently has, or had within the past 12 months, the following company(fes) as Investment banking client(s) :SupportSoft Inc.

Citigroup Global Markets Inc . currently has, or had within the past 12 months, the following company(ies) as clients, and the servicesprovided were non-investment-banking, securities-rela ted : SupportSoft Inc .

Cltig ro up Global Markets Inc . or an affiliate received compensation In the past 12 months from SupportSoft Inc .

Analysts' compensation is determined based upon activities and services intended to benefit the Investor clients of Citigroup GlobalMarkets Inc. and its affiliates ("the Firm). Like all Firm employees, analysts receive compensation that Is Impacted by overall firmprofitability, which Includes revenues from, among other business units, the Private Client Division, Institutional Equities, and InvestmentBanking .

The Firm is a market maker In the publicly traded equity securities of SupportSoft Inc.Smith Barney Equity Research Ratings DistributionData current as of 30Septem ber 2004 - __ _ Buy - Hald _ SellSmith Ba rney Global Equity Research Coverage(2473) 40% 44% 17%

% of companies to each rating category that are Investment banking clients 55% -65% 47%Softwa re - North Ame rica(19) 42% 53% 5%

% of companies in each rating category that are Investment banking clients 25% 20% 100%Guide To Investment Ratings :Smith Barney's stock recommendations include a risk rating and an Investment rating.Risk ratings, which take Into account both price volatility and fundamental c riteria , are. Low [ L], Medium [M], High [H], and Speculative[S].Investment ratings are a function of Smith Barney's expectation of total return (forecast pri ce appreciation and dividend yield within thenext 12 months) and risk rating .For securi ties In developed markets (US, UK, Europe , Japan , and Austra)ia/New Zealand), investment ratings are: Buy [1] (expected totalreturn of 10% or more for Low-Risk stocks , 15% or more for Medium -Risk stocks , 20% or more for High-Risk stocks, and 35% or more forSpeculative stocks); Hold [2] (0%-10% for Low- Risk stocks, 0%-15% for Medium- Risk stocks, 0%-20% for High-Risk stocks, and 0%-35%for Speculative stocks); and Sell [3] (negative total return) .Investment ratings are determined by the ranges described above at the time of initiation of coverage , a change in risk rating, or achange in target price . At other times , the expected total returns may fall outside of these ranges because of price movement and/orvolatility . Such Interim deviations from specified ranges will be permitted but will become subject to review by Research Management .

7

411111114citigroupiSmith Barney

Your decision to buy or sell a security should be based upon your personal investment objectives and should be made only afterevaluating the stock 's expected performance and risk.

Between September 9, 2002, and September 12, 2003, Smith Barney's stock ratings were based upon expected performance over thefollowing 12 to 18 months relative to the analyst's Industry coverage universe at such time . An Outperform (1) rating Indicated that weexpected the stock to outperform the analyst's industry coverage universe over the coming 12-18 months . An In-line (2) rating indicatedthat we expected the stock to perform approximately In line with the analyst's coverage universe . An Underperform (3) rating indicatedthat we expected the stock to underperform the analyst's coverage universe . In emerging markets, the same ratings classifications wereused, but the stocks were rated based upon expected performance relative to the primary market Index In the region or country . Ourcomplementary Risk rating system -- Low (L), Medium (M), High (H), and Speculative (S) -- took Into account predictability of financialresults and stock price volatility . Risk ratings for Asia Pacific were determined by a quantitative screen which classified stocks into thesame four risk categories . In the major markets, our Industry rating system -- Overweight, Markotweight, and Underweight -- took intoaccount each analyst's evaluation of their Industry coverage as compared to the primary market index in their region over the following 12to 18 months.

Prior to September 9, 2002, the Firm's stock rating system was based upon the expected total return over the next 12 to 18 months . Thetotal return required for a given rating depended on the degree of risk in a stock (the higher the risk, the higher the required return) . A Buy(1) rating indicated an expected total return ranging from +15% or greater fora Low-Risk stock to +30% or greater for a Speculativestock . An Outperform (2) rating indicated an expected total return ranging from +5% to +15% (Low-Risk) to+10% to +30% (Speculative) .A Neutral (3) rating indicated an expected total return ranging from -5% to +5% (Low-Risk) to -10% to +10% (Speculative) . AnUnderperform (4) rating Indicated an expected total return ranging from -5% to -15% (Low-Risk) to -10% to -20% (Speculative) . A Sell (5)rating indicated an expected total return ranging from -15% or worse (Low-Risk) to -20% or worse (Speculative) . The Risk ratings werethe same as In the current system .

OTHER DISCLOSURESFor securities recommended In this report in which the Firm is not a market maker, the Firm usually provides bids and offers and may actas principal In connection with such transactions . The Firm is a regular issuer of traded financial instruments linked to securities that mayhave been recommended in this report. The Firm regularly trades in, and may, at any time, hold a trading position (long or short) in, theshares of the subject company(ies) discussed In this report . The Firm may engage in securities transactions in a manner Inconsistent withthis research report an d, with respect to securities covered by this report, will buy or sell from customers on a principal basis .

Securities recommended, offered, or sold by the Firm : (I) are not insured by the Federal Deposit Insurance Corporation; (i€) are notdeposits or other obligations of any insured depository Institution (including Citibank) ; and (iii)-are subject to Investment risks, includingthe possible loss of the principal amount Invested. Although information has been obtained from and Is based upon sources that the Firmbelieves to be reliable, we do not guarantee Its accuracy and it may be incomplete and condensed. Note, however, that the Firm hastaken all reasonable steps to determine the accuracy and completeness of the disclosures made In the Important Disclosures section ofthis report . All opinions, projections and estimates constitute the judgment of the author as of the date of the report and are subject tochange without notice. Prices and availability of financial Instruments also are subject to change without notice . It this is a fundamentalresearch report, it is the Intention of Smith Barney to provide research coverage of this/fhese Issuer(s), Including in response to newsaffecting this issuer, subject to applicable quiet periods and capacity constraints . This report Is for Informational purposes only and is notIntended as an offer or solicitation for the purchase or sale of a security . Any decision to purchase securities mentioned In this researchmust t ake Into account existing public information on such security or any registered prospectus.

Investing in non-U .S. securities, including ADRs, may entail certain risks . The securities of non-U.S. Issuers may not be registered with,nor be subject to the reporting requirements of the U .S . Securities and Exchange Commission. There may be limited informationavailable on foreign securities . Foreign companies are generally not subject to uniform audit and reporting standards, practices andrequirements comparable to those In the U.S. Securities of some foreign companies may be less liquid and their prices more volatile thansecurities of comparable U .S . companies . In addition, exchange rate movements may have an adverse effect on the value of anInvestment In a foreign stock and its corresponding dividend payment for U.S. Investors. Net dividends to ADA investors are estimated,using withholding tax rates conventions, deemed accurate, but investors are urged to consult their tax advisor for exact dividendcomputations. Investors who have received this report from the Firm may be prohibited In certain states or other jurisdictions frompurchasing securities mentioned In this report from the Finn. Please ask your Financial Consultant for additional details .

The UK's Financial Services Authority rules require that a firm must establish, Implement and make available a policy for managingconflicts of interest arising as a result of publication or distribution of investment research . The policy applicable to Cil€group's equityresearch products can be found at www.cltigroupgeo.com. This report may have been distributed simultaneously, in multiple formats, tothe Firm's worldwide institutional and retail customers . If this report is being made available via the Smith Barney Private Client Group Inthe United Kingdom and Amsterdam, please note that this report is distributed in the UK by Cftlgroup Global Markets Ltd ., a firmAuthorised and regulated by the Financial Services Aulhority (FSA) for the conduct of Investment Business in the UK . This document isnot to be construed as providing investment services In any jurisdiction where the provision of such services would be Illegal . Subject tothe nature and contents of this document, the investments described herein are subject to fluctuations in price and/or value and investorsmay got back less than originally Invested . Certain high-volatility investments can be subject to sudden and large falls In value that couldequal or exceed the amount invested . Certain investments contained herein may have tax implications for private customers in the UKwhereby levels and basis of taxation may be subject to change . If in doubt, Investors should seek advice from a tax adviser. This materialmay relate to Investments or services of a person outside of the UK or to other matters which are not regulated by the Financial ServicesAuthority and further details as to where this may be the case are available upon request in respect of this material . This report may notbe distributed to private clients In Germany. If this publication is being made available In certain provinces of Canada by Citigroup GlobalMarkets (Canada) Inc. ('CGM Canada"), CGM Canada has approved this publication . If this report was prepared by Smith Barney anddistributed in Japan by Nikko Citigroup Ltd ., it is being so distributed under license. This report is made available in Australia to wholesaleclients through Citigroup Global Markets Australia Ply Lid . (ABN 64 003 114 832 and AFSL No. 240992) and to retail clients throughSmith Barney Citigroup Australia Ply Ltd . (ABN 19 009 145 555 and AFSL No . 240813), Participants of the ASX Group . This advice hasbeen prepared without taking account of the objectives, financial situation or needs of any particular investor . Accordingly, Investors


should, before acting on the advice, consider the appropriateness of the advice, having regard to their objectives, financial situation andneeds . In New Zealand this report is made available through Citigroup Global Markets New Zealand Ltd ., a member firm of the NewZealand Stock Exchange . Citigroup Global Markets (Pty) Ltd . Is Incorporated In the Republic of South Africa (company registrationnumber 20001025866107) and its registered office is at Citibank Plaza, 145 West Street, Sandown, Sandton, Johannesburg 2186 . TheInvestments and services contained herein are not available to private customers in South Africa. If this report is made available in HongKong by, or on behalf of, Citigroup Global Markets Asia Ltd ., it is attributable to Citigroup Global Markets Asia Ltd ., Citibank Tower,Citibank Plaza, 3 Garden Road, Hong Kong . If this report Is made available In Hong Kong by The Citigroup Private Bank to its clients, it isattributable to Citibank N.A., Citibank Tower, Citibank Plaza, 3 Garden Road, Hong Kong . This publication Is made available in Singaporethrough Citigroup Global Markets Singapore Pte . Ltd ., a Capital Markets Services Ucence holder .

0 2004 Citlgroup Global Markets Inc . Member SIPC . Smith Barney is a division and service mark of Ciligroup Global Markets Inc . and itsaffil€ates and is used and registered throughout the world . Citigroup and the Umbrella Device are trademarks and service marks ofCiticorp or its affiliates and are used and registered throughout the world . Nikko is a registered trademark of Nikko Cordial Corporation.All rights reserved, Any unauthorized use, duplication, redistribution or disclosure Is prohibited by law and will result in prosecution . TheFirm accepts no liability whatsoever for the actions of third parties . The Firm makes no representations or warranties whatsoever as tothe data and information provided in any third party referenced website and shall have no liability or responsibility arising out of, or inconnect i on with, any such referenced website.


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52 declaration of mark p. kindall supporting plaintiffs - securities

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