North America Equity Research

12 July 2013

Software Technology
The Source Code V47- Claims Management Software
Stocks in our coverage are surging higher with the market as the pre-announcement period has been very quiet. CHKP and FTNT put out earnings call notices giving investors some confidence, but we would note our industry conversations indicate the June quarter was bumpy. So, even if revenue results are decent, it was probably not an easy accomplishment in our view. We have also seen a noticeable turn in RAX, one of our four favorite names, but remind everyone that this name will likely be volatile as shown by the stock reaction to the latest Amazon price cut on dedicated hosting. This week we take a look at another of GWRE's product segments the claims software space.  Spotlight: Closer look at North American claims management market. As a follow-up to Source Code V34 “P&C Policy Management,” we are profiling the North American P&C claims management space in this Spotlight, a space where Guidewire is a clear leader. We recap current challenges in the P&C space, how claims management tools address these challenges, market sizing, and Guidewire’s competitive strength.  Recent Buzz: SNCR (OW/PT $35) was down 12% on a competitor downgrade. We believe SNCR is on target and expect an in-line 2Q. Investor narrative around Rackspace has turned as evidenced by the first decline in short interest since April. Investors are looking at the potential of group stabilization and what it could do for the stock. But continued price cuts by Amazon showed just how volatile the name can be as this week’s announcement moved the stock by as much as 8% intraday.  News That Matters: It was a relatively quiet week of news, as we gear up for 2Q earnings. ICANN Board approved 2013 registry agreement for new gTLDs, which is important for VRSN. Microsoft (covered by JPM Software analyst John DiFucci) announced it is focusing its engineering efforts around OS, Apps, Cloud and Devices and aims to facilitate a “holistic” view of the company’s product lines.  Metrics That Matter: This week we updated two of our quarterly macro economic metrics. The first one is for US unemployment rate for 2Q which came in at 7.6%, slightly ahead of JP Morgan estimate of 7.5% and the second update is for Euro and Yen currencies vs. USD at the end of 2Q which were USD 1.31 per EUR and 98.76 JPY per USD as compared to JPM estimate of USD 1.30 per EUR and 100.00 JPY per USD. And lastly, in our monthly metrics, we introduce Jun-13 metrics. Some major updates from the June metrics include: NFIB index for small business optimism which declined 0.9 points in June, Semiconductor revenues for the month of June which was 3.2% up from last month and Manufacturing data which showed expansion in US and contraction in Europe, although Europe showed some improvement from last month.

Software Technology Sterling Auty, CFA

(1-212) 622-6389 Bloomberg JPMA AUTY <GO>

Lauren Choi
(1-212) 622-6102

Saket Kalia, CFA
(1-212) 622-6477 J.P. Morgan Securities LLC

 Earnings season begins next week: Next week we start our earnings season
with one company CHKP on Thursday.

See page 19 for analyst certification and important disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

Sterling Auty, CFA (1-212) 622-6389

North America Equity Research 12 July 2013

Table 1: Next Week Earnings Preview

JPM Company CHKP Rating OW PT $53 Call Info Jul 18, 8:30 AM (ET) Dial-In: 1 201.689.8261

Calendar 2Q13 Quarter Estimates JPM $331.8 $0.81 Street $336.4 $0.81 Preannounced/Guidance $320-350 $0.76-0.84 J.P. Morgan View All eyes will be on the product revenue line that we still have forecast to decline 7% y/y. We believe the company had a decent finish to the quarter, but was very back-end loaded. Given the run in the stock, that number along with implied bookings will have to be positive to keep the shares moving higher.

Revenue (in $M) EPS


policyholders want to interact with their insurance similar to their interaction with other vendors through portals or mobile devices. business intelligence. On the bottom line.Sterling Auty. plus ~1. and Guidewire’s competitive strength. On the top line. whether it is from a fender-bender with their car or for more serious damages to their property.5B. the more profitable they will be even with periodic claims. etc). new technologies like fraud analytics. specialty. For this North America Equity Research 12 July 2013 Spotlight: Closer Look at North American Claims Management Market As a follow-up to Source Code V34 “P&C Policy Management. We recap current challenges in the P&C space.5x for the services. further pressuring DWP growth. Claims Management Is another Key Element to Improving Customer Service & Retention Pressures on the top line and bottom line of P&C carriers We believe property & casualty insurance carriers’ top and bottom lines are pressured as an industry. we believe customer retention and new product introductions are key to growth. the P&C insurance market is a stable and mature industry. New product introductions are important too. It is also a very fragmented market with multiple sub-markets (personal. and pay claims when customers need to make a claim against their insurance policy. as we believe some sub-segments of insurance could have different growth/competitive profiles. etc).” we are profiling the North American P&C claims management space in this Spotlight. which places different strains on claims management systems. there seems to be a growing number of catastrophes (Hurricane Sandy. Claims Management Is a Big and Growing Market We estimate the claims management market is worth $2-$2. with about half in North America We estimate the worldwide market for claims management software and services is worth $2-$2. and hundreds of players in each region. Claims management tools need to be more interactive with customers.auty@jpmorgan. commercial. From the customer perspective. how claims management tools address these challenges.5B. which could drive claims (ie payouts to policy holders) up. Retention and new products are key to driving top line Because of the industry dynamics we described above. That is based on our estimate of pricing to be 4-6 bps for every $1B in DWP for the recurring license portion. the claims management system has to be easy to use for insurance agents in order to provide timely. market sizing. From the P&C carriers’ perspective. and geographical informational systems for example can make claims management systems more efficient and reduce insurance leakage. process. We believe customer retention is important in the insurance industry because the longer customers pay a premium. with direct written premium (DWP) trending in line with GDP. CFA (1-212) 622-6389 sterling. A customer is probably not too happy when they are making an insurance claim. The services 3 . and be more technically savvy for vendors to improve retention P&C carriers use their claims management system to accept. accurate service when paying claims. a space where Guidewire is a clear leader.

and with similar pricing. Guidewire is the Clear Leader Guidewire has the largest number of customers in production. though we note this is a very rough estimate without sales information.Sterling Auty. and Continuing to Extend Lead with Customer Wins Source: Gartner 4 . Second. so applying that math gets us to ~$2. there is still room for existing customers to upgrade to more current versions of software. We estimate North America makes up about half of worldwide DWP. CFA (1-212) 622-6389 sterling. and is capitalizing on its leadership position in the market. up 27% from 2011. by our estimates. First.5T. Gartner estimates ~9% of Guidewire’s customers are on a current version.auty@jpmorgan. cover more DWP. that means North America represents ~$1B in total market size. or 3x its nearest competitor. as that system is more integrated into the P&C’s core systems and is the system of record for the carrier. We believe growth can continue for two reasons. and thus help drive market growth. Just as important. and is winning the most deals As we show in Figure 2 below. with 60 customers in production.1B worldwide. which we estimate is about 20% penetrated. and still room for growth for two reasons The six claims management vendors in Figure 1 below signed 33 new North American deals in 2012. We estimate worldwide DWP to be ~$1.200 worldwide P&C carriers worldwide. We believe upgrades bring more capability. of which ~50% are in North America. ClaimCenter is continuing to extend this lead by signing 4-5x more new customers in 2012 than its nearest competitor with 18. We think this shows Claimcenter is keeping up with customer demands. Guidewire is the clear leader in the space with its ClaimCenter product. For North America Equity Research 12 July 2013 intensity for claims is slightly lower than policy management. consistent with the distribution of direct written premium. a sign of the healthy growth in this market. 27% growth in number of deals signed in 2012. We estimate this back-of-the-envelope by assuming ~1. these six vendors had 116 customers in production in North America. Figure 1: Guidewire the Clear Leader in Claims. Based on customer count. and similarly only a couple of Accenture’s customers were on their latest release. this would equate to roughly 50% market share in claims management.

First. Pegasystems and MphasiS Wyde. is fraud detection. CA). By the same token.Sterling Auty. This is not surprising as tier 2 and tier 3 customers are usually quicker to adopt more recent technologies. tier 2 between $1-$5B. compared to tier 1 customers who can afford to rely on older systems given their market share. we see three areas that the company has invested in for innovation. The three tiers are separated by the amount of direct written premium for an individual carrier. with tier 1 with more than $5B. an admirable achievement for a much smaller and younger provider. The vendors that were excluded because of no new customer wins were Aon eSolutions. Guidewire leads by 3x in tier 2 carriers. Second. indicating the market is consolidating to a smaller number of providers. 5 . is their newest introduction Guidewire Live. which recall we estimate fraud to consume 2-4% of global DWP or approximately $50B per year. MajescoMastek. Figure 2: Guidewire's Leadership in Claims Crosses All Segments of the Market Source: Gartner Market is consolidating to select few vendors. Stone River was excluded because it did not have the minimum number of live customers in North America (note Stone River is headquartered in Oakland. Third. and by 2x in tier 3. and tier 3 less than $1B. CFA (1-212) 622-6389 sterling.auty@jpmorgan. Guidewire is virtually neck-and-neck with Accenture with 8 and 9 tier 1 customers respectively. Competitive Landscape Guidewire is adding innovative products to maintain/grow its leadership Based on our analysis of Guidewire’s North America Equity Research 12 July 2013 Guidewire is a leader in all tiers of P&C insurance Figure 2 below shows how the 116 North American customers are spread across the three tiers of P&C insurance carriers. rather than best-of-breed solutions. we think partially from desire for suite Gartner’s Marketscope excluded six vendors in this version because they either did not win any new customers in North America or did not have at least three live customers in production in North America. We think part of the reason for the consolidation to less vendors is the desire for customers to consolidate vendors and buy suite solutions. is analytics with its good catastrophe management tools that offer heat maps and integration with third-party data (for example weather services) which make insurers more prepared to respond. Insurity.

and while it is still nascent. We believe this has given Accenture the reputation in the market of being a "large customer" provider. We think this is helping it capture more share than smaller point providers. making it more challenging to go down-market. Accenture has a larger presence in tier 1 and tier 2 customers. As we show in Figure 3 below. Accenture benefits from having a full insurance suite with Claims Components and Duck Creek Policy Administration. Like Guidewire.Sterling Auty. Accenture is Guidewire's most formidable competitor in claims management as we show in Figure 3 below with its "Strong Positive" rating. with 14 of their 16 North American customers in one of those two tiers. This is a new and innovative offering in P&C insurance.auty@jpmorgan. Figure 3: Gartner Vendor Ratings Source: Gartner 6 . a distinction it has received for six consecutive years by Gartner. Guidewire has received a "Strong Positive" rating. How is Accenture different in claims management? Just as in policy management (refer to Source Code V34). could help Guidewire extend its leadership position in claims North America Equity Research 12 July 2013 which will allow existing customers to benchmark performance against other customers. CFA (1-212) 622-6389 sterling.

Source: J. by our estimates. 7 . Upsell / Cross-sell into healthy dealers Auto dealers are in better financial position than they have been in five years.P. including the largest credit application network. combined with subscription revenue. including dealer management systems (DMS) into the automotive industry. Valuation: EV/FCFF of 26. Action: Buy the stock as recent SAAR data suggest healthy auto sales. Embedded software competitors Reynolds & Reynolds and ADP lock in customers for long-term contracts. Opportunities Consolidation – fragmented market Management utilizing a solid balance sheet to create shareholder value through acquisitions that bolster long-term growth and cash flow potential. should lead to 15% organic growth. providing opportunity to invest in solutions to help them grow.7-4B. making replacement sales more challenging. Positives Large ~$3-5B industry Transaction revenue addressable market approximately $630 million and subscription software market $2. as well as a leading SaaS software provider of solutions. and TRAK is best positioned to capitalize.Sterling Auty. Morgan.2x as compared to SaaS of 20x and peer group of 18x. SaaS should accelerate in 2013 as divestitures annualize. Risks/Challenges Health of auto industry Transaction revenue is 60% of total and 70% correlated with auto sales. but the stock has faded. in our view. Threats Lenders look for alternative in transaction business Technology has significantly changed since the company first began its credit application North America Equity Research 12 July 2013 Top Picks DealerTrack (TRAK) Description: Provider of transaction-based solutions.auty@jpmorgan. in our view. unlike its five-year correlation to this data. 12% yoy SAAR should drive 15% organic growth rate Transaction revenue should grow 2-3x the SAAR. potentially providing 20-30% growth and. CFA (1-212) 622-6389 sterling. A threat would be if lenders and nonbank companies that are looking at mobile payment opportunities form a competitive solution.

That growth drops to the bottom line.P. which combined with estimate upside potential could drive share outperformance Positives Large addressable market. if sales cycles lengthen. But when SaaS-only vendors enter the market. Action: Buy the stock as we believe the market will reward the stock with a higher multiple for this secular story. it could impact forward revenue estimates. we believe this multiple could expand to 4x (compared to peers at 4-7x).com North America Equity Research 12 July 2013 Model N (MODN) Description: Leading provider of software that helps customers maximize and grow revenue (revenue management) through pricing analysis. marketing. Morgan. focused in Life Sciences and High Tech. it could potentially pressure share gains. We estimate about a third of this (or ~$5B) could be devoted to revenue management. MODN offers its solutions on both a traditional license basis and SaaS basis.3x FY14E EV/S. giving customers the choice. Risks/Challenges Revenue growth tied to Implementation. Source: J. so.Sterling Auty. could get troughs in growth. contract management/compliance. Threats Potential SaaS-only competitor. Generates incremental revenue for customers. CFA (1-212) 622-6389 sterling. etc. Go down market with SaaS simplified offering. high-tech customers can see anywhere from 6-20% gross margin improvement over five years. Vertical industry expansion Can add other industries where pricing is complex or discounting prevalent. Valuation: Stock is trading at 4. 94% revenue coverage next 12 months Backlog plus deferred revenue we estimate gives them 94% coverage on FY13 revenue estimates. creates better growth and profitability The company estimates that for every $1B of sales. regulatory compliance. Opportunities Deeper penetration into segments of High Tech and Life Sciences We know of just one customer in the software industry. channel strategy. for example. incentive/rebate management. and finance departments. MODN’s two main markets (Life Sciences and High Tech) spend ~$17B on technology in the sales.auty@jpmorgan. so we believe there is lots of penetration opportunity in the high-tech vertical. So if sales cycles lengthen. The bulk of an average implementation is 9-12 months. 8 . most companies leave $40-120M on the table per year.

local.4x 2014E earnings for a company that we believe will generate consistent double-digit earnings growth. Shelf registration domain and could benefit revenue General Atlantic (GA) still from adoption of potentially has an estimated 8. and and in mobile.web incremental $144M in business online solutions. real estate on the Internet acquisition could add focus on providing small applied for . for social networks. Large tech or social eCommerce. 9 .Sterling Auty. CFA (1-212) 622-6389 sterling. Too cheap. Social. Source: J. tough economic times. should accelerate to double registered that come digits in next few years. network company offering advertising. 80-90% recurring subscription revenue.auty@jpmorgan. Morgan. in our North America Equity Research 12 July 2013 Web. high. Valuation: Trading at 11. unlocked at the end of October and the company Visibility has 7M primary shares. Action: Buy stock because we believe valuation will re-rate higher as operating metrics keep improving. Competition: similar solutions could gTLD program adds new VistaPrint and impact do-it-yourself part of Network Solutions ConstantContact increasing WWWW business. Positives Opportunities Risks / Challenges Threats (WWWW) Description: Putting small business on the Internet. local and Mobile Cyclical New Entrants Attacking $19B market for Selling marketing solutions SMB typically suffers in Barriers to entry not very small business Internet.P.5 million up to 400 new top-level Accelerating growth shares from the Network domains in 2013 and 7% organic growth in 2013E Solutions acquisition beyond.

leases network equipment. customers can prevent vendor-lock in on other systems. RAX resells data center space. Source: J. showing company is taking share.auty@jpmorgan. as the company invests in cloud opportunity.P. CFA (1-212) 622-6389 sterling. Enterprise is still an opportunity RAX’s historical stronghold has been in small business (SMB). and RAX is a pure play. leaving a lot of runway for growth. Longer term. in our opinion. cannibalizing RAX’s larger. We note this stock. Action: Buy the stock as we believe the public cloud business will re-accelerate in 2H13. This differentiates from pure-play public North America Equity Research 12 July 2013 Rackspace Hosting (RAX) Description: Rackspace is a cloud-computing provider in the managed hosting and public cloud infrastructure-as-a-service (IaaS) markets. and the managed hosting growth will stabilize. and RAX has grown 15-20%. we think the multiple can get to 13x. Long-term margin target of 47% leavea a lot of runway EBITDA margins have been in the 30-35% range. We believe RAX can participate in this growth. which we think will drive multiple expansion. which could commoditize the public cloud.P. where the range of applications could be limited. which could potentially create tough comparables despite solid business performance. RAX has been gaining share in Managed hosting IDC forecasts the complex managed hosting market to grow at 7-8% CAGR through 2016. there could be a risk that more customers opt for public cloud rather than managed hosting. more profitable business. RAX has historically not given quarterly or annual revenue guidance (though it started in 2Q13). RAX is a pure play in the space. Risks/Challenges Public cloud could cannibalize managed hosting business As more computing moves to the cloud.2x FY14E EBITDA and has approximately 10% short interest. and provides service so customers can focus on their core business. Company does not give detailed guidance. Morgan. which are usually larger deal sizes. Positives Move to cloud is secular trend. which would still be a discount to its three-year average of 15x. 10 . Morgan Internet analyst Doug Anmuth) Web Services (AWS) is the #1 provider of public cloud services. In our experience. Amazon (covered by J. this sometimes creates big ranges in expectations. represents a very high risk. compared to others that are small parts of larger businesses. Opportunities Openstack could be a gamechanger in public and private cloud RAX runs its public cloud on an open-source platform called OpenStack. Hybrid cloud is a nice differentiator. Because it is open source. Threats Amazon continues to lower pricing frequently. Public cloud market is ~40% grower The public cloud IaaS market is expected to grow at ~40% CAGR through 2016. it has started to penetrate enterprises. It lowers pricing frequently. More computing is moving to the cloud. but potentially high reward opportunity. But because of its “Fanatical” service model. The combination of RAX's managed hosting and public cloud business gives customers the choice to put different applications on dedicated hosting versus public cloud. RAX is targeting 47%+ EBITDA margins. and run it in the private and public clouds.Sterling Auty. Valuation: Stock is trading at 9.

we think there is enough catalysts for the stock to work in the 2H. We believe with Verizon live now.Sterling Auty. but we continue to highlight to investors that we believe the risk associated with it is high as evidenced by the 8% intraday hit the stock took when Amazon announced the price cut to its dedicated server pricing. the company is on track to their 2Q guidance. and that the cloud business has the potential for re-acceleration. We are getting a number of investor calls looking at the name on the long side as we believe the valuation under 10x EV/EBITDA is attractive. The stock continues to be one of our four favorite stocks. subscription and storage fees. we feel comfortable that our estimates for 2Q and 2H is achievable. We would buy on weakness. dormant.auty@jpmorgan. the first notable reduction since April. Vodafone and the Indian carrier going live in 4Q or 1Q North America Equity Research 12 July 2013 Recent Buzz SNCR (OW/PT $35) down 12% on competitive downgrade We fielded a number of calls this week on Synchronoss post a competitor downgrade. We believe the dedicated hosting part of Rackspace business will see growth stabilize over the next two quarters. If that happens we believe the stock will react favorably. With Verizon Cloud. Also because Verizon pays SNCR based on a combination of active. Investors looking for the bottom in Rackspace The short interest in Rackspace according to Bloomberg declined in the June 28 report. CFA (1-212) 622-6389 sterling. 11 .

This agreement is intended to enhance the security and stability of the Domain name System while bolstering the competition in domain name industry. The new registry agreement includes a Trademark clearinghouse where the trademark holder can protect there North America Equity Research 12 July 2013 News That Matter ICANN Board approves 2013 registry agreement for new gTLDs The New gTLD program committee of the ICANN board of directors approved the new registry agreement on 7/3.auty@jpmorgan. We believe the new organizational structure reflects MSFT’s efforts to more clearly define its strategy – though that strategy still lacks nt-03jul13-en. Notably. some questions remain MSFT (covered by JPM Software analyst John DiFucci) formally announced the details of a long-awaited reorganization that focuses the company’s engineering efforts around OS. This could be negative for Rackspace (RAX/OW). 12 . Windows and Office will fall under new leadership. while longtime Office leader Kurt DelBene is retiring. Apps. To learn more please follow the link to ICANN press release below: http://www. Microsoft announces restructuring. Amazon has done 20+ price cuts over the last few years on its various cloud products. so this is not surprising. This has brought the new gTLD applicants closer to a point where they can see their names go online. in our opinion. CFA (1-212) 622-6389 sterling.htm Amazon Web Services (AWS) cuts prices again AWS announced on 7/9 that is cutting prices on dedicated EC2 compute instances by up to 80%. Cloud and Devices and aims to facilitate a “holistic” view of the company’s product lines. since the cuts are geared towards the dedicated business rather than the shared (ie public cloud) infrastructure business.Sterling Auty.icann. which is RAX’s larger business.

2% 65.0% 386.6% Gartner 13 .5% 30.1% 3. This tracks the health of EDA industry. CSGS ROVI.0% 316.1% 0. Many of these metrics are critical to the way that we build or validate the revenue forecasts for the companies listed.0 12.4 3. WWW CHPK.1 28.0% 369. corporations.7 -2. EDA spending typically comes out of semiconductor research and development (R&D) budgets.6% 2011 575980 0.6% TBD Feb/March 2014 January 2014 Rovi generates an estimated ~25% of total revenue from licensing IP to TV manufacturers based on shipments.5 0.9 -6.8 13.1 -14. INTU generates ~35% of revenue from its consumer tax business.9 -4.6 -2.2 3.8 6.9% 216.4 8.6 -8.0 -3. Relevant Stocks ADSK. VRSN.1% 17.3% 63.4% 378.4 -17.0% 144. WWW ROVI.5 -0. VRSN.0% 142.4% 3.3% 62.1% 14. VRSN.8 -1.2% 14. VRSN.1 6. Assets under management (AUM) are the lifeblood of investment managers. CFA (1-212) 622-6389 sterling.8% 290.4 -1.6% 116. CMVT.0% 303. IMPV TBD 0.9 32.5% 2012 593360 3. Table 2: Annual Metrics that Matter Annual Metrics Engineers Employed (US) yoy change Giving USA (in $ Bil) yoy change Top 500 Assets Under Management (in $ Tril) yoy change JPM Semi R&D Spending Tracker ($ Bil) yoy change EDA Spending ($ Bil) yoy change Flat Panel TV Shipments (in millions) yoy change US Individual Income Tax Returns (in millions) yoy change Global Wireless Capex ($ Bil) yoy change US Total Advertising Spending ($ Bil) yoy change US Internet Advertising Spending ($ Bil) yoy change Security Spend ($ Bil) yoy change Source: Shown Above.2% 4.9% 23.4% 3.0% 63. Online advertising spending is an important metric for ROVI.1% 70.7 1.4 -8.8 22.1% 22. ANSS BLKB Why Relevant? Tracks the number of mechanical engineers.1 6.Sterling Auty. CDNS.6% 17.9 19.6 40.9 2009 593610 -2.3% 347.4% 17.6E 8.1% 143.3% INTU DOX.3 14.8% 20.8% 26.0E 2.1% 221.0% 53. SSNC SNPS. and we will likely expand this section going forward. and WWWW.0 16.0% 142.5% TBD TBD TBD 4. We track this to keep an eye on spending levels for security companies.5% 16.1 37. Highlighted in gray are new updates and the value within bracket is the old value.3% 148.2 7.4% 36. so we believe the change in total US tax returns is a relevant metric for this business The budget to vendors that sell into Telco's come from capex.7 5.7% 209.1 13.auty@jpmorgan. and architects in the US This tracks the amount of total donations by most major sources (individuals.3E 18. and sometimes the metric for which vendors price North America Equity Research 12 July 2013 Metrics That Matter Below you will find a table containing metrics that we believe are most important to the companies that we follow.4 5.0 3.4 1.2% 19.8% 19.8 -1.8% 314.5 11.8% 13.0% 380. Online advertising spending is an important metric for ROVI.4 8.2 14. PMTC.4% 78.4 -1.1% 307. NSR.4 TBD 12.6% 2008 605960 5.0% 72.4 2.4 -23. 90.4% 2010 571220 -3.3% 69.7 18. 2007 576530 3. We believe this will provide a concise resource to track these metrics.1 -7.4% 159. This is a gauge of how spending is at their customers. MENT SNPS.0 3. civil engineers. WBSN. CDNS.1% 3.3% 73.2 13.6% 350.4% 356.5 30.0 -3.1% 17.5% 2013E Next Update May 2014 June 2014 October 2013 Source US Bureau of Labor Statistics Giving USA ADVS.7 63.9% 19.2% 20. MENT ROVI Tower Watson JPMorgan proprietary model JPMorgan proprietary model Display Search US Internal Revenue Services (IRS) JP Morgan Analyst Rod Halls Estimate Zenith Optimedia Zenith Optimedia 25.6E 9. and has shown a 90%+ correlation over the last 10+ years.6% 145.9% 11.0 4.6 14.3% 4. and WWWW.1 9.3 2.9 15. FTNT. etc) in the US.7 7.8% 305.

7 7.5E) 1.81 -7.76 (100. but particularly ADSK.6 (7.9 2Q13E 2. INTU.6% 97.3% and .4% 221.30E TBD 4.00 -30.P.0E 0. Morgan Economics J.1% 1. PMTC.0 47.P.02 3.1% This is important for the health of the industry Rovi generates ~40% of total revenue from licensing interactive program guide (IPG) product and patents to service providers Verisign generates 95%+ of total revenue from its .13 and .25 -12.6% 310.92E) -30. Morgan Economics 1. but particularly ADSK. Rod Hall's Global Handset Model JPMorgan Telecom Research Team (Phil Cusick) market model VeriSign ROVI TBD -0.6% 98.7 3Q12 3.480 1.25E (0.3 -2.2% 252.33 4.1 -0.2% 240.4% 233.8% 2.25 -34.2 8.942E 7.32 -2.4E TBD J.1% 308.33 For translation purposes -1.733 0.6% 1.Sterling Auty.3% 96.3 -0.6% 97.1% 1. PMTC.5E Next Update TBD TBD Source J.0 -0.0% 315.2% 1.3E 44.80 0. WWWW DOX.0% 78. PMTC.3 8.0 12. our coverage universe generates ~20-30% of revenue from Europe 1Q12 2.1% 1.9% 86.6 For translation purposes -6.76 5.0 11.144E -0.5% 192.0% 1.0E 0.29 net additions (in millions) yoy change Total Domain Names (in millions) yoy change Wireless Subscribers (in millions) yoy change Source: Shown Above Many software tools are sold on a per seat basis registry business We track the growth of all domains combined to gauge market share Tracks the health of the wireless industry. SNCR. Morgan Economics US Unemployment rate (at annual rate) EUR/USD FX Rate yoy change USD/JPY FX Rate yoy change Smartphone Units ( in Millions) yoy change North American Video Subscribers (in 000s) yoy change Total .0 11.0% 96.4% 97.9% 96.1% 1.P.6% 80.802 0.0% TBD 316.5% 94.30E) 1.0 30.7 38. but particularly ADSK.P.914 0. 147.auty@jpmorgan.4% VRSN VRSN.6% 1.4% 242.37 -31. NSR.3 1Q13 2.7 -1. our coverage universe generates ~40% of revenue from the US On average.4 -2. Morgan Economics J.00E TBD 29.8% 312.6% 77.75 12.0 11.2 4Q12 0.31 ( North America Equity Research 12 July 2013 Table 3: Quarterly Metrics that Matter Quarterly Metrics US Real GDP Change (at annual rate) Euro Real GDP Change (at annual rate) Relevant Stocks All All All.P. ROVI Why Relevant? On average.8 7.9% 0.0% 102. ANSS All.0E 3Q13E 2.1 2Q12 1.3% 246.86 4.00E) 22.1 7. MOTR.1% 153.4 -0.7 42.28 21.59 5. CNSI TBD VeriSign JPMorgan proprietary model TBD 14 .9E TBD 43.7% 2.81E) -35.89E (0.0% 1. SNCR.2 46. Morgan Economics JP Morgan. ANSS DOX.4% 169.6% J. CFA (1-212) 622-6389 sterling. ANSS All.

7 -1.2 0. PMTC.30 -0. Morgan Economics J. ANSS All.3 -5.3% 7/24/2013 8/1/2013 TBD Company Reports Automotive News American Institute of Architects Institute of Supply Management Markit Semiconductor Industry Association J. WWWW.2% 46.30 0. Morgan Economics National Federation of Independent Business.34 0.33 1.2 -3.2 -0.8% 50.252 May-13 486.5 3.2% 50.5 8/13/2013 0.3 3.2% 48. in 000s) y/y change (over comparable period) US Auto Sales Total Annualized SA monthly change Architectural Billings Index monthly change ISM Manufacturing Survey monthly change Euro PMI Manufacturing index monthly change SIA data (in $ Bil) monthly change EUR/USD FX Rate monthly change USD/JPY FX Rate monthly change Brent Crude Oil Prices monthly change Small Business Optimism Index Intuit Small Business Employment Index monthly change Source: Shown Above Relevant Stocks VRSN Why Relevant? Verisign generates 95%+ of total revenue from its .0 -3.2 4.1 2.2 -0.1% 1.30 -2. PMTC.1% 25.4% 94.2 -3.3 5. ANSS SNPS.7 2.9 0.2 2.1% 8/1/2013 TBD TBD TBD 15.3% 26.4% 46.5% 95. CFA (1-212) 622-6389 sterling.3 2.0% 51.9 10.1 0. RAX 15.8 0.6% 94.9% Feb-13 584.4% 2.2% 1. ANSS ADSK.8 -5.8 -2.1 0. WWWW.9% 23.4 For Translation Purposes Aspen generates 40-50% of total revenue from the energy industry INTU.P.8% 14.1 -0.7% 51. Morgan Economics J.4% 52.699 -6. CDNS.31 15.7% 92.1% 94.7 0.0 -31.5% 94.2% 23.4% 89.9 3.6 -9.3% 111.9 1.5 0.2 24.5% 54.6% Next Update 8/1/2013 Source Verisign INTU Feb 2014 North America Equity Research 12 July 2013 Table 4: Monthly Metrics that Matter Monthly Metrics Total . but particularly ADSK.5 -1.0 TBD 15 .net registry business INTU generates 35% of revenue from its consumer tax business TRAK's transaction revenue is 70% correlated with SAAR numbers.5% 83.9 -5.4% 50.649 0.1% 24.9 -2. RAX and WWWW generate significant percentages of revenue from small business name additions (in thousands) monthly change TurboTax Season to Date Returns (Total ex FF.7% 47.9 8.8% 1.6 -6.1 -9.9 3.3% 88.9% 88.2% Apr-13 442.9% 1.4% 46.0% 12. Autodesk generates at least 30% of total revenue from the architectural.4 2.3 -1.0 0.Sterling Auty. RAX and WWWW generate significant percentages of revenue from small business INTU.8 8/1/2013 For Translation Purposes 1.3% 54.9% 48.7% 94.9% 94.0% 24.4% 23.3 0.6% 15.0 -1. PMTC.6% 88. engineering.6% 103.3% 109.0% 94.1 and .1% 47.2 2. ANSS AZPN INTU.7 0.7% 103.1% -1.8 -18.auty@jpmorgan.9 2.8 1.2% 1.4 -22.P.3% 96. MENT All. important for health of EDA spending Dec-12 363.8 1.8% 92.9% 98. Intuit TRAK ADSK ADSK.4 0.P.8% 104.7% 54.1% 93.8 -1.6% 1.9 4.3 105.7 -0.2% 15.0% 90.9% 53. Manufacturing is a key vertical for design software Manufacturing is a key vertical for design software Tracks worldwide semi revenue.2% Jun-13 323.9 9.31 0.5% 51.2 5.3 3.8% 49.5 -0. PMTC.1 4.8% 17. RAX INTU.1% 100. but particularly ADSK.4% and .3 -33.1% Jan-13 749.4% 48.8% 111.1% 1.9 15.0% 21.2 3.0% 95.0% Mar-13 641.5 3. and construction (AEC) industry.2% 1.

Sterling Auty.3% 149.0 13.0 16.6% -26.0 17.0 14.0 42.8 60.1 24. Palo Alto Networks E2open Inc. Name Guidewire Software Inc AVG Technologies NV Brightcove Inc Bazaarvoice Inc Yelp Inc Demandware Inc Exact Target Vocera Communications Millennial Media Inc.7% 253.5 17.0 12. Automated network control devices Data protection solutions Brand e-commerce and digital marketing Voice and audio processors Simulation Software Developer Enterprise information technology management software Next generation firewall provider On demand demand-supply solutions Real estate search engine Provides IT security risk and compliance management solutions Global Provider of fleet management solutions delivered as SaaS HD video compression and image processing semiconductors Operates a global marketplace for commercial digital imagery Renders enterprise SaaS business model products.0% 74.0 10.8 24.8 % Change 240.0 19.1 10.5 11.0% -16.3% 36.0 17.4% 16.8% 11.0 Current Price 7/11/2013 44.4% 97. Provides revenue management software Provides online advertising management services Provides application lifecycle management solutions Provides analytics and data visualization software Ticker GWRE AVG BCOV BV YELP DWRE ET VCRA MM SPLK BLOX PFPT AQ ADNC EXA NOW PANW EOPN TRLA QLYS FLTX AMBA SSTK WDAY MODN MRIN RALY DATA Trading Date 1/24/2012 2/1/2012 2/16/2012 2/23/2012 3/1/2012 3/14/2012 3/21/2012 3/27/2012 3/28/2012 4/18/2012 4/19/2012 4/19/2012 4/26/2012 5/9/2012 6/28/2012 6/28/2012 7/19/2012 7/25/2012 9/19/2012 9/27/2012 10/4/2012 10/9/2012 10/10/2012 10/11/2012 3/20/2013 3/22/2013 4/12/2013 5/16/2013 IPO Price 13.0 12.0 16. Table 5: IPO List in the Software sector for the year.4 33.0 15.0 18.2% 96.auty@jpmorgan.5 55.8 17.5 24.9% .1% 196.1% 101.5 14.2 16.5 46.4 44. Service Now Inc. CFA (1-212) 622-6389 sterling. Trulia Qualys FleetMatics Group PLC Ambarella Inc Shutterstock Inc Workday Inc ModelN Marin Software Rally Software Tableau Software Source: Bloomberg 16 Company Description Insurance industry software Antivirus and Internet Security Video hosting and publishing services Social Analytics Platform Social Networking e-commerce solution provider Email marketing software Instant voice communication solutions Mobile advertising and data services Online information technology search engine soln.3 21.0 17.6% -12.0 15.4 34.3% 77.4 46.0 31.5 31.0 13.1 9.8 14.0 13.0% -23.0% -18.8% 31.0 9. Infoblox Inc Proofpoint Inc Acquity Group Ltd Audience Exa Corp.7% 84.0 16.0 11.2 65.0 15.0 6.0 28.0 17.5 49.9% 79.4% -17.3% 58.8 37.0 16. Splunk Inc.8% 116.0 13.0% 146.2% 4.4 33.0 9.9% 132.7% 190.0 North America Equity Research 12 July 2013 IPO and M&A in the Sector Below we provide a table of recent notable IPOs in software and related sectors.7% 191.0 6.

6x FY1 EV/FCFF 6. Deal Value $7.8x EV/Sales 3.4B $1.8x EV/Sales 9. Goldman Sachs Affiliate Source: Bloomberg.2x EV/maintenance 3.3B $1. For Service Lifecycle Management (SLM) For recruiting & talent management solutions.9B $449M $4.5B $10.6x EV/Sales 11. Synopsys SAP AG Oracle Corp.5B $507M $3. Convergys IM Business Ariba Yammer Authentec Springsoft Servigistics Kenexa ClickMotive JDA Retalix Ltd.Sterling Auty. Biometric authentication sensors & software. For additional analog & verification capabilities. Cost synergies. Windows Phone.1x FY1 EV/Sales 2.9x EV/Sales 8. IM North America Equity Research 12 July 2013 Table 6: Key M&A events in the sector Acquirer Intel Microsoft Google HP Providence Equity Partners Oracle Corp.9B $650M $871M $55M $1. To strengthen SAAS portfolio. CFA (1-212) 622-6389 sterling.3B $1.6x EV/Sales 54x EV/Sales 3. Taking company private.6B $1. Target McAfee Skype Motorola Mobility Autonomy Blackboard Right Now Magma SuccessFactors Taleo Corp. including smart revenue solutions.5x FY1 EV/Sales 3.9M $1. To strengthen data analytics.2B $356M $406M $220M $1.7B $8.7x EV/Sales 5. To offer broad portfolio of solutions & services To expand retail industry leadership To create a comprehensive Customer Experience Cloud offering To add cloud based technologies expand their international reach To speed deployment of All-IP networks Taking company private.5B $12. enhanced R&D in analog design. cloud and workflow management capabilities. To strengthen the digital marketing footprint.7x EV/Sales 17x FY13E EBITDA 9. Support Xbox.3x EV/Sales 23.8x EV/Sales Reason Acquired for security solutions. For cloud based spend management solutions Acquired for enterprise social networking. Synchronoss Oracle Corp. Acquired for on-demand customer service solutions. Lync & Outlook Wireless connectivity patent portfolio and also boost to Google TV. NEC SAP AG Microsoft Apple Synopsys PTC IBM DealerTrack RedPraire NCR Oracle Corp.7B $820M Announcement Date 8/19/2010 5/10/2011 8/15/2011 8/18/2011 10/4/2011 10/24/2011 11/30/2011 12/3/2011 2/9/2012 3/22/2012 5/22/2012 6/25/2012 7/27/2012 3/8/2012 8/8/2012 8/27/2012 10/2/2012 11/2/2012 11/28/2012 12/20/2012 12/2/2012 2/4/2013 5/1/2013 Acquisition Multiple 3.3B $48.9x EV/Sales 11x EV/ FY2 EBITDA 17.auty@jpmorgan. 17 . Eloqua Newbay Acme Packet EBIX Inc. For cloud-based human capital management solutions.

00 $ Amdocs Limited Comverse Inc.1 11.6 Valuation EV/Sales FY1 FY2 5.0 2.9 13.4 12.3 3. Inc.8 14.6 19. Web.4 9.2 11. Company Check Point Software Tech.9 4.00 $48.6 3.7 4.7 8.0 2.01 $36.2 4.6 19.2 11.49 $20.7 2.5 12.8 18.6 24.3 23.50 $17.9 24.2 14.4 14.3 8.1 11.7 2.00 $25.5 18.35 $47.4 13.2 10.8 15.9 21.9 7.2 8.7 9.00 $33.4 10. Morgan estimates.9 3.2 7.1 15.9 10.8 11.7 26.3 NM 21.9 7.87 $33.1 8.6 NM NM NM 51.8 23.00 $37.4 3.2 3.00 Average Mean Median Source: Company reports and J.12 $38.5 21.38 $27.4 5.6 21.00 $24.3 15.3 15.1 3.9 13.92 $21.9 FY2 8.22 $44.7 21.5 0.3 17.37 $15.9 20.0 26.4 5.7 49.5 11.8 12.2 10.0 6.00 $55.00 $16.2 15.9 4.6 13.2 5.8 5.00 Average $80.2 33.9 3.0 3.48 $20.3 12.0 9.3 15.6 0.1 19.3 3.5 4.4 15.4 12. CFA (1-212) 622-6389 sterling.auty@jpmorgan.4 4.5 45.1 26.0 1.4 2.8 13.5 3.6 21.6 25.5 3.5 15.6 4.6 8.7 14.4 1.3 13.6 3.00 $19.3 4.7 21.4 NM 18.6 6.0 19.7 NM 20.1 25.00 $38. AKAM EQIX RAX VRSN WWWW DOX CNSI CSGS NSR SNCR ANSS AZPN ADSK CDNS MENT PMTC SNPS ADVS BLKB TRAK GWRE INTU TYPE MODN RP SSNC OW OW N OW N N N N OW N OW N OW N N OW N N OW OW N OW OW N OW $44.9 12.1 19.9 3.6 1.2 41.8 6.3 28.7 4.4 12.8 2.5 10.7 16.6 5.6 23.2 14.1 4.20 $26.1 32.9 55.3 10. Fortinet Imperva Qualys ROVI Ticker CHKP FTNT IMPV QLYS ROVI Rating OW N OW OW N Non-GAAP P/E FY1 FY2 16.5 NM 16.4 4.5 86.8 17.4 21.9 10.2 12.3 4.1 3.1 12.0 16.5 9.0 34.3 14.5 2.40 $15.7 NM 34.3 15.2 70.1 2.43 $26.1 18.58 $51.4 22.42 $35.00 $25.00 $38.5 12.0 13.51 $40.1 30.00 Average $39.3 16.8 11.7 3.0 10.00 $65.6 4.6 7.5 13.00 $30.2 16.8 15.5 12.0 28.6 41.3 13.3 25.2 NM NM 12.6 1.8 11.00 $32.6 19.3 NM 12.Sterling Auty.5 24.8 39.6 11.0 28.30 $64.00 $22.4 19.4 17.1 2.7 8.6 17.1 4.3 25.8 13.9 42.1 2.3 13.8 8.1 26.0 11.7 22.9 7.5 5.8 9.P.9 14.7 57.81 $23.6 16.00 $45.3 17.1 67.8 5.3 6.4 11.6 30.7 21.8 4.00 $47.5 21.3 4.3 9.0 20.1 74.7 19.4 17.6 21.6 22.9 3.5 2.0 27.05 $52.1 7.3 15.5 23.3 22.7 9.00 $35.0 NM 94.00 $22.2 5.4 17.00 Average $35.1 34.5 15.4 29.5 4.4 18.2 North America Equity Research 12 July 2013 Table 7: Comparables Price Info Price as of Target 7/11/2013 Price $54.00 $21.3 15.5 18.4 8.35 $31. CSG Systems Neustar Synchronoss Technologies Ansys Aspen Technology Autodesk Cadence Design Systems Mentor Graphics Parametric Technology Corp Synopsys Advent* Blackbaud DealerTrack Guidewire Intuit Monotype Imaging ModelN Realpage SS&C Technologies Inc.00 $23.2 NM 26.9 15.5 17.7 1.0 18 .6 20.8 9.9 9.1 15.1 4.6 10.14 $30.8 19.9 NM 27.15 $53.0 5.2 9.1 2.6 EV/EBITDA FY1 FY2 9.1 9.1 3.6 12.5 15.00 Average Akamai Technologies Equinix Rackspace Hosting Verisign.6 19.9 3.8 23.78 $24.44 $26.3 18.7 9.4 18.4 EV/FCFF FY1 9.8 21.00 $40.5 39.1 13.1 3.6 15.48 $78.9 4.50 $199.8 7.6 7.70 $28.9 7.3 10.1 10.6 12.7 NM 29.4 24.10 $26.3 17.25 $46.00 $20.2 11.9 3.8 NM 66.4 11.6 13.3 3.00 $48.58 $37.3 8.3 14.1 16.5 11.

Web. Rackspace Hosting. Morgan currently has. and the services provided were non-investment-banking. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for Model N. or had within the past 12 months. Morgan currently has.P. Rackspace Hosting. Morgan currently has.Sterling Auty. Guidewire Software.51/Overweight). the following company(ies) as clients: DealerTrack Holdings Inc. the following company(ies) as clients. Guidewire Software.21/Overweight) Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or.disclosure. Non-Investment Banking Compensation: J. Investment Banking (past 12 months): J.P. and (2) no part of any of the research analyst's compensation was. Guidewire Software. Guidewire Software (GWRE/$44. Investment Banking (next 3 months): J. Web. including price within the past 12 months. Each Gartner publication speaks as of its original publication date (and not as of the date of this report). For important disclosures for these companies. Guidewire CFA (1-212) 622-6389 sterling. the following company(ies) as investment banking clients: DealerTrack Holdings Inc. Company-Specific Disclosures: Important disclosures. Model N. Web.inquiries@jpmorgan.P.auty@jpmorgan.P. Lead or Co-manager: J.P. Morgan expects to Rackspace Technical. and Quantitative Research teams may screen companies not covered by Morgan.P. Securities-Related: with your request. where multiple research analysts are primarily responsible for this report. compensation for investment banking services in the next three months from DealerTrack Holdings North America Equity Research 12 July 2013 Companies Recommended in This Report (all prices in this report as of market close on 12 July 2013) DealerTrack Holdings Inc (TRAK/$38. Web. and have not been reviewed by Gartner.disclosure. Rackspace Hosting. Rackspace Hosting. Model N. or had within the past 12 months. Morgan’s Strategy. with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers. please call 1-800-477-0406 or e-mail research. Client: J. The opinions expressed in Gartner publications are not representations of fact. and the services provided were non-securities-related: DealerTrack Holdings Inc. is. the research analyst denoted by an “AC” on the cover or within the document individually certifies. (WWWW/$26. Model N. Client/Non-Securities-Related: J. and are subject to change without notice.37/Overweight). Morgan– covered companies by visiting https://mm. Client/Non-Investment Banking. calling 1-800-477-0406. Inc. Important Disclosures           Market Maker: JPMS makes a market in the stock of DealerTrack Holdings Morgan has received compensation in the past 12 months for products or services other than investment banking from Rackspace Hosting. 19 . or had within the past 12 months.P.. Rackspace Hosting (RAX/$40. or intends to seek. Gartner: All statements in this report attributable to Gartner represent J.inquiries@jpmorgan. Rackspace Hosting. the following company(ies) as clients. or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. Morgan currently has. Web. Guidewire Software.09/Overweight). are available for compendium reports and all J.P. or e-mailing research.24/Overweight).P. Client/Investment Banking: J. Model Web. Morgan received in the past 12 months compensation from investment banking DealerTrack Holdings Inc. Model N (MODN/$24. or had within the past 12 months. securities-related: Web. Web. Morgan's interpretation of data opinion or viewpoints published as part of a syndicated subscription service by

Morgan.Sterling Auty.P.24 Price Target ($) 35. 20 . 2013.00 8 0 Mar 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Source: Bloomberg and J.auty@jpmorgan. Initiated coverage Feb 29.00 17 0 Oct 06 Jul 07 Apr 08 Jan 09 Oct 09 Jul 10 Apr 11 Jan 12 Oct 12 Jul 13 Source: Bloomberg and North America Equity Research 12 July 2013 DealerTrack Holdings Inc (TRAK. 2008.92 Price Target ($) 25.00 40. price data adjusted for stock splits and dividends.P. TRAK US) Price Chart 85 68 51 Price($) 34 OW N OW $35 OW $40 Date 29-Feb-08 12-Aug-08 02-Oct-12 03-Jul-13 Rating Share Price ($) OW N OW OW 20.47 15. Initiated coverage Apr 15. CFA (1-212) 622-6389 sterling. Model N (MODN. Morgan. MODN US) Price Chart 40 32 OW $25 24 Price($) 16 Date 15-Apr-13 Rating Share Price ($) OW 19. price data adjusted for stock splits and dividends.79 28.01 36.

98 55.00 05-Dec-12 OW 50 13-Feb-13 22-Feb-13 09-May-13 OW 25 0 Jun 09 Mar 10 Dec 10 Sep 11 Jun 12 Mar 13 Source: Bloomberg and J. WWWW US) Price Chart 44 33 OW $18 Price($) 22 OW $20 Date Rating Share Price ($) 10.67 15.59 74.00 81.auty@jpmorgan. Rackspace Hosting (RAX.00 20-Dec-11 OW 26-Oct-12 11 0 Nov 08 Aug 09 May 10 Feb 11 Nov 11 Aug 12 May 13 Source: Bloomberg and J. (WWWW. 21 .33 52. RAX US) Price Chart 125 OW $75 OW $81 100 OW $83 Price($) 75 OW $55 Date Rating Share Price ($) North America Equity Research 12 July 2013 Web.24 OW OW Price Target ($) 83. 2011. Initiated coverage Dec 20. 2012. CFA (1-212) 622-6389 sterling.Sterling Auty.00 75. price data adjusted for stock splits and dividends.94 OW Price Target ($) 18. Morgan. Initiated coverage Dec 05.00 20.00 55. price data adjusted for stock splits and dividends.

www.P.P. CSG Systems (CSGS). Blackbaud Inc (BLKB). Initiated coverage Mar 05. Intuit (INTU).K. In our Asia (ex-Australia) and U. Morgan Equity Research Ratings Distribution. The chart(s) show J. The previous rating and. UW = Underweight. small.53 Price Target ($) 30.] Neutral [Over the next six to twelve months. Equinix (EQIX). (PMTC). Morgan Global Equity Research Coverage IB clients* JPMS Equity Research Coverage IB clients* Overweight (buy) 44% 56% 42% 76% Neutral (hold) 44% 50% 50% 66% Underweight (sell) 12% 40% 8% 55% *Percentage of investment banking clients in each rating category. Cadence Design Systems (CDNS). Parametric Technology Corp. we expect this stock will outperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe. Rovi (ROVI). Inc. we expect this stock will underperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe. Sterling P: ANSYS. the price target. not to those analysts’ coverage universe. as of June 28. regulatory or policy reasons. Amdocs (DOX).] Not Rated (NR): J. (AKAM). Qualys (QLYS). Please note that stocks with an NR designation are not included in the table above.P. 2012. Inc. Web.and mid-cap equity research. if applicable. Synopsys Inc (SNPS).auty@jpmorgan. Advent Software (ADVS).P.P.] Underweight [Over the next six to twelve months. SS&C Technologies (SSNC). Neustar (NSR).P. DealerTrack Holdings Inc (TRAK). if applicable. Morgan's continuing coverage of the stocks. Guidewire Software (GWRE).com (WWWW) J.69 32. we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe. Imperva (IMPV).Sterling Auty. Designations and Analyst(s) Coverage Universe: J. no longer should be relied upon. the current analysts may or may not have covered it over the entire North America Equity Research 12 July 2013 Guidewire Software ( 28 05-Sep-12 29-May-13 OW 14 0 Jan 12 Apr 12 Aug 12 Nov 12 Mar 13 Jul 13 Source: Bloomberg and J. Morgan. J. Akamai Technologies. N= Neutral. Morgan’s research website.00 45. If it does not appear in the Important Disclosures section of this report. our Overweight rating falls into a buy rating category. GWRE US) Price Chart 70 56 OW $30 Price($) 42 OW $40 OW $45 Date 05-Mar-12 Rating Share Price ($) OW OW 21. each stock’s expected total return is compared to the expected total return of a benchmark country market index. Fortinet. For purposes only of FINRA/NYSE ratings distribution rules.jpmorganmarkets. for this stock because of either a lack of a sufficient fundamental basis or for legal. Coverage Universe: Auty. the certifying analyst’s coverage universe can be found on J. Comverse Inc (CNSI). (ANSS). An NR designation is not a recommendation or a rating. Morgan uses the following rating system: Overweight [Over the next six to twelve months. Autodesk (ADSK). and our Underweight rating falls into a sell rating category. Check Point Software (CHKP). Morgan ratings or designations: OW = Overweight. NR = Not Rated Explanation of Equity Research Ratings. Rackspace Hosting (RAX). Morgan has removed the rating and.P. Inc (FTNT). Model N (MODN). price data adjusted for stock splits and dividends.25 41. our Neutral rating falls into a hold rating category. the price target. 22 . 2013 J. Aspen Technology (AZPN). VeriSign (VRSN).00 40. CFA (1-212) 622-6389 sterling.

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