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


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

Gartner estimates ~9% of Guidewire’s customers are on a current version. with 60 customers in production. of which ~50% are in North America. Second. We estimate this back-of-the-envelope by assuming ~1. a sign of the healthy growth in this market. Figure 1: Guidewire the Clear Leader in Claims. and with similar pricing. consistent with the distribution of direct written premium. this would equate to roughly 50% market share in claims management.200 worldwide P&C carriers worldwide. though we note this is a very rough estimate without sales information.1B worldwide. 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. by our estimates. We think this shows Claimcenter is keeping up with customer demands. that means North America represents ~$1B in total market size.5T. there is still room for existing customers to upgrade to more current versions of software. We believe growth can continue for two reasons. and similarly only a couple of Accenture’s customers were on their latest release. For example. as that system is more integrated into the P&C’s core systems and is the system of record for the carrier. We estimate North America makes up about half of worldwide DWP. Just as important. which we estimate is about 20% penetrated. and Continuing to Extend Lead with Customer Wins Source: Gartner 4 . First.auty@jpmorgan. We believe upgrades bring more capability.Sterling Auty. cover more DWP. Guidewire is the clear leader in the space with its ClaimCenter product. and thus help drive market growth. so applying that math gets us to ~$2. up 27% from 2011. Guidewire is the Clear Leader Guidewire has the largest number of customers in production. and is winning the most deals As we show in Figure 2 below. these six vendors had 116 customers in production in North America. or 3x its nearest competitor. We estimate worldwide DWP to be ~$1. Based on customer count. CFA (1-212) 622-6389 sterling. ClaimCenter is continuing to extend this lead by signing 4-5x more new customers in 2012 than its nearest competitor with 18. 27% growth in number of deals signed in North America Equity Research 12 July 2013 intensity for claims is slightly lower than policy management. and is capitalizing on its leadership position in the market.

This is not surprising as tier 2 and tier 3 customers are usually quicker to adopt more recent technologies. Third. The three tiers are separated by the amount of direct written premium for an individual carrier. By the same token. Guidewire leads by 3x in tier 2 carriers. Second.Sterling Auty. we see three areas that the company has invested in for innovation. First. and tier 3 less than $1B. 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 fraud detection. indicating the market is consolidating to a smaller number of providers. Guidewire is virtually neck-and-neck with Accenture with 8 and 9 tier 1 customers respectively. 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. 5 . compared to tier 1 customers who can afford to rely on older systems given their market share. Figure 2: Guidewire's Leadership in Claims Crosses All Segments of the Market Source: Gartner Market is consolidating to select few 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. The vendors that were excluded because of no new customer wins were Aon eSolutions.auty@jpmorgan. is their newest introduction Guidewire Live. Pegasystems and MphasiS Wyde. tier 2 between $1-$5B. with tier 1 with more than $5B. MajescoMastek. Competitive Landscape Guidewire is adding innovative products to maintain/grow its leadership Based on our analysis of Guidewire’s Claimcenter. an admirable achievement for a much smaller and younger provider. which recall we estimate fraud to consume 2-4% of global DWP or approximately $50B per year. CFA (1-212) 622-6389 sterling. rather than best-of-breed solutions. CA). and by 2x in tier 3. 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. Insurity. 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.

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

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

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

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

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

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 first notable reduction since April. The stock continues to be one of our four favorite stocks. We believe with Verizon live now. If that happens we believe the stock will react favorably. we think there is enough catalysts for the stock to work in the 2H. Vodafone and the Indian carrier going live in 4Q or 1Q 14. We believe the dedicated hosting part of Rackspace business will see growth stabilize over the next two 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. CFA (1-212) 622-6389 sterling. the company is on track to their 2Q guidance.auty@jpmorgan. 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. With Verizon Cloud. we feel comfortable that our estimates for 2Q and 2H is achievable. dormant. Also because Verizon pays SNCR based on a combination of active.Sterling Auty. Investors looking for the bottom in Rackspace The short interest in Rackspace according to Bloomberg declined in the June 28 report. We would buy on weakness. and that the cloud business has the potential for re-acceleration. 11 . subscription and storage fees.

so this is not surprising. This has brought the new gTLD applicants closer to a point where they can see their names go online. Cloud and Devices and aims to facilitate a “holistic” view of the company’s product lines. while longtime Office leader Kurt DelBene is retiring. We believe the new organizational structure reflects MSFT’s efforts to more clearly define its strategy – though that strategy still lacks clarity. Notably.Sterling Auty. This could be negative for Rackspace (RAX/OW). Apps. since the cuts are geared towards the dedicated business rather than the shared (ie public cloud) infrastructure business. in our opinion. which is RAX’s larger business. 12 .auty@jpmorgan.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%. Windows and Office will fall under new leadership. Amazon has done 20+ price cuts over the last few years on its various cloud products. 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. CFA (1-212) 622-6389 sterling. The new registry agreement includes a Trademark clearinghouse where the trademark holder can protect there nt-03jul13-en. This agreement is intended to enhance the security and stability of the Domain name System while bolstering the competition in domain name industry. Microsoft announces restructuring. To learn more please follow the link to ICANN press release below: 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.

0% 142.7 18.9% 216.0 3. VRSN.4 -8.6% 116.4 2.3% 69.4 -17.8% 13.0% 53.8 22.1 -14.4 -23.4 1.6 40. corporations. CMVT.4 8.2 3.Sterling Auty.8% 19.4% 378.2% 14.1 -7. We believe this will provide a concise resource to track these metrics.0% 380.2% 19. Assets under management (AUM) are the lifeblood of investment managers.4% 356.0% 316.3% 347. PMTC.9 -6.8% 20.3% 62.8 -1.0E 2.0% 369.6% 350.0% 63.2 13.7 63. Many of these metrics are critical to the way that we build or validate the revenue forecasts for the companies listed. 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. NSR. 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. 2007 576530 3.0% 386. Highlighted in gray are new updates and the value within bracket is the old value. WWW ROVI.4% 2010 571220 -3.6E 8.2% 4.2% 65.1% 3.6 14.5% 2013E Next Update May 2014 June 2014 October 2013 Source US Bureau of Labor Statistics Giving USA ADVS. WWW CHPK.8 6.0 -3.1% 221.7% 209.4 -1.1% 22.1% 14.1% 17. WBSN. FTNT.0% 142.0 16.5 -0.1 28.0% 144.0 12.2% 20.9 -4.9 32.8 -1. and has shown a 90%+ correlation over the last 10+ years. and we will likely expand this section going forward. MENT SNPS.8% 26.1% 307. and sometimes the metric for which vendors price solutions. INTU generates ~35% of revenue from its consumer tax business.8% 290.9 19. Online advertising spending is an important metric for ROVI.3% 148.0% 72.6 -8.4% 78.3 2.4 3.0 4.5% 2012 593360 3.1 37.3% 63. and WWWW.0% 303. CDNS.5 0.7 1.9 15. Online advertising spending is an important metric for ROVI. civil engineers. VRSN.auty@jpmorgan. VRSN. This tracks the health of EDA industry.9 2009 593610 -2.1% 143.5% 16. SSNC SNPS. This is a gauge of how spending is at their customers.8% 305. CSGS ROVI. etc) in the US.3% 73.3% INTU DOX.3% 4. 90. and WWWW.6 -2.4% 159.5 30.1% 70.7 7.6% 2011 575980 0. VRSN. EDA spending typically comes out of semiconductor research and development (R&D) budgets.4 8. ANSS BLKB Why Relevant? Tracks the number of mechanical engineers.2 7.6% 145.1 6.8 13.9% 11. We track this to keep an eye on spending levels for security companies.1 9.1% 0.4% 17.3 14.6% Gartner 13 . CFA (1-212) 622-6389 sterling.0 3.5% TBD TBD TBD 4.5% 30.4 -1.1 6.6% TBD Feb/March 2014 January 2014 Rovi generates an estimated ~25% of total revenue from licensing IP to TV manufacturers based on 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. Relevant Stocks ADSK. CDNS.7 -2. 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.3E 18.6E 9.4% 3. and architects in the US This tracks the amount of total donations by most major sources (individuals.6% 2008 605960 5.6% 17. IMPV TBD 0.5 11.7 5.1% 17.9% 19.2 14.4% 36.4 5.8% 314.9% 23.1% 3.4% 3.4 TBD 12.0 -3.1 13.

28 21.76 (100.0% 96. ANSS All.0E 0. our coverage universe generates ~20-30% of revenue from Europe 1Q12 2.4 -2.30E) 1.2% 240.3 1Q13 2.auty@jpmorgan.6% 80.4% 221.1% 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 .33 4. ANSS DOX.29 -9.5% 94.81E) -35.0 12. Morgan Economics 1. PMTC.80 0.81 -7.92E) -30.942E 7.0% TBD 316.3E 44. PMTC.3% 246. CFA (1-212) 622-6389 sterling.3 -0.P. Morgan Economics JP Morgan. INTU.5E Next Update TBD TBD Source J.25 -12. but particularly ADSK.0% 1.4% VRSN VRSN.0E 0. ANSS All.0% 1.89E (0. our coverage universe generates ~40% of revenue from the US On average.9 2Q13E 2.6 (7.9% 96. PMTC.4% 233.P.6% 77.3 8.P.6% 97.0% and .1 2Q12 1.733 0.2 8.13 2.914 0.8 7.75 12.33 For translation purposes -1. NSR.25 -34.7% 2.0 47. 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 .1% 1.1 7. Morgan Economics J.7 3Q12 3.P.5% 192.2% 1. WWWW DOX.30E TBD 4.8% 312.1% 153.1 -0.3% 96. Rod Hall's Global Handset Model JPMorgan Telecom Research Team (Phil Cusick) market model VeriSign ROVI TBD -0.7 38.4% 97.6 For translation purposes -6.0 11.0% 102.76 5.0 11.37 -31.P.00E) 22.02 3.32 -2. CNSI TBD VeriSign JPMorgan proprietary model TBD 14 .4E TBD J.802 0.Sterling Auty.9E TBD 43.4% 169.7 7.0E 3Q13E 2.6% 98. but particularly ADSK.6% 97.144E -0.1% 1. but particularly ADSK.6% 310.480 1.0% 78.9% 0.0 11.59 5. MOTR. Morgan Economics J.0 -0.86 4.2 4Q12 registry business We track the growth of all domains combined to gauge market share Tracks the health of the wireless industry. 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.0 30.1% 308.00E TBD 29.3 -2.2 46. 147.4 -0.7 42.3% 207. SNCR.8% 2.1% 1.6% 1.9% 86.00 -30.7 -1. ROVI Why Relevant? On average.6% 1.6% 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 8.5E) and .1% 1.31 (1.4% 242.25E (0.2% 252.

5% 94.0 -1.2% 1.8% 104.2% Jun-13 323. Morgan Economics J.6% Next Update 8/1/2013 Source Verisign INTU Feb 2014 3.3% 54.30 0.7 -1. PMTC.7% 103. Manufacturing is a key vertical for design software Manufacturing is a key vertical for design software Tracks worldwide semi revenue.P.6% 15.3% 109.8% 1.8 -2. WWWW.33 1. ANSS ADSK.9 10.4% 52.0 0.1 -8.5 8/13/2013 0.0 -31.9 3.9 9.8 -1.5 3.1 0.4% 2. RAX INTU.1% -1.8% 17.6 -9.9% 48.2% Apr-13 442.2% 1. engineering.2% 23.7 0.2 2.Sterling Auty.2 4.0% 12. ANSS All.1% 93.5 0.3% 111.1% 47.2 -0.3 2.3 -1.6 -6.0% 24.6% 88. Morgan Economics J. CFA (1-212) 622-6389 sterling.1 -9. and construction (AEC) industry. Intuit TRAK ADSK ADSK.9 -5.2 0.9 -2. but particularly ADSK.0% 95.8 1.6% 94.9 3.8% 50.0% 21. important for health of EDA spending Dec-12 363.31 0.4% 94.4% 89. but particularly ADSK.2 2.3% 96.9% 88.2 5.649 0. ANSS AZPN INTU.0 TBD 15 .1% Jan-13 749.8% 111.4% 48.252 May-13 486.7 0.34 0. RAX and WWWW generate significant percentages of revenue from small business INTU.8% 14. ANSS SNPS.3% 88.1% 25.6% 103.1 4.4% 115.2 -3.3 -33.9 15.5 3.1 0.1 -0.3 5.9 2.0 -3.4 0.1% 94.2% 48.30 -2.3 0.8% 49.2% 15.2 3.1 registry business INTU generates 35% of revenue from its consumer tax business TRAK's transaction revenue is 70% correlated with SAAR numbers.9% 53.4% 50.7% 51.4 For Translation Purposes Aspen generates 40-50% of total revenue from the energy industry INTU. Autodesk generates at least 30% of total revenue from the architectural.7% 94.0% Mar-13 641.8 0.auty@jpmorgan.1% 8/1/2013 TBD TBD TBD 15. 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 .1% 1.1% name additions (in thousands) monthly change TurboTax Season to Date Returns (Total ex FF.0% 94.6% 1.8 8/1/2013 For Translation Purposes 1. CDNS.4% and .9 8.3 3. WWWW.P. PMTC.1% 1.3% 26.5% 83.2 -0.8% 92.4 2.4 -22.2 -3. RAX 15.4% 46.8 -5.5 -1.8 -18. PMTC. RAX and WWWW generate significant percentages of revenue from small business 3.9% 1.9% 98.1% 24.3 -5.2% 1.7 2.7% 54. Morgan Economics National Federation of Independent Business.3 105.2 24.5% 54.9 and .8 1.9% 23. PMTC.0% 51.0% 90.3% 7/24/2013 8/1/2013 TBD Company Reports Automotive News American Institute of Architects Institute of Supply Management Markit Semiconductor Industry Association J.699 -6.31 15.5% 95.5 -0.9 4.5% 51.30 -0.2% 46.9% 94.2% 50.9% Feb-13 584.9 0. MENT All.7% 47.7 North America Equity Research 12 July 2013 Table 4: Monthly Metrics that Matter Monthly Metrics Total .7% 92.4% 23.3 3.

4 46.Sterling Auty.8 17.auty@jpmorgan.5 14.4 33.1% 101.0 17.0 14. Service Now Inc.0 9.2% 4.3 21.8 24.8 % Change 240.0% -23.9% 79.4% 97.6% -12.0 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.9% .5 55.5 31.6% -26.0 42.7% 191.0 15.4 44.8% 11. 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 13.7% 190.7% 253.2% 96.7% 84.3% 36.0 19.1 9.0 15. Palo Alto Networks E2open Inc.0 13.0 12.0 9. 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.4% -17.3% 77.0 16.0 16.9% 132.5 46.4 34. 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.0 13.0% -18.8% 116.0 18.1 10.5 24.5 11. Infoblox Inc Proofpoint Inc Acquity Group Ltd Audience Exa Corp.3% 149.0 6.0 13. CFA (1-212) 622-6389 sterling.0 15.0 11.0 28.2 65.2 16.0% 146.5 17.4 33.3% 58. Name Guidewire Software Inc AVG Technologies NV Brightcove Inc Bazaarvoice Inc Yelp Inc Demandware Inc Exact Target Vocera Communications Millennial Media Inc.0 12.1% 196.8% 31.0 31.8 37.1 24.0 13.0 17.0% -16.0 10.4% 16.8 60.8 14.0 Current Price 7/11/2013 44.0 16.5 49.0 16.0 17.0 17. Table 5: IPO List in the Software sector for the year. Splunk Inc.0% 74.0 17.

9B $650M $871M $55M $1. Synchronoss Oracle Corp. To strengthen SAAS portfolio.8x EV/Sales 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.3B $1.auty@jpmorgan.6x EV/Sales 54x EV/Sales 3.5x FY1 EV/Sales 3.6x FY1 EV/FCFF 6. To strengthen the digital marketing footprint.8x EV/Sales Reason Acquired for security solutions. Biometric authentication sensors & software.9x EV/Sales 8. Goldman Sachs Affiliate Source: Bloomberg.6x EV/Sales 11.9B $449M $4.Sterling Auty.7x EV/Sales 17x FY13E EBITDA 9. Target McAfee Skype Motorola Mobility Autonomy Blackboard Right Now Magma SuccessFactors Taleo Corp. To strengthen data analytics.5B $507M $3.7B $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. Lync & Outlook Wireless connectivity patent portfolio and also boost to Google TV. 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.3B $1. Taking company private.7B $8. including smart revenue solutions. For additional analog & verification capabilities.5B $10.9x EV/Sales 11x EV/ FY2 EBITDA 17. 17 . For cloud based spend management solutions Acquired for enterprise social networking. Windows Phone.6B $1.9M $1.7x EV/Sales 5. enhanced R&D in analog design.2B $356M $406M $220M $1. cloud and workflow management capabilities. NEC SAP AG Microsoft Apple Synopsys PTC IBM DealerTrack RedPraire NCR Oracle Corp.5B $12. Deal Value $7. Acquired for on-demand customer service solutions. IM system. For cloud-based human capital management solutions.3x EV/Sales 23.4B $1.1x FY1 EV/Sales 2. CFA (1-212) 622-6389 sterling. Convergys IM Business Ariba Yammer Authentec Springsoft Servigistics Kenexa ClickMotive JDA Retalix Ltd. Support Xbox. Eloqua Newbay Acme Packet EBIX Inc. For Service Lifecycle Management (SLM) For recruiting & talent management solutions.2x EV/maintenance 3. Cost synergies. Synopsys SAP AG Oracle Corp.3B $48.8x EV/Sales 3.

7 NM 29.48 $20.4 17.P.0 1.9 14.6 20.6 0.7 4.1 25.5 4.4 13.1 3.3 28.2 70.6 22.9 55.4 12.3 25.1 30.1 7.6 13.1 2.0 9.2 5.3 14.9 3.6 3.00 $24.1 4.00 $35.3 6.2 7.00 $25.8 15.6 4.4 4.8 39.9 24.3 14.8 21.0 2.9 4.2 15.9 21.7 19.6 16.5 21.5 4.4 5.1 3.1 4.6 15.00 $22.6 41.8 14.9 4.2 10.4 29.6 8.35 $31.37 $15.5 15.4 18.5 11.9 15.6 21.5 23.00 Average $39.8 19.4 NM 18.5 0.7 21.6 6.2 33.8 4. Web.3 17.2 NM 26.3 4. CFA (1-212) 622-6389 sterling.6 Valuation EV/Sales FY1 FY2 5.8 17.6 23.4 15.1 3.05 $52.8 11.2 5.14 $30.1 19.44 $26.1 12.3 17.87 $33.4 12.00 $16.00 $40.5 12.1 9.00 $32.5 15.2 41.5 2.3 4.00 $33.3 9.1 26.5 11.2 3.00 $20.8 23.00 $48. Inc.7 NM 20.00 $65.0 34.2 14.8 9.22 $44.9 3.2 11.4 5.1 32.0 2.3 13.25 $46.9 42.8 2.1 11.8 13.1 19.4 1.3 22.6 12.6 11.8 12.8 7.7 14.6 4.3 13.4 21.6 19.00 $34.1 74.9 3.8 13.70 $28.3 15.4 10.1 10.49 $20.7 22.2 4.00 Average $80.7 1.3 3.1 15.3 8.5 24.2 12.5 86.0 11.5 NM 16.5 45.9 13.0 3.58 $51.00 $38.9 3.50 $17.0 13.9 13.1 2.9 FY2 8.7 3.3 12.3 3.8 11.1 34.5 12.2 11.6 19. Morgan estimates.7 57.00 $30.9 7.2 11.6 EV/EBITDA FY1 FY2 9.00 $47.4 12.9 9.3 17.4 4.4 17.6 19.5 3.00 Average Akamai Technologies Equinix Rackspace Hosting Verisign.9 7.6 25.8 6.4 24.3 NM 12.8 23.2 16.0 6.92 $21.7 21.9 3.8 11.Sterling Auty.30 $64.0 5.4 8.7 8.3 10.8 9.4 18.9 7.3 4.00 $38.12 $38.9 12.38 $27.5 Amdocs Limited Comverse Inc.7 NM 34.9 20.6 24.8 15.3 16.auty@jpmorgan.7 2.1 13.5 10.00 $21.7 9.3 15.9 10.3 25.78 $24.00 Average Mean Median Source: Company reports and J.7 2. 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.15 $53.8 8.00 $19.0 26.6 17.7 9.3 18.7 9.6 21.3 NM 21.1 16.3 10.4 11.3 13.4 11.6 7.0 19.3 15. Fortinet Imperva Qualys ROVI Ticker CHKP FTNT IMPV QLYS ROVI Rating OW N OW OW N Non-GAAP P/E FY1 FY2 16.5 15.7 4.1 2.48 $78. Company Check Point Software Tech.50 $199.6 NM NM NM 51.3 15.5 21.8 NM 66.6 10.9 10.1 11.0 20.2 9.00 $48.0 16.3 15.5 9.3 8.0 10.81 $23.0 28.3 15.01 $36.43 $26.7 16.6 1.1 26.4 9.1 2.4 17.1 67.5 5.0 North America Equity Research 12 July 2013 Table 7: Comparables Price Info Price as of Target 7/11/2013 Price $54.7 49.5 12.5 39.4 14.3 3.1 8.4 22.9 4.1 15.1 18.7 26.2 8.10 $26.6 30.5 13.0 NM 94.5 18.7 8.8 5.5 3.0 18 .42 $35.00 $45.00 $23.51 $40.5 2.00 $25.2 14.00 $22.6 19.2 10.6 12.6 5.8 5.6 7.9 7.00 $37.9 NM 27. 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 $44.1 3.3 23.35 $47.1 4.9 3.2 7.6 1.4 EV/FCFF FY1 9.4 2.8 18.4 19.6 3.7 21.6 13.40 $15.00 Average $35.4 3.2 NM NM 12.20 $26.6 21.5 17.58 $37.0 27.00 $55.

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

00 40.auty@jpmorgan.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 J. MODN US) Price Chart 40 32 OW $25 24 Price($) 16 Date 15-Apr-13 Rating Share Price ($) OW 19. Morgan. price data adjusted for stock splits and dividends. price data adjusted for stock splits and dividends. Morgan. 2013.P.01 36. TRAK US) Price Chart 85 68 51 Price($) 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. 20 .00 8 0 Mar 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Source: Bloomberg and J.24 Price Target ($) 35. Model N (MODN.47 15.79 28. CFA (1-212) 622-6389 sterling. Initiated coverage Apr 15.Sterling Auty. Initiated coverage Feb 29.P. North America Equity Research 12 July 2013 DealerTrack Holdings Inc (TRAK.92 Price Target ($) 25.

33 52. WWWW US) Price Chart 44 33 OW $18 Price($) 22 OW $20 Date Rating Share Price ($) 10. RAX US) Price Chart 125 OW $75 OW $81 100 OW $83 Price($) 75 OW $55 Date Rating Share Price ($) 66.59 74.00 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. Rackspace Hosting ( North America Equity Research 12 July 2013 Web. Morgan.67 15.00 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.98 55.00 81.00 20. 21 .Sterling Auty. 2012. Initiated coverage Dec 20.00 55. Initiated coverage Dec 05. Morgan. 2011.94 OW Price Target ($) 18.auty@jpmorgan.00 (WWWW. price data adjusted for stock splits and dividends.24 OW OW Price Target ($) 83.P. price data adjusted for stock splits and dividends. CFA (1-212) 622-6389 sterling.

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

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