View From The Top Global Technology Trends and Performance October 2012 February 2013

Issue 10
View from the top

Global technology trends and performance
October 2012February 2013 earnings season
Overview
3
Sector view
8
Regional view
14
Fast growth, IPOs and VC investments 17
Methodology
22
Top 100 and top 25 fast-growth companies 23
Highlights
Aggregate operating income for the top 100 global technology companies in the fourth quarter increases 10% year-over-year (YOY) to $88 billion. At $698 billion in aggregate sales, YOY growth slows to 1% in 4Q12. For the year, sales grow 2% to $2.6 trillion; operating income grows 6% to $304 billion. Smart mobility evolves into an accelerant for rapid growth of other transformative megatrends, such as cloud computing, big data analytics, social networking and the accelerated adaptation of technology innovation by other industries. Aggregate cash and investments continue to grow beyond $1 trillion. M&A buying of top 100 global technology companies falls to its lowest level of the year: $7.2 billion, or 25% of all 4Q12 disclosedvalue technology transactions.
Figure 1: Total sales* and market value (MV) of the top 100 global technology companies
$ billions
A view to the future With this edition, weve expanded View from the top: global technology trends and performance with analysis of the top 25 fastest-growing public technology companies, initial public offerings (IPOs) and venture capital (VC) investments. Our aim with this enhancement is to provide a more complete view of innovative technology transformations already impacting the performance of established global technology companies innovations whose impact is just emerging and those whose impact is just over the horizon.
$4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0
Sales MV 4Q 2011
Software Internet
Sales MV 1Q 2012
IT services
Sales MV 2Q 2012
Sales MV 3Q 2012
Sales MV 4Q 2012
Semiconductors
Diversified technology
Communications equipment
Computers, peripherals and electronics
*Sales based on trailing 12 months. Source: Ernst & Young analysis of Capital IQ data, accessed 22 February 2013.
Note: all currency references are in US dollars, unless otherwise indicated.
View from the top: global technology trends and performance
Overview
4Q12 growth slows, but innovation begins to broaden

The smart mobility megatrend that dominated growth among the top 100 global technology companies for the last two years ebbed a bit in 4Q12, as sales growth slowed to just 1% YOY. But smart mobility has evolved into a key accelerant for the rapid growth of cloud computing, big data analytics and social networking, as well as the adaptation of these transformational technology megatrends by many different industries.
Buffeted by macroeconomic headwinds and disruptions in every sector, the top 100 still managed to increase 4Q12 aggregate operating income by 10% YOY (Figure 2, page 4). Of note, not all the net 4Q12 operating income growth came from the two smart mobility leaders Apple and Samsung Electronics as has been the case in each of the six previous quarters (beginning in 2Q11). Excluding the two companies, the remaining 98 posted 5% YOY growth in 4Q12 aggregate operating income. For full-year 2012, the 100 companies increased aggregate sales 2%, though both years round to $2.6 trillion. Full-year 2012 aggregate operating income rose 6% to $304 billion. But without the two smart mobility leaders, full-year aggregate sales and operating income would have declined by 1% and 4%, respectively. A review of the last two years shows that Apple and Samsung, together, increased sales 64% and operating income 125%. Excluding them, the rest of the top 100 increased sales 6% over the same period, but dropped 7% in operating income. Consequently, annual aggregate operating margins for the 98 companies have fallen 13% over the two years, to 9.8% in 2012 from 11.2% in 2010. However, as the smart mobility market becomes more competitive, the impact of the two leaders is diminishing: the largest part of that margin drop was in the first year (201011), when it fell from 11.2% to 10.1%. Meanwhile, analyzing fast-growth companies, including IPOs and VC investments during 4Q12 (page 18), suggests that new cycles of technology innovation are emerging that make advantageous use of the widespread deployment of smart mobile devices. For example, dozens of companies are developing just about anything you can think of as a service in other words, cloud-based product and service offerings that can be delivered anytime, anywhere to a mobile device or desktop. Many of those are designed expressly for mobility. Several start-ups are focusing on different approaches to solving the mobile network operators challenge to manage the extraordinary increases in mobile data traffic. Several others are working on solutions to mobile power challenges. In addition, we noted fast-growth and start-up companies pursuing big data analytics and social networking innovations, both horizontally (i.e., generic tools meant for multiple industries) and vertically (industry-specific). Of note, smart mobile devices are helping fuel big data analytics. In 1Q13, at least one observer labeled a newly announced smartphone the Big Data Phone.1 Part of the lessening impact of smart mobility on the 4Q12 bottom line of the top 100 may be due to market maturation: smartphone unit growth slowed in 2012 to 44%, down from 76% in 2010 (see communications equipment (CE) section, page 8). That growth rate fell further in 4Q12, when shipments grew 36% YOY to 219 million units.2 However, even if smart mobilitys direct impact on the bottom line is diminishing, the industrys increasing focus on mobile as the new center of product and service design is increasing the blurring together of industry sectors. For example, tablet shipments dominated by Apple and Samsung, the two CE sector leaders increased 75% YOY to 52.5 million units in 4Q123 and appeared to contribute to a decline in PC demand that caused the computers, peripherals and electronics (CPE) sector to become the only sector to post a YOY sales decline (-6%) in 4Q12 (page 9). At the same time though, CPE also posted the second-largest aggregate
Global technology companies are cautiously optimistic that they can put the last two years of natural disasters and macroeconomic headwinds behind them, and return to the business of driving the worlds growth with transformative technology innovation. At the same time, they remain poised to react to sudden downward trends if macroeconomic or political conditions deteriorate.
Pat Hyek Global Technology Industry Leader Ernst & Young
Margins have fallen
13%
over the past two years (excluding the two smart mobility leaders).
operating income increase of any sector (21%), due to the strength of display and storage makers as well as improvements from many Japan-based companies that are in the midst of long-term turnarounds. The largest aggregate YOY operating income increase in 4Q12 (27%) came from the IT services sector, despite a sales increase that was so small it rounded to zero (page 11). Most of the bottom line improvement came from companies in turnaround situations that swung from losses in 4Q11 to gains in 4Q12. As has become expected, the internet sectors 27% YOY sales increase in 4Q12 represented the highest sales growth rate of any sector. Yet our long-term analysis shows that the high price of investing in constant self-renewal has caused the internet sector significant margin erosion over the past two years (page 10). Although they disrupt other industries, internet companies are themselves disrupted because all five of the transformational megatrends we have identified come together here. The five megatrends are smart mobility, cloud computing, social networking, big data analytics and accelerated adaptation, as
technology companies rapidly adapt to the needs of specific industries and other industries rapidly adapt to the evolving possibilities that technology enables. Also transforming is the semiconductor sector, as growth from companies shipping chips for smartphones and tablets appears to be offsetting declines related to PC sales. The semiconductor sector posted mixed results, but its first quarterly YOY sales increase of the year provided a sign that the traditionally cyclical sector may experience an upturn in 2013 (page 12). The software/SaaS sector which is in the midst of a cloud/SaaS transformation also posted mixed results (page 13). Of note, software companies adapting to recent technology innovation are beginning to blur with the CPE and internet sectors, as they offer more smart mobile hardware products and cloud-based internet services. The Americas was the only region to increase aggregate sales YOY in 4Q12 (6%), but operating income growth slowed from the pace set earlier in the year (page 14). Meanwhile, the Asia-Pacific (including India) and Japan (APJ) region saw operating income soar 54% YOY in 4Q12, but sales declined 3% (page 15). Further, Europe, the Middle East and Africa (EMEA)
Figure 2: Top 100 technology companies key performance indicators (KPIs)

Sector aggregate
$ millions
4Q 2011 $3,096,790 $690,941 $79,984 $40,551 $64,396 $914,223 $1,334,346 $472,515 $34,590 $223,358 11.6 35.4 5.9
4Q 1Q
2Q
3Q 4Q
4Q 2012 % Change $3,496,001 $697,631 $87,607 $42,019 $63,963 $1,029,415 $1,409,165 $500,693 $35,174 $224,224 12.6 35.5 6.0 13% 1% 10% 4% -1% 13% 6% 6% 2% 0% 9% 0% 2%
Trend

High value $499,614 $54,512 $17,210 $2,779 $16,559 $137,112 $127,346 $33,269 $3,902 $18,614 45.0 527.8 29.0
Median value $12,172 $3,276 $268 $249 $233 $3,834 $7,037 $2,580 $129 $1,628 10.1 38.2 8.6
Low value $2,260 $968 ($465) $7 ($3,239) $477 $2,076 $0 $2 $5 -16.2 0.0 0.2
Market value Sales Operating income R&D Levered free cash flow Cash, ST and LT investments Equity Debt Capital expenditures Inventory Operating margin (%) Debt-to-equity (%) R&D as a % of sales
Sector median Days sales outstanding (DSO) Days payable outstanding (DPO) ROIC (%) 53 58 8.4 53 57 8.9 0% -2% 6%

240 206 39.8
53 57 8.9
12 1 -11.8
Source: Ernst & Young analysis of Capital IQ data, accessed 22 February 2013.
saw both sales (-1%) and operating income (-19%) decline YOY in 4Q12 but at 25% YOY, its aggregate market value grew faster than any other region (page 16). After breaking the $1 trillion mark in 3Q12, the top 100 companies stockpile of cash and investments continued to grow in 4Q12, with a 13% YOY increase. Although that theoretically works out to roughly $10 billion for each company, the truth is that the cash is more concentrated among the top 25 companies, which hold 72% of it. Average cash and investments for the top 25 was $29.4 billion per company at the end of 4Q12, while the average for the remaining 75 was $3.9 billion. The top 25 technology companies also posted 65% of 4Q12 sales and 80% of operating income (see Figure 3, below). The amount of cash held by large multinational companies in general, and technology companies in particular, recently became a matter of public investor debate. Investors lobbying for more cash to be returned to shareholders may have influenced a 33% YOY 4Q12 increase (to $23.8 billion) in aggregate stock repurchases by the top 100 companies. For full-year 2012, however, stock repurchases were down 6%, to $76.4 billion from $81 billion in 2011.
This mirrors an all-industries trend: for example, US companies started 2013 by returning record amounts of cash to shareholders in the form of repurchases and dividends.4 Further, the top 100 companies spent less on M&A transactions in 4Q12: $7.2 billion out of the aggregate $29.4 billion in disclosed-value technology transactions (for all companies) in the quarter. That was the lowest total and the lowest percentage of quarterly disclosed value (25%) for the top 100 all year. They averaged 41% of the value in 1Q12, but then diminished all year, ending with 34% for full-year 2012. Finally, the market value of the top 100 global technology companies has consistently underperformed vis-a-vis the benchmark NASDAQ Composite Index in recent years. Figure 2 (page 4) shows, the top 100 raised aggregate market value 13% YOY in 4Q12, compared with a 16% increase in the NASDAQ index. For the past two years ending in 4Q12, the NASDAQ was up 14%, but the top 100 technology companies were up only 4%. And excluding the two smart mobility leaders, the other 98 companies posted an aggregate 5% decline.
Internet sector sales increase
27% YOY,
but margins erode.
Figure 3: Top 25 technology companies KPIs

Sector aggregate
$ millions
4Q 2011 $2,174,782 $445,061 $66,619 $28,669 $54,368 $639,870 $834,354 $280,106 $23,491 $128,551 15.0 33.6 6.4
4Q 1Q
2Q
3Q 4Q
4Q 2012 % Change $2,479,725 $451,775 $70,206 $29,692 $60,314 $736,225 $907,477 $295,893 $24,560 $129,085 15.5 32.6 6.6 14% 2% 5% 4% 11% 15% 9% 6% 5% 0% 3% -3% 3%
Trend

High value $499,614 $54,512 $17,210 $2,779 $16,559 $137,112 $127,346 $33,269 $3,902 $18,614 38.3 175.2 19.5
Median value $53,298 $14,314 $1,299 $1,010 $1,302 $15,342 $23,524 $9,085 $676 $4,423 15.8 40.6 7.8
Low value $11,197 $2,979 ($104) $307 ($3,239) $4,180 $8,192 $0 $96 $164 -1.1 0.0 1.4
Sector median Days sales outstanding (DSO) Days payable outstanding (DPO) ROIC (%) 45 55 10.5 48 56 9.9 7% 2% -6%

107 125 36.7
48 56 9.9
12 18 -1.2
Source: Ernst & Young analysis of Capital IQ data, accessed 22 February 2013. October 2012February 2013 earnings season 5
As smart mobility empowers faster cycles of technology innovation, that innovation might well become the catalyst to help global economies return to long-term growth.
Pat Hyek Global Technology Industry Leader Ernst & Young
Outlook As we close the books on 2012 and look ahead to what 2013 may bring to the technology industry, the global economic outlook remains uncertain. But the smart mobility megatrend spreading throughout the global economy appears poised to trigger new cycles of technology innovation with great potential to drive future economic growth. Early in 2013, the large economies of developed nations, as well as those of emerging markets, still gave mixed signals. The troubled Eurozone economy is expected to shrink in 2013.5 Japan reported a third consecutive quarter of economic contraction.6 Though still growing, Chinas economy has shown weakness in early 2013,7 exemplifying concerns about inflation and slowing growth throughout emerging markets. Yet in the US, economic recovery is believed to be broadening as companies are returning record amounts of cash to shareholders and are hiring at levels that have brought unemployment to a four-year low.8 In technology, the inexorable march of increasing processor, storage and network bandwidth performance at decreasing price points continues to make new things possible. With 919 million smartphones9 and 191 million tablets10 to be added to the worldwide installed base in 2013, smart mobile devices now constitute a platform for technology innovation that is unprecedented in terms of its high power and low cost. Beginning on page 18, in our analysis of fast-growth companies, IPOs and VC investments, you can read about many of the cloud/SaaS, big data analytics, social networking and other technology innovations that plan to make advantageous use of those smart mobile devices. Smart mobile devices, empowered by big data analytics and other sophisticated applications delivered from data centers in the cloud, are likely to unleash technology innovation that yields economic growth in the coming years. While this is a long-term trend, we anticipate that its beginning in 2013 will help the top 100 global technology companies return to higher levels of top- and bottom-line growth later in the year. And perhaps even provide an outlet for technology companies cash.
Notable factors
Global economic growth was 3.2% for 2012 and is projected to be 3.5% for 2013 and 4.1% for 2014.1 A gauge of US business investment plans edged up 0.2% in December 2012, bucking fears of a fiscal cliff and setting new expectations for slow-but-sure expansion in 2013.2 The Nobel Prize in physics was awarded to two researchers whose work could lead to quantum computers.3 Separately, a new venture fund was launched to invest in quantum computing.4 Worldwide tablet shipments rose 75% YOY in 4Q12 (to 52.5 million units),5 while PC shipments declined 6%, marking the first time in five years that holiday PC sales declined.6 The US and allies refused to sign an international treaty they say would usher in government regulation of the internet. Eighty-nine countries signed the pact at a December conference of the United Nations International Telecommunication Union; 55 countries did not sign.7 US online holiday spending grew 14% in 2012, as it did in 2011, to $42.3 billion.8 Foreign hackers renewed cyber attacks on US banks,9 leading to the announcement of a major expansion in the US Defense Departments Cyber Command for 2013.10
Sector and regional views

This section looks at the technology industry sectors that we follow and provides regional views. Each topic gives a brief overview of what has happened in the last quarter earnings season, KPI metrics and an outlook view.
Sector view 8 9 Communications equipment Computers, peripherals and electronics
10 Internet 11 IT services 12 Semiconductors 13 Software Regional view 14 Americas 15 Asia-Pacific* and Japan 16 Europe, the Middle East and Africa
*Asia-Pacific includes India.
Figure 4: Total cash and short- and long-term investments of the top 25 global technology companies, 4Q11 versus 4Q12
$ billions $800 $700 $600 $500 $400 $300 $200 $100 $0 4Q11 4Q12 $345 +30% $449 -3% $295 +15% $640 $287 $736
Top 10 Next 15
No matter how you look at it, the rich became richer in 4Q12, at least with regard to the cash and investment holdings of the top 100 global technology companies. The top 25 increased their aggregate stockpile of cash and short- and long-term investments by 15% YOY in 4Q12, while the top 100 overall increased by just 13% (Figure 2, page 4). Within the top 25, the top 10 increased by 30% YOY, while the next 15 actually declined 3%. And when we subtracted these top 25 companies from the top 100, we noted that the remaining 75 grew their stockpile by only 7% YOY, to $293 billion in 4Q12 from $274 billion in 4Q11.
Sector view
Smart mobilitys impact on communications equipment sector performance was marked but mixed in 4Q12. Smartphone growth slowed, but mobile network operators increased demands on their equipment suppliers to enable faster rollout of smart mobile services.
Growth in smartphone unit shipments has declined but is still relatively high: there was 76% YOY growth in full-year 2010, 61% in 2011 and 44% in 2012.1,2 At the same time, smartphone competition is intensifying as former leaders and new entrants both begin shipping new devices. For example, a closely held China-based CE company emerged as a new third-place competitor in terms of global smartphone market share during 4Q12.3 Consequently, aggregate operating income growth for the 17 companies in this CE sector view slowed in 4Q12. Aggregate operating income increased 8% YOY in 4Q12, but increased 15% for full-year 2012 (to $105.3 billion). YOY sales growth was 6% in 4Q12, after fluctuating earlier in the year from a 10% increase in 1Q12 to a 0.3% decline in 2Q12. For full-year 2012, sales increased 5% to $734.2 billion. Despite the intensifying competition, the two smartphone leaders Apple and Samsung continued to Figure 5: Communications equipment KPIs
Sector aggregate
$ millions
outperform the rest of the group. And, through their leadership in tablet computers, they brought CPE sector revenue into this sector view. Excluding the two companies, the remaining 15 saw aggregate sales decline 9% in 4Q12, the same percentage as in 3Q12. Public network operators appeared to increase their infrastructure spending in 4Q12, which has been expected due to the demands smartphones and tablets place on mobile networks. One public network equipment manufacturer among the 17 sector companies increased sales in 4Q12 by double digits. Another increased by less than 1%, but that company has been in a long-term turnaround situation the 4Q12 increase followed five consecutive quarterly declines. However, competition is also intensifying in this CE segment. The same closely held Chinese manufacturer that ranked third in 4Q12 smartphone market share (and is not included in our data because it is private) has also grown to within 1% of
the annual sales of the worlds top public network equipment maker by dollar value.4 Outlook Analysts see an improving 2013 outlook for the CE sector. While smartphone shipments have slowed, they are still expected to grow at an 18% compound annual growth rate (CAGR) for 201216.5 Meanwhile, there is good news for public network equipment makers. Mobile network operators global capex is expected to grow to a 3% CAGR in the five years from 2013 to 2017, a significant increase from just 0.4% in the previous four years.6 But the manufacturers will be challenged to provide gear capable of cloud-based virtualization, which mobile operators are demanding so that they can develop and deliver new smart mobile services faster to their subscribers.7 Analysts also project near-term growth for optical backbone, cable broadband and other carrier equipment categories.8,9,10
4Q 2011 $793,605 $193,586 $29,950 $11,636 $18,794 $290,664 $396,093 $104,570 $11,312 $64,442 15.5 26.4 6.0
4Q 1Q
2Q
3Q 4Q
4Q 2012 % Change $986,315 $204,348 $32,360 $12,237 $34,143 $340,146 $457,751 $103,049 $10,607 $63,473 15.8 22.5 6.0 24% 6% 8% 5% 82% 17% 16% -1% -6% -2% 2% -15% 0%
Trend

High value $499,614 $54,512 $17,210 $2,779 $16,559 $137,112 $127,346 $31,001 $3,902 $18,614 31.6 178.8 24.1
Median value $15,618 $3,678 $390 $430 $431 $7,733 $12,456 $3,499 $192 $1,918 9.7 29.3 10.3
Low value $3,000 $1,141 ($465) $136 ($3,239) $943 $2,442 $0 $33 $457 -16.2 0.0 1.9
Sector median Days sales outstanding (DSO) Days payable outstanding (DPO) ROIC (%) 66 61 8.4 68 54 8.2 3% -11% -2%

240 172 35.0
68 54 8.2
19 18 -11.8
Source: Ernst & Young analysis of Capital IQ data, accessed 22 February 2013. 8 View from the top: global technology trends and performance
Sector view

Its been a tough two years for CPE companies. A year ago, two once in a lifetime natural disasters disrupted global supply chains for PCs, displays and hard drives, contributing to YOY 4Q11 sales and operating income declines. This year, human-made disruptions drove a 4Q12 sales decline, as PC buyers switched to smart mobile devices and macroeconomic uncertainty dampened server demand.
The 32 CPE companies in this sector posted an aggregate 6% YOY sales decline in 4Q12, following a 3% YOY drop in last years fourth quarter. In aggregate operating income, CPE companies delivered a 21% YOY increase in 4Q12 but operating income was still 27% lower than in 4Q10. Of note, the 11 Japanese companies in this sector, which were hardhit by the 2011 natural disasters and posted an aggregate $4.4 billion YOY operating income decline in 4Q11, contributed a $1.1 billion YOY increase in 4Q12. Some of that improvement is due to a decline in the yen at the end of 2012, which boosted operating income for Japan-based companies.1 For full-year 2012, aggregate CPE sales declined 1% from 2011, though both years rounded to $1.1 trillion. At $43.2 billion, full-year 2012 operating income increased 9% compared with 2011 ($39.8 billion) but was still 24% lower than in 2010 ($56.9 billion). The 4% YOY aggregate market value decline in 4Q12 made CPE the only sector to drop in that metric for the quarter. Worldwide PC shipments experienced their first fourth quarter decline in more than five years, down between 4.9% and 6.4%, according to differing market estimates.2 Meanwhile, tablet computer sales grew 75% YOY and 74% sequentially in 4Q12 to a record 52.5 million units3 and are projected to top notebook PC sales in 2013.4 While most tablet revenue accrues in the CE sector (page 8), those few PC makers that had reasonable success with tablets or smartphones and high exposure to emerging markets, outperformed their sector rivals. Tablets, laptops and PCs all require displays, so display makers continued to outperform other CPE sector companies. However, researchers said server shipments declined 0.2% in 4Q12 due in part to enterprise customer budget constraints, though server revenue increased 5%.5 Outlook Despite pockets of growth (e.g., displays), the CPE sector will continue to struggle for the foreseeable future. Two factors could change that: the return of macroeconomic growth, which would free pent-up demand for servers, and the transition to tablet computers reaching a new point of equilibrium. But exacerbating the problem are declining R&D and capex investment, potentially stifling future innovation especially since CPE already has the lowest R&D as a percentage of sales of any top 100 sector. Emblematic of the sectors struggle is the announcement in early 1Q13 that one of its largest companies intends to go private.6
Figure 6: Computers, peripherals and electronics KPIs

Sector aggregate
$ millions
4Q 2011 $439,171 $291,134 $8,828 $11,033 $18,030 $278,134 $365,199 $199,791 $10,713 $117,615 3.0 54.7 3.8
4Q 1Q
2Q
3Q 4Q
4Q 2012 % Change $420,736 $273,969 $10,716 $9,684 $5,460 $277,481 $321,490 $204,887 $9,468 $116,517 3.9 63.7 3.5 -4% -6% 21% -12% -70% 0% -12% 3% -12% -1% 30% 16% -8%
Trend

High value $53,298 $29,810 $1,886 $1,134 $1,974 $96,080 $31,843 $28,227 $1,069 $13,446 21.5 527.8 13.2
Median value $9,973 $5,964 $192 $217 $4 $4,006 $5,815 $2,793 $166 $2,459 3.1 52.5 4.3
Low value $2,260 $1,619 ($164) $7 ($1,813) $1,030 $2,076 $46 $2 $173 -4.8 0.1 0.2
Sector median Days sales outstanding (DSO) Days payable outstanding (DPO) ROIC (%) 51 72 4.9 50 65 6.0 -2% -10% 22%

143 125 22.9
50 65 6.0
25 26 -3.0
Sector view
Internet
Internet companies continued to post the highest sales growth rate by far of any sector in 4Q12, and tied with CE for the highest market value increase. But the price of the sectors constant transformation, paid in the form of increasing investment in self-renewal, has become evident in eroding operating margins.
Aggregate sales for the eight companies in this sector view increased 27% YOY in 4Q12, compared with 1% for the top 100 companies overall and 6% for the secondfastest-growing sector, CE (page 8). That was the lowest YOY quarterly sales growth for the internet sector all year, apparently because the then-looming US fiscal cliff held down 2012 holiday sales.1 For full-year 2012, sales for the eight companies increased 29% to $153.1 billion, following 31% full-year growth in 2011. However, operating income grew at a slower pace than sales in 4Q12 and in every other quarter of 2012, resulting in declining operating margins (as shown in that metrics declining micro plotline shown in Figure 7, below). In fact, operating income increased 16% for full-year 2012, to $24.8 billion, after increasing 18% for full-year 2011. Because these growth rates are lower than sales growth, the sectors aggregate annual operating margin has fallen 10% per year for each of the last two years, to 16.2% in 2012 from 20.2% in 2010. Also, as the chart suggests, rapidly growing R&D (25%) and capex spending (42%) are the likeliest reasons for eroding margins. For example, those 4Q12 growth rates compare with 4% and 2%, respectively, for the top 100 overall. For full-year 2012 and 2011, internet sector R&D increased 32% and 42%, respectively. Full-year capex increased 16% and 22%, respectively. The sectors top-line growth is a well-understood result of the disruption of other industries. Companies represented here drive most revenue from the online migration of advertising and consumer retail spending. The eroding margins coming to light now appear to be a consequence of intensifying competition from the disrupted industries and of investment in more recent innovations, such as mobile commerce, mobile advertising and cloud computing. Building out data centers to meet the anticipated demand for cloud services may be the most costly investment, but it could lead to better margins in the long term, according to market researchers.2 The same source estimates the cloud services market will reach $38 billion by 2015. Mobile commerce is growing more rapidly: it reportedly grew 81% to $25 billion in 2012 and is expected to reach $52 billion in 2013 and $86 billion by 2016.3 Though smaller, at $4 billion in 2012, mobile advertising had raised concerns that it would generate lower revenue than online advertising, but 4Q12 results suggested that trend has been mitigated.4 Outlook Theres little doubt the internet will remain technologys fastest-growing sector for the foreseeable future. The key to success continues to be finding the right balance between growth and investment, and managing privacy and regulatory issues.
Figure 7: Internet KPIs

Sector aggregate
$ millions
4Q 2011 $461,826 $37,098 $6,078 $3,393 $7,411 $82,637 $109,373 $17,515 $2,594 16.4 16.0 9.1
4Q 1Q
2Q
3Q 4Q
4Q 2012 % Change $570,820 $47,135 $7,043 $4,226 $5,584 $108,272 $132,579 $25,184 $3,695 14.9 19.0 9.0 24% 27% 16% 25% -25% 31% 21% 44% 42% -9% 19% -1%
Trend

High value $232,441 $21,268 $3,394 $1,935 $3,186 $49,557 $71,715 $7,210 $2,026 45.0 116.6 17.9
Median value $47,021 $1,773 $546 $328 $574 $9,195 $7,141 $2,789 $180 23.1 36.3 10.7
Low value $10,243 $1,016 $213 $113 ($2,169) $4,668 $3,034 $125 $11 1.9 0.9 6.3
Market value Sales Operating income R&D Levered free cash flow Cash, ST and LT investments Equity Debt Capital expenditures Operating margin (%) Debt-to-equity (%) R&D as a % of sales

216 206 39.8
37 62 10.5
12 21 4.4
Sector view
IT services
Squeezed by macroeconomic pressure that held back customer demand and pricing pressure from the growth of cloud services, the IT services sector managed only 0.2% YOY sales growth in 4Q12 which rounds down to zero. Operating income, however, grew YOY for the third consecutive quarter, this time by 27%.
For the full year, the 15 companies in our top 100 IT services sector view increased aggregate sales 1% over 2011, to $277.2 billion. Full-year aggregate operating income increased 11% to $41.7 billion. In 4Q12, sales results were split: eight increases YOY and seven declines. Ten of the 15 companies posted YOY operating income increases. A majority of the aggregate increase came from three companies that swung from losses in 4Q11 to gains in 4Q12, including two US and one Japanese company. The operational improvements suggested by the improving bottom line were also seen in cash flow. Free cash flow, which had declined for three consecutive quarters, increased dramatically in 4Q12: 53% YOY and 205% sequentially to the highest aggregate value in at least three years. The cash flow increases were widespread, even though more than 90% of the aggregate increase came from one company. Eleven companies increased and only three declined (and one Figure 8: IT services KPIs
Sector aggregate
$ millions
did not report a cash flow value). Of note, DPO increased 15% in the quarter to 45 days, also the highest value for that metric in at least three years. So some of the cash flow improvement may have come from simply stretching out supplier payments. Lacking sales growth, IT services was held down in equities markets. The 15 companies had an aggregate market value increase of just 2% YOY, compared with 13% for the top 100 overall and 16% for the NASDAQ index. Several sector dynamics are rapidly evolving, beginning with the customer migration toward cloud services discussed in previous quarterly reports. This creates downward pricing pressure and is encouraging sector companies to develop proprietary IP that will enable them to build repeatable and reusable offerings.1 It also broadens the potential customer base,2 which could yield long-term sales growth. Separately, contract terms that had been shrinking in 20103 are now increasing again,4 which increases revenue
stability. And near-shoring/on-shoring is leading to increasing geographic diversification among sector companies, as they move resources closer to customers.5 Adding to that geographic diversification is rapid growth of IT services in emerging markets; Latin America, for example, is expected to grow at a compound rate of 10.8% per year from 2011 to 2016,6 more than double the worldwide rate. Outlook Several IT services companies delivered upside surprises when reporting 4Q12 results, leading to encouraging growth forecasts for 2013. One market research firm projects that sector growth of 1.8% in 2012 will increase to 5.2% in 2013 as macroeconomic uncertainties that have been holding back growth begin to get resolved.7 Regardless of the level of pent-up demand, enterprise IT customers appear to have acclimated to the macroeconomic uncertainty and are ready to get back to business.
4Q 2011 $420,060 $71,597 $10,015 $7,164 $40,329 $98,309 $71,890 $1,951 14.0 73.1
4Q 1Q
2Q
3Q 4Q
4Q 2012 % Change $428,078 $71,766 $12,714 $10,939 $45,102 $100,118 $71,351 $1,926 17.7 71.3 2% 0% 27% 53% 12% 2% -1% -1% 26% -2%
Trend

High value $216,438 $29,304 $7,893 $7,076 $16,150 $18,984 $33,269 $1,000 27.3 175.2
Median value $10,548 $2,767 $289 $248 $2,203 $6,395 $2,629 $82 17.1 58.4
Low value $3,870 $1,145 $158 ($527) $477 $2,417 $0 $10 3.0 0.0
Market value Sales Operating income Levered free cash flow Cash, ST and LT investments Equity Debt Capital expenditures Operating margin (%) Debt-to-equity (%)
Sector median Days sales outstanding (DSO) Days payable outstanding (DPO) ROIC (%) 72 39 10.8 73 45 12.2 1% 15% 13%

100 108 36.7
73 45 12.2
33 1 3.6
11
Sector view
Semiconductors
The semiconductor sector showed signs of recovery in 4Q12, as growth from companies shipping chips for smartphones and tablets offset declines related to falling PC sales.
The 18 companies in this sector view increased aggregate sales 2% YOY, following three successive quarterly YOY declines. Operating income shrank by 3%, due to a double-digit decline by one company that depends heavily on the PC market; excluding that company, operating income increased 23%. For the year, however, the 18 companies were down 1% in sales (to $201.4 billion) and 16% in operating income (to $36.7 billion) compared with full-year 2011. Annualized aggregate operating margin decreased in the last two years, from 24.2% in 2010 to 18.2% in 2012. The sectors 4Q12 sales growth was part of a broader though geographically patchy late-year semiconductor rebound. Worldwide semiconductor sales grew 3.8% YOY in December, with increases in the Americas and Asia-Pacific outweighing declines in Europe and Japan.1 Companies mixed fortunes reflected the continuing shift from PCs to tablets and Figure 9: Semiconductors KPIs
Sector aggregate
$ millions
smartphones. Sales increased at only 7 of the 18 companies, while operating income ups and downs were split evenly, at 9 each. In both metrics, the winners were companies focusing on devices for smartphones and tablets. Aggregate R&D climbed 10%, reflecting the escalating cost of developing new chip generations. Of note was the 4Q12 agreement by ASML Holding NV to acquire Cymer, Inc., for $2.5 billion, in a deal designed to accelerate delivery of extreme ultraviolet (EUV) lithography equipment to manufacture next-generation chips.2 Aggregate sector debt rose by 22%, as aggregate capex increased by 12%. In a broader industry trend, capex investment has increasingly become concentrated into a small number of large manufacturers and foundries, due to the large investment required for new fabs, with other semiconductor companies pursuing fabless strategies.3 The capex increase
shown in the chart below was due to major investments by just two sector companies. Excluding those two companies, capex declined by 17%. That decline more accurately reflects the broader industry trend, which resulted in double-digit 4Q12 sales declines at two makers of semiconductor manufacturing equipment. Outlook There are signs that this traditionally cyclical sector may be entering an upturn in 2013 though concerns remain due to difficult economic conditions and the challenges of adapting to the smart mobility and cloud megatrends. Market research estimates show worldwide semiconductor sales will grow 4.5% in 2013.4 That correlates to early reports of growing orders for semiconductor manufacturing equipment.5 However, PC sales may continue to fall and smartphone growth is slowing (see CE section, page 8). But tablets are still growing fast. 1Q13 should prove to be an interesting quarter.
4Q 2011 $453,713 $49,963 $9,624 $7,009 $5,345 $95,158 $193,626 $39,610 $6,953 $24,726 19.3 20.5 14.0
4Q 1Q
2Q
3Q 4Q
4Q 2012 % Change $486,860 $51,118 $9,312 $7,720 $1,503 $108,542 $211,488 $48,356 $7,788 $26,181 18.2 22.9 15.1 7% 2% -3% 10% -72% 14% 9% 22% 12% 6% -6% 12% 8%
Trend

High value $105,411 $13,477 $3,155 $2,629 $1,302 $28,371 $51,203 $13,448 $2,504 $4,734 37.5 75.3 29.0
Median value $9,624 $1,982 $205 $261 $43 $3,367 $7,200 $1,695 $115 $1,290 11.8 21.0 14.4
Low value $4,526 $1,048 ($142) $74 ($1,318) $922 $3,868 $0 $45 $420 -7.0 0.0 3.8
Sector median Days sales outstanding (DSO) Days payable outstanding (DPO) ROIC (%) 48 52 7.0 47 54 8.2 -2% 4% 17%

92 81 15.1
47 54 8.2
23 18 -4.6
Sector view
Software
Software sector sales bounced back in 4Q12 after a very difficult 3Q12, though operating income results were mixed. The accelerating cloud computing/SaaS and big data analytics megatrends helped boost growth at major enterprise software companies, but adoption of Windows 8 was reported to be slow.
Aggregate sales grew 4% YOY and 32% sequentially during the quarter, driven by increases at 7 of the 10 software companies in this sector view. Though operating income declined 0.2% YOY for the sector overall, it rounded to zero and was a considerable improvement over the 16% YOY decline seen in 3Q12. However, only 4 of the 10 sector companies increased operating income. The strong quarter helped the sector achieve a 1% increase in sales for full-year 2012, to $168.5 billion. Full-year operating income fell 3% to $52.8 billion. During the quarter, sales of cloud/SaaS and big data analytics products began to make significant contributions at large providers of enterprise applications.1,2 At the same time, the cost of developing these new products helped drive a 12% increase in R&D expenditures. Capex also leapt by 59%, driven by four companies that posted YOY increases between 51% and 87%. Figure 10: Software KPIs
Sector aggregate
$ millions
All four are in various stages of deploying cloud/ SaaS offerings, so we believe at least part of the capex increases are related to data center build outs. Software remained a primary target of M&A activity in 4Q12. Overall, software companies were targeted in transactions totalling $9.6 billion, or a third of quarterly disclosed value for all global technology M&A trasactions.3 Prominent deals included Oracles $956 million plan to acquire Eloqua, Inc., a provider of cloud-based software that helps companies monitor marketing and sales initiatives, including data from social networks. By fueling growth in smartphones and tablets at the expense of PCs, the smart mobility megatrend contributed to relatively slow early adoption of Windows 8 compared with previous releases of the operating system.4 A variety of factors influenced KPIs at other sector companies. One maker of game
software enjoyed strong sales and income growth due to several leading titles,5 but other companies were affected by declining sales of game consoles.6 The weak yen boosted income at one Japan-based firm.7 Another company was affected by a twoweek delay in the US tax season, which slowed sales of tax-preparation software.8 Outlook Global megatrends, such as cloud computing/SaaS, big data analytics and smart mobility, will continue to transform the software sector, presenting both opportunities and challenges. We expect cloud-based revenues to grow rapidly but are unsure of the net impact on sales because they will cannibalize traditional products. But the sector will clearly benefit from the ascent of big data technology and services, which analysts predict will grow at more than 30% a year to reach $23.8 billion by 2016.9
4Q 2011 $528,414 $47,564 $15,490 $5,531 $7,652 $127,301 $171,745 $39,139 $1,067 32.6 22.8 11.6
4Q 1Q
2Q
3Q 4Q
4Q 2012 % Change $603,192 $49,294 $15,461 $6,190 $6,334 $149,872 $185,738 $47,867 $1,692 31.4 25.8 12.6 14% 4% 0% 12% -17% 18% 8% 22% 59% -4% 13% 9%
Trend

High value $224,801 $21,456 $7,771 $2,528 $2,873 $78,805 $72,576 $19,757 $930 38.3 59.7 18.5
Median value $18,131 $1,780 $352 $209 $326 $4,342 $8,991 $1,475 $82 27.0 21.1 13.1
Low value $10,095 $968 $93 $160 $131 $766 $2,792 $0 $9 6.8 0.0 4.5
Market value Sales Operating income R&D Levered free cash flow Cash, ST and LT investments Equity Debt Capital expenditures Operating margin (%) Debt-to-equity (%) R&D as a % of sales
Sector median Days sales outstanding (DSO) Days payable outstanding (DPO) ROIC (%) 46 67 12.9 46 53 10.6 0% -21% -18%

69 97 23.1
46 53 10.6
24 19 5.0
Regional view: Americas
Sales rise 6%; income growth slows

The Americas was the only region to post YOY sales growth in 4Q12, a consequence of strong performances from technology companies leading the smart mobility and cloud computing megatrends.
Most of the regions KPIs increased during the quarter. Sales in the Americas rose 6% YOY, outweighing declining 4Q12 sales in APJ and EMEA and helping aggregate global sales to increase 1% for the quarter (see Figure 2, page 4). Operating income for the Americas grew more slowly: the regions 2% YOY increase was well below the 10% global average for 4Q12. Although Americas operating margin declined 4% YOY in 4Q12, it climbed 10% sequentially following three sequential declines. Americas 4Q12 aggregate operating margin of 20.5% was well above the 12.6% global average, and the region contributed 71% of global operating income during the quarter. Despite global macroeconomic headwinds, Americas full-year 2012 sales grew 6% to $1.1 trillion, while operating income rose 4% to $220 billion. The US economy remained stronger than many other developed nations, helping fuel sales growth. For example, US GDP rose 0.1% as other developed areas fell back into recession in 4Q12 and consumer spending rose by 2.1%.1 Of the 45 Americas companies, 31 increased sales, 16 of them by double-digit percentages, compared with only 5 double-digit declines. As in previous quarters, growth was driven across sectors by innovators in smart mobility and cloud computing, including CE, internet and semiconductor companies. The regions companies increased aggregate R&D spending by 13% in 4Q12, compared with a 4% global increase, suggesting they are committed to the investment required to continue driving innovation. The Americas accounted for 56% of global R&D spending during the quarter, and R&D as a percentage of sales increased 7% YOY. Capex rose 14%, compared with just 2% globally.
Americas technology companies reaffirmed their commitment to continuous innovation by increasing R&D spending by 13%, much more than any other region.
Guy Wanger Global Technology Industry, Americas Leader Ernst & Young
Note: of the 45 technology companies in the Americas region from the top 100 list, 44 are headquartered in the US and 1 in Canada.
Figure 11: KPIs for Americas region technology companies

Sector aggregate
$ millions
4Q 2011 $2,134,104 $286,924 $61,040 $20,714 $44,224 $487,886 $699,806 $195,838 $13,268 $44,670 21.3 28.0 7.2
4Q 1Q
2Q
3Q 4Q
4Q 2012 % Change $2,396,951 $304,632 $62,516 $23,369 $46,320 $588,304 $778,509 $217,554 $15,179 $46,802 20.5 27.9 7.7 12% 6% 2% 13% 5% 21% 11% 11% 14% 5% -4% 0% 7%
Trend

High value $499,614 $54,512 $17,210 $2,629 $14,767 $137,112 $127,346 $33,269 $2,504 $6,374 45.0 175.2 29.0
Median value $17,608 $2,646 $390 $290 $408 $3,837 $7,839 $2,128 $105 $1,126 18.3 27.3 12.0
Low value $3,870 $968 ($175) $7 ($2,169) $477 $2,076 $0 $9 $20 -7.0 0.0 0.2

166 97 39.8
48 53 9.9
12 9 -4.7
14
Regional view: Asia-Pacific* and Japan (APJ)
Income grows five times the global average

Sales in 4Q12 slipped for the APJ region but operating income grew at more than five times the global average. However, not counting Japan, which dropped back into recession during the fourth quarter,1 aggregate sales for the region climbed, propelled in part by smart mobility.
APJ operating income leapt 54% in 4Q12, posting a fourth consecutive YOY quarterly increase and far surpassing the global increase of 10% for 4Q12. Of the 45 companies in the region, 30 increased operating income YOY, 27 by double-digit percentages; 15 declined, 14 by double digits. For the full year, operating income was up 26% to $72 billion and sales increased 1% to 1.3 trillion. For 4Q12, however, APJ sales dropped 3% YOY, compared with a 1% global increase. Twenty-two companies reported sales increases and 23 reported decreases. Excluding Japan, the regions sales would have increased 5% in 4Q12 and operating income would have increased by 70%. Winners included several companies linked to the smart mobility trend, most notably a leading smartphone and semiconductor manufacturer whose operating income surged 120% YOY, accounting for 63% of the regions YOY operating income growth. A semiconductor foundry also linked to smart mobility, two Chinese internet companies and several Indian services firms also increased sales. Even two PC makers managed to increase sales by taking a larger share of the declining PC market. However, two handset makers experienced declining sales, as did a large contract manufacturer that has been affected by its customers slowing sales of some handsets and PCs.2 Several other KPIs would turn from negative to positive if Japanese companies were excluded. For example, cash flow would rise 60%, R&D 12% and capex 2%. For Japanese companies, the quarter unfolded differently. Sales fell 10% as only 7 of 21 companies increased sales. Operating income increased by 23% YOY, mostly due to four companies that returned to profitability in 4Q12 after posting losses in 4Q11.
Transformative technologies are lifting much of the region. Even as Japans traditional technology leaders continue to work through their turnarounds, the region is well-positioned for growth throughout 2013.
Joe Tsang Asia-Pacific Technology Leader Ernst & Young
Figure 12: KPIs for Asia-Pacific and Japan region technology companies
Sector aggregate
$ millions
4Q 2011 $770,826 $352,811 $13,338 $13,847 $14,679 $367,040 $534,183 $242,398 $19,705 $159,183 3.8 45.4 3.9
4Q 1Q
2Q
3Q 4Q
4Q 2012 % Change $859,683 $342,108 $20,553 $12,555 $10,662 $384,843 $537,527 $245,526 $18,500 $158,928 6.0 45.7 3.7 12% -3% 54% -9% -27% 5% 1% 1% -6% 0% 58% 1% -5%
Trend

High value $187,158 $52,708 $8,309 $2,779 $16,559 $96,080 $114,219 $31,001 $3,902 $18,614 45.0 527.8 14.6
Median value $9,350 $3,954 $213 $171 ($174) $3,762 $6,290 $2,913 $168 $1,866 3.5 46.6 4.4
Low value $2,260 $1,016 ($465) $24 ($3,239) $922 $2,078 $0 $2 $5 -16.2 0.0 0.7
Sector median Days sales outstanding (DSO) Days payable outstanding (DPO) ROIC (%) 62 67 4.1 65 64 4.6 5% -4% 12%

240 206 29.1
65 64 4.6
16 1 -11.8
Source: Ernst & Young analysis of Capital IQ data, accessed 22 February 2013. *Asia-Pacific includes India. October 2012February 2013 earnings season 15
Regional view: Europe, the Middle East and Africa (EMEA)
YOY sales and operating income declines slow in 4Q12

EMEA region sales and income continued to decline in 4Q12 as the Eurozone fell farther into recession.1
Aggregate sales dropped 1% YOY in 4Q12, while operating income fell 19%, in contrast to the global average increases of 1% and 10%, respectively. During full-year 2012, EMEA sales and operating income declined YOY during every quarter, resulting in an 8% sales decline to $181.1 billion for the full year. Likewise, operating income dropped 36% for full-year 2012, to $12.3 billion. Both sales and operating income also remained below their 2010 levels. Still, there were some positive signs in the 4Q12 numbers. For example, the YOY declines were smaller in each successive quarter. Also, sales and operating income grew sequentially during each of the last three quarters; in 4Q12, sales increased 15% sequentially and operating income increased by 50%. Two other positive signs resulted from the impact of an individual company, as sometimes happens because there are only 10 EMEA companies among the top 100. Figure 13: KPIs for Europe, the Middle East and Africa region technology companies
Sector aggregate
$ millions
The mobile-social-cloud transformative technologies are already driving growth at leading EMEA companies. Throughout 2013, the trend should continue to spread, enabling overall technology growth for the region.
James Bennet Interim EMEIA Technology Leader Ernst & Young
EMEAs 25% market value growth was double that of the other regions. But 68% of the increase came from one enterprise software vendor that has achieved doubledigit sales growth due in part to new products aimed at the big data analytics and cloud computing megatrends. Excluding that company, EMEAs market value increase would have been 12%, the same as the Americas and APJ. Similarly, EMEAs 27% cash flow increase came from one public network equipment vendor, without which cash flow would have declined 23% YOY. That company benefited from increased sales in the US due to the smart mobility trend, which is spurring deployments of 4G networks.2 EMEA companies increased R&D expenditure by 2%, suggesting a willingness to invest to drive future growth. R&D as a percentage of sales increased to 12%, far higher than the Americas (7.7%) and APJ (3.7%).
4Q 2011 $191,860 $51,206 $5,606 $5,990 $5,492 $59,298 $100,357 $34,279 $1,616 $19,505 10.9 34.2 11.7
4Q 1Q
2Q
3Q 4Q
4Q 2012 % Change $239,367 $50,890 $4,539 $6,095 $6,981 $56,268 $93,129 $37,613 $1,495 $18,494 8.9 40.4 12.0 25% -1% -19% 2% 27% -5% -7% 10% -7% -5% -18% 18% 3%
Trend

High value $95,584 $10,602 $2,098 $1,505 $2,867 $14,661 $21,268 $7,316 $282 $4,608 37.5 178.8 27.1
Median value $15,019 $4,084 $211 $722 $530 $3,947 $6,147 $3,571 $146 $2,028 5.8 38.6 14.5
Low value $3,000 $1,122 ($142) $162 ($392) $889 $2,417 $413 $22 $9 -6.6 8.7 6.8
Sector median Days sales outstanding (DSO) Days payable outstanding (DPO) ROIC (%) 66 75 8.8 63 69 8.8 -5% -8% 0%

91 135 21.9
63 69 8.8
45 49 -4.6
16
Fast growth, IPOs and VC investments

This section looks at the top 25 fastest-growing public technology companies. We let equities markets decide the fastest-growing public technology companies by measuring the market value increase over a 12-month period of all global technology companies. Additionally, we include an IPO activity scorecard and the top five IPOs that took place in the quarter and aggregate VC investment by sector.
18 KPIs for top 25 fastest-growing public technology companies 19 Global technology IPO scorecard 19 Top five IPOs by dollar value 20 Global technology VC investment by sector
17
Fast growth, IPOs and VC investments Following the money yields insights into technologies to come
What technologies will drive sales growth next year? Where are public markets placing their technology bets? What are the up-and-coming trends in technology the potential future megatrends that may drive the next cycle of technology innovation? On which technologies are venture capitalists (VCs) betting?
The answers to these questions are just a bit over the horizon but important to consider and plan for today. Here, well explore data and research related to fastgrowing technologies in multiple dimensions. First, well look at the 25 fastest-growing public technology companies* (overall, not just within the top 100); well analyze their KPIs and the technologies driving their growth. Next well highlight IPOs the newest public technology companies, whose technologies are relatively well understood. And last well explore the technologies receiving the biggest VC investments where the newest, most innovative possibilities are emerging. Technologies of the 25 fastest growers Among the technologies that floated to the top of the fast-growing group, big data analytics is most prominent. Five companies deliver such technologies. Included among these are generic data warehousing and data analytics tools that can be used by any company to develop business analytics applications. There are also industry-specific solutions for marketing automation and health care. Health care IT (HIT) technologies are also prominent, and part of five companies offerings. Two companies overlapped: they provide big data analytics for health care applications. Three companies offer e-commerce platforms specialized for a specific purpose (e.g., surplus/salvage assets, mobile payments) or region (Latin America). There are also three companies offering cloud-oriented co-location services, two more offering IT service management platforms in the cloud and two information security companies. Then there is a series of interesting one-off technologies, such as online and mobile games, integrated circuit design tools, public network equipment, online and mobile video distribution infrastructure and voice-based computer interfaces.
US start-ups attracted
77%
of the $4.2 billion in aggregate value invested by VCs in 4Q12.
*We let equities markets decide the fastest-growing public technology companies by measuring the market value increase over a 12-month period of all global technology companies (for a full explanation of View from the top methodology, see page 22).
Figure 14: KPIs for top 25 fastest-growing public technology companies

Sector aggregate
$ millions
4Q 2011 $113,265 $7,886 $1,699 $641 $560 $16,196 $25,371 $12,007 $337 $581 21.5 47.3 8.1
4Q 1Q
2Q
3Q 4Q
4Q 2012 % Change $136,544 $8,549 $1,927 $659 $1,002 $19,151 $30,191 $15,643 $382 $522 22.5 51.8 7.7 21% 8% 13% 3% 79% 18% 19% 30% 13% -10% 5% 10% -5%
Trend

High value $17,234 $972 $217 $120 $266 $3,295 $3,346 $9,214 $83 $184 57.1 1,743.5 34.3
Median value $3,579 $297 $44 $35 $37 $397 $803 $84 $7 $30 23.2 6.9 11.1
Low value $859 $66 $14 $1 ($81) $34 $250 $0 $0 $4 3.9 0.0 1.1

106 347 34.6
62 56 13.2
12 9 1.2
18
Highlights In aggregate, these 25 companies increased sales 8% YOY in 4Q12 and operating income 13%, compared with 1% and 10%, respectively, for the top 100 companies (see Figure 2, page 4). For full-year 2012, the fast growers saw sales increase 18% and operating income 23%, compared with 2% and 6% for the top 100 companies. The numbers show that the fast growers growth rates slowed in 4Q12; the top 100 slowed in the first half of 2012. In aggregate market value, the fast growers had increased 21% YOY at the end of 4Q12, bettering both the top 100 (13%) and the NASDAQ benchmark (16%). The fast growers aggregate operating margin was nearly double the top 100 (22.5% versus 12.6%). R&D as a percent of sales was higher (7.7% versus 6%), as was ROIC (13.2% versus 8.9%). The 25 fast growers were more leveraged than the top 100, with a debt-to-equity ratio of 51.8 versus 35.5; and had much less cash, averaging $766 million per company compared with more than $10 billion per company for the top 100.
4Q12 IPOs slow significantly IPO activity slowed in 4Q12, continuing a declining deal volume trend that began in 1Q12. Aggregate and average deal values have dropped since 2Q12, when one large deal caused the spike in the micro-plotlines shown in Figure 15, below. Cloud computing dominated the top five IPOs of 4Q12 by dollar-value of proceeds. Four of the five companies offer software or services that are based in the cloud and often can be delivered via web browserbased user interfaces or mobile apps. The fifth offers carrier-class Wi-Fi infrastructure that helps enable such cloud-based software and services. Those carrier-class Wi-Fi products match well with the anticipated demands of mobile network operators, who appear ready to increase their investments in infrastructure upgrades and are looking for innovative solutions to help them manage a dramatically rising mobile data traffic load (see CE section, see page 8). VC investments offer a peek at technologys future Overall, VC investments were also lower in 4Q12 than 4Q11 (see Figure 17, page 20), but by much smaller percentages than IPOs.
Of note, CE, semiconductors and software/ SaaS were actually up in terms of the aggregate value of investment rounds. This suggests that VC investors remain optimistic that near-future markets will favor well-executed technology innovation despite current lower IPO and M&A valuations. The investments being placed by VCs were the most interesting of all. By geography US start-ups attracted 77% of the $4.2 billion in aggregate value invested by VCs in 4Q12. European companies attracted 12% of 4Q12 VC investment, Canada and China 3% each, Israel 2% and India 1%. By sector and challenge In analyzing the top 10 VC transactions per sector, we discovered that many start-ups (across multiple sectors) are addressing several of the same big technology challenges. These challenges include the growing volume of mobile data traffic (already noted as part of the 25 fast growers and IPO companies), power storage and management (whether mobile or in the data center) and accelerating the performance of cloud servers/data centers. In addition, we saw many new takes on e-commerce and just about everything as a service.
Figure 15: Global technology IPO scorecard

IPOs announced 4Q11 43 $4,954 $115 4Q 1Q 2Q 3Q 4Q 4Q12 23 $1,588 $69 Sequential % change -32% -2% 44%

YOY % change -47% -68% -40%

Number of IPOs announced Total value of IPOs ($m) Average value of IPOs ($m)
Figure 16: Top five IPOs by dollar value

Company Proceeds ($m) $733 $153 $141 $126 $88 Value at IPO ($m) $4,488 $585 $750 $1,105 $558 IPO date 12-Oct 5-Oct 3-Oct 16-Nov 11-Oct Sector Software Software IT services CE Internet Description Cloud-based financial management and human capital management software GPS fleet and vehicle tracking software Identity-theft protection services Carrier-class, smart Wi-Fi products and technologies Online marketplace for commercial digital imagery
Workday, Inc. Fleetmatics Group Plc LifeLock, Inc. Ruckus Wireless, Inc. Shutterstock, Inc.
Source: Ernst & Young analysis of The 451 Group and Capital IQ data, accessed 4 January 2013.
19
Seven of the top 10

internet investments involve new takes on e-commerce, including sites or platforms specializing in luxury home dcor, unique collectibles, social community buying and a couple of travel and leisure sites.
Mobile bandwidth Start-ups addressing looming mobile bandwidth concerns are concentrated in the CE sector but also appear in others semiconductors, for instance. Though technologies differ, they mostly divide into two areas: technologies to create more bandwidth (e.g., two companies making laser-emitting chips for fiber optic networks) or technologies to manage bandwidth better (e.g., three companies with smart carrier services platforms or core technology to facilitate anywhere, any device voice, data and video sessions). Another three startups focus on software-defined network (SDN) technology (it emerged in the last year as an important M&A target for technology companies).1 Power storage and management Five of the top 10 CPE start-up investments are in companies that address a power issue. These include new kinds of batteries (e.g., printed batteries), adaptable power supplies, liquid cooling systems designed to lower data center power consumption and power conversion technology meant for uses as diverse as tablets, data centers and electric cars. Power management is also targeted in semiconductor sector investments. e-Commerce Seven of the top 10 internet investments involve new takes on e-commerce, including sites or platforms specializing in luxury home dcor, unique collectibles, social community buying and a couple of travel
and leisure sites. There is also a big data analytics start-up providing a marketing infrastructure that reveals relevant content to potential buyers wherever they are on the web. Perhaps most interesting to US consumers is a comparison shopping portal for health care and health care insurance. As a service In software/SaaS and IT services the startup investments nearly all involve creating new services in the cloud. These are diverse: there is a cloud-based education credentialing service, CRM for automobile service departments, SEO, mobile payments and various kinds of IT service management services. There are also several approaches to big data analytics as a service, including a cloud-based Hadoop development platform. Tech-cool Also among the top 10 by sector are some unusual technology start-ups that seem very tech-cool. These include technology for smart parking services in big cities, vending machines with a smartphone-like user interface, a mobile app that dynamically changes its capabilities based on what it perceives as its users current need (with new functions delivered via HTML5 from the cloud) and an SMS platform for app developers that hides the carrier complexity necessary to make SMS messaging applications work. There is also one start-up aiming to enable the internet of things by offering sensor-based kits designed to connect everyday items to the internet.
Figure 17: Global technology VC investment by sector

Number of rounds 4Q11 4Q 1Q 2Q 3Q 4Q VC rounds by sector CE CPE Internet IT services Semiconductors Software/SaaS Total 32 39 226 46 17 337 697 19 31 190 37 19 365 661 -37% -26% -10% -10% -10% -8% -11%

Aggregate value ($m) YOY % change 4Q11 4Q 1Q 2Q 3Q 4Q 4Q12 Sequential % change YOY % change
4Q12
Sequential % change
-41% -21% -16% -20% 12% 8% -5%
$318 $293 $1,717 $367 $122 $1,950 $4,767
$511 $254 $971 $220 $129 $2,072 $4,157
79% -34% -26% -63% -60% -13% -22%
61% -13% -43% -40% 6% 6% -13%
Source: Ernst & Young analysis of Dow Jones Venture Source data, accessed 21 February 2013.
20
Source notes
Overview
1 3
The Morning Download: Samsung Galaxy S 4 Is a Big Data Phone, CIO Report, 15 March 2013, via Factiva, 2013 Dow Jones & Company, Inc. Strong demand for smartphones, heated competition characterize global handset market in 4Q12, ETMAG.com, 15 February 2013, via Factiva, 2013 EUROTRADE Media Co., Ltd. Tablet Shipments Soar to Record Levels During Strong Holiday Quarter, According to IDC, Business Wire, 31 January 2013, via Factiva, 2013 Business Wire. Firms Send Record Cash Back to Investors, WSJ.com, 7 March 2013, via Factiva, 2013 Dow Jones & Company, Inc. Euro-Zone Economy to Shrink in 2013, Dow Jones News Service, 22 February 2013, via Factiva, 2013 Dow Jones & Company, Inc. Japan GDP Shrinks for 3rd Straight Quarter, Dow Jones News Service, 14 February 2013, via Factiva, 2013 Dow Jones & Company, Inc. Chinese Economy Shows Weakness: Early 2013 Data Signal Prices Rising, Activity Slowing in Driver of Global Economy; Forecasts Mixed, The Wall Street Journal, 11 March 2013, via Factiva, 2013 Dow Jones & Company, Inc. Employers Ignore Economic Clouds, WSJ.com, 8 March 2013, via Factiva, 2013 Dow Jones & Company, Inc. Smartphones Expected to Outship Feature Phones for First Time in 2013, According to IDC, Business Wire, 4 March 2013, via Factiva, 2013 Business Wire. Low Cost Products Drive Forecast Increases in the Tablet Market, According to IDC, Business Wire, 12 March 2013, via Factiva, 2013 Business Wire.
Apple, Samsung Find New Rival in Chinas Huawei, Dow Jones News Service, 25 January 2013, via Factiva, 2013 Dow Jones & Company, Inc. Ericsson surpassed Huawei with $35.75B revenue Last year, Mena Report, 6 February 2013, via Factiva, 2013 Al Bawaba. Worldwide Mobile Phone Growth Expected to Drop to 1.4% in 2012 Despite Continued Growth Of Smartphones, According to IDC, Business Wire, 4 December 2012, via Factiva, 2012 Business Wire. The Mobile Economy 2013, GSMA, accessed 25 February 2013, 2013 GSMA. Mobile carriers, vendors eager to virtualize networks, Computer World, 28 February 2013, via Factiva, 2013 IDG Communications. Optical Network Market Poised for Growth in 2013, Reports Infonetics Research, Business Wire, 20 February 2013, via Factiva, 2013 Business Wire. Infonetics Research: Cable Broadband Market Primed for Double-Digit Recovery in 2013, Business Wire, 27 February 2013, via Factiva, 2013 Business Wire. Infonetics predicts resurgence in 2013 for carrier router and switch market, Business Wire, 21 February 2013, via Factiva, 2013 Business Wire.
Gartner Says Worldwide IT Spending Forecast to Reach $3.7 Trillion in 2013; Analysts to Discuss Latest IT Spending Outlook During Complimentary Gartner Webinar, M2 Presswire, 3 January 2013, via Factiva, 2013 M2 Communications.
Semiconductors
1
Semiconductor Industry Posts Near-Record Sales Total in 2012, PR Newswire, 4 February 2013, via Factiva, 2013 PR Newswire Association LLC. Global technology M&A: October-December 2012 and year in review, Ernst & Young, 2012 EYGM Limited. Global chip capex expected to drop 6% in 2012, EE Times, 12 September 2012, via Factiva, 2013 UBM Tech. IDC Forecasts Worldwide Semiconductor Revenues Will Grow 4.9% and Reach $319 Billion in 2013, Business Wire, 26 December 2012, via Factiva, 2012 Business Wire. All Things Digital: Applied Materials Sees Bounce After Hitting Bottom, Dow Jones News Service, 14 February 2013, via Factiva, 2013 Dow Jones & Company, Inc.
Software
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10
Oracle Q2 Beats the Street, All Things D, 18 December 2012, via Factiva, 2012 Dow Jones & Company, Inc. SAP delivers solid Q4, HANA, cloud revenue touted, ZDnet, 23 January 2013, via Factiva, 2013 CBS Interactive. Global technology M&A: October-December 2012 and year in review, Ernst & Young, 2012 EYGM Limited. Microsofts Profit Falls 3.7% as Windows 8 Gets Off to a Slow Start, The Wall Street Journal Online, 24 January 2013, via Factiva, 2013 Dow Jones & Company, Inc. Activision Powers Through the Holiday With Call of Duty Sales, Dow Jones Business News, 7 February 2013, via Factiva, 2013 Dow Jones & Company, Inc. Console sales set for rebound, courtesy of next-gen, CNET, 9 January 2013, via Factiva, 2013 CBS Interactive Inc. Nintendo chief rules out Wii price cuts, promises return to operating profitability, new games, Associated Press, 31 January 2013, via Factiva, 2013 The Associated Press. Intuits Profit Drops 40% as U.S. Tax Season Delayed, The Wall Street Journal Online, 21 February 2013, via Factiva, 2013 Dow Jones & Company, Inc. New IDC Big Data Technology and Services Forecast Shows Worldwide Market Expected to Reach to $23.8 Billion in 2016, Business Wire, 8 January 2013, via Factiva, 2013 Business Wire.

1
Yen sinks to lowest since April 2011 as Abe takes power, Reuters News, 25 December 2012, via Factiva, 2012 Reuters Limited. Gartner Sees Structural Shift in PC Market; Worldwide Shipments Dropped 4.9% in 4th Quarter, Dow Jones Global News Select, 14 January 2013, via Factiva, 2013 Dow Jones & Company, Inc. Tablet Shipments Soar to Record Levels During Strong Holiday Quarter, According to IDC, Business Wire, 31 January 2013, via Factiva, 2013 Business Wire. Tablet sales to outpace notebooks, EE Times, 11 January 2013, via Factiva, 2013 UBM Tech. Gartner Says Worldwide Server Shipments Declined 0.2 Percent; Revenue Increased 5.1 Percent In Fourth Quarter of 2012, EFYtimes.com, 4 March 2013, via Factiva, 2013 EFY Enterprises Pvt. Ltd. Dell to Sell Itself for $24.4 Billion, The Wall Street Journal, 5 February 2013, via Factiva, 2013 Dow Jones & Company, Inc.
10
Notable factors
1
I.M.F. Forecasts Modest Global Economic Growth, The New York Times, 23 January 2013, 2013 The New York Times Company. Gauge of US Business Spending Plans Edges Higher, Reuters, 28 January 2013, via Factiva, 2013 Reuters Limited. Nobel Prize in physics awarded for work in quantum optics, CNET News.com, 9 October 2012, CNET News.com, via Factiva, 2013 CBS Interactive Inc. Quantum Computing Goes Mainstream? New VC Fund Debuts, CNET News.com, 10 December 2012, via Factiva, 2013 CBS Interactive Inc. Tablet Shipments Soar to Record Levels During Strong Holiday Quarter, According to IDC, Business Wire, 31 January 2013, via Factiva, 2013 Business Wire. Soft PC Shipments in Fourth Quarter Lead to Annual Decline as HP Holds Onto Top Spot, According to IDC, Business Wire, 10 January 2013, via Factiva, 2013 Business Wire. 89 ITU members sign controversial UN telecom treaty, Agence France-Presse, 14 December 2012, via Factiva, 2012 Agence France-Presse. 2012 US Online Holiday Spending Grows 14 Percent vs. Year Ago to $42.3 Billion, PR Newswire (US), 3 January 2013, via Factiva, 2013 PR Newswire Association LLC. Iran Renews Internet Attacks On US Banks, Dow Jones Top News & Commentary, 18 October 2012, via Factiva, 2012 Dow Jones & Company, Inc. Pentagon Expanding Cybersecurity Force to Protect Networks Against Attacks, NYTimes.com, 28 January 2013, via Factiva, 2013 The New York Times Company.
Internet
1
2012 U.S. Online Holiday Spending Grows 14 Percent vs. Year Ago to $42.3 Billion, PR Newswire, 3 January 2013, via Factiva, 2013 PR Newswire Association LLC. Answer to Amazons Low Margins May Be Found in the Cloud, The Wall Street Journal, 14 January 2013, via Factiva, 2013 Dow Jones & Company, Inc. 2012: M-Commerce Up 81% To $25B, MediaPost.com, 10 January 2013, via Factiva, 2013 MediaPost.com. Facebook and Google Benefit From Mobile Ad Surge, NYT Blogs, 17 December 2012, via Factiva, 2012 The New York Times Company.
Regional view: Americas

1
Exports Nudge Up Economy, The Wall Street Journal, 1 March 2013, via Factiva, 2013 Dow Jones & Company, Inc.
4 7
Regional view: APJ

1
IT services
1
Japan Economy Still in Recession, but Pick Up Coming, Reuters, 13 February 2013, via Factiva, 2013 Reuters Limited. Gadget Maker Foxconn Freezes Overall China Hiring, The Wall Street Journal Online, 20 February 2013, via Factiva, 2013 Dow Jones & Company, Inc.
IT firms invest in Intellectual Property will see quantum growth: Study, The Times of India, 22 January 2013, via Factiva, 2013 The Times of India Group. Worldwide Services 2012-2016 Forecast Update, IDC, November 2012, IDG 2012. View from the top: global technology trends and performance, October 2010, Ernst & Young, 2010 EYGM Limited. Longer-Term Outsourcing Contracts Gain Favor, CMP TechWeb, 14 January 2013, via Factiva, 2013 United Business Media LLC. Geographic diversification now an essential part of outsourcing, Dataquest, 24 January 2013, via Factiva, 2013 CyberMedia. IDC finds Latin America to be the next emerging flavor, Dataquest, 27 November 2012, via Factiva, 2012 CyberMedia.
Regional view: EMEA

1
10
1
Europe Woes Deepen as Economies Contract; Slump in Euro Zones South Infects Germany and France, Jarring Hopes for a Return to Growth; So Many False Dawns, The Wall Street Journal, 15 February 2013, via Factiva, 2013 Dow Jones & Company, Inc. North America Boosts Ericsson Sales, The Wall Street Journal, 31 January 2013, via Factiva, 2013 Dow Jones & Company, Inc.
View from the top: global technology trends and performance, Analysis of second-quarter 2012 earnings season, Ernst & Young, 2013 EYGM Limited. Strong demand for smartphones, heated competition characterize global handset market in 4Q12, ETMAG.com, 15 February 2013, via Factiva, 2013 EUROTRADE Media Co., Ltd.
Fast growth, IPOs and VC investments

1
Global technology M&A: October-December 2012 and year in review, Ernst & Young, 2012 EYGM Limited.
21
Methodology
View from the top: global technology trends and performance is based on extensive secondary research and trend analysis combined with Ernst & Youngs analysis of Capital IQ data for the top 100 and 25 fastest-growing technology companies; Capital IQ and The 451 Group data for IPO companies; and Dow Jones Venture Source data for venture capital investments. Financial data is drawn from results reported during the fourth-quarter earnings season for 2012. Our quarterly performance analysis is based on standardized data pulled from the Capital IQ database on 22 February 2013; also, certain data for this quarters report was augmented from SEC filings. The performance data provides a directional look at how these companies are doing at a given point in time. Data for the quarter is presented as the aggregate of those companies comprising the top 100, top 25 and each technology industry sector view, with the following exceptions: days sales outstanding, days sales payable and ROIC (which are based on the medians for each group presented). Figure 1 on the inside front cover (Total sales and market value of the top 100 global technology companies) is presented on a trailing 12-month basis to offer a more complete picture. We select the top 100 technology companies each year by ranking all public technology companies around the world by sales and by market capitalization and then averaging the two ranks together into a single ranked list. Data drawn for ranking the top 100 companies is as of 31 December 2011. For 2012, six companies were replaced by new additions, highlighted in bold type on page 23. We identify the 25 fastest-growing companies by measuring the YOY improvement in market value of all public technology companies (excluding the top 100 and any companies that do not report sufficient financial metrics). Our report includes a separate look at the top 25 companies because these companies are either highly diversified or moving toward diversification; they are participating in and influencing many industry sectors beyond the sector in which they originated. Our report also includes a look at the following sectors within the technology industry: communications equipment, computers, peripherals and electronics, internet, IT services, semiconductors and software. The performance data analysis for these sectors is based on the companies within the top 100 that are either pure plays within the sector or diversified companies participating in the sector. For this report, diversified companies were reported only in their main sector the sector from which they derive the most revenue. Unless otherwise indicated, KPI definitions are based on Capital IQ database definitions. All currency references are in US dollars, unless otherwise noted.
22
The top 100 technology companies

Acer Inc. Activision Blizzard, Inc. Adobe Systems Inc. Advanced Semiconductor Engineering Inc. Agilent Technologies Inc. Alcatel-Lucent, S.A. Amazon.com Inc.* Amphenol Corporation Apple Inc.* Applied Materials Inc. ASML Holding NV ASUSTeK Computer, Inc. Atos S.A. AU Optronics Corporation Automatic Data Processing, Inc. Baidu, Inc. Broadcom Corporation CA Technologies Canon Inc.* Chimei Innolux Corporation Cisco Systems, Inc.* Cognizant Technology Solutions Corporation Compal Electronics Inc. Computer Sciences Corporation Corning Inc. Dell Inc.* Delta Electronics Inc. eBay Inc. EMC Corporation* Experian plc Fidelity National Information Services, Inc. Fiserv, Inc. Flextronics International Ltd. FUJIFILM Holdings Corporation Fujitsu Ltd. Google Inc.* Hewlett-Packard Company* Hitachi Ltd.* Hon Hai Precision Industry Co., Ltd.* Hoya Corporation HTC Corporation Infineon Technologies AG Infosys Ltd. Intel Corporation* International Business Machines Corporation* Intuit Inc. Jabil Circuit Inc. Juniper Networks, Inc. Konica Minolta Holdings Inc. Koninklijke Philips Electronics NV* Kyocera Corporation Lenovo Group Ltd. LG Display Co., Ltd. LG Electronics Inc. Micron Technology Inc. Microsoft Corporation* Motorola Solutions, Inc. Murata Manufacturing Co. Ltd. NEC Corporation NetApp, Inc. Nikon Corporation Nintendo Co. Ltd. Nitto Denko Corporation Nokia Corporation* NTT Data Corporation NVIDIA Corporation Oracle Corporation* Panasonic Corporation* priceline.com Incorporated QUALCOMM Incorporated* Quanta Computer, Inc. Rakuten, Inc. Research In Motion Limited Ricoh Co. Ltd. SAIC, Inc. Samsung Electronics Co. Ltd.* SanDisk Corporation SAP AG* Seagate Technology PLC Sharp Corporation SK Hynix, Inc. Sony Corporation* STMicroelectronics NV Symantec Corporation Taiwan Semiconductor Manufacturing Co. Ltd.* Tata Consultancy Services Limited TDK Corporation TE Connectivity Ltd. (formally Tyco Electronics Ltd.) Telefon LM Ericsson* Tencent Holdings Ltd. Texas Instruments Inc.* Tokyo Electron Ltd. Toshiba Corporation* VMware, Inc. Western Digital Corporation Wipro Ltd. Wistron Corporation Xerox Corporation Yahoo! Inc. ZTE Corporation
Legend: * top 25 rank; diversified; bold text indicates companies new to the list in 2012.
Top 25 fastest-growing public technology companies

Acacia Research Corporation Alliance Data Systems Corporation ARM Holdings plc AZ Electronic Materials S.A. Cadence Design Systems, Inc. Cerner Corporation Check Point Software Technologies Ltd. CommVault Systems, Inc. Dassault Systmes S.A. Fortinet, Inc. HMS Holdings Corporation Liquidity Services, Inc. M3, Inc. MercadoLibre, Inc. Net One Systems Co. Ltd. Netease, Inc. Nuance Communications, Inc. PT Elang Mahkota Teknologi Tbk Rackspace Ltd SCSK Corporation SolarWinds, Inc. Telecity Group plc Teradata Corporation TIBCO Software, Inc. Total System Services, Inc.
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Name Global Technology Center contacts Pat Hyek Global Technology Industry Leader Guy Wanger Deputy & Americas Technology Industry Leader Joe Tsang Asia-Pacific Technology Industry Leader Yuichiro Munakata Japan Technology Industry Leader
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Email
Ernst & Young Assurance | Tax | Transactions | Advisory
+1 408 947 5608
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About Ernst & Young Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 167,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential. Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit www.ey.com. About Ernst & Youngs Global Technology Center The technology industry is in a constant state of change driven by continuous innovation, shifting markets, converging industries, consumer demand and the need for first-mover advantage. Ernst & Youngs Global Technology Center connects a worldwide team of more than 15,000 technology professionals to help you navigate the challenges of this continuous change. We provide assurance, tax, transaction and advisory guidance through a network of experienced advisors to help you manage risk, transform business performance and improve operationally. We can help you deliver cost-effective innovation, balance product portfolios, maintain effective supply chains, and identify, execute and integrate strategic growth transactions. Our global technology network leverages our leading market share position in serving technology companies to provide you with timely, reliable information. Our teams use a cross-disciplinary, collaborative approach to help you achieve your business objectives. We encourage our people to use their ingenuity and initiative to help you develop approaches and seize opportunities. Its how Ernst & Young makes a difference. www.ey.com/technology ED None.
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View From The Top Global Technology Trends and Performance October 2012 February 2013

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Issue 10

View from the top

Fast growth, IPOs and VC investments 17

Top 100 and top 25 fast-growth companies 23

October 2012February 2013 earnings season

$4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0

Computers, peripherals and electronics

Note: all currency references are in US dollars, unless otherwise indicated.