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Powered by S&P Capital IQ INDUSTRY SURVEYS Technology Hardware, Storage & Peripherals April 2015 ANGELO
Powered by S&P Capital IQ INDUSTRY SURVEYS Technology Hardware, Storage & Peripherals April 2015 ANGELO

Powered by S&P Capital IQ

INDUSTRY SURVEYS

Technology Hardware, Storage & Peripherals

April 2015

ANGELO ZINO, CFA

Equity Analyst

SURVEYS Technology Hardware, Storage & Peripherals April 2015 ANGELO ZINO , C F A Equity Analyst

www.spcapitaliq.com

2 April 2015 INDUSTRY SURVEYS Technology Hardware, Storage & Peripherals PERFORMANCE 6 Sector Overview 20
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April 2015
INDUSTRY SURVEYS
Technology Hardware, Storage & Peripherals
PERFORMANCE
6
Sector Overview
20
Industry Overview
Revenues
Expenses
Profits & Margins
Valuation
Capital Markets
INDUSTRY PROFILE
43
Trends
50
How The Industry Operates
57
Key Ratios And Statistics
59
How To Analyze This Industry
CONTACTS
65
Glossary
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68
SALES
69
Comparative Company Analysis
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All of the views expressed in these research reports accurately reflect the research analyst’s personal views regard-
ing any and all of the subject securitiesor issuers. No part of the analyst’s compensation was, is, or will be, directly or
indirectly, related to the specific recommendations or views expressed in this research report. For important regula-
tory information, go to www.standardandpoors.com and click on Regulatory Affairs and Disclaimers. Copyright © 2015
Standard & Poor’s Financial Services LLC, a part of McGraw-Hill Financial. All rights reserved.
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April 2015

INDUSTRY SURVEYS

Technology Hardware, Storage & Peripherals

SURVEYS Technology Hardware, Storage & Peripherals TOPICS COVERED BY INDUSTRY SURVEYS Aerospace & Defense

TOPICS COVERED BY INDUSTRY SURVEYS

Aerospace & Defense Airlines Automobiles Banks Beverages Biotechnology Capital Markets Chemicals Commercial Services & Supplies Communications Equipment Consumer Finance Electric Utilities Electrical Equipment Energy Equipment & Services Food & Staples Retailing Food Products Gas Utilities Health Care Equipment & Supplies Health Care Providers & Services Hotels, Restaurants & Leisure Household Durables

Household Products Insurance Internet Software & Services Information Technology Services Life Sciences Tools & Services Machinery Media Metals & Mining Multiline Retail Oil, Gas & Consumable Fuels Paper & Forest Products Pharmaceuticals Real Estate Investment Trusts Road & Rail Semiconductors & Equipment Software Specialty Retail Technology Hardware Telecommunications Textiles, Apparel & Luxury Goods Thrifts & Mortgage Finance

CONTRIBUTORS

GARY ALBANESE Senior Director, Global Markets Intelligence

RICHARD PETERSON Director, Global Markets Intelligence

TODD ROSENBLUTH Director, ETF Research

BETH PISKORA

Content Director

Director, ETF Research BETH PISKORA Content Director All of the views expressed in these research reports

All of the views expressed in these research reports accurately reflect the research analyst’s personal views regard- ing any and all of the subject securitiesor issuers. No part of the analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. For important regula- tory information, go to www.standardandpoors.com and click on Regulatory Affairs and Disclaimers. Copyright © 2015 Standard & Poor’s Financial Services LLC, a part of McGraw-Hill Financial. All rights reserved.

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April 2015

INDUSTRY SURVEYS Technology Hardware, Storage & Peripherals

To our valued Industry Survey clients:

S&P Capital IQ is pleased to inform you of many insightful enhancements and modifications to our product offering. First of all, you will notice an entirely new Performance section in addition to our traditional coverage of key industry statistics and trends that are now contained in the Industry Profile portion of our publication. The new and innovative Performance section is predominantly driven and empowered by S&P Capital IQ company fundamental data that is aggregated and market capitalization index weighted according to Global Industry Classification Standards (GICS) methodology. By taking this customized proprietary approach to data collection and analysis we are now able to provide our clients with a unique, contemporary and highly relevant perspective on the financial performance of entire sectors and related specific industries representing groupings of multinational corporations included in the S&P 1500 index, according to the most current financial reporting metrics available to the marketplace.

Appropriately, the specific industry titles covered by our Industry Survey report service offering have now also been aligned to the widely recognized and accepted GICS format. This new approach provides a direct connection between the data and insights provided in our upgraded reports, and many stock market indices and index-based securities, such as Exchange Traded Funds (ETFs). We have also added a new Sector Overview portion at the beginning of each report that is designed to summarize the fundamental sector-level backdrop in which the specific industry in-focus operates and competes on a peer-group basis. Coverage of capital market activity (M&A and, IPOs), inclusive of data, trend and deal analysis, has also been significantly enhanced as part of our upgraded service offering.

The sector and industry level data, observations and analysis are presented in a deliberate ordered fashion where the cumulative insights flow in a logical and decision-supportive progression, specifically:

a logical and decision-supportive progression, specifically: All of the views expressed in these research reports

All of the views expressed in these research reports accurately reflect the research analyst’s personal views regard- ing any and all of the subject securitiesor issuers. No part of the analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. For important regula- tory information, go to www.standardandpoors.com and click on Regulatory Affairs and Disclaimers. Copyright © 2015 Standard & Poor’s Financial Services LLC, a part of McGraw-Hill Financial. All rights reserved.

Copyright © 2015 Standard & Poor’s Financial Services LLC, a part of McGraw-Hill Financial. All rights
Copyright © 2015 Standard & Poor’s Financial Services LLC, a part of McGraw-Hill Financial. All rights

EXECUTIVE SUMMARY

A steadily improving, but decelerating growth, smartphone landscape is likely to continue to

support higher revenue for the technology hardware, storage & peripherals industry. Consumers in Asia and emerging markets will see rising penetration for smartphones, while both Apple and Samsung will remain the key innovators of next generation devices. S&P Capital IQ forecasts stabilization in the PC space but expects growth to remain elusive, while tablets are more inclined to

experience a low-to-mid single-digit growth environment given the maturation of the market. S&P Capital IQ predicts that the wearables space will be a major growth engine for the industry in the coming years.

While pricing pressure is likely to remain across the industry, constraining gross margin

expansion, S&P Capital IQ anticipates operating margin expansion as manufacturers benefit from higher volume and tight cost controls. Competition is likely to be greatest at the low end of the smartphone, PC and tablet chain, while the high-end should be less exposed to price sensitivity, as these consumers are more likely to spend for next generation and better performing devices.

Companies in the hardware industry appear more inclined to increase debt levels given their

strong balance sheets and low interest rate environment, based on our leverage analysis. In addition, robust cash positions and healthy free flow generation should result in greater shareholder return via share repurchases and dividend increases.

Participants in the technology hardware, storage & peripherals industry will need to contend

with decelerating growth across a number of key end-markets and intense competitive pressures. Despite this, growth should persist driven by new innovative product launches from Apple, among others, as well as from opportunities to expand into new emerging categories like wearables.

SECTOR OVERVIEW

The information technology sector makes up 19.9% of the S&P 500 and 19.7% of the S&P 1500, as of March 9, 2015. There are three main industry groups in this sector: software & services (i.e., application, system and Internet software), technology hardware & equipment (i.e. networking and communication equipment, computer hardware, storage and peripherals), and semiconductors & semiconductor equipment. These industry groups are composed of 16 sub-industries.

From a stock price perspective, the 18.2% increase in 2014 for the information technology sector outperformed the 11.4% rise in the S&P 500, while the 27.4% gain for the S&P 500 technology hardware & equipment industry group exceeded both. Meanwhile, the information technology sector is expected to rise 17.3% for the fourth quarter of 2014, above the 7.8% average for the S&P 500, according to profit projections as of March 9, 2015.

From a profit perspective, as of March 9, 2015, the information technology sector is expected to rise 17.3% for the fourth quarter of 2014, above the 7.8% average for the S&P 500. For fiscal year 2015, the information technology sector is poised to generate a profit growth of 6.6%, also above the 1.1% average for the S&P 500. Excluding the impact of energy stocks, S&P 500 earnings are expected to increase 7.7% in 2015, which is above the projection for the information technology sector.

The software & services industry is the largest of the three main industry groups in
The software & services industry is the largest of the three main industry groups in terms of
enterprise value (debt plus equity market capital less cash). The sector accounts for 44% of the
information technology sector, according to projected fourth quarter 2014 figures.
INFORMATION TECHNOLOGY BREAKDOWN BY MARKET CAP
Semiconductors &
Semiconductor
Equipment
12.3%
Technology
Hardware &
Equipment
32.7%
Software & Services
55.0%
Source: S&P Capital IQ.

In addition, the software & services industry possesses the highest net income margin in the sector since 2009. The software & services industry is projected to have a 36.2% net income margin for

the fourth quarter of 2014 (as of March 5, 2015), which tops the projected 34.0% for the technology hardware & equipment and the 20.1% for the semiconductor & semiconductor equipment industry. All industries under the information technology sector have seen improving net income margins since 2009, although semiconductor & semiconductor equipment have exhibited higher volatility.

INFORMATION TECHNOLOGY SECTOR NET INCOME MARGIN BY INDUSTRY GROUP* Percent 40 35 30 25 20
INFORMATION TECHNOLOGY SECTOR NET INCOME MARGIN BY INDUSTRY GROUP*
Percent
40
35
30
25
20
15
10
5
0
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2009
2010
2011
2012
2013
2014
S&P Composite 1500 Software & Services Index
S&P Composite 1500 Technology Hardware & Equipment Index
S&P Composite 1500 Semiconductors & Semiconductor Equipment Index
*Values as of March 5, 2015.
Source: S&P Capital IQ.
The environment for IT spending remains robust. The accompanying chart shows that IT
spending quickly recovered after the decline in 2009 and has grown since. Spending is projected to
grow further in 2014 and 2015.
WORLDWIDE IT SPENDING (aggregate data, in $ billions) 4000 3500 3000 2500 2000 1500 1000
WORLDWIDE IT SPENDING
(aggregate data, in $ billions)
4000
3500
3000
2500
2000
1500
1000
500
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Source: Statista.

Overall, with the expectations for continued IT spending and rising margins, the environment appears to be encouraging for the information technology sector, which may help to explain its share performance in 2014 and its earnings growth expectations in 2015.

Sector Revenue

Revenue and Revenue Growth

Revenue is the amount of money that a firm, industry or sector generates through product or

service sales to its customers. It is important because it reflects the level of demand for its products and services. Demand may shift due to seasonality, economic conditions or a structural change in

the market for certain products and service.

Heightened demand could also allow for pricing power, which should help drive revenue

growth, as well as additional sale volumes or new contracts. Upon strengthened demand, there must also be adequate supplies or available employee capacity to meet this demand.

Revenue growth is important because it can illustrate the demand and supply shifts.

As shown in the accompanying revenue chart, revenue reflects the average revenue per share

within the information technology sector as a component of the S&P 1500 constituent universe. The
within the information technology sector as a component of the S&P 1500 constituent universe.
The average is market-weighted, which means that larger companies are more influential than
smaller ones.
REVENUE AND REVENUE GROWTH
(aggregate value weighted per share, $)
Percent
300
20
275
250
15
225
200
10
175
150
5
125
100
0
75
50
(5)
25
0
(10)
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4 Q1
Q2 Q3
Q4
Q1
Q2
Q3
Q4 Q1
Q2 Q3
Q4
Q1
Q2
Q3 Q4
2009
2010
2011
2012
2013
2014
Revenue per Share - Information Technology Sector of S&P 1500 (left scale)
Historical Average Revenue (left scale)
Revenue per Share Growth (right scale)
Source: S&P Capital IQ.

Projections as of March 6, 2015 show that in the fourth quarter of 2014, last twelve months

(LTM) revenue growth was 7.3%—the highest increase over the two years. The information technology’s projected revenue growth rate for the four quarter of 2014 is the second highest among other sectors, lagging only health care’s 9.0%.

The information technology sector’s highest revenue growth was recorded during the first

quarter of 2011, when its revenue increased 17.7%.

Average LTM revenue per share was projected to be $245.5 per share in the fourth quarter of

2014, up significantly from its trough level of $162.9 per share in the fourth quarter of 2009, which incorporated a portion of the 2008–2009 recession in the US.

As with other financial metrics, the sector’s revenue has improved significantly since the 2008–

2009 recession.

Sector Profit Margins

Gross Margin

One of the primary financial metrics that we focus upon is gross margin. In the case of the

information technology sector, it shows how much the sector is spending in terms of its direct production and manufacturing costs as a function of the revenue generated. As productivity improves,

economies of scale are realized, and where pricing power is available, gross margins can increase.

The information technology sector’s gross margin since the first quarter of 2009 increased 400

basis points (bps) to 43.3% through the last completed quarter (third quarter of 2014) and is likely to expand to 43.5% in the fourth quarter of 2014, according the S&P Capital IQ estimates. The projected fourth quarter 2014 gross margin would be the highest for the sector since 2009.

Comparatively, the gross margin of the S&P 1500 is projected to reach 37.1% for the fourth

quarter of 2014, which is 640 bps below the information technology sector’s projected gross margin,
quarter of 2014, which is 640 bps below the information technology sector’s projected gross
margin, and 470 bps below the sector average since 2009.
GROSS MARGIN
Percent
45
43
41
39
37
35
33
Q1
Q2 Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3 Q4
2009
2010
2011
2012 2013
2014
S&P 1500
Information Technology Sector of S&P 1500
Historical Average (Information Technology)
Source: S&P Capital IQ.

A potential positive catalyst for the sector’s gross margins could be the increased business

spending for information technology. About 43% of the IT executives who participated in

Computerworld’s annual IT forecast (released November 4, 2014) expect to have higher IT budgets in 2015. If realized, the increased spending should not only expand revenue, but also support sector pricing, which could either maintain gross margins or continue the multi-year margin expansion trend.

Overall, the environment appears positive for the sector’s gross margins.

EBIT Margin

Another important financial metric is the earnings before interest and income taxes (EBIT) or

operating margin. The primary difference between gross margin and EBIT margin is that the EBIT margin incorporates the effects from selling, general and administrative expenses (SG&A), depreciation and amortization (D&A) and other operating expenses. While the gross margin looks at the costs of producing goods or services, the EBIT margin incorporates the costs of operating as a business and the cost of selling or marketing the product or service. Thus, the EBIT margin is a

more comprehensive measure of a company’s costs. EBIT MARGIN Percent 20 18 16 14 12
more comprehensive measure of a company’s costs.
EBIT MARGIN
Percent
20
18
16
14
12
10
8
Q1
Q2 Q3
Q4 Q1
Q2
Q3 Q4
Q1
Q2 Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2 Q3
Q4
2009
2010 2011
2012 2013
2014
S&P 1500
Information Technology Sector of S&P 1500
Historical Average (Information Technology)
Source: S&P Capital IQ.

The information technology sector’s EBIT margin trend is similar to the gross margin trend.

For the fourth quarter of 2014, EBIT margin was projected to be 18.6%, exceeding the 17.0% historical average since 2009 and outperforming the projected 12.5% margin for the S&P 1500 in the fourth quarter of 2014.

Compared with the gross margin, the EBIT margin remained slightly below the 18.7% peak in

the second quarter of 2012 through the fourth quarter of 2012. Still, the trend has been in a positive direction for over a year, and this should push the EBIT margin toward new highs if the trend continues.

Net Income Margin

Net income margin, like gross margin and EBIT margin, is a measure of profitability, but it also

considers the impact of taxation.

The net income margin of the information technology has increased considerably since the third

quarter of 2009, when the margin was 7.8%. With an average net income margin of
quarter of 2009, when the margin was 7.8%. With an average net income margin of 10.5% since
2009, the sector’s net income margin has stayed above this level since the fourth quarter of 2010.
NET INCOME MARGIN
Percent
14
12
10
8
6
4
Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3 Q4
2009
2010
2011
2012 2013
2014
S&P 1500
Information Technology Sector of S&P 1500
Historical Average (Information Technology)
Source: S&P Capital IQ.

The sector’s net income margin in the third quarter of 2014 was 11.3% and is expected to rise

modestly to 11.5% in the fourth quarter of 2014. The projected net income margin fourth quarter 2014 is 340 bps higher than the projected 8.1% net income margin for the S&P 1500.

The higher net income margins helped provide the sector with earnings growth.

Sector Earnings

Net Income per Share and Net Income per Share Growth

Net income per share growth is important because it can be a vital factor in the valuation

multiple applied to a company, industry or sector. Higher net income growth is usually rewarded

with higher valuation multiples.

Since 2009, net income per share growth has been volatile, growing materially in 2010 after the

2008–2009 recession, and then contracting in 2013.

For the completed third quarter of 2014, the net income per share was $27.04, which was a

new high since 2009. For the fourth quarter of 2014, the net income per share is expected to reach a new high of $28.17 per share. Since 2009, the average net income per share has been $22.08.

While the growth has been somewhat volatile, 2014 was projected to end with a net income

growth rate of 11.2%.

Compared with the other sectors, excluding telecom due to a change in the sector its index

constituents, the information technology’s fourth quarter growth rate of 11.2% is the fourth highest, lagging only industrials (14.6%), materials (13.8%), and financials (12.6%).

NET INCOME PER SHARE & NET INCOME PER SHARE GROWTH (aggregate value weighted per share,
NET INCOME PER SHARE & NET INCOME PER SHARE GROWTH
(aggregate value weighted per share, $)
Percent
30
60
27
50
24
40
21
18
30
15
20
12
9
10
6
0
3
0
(10)
Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2 Q3
Q4 Q1
Q2 Q3
Q4 Q1
Q2 Q3
Q4
2009
2010
2011
2012
2013
2014
Net Income per Share - Information Technology Sector of S&P 1500
Historical Average Net Income
Net Income Growth
Source: S&P Capital IQ.

Historical Earnings Growth for the Information Technology Sector Versus the S&P 500 From an earnings perspective, the information technology sector performed relatively well in 2014 compared with the S&P 500. Over the last five years, the sector’s earnings on a compound annual growth rate (CAGR) basis, outperformed, rising 9.6% per year compared with S&P 500’s 8.4%. In the 10 year-period ending in 2014, the sector’s 11.7% CAGR outperformed the S&P 500’s 5.0%. Over the 10-year period, the information technology sector was the leading sector, followed by health care (8.9%) and the consumer discretionary sector (8.7%).

From a year-over-year perspective that illustrates the earnings volatility over the past decade, including the 2008–2009 recession, the information technology sector mostly exceeded the growth of the S&P 500. Although the sector’s growth estimate recently lagged that of the S&P 500, it will likely exceed again in the fourth quarter of 2014.

Additionally, the information technology sector is projected (as of March 9) to rise 6.6% in FY15 compared with the 1.1% expected growth of the S&P 500. However, if the adverse impact of the energy sector is not included, the S&P 500 is likely to grow 7.7%, which would be above the information technology sector.

COMPOUND ANNUAL GROWTH RATES S&P 500 TOTAL AND BY SECTOR* (values are in percent)

SECTOR

5-YEAR

10-YEAR

Consumer Discretionary Sector Index Consumer Staples Sector Index Energy Sector Index Financials Sector Index Health Care Sector Index Industrials Sector Index Information Technology Sector Index Materials Sector Index Telecommunication Services Sector Index Utilities Sector Index

11.73

8.69

5.85

7.28

5.24

2.56

8.65

(4.32)

7.65

8.91

11.40

6.22

9.59

11.67

6.58

3.83

10.81

3.15

1.12

3.22

S&P 500

8.41

5.02

*Includes projections for 2014 fourth quarter earnings.

 

Values as of March 6, 2015. Source: S&P Capital IQ.

ANNUAL EARNINGS GROWTH—INFORMATION TECHNOLOGY vs S&P 500 Percent 50 40 30 20 10 0 (10)
ANNUAL EARNINGS GROWTH—INFORMATION TECHNOLOGY vs S&P 500
Percent
50
40
30
20
10
0
(10)
(20)
(30)
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015*
S&P 500
Information Technology Sector Index
*Projected, values as of March 9, 2015.
Source: S&P Capital IQ.
Sector Balance Sheet

Cash

Cash and short-term investments represent the amount of liquid cash or securities that a company

can use to pay either immediate operating needs or to help finance business expansion opportunities.

Since 2009, the information technology sector’s cash and short-term securities has risen from

under $50 per share to over $90 per share.

The sector’s $91.13 per share of cash projected for the fourth quarter 2014 more than offsets

the $66.55 per share of total debt for the sector (also expected for the fourth quarter 2014), which places the sector in a strong credit position because it has enough cash and short-term securities to pay off its entire debt.

CASH AND SHORT-TERM INVESTMENTS (aggregate per share, $, except for growth) Percent 100 30 90
CASH AND SHORT-TERM INVESTMENTS
(aggregate per share, $, except for growth)
Percent
100
30
90
25
80
70
20
60
50
15
40
10
30
20
5
10
0
0
Q1
Q2
Q3 Q4 Q1
Q2
Q3 Q4 Q1
Q2
Q3 Q4 Q1
Q2 Q3
Q4 Q1
Q2
Q3 Q4 Q1
Q2 Q3 Q4
2009
2010
2011
2012
2013
2014
Cash per Share - Information Technology Sector of S&P 1500
Historical Average Cash
Cash Growth
Source: S&P Capital IQ.

Inventory Days Inventory days illustrate how many days it takes for a company, industry or sector to turn its inventory into sales. It measures the efficiency of a sector in using part of its working capital. Too little inventory can lead to potential missed sales, while too much inventory may lead to write- downs or product discounts.

AVERAGE INVENTORY DAYS Days 48 46 44 42 40 38 36 34 32 30 Q1
AVERAGE INVENTORY DAYS
Days
48
46
44
42
40
38
36
34
32
30
Q1
Q2
Q3
Q4 Q1
Q2 Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2 Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2 Q3
Q4
2009
2010
2011
2012
2013
2014
S&P 1500
Information Technology Sector of S&P 1500
Historical Average (Information Technology)
Source: S&P Capital IQ.
 From an operational perspective, the sector’s inventory days are not a significant concern, since the
metric remained stable over the past few years. In addition, the 34.1 inventory days projected for the

fourth quarter of 2014 for the information technology sector, which are significantly lower compared with the S&P 1500’s 45.3 days, should allow for more agility from a working capital perspective.

Since 2009, the average number of inventory days for the information technology sector was 33.2.

In summary, we do not view the sector’s recent inventory days ratio as problematic, but under control.

Debt-To-Capitalization

Debt-to-capitalization is a credit-focused metric that measures the amount of debt as a

percentage of the capital structure. A lower ratio indicates lower credit risk whereas a higher ratio

indicates a higher credit risk. A sector’s credit strength may depend upon the amount of debt in relation to other balance sheet items, such as equity or capital, or against the company’s cash flow generation. Investors should monitor this metric because weaker credit could increase borrowing costs, which could hurt profits.

On the balance sheet, debt as a percent of capitalization rose from its trough of 21.1% during

the first quarter of 2014 to what is projected to be its highest level (27.2%)
the first quarter of 2014 to what is projected to be its highest level (27.2%) for the fourth quarter
of 2014. For the third quarter of 2014, the debt-to-capitalization for the sector was 26.8%.
DEBT-TO-CAPITALIZATION
Percent
70
60
50
40
30
20
10
0
Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2 Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2 Q3
Q4
2009
2010
2011
2012
2013
2014
S&P 1500
Information Technology Sector of S&P 1500
Historical Average (Information Technology)
Source: S&P Capital IQ.

While the sector’s debt-to-capitalization ratio rose over the past few years, it is still considerably

lower than the S&P 1500’s projected debt-to-capitalization of 50.2%. The information technology sector has the lowest debt-to-capitalization ratio among all the other sectors, hence, although its debt-to-capitalization ratio is higher than a few years ago, we do not view this as a material increase in credit risk due to the sector’s conservative debt usage, as well as its significant cash holdings.

Interest Coverage

Interest coverage is typically viewed in conjunction with a leverage metric, such as debt-to-

capitalization, because interest coverage measures the ability of a company, industry or sector to service its debt through regular interest payments. A higher interest ratio indicates a greater ability to

pay regular debt obligations. Although interest coverage is computed using income statement items, this metric will be discussed in this section due to its proximity to the debt-to-capitalization ratio.

Since the sector has a relatively low debt-to-capitalization, it also has a higher interest coverage

ratio. For the fourth quarter of 2014, the information technology sector is expected to have
ratio. For the fourth quarter of 2014, the information technology sector is expected to have 31.8x
interest coverage, well above the 12.3x coverage for the S&P 1500.
INTEREST COVERAGE
Multiple
45
40
35
30
25
20
15
10
5
Q1
Q2 Q3
Q4 Q1
Q2 Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3 Q4
2009 2010
2011
2012 2013
2014
S&P 1500
Information Technology Sector of S&P 1500
Historical Average (Information Technology)
Source: S&P Capital IQ.

Overall, these financial metrics are positive for the information technology sector. With these solid metrics, the information technology sector performed well from an investing perspective. Nevertheless, with the ramp up in share prices, the information technology sector is valued at a high multiple relative to its recent history.

Sector Valuation

Forward P/E

Forward price-to-earnings ratio (P/E) is one of the most popular valuation metrics, because it

measures an investment based on a forward-looking perspective rather than on past performance.

From a valuation perspective, the information technology sector has been valued at a

significant premium to its 14.4x average since 2009. For the fourth quarter of 2014, the sector is

projected to have a forward P/E of 16.3x, which would be a discount to the projected 17.0x forward P/E multiple of the S&P 1500.

The projected forward P/E for the fourth quarter of 2014 would be its highest level since the

first quarter of 2010. The sector’s trough level was 11.4x, recorded in the third quarter of 2011.

FORWARD PRICE-TO-EARNINGS RATIO Multiple 18 17 16 15 14 13 12 11 Q1 Q2 Q3
FORWARD PRICE-TO-EARNINGS RATIO
Multiple
18
17
16
15
14
13
12
11
Q1
Q2
Q3 Q4
Q1
Q2 Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2 Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2 Q3
Q4
2009 2010
2011
2012 2013
2014
S&P 1500
Information Technology Sector of S&P 1500
Historical Average (Information Technology)
Source: S&P Capital IQ.

Enterprise Value-To-Forward EBITDA Ratio Another popular valuation metric, and one that is often used in acquisition valuation, is Enterprise Value (EV) to forward EBITDA. This ratio incorporates debt and equity while discounting cash, as a function of cash flow (not earnings), and thus adds back non-cash expenses during the period, such as depreciation.

ENTERPRISE VALUE-TO-FORWARD EBITDA RATIO Multiple 10.5 10.0 9.5 9.0 8.5 8.0 7.5 7.0 6.5 6.0
ENTERPRISE VALUE-TO-FORWARD EBITDA RATIO
Multiple
10.5
10.0
9.5
9.0
8.5
8.0
7.5
7.0
6.5
6.0
Q1
Q2 Q3
Q4 Q1
Q2 Q3
Q4 Q1
Q2
Q3 Q4
Q1
Q2
Q3 Q4
Q1
Q2
Q3
Q4 Q1
Q2 Q3
Q4
2009
2010
2011
2012
2013
2014
S&P 1500
Information Technology Sector of S&P 1500
Historical Average (Information Technology)
Source: S&P Capital IQ.

Since 2011, the EV to forward EBITDA ratio has expanded significantly, moving from a low of

6.7x in the third quarter of 2011 to its projected peak of 10.1x in the fourth quarter of 2014. In the third quarter of 2014, the multiple stood at 9.7x.

In comparison, the EV to forward EBITDA for the S&P 1500 was 9.1x in the third quarter of

2014, and is projected to be 9.9x for the fourth quarter of 2014.

From 2010 to 2013, the sector’s EV to forward EBITDA valued the sector at a discount to the S&P

1500. The current premium, which was in place for the entire 2014, may be a concern to investors.

Among the sectors, information technology had the fifth highest EV to EBITDA multiple in the

third quarter of 2014. For comparison, the sectors with the highest EV to forward EBITDA multiples were consumer staples (11.4x), health care (10.9x), and industrials (10.8x), while the sectors with the

lowest forward multiple, excluding financials, were telecom and energy, both at 5.8x.

Overall, the information technology sector appears to be strong, although the run up in share prices created a high valuation. These elevated valuations could expand even further, but the higher the multiples, the greater the likelihood of either enhanced volatility or underperformance.

ETF Market Flows and Investing Landscape

Investors have increasingly been using exchange-traded funds (ETFs) in a tactical manner to

gain exposure to industries, while benefiting from the ability to make intra-day trades not to

mention ETF’s low-cost, passive nature. In 2014, $41 billion was added to all sector ETFs. In December, investors put $16.4 billion of fresh money into US sector ETFs, with approximately $460 million in information technology ETFs. In the first two months of 2015, investors pulled $2.3 billion out of technology ETFs.

ETFS WITH MEANINGFUL TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS EXPOSURE

 

ASSETS UNDER

NET

MANAGEMENT EXPENSE

NAME

(in millions)

RATIO

PowerShares QQQ Trust Technology Select Sector SPDR Vanguard Information Technology iShares US Technology SPDR Morgan Stanley Technology First Trust NASDAQ-100 Technology Fidelity MSCI Information Technology

40,792

0.20

13,223

0.15

7,369

0.12

3,135

0.45

381

0.35

367

0.60

324

0.12

Source: S&P Capital IQ ETF Report March 5, 2015.

There is no dedicated technology hardware ETFs. However, the industry is the largest in many

diversified technology oriented ETFs. The three largest, market-cap weighted products, PowerShares QQQ Trust (QQQ), Technology Select Sector SPDR (XLK), and Vanguard Information Technology Index (VGT), all have 16% or more of assets.

In 2014, QQQ and XLK experienced outflows, while VGT gathered approximately $1.5 billion

of fresh money. These trends continued in the first two months of 2015.

Meanwhile, Fidelity MSCI Information Technology (FTEC), which was launched in October 2013, has grown to more than $300 million.

SECTOR ETF INFLOWS (total inflows for the month and for the year ended, in millions)

SECTOR

2014 1QTR 2015

Consumer Discretionary Consumer Staples Energy Financial Services Health Care Industrials Information Technology Materials REITs Telecommunications Services Utilities

4,212

3,019

2,104

(1,654)

11,428

4,752

3,685

(5,018)

6,427

5,966

227

(1,701)

2,440

(1,836)

(1,871)

(46)

7,429

1,094

478

132

4,501

(2,222)

Source: BlackRock.

INDUSTRY OVERVIEW

The technology hardware, storage & peripherals industry is benefiting from secular trends within the mobility space, specifically greater adoption of smartphone devices, which we expect to persist in the coming years. The PC market appears to be stabilizing following a notable decline in 2012 and 2013, but growth prospects remain bleak. Apple will be the key constituent to watch within the group, comprising more than three-fourth of the industry group.

Industry Revenues

Revenue within the technology hardware, storage & peripherals space trended upwards from 2009

to the end of 2011. This was largely due to a resurgence of growth from a macroeconomic perspective.

However, quarterly sales growth decelerated in 2012 and went negative for a brief period in

2013. We attribute this to secular headwinds within the PC space given the emergence of
2013. We attribute this to secular headwinds within the PC space given the emergence of tablets,
which had a trickle-down impact of hard disk drive manufacturers and other key vendors that sell
directly to the PC supply chain.
S&P 1500 TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS CONSTITUENTS
SanDisk
Seagate Technology
1.8%
Others*
2.0%
3.0%
Western Digital
2.4%
EMC
6.0%
Hewlett-Packard
6.7%
Apple
78.2%
*Others: NetApp, NCR, 3D Systems, Lexmark International, Diebold, Electronics for Imaging, Super Micro
Computer, Qlogic.
Source: S&P Capital IQ.

Growth began to accelerate in late 2013 following the launch of the iPhone 5s in September

2013 and stabilization in the PC market. Apple’s entry into the large screen phone space (iPhone 6 and iPhone 6 Plus) in late 2014 added to the momentum.

The mobile phone market is by far the most important category, in terms or revenue and

shipments, for the technology hardware supply chain. In terms of operating systems, Google’s

Android and Apple’s iOS platforms accounted for over 90% of the total market share in 2014,

and we see little that can change the dominance of these two companies in the
and we see little that can change the dominance of these two companies in the category over the
next several years.
TOTAL REVENUES
(aggregate value weighted per share, $)
Percent
200
30
180
25
160
20
140
15
120
10
100
5
80
0
60
(5)
40
20
(10)
0
(15)
Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2 Q3
Q4 Q1
Q2
Q3 Q4
Q1
Q2
Q3
Q4 Q1
Q2
Q3 Q4
2009
2010
2011
2012
2013
2014
Revenue per Share - Technology Hardware, Storage & Peripherals Industry of S&P 1500 (left scale)
Revenue Growth (right scale)
Source: S&P Capital IQ.
 In recent years, the industry has benefited from the global adoption of smartphones, which
 In recent years, the industry has benefited from the global adoption of smartphones, which
contains significantly more content than traditional non-smartphones. Smartphone penetration
reached 66% of total mobile phones in 2014, as compared with 55% in 2013 and less than 20%
in 2010.
WORLDWIDE MOBILE PHONE SHIPMENTS
Millions
Percent
2,500
90
80
2,000
70
60
1,500
50
40
1,000
30
20
500
10
0
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
Non-Smartphones (left scale)
Smartphones (left scale)
Penetration Rate (right scale)
Source: IDC.

Smartphones will likely comprise over 80% of total mobile phone shipments by 2018, with

Asia and emerging markets being the biggest contributors given the maturation of smartphones within the US and European regions.

Global smartphone shipments grew 29% in 2014, exceeding 1.3 billion units. This was a

deceleration from the increase of 39% in 2013 and 47% in 2012. While we still anticipate healthy growth between 10% and 15% for both 2015 and 2016, the lower growth rates reflect a much

more mature and penetrated industry. GLOBAL SMARTPHONE SHIPMENTS Millions Percent 2,000 80 1,800 70 1,600
more mature and penetrated industry.
GLOBAL SMARTPHONE SHIPMENTS
Millions
Percent
2,000
80
1,800
70
1,600
60
1,400
50
1,200
1,000
40
800
30
600
20
400
10
200
0
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
Shipments (left scale)
Growth Rate (right scale)
Source: IDC.

Samsung and Apple remain the clear market share leaders on the hardware side, but Apple

appears to have all the momentum for the time being. In September 2014, Apple rolled out its iPhone 6 and iPhone 6 Plus devices, which catapulted the company into the large screen smartphone category. Given market share data figures, consumers have been migrating to larger screen devices over the last two years.

Samsung, on the other hand, witnessed significant share loss in 2014, hurt not only by Apple’s

success on the high-end, but also by emerging competitors like Xiaomi taking market share at the low end of the market. Nonetheless, the greater availability of lower-priced devices should continue to drive smartphone penetration in Asia and other emerging regions for years to come. We expect Asia to represent over half of total smartphone shipments in 2015, making it the most important geographic region for smartphones.

Apple’s iPhone is by far the single most important product offering for the technology hardware,

storage & peripherals industry in terms of revenue and earnings potential. Not only is the iPhone success important for Apple, it has a trickle-down effect on the entire technology space. In September 2014, Apple revealed both a 4.7 inch (iPhone 6) and 5.5 inch (iPhone 6 Plus) display phone.

APPLE IPHONE REVENUE $, Billions Millions 60 80 70 50 60 40 50 30 40
APPLE IPHONE REVENUE
$, Billions
Millions
60
80
70
50
60
40
50
30
40
30
20
20
10
10
0
0
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2009 2010
2011
2012
2013
2014
Units Sold (right scale)
Sales (left scale)
Source: S&P Capital IQ.
 Apple’s move to large screen iPhones helped the company reach its highest revenue and

shipment level ever by a wide margin. It also helped the company recapture share lost in prior

years. During the completed December quarter in 2014, iPhone sales accounted for 69% of Apple’s revenue versus 56% in the prior year.

While selling prices for smartphones have come down, Apple has been able to sustain it prices.

However, we note the iPhone 6 and the 6 Plus version have different memory storage than prior models (16/64/128 GB compared with 16/32/64 GB in prior releases). The iPhone 6 is priced at $199, $299, and $399 based on the memory selection while the larger iPhone 6 Plus is currently selling for $299, $399, and $499, respectively.

The PC industry witnessed a steep correction that began in the second half of 2011 and lasted

through most of 2013, before beginning to stabilize last year. In 2014, the PC space benefited from the expiration of Windows XP support (April 2014), which resulted in the commercial space upgrading PCs and migrating to Windows 7. The pull-ins that occurred last year as a result of this

is likely to have an adverse effect on 2015 shipments, and we see a mid-single-digit shipment declines for this year.

While we anticipate a mixed picture in the PC market going forward, shipments are likely to

remain fairly steady in the coming years (an annualized growth of flat to down 3%). Overall, the

cooling of the tablet market, new innovative product offerings on the horizon, and an aging PC landscape should all support some corporate spending for PCs. However, the launch of Windows 10 this summer will likely have a minimal impact on PC sales.

While the commercial space has clearly supported the PC space, we are finally beginning to see

some signs of life from the consumer arena. New portable devices will further assist with stabilizing the consumer end of the PC market, in our view. In addition, we expect the US to outperform in 2015 relative to other regions, such as Europe and Japan.

WORLDWIDE PC SHIPMENTS, REVENUES, AND GROWTH RATES (shipments in millions, revenues in $, billions) Percent
WORLDWIDE PC SHIPMENTS, REVENUES, AND GROWTH RATES
(shipments in millions, revenues in $, billions)
Percent
400
15
350
10
300
5
250
0
200
(5)
150
(10)
100
(15)
2010
2011
2012
2013
2014
2015
2016
2017
2018
Shipments (left scale)
Revenue (left scale)
Revenue Growth (right scale)
Source: IDC.
 The tablet market still represents a relatively new category, as it emerged in 2010 after the
launch of the iPad. Since then, the market has seen unprecedented growth before grinding to a
halt in 2014. Consensus expectations heading into 2014 were that tablets would grow 50%;
however, the space witnessed growth of less than 5%.
TABLET SHIPMENTS Millions Percent 400 350 350 300 300 250 250 200 200 150 150
TABLET SHIPMENTS
Millions
Percent
400
350
350
300
300
250
250
200
200
150
150
100
100
50
50
0
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
Shipments (left scale)
Growth Rate (right scale)
Source: IDC.
 The stabilization in the PC market and consumer preference toward larger screen “Phablet”
devices is having a negative impact on tablet sales, in our view. A “base” case scenario for tablets
is now one where shipments are likely to rise at an annualized pace between 5% and 10% over

the next three years. However, we note that tablets witnessed their first ever year-over-year decline in the fourth quarter of 2014; this trend is clearly pointing to the downside at the moment.

Apple has been the clear leader with its iPad Air and mini devices, but sales for the company in

this category have also been challenged. While new product refreshes are likely for Apple in the coming quarters, we question whether this will be enough to accelerate growth in the tablet arena.

We note that iPad sales declined about 15% in calendar year 2014. APPLE IPAD AND
We note that iPad sales declined about 15% in calendar year 2014.
APPLE IPAD AND MAC SHIPMENTS
(in million units)
6.0
30
5.5
25
5.0
20
4.5
4.0
15
3.5
10
3.0
5
2.5
2.0
0
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2009 2010
2011
2012
2013
2014
Mac (left scale)
iPad (right scale)
Source: S&P Capital IQ.

The iPad is the market share leader within the tablet space, but has witnessed year-over-year

declines for several quarters now. In the fourth quarter of 2014, iPad sales declined more than 20% from the prior-year period. This softness partly reflects the introduction of the larger iPhones screens.

While traditional Window-based PCs account for about 90% of the total market, Apple’s Mac

products have outperformed the total space. Given the Mac’s higher selling prices and margins, making it Apple’s most profitable businesses, it remains an important business for the company.

The declines being seen for iPad’s largely reflects the challenges in the overall tablet space and

the recent stabilization in the PC market. Going forward, new product releases should help improve iPad shipments, but growth projections are likely to be much more tempered than that witnessed over the last several years.

The next major growth category for the hardware space is likely to be the emergence of

wearable devices, and we see 2015 being a major inflection point for the category. The wearables space is likely to more than double and could potentially triple this year, albeit from low levels (about 20 million units sold in 2014).

While health and fitness trackers dominated the wearables market in the past, smart wearables

(i.e., the Apple watch) are likely to drive the segment to relevance. We think the Apple watch will help drive consumer interest into the category and will also lead to other device manufacturers following suit with similar launches.

While wrist products (watches, bands, bracelets, and others) will likely garner most of the

attention and revenue early on, the potential for wearables is never-ending. We also expect eyewear
attention and revenue early on, the potential for wearables is never-ending. We also expect
eyewear and clothing to be important contributors over time.
WORDLWIDE WEARABLES SHIPMENTS
Millions
Percent
120
300
100
250
80
200
60
150
40
100
20
50
0
0
2013
2014
2015
2016
2017
2018
Shipments (left scale)
Growth Rate (right scale)
Source: IDC.

The storage arena, led by market share leader EMC Corp., has had its share of challenges in

recent years. After witnessing robust growth after the 2008–2009 economic downturn, revenue growth has been
recent years. After witnessing robust growth after the 2008–2009 economic downturn, revenue
growth has been muted ever since.
QUARTERLY GLOBAL EXTERNAL STORAGE REVENUE
$, Billions
Percent
8
20
7
15
6
10
5
4
5
3
0
2
(5)
1
0
(10)
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
2011
2012
2013
2014
Revenue (left scale)
Revenue Growth (right scale)
Source: IDC.

We expect the biggest headwind within the storage space to be the increasing adoption of the

cloud within the enterprise space. In addition, the industry has to cope with economic uncertainty

in regions like Europe, as well as the corporate world holding onto systems longer because of tighter budgets and the shift toward more efficient storage devices.

A flat to low single-digit growth environment is likely the best case scenario for storage

providers in 2015 and 2016. We expect competitive pressures to remain intense, which will put downward pressure on prices.

While the hard disk drive (HDDs) space benefited from a better-than-expected PC landscape in

2014, a no growth environment for HDDs is likely in the foreseeable future, given end-market
2014, a no growth environment for HDDs is likely in the foreseeable future, given end-market
dynamics and the increasing penetration of solid-state drives. While data centers and hybrid
storage systems are positives, we expect the cloud and slower growth for consumer storage
solutions to act as notable headwinds.
HARD DISK vs SOLID-STATE SHIPMENTS AND GROWTH
Millions
Percent
700
90
80
600
70
500
60
50
400
40
300
30
20
200
10
100
0
0
(10)
2010
2011
2012
2013
2014
2015
2016
2017
2018
HDD (left scale)
HDD Growth (right scale)
SSD (left scale)
SSD Growth (right scale)
Source: IDC.

Solid-state drives (SSDs) are likely to significantly outgrow the HDD market over the next five

years. Increased SSD adoption in PCs, both portable and desktops, as well as greater penetration

into the enterprise market should drive strong growth.

We expect price points to decline for both HDDs and SSDs in 2015 and 2016, but less than

that witnessed over the past decade. However, ongoing SSD price declines will make SSDs appear

more attractive in comparison with HDDs.

Industry Profit Margins

Limited upside potential to industry gross margins are likely in the foreseeable future, as higher

volume and new product launches are offset by pricing pressure.

Gross margins are likely to remain in the mid-30% range. We expect storage providers EMC and

NetApp to command the highest margins in the space (in the low 60% range). The PC and HDD vendors (Hewlett Packard, Western Digital and Seagate Technology) are likely to continue to post below-average metrics (in the mid-to-high 20% range). Apple, the biggest constituent, should post quarterly margins modestly above the industry average (in the high 30% to low 40% range).

GROSS MARGIN Percent 37 36 35 34 33 32 31 30 29 28 Q1 Q2
GROSS MARGIN
Percent
37
36
35
34
33
32
31
30
29
28
Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2 Q3
Q4 Q1
Q2 Q3
Q4 Q1
Q2 Q3
Q4 Q1
Q2 Q3
2009
2010
2011
2012
2013
2014
S&P Composite 1500 Technology Hardware, Storage & Peripherals Index
Source: S&P Capital IQ.
 PCs, tablets, and smartphones are all likely to witness pricing pressure as consumers remain price

sensitive and as Asia/emerging markets see greater shipment representation in the coming years.

EBITDA margins are likely to widen in 2015 and 2016, driven by increasing volume and tight

cost controls. These factors should drive earnings leverage.

  Quarterly margins will continue to see some volatility, highly dependent on seasonal factors
Quarterly margins will continue to see some volatility, highly dependent on seasonal factors
and the timing of new product ramps.
EBIT MARGIN
Percent
28
26
24
22
20
18
16
14
12
Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2 Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2 Q3
Q4 Q1
Q2 Q3 Q4
2009
2010
2011
2012 2013
2014
S&P Composite 1500 Technology Hardware, Storage & Peripherals Index
Source: S&P Capital IQ.

Apple’s EBITDA margin will likely widen modestly to the mid-30% range over the next two

years. The company recently posted the best EBITDA margin (33.9% in the December 2014 quarter end) in the space.

Industry Earnings

Operating EPS is likely to increase, albeit with periods of lumpiness, with rising smartphone

sales and greater leverage being the key drivers.

Given Apple’s iPhone product ramps in the past (next generation releases typically occur in

September), quarterly EPS is expected to reach peak levels during the fourth quarter of each calendar year.

We anticipate greater focus on share repurchases, aiding earnings growth, as revenue growth

begins to decelerate given more challenging comparables over the next twelve months. OPERATING EARNINGS PER
begins to decelerate given more challenging comparables over the next twelve months.
OPERATING EARNINGS PER SHARE
(aggregate value weighted per share, $)
40
35
30
25
20
15
10
5
0
Q1
Q2 Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3 Q4
2009
2010 2011
2012 2013
2014
S&P Composite 1500 Technology Hardware, Storage & Peripherals Index
Source: S&P Capital IQ.

Industry Balance Sheet

Long-term debt has been on the rise since early 2013, which we note is when treasury yields

reached their lowest point. Not surprisingly, debt for hardware manufacturers has been increasing ever since, as corporations are looking to take advantage of historically low interest rates ahead of a potential rise.

In early 2013, Apple issued $16.9 billion in long-term debt, which included $3 billion in floating-

rate notes. This event was a change in the company’s capital structure, as it had not held long-term debt in prior years. In 2014, Apple issued $12 billion in long-term debt (we also note that it launched a commercial paper program, which is not treated as long-term debt). EMC Corp., among others, followed Apple’s path by issuing $5.5 billion in long-term debt in June 2013.

DEBT PROFILE (aggregate value weighted per share, $) Percent 110 40 100 35 90 80
DEBT PROFILE
(aggregate value weighted per share, $)
Percent
110
40
100
35
90
80
30
70
60
25
50
40
20
30
20
15
Q1
Q2
Q3 Q4 Q1
Q2
Q3 Q4 Q1
Q2 Q3
Q4 Q1
Q2 Q3
Q4 Q1
Q2 Q3
Q4 Q1
Q2 Q3 Q4
2009
2010
2011
2012
2013
2014
Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009 2010 2011 2012 2013 2014 Source: S&P Capital

Source: S&P Capital IQ.

Long Term Debt (left scale)

Debt-to-Capital (right scale)

Both hardware and storage manufacturers are likely to remain active in the debt markets given the still low interest rate environment. We also note that this industry has received scrutiny from active investors in recent years, as Apple, EMC, and others have typically avoided leveraging their balance sheets.

Historically, cash has been an important line item because behemoth technology companies have so much of it and generate a significant amount of free cash flow. We expect cash levels to remain healthy in the foreseeable future. However, rather than focus on increasing their cash position, manufacturers will likely look to sustain cash at stable or flat levels while focusing on returning more excess cash to shareholders.

CASH AND CASH EQUIVALENTS (aggregate value weighted per share, $) 90 80 70 60 50
CASH AND CASH EQUIVALENTS
(aggregate value weighted per share, $)
90
80
70
60
50
40
Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2 Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3 Q4
2009
2010 2011
2012 2013
2014
S&P Composite 1500 Technology Hardware, Storage & Peripherals Index
Source: S&P Capital IQ.

Given the ample amount of cash on hand that the industry possesses, companies are likely to

focus on a mix of more aggressive share repurchases, dividend increases, and opportunistic acquisitions. We expect Apple, with nearly $180 billion in cash, to use excess cash more toward

share repurchases. Hewlett Packard, shoring up its balance sheet following some disastrous acquisitions, appears to
share repurchases. Hewlett Packard, shoring up its balance sheet following some disastrous
acquisitions, appears to be more likely to take the merger and acquisition (M&A) approach. In
March 2015, HP announced its intent to acquire Aruba Networks for $3.0 billion.
UNLEVERED FREE CASH FLOW MARGIN
Percent
22
20
18
16
14
12
10
8
6
4
Q1
Q2
Q3
Q4 Q1
Q2 Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2
Q3
Q4 Q1
Q2 Q3 Q4
2009
2010
2011
2012 2013
2014
S&P Composite 1500 Technology Hardware, Storage & Peripherals Index
Source: S&P Capital IQ.

We think that decelerating growth rates, high activist interest, and healthy free cash flow

generation will all help support greater cash usage by hardware/storage manufacturers.

Free cash flow is likely to remain attractive and improve from current levels. S&P Capital IQ

thinks this is an important metric for investors to consider, as we see an increasing portion of free

cash flow being returned to investors via share repurchases and dividends.

We note that Apple’s free cash flow alone was over $40 billion during the 2014 calendar year,

more than triple the cash flow in 2010. iPhone sales will likely drive free cash flow for the company over the next two years.

While we expect free cash flow margins to continue to improve, as corporate profits outpace top-line growth, we anticipate that a significant amount of the free cash flow generated will come overseas. As a result, corporations will be limited to some extent on how cash is used.

Industry Valuation

The industry P/E multiple saw significant margin expansion in 2014 following compression for

much of 2012 and 2013.

We attribute the recent expansion to Apple’s launch into the large screen smartphone space,

which has led to greater than expected earnings growth, stabilization in the PC market following significant contraction, and improvement in the overall equity markets.

With the industry P/E rising toward the higher end of its five-year historical range, we see

limited multiple expansion over the next twelve months and instead expect earnings growth to be
limited multiple expansion over the next twelve months and instead expect earnings growth to be
the primary contributor toward stock performance.
PRICE-TO-EARNINGS PER SHARE RATIO
Multiple
19
18
17
16
15
14
13
12
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
2010
2011
2012 2013
2014 2015
S&P Composite 1500 Technology Hardware, Storage & Peripherals Index
Source: S&P Capital IQ.

Other multiples, specifically price-to-sales and price-to-book, have been expanding since the

second half of 2013. Not surprisingly, the trend is similar to that of the industry
second half of 2013. Not surprisingly, the trend is similar to that of the industry P/E.
PRICE-TO-TANGIBLE BOOK VALUE AND PRICE-TO-SALES RATIOS
(values are in multiples)
8.5
2.6
8.0
2.4
7.5
2.2
7.0
2.0
6.5
6.0
1.8
5.5
1.6
5.0
1.4
4.5
1.2
4.0
3.5
1.0
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
2010
2011
2012
2013
2014
2015
Price-To-Sales (left scale)
Price-To-Tangible Book Value (right scale)
Source: S&P Capital IQ.

Apple has seen significant multiple expansion, given its acceleration of growth in recent

quarters. We also think that low multiple names in the PC space, like Hewlett Packard, benefited from expansion, as a worst-case scenario appears to have been averted.

Similar to P/E metrics, we see limited multiples expansion as valuations currently reside toward the

high end of the range. That said, ratios are not likely to widen for low multiple areas (i.e. PCs, printers, HDDs, and others) if manufacturers can prove to be successful with adjacent market expansion.

Capital Markets

Announced information technology M&A activity involving S&P 1500 companies as a target,

buyer or seller saw $110 billion in deal value in 2014, up from $60.8 billion in 2013. Facebook, Inc.’s $19.7 billion purchase of WhatsApp Inc., announced in February 2014, accounted for

approximately 18% of the deal value for announced IT M&A deals involving S&P 1500 companies.
approximately 18% of the deal value for announced IT M&A deals involving S&P 1500 companies.
INFORMATION TECHNOLOGY M&A TRANSACTIONS*
$, Billions
180
160
140
120
100
80
60
40
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
*Includes S&P 1500 companies as target, buyer, or seller.
Source: S&P Capital IQ.

Last year’s results marked the strongest period for IT M&A deal activity since 2011, when

transaction value topped $158 billion.

The combination of growing cash balances, continued low borrowing costs, and elevated equity

prices contributed to the acceleration in the number of announced IT M&A transactions involving S&P 1500 companies. Last year’s count of 572 deals marked a 21% increase from the previous year’s total.

Deal multiples based on a multiple of the target’s revenue fell to 4.3x in 2014 from 5.4x for

transactions announced in 2013. Despite that decline, last year’s valuation marked a multi-year high.

S&P Capital IQ data indicated that, on average, buyers became less aggressive in their bidding

as valuations based on a target’s EBITDA retreated in 2014 to 29.9x from 42.7x in 2013.

INFORMATION TECHNOLOGY M&A DEAL COUNT* 600 550 500 450 400 350 300 2004 2005 2006
INFORMATION TECHNOLOGY M&A DEAL COUNT*
600
550
500
450
400
350
300
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014

*Includes S&P 1500 companies as target, buyer, or seller.

Source: S&P Capital IQ.

INFORMATION TECHNOLOGY M&A TOTAL ENTERPRISE VALUE-TO-REVENUE MULTIPLE* 6 5 4 3 2 1 0 2004
INFORMATION TECHNOLOGY M&A
TOTAL ENTERPRISE VALUE-TO-REVENUE MULTIPLE*
6
5
4
3
2
1
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014

*Includes S&P 1500 companies as target, buyer, or seller.

Sources: S&P Capital IQ.

INFORMATION TECHNOLOGY M&A TOTAL ENTERPRISE VALUE-TO-EBITDA MULTIPLE* 45 40 35 30 25 20 15 10
INFORMATION TECHNOLOGY M&A
TOTAL ENTERPRISE VALUE-TO-EBITDA MULTIPLE*
45
40
35
30
25
20
15
10
5
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
*Includes S&P 1500 companies as target, buyer, or seller.
Sources: S&P Capital IQ.
 The completion rate for IT M&A deals involving S&P 1500 companies announced and completed
 The completion rate for IT M&A deals involving S&P 1500 companies announced and
completed in the same calendar year, dipped to 88% in 2014. That represents the first sub-90%
completion rate since 2004 when it was 82%.
INFORMATION TECHNOLOGY M&A COMPLETION RATE*
Percent
100
95
90
85
80
75
70
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
*Includes S&P 1500 companies as target, buyer, or seller.
Sources: S&P Capital IQ.

Technology hardware M&A activity saw an improvement in 2014 as $29.5 billion in deals occurred, up from $17 billion in 2013. Chicago-based private equity firm Thoma Bravo, LLC along with the Ontario Teachers’ Pension Plan entered into a definitive agreement to acquire

Riverbed Technology, Inc. for $3.3 billion in cash on December 14, 2014, representing the largest announced technology M&A deal of last year with the involvement of a S&P 1500 company as a target, buyer, or seller.

TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS M&A TRANSACTIONS*

$, Billions 70 60 50 40 30 20 10 0 2004 2005 2006 2007 2008
$, Billions
70
60
50
40
30
20
10
0
2004 2005
2006
2007
2008
2009
2010
2011
2012
2013
2014

*Includes S&P 1500 companies as target, buyer, or seller.

Source: S&P Capital IQ.

M&A results in 2014 represented the best year for aggregate deal value since 2011, when $52 billion in transactions occurred.

 The trend in technology hardware M&A has been choppy in recent years, with the
 The trend in technology hardware M&A has been choppy in recent years, with the tally of 167
deals involving S&P 1500 companies in 2014, higher than 154 in 2013, but below 190 in 2012.
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS M&A DEAL COUNT*
250
200
150
100
50
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
*Includes S&P 1500 companies as target, buyer, or seller.
Source: S&P Capital IQ.

Based on transactions involving S&P 1500 companies, the last time annual technology hardware M&A deals topped 200 was in 2007.

 Technology hardware M&A transaction valuations based on a target’s revenue saw a modest reduction
 Technology hardware M&A transaction valuations based on a target’s revenue saw a modest
reduction in 2014 to 2.5x, from 2.7x in the previous year.
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS M&A
TOTAL ENTERPRISE VALUE-TO-REVENUE MULTIPLE*
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
*Includes S&P 1500 companies as target, buyer, or seller.
Sources: S&P Capital IQ.
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS M&A TOTAL ENTERPRISE VALUE-TO-EBITDA MULTIPLE* 70 60 50 40 30
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS M&A
TOTAL ENTERPRISE VALUE-TO-EBITDA MULTIPLE*
70
60
50
40
30
20
10
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
*Includes S&P 1500 companies as target, buyer, or seller.
Sources: S&P Capital IQ.

Over the past five years, the average annual transaction multiple, based on revenue, fell under

2x only once in 2012.

After soaring to nearly 62x EBITDA in 2013, average technology hardware M&A valuation

dropped to 14.4x in 2014, the lowest multiple since 2008 when it was 10.4x, according to S&P Capital IQ data.

The calculated completion rate for technology hardware M&A deals, based upon transactions

announced and completed in the same calendar year, sunk to under 81% in 2014, the
announced and completed in the same calendar year, sunk to under 81% in 2014, the lowest level
over the time span under review.
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS
M&A TRANSACTIONS COMPLETION RATE*
Percent
92
90
88
86
84
82
80
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
*Includes S&P 1500 companies as target, buyer, or seller.
Source: S&P Capital IQ.

IBM Products United States, Inc., which operates as a subsidiary of Chinese technology firm

Lenovo Group Limited, ranked as the biggest buyer among S&P 1500 companies in the technology hardware arena during 2014 with $5.22 billion in acquisitions. IBM Products United States, Inc. entered into the acquisition agreement to acquire Motorola Mobility Holdings LLC from Google Inc. for $2.9 billion on January 29, 2014. In addition, the company entered into a definitive asset purchase agreement to acquire the server hardware and related maintenance services businesses of International Business Machines Corporation for $2.3 billion in cash and stock on January 23, 2014.

Sunnyvale, California-based Trimble Navigation Limited was the most active buyer among

S&P 1500 technology hardware companies with 10 deals.

TRANSACTION SUMMARY*

 

MOST ACTIVE BUYERS/INVESTORS

 

BY NUMBER OF TRANSACTIONS

BY TOTAL TRANSACTION SIZE

COMPANY NAME

DEALS

COMPANY NAME

TOTAL SIZE ($M)

Trimble Navigation Limited 3D Systems Apple EMC Cisco Systems Ametek TE Connectivity Electronics for Imaging Hewlett-Packard QUALCOMM

10

IBM Products United States Ontario Teachers' Pension Plan Thoma Bravo Ontario Teachers' Pension Plan - International Investments Zebra Technologies NetScout Systems Facebook TE Connectivity SanDisk American Tower

5,220

8

3,866

8

3,866

7

3,866

6

3,450

5

2,619

5

2,300

4

2,144

4

1,276

4

1,050

 

MERGER & ACQUISITION STATISTICS

 

VALUATION SUMMARY

NUMBER OF DEALS BY TRANSACTION RANGES

Total Deal Value ($M):

29,491

Greater than $1 billion $500 - $999.9mm $100 - $499.9mm Less than $100mm Undisclosed

9

Average Deal Value:

434

3

Average TEV/Revenue:

2

17

Average TEV/EBITDA:

14

39

Average Day Prior Premium (%):

31

99

*S&P 1500 companies involved as buyer, seller, or target for a transaction involving a company in the technology hardware & equipment industry group. Source: S&P Capital IQ.

TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS M&A - S&P 1500 INVOLVEMENT 2014 (for the past six months)

 

TOTAL

ANNOUNCED

DATE

CLOSED

DATE

TARGET

BUYERS / INVESTORS

TRANSACTION

VALUE ($M)

03/05/15

03/05/15

Linear project EAI Design Services kubit Aruba Networks immixGroup Trace Laboratories iNapogee Information Systems AdvancedCath Hearst Business Media Corporation, United Technical Publishing Division

Trimble Navigation ViaSat FARO Technologies Hewlett-Packard Arrow Electronics National Technical Systems iNovex Information Systems TE Connectivity

-

03/03/15

03/03/15

-

03/03/15

03/03/15

-

03/02/15

-

2,651

03/02/15

-

-

02/26/15

02/03/15

-

02/24/15

02/24/15

-

02/18/15

-

190

02/17/15

02/17/15

Arrow Electronics

-

02/12/15

-

Cobham, PXI Modular Instruments Hardware Product Line

National Instruments

-

02/12/15

02/12/15

Emergency CallWorx

Motorola Solutions

-

02/11/15

-

ATM Electronic

Arrow Electronics

-

02/09/15

-

Voltage Security

Hewlett-Packard

-

02/06/15

-

Exelis ARAS 360 Technologies FEMTOLASERS Produktions Riverbed Technology, SteelApp Business RD Trading Data Modul

Harris FARO Technologies Newport Brocade Communications Systems Arrow Electronics Arrow Electronics

5,193

02/05/15

02/05/15

-

02/05/15

-

-

02/05/15

03/04/15

-

02/02/15

02/02/15

84

01/28/15

-

38

01/28/15

-

TE Connectivity, Telecom, Enterprise and Wireless Business

CommScope Holding

3,059

01/26/15

01/26/15

Network Power Systems Division Innovative Techncial Solutions Baicheng City Gold-Star Electric Systems EnVerv botObjects IRON Solutions

Unipower

10

01/22/15

01/22/15

Corning

-

01/21/15

12/31/14

Amphenol

-

01/14/15

01/14/15

Semtech

-

01/05/15

01/05/15

3D Systems

-

12/23/14

12/23/14

Trimble Navigation

-

12/22/14

Ingram Micro, Two Facilities in Plainfield and

Granite Real Estate Investment Trust

69

 

-

 

29 acres in AllPoints Midwest Business Arlon

Park

 

12/19/14

01/22/15

Rogers Ontario Teachers' Pension Plan,Ontario Teachers' Pension Plan - International Investments,Thoma Bravo

157

12/15/14

-

Riverbed Technology

3,866

Source: S&P Capital IQ.

 

TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS M&A - S&P 1500 INVOLVEMENT 2014

 

(for the past six months; continued)

 
 

TOTAL

ANNOUNCED

DATE

CLOSED

DATE

TARGET

BUYERS / INVESTORS

TRANSACTION

VALUE ($M)

12/15/14

1/9/15

TR Manufacturing

Corning

-

12/15/14

11/18/14

Trident Datacom Technologies

Motorola Solutions

-

12/10/14

-

Neohapsis

Cisco Systems

-

12/9/14

1/2/15

Tripwire

Belden

710

12/1/14

12/1/14

Nexala

Trimble Navigation

-

11/24/14

2/9/15

Cimatron

3D Systems TCL Communication Technology Holdings Electro Scientific Industries

97

11/14/14

10/31/14

Palm

-

11/13/14

1/19/15

Wuhan Topwin Optoelectronics Technology

18

11/12/14

11/19/14

QUALCOMM Panel Manufacturing Amtech Group Hewlett-Packard, Portfolio of Patents Related to Lighting and Building Systems Technologies

Taiwan Semiconductor Manufacturing Trimble Navigation

85

11/11/14

11/11/14

-

11/6/14

11/6/14

Wi-Lan

-

10/29/14

10/29/14

Yamei Electronics Technology

Astrata (Group)

-

10/28/14

10/28/14

Maginatics

EMC Corporation

-

10/28/14

10/28/14

Spanning Cloud Apps

EMC Corporation

-

10/27/14

10/27/14

Corning Inc., QCL Business

Thorlabs Quantum Electronics

-

10/24/14

10/24/14

Riverbed Technology, SteelStore Product Line

NetApp

80

10/22/14

1/2/14

Corning Laser Technologies

Corning

50

10/22/14

-

VCE Company

EMC

-

10/13/14

10/28/14

The Cloudscaling Group

EMC

-

10/7/14

10/7/14

Injazat Data Systems

Mubadala Development

-

10/3/14

10/1/14

Observatory Crest Australia Pty

Arrow Electronics

-

9/23/14

9/23/14

Prss

Apple

-

9/22/14

-

Viasystems Group

TTM Technologies

1,006

9/18/14

10/13/14

Memoir Systems

Cisco Systems

-

9/17/14

9/29/14

Metacloud

Cisco Systems

-

9/15/14

9/15/14

DiMS! organizing print

Electronics for Imaging

-

9/12/14

9/12/14

Eyeon Software

Blackmagic Design Pty

-

9/11/14

-

Eucalyptus Systems

Hewlett-Packard

-

9/11/14

9/11/14

Manzanita Systems

DTS

-

Source: S&P Capital IQ.

 

TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS PRIVATE PLACEMENT (for the past six months)

 

TOTAL

ANNOUNCED

DATE

CLOSED

DATE

TARGET

BUYERS / INVESTORS

TRANSACTION

VALUE ($M)

1/28/15

1/28/15

Adallom WorldVu Satellites Shanghai Ketong Information Technology PowerbyProxi Encoding.com InterCloud Société par Actions Simplifiée Benu Networks

EMC, Index Ventures, Sequoia Capital Israel QUALCOMM, Virgin Group Holdings

30.0

1/15/15

1/15/15

-

   

-

1/9/15

1/9/15

Cisco Systems

10/31/14

-

Movac, TE Connectivity Harmonic, Metamorphic Ventures, Zelkova Ventures CapHorn Invest - Société de Gestion, Riverbed Technology, Ventech ARRIS Group, Comcast Ventures,Liberty Global Ventures, Shaw Ventures, Spark Capital Partners, Sutter Hill Ventures Carmel Ventures, Intel Capital, Jerusalem Venture Partners, Seagate Technology

30.0

10/22/14

10/22/14

3.5

 

5.1

10/16/14

10/16/14

10/6/14

10/21/14

27.7

10/6/14

10/6/14

Reduxio Systems

15.0

Source: S&P Capital IQ.

 

BUYBACK TRANSACTIONS* (for the past six months)

 

ANNOUNCED

CLOSED

DATE

DATE

TARGET

SIZE ($M)

3/9/15

-

QUALCOMM

15,000

3/4/15

-

Plantronics

-

2/20/15

-

Itron

50

2/18/15

-

Plantronics

-

2/11/15

-

Insight Enterprises

75

2/6/15

-

FLIR Systems

-

1/29/15

-

Coherent

25

1/26/15

-

Sanmina

-

1/21/15

-

Amphenol

-

1/8/15

-

Park Electrochemical

-

12/12/14

-

Arrow Electronics

200

12/8/14

-

Benchmark Electronics

100

12/4/14

-

Tech Data

100

12/3/14

-

Corning

1,500

11/17/14

-

Plexus

30

10/30/14

-

Digi International

15

10/29/14

-

Insight Enterprises

25

10/23/14

-

Netgear

-

10/16/14

-

Qlogic

100

*Cancelled transactions are not included in the results. Source: S&P Capital IQ.

 

LEADING TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS COMPANIES PUBLIC OFFERINGS (for the past six months)

 
 

REGISTRATION

OFFER

PRIMARY TRANSACTION FEATURES

 

ISSUER

FILED

DATE

SECURITIES ISSUED

SIZE ($M)

Cisco Systems

12/5/14

-

Shelf Registration

Common Stock

4,166

Apple

2/2/15

2/2/15

Fixed-Income Offering

Corporate Debt (Non-Convertible) 1,982

Apple

11/4/14

11/4/14

Fixed-Income Offering

Corporate Debt (Non-Convertible)

1,749

Apple

11/4/14

11/4/14

Fixed-Income Offering

Corporate Debt (Non-Convertible)

1,747

Seagate Technology

10/31/14

-

Shelf Registration

Common Stock

1,528

Keysight Technologies

10/21/14

-

Shelf Registration

Common Stock

1,508

Apple

2/2/15

2/2/15

Fixed-Income Offering

Corporate Debt (Non-Convertible) 1,498

Apple

2/2/15

2/2/15

Fixed-Income Offering

Corporate Debt (Non-Convertible)

1,250

Apple

2/2/15

2/2/15

Fixed-Income Offering

Corporate Debt (Non-Convertible)

1,247

Zebra Technologies

9/25/14

9/30/14

Fixed-Income Offering

Corporate Debt (Non-Convertible)

1,050

Apple

2/10/15

2/25/15

Fixed-Income Offering

Corporate Debt (Non-Convertible)

929

Keysight Technologies

10/6/14

10/6/14

Fixed-Income Offering

Corporate Debt (Non-Convertible) Common Stock

600

Western Digital

11/5/14

-

Shelf Registration

543

NetApp

11/25/14

-

Shelf Registration

Common Stock

533

Riverbed Technology

2/23/15

2/27/14

Fixed-Income Offering

Corporate Debt (Non-Convertible)

525

Western Digital

11/5/14

11/6/14

Follow-on Equity Offering

Common Stock

522

Apple

2/2/15