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Project Aardvark
Presentation to the Board of Directors January 29, 2010
Goldman Stanley
Confidential Draft
Table Of Contents
Executive Summary 3
Aardvark Valuation
Potential Acquisitions Process Recommendations Appendix
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Goldman Stanley
Executive Summary
Goldman Stanley
Executive Summary
As of January 29, 2010, Aardvarks share price and valuation are at all-time highs, having more than doubled since early 2009 As Aardvarks stock price has soared in value, it has also generated over $35B in cash & cash-equivalents As Aardvarks cash balance grows, it is likely to face shareholder pressure to reinvest the cash in its business and to make significant acquisitions Given Aardvarks strong currency and cash balance, it could easily make several tuck-in acquisitions or larger-scale acquisitions to acquire customers Such a strategy would allow Aardvark to capture more of the smartphone, laptop, and desktop markets, and significantly improve its software offerings
Given Aardvarks cash position, such acquisitions could be made with 100% cash or in the case of a larger deal, stock could also be used
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Aardvark Valuation
Goldman Stanley
Valuation Summary
Aardvarks current share price of $192.61 far exceeds the value implied by comparable public companies Recent comparable transactions show higher implied valuation ranges due to flurry of consolidation and hardware M&A activity over 2009 Discounted Cash Flow Analysis under base-case assumptions shows implied valuation on-par with Aardvarks current share price, implying that share price is justified All valuation analysis is based on base-case financial projections in line with Wall Street analyst expectations Given Aardvarks cash balance and high valuation multiples vs. similar public companies, few competitors are well-positioned to make substantial acquisitions
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Model Uses Base Case Financial Projections Mid-Year Convention Used For PV Of Cash Flows
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Potential Acquisitions
Goldman Stanley
Potential Acquisitions
Given Aardvarks large cash balance, it could make a wide variety of acquisitions ranging from small tuck-in deals to acquire technology and IP to larger deals driven by customer or market share acquisition
Tier 2 Potential Acquisitions Tier 2 acquisition candidates are worth less than $1 billion and would enhance Aardvarks core technology and fill in gaps in existing products Potential acquisitions include specialized chipset and semiconductor companies as well as Web 2.0, social media, and mobile software companies
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Holdings is a supplier of semiconductor intellectual property and components of digital electronic products. It designs and licenses Key Partners: Financial Information: intellectual property rather than manufacturing and selling semiconductor chips, and it licenses its IP to Market Cap: $2.5B Electronic Arts, LSI Logic, a wide network of hardware, mobile, and Cash: $204M Microsoft, National Semiconductor, networking companies. It also provides tools to 2009 Revenue: $490M Nokia, NVIDIA, Rambus, Real 2009 EPS: $7.85 optimize system-on-chip designs. Networks, Samsung, and Toshiba. 2010E Revenue: $531M Products:
2010E EPS: $10.97
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Processors ARM provides 32-bit embedded microprocessors based on a common architecture that delivers high-performance, power efficiency, and reduced system cost. System IP Serves as the connection between processors, memory, and peripherals to ensure optimum performance. Multimedia ARM provides graphics processors that enable embedded graphics, audio, and video applications. Physical IP Provides SoC integrated circuits and logic, embedded memory, and interface IP. Tools ARM subsidiaries provide compilers, debuggers, simulators, and other optimization tools
Jim Balsillie Mike Lazaridis Don Morrison Robin Bienfait Brian Bidulka David Yach
Financial Information: Market Cap: Cash: 2009 Revenue: 2009 EPS: 2010E Revenue: 2010E EPS:
Key Partners: AT&T, Brightstar, Digital China, GPXS, Hewlett-Packard, IBM, Skype, Sprint, Tata Indicom, TMobile, Verizon, Virgin, and Vodafone,
as well as GPS, Wi-Fi, and 3G network support. BlackBerry Curve 8500 Includes Trackpad and dedicated media keys, easy media sharing, and 2.0 MP camera. BlackBerry Tour 9630 Provides GPS, worldwide compatibility, and 3.2 MP camera. BlackBerry Storm Features Wi-Fi, SurePress technology, and 3G network support. BlackBerry Curve 8900 Features thin, lightweight design as well as GPS and Wi-Fi support and 3.2 MP camera.
Goldman Stanley
Process Recommendations
Goldman Stanley
Key Recommendations
We recommend engaging in targeted discussions with the Tier 1 acquisition candidates and assessing their receptiveness to M&A discussions At the same time, Goldman Stanley will reach out to Tier 2 candidates and introduce Aardvark as a potential acquirer M&A process with Tier 1 candidates will take significantly longer due to the scale of the companies, so we recommend conducting both processes simultaneously Depending on responses from Tier 1 and Tier 2 candidates, Goldman Stanley and Aardvark may do additional research to determine other potential acquisitions and then approach them
Broad Buy-Side M&A Ranges from 10 to hundreds of companies Time required is highly variable
Close-ended
Higher success probability
Iterative process
Lower success probability
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Process Recommendation
Broad Marketing
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Appendix
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Goldman Stanley