Americas Morning Summary

November 15, 2010

The Goldman Sachs Group, Inc.
This document contains comments related to the following stocks: Advanced Energy Industries, Inc. (AEIS) Advanced Micro Devices, Inc. (AMD) Aeroflot (AFLT.RTS) Agilent Technologies (A) Altera Corp. (ALTR) Inc. (AMZN) Analog Devices, Inc. (ADI) Applied Materials, Inc. (AMAT) Aruba Networks, Inc. (ARUN) Atmel Corporation (ATML) Autodesk Inc. (ADSK) Bally Technologies, Inc. (BYI) BE Aerospace, Inc. (BEAV) Best Buy Company, Inc. (BBY) Bill Barrett Corp. (BBG) BJ's Wholesale Club, Inc. (BJ) BMC Software, Inc. (BMC) The Boeing Company (BA) Boise Inc. (BZ) BRF-Brasil Foods S.A. (BRFS3.SA) Broadcom Corporation (BRCM) Buckeye GP Holdings L.P. (BGH) Buckeye Partners, L.P. (BPL) CA, Inc. (CA) Cardinal Health, Inc. (CAH) Cathay Pacific (0293.HK) Cemig (CMIG4.SA) CESP (CESP6.SA) Charles River Laboratories (CRL) Chesapeake Midstream Partners, L.P. (CHKM) China Eastern Airlines (H) (0670.HK) Citrix Systems Inc. (CTXS) Costco Wholesale (COST) Covance Inc. (CVD) Dollar Tree Stores, Inc. (DLTR) Domtar Corp. (UFS) Eletrobras (ELET3.SA) Enterprise GP Holdings L.P. (EPE) EXCO Resources, Inc. (XCO) For further product information, contact: New York Investment Research (212) 902-1000 Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S. Global Investment Research

Focus Items
Americas: Energy: Oil: Trading update: Bullish oil correlations, bullish liquids shale players Americas: Energy: Oil & Gas - E&P: Reiterate Buy on QEP, CL-Buy on NFX; KWK now Neutral Global: Transportation: What happens when 1bn Chinese fly? Americas: Healthcare Services: CROs: Continued solid clinical bookings with 3Q; reiterate CL-Buy on PRXL
1 2 3 4

Key Data Changes
Investment List Removals
Company Quicksilver Resources, Inc. Ticker KWK Investment List Removals Americas Sell List

Company International Flavors & Fragrances Inc. Ticker IFF Rating/ Coverage view N/N Price Target $57.00 Current Year $3.43 Next Year $3.67 Fiscal y/e Dec

Rating and price target changes
Company Agilent Technologies Aruba Networks, Inc. Enterprise GP Holdings L.P. Forest Oil Corp. International Flavors & Fragrances Inc. Newfield Exploration Quicksilver Resources, Inc. Research In Motion Ltd. SandRidge Energy, Inc. Rating/ Coverage view Ticker New Old A ARUN EPE FST IFF NFX KWK RIMM SD N/N B/N N/N N/N N/N B/N ↑ N/N S/N N/N unch unch unch unch -unch S/N unch unch Price Target New Old Estimates % chg Current Year Next Year Fiscal y/e 8.6% 9.1% 4.8% 2.9% -5.7% 15.4% 11.1% (16.7%) $2.00 $0.14 $1.74 $1.78 $3.43 $4.71 $0.72 $5.74 $0.12 $2.47 $0.32 $2.04 $2.19 $3.67 $5.58 $0.42 $5.51 $0.12 Dec Jul Dec Dec Dec Dec Dec Feb Dec

↑ $38.00 $35.00 ↑ $24.00 $22.00 ↑ $65.00 $62.00 ↑ $35.00 $34.00 $57.00 --

↑ $74.00 $70.00 ↑ $15.00 $13.00 ↑ $50.00 $45.00 ↓ $5.00 $6.00

Estimate changes
Company Agilent Technologies Bill Barrett Corp. Rating/ Ticker Coverage view A BBG N/N N/N Current Year New Old % chg 2.2% (4.1%) New ↑ $2.00 $1.96 ↓ $2.29 $2.39 Next Year Old % chg 5.0% 10.2% ↑ $2.47 $2.36 ↑ $2.15 $1.95 Fiscal y/e Dec Dec

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Forest Oil Corp. (FST) FormFactor, Inc. (FORM) General Mills, Inc. (GIS) ICON plc (ADR) (ICLR) Intel Corp. (INTC) International Flavors & Fragrances Inc. (IFF) International Game Technology (IGT) International Paper Company (IP) International Rectifier Corp. (IRF) Intersil Corp. (ISIL) Intuit, Inc. (INTU) Kendle International Inc. (KNDL) KLA-Tencor (KLAC) Lam Research Corp. (LRCX) The Estee Lauder Companies Inc. (EL) Linear Technology Corp. (LLTC) LSI Corp. (LSI) Marvell Technology Group Ltd. (MRVL) Maxim Integrated Products (MXIM) McKesson Corp. (MCK) Microchip Technology Inc. (MCHP) Micron Technology Inc. (MU) MKS Instruments, Inc. (MKSI) National Semiconductor Corp. (NSM) Newfield Exploration (NFX) Nordstrom, Inc. (JWN) Northeast Utilities (NU) Novellus Systems Inc. (NVLS) Nvidia Corp. (NVDA) NXP Semiconductors N.V. (NXPI) ON Semiconductor Corp. (ONNN) Oracle Corp. (ORCL) Owens & Minor, Inc. (OMI) Parexel International Corp. (PRXL) Patterson Companies, Inc. (PDCO) Pharmaceutical Product Dev. (PPDI) PMC-Sierra, Inc. (PMCS) Precision Castparts Corp. (PCP) PSS World Medical, Inc. (PSSI) QEP Resources, Inc. (QEP) Quicksilver Resources, Inc. (KWK) Research In Motion Ltd. (RIMM) Rolls-Royce (RR.L) Ross Stores, Inc. (ROST) Saks Inc. (SKS), Inc. (CRM) SanDisk Corporation (SNDK) SandRidge Energy, Inc. (SD) Sappi Ltd. (ADR) (SPP) Sears Holdings Corp. (SHLD) Semtech Corporation (SMTC) Shanghai Int'l Airport (600009.SS) SIA Engineering (SIAE.SI) Spirit AeroSystems Holdings, Inc. (SPR) STEC, Inc. (STEC) Suburban Propane Partners, L.P. (SPH) SuccessFactors, Inc. (SFSF) Taleo Corporation (TLEO)

Buckeye GP Holdings L.P. Buckeye Partners, L.P. Chesapeake Midstream Partners, L.P. Enterprise GP Holdings L.P. EXCO Resources, Inc. International Flavors & Fragrances Inc. Northeast Utilities NXP Semiconductors N.V. QEP Resources, Inc. Quicksilver Resources, Inc. Research In Motion Ltd. SandRidge Energy, Inc. Suburban Propane Partners, L.P. Ultra Petroleum Wisconsin Energy Corp.





-(1.1%) (2.9%) (7.5%) 1.5% -(0.6%) 5.7% (2.3%) -0.2%

↑ $2.08 $2.07 $3.80 $1.45 unch unch

0.7% --(9.2%) --(2.0%) -(0.3%) (1.8%) 2.5%

Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Feb Dec Sep Dec Dec

↓ $3.51 $3.55 ↓ $1.36 $1.40 ↓ $1.74 $1.88 ↑ $0.73 $0.72 $3.43 --

↓ $2.04 $2.25 $0.97 $3.67 unch --

↓ $2.05 $2.07 ↑ $1.38 $1.30 ↓ $1.46 $1.49 $0.72 unch

↓ $2.31 $2.36 $2.75 unch

↓ $1.91 $1.92 ↓ $0.42 $0.43 ↑ $5.51 $5.38

↑ $5.74 $5.72

↓ $0.12 $0.36 (65.2%) ↓ $0.12 $0.19 (36.4%) ↓ $3.95 $4.05 ↑ $2.32 $2.30 ↓ $3.87 $3.94 (2.5%) 0.6% (1.7%) $4.15 unch -(2.9%) 0.6%

↓ $3.21 $3.31 ↑ $4.18 $4.16

Other Headlines
Basic Materials
Americas: Paper & Forest Products: Printing Paper: Preliminary data show volumes turn negative in Oct. 5

Consumer Cyclicals
Americas: Retail: Amazon widens leads in Toys and CE, but Wal-Mart makes its move Americas: Gaming: Takeaways from Bally and IGT pre-G2E analyst events Americas: Retail: Broadlines: With even fewer beat & raises likely in week 2, see limited upside 6 7 8

Consumer Staples
BRF-Brasil Foods S.A. (BRFS3.SA): 3Q2010 in line, but not firing from all cylinders yet; stay neutral United States: Food: Actions are louder than words; the promo heat's still on International Flavors & Fragrances Inc. (IFF): Initiate on IFF at Neutral - 2010 was zesty, but 2011 could be milder Americas: Consumer Products: Cosmetics: US Prestige cosmetics: Industry sales up 7%; EL up 4% in October 9 10 11 12

Americas: Managed Care: A frontline perspective on 2011 pricing and product trends Agilent Technologies (A): Beats 4Q2010 on stronger electronic measurement sales Americas: Healthcare Services: Distributors: Upcoming Distributor Events in November and December 2010 13 14 15

Technology, Inc. (CRM): Bookings growth likely to remain strong; Social proliferating; Buy Americas: Communications Technology: GS CommTech Weekly: Previews for QCOM, FFIV, and ARUN; raising RIMM EPS and PT Americas: Technology: Semiconductors: GS US Semi Weekly: Inventory database; AMAT, MRVL previews Americas: Technology: Software: The Weekly Catalyst: CRM, ADSK, INTU; Techtonics and CIO wrap 16 17 18 19

(VSEA) Verigy Ltd. (WMT) Wisconsin Energy Corp. (WEC): Updating estimates for WEC post 3Q.SA): First Take: Adjusted EBITDA in line with consensus. (TJX) Ultra Petroleum (UPL) Varian Semi Equipment Assoc.SA): First Take: Adjusted EBITDA grows 17% yoy and beats consensus Cemig (CMIG4.Target Corporation (TGT) Teradyne. Inc. maintaining CL Buy 20 21 22 23 24 25 Other Latin America Weekly Kickstart: Picking sectors by inflation exposure 26 Reports Published . (VRGY) VMware. Inc. (WEC) XILINX Corp. (VMW) Wal-Mart Stores. 3Q neutral Eletrobras (ELET3. Inc. (TXN) The TJX Companies. (TER) Texas Instruments Inc.SA): First Take: Neutral 3Q. (XLNX) Utilities Northeast Utilities (NU): Data Update: Updating estimates after 3Q2010 reporting CESP (CESP6. good operating performance but on one-offs Americas: Utilities: Diversified: Pipeline & MLP Essentials: Plethora of data points over next 8 days Wisconsin Energy Corp. Inc.

NBR. Andre Benjamin (New York): andre. and SU. The jury is still out on whether Exxon/XTO and Conoco/Burlington make sense. SU We have updated our analysis of energy sector share price correlations to two-year WTI strip oil (using weekly returns since 2004) and are highlighting our Top 10 Buy-rated equities across the Energy sector favorably leveraged to our constructive crude oil view. NFX. HP. (212) 357-0931 Goldman Sachs & Co. While Conviction Buy Occidental Petroleum has interesting California “shale” acreage.Americas Morning Summary November 15. (917) 343-5385 Goldman Sachs & Co. 1 Americas: Energy: Oil & Gas . NFX. PBR. OIS. In our view. it is a smaller driver of our recommendation and hence we do not associate Oxy as much with this theme. CL-Buy on NFX. Joe Citarrella (New York): joe. PBR. (212) 855-0470 Goldman Sachs & Co. we are not surprised to see a pullback.citarrella@gs. 2010 Focus Items Americas: Energy: Oil: Trading update: Bullish oil correlations. though all are Neutral rated. We believe the second half of 2010 is shaping up to be a pivotal inflection point in terms of integrated oils making solid progress with unconventional resource strategies. with liquids upside in 2012 Goldman Sachs Global Investment Research . bullish liquids shale players Arjun N. HAL. PXP. and RDC. SLB. We continue to see Buy-rated Murphy Oil as best positioned on this theme. RDC For investors focused on SMID-cap equities (under $7. Chevron entered the fray with the announcement of its Atlas Energy acquisition last week. following a long stretch where the business was dominated by E&Ps. as our core expectation is for a continued “grind higher” over the coming year. 2 Denver trip: Non-Rockies production. including FST. Top 10 oils: CNQ. QEP: Not well known and undervalued. sending it a hair below $85/bbl.benjamin@gs. Bullish oil macro data consistent with our “grind higher” call Oil macro data this past week remained constructive—via US inventory draws and a bullish IEA report—and consistent with our view that WTI spot crude oil prices will trade in a higher $85-$95/bbl band in the coming six We came away more positive on the Granite Wash (TX/OK) and on potential Rockies liquids exploration catalysts.5 billion market cap.murti@gs. NBR. A “risk-off” day on November 12 knocked nearly $3/bbl off the spot WTI crude oil price. KWK now Neutral Brian Singer. Siddharth Ramtri (New York): siddharth. OXY. We reiterate our Buy ratings on QEP. MUR. Pavan Hoskote (New York): pavan. (917) 343-9044 Goldman Sachs & Co. (212) 357-9301 Goldman Sachs & Co. (212) 902-6787 Goldman Sachs & Co. SLB. Murti (New York): arjun. CL-Buy on Newfield Exploration and Neutral ratings on FST and we highlight five equities that have a high correlation with crude oil prices.). CFA (New York): brian. Rockies exploration in focus We met in Denver with Forest Oil. PXP. Given the sharp $16/bbl increase from September 1 lows of just under $72/bbl to the November 11 high of nearly $88/bbl. investors should take advantage of inevitable oil price volatility to add to positions.singer@gs.hoskote@gs. (212) 902-8259 Goldman Sachs & Co. Will Su (New York): will. ESV. Five SMID-cap oils: FST. though Neutral-rated Hess also appears well positioned. OXY.E&P: Reiterate Buy on QEP. Our Top 10 Buy-rated favorites include CNQ. ESV. Bill Barrett and QEP Integrated/domestic oils at key inflection point on shale strategies One of our key themes for integrated and domestic oil companies in 2010 has been the potential for companies to get credit for North America unconventional resource expansion strategies.ramtri@gs.

for we see it developing into an important destination market.C.keung@ghsl. We expect 2011 capex/production guidance to be released this week to be positive. see exploration as a more important catalyst. +86(10)6627-3483 Beijing Gao Hua Securities Company Limited 3 1bn in 12 yrs We expect China to become the largest aviation market globally by 2020 and achieve 1bn air passenger (pax) traffic by GDP growth coupled with an increasing air travel penetration rate. 30%50%) within our M&A framework. Beyond the Niobrara (first well drilling now) the Mancos play remains a key catalyst. 2010 We have increased confidence in 2012 liquids upside from: (1) processing UPL. costs. gov’t pronouncements. We believe QEP is not well known to E&P investors and would use weakness during the continued shareholder transition since QEP's spinoff from Questar as a long-term opportunity. BRICs will represent 35% of the global aviation market by 2020E. Hino Lam (Hong Kong): hino. vs. +44(20)7774-1917 Goldman Sachs International Ricky Tsang (Hong Kong): ricky. Upgrade KWK to Neutral.C. prefer NFX We have continued confidence in the Granite Wash and FST's leading position in the play. BBG: Production growth flexibility. as long as gas sentiment remains poor. Key risks: commodity prices. well results. Global: Transportation: What happens when 1bn Chinese fly? Tom Kim (Hong Kong): tom. +852-2978-0856 Goldman Sachs (Asia) L. as low-cost carriers are expanding.15% currently. even in China. Ronald Keung (Beijing): ronald. and we raise our 6-month DCF. +852-2978-6631 Goldman Sachs (Asia) L. CFA (New York): noah. but air traffic control is a potential in our view.lam@gs. and (2) production in the Granite Wash/Bakken/Cana Woodford that could approach critical mass in 2012. Airports are well positioned to benefit China’s plan to add 90 airports by 2020 implies sufficient capacity to handle 1bn pax/yr. Ultra Petroleum. Noah Poponak. up 3.and multiples-based price target for SD to $5 from $6 to reflect lower EBITDA and LT which bodes particularly well for domestic carriers. update ests. but exploration key We believe BBG has ample flexibility for growth following the BLM's permitting of drilling acceleration in the West Tavaputs (UT) field. rising consumption in China could drive domestic and outbound int’l air travel. there is no room for complacency. and could continue to take market share from incumbents.C. We also update estimates for QEP. Recent well results above company type curves appear more the norm. BBG. (212) 357-0954 Goldman Sachs & Co. By our estimation. +852-2978-0526 Goldman Sachs (Asia) L. SD. Secular growth should stem from the multiplier effect of faster-than-avg. FST is well positioned to benefit from both from the Granite Wash and emerging plays in Canada. Chun-Yai Wang (New York): chun-yai. XCO We upgrade KWK to Neutral from Sell and raise our 6-month target price to $15 from $13 to add an M&A component to our new price target methodology with a potential M&A ranking of 1 (high probability.L. +44(20)7552-2958 Goldman Sachs International Hugo Scott-Gall (London): multiplesbased price target to $35 from $34.poponak@gs. While we prefer NFX among Granite Wash players (and raise our price target to $74 from $70 on Granite Wash upside). David H. We lower our 6-month DCF. Perry (London): FST: Granite Wash guidance appears conservative.tsang@gs.Americas Morning Summary November 15. Not only will China become a key demand generator for overseas tourism.scott-gall@gs. We do not believe this will be appreciated. BBG. China fleet to double by 2022E Goldman Sachs Global Investment Research . SandRidge Energy. (212) 902-9610 Goldman Sachs & Quicksilver Resources and EXCO Resources to reflect 3Q results/other adjustments. c.5 times from an estimated 284mn pax in 2010E.L. and as such. Another angle on China consumption In our view.

and (3) CROCI growth. (212) 357-3292 Goldman Sachs & Co. Top 10 long-term winners We have identified 10 stocks in our global aviation coverage universe with at least 15% exposure to BRICs and leveraged to the secular growth prospects we forecast. ICLR expects to see an uptick in the amount of revenue converted out of its backlog in the next 12 months despite its ongoing central lab issues. 2010 To carry 1bn air pax/yr. (212) 934-6193 Goldman Sachs India SPL 4 Backlog growth seen with 3Q. we believe preclinical exposure will be an overhang for CRL and CVD and stay Neutral on both Specifically. China Eastern Airlines. we estimate China’s current aircraft fleet would need to double to 3. PPDI also mentioned that its backlog duration had actually decreased slightly. Until we see signs of a more meaningful improvement.banwait@gs. On the issue of backlog conversion. we maintain our CL-Buy. given an overall lengthening in the duration of clinical trials and a higher level of project scope. Embraer and Bombardier. 3Q’s disappointing preclinical results demonstrated that the earlystage environment remains challenged as still weak demand and excess capacity sparked further cost actions and buyback announcements. Jones (New York): robert.Americas Morning Summary November 15. and Spirit Aerosystems. These 10 stocks have outperformed the MSCI World Industrials Index cumulatively by c. Importantly. In our view. Americas: Healthcare Services: CROs: Continued solid clinical bookings with 3Q. SIA Engineering.walker@gs. management said it was seeing longer revenue conversions. Baneesh Banwait (Bangalore): baneesh. the preclinical industry continues to face challenges and low visibility into future business.p.500 by 2022E. an issue that has been top of mind for longer-term share performance remains linked to an improving preclinical environment. and while it will take share. (212) 902-8446 Goldman Sachs & Co.500% over the past 10 years. On CVD’s late-stage business.0 or better across the group. and are pursuing share repurchases as excess capacity and prolonged lack of demand continues to pressure fundamentals. we received updates from managements and we continue to feel comfortable that the bolus of strategic wins will lead to accelerated top-line growth. While slower conversion related to the large number of projects in the start-up phase from recent strategic wins led PRXL to lower its near-term outlook. Strategic deals help bookings with clarity on backlog conversion We saw further growth in aggregate backlogs which were helped by new business related to recent strategic deals. China’s demographics and fleet mix may result in even greater opportunity for the regional jet OEMs. Verdell Walker (New York): verdell. (212) 357-3336 Goldman Sachs & Co. Rolls Royce. the quarter also provided further clarity around backlog conversion. Shanghai Int’l Airport. Our top 10 long-term picks are Aeroflot. BE Aerospace. China is focused on its indigenous manufacturing capability. it will require many years. screened against our global investment profile (IP) metrics including: (1) Director’s Cut valuation . Boeing. and Airbus. presenting ample opportunity for current large-jet Both companies with preclinical exposure (CRL and CVD) reduced capacity. given (1) industry leading TTM book-to-bill ratio of 1. (2) reset FY2011 (2) cash returns on cash invested (CROCI). reiterate CL-Buy on PRXL Robert P. Boeing.jones@gs. Precision Castparts. CVD & CRL take further actions to offset still poor fundamentals In contrast to the late-stage. Cathay Pacific. stay CL-Buy on PRXL & Buy on PPDI Our positive view of an attractive clinical late-stage environment was strengthened again this quarter as we saw book-to-bills ratios of 1. and (3) best EPS growth in the space (21% three-year forward EPS CAGR). Randall Stanicky.67. given the increasing prevalence of long-term strategic deals. undertook significant cost-cutting initiatives. Conversely. CFA (New York): randall. Goldman Sachs Global Investment Research .

(2) robust free cash flow (+20% FCF yield). Richard Skidmore. the first decline in 11 months and driven by weakness in coated groundwood.6% yoy ytd in 2010. The coated paper market remains tight with operating rates in the mid-90s. and (3) our forecast that Domtar will increase its return of cash to shareholders in 2011 by repurchasing $400 mn of its stock. Alex Ovshey (New York): alex.5% yoy in October.8% yoy – the largest drop thus far in 2010 and below our estimate of minus 4%-5%. but are up 16. Last ytd.5% yoy in October. but market remains tight Coated paper shipments fell 1. We expect producers will close 4% of capacity to keep operating rates near 90% and prices steady. given (1) expectations for UCFS markets to stay balanced. Usha Chundru (Bangalore): CFA (New York): stephen.grambling@gs. Scott Kaufman-Ross (New York): scott.8% yoy in September and October. and pricing rising.skidmore@gs.kaufman-ross@gs. 6 Goldman Sachs Global Investment Research .com. RISI’s Paper Trader reported UCFS prices slipped $20/ton in October. (212) 357-0648 Goldman Sachs & Co. Total printing and writing paper shipments are up 6. significantly weaker than the 2. Domtar is Buy rated owing to robust FCF generation Although Domtar is the largest UCFS producer and we acknowledge UCFS volumes are likely to continue to decline. (212) 902-7832 Goldman Sachs & Co. Stephen Grambling. we remain Buy rated on Domtar. but weaker volumes pose risk Uncoated freesheet (UCFS) shipments are down 6. We attribute slower coated paper demand to tougher yoy comparisons and the inventory restocking cycle coming to an end.0% yoy.0% yoy ytd decline. Morry Brown. but Wal-Mart makes its move Adrianne Shapira (New York): Uncoated freesheet volumes declined 7. $1098/ton in 2010 as we expect prices to remain steady from current levels. (212) 902-6751 Goldman Sachs & Co. We forecast UCFS prices will average $1. Key risks: greater secular UCFS volume declines. inventories below average levels. (212) 934-4206 Goldman Sachs & Co.Americas Morning Summary November 15. (212) 934-5057 Goldman Sachs India SPL Uncoated freesheet volumes disappoint in October According to preliminary statistics reported by the American Forest & Paper Association (AF&PA). Uncoated freesheet markets steady. CFA (New York): richard. We expect UCFS volumes to fall 4% in 2011.shapira@gs. Conversations with the large UCFS producers suggest their prices are unchanged and that the weakness is coming from discounted imports and competitive activity in private label.ovshey@gs. We attribute weaker UCFS volume to high unemployment levels and negative secular trends. Coated paper volumes fell 1.8% and 7. US printing and writing paper shipments declined 4. In October.chundru@gs. the International Trade Commission affirmed tariffs on Chinese and Indonesian coated freesheet imports – a positive for US coated freesheet producers.120/ton in 2011 vs.brown@gs. 2010 Other Headlines Basic Materials Americas: Paper & Forest Products: Printing Paper: Preliminary data show volumes turn negative in Oct. lower paper Coated paper volumes are slowing. 5 Consumer Cyclicals Americas: Retail: Amazon widens leads in Toys and CE. (212) 357-5509 Goldman Sachs & CFA (New York): morry. (212) 357-4174 Goldman Sachs & Co.

3%. Bally management believes there is a systems revenue opportunity of ~$1. However. Ethernet cable.portus@gs. Bally’s new Alpha2 and pro series products were a marked improvement over its older offerings. with all retailers maintaining their positions and Amazon widening its lead. new cabinets/platform raise bar Bally’s event focused on systems and the new Alpha2 platform and pro series cabinets. Last year. 8 Goldman Sachs Global Investment Research . they will only be successful if customer budgets increase. lowering prices by 2.shapira@gs. while the quality of products seems to improve each year. Consumer Electronics Count: Amazon widens lead.1% higher than Wal-Mart. CFA (New York): stephen.kent@gs. Amazon had a wider 4. followed by Best Buy. with Wal-Mart.3% below the average. (212) 357-4174 Goldman Sachs & Co. IGT sets goals for FY11 with an increased focus on on-line/mobile IGT discussed 5 goals for FY2011 during its presentation: (1) reduce its reliance on a North American replacement cycle by improving gaming ops yields.grambling@gs.5%. Neil Portus.8% above respectively. prices fell 1.2% were in line with last week at 2. Overall. as Wal-Mart and Amazon lowered while Kmart and Target were flat. We thought the games looked very good and the interaction between the iDeck. Stephen Grambling. cutting prices by 2. IGT also displayed several new titles including a graphically-impressive Dark Knight as well as Dirty Dancing. followed by Wal-Mart at 3. and 6. (212) 902-7832 Goldman Sachs & Co.9% (212) 902-9672 Goldman Sachs & Co. (212) 902-2077 Goldman Sachs & Co. Costco retreats Week 3 of our CE Count was uneventful.hackel@gs.8% above.Americas Morning Summary November 15. 2010 Toy Tally: Wal-Mart makes its move. While this installation was successful and could attract more customers. but Amazon still tops in Toys Week 3 saw Wal-Mart fire back against rival Target. Amazon was just as aggressive.2% to move 2. Amazon prices were 10. 7 Industry context Yesterday. Kmart remained out of contention. Amazon and Kmart most aggressive. while Target was a narrower 1. casinos need to have iView installed. Last Bally – Innovation in systems. 6. The meetings were well attended and investor interest was high.8bn for new products and $10 mn-$20 mn for maintenance/sales revenues over the next 5-7 and (5) accelerating growth from its on-line and mobile group (which IGT views as a significant opportunity and expects to be a leading player. we saw similar positioning after week (2) growing globally. Bally is looking to extend its lead in systems by growing the installed base of iViews and launching floor wide value-add applications. The software is currently installed at the Barona casino and company management indicated that there was an increase in win after the installation.6% below to 0. see limited upside Adrianne Shapira (New York): adrianne. Kmart at 3. 10.7% below Target. The second focus point at the investor event was the new games and hardware. Costco moved from 1.3% above Wal-Mart. its systems offerings and revenues from its IP catalog. base game and top box was solid. though Best Buy was in line with the average and Costco improved its position. CFA (New York): Eli Hackel (New York): eli. Overall. Americas: Gaming: Takeaways from Bally and IGT pre-G2E analyst events Steven Kent. (3) taking advantage of its cash flows. Americas: Retail: Broadlines: With even fewer beat & raises likely in week 2. CFA (New York): neil. IGT and Bally hosted pre-industry slot show events. Kmart and Target. (4) improving operating efficiencies and returns (including monetization of prior acquisitions and keeping R&D spend relatively flat but increasing efficiencies by leveraging third party technologies and increasing cross-studio collaboration).3% during week 3.0% pricing gap. One example of a value-add application that showed success is Bally’s virtual racing application. (212) 902-6752 Goldman Sachs & Co. and a dedicated sales/marketing staff to get a full return. iView. IGT expects to grow this division from about 200 people currently to around 300 over the next year). The Hangover and Ghostbusters. price cuts of 2. However.9% to take the top Toy Title with prices 1.3% below Wal-Mart.

This expectation stems from continued weakness in discretionary categories.00 2010E 0. However.68 since 2Q. BRF will hold an analyst day on Tuesday (Nov 16) in São Paulo. (212) 934-4206 Goldman Sachs & Co.67 remains a penny below consensus. +55(11)3372-0101 Goldman Sachs Brasil Bco Múlt S.brown@gs.6%. EBITDA margin stood at 10. Eng: +1706-679-9291. Processed meats – BRF’s largest segment (49% of domestic sales) – was the weak point of the quarter with only 1% volume growth and prices down 2% yoy.7%. we see a similar theme emerging as a continued mix shift to food and away from weaker discretionary sales may put downward pressure on off-mall retailers’ gross margins. and the results largely vindicated this expectation. Although in natura prices rose 9% driven by strong pork prices (up 22% yoy).com.6% was at low end of 1-3% plan. 30 bp above GSe and 50 bp above the Street.SA): 3Q2010 in line.wigman@gs.A. CFA (New York): morry. suggesting upside will be based on cost control.Americas Morning Summary November 15. Domestic volume growth of 10% yoy was driven by in natura poultry/pork (+21% yoy) and other processed food categories (+21% yoy). We would expect SKS’ beat to stem from strong margin expansions while JWN’s expenses to likely restrain strong flow through. underperforming Brazilian exports (which grew 17% yoy in the quarter. but no growth from processed meats.lensing@gs. Week 1 share reactions Ahead of week 1 of 3Q earnings. which are the backbone of the holiday selling season. Looking towards week Claudio Lensing (Sao Paulo): claudio.kaufman-ross@gs.876 mn R$27. High end department stores lap tough comparisons well Both JWN and SKS demonstrated their ability to lap tough year ago comparisons as they delivered above plan comps of 5. 3) consensus est for 3Q remained flat at $0. Overall export volumes increased 10% vs.14 Market cap Target price Fiscal y/e Dec EPS (R$) P/E EPS Quarter/Interim Investment Lists Neutral Coverage view *Current and a year ago Neutral * 9 R$21. this expectation is factored into our earnings estimates. WMT: Negative sentiment braced for a guide down We do not expect WMT to miss Q3 EPS nor guide down Q4. Consistent with the prior week. 2) discretionary and margin rich categories like apparel and home softened in Q3. Dial-in: Port: +55-11-2101-4848. Analysis Domestic sales up 8% Goldman Sachs Global Investment Research . Most emerged with heavy inventory levels that could cap future margin expansion into the holiday season. respectively.9X 0. beating our and Bloomberg consensus estimates by 3%. 2010 Morry Brown.A. both have strong momentum heading into the holiday season. R$25. starting 6 am EST. EPS broadly surpassed consensus estimates due to better cost control and below the line items. +55(11)3371-0839 Goldman Sachs Brasil Bco Múlt S.74 33. according to Secex). (212) 357-0648 Goldman Sachs & Co. and 4) comparisons become more difficult in 4Q. News Brasil Foods reported on November 12 recurring EBITDA of R$602 mn. Net income of R$190 mn was 5% below our estimates owing to a slightly higher tax rate. (BRFS3.A. BRF’s in natura poultry exports grew 8% yoy.SA. 3Q2009. stay neutral BRFS3. ISM. QE2). Our 3Q EPS est of $0.4X 0.23 2011E 1. Consumer Staples BRF-Brasil Foods S. while its turnaround efforts are far from smooth.9% and 5. we believe the stock could bounce given the overly negative set up in the absence of a miss and Expect guidance to remain conservative heading into the holidays Although economic indicators have improved over the past two months (payrolls.24 Gustavo Wigman (Sao Paulo): gustavo. we expected unfavorable weather trends to pressure margins. but not firing from all cylinders yet. we think guidance will remain conservative heading into the holidays and expect executives to maintain their current outlooks. with average BRL prices down 3% impacted by FX appreciation. TGT: See potential for EPS miss on soft sales and negative mix shift We see downside risk due to four factors: 1) 1. Scott Kaufman-Ross (New York): scott. Nonetheless.44 17. average domestic prices declined 2% yoy driven by processed meats. Poultry exports trended below overall Brazilian exports in 3Q2010.

the heat’s still on We retain our Cautious view of packaged food sector due to sluggish volume trend and high level of competition. suggesting ROI remains relatively low. estimates and PT remain unchanged. in our view. We believe the transition could be disruptive and expect the disruption to be most severe in promotionally intense categories. 10 Still searching for promotional inflection points in Food This is the second installment of our retail promotion tracking report.luddy@gs. SG&A was 5% (or 90 bp. Nestle continues to stir the pot. In other words. Tyler Walling (New York): tyler. Implications Although from a margin perspective results were good. We see this as a likely enabler to pricing actions for K and KFT in the coming months. No relief in cereal. Another quarter of double-digit EBITDA mg. Hong (New York): judy.5% and 16. Cookies and crackers still relatively benign The seemingly rational competitive activity that we reported on last month in the cookie and cracker category continues. We continue to see potential for Mars and Hershey to respond in the coming months. Danone’s retaliation to Mills’ aggression is building in yogurt. Goldman Sachs Global Investment Research .com. 2010 Total export revenues increased 7% yoy. the lack of consistent volumes & pricing across categories deterred BRF from having a clean quarter. United States: Food: Actions are louder than words. This analysis is of particular relevance today as the industry transitions from a deflationary cost environment to an inflationary one. Aggression continues to build in soup & chocolate candy Campbell had been the chief aggressor but Mills hit back in a big way this month (GIS soup pricing down 22% yoy). (212) 902-9592 Goldman Sachs & Co. The report uses unique and innovative data and calculations to provide what we believe is a more accurate portrayal of promotional intensity. Recurring EBITDA margin expanded 70 bp qoq driven by lower employee profit sharing. the promo heat's still on Judy E. it has yet to dial back promotional intensity. Jason English (New York): jason. (212) 934-0495 Goldman Sachs & Co. We look for price investment to remain elevated in an effort to restore volume. (212) 902-3293 Goldman Sachs & Co. IT and consulting expenses. but we no longer see the aggression building. as packaged food remains heavily promotional and the efficacy of promo spend is still down yoy.hong@gs. Coffee is still aggressive with Kraft moving the wrong way on price. Despite the rhetoric. Trends. (212) 902-0490 Goldman Sachs & Co. gross margin was up 40 bp qoq thanks to physical inventory Our analysis supports this caution. however. coffee. as % of sales) ahead of our estimates on higher marketing. Our rating. Michael Luddy (New York): michael. Although local prices of corn and soybeans grew 7. are not universal and we continue to see divergences at the category level.walling@gs. Baking mix aggression remains high.Americas Morning Summary November 15. while the industry has begun to talk of price increases.8% qoq respectively. In chocolate. which along with the rapid rise in commodity costs could drive profit and margin disappointment in the near term. no impact from grains yet.english@gs. yogurt & baking mixes Mills is still aggressive in cereal and Kellogg may at last be rejoining the Mills’ price investment was surprising but not as surprising as the +47% volume response.

67 14. Clinique grew 6-7% and MAC was up 5-6%. EL up 4% in October Andrew Sawyer. Stephanie Whited (New York): stephanie. Its skin care business (+11-12%) continues to outpace Goldman Sachs Global Investment Research . Investment view We initiate coverage on IFF with a Neutral rating and see 10% upside to our $57. Industry context IFF is an unbranded supplier in a fragmented industry. flavors & fragrances are a real value-add for the CPG customers at a relatively low Core drivers of growth We see LT sales growth of 4% vs. All three beauty sub-categories posted solid results.sawyer@gs. (IFF): Initiate on IFF at Neutral .com. On the plus side.2010 was zesty. Americas: Consumer Products: Cosmetics: US Prestige cosmetics: Industry sales up 7%. 12-month price target. a 3% historic average on increased emerging market presence (40-45% of sales). Estee’s smaller brands generally posted the strongest growth Estee’s category performance was broadly positive. (212) 855-9812 Goldman Sachs & Co.sawyer@gs.whited@gs. which could make margin expansion difficult. We envision long-term EPS growth of 9%.Americas Morning Summary November 15. Stephanie Whited (New York): stephanie.3X 0. (212) 902-5488 Goldman Sachs & Co. We also see limits on margin potential due to rising input costs and the fragmented industry structure. 2010 International Flavors & Fragrances Inc. Sales were positive across Estee’s top three brands. Valuation We are setting a 12-month P/E and DCF-based price target of $57. Strong FCF is a key plus and we see a 20-25% increase in the dividend in 2011 along with resumption in buybacks ($100 mn). $ CFA (New York): andrew. sales were up 1-2%.73 2011E 3. The Estee Lauder brand lagged a bit with sales only up 1-2%.00 2010E 3.whited@gs. We also expect the strategic review to result in a doubling in cash back to shareholders in 2011.63 Andrew Sawyer. This said. Risks to the investment case (1) The 2010 sales base is inflated by customer inventory re-stocking. This is 14-15X our 2012 estimate. Sales growth could be sub-par at 1-2% in 2011 as IFF hurdles inventory restocking from 2010. core (ex-Prescriptives) grew 7% Estee Lauder’s sales were up 4% according to NPD. Make-up sales were up 4% for the period. and improved resource allocation. We are encouraged by the 300bp of sequential improvement versus the June quarter average. Fragrance sales grew 7-8% as the category lapped a -15% decline in the yearago period. This said. and (2) IFF had difficulty pricing to recover input cost inflation in 2008. EL’s underlying fundamentals remain strong with the company’s core business (excluding the discontinuation of Prescriptives) growing inline with the industry. but 2011 could be milder IFF. (212) 902-5488 Goldman Sachs & Co. in line with the company’s historic average. which supports margins.193 mn $57.3X 0.43 15.46 Market cap Target price Fiscal y/e Dec EPS ($) P/E EPS Quarter/Interim Investment Lists Neutral Coverage view *Current and a year ago Neutral * 11 $4. we stay on the sidelines due to modest risk to consensus sales and EPS forecasts. EL reported sales up a significant step-up versus the 4-5% year-to-date decline and the first positive number on this basis since April 2009. Skin care remains the strongest category with sales climbing 11% in the month. On a two-year stacked basis. (212) 855-9812 Goldman Sachs & Co. a better R&D pipeline. Margin gains may be difficult to obtain in a fragmented industry with larger customers. 12 US cosmetics industry up 7% Total cosmetics sales in US department stores grew 7% for the month of October. Industry consolidation should favor the big suppliers like IFF. IFF has posted robust growth in 2010 and is making strategic changes to re-allocate more resources to growth areas like emerging markets. CFA (New York): andrew.

carriers appear to be incorporating an additional 100-300 bp in pricing to reflect the expected impact from health reform mandates (e. With regard to the pending minimum medical loss ratio (MLR) thresholds. featuring his frontline view of 2011 pricing and product trends. A premium multiple is warranted by strong sales and margin trends. On average. Ken is a national employee benefit practice leader for Equity Risk Partners. Strong price discipline following the 2006-2009 industry downcycle Over the years. Sam Wass (New York): sam. adult dependent coverage). 2010 the industry. a San Francisco-headquartered risk management and employee benefits consulting firm with a national scope of practice and a focus on the high-end of small group and middle-market employer segments. (212) 902-6784 Goldman Sachs & Co. but the potential for a further in the P/E premium is limited. A transcript of the conference call is provided in the body of this report. Ken and his colleagues have provided a quite valuable perspective to us in terms of spotting key inflection points. As background. CFA (New York): matthew. With that backdrop. Remain Neutral on EL shares We view the industry and EL’s core performance as positive. In this (2) Shares reflect solid turnaround dynamics – The stock is trading at 20X our CY2011 EPS. Subsequent results could be choppier if this dynamic reverses and sell-in lags sell-through. our call this year highlighted a strong bias to price discipline across most carriers and markets. For example. CFA (New York): sebastian. the shift from multi-year periods of intense price competition and margin erosion to recovery of price discipline and margin expansion).paquette@gs.borsch@gs. 25% above the large-cap multi-national average of 16X. most carriers appear to be positioned for rebating surpluses as opposed to pricing lower to proactively achieve compliance with MLR floors.. Healthcare Americas: Managed Care: A frontline perspective on 2011 pricing and product trends Matthew Borsch. while make-up (+20bp) and fragrance (+1-2%) underperformed with sales up modestly. consistent with what we expect given our view that 2010 marks the first year of recovery from the 4year industry down-cycle (2006-9). We remain Neutral for two reasons: (1) Expect better buying opportunity in subsequent quarters – Estee’s restructuring is clearly gaining traction and sales trends are healthy. 13 Goldman Sachs Global Investment Research . Sept 1Q results benefited from sell-in that exceeded sell-through in Europe and the US. including major carrier service disruptions as well as turning points in the health insurance industry underwriting cycle (in carriers are citing the MLR rules as a rationale to compress producer / broker commissions. which we continue to see as the key bellwether for health insurance industry trends. This said. it appears that Coventry’s recent public comments about pricing proactively below trend for books below the MLR threshold is an However. 2010 we hosted our 8th annual conference call with middle-market employee benefit consultant Ken Ambos. there may be potential for a better entry point in coming quarters. Sebastian Paquette. 10. with – for example – the Blue Cross plan margins hitting a 20-year low in 2009. A national perspective on the middle-market On Nov. Higher pricing for 2011 partly reflects new health reform mandates Conservatism in underwriting moving into 2011 is widespread. reported sell-in to US department stores grew DD while sell-through in the NPD data was up 4%. preventive care. (212) 902-5306 Goldman Sachs & Co.g.Americas Morning Summary November 15. (212) 357-0617 Goldman Sachs & Co.

higher acquisition synergies. cyclical demand for EM our previous estimates.3 bn in revenue and $2.stanicky@gs. Management provided FY2011 guidance of $6. Domenic Pilla. respectively) to reflect increased guidance visibility. Jones (New York): 5.80. (212) 934-6193 Goldman Sachs India SPL 15 Distributor events for November and December 2010 Even though we are through the majority of 3QCY2010 for our Healthcare Distributor coverage. Americas: Healthcare Services: Distributors: Upcoming Distributor Events in November and December 2010 Robert P. Implications We are raising our 2011E-2013E EPS by 5. we will be hosting investor meetings in Toronto with the President of McKesson Canada. as well as key customer contract negotiations in Canada. downside risks include acquisition integration challenges.jones@gs. there are several important events upcoming for the group before year-end MCK (NR) – Investor meetings with President of McKesson Canada On 11/16. Investor focus will likely center around the impact from government-imposed price reductions on generic drugs across certain provinces.5X.52 bn-$1.55 bn/$0. Jeff Ares (New York): jeff.1% to $2.7X 0. (212) 902-5166 Goldman Sachs & Co. Our price target is based on an equal weight of P/E (50%) and EV/EBITDA (50%) and implies 15. We are raising our P/E and EV/EBITDA multiples slightly (15X to 16X and 9X to 9. $2. and failure to recapture market share in the VARI franchise.3% for our FY2011 EPS estimate of $ India +31%). (212) 357-3292 Goldman Sachs & 14. PDCO (Neutral) – 2QFY2011 Earnings on November 23 Patterson Companies will report 2QFY2011 results before the market open on 11/23 and hold a conference call at 10:00am. and 1.47. Key risks Upside risks to our price target include a broader economic recovery. On the Life Science and Chemical Analysis side of the business. (212) 902-6393 Goldman Sachs & Co.1 bn-$6. Verdell Walker (New York): verdell. Schein mentioned that it is seeing stability in the number of dental visits and it believes that a ‘‘plateau’’ has been reached. Valuation We are raising our 12-month price target to $38 from $35 based on higher estimates and target multiples. 2010 Agilent Technologies (A): Beats 4Q2010 on stronger electronic measurement sales A.06. Agilent expects revenue/EPS of $1.50 EPS. network spending on 3G manufacturing and R&D.00 18.47.$2. CFA (New York): randall. and sustainability of demand for EM products. What's changed Agilent reported better-than-expected 4Q2010 revenue/EPS driven by higher-than-expected revenue growth and incremental margins in its Electronics Measurement Group.Americas Morning Summary November 15. For F1Q11. The company continues to benefit from growth in emerging markets (China: +37%. Competitor Henry Schein (HSIC. Agilent raised expected cost synergies from VARI to $100 mn from $75 mn and noted it remains on track in the integration and is in the process of consolidating facilities and leveraging its scale in procurement and Market cap Target price Fiscal y/e Dec EPS ($) P/E EPS Quarter/Interim Investment Lists Neutral Coverage view *Current and a year ago Neutral * 14 $12.57. $36. and $3.799 mn $38. slightly lower contributions from Varian vs. Baneesh Banwait (Bangalore): baneesh. (212) 357-3336 Goldman Sachs & Co.0%.5% yoy for consumables and 1. with the Goldman Sachs Global Investment Research .65 2011E 2.32 Isaac Ro (New York): isaac.00 2010E 2.55-$0. We expect similar results from PDCO. Neutral) reported internal sales growth of 1. (212) 902-8446 Goldman Sachs & Co. and lower incremental margins from both the Life Science and Chemical Analysis divisions.0%.banwait@gs. Randall Stanicky.2X 0. to reflect stronger revenue growth and better incremental margins in EMG.ares@gs. as well as growth in R&D related to the LTE rollout.

Inc. as the NFIB index has improved for two consecutive months. compared to a 13% rise in the S&P 500. Dial-in: 1-877941-8609 / ID: 4384954.00 2012E and Service Cloud. CFA (San Francisco): stephanie. Social proliferating. CFA (San Francisco): simona.08).com. we believe that. while there is still uncertainty about increased competition. Valuation 12-month PT of $128 (10% upside) is based on EV/rev. raising RIMM EPS and PT Simona Jankowski. CRM is at a CY12E EV/adj. Technology salesforce. Our surveys show increasing appetite for social software among both large enterprises and SMBs as organizations aim to improve intra-company collaboration. PSSI (Neutral) – Hosting investor meetings with management We will be hosting investor meetings with PSS in Milwaukee and Toronto on 12/1 and 12/2.withers@gs. (415) 249-7470 Goldman Sachs & Co. FFIV. and nuclear pharmacy ramp-up.46 for the quarter vs. both of which were an acceleration from last quarter’s 12% and 49%. expect FY2011 guidance O&M will host an Analyst Day on 12/2 and give first time FY2011 guidance (GS/Street at $2. recent SMB data points have suggested a level of cautious optimism. vs. (2) Transactions on the company’s platform grew 14% qoq and 54% yoy. Implications We maintain our above-consensus estimates for FY2012 and FY2013 and we believe that Street estimates will increase as salesforce. as well as updates on utilization trends.friar@gs. Stephanie Withers.115.18 0. FCF/ continues to gain market share from legacy vendors and drives top-line growth and margin expansion through up-sell. resulting in total bookings of $412 mn. updates on key initiatives We expect CAH to provide more insight into its specialty distribution strategy. Ventsi Stoichev (San Francisco): ventsi. especially Service Cloud and now Chatter.jankowski@gs. CAH (Neutral) – 2010 Analyst Day on 12/7.Americas Morning Summary November 15.2X 0. including private label growth and cost cutting efforts. 17 Goldman Sachs Global Investment Research . industry conversations and surveys suggest that the company is increasingly gaining traction beyond its core salesforce automation offering. (CRM): Bookings growth likely to remain strong. FCF of and expect the company to post bookings growth of 26% for the quarter. -. User feedback on Chatter remains very positive and.73 Market cap Target price Fiscal y/e Jan EPS ($) P/E EPS Quarter/Interim* Investment Lists Americas Buy List Coverage view *Current and a year ago Attractive 2011E 0. but also customer outreach and marketing.05/$2.66 $16. Expectations are elevated with the stock up 22% since last and ARUN.45. are too high. margin expansion efforts. 2010 possible exception that its equipment sales might fare better given its exclusive rights to distribute the CEREC CAD/CAM system in the US. Buy CRM.013 mn $128. What's changed We are buyers of salesforce. We look for further commentary on margin expansion initiatives. SaaS peers at Key risks A derailing of the enterprise spending recovery.16 Americas: Communications Technology: GS CommTech Weekly: Previews for QCOM. at the very’s ability to successfully monetize it. generic penetration. the Street at $0.. we believe Street 2011 revenue estimates. respectively. and DCF. OMI (Sell) – 2010 Analyst Day. Our positive view is based on: (1) Our checks. Chatter penetration will significantly improve the company’s stickiness within the organization and pave the way for further up-sell and wider adoption of Force. EV/adj. We are at $0. (3) Finally. With continued utilization headwinds.stoichev@gs. (415) 249-7437 Goldman Sachs & Co.01 16 Sarah Friar (San Francisco): sarah. which imply 4% growth. (415) 249-7440 Goldman Sachs & Co. We are 2% and 6% above $116. (415) 249-7436 Goldman Sachs & Co. and 3) its entry in the CE display market with Mirasol. Sell): Raising estimates and price target as we incorporate tablets We raise our FY12/13 estimates to $ suggesting an 8% discount to its 1-yr average of (prior 4. Short interest declined in 2H October Short interest for CommTech fell 4. Mukul Garg (Bangalore): mukul. flat with the S&P 500 and the Nasdaq. Amanda O'Brien (San Francisco): amanda. which would leave units in line with long-term demand. Although most segments are balanced. the size of the tablet market. (212) 357-0535 Goldman Sachs & Co.delaney@gs.4X. (New York): james.0/2. (212) 357-7956 Goldman Sachs & Co. Semi revenue guidance is for a slightly below seasonal 4Q.schneider@gs. F5 (FFIV.covello@gs.3X the S& Our strongest performer was BSFT. (212) 934-9960 Goldman Sachs India SPL Weekly stock performance Our median stock was down 2% last week. (917) 343-3149 Goldman Sachs & Co. supply/demand balanced Our quarterly inventory compilation of approximately 75 companies across the tech supply chain showed that total 3Q10 inventory increased 5% AMAT.26 as we are incorporating 2. (415) 249-7453 Goldman Sachs & Co.7 mn/ $0. outline opportunities for secular growth in its telco vertical. CL-Buy): Expect upbeat tone at Analyst Day We expect an upbeat tone at Qualcomm’s Analyst Day in NY next Wednesday. Erin Riley (San Francisco): erin. Buy): Expect another solid quarter. 2010 Thomas D. in line with seasonality of +3 to 5% qoq. down 17%. This compares to the S&P 500’s inventory in the Comm segment grew 7% qoq compared to revenue growth of 1%. we don’t expect the Analyst Day to be a negative catalyst for the stock. revenues have grown 10% while inventory dollars are up just 1%. Americas: Technology: Semiconductors: GS US Semi Weekly: Inventory database. up 82% on strong earnings. (415) 249-7489 Goldman Sachs & Co.4 mn tablet units in our FY12/13 estimates. not a negative catalyst While we rate FFIV shares Sell on concerns about Street estimates in the context of a slowing server cycle in 2011. 2) (415) 249-7467 Goldman Sachs & Co.2X.D.51/$ Since 1Q08. As a result. 18 3Q inventory grew seasonally +5% qoq.38/$5. and address its virtual product portfolio. Kent Schofield (San Francisco): kent. Our PT moves to $24 from $22 on higher EV/sales of 5. of $ We expect the company to address: 1) handset/smartphone market trends. Gabriela Borges (New York): gabriela. Sell): Expect strong focus on TAM and new products. Aruba (ARUN. Qualcomm (QCOM. while our weakest was CSCO. (212) 902-1918 Goldman Sachs & Co.d. (212) 902-2066 Goldman Sachs & Co.Americas Morning Summary November 15. Valuation The median CommTech forward P/E was 16. which we view as very positive.11.38 from $5.garg@gs.9X last week.borges@gs.obrien@gs. Relative valuation was flat at 1. James Schneider. and slightly below revenue growth of 6%. RIM (RIMM. Mark Delaney (New York): mark. The balanced view the inventory database suggests matches our trendline analysis. our PT moves higher to $50 from $45. Given the Goldman Sachs Global Investment Research .lee@gs. (212) 357-2692 Goldman Sachs & Co.3% on an absolute basis in 2H Oct compared to 1H Oct. MRVL previews James Covello (New York): james. raising our price target to $24 We expect inline or better F1Q results with our/ Street’s sales/non-GAAP EPS est.7X) as a result of higher multiples for its comps and accelerating demand. Lee (New York): thomas. Kate Kotlarsky (New York): kate. We expect F5 to detail its target addressable market.

MRVL: Buy the stock.08 cents above the high end of the guided EPS range).com. recent SMB data points have suggested a level of cautious optimism. and (3) Finally. (415) 249-7436 Goldman Sachs & Co. Autodesk (Neutral): We expect upside on the quarter. 2010 balanced supply side. driven by weakness in DRAM and FPD. AMAT: 4QCY10 guidance should drive upward estimate revisions We expect 3QCY10 results to be in line with guidance for sales of $2. which were up 14% qoq and 54% yoy. PMI. INTU. NXPI: Erratum – Adjusting 4Q10 estimate on minority interest We are adjusting our 4Q10 estimate on management’s clarification of guidance for 4Q minority interest: 2010E EPS to $ given relatively bearish market expectations for the PC supply chain. as valuation remains reasonable (in line with the group on 2011 P/E) and we believe Marvell’s growth prospects remain significantly higher than the broader semi industry. in line with Street) based on (1) our industry checks and survey work. We expect 4QCY10 sales to be guided up in the low-/mid-single-digit percentage range (at the mid-point) consistent with SPE reports thus far during earnings season. GS GLI) have showed improvement. there is no change to our view that the SPE cycle is intact and we expect orders to reaccelerate in 1HCY11 ahead of new NAND capacity to $0. (415) 249-7438 Goldman Sachs & Co. Relative to 3Q results.. Americas: Technology: Software: The Weekly Catalyst: CRM. which suggest the company is successfully gaining traction beyond its core sales automation tool. Gonzalo Cavenaghi (San Francisco): gonzalo. We expect an in-line to slightly better quarter that will be driven by continued strength in the QuickBooks segment and a stabilizing SMB backdrop.g.friar@gs. Techtonics and CIO wrap Sarah Friar (San Francisco): sarah. (415) 249-7435 Goldman Sachs & Co.06-$0. as the NFIB index has improved for two consecutive months.bingham@gs. Bingham (San Francisco): derek. we expect the quarter to account for just 14% of 2011E revenue and contribute negatively to earnings. Software takeaways from the GS Techtonics conference Goldman Sachs Global Investment Research . and select micro data points from European CAD vendors and domestic commercial construction have been positive. However. If management provides 4QCY10 order guidance (Applied has not guided orders for several quarters). We think 4Q revenue guidance is likely to be above the Street (but in line with our estimate). though perhaps not as substantial upside as the beats we have been seeing in the last three quarters (each $0.6 bn (flat to +5% qoq) and EPS of $0. ADSK. Takeaways from our In-Your-Office call with 3 Fortune 500 CIOs Our panel expects normal 4Q seasonality and plans to increase their adoption of server virtualization.30. 2011 unit growth could be seasonal. as we expect stronger HDD results driven by the ongoing recovery in the PC market. we believe that management’s relatively conservative guidance has positioned the company for modest upside around the quarter. as we believe the stock is likely to trade higher on stronger 4Q guidance. both of which accelerated from last quarter. FX movements have moved in Autodesk’s favor.5 bn-$2.withers@gs. (2) continued growth in transactions. elevated expectations could temper stock reaction Key macro indicators (e. ABI index. implying 11% yoy growth. VDI. CFA (San Francisco): stephanie. This shares as we expect the company to continue posting solid bookings growth (we model 26% for the (Buy): Bookings growth likely to remain strong We remain buyers of salesforce. and SaaS.38 from $1. Stephanie Withers. 19 salesforce. we would expect the mid-point to be for orders to be down qoq. in our view. We expect above-consensus results. We continue to like the stock. CIOs expect 10%-15% of their apps deployed via SaaS today to double in the next 3 years. Intuit (Neutral): October quarter typically less important Intuit’s October quarter is a seasonally smaller contributor to full-year results. For example. as some of our checks have suggested that some of the downturn’s pent-up demand has been soaked up.32. as 4Q guidance is likely to beat expectations We would Buy Marvell ahead of the report. Derek (415) 249-7470 Goldman Sachs & Co.Americas Morning Summary November 15.

(917) 343-0717 Goldman Sachs & Co. Net income was R$164 mn (GSe R$150 mn).2X we would expect 4Q volumes to be lower than 3Q.63 17. Jaideep Malik (New York): jaideep. and showed reasonable cost control.46 R$9. CESP (CESP6.2X 0. +55(11)3371-0825 Goldman Sachs Brasil Bco Múlt S. mainly reflecting higher provisions on potential labor and environmental liabilities. down from R$255 mn last year with the yoy drop explained by (1) lower noncash monetary gains on CESP dollar-denominated debt (as the Brazilian FX rate appreciated 7% vs.67 Market cap Target price Fiscal y/e Dec EPS (R$) P/E EPS Quarter/Interim* Investment Lists Americas Buy List Coverage view *Current and a year ago Neutral 2010E 1. (212) 357-6307 Goldman Sachs & Co. However. VDI adoption is shifting from hype to reality. 2010 Three main highlights from our panelists: the shift to SaaS is accelerating.78 21 Francisco Navarrete (Sao Paulo): francisco.59 2011E 2.navarrete@gs.29 Market cap Fiscal y/e Dec EPS ($) P/E EPS Quarter/Interim Investment Lists Not Rated *Current and a year ago * 20 $5. Therefore.mehta@gs.31 13. and private Clouds are getting more traction than public for now. $31. Andre Gaeta (Sao Paulo): andre.A. even in large enterprise. Electricity sales are mostly fixed for the full year. This does not affect our full year estimates. 11% last year) and (2) a higher effective income tax rate of 35% (26% in 3Q2009). (212) 357-4042 Goldman Sachs & Co. Utilities Northeast Utilities (NU): Data Update: Updating estimates after 3Q2010 reporting NU. up 17% yoy and ahead of our R$688 mn Neil Mehta (New York): neil. implying a wash in earnings.6X 0. CESP did not show any apparent loss from exposure to the spot market.05 15.062 mn R$32. as we expect that 4Q will show lower volumes (a wash for the full year). Results beat our forecast mainly on higher revenue that we attribute to better-than-expected volume sales on the seasonality of sales contracts to distributors. up 17% yoy. +55(11)3372-0103 Goldman Sachs Brasil Bco Múlt S. Goldman Sachs Global Investment Research .lapides@gs.Americas Morning Summary November 15.82 15. 14% above our estimate and 18% ahead of Street consensus (Broadcast).507 mn 2010E 2.SA): First Take: Adjusted EBITDA grows 17% yoy and beats consensus CESP6. Implications Our rating. R$27. material) were 6% below our estimate at R$79 mn. estimates and price target are unchanged. we think the better-than-expected top line was mainly on above-normal volumes delivered in 3Q2010 to distribution companies.malik@gs. CESP booked R$81 mn of net nonrecurring expense.SA. News Brazilian power generator CESP reported adjusted 3Q2010 EBITDA of R$517 mn. Changes and Implications We update 2010-2014 EPS estimates by up to 2% for Northeast Utilities (NU) after 3Q2010 reporting and the fall 2010 EEI conference. We do not view these changes as material – as NU made modest changes to long-term capital spending and therefore rate base growth projections. services.20 2011E 1.0X any higher/lower volume delivered in any given quarter is compensated at the next. which was a concern for some investors. Analysis Net revenues came at R$757 mn.48 Michael Lapides (New York): michael. Controllable opex (payroll.gaeta@gs. Valuation We remain Not Rated on Northeast Utilities (NU).A.

R$28.A. but on higher non-cash monetary losses of R$528 mn driven by the strengthening of the currency. which reached 89. this increase is mainly explained by higher maintenance expenses.30 2010E 2. after adjusted. However. Analysis Generation & Transmission (56% of total EBITDA): EBITDA of R$666 mn was slightly higher than GS of R$624 mn.47 Market cap Target price Fiscal y/e Dec EPS (R$) P/E EPS Quarter/Interim Investment Lists Neutral Coverage view *Current and a year ago Neutral * 23 R$25.13 7. which impacts Eletrobras’s US$4.8% in 3Q2010 (GS 88%).A. This is a significant improvement from 80% EBITDA margins. However. which are volatile and not a core earnings driver.28 12. (2) controllable: slightly lower revenues from noncore operations (no details). in line with our estimate. which if excluded would leave EBITDA in line with our estimates and consensus. +55(11)3371-0825 Goldman Sachs Brasil Bco Múlt S.7X 0. Service expenses declined 30% yoy to R$28mn (GS R$44 mn). but mainly on one-offs which. The potential reduction in opex could be a key theme for Cemig in 2011. up from 88. As in the case of Chesf. +55(11)3371-0825 Goldman Sachs Brasil Bco Múlt S. Implications Our Neutral rating.688 mn R$31. and is about management’s target of a 90% billion net dollar-assets.SA): First Take: Adjusted EBITDA in line with consensus. A net financial loss at the holding co of R$145 mn was below our expectation. GS of R$463 mn and 12% ahead of consensus. R$ but driven by higherthan-expected spot revenues. Eletrobras (ELET3. In the last two years. 2010 Cemig (CMIG4.Americas Morning Summary November 15.97 9. in line with our estimates. leave underlying EBITDA flat yoy for these companies.68 2011E 2. Andre Gaeta (Sao Paulo): andre.40 Francisco Navarrete (Sao Paulo): francisco. estimates.SA. and price target are The bottom line was ahead of our estimate on (1) higher equity income driven by higher spot revenues at subsidiary Chesf and (2) a nonrecurring gain of R$181 mn at thermal generator CGTEE (regulatory recovery of past costs from the delay in start-up of a generation unit).5% in 2Q2010. Andre Gaeta (Sao Paulo): andre. apparently at the holding company).5X 0. and management has indicated this extra cost could drop next year.60 2010E 2. and (2) better aggregate results at the main power generation subsidiaries.2X 0. News Brazil’s federally controlled utility Eletrobras reported 3Q2010 net income of R$800 mn.85 Market cap Target price Fiscal y/e Dec EPS (R$) P/E EPS Quarter/Interim Investment Lists Neutral Coverage view *Current and a year ago Neutral * 22 R$19.A. Power distribution (24%). above GS of R$642 mn and compared to R$454 mn last year.A.SA): First Take: Neutral 3Q. opex seems also under control. and showing a Goldman Sachs Global Investment Research . 3Q neutral CMIG4. the company has expend around R$200 mn in higher service/maintenance to refurbish its power distribution network. Eletronorte (18%): EBITDA of R$349 mn was 5% up yoy but short of our R$431 mn estimate explained by (1) noncontrollable: lower spot revenues and. News Brazilian integrated utility Cemig reported 3Q2010 EBITDA of R$1.99 7.188 mn. EBITDA was R$283 mn.navarrete@gs. Transmission company Taesa (former Terna) continues to improve EBITDA margins. +55(11)3372-0103 Goldman Sachs Brasil Bco Múlt S. According to Cemig.SA. We think this higher cost level could repeat in 4Q reflecting increasing demand on the approach of the summer.gaeta@gs. but we do not think this is likely a trend. on slightly better-than-expected revenues (we think on higher seasonal allocation of contracts) and lower service costs. Analysis Chesf (44% of aggregate EBITDA): EBITDA of R$869 mn was above GS of R$665 mn. Service expenses were the main negative highlight. Net income was R$553 mn vs. up 11% yoy and 10% ahead of GS and 6% above consensus (Bloomberg).com.444 mn R$25. we estimate 3Q results were positively impacted by around R$80 mn of one-off provision reversal (no details. as costs tend to seasonally increase in 2H.57 2011E 3. this yoy improvement was driven by (1) half the noncash FX losses of last year on lower 3Q2010 currency appreciation.83 Francisco Navarrete (Sao Paulo): francisco. when Cemig took control of operations. +55(11)3372-0103 Goldman Sachs Brasil Bco Múlt S.gaeta@gs. good operating performance but on one-offs ELET3. Operating expenses (adjusted for one-offs in 3Q2009) grew only around 6% yoy compared to 5% inflation.6X 0.navarrete@gs. 22% ahead our estimate and 49% up yoy (offset by lower payroll but mostly on a provision reversal).

Bison. However. CFA (New York): michael. 2010 slight yoy decline (we think unlikely a trend). better-than expected revenue (on slightly higher average tariffs and volume sales) was offset by an increase in core opex (payroll.7 bn market cap natural gas utility will host an analyst day in NYC on 11/18. Michael Cerasoli. and price target are unchanged. Although the Street analyzed a vast amount of information over the past three weeks. estimates. Energy Transfer Analyst Day. Horn River. capital market volatility. El Paso Altamont Update. given depressed gas price volatility. Buckeye (on 11/16) and Enterprise (on 11/22) will host special meetings where its unitholders will vote on proposals to eliminate their general partners (EPE for EPD. and (4) “GP burden” commentary. What to watch for: (1) updates on various rate cases. BGH for BPL). (3) cash flow recovery plans for its core Mainline natural gas pipeline system. CHKM. Goldman Sachs Global Investment Research . What to watch for: (1) timetable for distribution (2) strategy for financing the remainder of its multi-year. (2) utility customer growth trends. C$21bn program. Americas: Utilities: Diversified: Pipeline & MLP Essentials: Plethora of data points over next 8 days Theodore Durbin (New York): ted. EPE. We expect a deluge of operational data from El Paso regarding this oil field on its 11/18 conf call. Atmos Energy Analyst Day. This $2. We update estimates/target prices for BPL/BGH. TX on 11/17. The fourth-largest MLP by market cap will host an analyst day in Dallas. TransCanada Analyst Day. Bruce Power. We will primarily focus on wellhead economics (returns) and production growth expectations. Spectra will meet investors on 11/17 in NYC and Boston to further discuss 3Q results. and eight misses. Our largest company under coverage will host analyst days in Toronto on 11/17 and NYC on 11/18. (212) 357-1914 Goldman Sachs & Co. Risks Weaker infrastructure growth or energy prices. Spectra Energy Analyst Update.Americas Morning Summary November 15. given nine matches. (2) expectations for natural basis differentials. Implications Our Neutral rating. which grew 11% yoy or double inflation. (3) asset acquisition outlook. we expect a plethora of data points over the next eight days. What to watch for: (1) updates on capital growth program. (212) 902-2312 Goldman Sachs & Co. and SPH. and wind power. services and material). including Keystone. These events include the following. eight beats. Although SE provided a framework for Furnas (21%): EBITDA of R$418 mn was up only 4% yoy and in line with our forecast. Buckeye/Enterprise Special Meetings. (3) outlook for marketing.durbin@gs.cerasoli@gs. especially Texas Pipeline. we do not expect a detailed discussion of guidance until its traditional January meeting. 24 Industry context Last week largely wrapped up an earnings season we rate as in line.

Brazilian companies with IGPM-linked revenues.08 2011E 4. (WEC): Updating estimates for WEC post 3Q. Neil Mehta (New York): neil.lapides@gs.Americas Morning Summary November 15. 26 Goldman Sachs Global Investment Research . if rates rise.18/$4. maintaining CL Buy WEC. and (3) weakness in electricity demand. Beneficiaries: Basic commodity producers.3X 1.graham@gs.75/$4.2x/11. Implications We remain Conviction Buy on WEC as we believe the stock warrants a premium to peers given (1) significant dividend increases for 2011/2012.94 to $ Valuation We maintain our P/E. We expect a 17% dividend increase by WEC in the coming months – with upside potential to this estimate – and further double-digit dividend increases for 2012-2013. We modestly lower our 2010 estimate from $3. WEC trades at 12.1X 1.18 14. (2) slightly revised rate base estimates for the utilities. given WEC’s payout ratio remains below peer levels.97 to $4. Jaideep Malik (New York): jaideep. Stocks that match are discussed inside. (212) 357-6307 Goldman Sachs & Co. Vulnerable: Commodity price takers. (2) above average earnings growth and (3) above average realized returns on capital going forward. Stock exchanges. Other Latin America Weekly Kickstart: Picking sectors by inflation exposure Stephen Graham (Sao Paulo): stephen.87 15. and prospects for others will change as policy and competition respond. +55(11)3371-0831 Goldman Sachs Brasil Bco Múlt S.77/$4.10 Market cap Target price Fiscal y/e Dec EPS ($) P/E EPS Quarter/Interim Investment Lists Americas Buy List Americas Conviction Buy List Coverage view *Current and a year ago Neutral * 25 $6.mehta@gs.00 2010E 2010 Wisconsin Energy Corp.9x on our 2012/2013 estimates versus peers at 12. and (3) updated financing assumptions. Inflation-exposed firms with quick pass-through. Powerful retail players in fragmented markets. (212) 357-4042 Goldman Sachs & Co. implying a total return potential of 16% versus average upside for small/mid regulated utilities of 9%. Nevertheless.997 mn $ Michael Lapides (New York): michael. Our equity view The pickup of inflation datapoints in China is refocusing investor attention on emerging-markets inflation pressure in general.87 and update our 2011-2013 estimates from $4. What's changed After 3Q2010 reporting.4x/11. Businesses under discretionary price controls. we reiterate Conviction Buy on Wisconsin Energy (WEC) and update our 2010-2014 estimates to reflect: (1) 3Q2010 earnings and 10-Q data. if i-rates respond fast. Many businesses are inflation-neutral.based 12-month target price of $67.malik@gs.96 and maintain our 12month target of $67 per share. (2) rate case and general regulatory risks.16/$4.A. Large investment projects w/delayed revenues. (917) 343-0717 Goldman Sachs & Co. we can gauge winners and losers from a first round of any inflation while price indices in Brazil and Mexico are also showing new pressure. Key risks Key risks for WEC include: (1) delays in the in-service dates for Oak Creek unit 2. Asset-sensitive financials. $59.

Locally.35/$. Our Latin America research coverage is listed on page 10. the MSCI Latin America lost 4.7%.2% and the MSCI Emerging Markets 3. I also certify that no part of my compensation was. MSCI LatAm while gained 0.0%. Brazil was down 3. Goldman Sachs Global Investment Research . our Focus List lost 0.Americas Morning Summary November 15. Rates and currency The Brazilian Real fell 2. is. related to the specific recommendations or views expressed in this report.1% and Mexico 0. Valuation MSCI Brazil is trading at 10. or will be. our Latin American coverage universe. directly or indirectly.5X.6X next-12-month consensus earnings. Name of Analyst. 2010 Equity performance Last week.4% to 1.2% to 12. Reports Published Europe this week  GS US Economics Analyst: Awaiting Tidings of the Holiday Spending Season   S&P 500 Beige Book: Five themes from the 3Q 2010 earnings conference calls  Analyst Certification Disclaimer Each equity and strategy research report excerpted herein was certified under Reg AC by the analyst primarily responsible for such report as follows: I. hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. LatAm Focus List Over the week (to Thursday). both in dollars.72/$ and the Mexican peso 1.1% vs.7% vs. with Mexico at 16.

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