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Google Inc.

US | Internet & Software | GOOG January 13, 2010

Recommendation BUY
Is Your Personal Information Safe? Price $590.48
Target $635.00

Fiscal Year Ends: Dec 2008A 2009E 2010E Key Data


Revenue (MM) $15,857 $17,384 $20,322 52-Week Range $629.51-$282.75
PF Earnings per Share Shares Outstanding (MM) 243.0
Q1 $4.84 $5.16A $6.17 Market Cap (MM) $143,486
Q2 $4.63 $5.36A $6.10 Avg. Daily Volume (000) 2,719
Q3 $4.92 $5.89A $6.40 Float (MM) 241.6
Q4 $5.10 $6.26 $7.21 % Held Institutionally 85.5%
Year $19.49 $22.68 $25.89 Long Term Growth Rate 18%
P/E ProForma 30.3x 26.0x 22.8x Total Debt (MM) $0.0
Diluted Shares (MM) 317.5 319.1 324.2 Cash Per Share $68.79

■ Summary Stock Performance


Yesterday Google announced its decision to stop censoring its search 1 Year Price History for GOOG
results in China (even though that means closing its China operations) in 700

an apparent move to retaliate following a sophisticated cyber attack on 600


500
user personal information hosted in Google's servers in China. Google's 400
300
reaction shows that as a leading Internet company, it cannot afford its Q1 Q1 Q2 Q3
200

reputation to be tarnished by allowing anyone to tamper with users 2010

12
personal information or privacy data. The cyber attack in China is not a 9
6
local issue but can risk Google global franchise & biz model, which is built 3
0
on trust (that it takes utmost care in protecting users privacy). Per our Created by BlueMatrix

estimates, China accounts for approx. $230mm in rev, $90mm in EBITDA, 1m 3m 12m
and $0.19 in PF EPS for '09 growing 3x of US and will likely reach
$300mm, $120mm, and $0.24, respectively, in '10. It is too early to Performance 0.0% 12.7% 88.8%
conclude if Google will exit China in our view. Source: Bloomberg

■ Recent developments in China Google is a leading provider of Internet search and online
advertising, provider of Web applications/tools, as well as a
In an extensive blog posted by David Drummond, Google's Chief Legal developer of software and mobile applications. The
Officer and SVP Corporate Development, the company announced on company operates a leading index of web sites and media
Tuesday its plans to stop censoring search results in China and some content and offers an auction-based advertising platform
facts about the sophisticated targeted hacker attack on its servers. where advertisers can deliver targeted messaging to
Ongoing investigation has determined that the main objective of the attack Google search pages and relevant third-party web sites.
The company was founded in 1998, and is headquartered
was to obtain personal information of civil rights activists from China and
in Mountain View, California.
around the world. According to the company, other major US companies
have been victims of the same attack.
■ Google China Please see page 2 for price targets,
With 360mm Internet users, China offers the largest Internet audience in valuation methods, and risks to
the world and presents the largest growth opportunity for GOOG or any achieving those targets.
other Internet company. Since 2006, Google has made lots of
investments in the country such as opening an R&D center, hosting
servers,censoring search results, and hiring Dr. Kai-Fu Lee, in a move
disputed in court by Microsoft, to lead its Chinese operations (Mr. Lee left
Google in Sep. '09). Despite all these efforts and investments, Google has
been the distant #2 player on the Chinese search market and struggling Contact
against Baidu (with market share of 31% vs. 64% by BIDU ).
Sandeep Aggarwal
415-659-2260
saggarwal@collinsstewartllc.com
Disclaimers regarding the content of this report as well as full disclosure of Stan Velikov, CFA
Collins Stewart LLC's ratings and information on the firm's position(s) in 415-659-2241
securities mentioned herein appear on pages 11 - 13 of this report. svelikov@collinsstewartllc.com
New York San Francisco London Dublin
Collins Stewart LLC Collins Stewart LLC Collins Stewart Europe Limited Collins Stewart Europe Limited
350 Madison Avenue 22nd Floor 9th Floor First Floor
New York 456 Montgomery Street 88 Wood Street South Dock House
NY 10017 San Francisco, CA 94104 London EC2V 7QR Hanover Quay, Dublin 2
(212) 389 8000 415 659 2222 +44 (0)20 7523 8000 +353 1 635 0210
Valuation & Risks
Valuation
GOOG: We arrive at our $635 PT by using a combination of EV/EBITDA and
P/E multiples on our ’10 estimates. We assign a multiple of 14.5x to our ‘10E
EBITDA of $12.74bn (EBITDA per share of $39.30) to reach $645, adjusting
for 2009 year-end net cash of $24.04bn or $75.36 per share. This implies
EV/EBITDA to Growth of 0.8x based on our LT EBITDA growth rate of 19%.
We assign a multiple of 23x to our 2010E PF EPS of $25.89 to reach a $595
price. This implies a PEG of 1.4x based on our LT PF EPS growth rate of
17%. We are using modestly higher multiples to reflect our higher confidence
in online ad spend recovery and cost control initiatives at Google.
MSFT: We arrive at our $36 PT by using P/E and P/FCF multiples on our
CY10 estimates. We assign a P/E multiple of 17x to our CY2010 GAAP EPS
of $2.02 to reach $34. We assign a P/FCF multiple of 16x to our CY2010
FCF/share of $2.31 to reach $37. Due to stabilization in the PC market,
potential lift in premium mix in consumer segment, and more confidence in a
leaner cost structure going forward, we are assigning modestly higher
P/Cash flow multiples to MSFT.
YHOO: We reach our $22 PT by assigning 9.5x to our 2010E EBITDA per
share of $1.59 (assuming $0.30 incremental from MSFT search deal),
adjusting for $3.22 per share in net cash for 2009 and $3.53 in off-balance
sheet assets (Yahoo! Japan and Alibaba post illiquidity discount and tax and
NOLs). We are assigning a modestly higher multiple to YHOO because of
recovery in E-Commerce and online advertising and because Yahoo! screens
much better now as a fundamental improvement story.

Investment Risks
GOOG: 1) Google’s competition is getting more intense; 2) Google is still a
one-trick pony with nearly 94% revenue coming from search; 3) Execution
risk with recent acquisitions; 4) Google is vulnerable to threats from
computing platforms, browsing technologies, and ad blocking technologies;
5) Cap-Ex spending continues to be very high; 6) Rising cost of revenue; 7)
Privacy issues and click fraud continue to be a nagging problem; 8) Conflict
of interest with Checkout and Google Analytics; 9) More experienced search
marketers are diverting part of search ad dollars to search engine
optimization.
MSFT: 1) Competition; 2) Slowing PC market growth; 3) Disappointing
ramp-up of the online business so far; 4) Piracy; 5) Investment mode; 6)
Cloud Computing/SaaS; 7) Virtualization; 8) Exposed to macro-economic
headwinds.
YHOO: 1) Increasing competitive pressure from Google and others; 2)
Current growth materially lower than overall Internet ad growth; 3) Limited
traction internationally; 4) Mass talent attrition; 5) Execution risk with recent
acquisitions; 6) Future business strategy not fully firmed up.

Page 2 | Google Inc. | January 13, 2010


01/11/10
GOOG - Income Statement
($ Thousands, except EPS)
2009E 2010E Annual
3/09 6/09 9/09A 12/09E 3/10E 6/10E 9/10E 12/10E 2008A 2009E 2010E 2011E
Total Revenue - Gross 5,508,990 5,522,897 5,944,851 6,555,978 6,559,210 6,470,497 6,800,023 7,532,021 21,795,550 23,532,716 27,361,750 31,739,918
Total Revenue - Net 4,073,030 4,069,543 4,385,635 4,855,799 4,860,254 4,819,877 5,052,064 5,589,968 15,856,598 17,384,007 20,322,163 23,533,623

Street - Net Revenue 4,085 4,063 4,240 4,879 4,889 4,887 5,139 5,673 15,754 17,407 20,468 23,446

Traffic Acquisition Costs 1,435,960 1,453,354 1,559,216 1,700,179 1,698,956 1,650,620 1,747,959 1,942,052 5,938,952 6,148,709 7,039,587 8,206,295

Operating Expense 2,189,439 2,195,649 2,311,917 2,529,776 2,575,954 2,577,260 2,691,372 2,902,423 10,319,386 9,226,781 10,747,009 12,389,439
Other Cost of Revenue 653,007 641,025 652,153 735,654 741,189 727,801 765,388 841,290 2,641,215 2,681,839 3,075,668 3,588,878
Research & Development 473,082 525,417 561,900 582,696 583,230 588,025 606,248 656,821 2,060,773 2,143,095 2,434,324 2,765,201
Sales & Marketing 374,915 411,745 435,552 485,580 510,327 506,087 530,467 561,792 1,740,224 1,707,792 2,108,672 2,412,196
General & Administrative 410,952 324,392 344,785 393,320 393,681 392,820 411,743 449,992 1,662,651 1,473,449 1,648,236 1,906,223
Stock-Based Compensation 277,483 293,070 317,527 332,527 347,527 362,527 377,527 392,527 1,119,766 1,220,607 1,480,108 1,716,941
Other 0 0 0 0 0 0 0 0 1,094,757 0 0 0

Operating Income 1,883,591 1,873,894 2,073,718 2,326,023 2,284,301 2,242,616 2,360,691 2,687,546 5,537,212 8,157,226 9,575,154 11,144,184
Non-GAAP Operating Income 2,161,074 2,166,964 2,391,245 2,658,550 2,631,828 2,605,143 2,738,218 3,080,073 7,751,735 9,377,833 11,055,262 12,861,125

D&A 403,222 376,957 378,623 393,623 408,623 413,623 426,123 436,123 1,499,887 1,552,425 1,684,492 2,015,779

EBITDA 2,564,296 2,543,921 2,769,868 3,052,173 3,040,451 3,018,766 3,164,341 3,516,196 9,251,622 10,930,258 12,739,754 14,876,904

Street 2,416 2,513 2,641 3,037 2,991 2,972 3,127 3,487 9,235 10,909 12,709 13,891

Interest income 6,210 (17,718) (7,177) 2,823 17,823 22,823 27,823 40,323 316,382 (15,862) 108,792 158,792

Pretax Income 1,889,801 1,856,176 2,066,541 2,328,846 2,302,124 2,265,439 2,388,514 2,727,869 5,853,594 8,141,364 9,683,946 11,302,976

Provision for income taxes 466,973 371,631 427,566 570,567 569,776 560,696 585,186 664,236 1,626,737 1,836,737 2,379,894 2,786,184

Net Income 1,422,828 1,484,545 1,638,975 1,758,279 1,732,348 1,704,743 1,803,328 2,063,633 4,226,857 6,304,627 7,304,052 8,516,793

Extraordinary Items 0 0 0 0 0 0 0 0 0 0 0 0

GAAP Net Income 1,422,828 1,484,545 1,638,975 1,758,279 1,732,348 1,704,743 1,803,328 2,063,633 4,226,857 6,304,627 7,304,052 8,516,793

Non-GAAP Net Inc. 1,636,295 1,708,215 1,883,920 2,007,674 1,987,780 1,971,201 2,080,811 2,352,140 6,188,573 7,236,104 8,391,932 9,778,744

EPS (excl. extraordinary items) $4.49 $4.66 $5.13 $5.48 $5.38 $5.27 $5.55 $6.32 $13.31 $19.76 $22.53 $25.83
GAAP EPS $4.49 $4.66 $5.13 $5.48 $5.38 $5.27 $5.55 $6.32 $13.31 $19.76 $22.53 $25.83
Non-GAAP EPS $5.16 $5.36 $5.89 $6.26 $6.17 $6.10 $6.40 $7.21 $19.49 $22.68 $25.89 $29.66

Street PF EPS $4.93 $5.09 $5.42 $6.43 $6.39 $6.29 $6.63 $7.44 $19.33 $22.81 $26.47 $30.56

Diluted Shares Outstanding (000s) 317,221 318,536 319,746 320,746 321,996 323,346 324,896 326,446 317,514 319,062 324,171 329,671

Source: Company reports; Thomson Reuters; Collins Stewart LLC estimates ; Q3-08 adj EBITDA and PF EPS are adjusted for $95.1mm in 1x legal expenses

Page 3 | Google Inc. | January 13, 2010


01/11/10
GOOG - P&L Trends

Growth Analysis Y/Y 3/09 6/09 9/09A 12/09E 3/10E 6/10E 9/10E 12/10E 2008A 2009E 2010E 2011E
Gross Revenue Y/Y 6% 3% 7% 15% 19% 17% 14% 15% 31% 8% 16% 16%
Net Revenue Y/Y 10% 5% 8% 15% 19% 18% 15% 15% 36% 10% 17% 16%
Operating Expenses Y/Y 2% -5% -4% -27% 18% 17% 16% 15% 57% -11% 16% 15%
EBITDA Y/Y 19% 13% 15% 21% 19% 19% 14% 15% 34% 18% 17% 17%
PF Operating Income Y/Y 18% 17% 24% 24% 22% 20% 15% 16% 30% 21% 18% 16%
GAAP EPS (Recurring) Y/Y 9% 19% 26% 354% 20% 13% 8% 15% 0% 48% 14% 15%
Non-GAAP Net Income Y/Y 6% 16% 21% 24% 21% 15% 10% 17% 26% 17% 16% 17%
PF EPS Y/Y 7% 16% 20% 23% 20% 14% 9% 15% 25% 16% 14% 15%
Growth Analysis Q/Q
Gross Revenue Q/Q -3% 0% 8% 10% 0% -1% 5% 11% -- -- -- --
Net Revenue Q/Q -3% 0% 8% 11% 0% -1% 5% 11% -- -- -- --
Stock-Based Compensation Q/Q -3% 6% 8% 5% 5% 4% 4% 4% -- -- -- --
Operating Expenses Q/Q -37% 0% 5% 9% 2% 0% 4% 8% -- -- -- --
Other Cost of Revenue Q/Q -6% -2% 2% 13% 1% -2% 5% 10% -- -- -- --
Research & Development Q/Q -14% 11% 7% 4% 0% 1% 3% 8% -- -- -- --
Sales & Marketing Q/Q -17% 10% 6% 11% 5% -1% 5% 6% -- -- -- --
General & Administrative Q/Q 9% -21% 6% 14% 0% 0% 5% 9% -- -- -- --
Margins Analysis (% of net rev)
Operating Margin - Net 46.2% 46.0% 47.3% 47.9% 47.0% 46.5% 46.7% 48.1% 34.9% 46.9% 47.1% 47.4%
PF Operating Margin - Net 53.1% 53.2% 54.5% 54.8% 54.2% 54.1% 54.2% 55.1% 48.9% 53.9% 54.4% 54.7%
Incremental PF Op Inc. Margin - Net 89.5% 179.4% 136.6% 80.2% 59.8% 58.4% 52.1% 57.4% 42.9% 106.5% 57.1% 56.2%
EBITDA Margin - Net 63.0% 62.5% 63.2% 62.9% 62.6% 62.6% 62.6% 62.9% 58.3% 62.9% 62.7% 63.2%
Incremental EBITDA Margin - Net 107.3% 171.0% 106.3% 81.5% 60.5% 63.3% 59.2% 63.2% 55.5% 109.9% 61.6% 66.5%
EBITDA Margin - Gross 47% 46% 47% 47% 46% 47% 47% 47% 42% 46% 47% 47%
Incremental EBITDA Margin - Gross 124% 194% 89% 61% 45% 50% 46% 48% 45% 97% 47% 49%
Expense Analysis (% of net rev)
TAC 35.3% 35.7% 35.6% 35.0% 35.0% 34.2% 34.6% 34.7% 37.5% 35.4% 34.6% 34.9%
Other Cost of Revenue 16.0% 15.8% 14.9% 15.2% 15.3% 15.1% 15.2% 15.1% 16.7% 15.4% 15.1% 15.3%
Research & Development 11.6% 12.9% 12.8% 12.0% 12.0% 12.2% 12.0% 11.8% 13.0% 12.3% 12.0% 11.8%
Sales & Marketing 9.2% 10.1% 9.9% 10.0% 10.5% 10.5% 10.5% 10.1% 11.0% 9.8% 10.4% 10.3%
General & Administrative 10.1% 8.0% 7.9% 8.1% 8.1% 8.2% 8.2% 8.1% 10.5% 8.5% 8.1% 8.1%
Stock-Based Compensation 6.8% 7.2% 7.2% 6.8% 7.2% 7.5% 7.5% 7.0% 7.1% 7.0% 7.3% 7.3%
D&A 9.9% 9.3% 8.6% 8.1% 8.4% 8.6% 8.4% 7.8% 9.5% 8.9% 8.3% 8.6%
Tax Rate 25% 20% 21% 25% 25% 25% 25% 24% 28% 23% 25% 25%
Tax Rate (Excl. Stock Comp) 13% 8% 9% 14% 14% 13% 13% 14% (6%) 11% 13% 13%

Source: Company reports; Collins Stewart LLC estimates

Page 4 | Google Inc. | January 13, 2010


01/11/10
GOOG - Revenue By Business Segment
($ Thousands)
2009E 2010E Annual
3/09 6/09 9/09A 12/09E 3/10E 6/10E 9/10E 12/10E 2008A 2009E 2010E 2011E
Total Revenue - Gross 5,508,990 5,522,897 5,944,851 6,555,978 6,559,210 6,470,497 6,800,023 7,532,021 21,795,550 23,532,716 27,361,750 31,739,918
Total Revenue - Net 4,073,030 4,069,543 4,385,635 4,855,799 4,860,254 4,819,877 5,052,064 5,589,968 15,856,598 17,384,007 20,322,163 23,533,623

Google Total Ad Rev (exc DoubleClick) - Gross 5,330,865 5,336,128 5,756,621 6,351,060 6,360,034 6,258,274 6,576,219 7,289,985 21,128,514 22,774,674 26,484,512 30,645,659
Y/Y Change 5% 3% 8% 15% 19% 17% 14% 15% 29% 8% 16% 16%
Q/Q Change -3% 0% 8% 10% 0% -2% 5% 11% -- -- -- --
TAC -- Total 1,435,960 1,453,354 1,559,216 1,700,179 1,698,956 1,650,620 1,747,959 1,942,052 5,938,952 6,148,709 7,039,587 8,206,295
TAC as % of Total Ad Gross Rev 27% 27% 27% 27% 27% 26% 27% 27% 28% 27% 27% 27%
Google Total Ad Rev (exc DoubleClick) - Net 3,894,905 3,882,774 4,197,405 4,650,881 4,661,078 4,607,654 4,828,260 5,347,933 15,189,562 16,625,965 19,444,926 22,439,365
Y/Y Change 8% 5% 9% 16% 20% 19% 15% 15% 32% 9% 17% 15%
Q/Q Change -3% 0% 8% 11% 0% -1% 5% 11% -- -- -- --
% of Total Net Revenue 96% 95% 96% 96% 96% 96% 96% 96% 96% 96% 96% 95%

Google Web Sites - Gross 3,692,823 3,652,628 3,955,731 4,382,232 4,420,224 4,380,792 4,603,353 5,102,990 14,413,827 15,683,414 18,507,359 21,605,190
Y/Y Change 9% 3% 8% 15% 20% 20% 16% 16% 36% 9% 18% 17%
Q/Q Change -3% -1% 8% 11% 1% -1% 5% 11% -- -- -- --
% of Gross Ad Revenue 69% 68% 69% 69% 70% 70% 70% 70% 68% 69% 70% 71%
TAC -- Direct 207,000 218,000 229,000 262,934 282,894 284,751 317,631 367,415 654,000 916,934 1,252,692 1,641,994
TAC as % of Website Gross Rev 5.6% 6.0% 5.8% 6.0% 6.4% 6.5% 6.9% 7.2% 4.5% 5.8% 6.8% 7.6%
Google Web Sites - Net 3,485,823 3,434,628 3,726,731 4,119,298 4,137,329 4,096,040 4,285,722 4,735,575 13,759,827 14,766,480 17,254,666 19,963,195
Y/Y Change 7% 2% 6% 14% 19% 19% 15% 15% 34% 7% 17% 16%
Q/Q Change -4% -1% 9% 11% 0% -1% 5% 10% -- -- -- --
% of Total Net Revenue 86% 84% 85% 85% 85% 85% 85% 85% 87% 85% 85% 85%

Google Network Web Sites - Gross 1,638,042 1,683,500 1,800,890 1,968,829 1,939,810 1,877,482 1,972,866 2,186,996 6,714,687 7,091,261 7,977,154 9,117,084
Y/Y Change -3% 2% 7% 16% 18% 12% 10% 11% 16% 6% 12% 14%
Q/Q Change -3% 3% 7% 9% -1% -3% 5% 11% -- -- -- --
% of Gross Ad Revenue 31% 32% 31% 31% 31% 30% 30% 30% 32% 31% 30% 30%
TAC -- Network 1,228,960 1,235,354 1,330,216 1,437,245 1,416,062 1,365,868 1,430,328 1,574,637 5,284,952 5,231,775 5,786,894 6,564,300
TAC as % of Network Website Gross Rev 75.0% 73.4% 73.9% 73.0% 73.0% 72.8% 72.5% 72.0% 78.7% 73.8% 72.5% 72.0%
Google Network Web Sites - Net 409,082 448,146 470,674 531,584 523,749 511,614 542,538 612,359 1,429,735 1,859,486 2,190,260 2,552,783
Y/Y Change 19% 34% 34% 33% 28% 14% 15% 15% 15% 30% 18% 17%
Q/Q Change 2% 10% 5% 13% -1% -2% 6% 13% -- -- -- --
% of Total Net Revenue 10% 11% 11% 11% 11% 11% 11% 11% 9% 11% 11% 11%

Licensing and Other (Excl DoubleClick) 108,125 121,769 118,230 132,418 119,176 129,723 138,804 154,035 432,036 480,542 541,737 704,259
Y/Y Change 36% 20% -1% 1% 10% 7% 17% 16% 138% 11% 13% 30%
Q/Q Change -18% 13% -3% 12% -10% 9% 7% 11% -- -- -- --
% of Total Net Revenue 3% 3% 3% 3% 2% 3% 3% 3% 3% 3% 3% 3%

DoubleClick 70,000 65,000 70,000 72,500 80,000 82,500 85,000 88,000 235,000 277,500 335,500 390,000
Y/Y Change -- -19% 0% 12% 14% 27% 21% 21% -- 18% 21% 16%
Q/Q Change 8% -7% 8% 4% 10% 3% 3% 4% -- -- -- --
% of Total Net Revenue 2% 2% 2% 1% 2% 2% 2% 2% 1% 2% 2% 2%

Source: Company reports; Collins Stewart LLC estimates

Page 5 | Google Inc. | January 13, 2010


01/11/10
GOOG - Revenue Drivers & Assumptions
($ Thousands)
2009E 2010E Annual
3/09 6/09 9/09A 12/09E 3/10E 6/10E 9/10E 12/10E 2008A 2009E 2010E 2011E
0 0 0 0
Search Queries 61,726,377 59,257,322 60,828,594 63,870,024 68,340,926 65,607,289 66,263,362 69,576,530 220,899,170 245,682,318 269,788,105 291,371,154
Y/Y Growth 10% 10% 12% 13% 11% 11% 9% 9% 15% 11% 10% 8%
Q/Q Growth 9% -4% 3% 5% 7% -4% 1% 5% -- -- -- --
Click Thru Rate (CTR) 15.0% 15.0% 15.4% 15.7% 15.4% 15.4% 15.7% 16.1% 15.0% 15.3% 15.6% 16.1%
Y/Y Growth 2% 1% 1% 3% 3% 3% 2% 2% 3% 2% 3% 3%
Q/Q Growth -2% 0% 3% 2% -2% 0% 2% 3% -- -- -- --

Sponsored Clicks 9,259,891 9,057,149 9,367,600 10,032,699 10,520,289 10,099,477 10,404,481 11,197,823 32,901,870 37,717,339 42,222,070 46,864,117
Y/Y Growth 17% 15% 14% 12% 14% 12% 11% 12% 19% 15% 12% 11%
Q/Q Growth 3% -2% 4% 7% 5% -4% 3% 8% -- -- -- --

Cost Per Click (CPC) 0.58 0.57 0.61 0.63 0.60 0.62 0.63 0.65 0.64 0.60 0.63 0.65
Y/Y Growth -10% -13% -6% 3% 5% 8% 3% 3% 8% -6% 4% 4%
Q/Q Growth -6% 5% 5% 3.0% -4.5% 2.5% 2.0% 3.0% -- -- -- --

Gross Search Revenue $5,330,865 $5,336,128 $5,756,621 $6,351,060 $6,360,034 $6,258,274 $6,576,219 $7,289,985 $21,128,514 $22,774,674 $26,484,512 $30,645,659
Y/Y Growth 5% 3% 8% 15% 19% 17% 14% 15% 29% 8% 16% 16%
Q/Q Growth -3% 0% 8% 10% 0% -2% 5% 11% -- -- -- --

RPS (Gross rev per 000s searches) $86 $90 $95 $99 $93 $95 $99 $105 $96 $93 $98 $105
Y/Y Growth -5% -6% -4% 2% 8% 6% 5% 5% 12% -3% 6% 7%
Q/Q Growth -11% 4% 5% 5% -6% 3% 4% 6% -- -- -- --

Source: Company reports; Collins Stewart LLC estimates

01/11/10
GOOG - Revenue By Geography
($ Thousands)
2009E 2010E Annual
3/09 6/09 9/09A 12/09E 3/10E 6/10E 9/10E 12/10E 2008A 2009E 2010E 2011E
Total Gross Revenue 5,508,990 5,522,897 5,944,851 6,555,978 6,559,210 6,470,497 6,800,023 7,532,021 21,795,550 23,532,716 27,361,750 31,739,918

U.S. Revenue 2,633,297 2,612,330 2,800,025 3,068,198 3,040,194 2,976,428 3,094,010 3,427,069 10,656,830 11,113,850 12,537,702 14,282,963
Y/Y Change 4% 2% 3% 8% 15% 14% 10% 12% 23% 4% 13% 14%
Q/Q Change -7% -1% 7% 10% -1% -2% 4% 11% -- -- -- --
% of Total Revenue - Gross 48% 47% 47% 47% 46% 46% 46% 46% 49% 47% 46% 45%

International Revenue 2,875,693 2,910,567 3,144,826 3,487,780 3,519,016 3,494,068 3,706,012 4,104,951 11,138,720 12,418,866 14,824,048 17,456,955
Y/Y Change 8% 4% 11% 22% 22% 20% 18% 18% 41% 11% 19% 18%
Q/Q Change 0% 1% 8% 11% 1% -1% 6% 11% -- -- -- --
Y/Y FX Impact (429,000) (497,000) (297,000) (100,000) (75,000) (35,000) 35,000 75,000 353,000 (1,323,000) 0 100,000
FX Impact as % of International Revenue -15% -17% -9% -3% -2% -1% 1% 2% 3% -11% 0% 1%

Intl Revenue (excl. FX) 3,304,693 3,407,567 3,441,826 3,587,780 3,594,016 3,529,068 3,671,012 4,029,951 10,785,720 13,741,866 14,824,048 17,356,955
Y/Y Change (excl FX) 25% 22% 22% 25% 25% 21% 17% 16% 47% 27% 8% 17%
Q/Q Change 0% 1% 8% 11% 1% -1% 6% 11% -- -- -- --
% of Total Revenue - Gross 52.2% 52.7% 52.9% 53.2% 53.7% 54.0% 54.5% 54.5% 51% 53% 54% 55.0%

Source: Company reports; Collins Stewart LLC estimates

Page 6 | Google Inc. | January 13, 2010


01/11/10
GOOG - FX Analysis
($ Thousands)
2009E 2010E Annual
3/09 6/09 9/09A 12/09E 3/10E 6/10E 9/10E 12/10E 2008A 2009E 2010E 2011E

Reported Gross Revenue 5,508,990 5,522,897 5,944,851


Reported Net Revenue 4,073,030 4,069,543 4,385,635
Non Organic Y/Y Growth 10% 5% 8%
Non Organic Q/Q Growth -3% 0% 8%

FX Impact Y/Y (Gross) (429,000) (497,000) (297,000)


FX Impact Y/Y (Net) (317,178) (366,214) (219,103)
FX Adjusted Net Revenue 4,166,208 4,311,757 4,565,738
Organic Y/Y Growth 13% 11% 13%

FX Impact Q/Q (Gross) (120,000) 44,000 166,000


FX Impact Q/Q (Net) (88,721) 32,421 122,462
FX Adjusted Net Revenue 4,091,751 4,037,122 4,224,173
Organic Q/Q Growth -3.0% -0.9% 3.8%

Source: Company reports; Collins Stewart LLC

04/07/08
GOOG - Organic and Proforma Revenue Analysis
($ Thousands)
2009E 2010E Annual
3/09 6/09 9/09A 12/09E 3/10E 6/10E 9/10E 12/10E 2008A 2009E 2010E 2011E
Net Rev (inc. acq since March '08) $4,073,030 $4,069,543 $4,385,635 $4,855,799 $4,860,254 $4,819,877 $5,052,064 $5,589,968 $15,856,598 $17,384,007 $20,322,163 $23,533,623
Y/Y Growth 10.1% 4.5% 8.4% 15.1% 19.3% 18.4% 15.2% 15.1% 36.0% 9.6% 16.9% 15.8%

Acquisitions Contribution $70,000 $65,000 $70,000 $72,500 $80,000 $82,500 $85,000 $88,000 $235,000 $277,500 $335,500 $390,000
DoubleClick (exc Performics from Q2-08) $70,000 $65,000 $70,000 $72,500 $80,000 $82,500 $85,000 $88,000 $235,000 $277,500 $335,500 $390,000
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Organic Rev (exc DoubleClick - not FX adj) $4,003,030 $4,004,543 $4,315,635 $4,783,299 $4,780,254 $4,737,377 $4,967,064 $5,501,968 $15,621,598 $17,106,507 $19,986,663 $23,143,623
Y/Y Growth 8.8% 5.0% 8.5% 15.2% 19.4% 18.3% 15.1% 15.0% 34.0% 9.5% 16.8% 15.8%

Acquisitions Historical Revenue $0 $0 $0 $0 $0 $0 $0 $0 $50,000 $0 $0 $0


DoubleClick $0 $0 $0 $0 $0 $0 $0 $0 $50,000 $0 $0 $0
Others $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Proforma Rev $4,073,030 $4,069,543 $4,385,635 $4,855,799 $4,860,254 $4,819,877 $5,052,064 $5,589,968 $15,906,598 $17,384,007 $20,322,163 $23,533,623
Y/Y Growth 8.6% 4.5% 8.4% 15.1% 19.3% 18.4% 15.2% 15.1% 32.9% 9.3% 16.9% 15.8%

Source: Company reports; Collins Stewart LLC estimates

Page 7 | Google Inc. | January 13, 2010


01/11/10
GOOG - Other Business Metrics

2009E 2010E Annual


3/09 6/09 9/09A 12/09E 3/10E 6/10E 9/10E 12/10E 2008A 2009E 2010E 2011E
Headcount 20,164 19,786 19,665
Seq. Additions (58) (378) (121)
Y/Y Growth 5% 1% -2%
Q/Q Growth 0% -2% -1%
Annualized Gross Revenue per Headcount $1,092,837 $1,116,526 $1,209,225
Y/Y Change 1% 2% 10%
Annualized Net Revenue per Headcount $807,981 $822,712 $892,069
Y/Y Change 5% 4% 11%
Annualized Operating Profit per Headcount $373,654 $378,832 $421,809
Y/Y Change 16% 18% 29%

Source: Company reports; Collins Stewart LLC estimates

01/11/10
GOOG - Key Financial Metrics
($ Thousands)
2009E 2010E Annual
3/09 6/09 9/09A 12/09E 3/10E 6/10E 9/10E 12/10E 2008A 2009E 2010E 2011E

Net Cash & Equivs. 17,784,933 19,344,006 21,994,391 24,044,938 26,180,320 28,317,415 30,451,063 32,695,753 15,845,771 24,044,938 32,695,753 42,859,165
Seq. Change 1,939,162 1,559,073 2,650,385 2,050,547 2,135,382 2,137,094 2,133,649 2,244,690 1,627,158 8,199,167 8,650,815 10,163,412
Net Cash & Equivs. Per Share $56.06 $60.73 $68.79 $74.97 $81.31 $87.58 $93.73 $100.16 $49.91 $75.36 $100.86 $130.01

OCF 2,249,512 1,609,172 2,725,983 2,291,766 2,458,781 2,423,856 2,452,281 2,653,059 7,852,854 8,876,433 9,987,977 11,662,948
Y/Y Growth 26% -9% 25% 8% 9% 51% -10% 16% 36% 13% 13% 17%

Capex 262,755 139,437 186,339 278,629 360,757 323,525 357,001 451,921 2,358,461 867,160 1,493,204 1,682,216
Y/Y Growth -69% -80% -59% -24% 37% 132% 92% 62% -2% -63% 72% 13%
Capex as % of Gross Revenue 4.8% 2.5% 3.1% 4.3% 5.5% 5.0% 5.3% 6.0% 10.8% 3.7% 5.5% 5.3%

FCF = OCF - Capex 1,986,757 1,469,735 2,539,644 2,013,137 2,098,024 2,100,331 2,095,280 2,201,138 5,494,393 8,009,273 8,494,774 9,980,732
Y/Y Growth 112% 38% 47% 15% 6% 43% -17% 9% 63% 46% 6% 17%
FCF per Share $6.26 $4.61 $7.94 $6.28 $6.52 $6.50 $6.45 $6.74 $17.30 $25.10 $26.20 $30.27
Y/Y Growth 112% 37% 46% 13% 4% 41% -19% 7% 62% 45% 4% 16%
GAAP EPS $4.49 $4.66 $5.13 $5.48 $5.38 $5.27 $5.55 $6.32 $13.31 $19.76 $22.53 $25.83
Y/Y Growth 9% 19% 26% 354% 20% 13% 8% 15% 0% 48% 14% 15%
EBITDA 2,564,296 2,543,921 2,769,868 3,052,173 3,040,451 3,018,766 3,164,341 3,516,196 9,251,622 10,930,258 12,739,754 14,876,904
Y/Y Growth 19% 13% 15% 21% 19% 19% 14% 15% 34% 18% 17% 17%
EBITDA per Share $8.08 $7.99 $8.66 $9.52 $9.44 $9.34 $9.74 $10.77 $29.14 $34.26 $39.30 $45.13
Y/Y Growth 19% 13% 14% 19% 17% 17% 12% 13% 33% 18% 15% 15%

OCF/EBITDA (TTM) 85% 81% 84% 81% 80% 83% 78% 78% 85% 81% 78% 78%
FCF/EBITDA (TTM) 67% 69% 74% 73% 71% 74% 68% 67% 59% 73% 67% 67%

Source: Company reports; Collins Stewart LLC estimates

Page 8 | Google Inc. | January 13, 2010


01/11/10
GOOG - Balance Sheet
($ Thousands)
2009E 2010E Annual
3/09 6/09 9/09A 12/09E 3/10E 6/10E 9/10E 12/10E 2008A 2009E 2010E 2011E

Total Assets 33,513,029 35,158,760 37,702,845 40,018,315 42,107,840 44,099,686 46,369,067 49,077,840 31,767,575 40,018,315 49,077,840 59,655,837

Current Assets 22,080,802 23,834,853 26,353,544 28,784,008 30,921,399 33,003,343 35,341,847 38,034,821 20,178,182 28,784,008 38,034,821 48,946,382
Cash & cash equivalents 10,426,291 11,911,351 12,087,115 14,137,662 16,273,044 18,410,139 20,543,787 22,788,477 8,656,672 14,137,662 22,788,477 32,951,889
Short-term investments 7,358,642 7,432,655 9,907,276 9,907,276 9,907,276 9,907,276 9,907,276 9,907,276 7,189,099 9,907,276 9,907,276 9,907,276
Accounts receivable, net 2,543,105 2,701,912 2,807,341 3,095,934 3,097,460 3,055,567 3,211,179 3,552,428 2,642,192 3,095,934 3,552,428 4,120,854
Deferred income taxes 434,903 575,976 663,446 663,446 663,446 663,446 663,446 663,446 286,105 663,446 663,446 663,446
Prepaid expenses and other current assets 1,317,861 1,212,959 888,366 979,689 980,172 966,916 1,016,158 1,123,194 1,404,114 979,689 1,123,194 1,302,917

Long Term Assets 11,432,227 11,323,907 11,349,301 11,234,307 11,186,441 11,096,342 11,027,221 11,043,019 11,589,393 11,234,307 11,043,019 10,709,455
Property and equipment, net 5,122,105 5,005,900 4,917,491 4,870,018 4,889,673 4,867,095 4,865,495 4,948,814 5,233,843 4,870,018 4,948,814 4,885,334
Goodwill 4,830,315 4,836,913 4,849,217 4,849,217 4,849,217 4,849,217 4,849,217 4,849,217 4,839,854 4,849,217 4,849,217 4,849,217
Intangible assets, net 910,344 856,386 823,248 755,727 688,206 620,685 553,164 485,643 996,690 755,727 485,643 215,559
Prepaid revenue share, expenses, other 569,463 624,708 759,345 759,345 759,345 759,345 759,345 759,345 519,006 759,345 759,345 759,345

Liabilities & Shareholders' Equity 33,513,029 35,158,760 37,702,845 40,018,315 42,107,840 44,099,685 46,369,067 49,077,840 31,767,575 40,018,315 49,077,840 59,655,837

Total Liabilities 3,664,934 3,563,904 3,981,092 4,538,283 4,895,460 5,182,562 5,648,616 6,284,519 3,528,713 4,538,283 6,284,519 8,320,719

Current Liabilities 2,183,854 2,000,962 2,321,774 2,538,386 2,541,361 2,461,181 2,544,670 2,788,387 2,302,090 2,538,386 2,788,387 3,101,556
Accounts payable 196,220 221,914 192,743 212,557 212,662 209,785 220,469 243,904 178,004 212,557 243,904 282,931
Accrued compensation and benefits 464,899 589,862 831,205 831,205 831,205 831,205 831,205 831,205 811,643 831,205 831,205 831,205
Accrued expenses and other current liabilities 465,164 411,226 446,322 552,946 555,070 487,047 514,144 633,553 480,263 552,946 633,553 734,928
Accrued revenue share 522,835 550,199 599,283 663,529 664,138 658,621 690,348 760,530 532,547 663,529 760,530 882,223
Deferred revenue 216,937 227,761 252,221 278,149 278,286 274,522 288,503 319,195 218,084 278,149 319,195 370,269
Income taxes payable 317,799 0 0 0 0 0 0 0 81,549 0 0 0
Current portion of equipment leases 0 0 0 0 0 0 0 0 0 0 0 0

Long Term Liabilities 1,481,080 1,562,942 1,659,318 1,999,897 2,354,099 2,721,382 3,103,946 3,496,132 1,226,623 1,999,897 3,496,132 5,219,162
Long-term portion of equipment leases 0 0 0 0 0 0 0 0 0 0 0 0
Deferred revenue, long-term 30,146 31,675 35,846 35,846 35,846 35,846 35,846 35,846 29,818 35,846 35,846 35,846
Liability for stock options exercised early, LT 0 0 0 0 0 0 0 0 0 0 0 0
Deferred income taxes 0 0 0 0 0 0 0 0 12,515 0 0 0
Other long-term liabilities 1,450,934 1,531,267 1,623,472 1,964,051 2,318,253 2,685,536 3,068,100 3,460,286 1,184,290 1,964,051 3,460,286 5,183,316

Redeemable convertible preferred stock warrant 0 0 0 0 0 0 0 0 0 0 0 0

Shareholders' Equity 29,848,095 31,594,856 33,721,753 35,480,032 37,212,380 38,917,123 40,720,451 42,793,321 28,238,862 35,480,032 42,793,321 51,335,118

Source: Company reports; Collins Stewart LLC estimates

Page 9 | Google Inc. | January 13, 2010


01/11/10
GOOG - Cash Flow Statement
($ Thousands)
2009E 2010E Annual
3/09 6/09 9/09A 12/09E 3/10E 6/10E 9/10E 12/10E 2008A 2009E 2010E 2011E
Net Income (Loss) 1,422,828 1,484,545 1,638,975 1,758,279 1,732,348 1,704,743 1,803,328 2,063,633 4,226,857 6,304,627 7,304,052 8,516,793
Depreciation 321,129 310,982 311,102 326,102 341,102 346,102 358,602 368,602 1,212,237 1,269,315 1,414,408 1,745,695
Amortization of warrants 0 0 0 0 0 0 0 0 0 0 0 0
Amortization of intangibles 82,093 65,975 67,521 67,521 67,521 67,521 67,521 67,521 287,650 283,110 270,084 270,084
Tax benefit from stock-based award activity (31,844) (4,515) (28,034) (29,358) (30,683) (32,007) (33,331) (34,656) (159,088) (93,751) (130,677) (151,586)
Other (34,256) (103,262) (177,158) 0 0 0 0 0 838,200 (314,676) 0 0
In-process R&D 0 0 0 0 0 0 0 0 0 0 0 0
Stock-based compensation 277,483 293,070 317,527 332,527 347,527 362,527 377,527 392,527 1,119,767 1,220,607 1,480,108 1,716,941
Changes in Working Capital 212,079 (437,623) 596,050 (163,304) 965 (25,030) (121,366) (204,567) 327,231 207,202 (349,998) (434,979)
Accounts receivable 97,390 (139,118) (84,951) (288,593) (1,526) 41,893 (155,612) (341,249) (334,465) (415,272) (456,494) (568,426)
Deferred income taxes 0 0 0 0 0 0 0 0 0 0 0 0
Prepaid revenue share, expenses, other assets 77,457 10,338 225,663 (91,323) (483) 13,257 (49,243) (107,036) (147,132) 222,135 (143,504) (179,723)
Accounts payable 21,879 19,936 (32,500) 19,814 105 (2,876) 10,684 23,435 (211,539) 29,129 31,347 39,027
Income taxes payable 324,753 (388,271) 160,621 0 0 0 0 0 626,027 97,103 0 0
Accrued compensation and benefits 0 0 0 0 0 0 0 0 0 0 0 0
Accrued expenses and other liabilities (322,339) 41,172 266,892 106,624 2,124 (68,023) 27,097 119,409 338,907 92,349 80,607 101,375
Accrued revenue share 4,264 14,859 37,884 64,246 609 (5,517) 31,728 70,182 14,000 121,253 97,001 121,693
Deferred revenue 8,675 3,461 22,441 25,928 137 (3,764) 13,981 30,691 41,433 60,505 41,045 51,074
Net Cash Flow from Operations 2,249,512 1,609,172 2,725,983 2,291,766 2,458,781 2,423,856 2,452,281 2,653,059 7,852,854 8,876,433 9,987,977 11,662,948

Purhcases of property and equipment (262,755) (139,437) (186,339) (278,629) (360,757) (323,525) (357,001) (451,921) (2,358,461) (867,160) (1,493,204) (1,682,216)
Purchase of short-term investments (5,244,845) (5,390,722) (8,951,434) 0 0 0 0 0 (15,356,304) (19,587,001) 0 0
Maturities and sales of short-term investments 5,109,590 5,316,038 6,562,764 0 0 0 0 0 15,752,242 16,988,392 0 0
Acquisition of businesses, net of cash acquired (20,822) (3,021) (34,980) 0 0 0 0 0 (3,356,899) (58,823) 0 0
Change in other assets 0 0 0 0 0 0 0 0 0 0 0 0
Net Cash Flow from Investing (418,832) (217,142) (2,609,989) (278,629) (360,757) (323,525) (357,001) (451,921) (5,319,422) (3,524,592) (1,493,204) (1,682,216)

Proceeds from issuance of conv pfd stock 0 0 0 0 0 0 0 0 0 0 0 0


Proceeds from exercise of stock options (36,736) 46,731 463 0 0 0 0 0 (71,521) 10,458 0 0
Payments of notes receivable from stockholders 0 0 0 0 0 0 0 0 0 0 0 0
Excess tax benefits from SBC 31,844 4,515 28,034 37,410 37,358 36,763 38,369 43,552 159,088 101,803 156,041 182,680
Payments of principal on cap leases 0 0 0 0 0 0 0 0 0 0 0 0
Net Cash Flow from Financing (4,892) 51,246 28,497 37,410 37,358 36,763 38,369 43,552 87,567 112,261 156,041 182,680

Effect of exchange rate changes (56,169) 41,784 31,273 0 0 0 0 0 (45,920) 16,888 0 0

Net Change in Cash & Equivalents 1,769,619 1,485,060 175,764 2,050,547 2,135,382 2,137,094 2,133,649 2,244,690 2,575,079 5,480,990 8,650,815 10,163,412
Cash & Equivalents (BOP) 8,656,672 10,426,291 11,911,351 12,087,115 14,137,662 16,273,044 18,410,139 20,543,787 6,081,593 8,656,672 14,137,662 22,788,477
Cash & Equivalents (EOP) 10,426,291 11,911,351 12,087,115 14,137,662 16,273,044 18,410,139 20,543,787 22,788,477 8,656,672 14,137,662 22,788,477 32,951,889
Source: Company reports; Collins Stewart LLC estimates

Page 10 | Google Inc. | January 13, 2010


Important Disclosure / Disclaimer Information
Other Public Companies Mentioned in this Report
Company Ticker Price Recommendation
Microsoft Corp. MSFT $30.07 BUY
Yahoo! Inc. YHOO $16.68 BUY

Google Inc.
$800

$700

$600

$500

$400

$300

$200
02-2007

05-2007

09-2007

01-2008

05-2008

09-2008

01-2009

05-2009

09-2009

01-2010
Price Recommendation Change Price Target Coverage Transfer
Created By BlueMatrix

Ticker Date Action Prior Rating Current Rating Price Target Price
GOOG 2009-10-16 Raising Target Price BUY BUY $549.85 $635.00
GOOG 2009-09-18 Raising Target Price BUY BUY $491.46 $600.00
GOOG 2009-07-17 Raising Target Price BUY BUY $430.25 $500.00
GOOG 2009-02-23 Lowering Target Price BUY BUY $330.06 $435.00
GOOG 2009-01-23 Lowering Target Price BUY BUY $324.70 $450.00
GOOG 2008-11-12 Lowering Target Price BUY BUY $291.00 $465.00
GOOG 2008-10-17 Lowering Target Price BUY BUY $372.54 $525.00
GOOG 2008-10-03 Lowering Target Price BUY BUY $386.91 $575.00
GOOG 2008-04-18 Raising Rating HOLD BUY $539.41 $615.00
GOOG 2008-04-15 Initiation of Coverage NA HOLD $446.84 NA

Page 11 | Google Inc. | January 13, 2010


Microsoft Corp.
$40

$35

$30

$25

$20

$15

$10
02-2007

05-2007

09-2007

01-2008

05-2008

09-2008

01-2009

05-2009

09-2009

01-2010
Price Recommendation Change Price Target Coverage Transfer
Created By BlueMatrix

Ticker Date Action Prior Rating Current Rating Price Target Price
MSFT 2009-12-14 Raising Target Price BUY BUY $30.11 $36.00
MSFT 2009-10-26 Raising Target Price BUY BUY $28.68 $35.00
MSFT 2009-07-24 Lowering Target Price BUY BUY $23.32 $29.00
MSFT 2009-06-29 Raising Target Price BUY BUY $23.73 $30.00
MSFT 2009-02-12 Raising Target Price BUY BUY $18.90 $26.00
MSFT 2009-01-23 Lowering Target Price BUY BUY $16.88 $23.00
MSFT 2008-11-24 Lowering Target Price BUY BUY $20.31 $28.00
MSFT 2008-10-24 Lowering Target Price BUY BUY $21.41 $30.00
MSFT 2008-10-03 Lowering Target Price BUY BUY $25.66 $32.00
MSFT 2008-07-28 Initiation of Coverage NA BUY $24.76 $33.00

Yahoo! Inc.
$40

$35

$30

$25

$20

$15

$10

$5
02-2007

05-2007

09-2007

01-2008

05-2008

09-2008

01-2009

05-2009

09-2009

01-2010

Price Recommendation Change Price Target Coverage Transfer


Created By BlueMatrix

Ticker Date Action Prior Rating Current Rating Price Target Price
YHOO 2009-10-21 Raising Target Price BUY BUY $17.66 $22.00
YHOO 2009-09-21 Raising Target Price BUY BUY $17.04 $21.00
YHOO 2009-07-30 Lowering Target Price BUY BUY $14.60 $18.50
YHOO 2009-04-22 Raising Target Price BUY BUY $14.48 $20.00
YHOO 2008-11-04 Raising Rating HOLD BUY $13.35 $18.00
YHOO 2008-05-15 Raising Rating SELL HOLD $27.75 NA
YHOO 2008-05-05 Lowering Rating & TP BUY SELL $24.37 $23.00
YHOO 2008-04-16 Initiation of Coverage NA BUY $28.31 $33.50
Collins Stewart LLC Ratings
Collins Stewart LLC assigns research equity ratings of Buy, Hold or Sell. For Buys, we will publish a 12-month price target for any stock with an estimated appreciation potential of 20% or
more. For Sells, we also publish a 12-month price target for any stock with an estimated underperformance potential of 20% or more.

Page 12 | Google Inc. | January 13, 2010


Buy: 12 months, estimated 20% or more appreciation
Hold: 12 months, between 20% appreciation and 20% decline expected.
Sell: 12 months, estimated 20% or more decline.
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This report is for informational purposes only, and the information herein is obtained from sources that we believe to be reliable, but its accuracy and completeness, and that of the
opinions based thereon, are not guaranteed. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Further, this report is not
intended as an offer or solicitation to buy or sell any securities or related instruments. The investments discussed or recommended in this report may not be suitable for the specific
investment objectives, financial situation or needs of the reader, and should not be relied upon without consultation with an investment professional. Opinions expressed in this report are
subject to change without notice. Collins Stewart LLC accepts no liability whatsoever for any loss or damage of any kind arising out of the use of any part, or all, of this report. This report is
for distribution only under such circumstances as may be permitted by applicable law, and may not be reproduced or distributed in any form without the specific consent of Collins Stewart
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regard.
From time to time, Collins Stewart LLC or its employees may have a long or short position in the securities of company (ies) discussed herein and, at any time, may make purchases
and/or sales as principal or agent.

% of CSTI Universe with % of rating tier for which CSTI


this rating provided IB services
Buy 42% 0%
Hold 53% 0%
Sell 5% 0%
The research analyst who is primarily responsible for the research contained in this research report and whose name is listed first on this report: (1) attests that all of the views expressed
in this research report accurately reflect that research analyst's personal views about any and all of the securities and issuers that are the subject of this research report; and (2) attests
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All Collins Stewart LLC ("CSTI") employees, including research associates, receive compensation that is based in part upon the overall performance of the firm, including revenues
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Footnotes for CSTI, a member of SIPC and NASD
CSTI makes a market in GOOG, MSFT and YHOO securities. CSTI, in its market making capacity, sells to or buys from customers the securities of these companies in the past 12 months
on a principal basis.

Page 13 | Google Inc. | January 13, 2010