CONFIDENTIAL | 25 JANUARY 2010

PRESENTATION TO INVESTORS | VALUATION ANALYSIS

Project Google

Sample Valuation

Confidential

Table of Contents
I.

INDUSTRY OVERVIEW………………………………………………… 3

II.

COMPANY OVERVIEW………………………………………………… 6

III.

FINANCIAL OVERVIEW……………………………………………….. 10

IV.

APPENDIX……………………………………………………………….. 18

Sample Valuation

Project Google

Project Google

INDUSTRY OVERVIEW | INTERNET SOFTWARE & SERVICES

Sample Valuation

3

Project Google

Industry Overview

Global Search Market Posted 46% Growth in 2009

The worldwide internet search reached over 131 billion queries in December 2009. This statistic
represents: (1)

4 billion searches per day

175 million searches per hour

2.9 million searches per minute

The U.S. had the largest share of the global individual search market with 22.7 billion searches
conducted by people age 15 or older. (2)
25,000

Top 10 Countries by Number of Searches Conducted

Global Searches (MM)

22%

20,000

15,000

13%
December-08
48%

10,000

December-09
35%

38%

61%

5,000

44%

53%

28%

92%

Canada

Russian
Federation

0
United
States

Sample Valuation

1)
2)

China

Japan

United
Germany
Kingdom

France

South
Korea

Brazil

Source: “comScore Reports Global Search Market Growth of 46 percent in 2009.” (January 22, 2010)
Source: “comScore Reports Global Search Market Growth of 46 percent in 2009.” (January 22, 2010)

4

Industry Overview

Project Google

Google Sites Had a Dominate Share Of Search Query Volume in 2009

The U.S. core search market grew 16% overall in 2009

Google Sites search query volume grew 21 %

Microsoft Sites had the greatest growth in search volume at 49%

Ask Network increased its search query volume by 12%

Sample Valuation

5

Project Google

COMPANY OVERVIEW | GOOGLE INC.

Sample Valuation

6

Project Google

Company Overview

Selected Company Data
(1)

Company Information

(2)

Selected Market Data

Company Name
Ticker:
Fiscal Year Ending
Fiscal Year Ending + 1
Fiscal Year Ending + 2
Marginal Tax Rate
Beta

Google Inc.
GOOG
Dec-31-08
Dec-31-09
Dec-31-10
35.0%
1.08

Jan/25/10
$529.0

Stock Valuation Date
Share Price as of (01/25/10)
F.D. Shares Outstanding
Equity Value
Net Debt

320.3
$169,435.4
($21,994.4)

Enterprise Value

$147,441.0

700 %

600 %
500 %
400 %
Google

300 %

Nasdaq

200 %
100 %
0%

Google

Sample Valuation

1)
2)

Based on company filings.
Based on closing prices as of January 25, 2010.

NASDAQ

7

Project Google

Company Overview

Google Stock Price Trading History

(1)

12,000
10,000
8,000
6,000
4,000
2,000

Volume
Share Price

0

Price
High (01/04/2010)
Low (03/09/2009)
Average

Volume
$626.75
$290.89
$456.18

High (04/17/2009)
Low (12/24/2009)
Average

10,730
858.7
3,480

Volume

Sample Valuation

Volume in Thousands

$700
$650
$600
$550
$500
$450
$400
$350
$300
$250
$200
$150
$100
$50
$0

1) Source: Yahoo! Finance.
Note: Price and volume data are based on closing prices and volumes.

Share Price

8

Project Google

Company Overview

Google Stock Trading History

(1)

26 Oct 09
16 Sep 09

$700
$650
$600
$550
$500
$450
$400
$350
$300
$250
$200
$150
$100
$50
$0

Sample Valuation

03 May 09
12 Feb 09

Google
Exits Radio
Advertising
Business. Reuters

Apple and
Google Ties are
Investigated. NYT

Google Acquires Carnegie
Mellon Spin-Off
ReCapture Inc. - Reuters

06 Dec 09
13 Jan 2010
09 Nov 09
05 Aug 09

03 Apr 09

26 Mar 09
Google Cut 200
Jobs From
Sales Force. Reuters

On2 Technologies Announced Proposed
Settlement in Litigation. -Reuters

Google to acquire On2
technologies.-Reuters

Google Signs Agreement
To Acquire AdMob. Reuters

Google Could Be in
Talks To Buy
Twitter. - Reuters.

1) Yahoo! Finance.
Note: Price and volume data are based on closing prices and volumes.

Google Buys Online
Word Processing
Startup AppJet.Reuters

Rejecting
Censorship, Google
Threatens To Quit
China. -Reuters

23 Nov 09
Google To Buy Display
Advertising Startup
Teracent. -DJ

9

Project Google

FINANCIAL OVERVIEW | GOOGLE INC.

Sample Valuation

10

Project Google

Financial Overview

Valuation Summary

PREMIUM
TO 01/25/2010
PRICE: $533.50

EBITDA

212.2% - (50.0%)

7.2x – 34.7x

9.5x – 60.1x

175.4% - (67.0%)

7.9x – 50.8x

10.8x – 90.0x

(3.6%) - (31.7%)

18.8x – 25.6x

30.8x – 43.5x

(1.3%) - (60.0%)

18.4x – 42.7x

30.1x – 75.0x

$626.76

(83.4%) - (14.9%)

10.8x – 21.0x

16.2x – 34.9x

$635.00

(11.1%) - (16.0%)

20.2x – 21.2x

33.4x – 35.3x

GOOGLE VALUATION –
IMPLIED PRICE PER SHARE

COMPARABLE
PUBLIC
COMPANIES

$1081.61

$170.89

IMPLIED 2009E MULTIPLES
P/E

(1)

PRECEDENT
TRANSACTIONS

$1617. 37

$193.75

(2)

DISCOUNTED
CASH FLOW

$781.66

$ 553.59

Median: $659.9

(3)

PREMIUMS PAID
ANALYSIS
(4)

52-WEEK RANGE

$1348. 58

$540.46

$290.89

(5)

ANALYST PRICE
TARGETS
(5)

$600.00
$200.00

Sample Valuation

$700.00

1)
2)
3)
4)
5)
6)

$1,200.00

$1,700.00

Based on selected comparable companies for the “Internet Software & Services” sector.
Selected transactions are based on data provided by techcrunch.com and company press-releases.
Reflects WACC of 12.1% and exit multiple of 14.5x.
Source: Techcrunch.com. Includes transactions greater than $1 billion from 2007 to date.
Based on closing prices as of January 25, 2010.
Based on selected Wall Street analysts„ equity reports on October 16, 2009.

11

Project Google

Financial Overview
($ in millions, except per share data )

Comparable Public Companies

(1)

Multiples Analysis
Company Name
Amazon.com, Inc.
eBay Inc.
Yahoo Inc.
Microsoft Corp.
Maximum
75th Percentile
Median
Mean
25th Percentile
Minimum
Google Inc.

Ticker
AMZN
EBAY
YHOO
MSFT

GOOG

Share
Price
1/11/2010
$120.4
$23.7
$15.9
$29.3
$120.4
$52.1
$26.5
$47.3
$21.7
$15.9
$533.5

% of 52Market
Enterprise
Week High Capitalization
Value
17.5%
$52,915.0
$49,030.0
8.2%
$30,630.3
$27,671.0
12.0%
$22,220.8
$17,801.3
7.0%
$260,494.6
$260,494.6
17.5%
$260,494.6
$260,494.6
13.4%
$104,809.9
$101,896.1
10.1%
$41,772.6
$38,350.5
11.2%
$91,565.1
$88,749.2
7.9%
$28,527.9
$25,203.5
7.0%
$22,220.8
$17,801.3
14.9%

$170,879.4

$148,885.0

Cash
$4,001.0
$3,159.3
$4,503.1
$36,728.0
$36,728.0
$12,559.3
$4,252.0
$12,097.8
$3,790.6
$3,159.3
$21,994.4

Debt
$116.0
$200.0
$83.6
$5,996.0
$5,996.0
$1,649.0
$158.0
$1,598.9
$107.9
$83.6
$0.0

EV/Revenue
LTM
FYE +1
FYE +2
2.3x
2.1x
1.6x
3.3x
3.2x
3.0x
3.7x
3.8x
3.6x
4.1x
3.8x
3.5x
4.1x
3.8x
3.6x
3.8x
3.8x
3.5x
3.5x
3.5x
3.3x
3.3x
3.2x
2.9x
3.0x
2.9x
2.7x
2.3x
2.1x
1.6x
8.9x

8.3x

7.2x

EV/EBITDA
LTM
FYE +1
FYE +2
30.9x
27.5x
19.2x
9.2x
9.0x
8.0x
10.3x
10.5x
10.0x
9.8x
9.5x
8.6x
30.9x
27.5x
19.2x
15.5x
14.7x
12.3x
10.1x
10.0x
9.3x
15.0x
14.1x
11.5x
9.6x
9.4x
8.5x
9.2x
9.0x
8.0x
14.2x

14.0x

11.8x

Margins Analysis
Company Name
Amazon.com, Inc.
eBay Inc.
Yahoo Inc.
Microsoft Corp.
Maximum
75th Percentile
Median
Mean
25th Percentile
Minimum

Revenue Growth (CAGR) EBITDA Growth (CAGR) EBIT Growth (CAGR) LTM CapEx
EBIT Margin
FYE '06-08 FYE '08-10 FYE '06-08 FYE '08-10 FYE '06-08 FYE '08-10 % Revenue LTM
FYE +1
FYE +2
33.8%
26.7%
42.1%
34.7%
51.0%
25.7%
2.0%
5.7%
4.6%
5.7%
19.6%
3.2%
18.3%
3.8%
19.3%
8.2%
6.6%
26.3%
29.6%
31.9%
8.8%
(4.9%)
(2.5%)
(0.9%)
(13.5%)
(20.8%)
9.5%
20.1%
8.8%
13.2%
6.9%
6.3%
7.9%
3.3%
5.9%
3.0%
4.9%
37.1%
35.4%
36.0%
33.8%
26.7%
42.1%
34.7%
51.0%
25.7%
9.5%
37.1%
35.4%
36.0%
23.2%
11.4%
24.3%
11.5%
27.2%
12.6%
7.3%
29.0%
31.0%
32.9%
14.2%
4.7%
13.1%
3.5%
12.6%
5.6%
5.8%
23.2%
19.2%
22.5%
17.3%
7.8%
16.5%
10.2%
15.7%
4.0%
5.8%
22.3%
19.6%
21.7%
8.3%
1.2%
5.3%
2.3%
1.0%
(2.9%)
4.2%
16.5%
7.7%
11.3%
6.9%
(4.9%)
(2.5%)
(0.9%)
(13.5%)
(20.8%)
2.0%
5.7%
4.6%
5.7%

Google Inc.

Sample Valuation

47.4%

13.9%

1)

49.0%

16.1%

46.9%

12.3%

5.7%

53.5%

46.1%

Based on selected comparable companies for the “Internet Software & Services” sector.

48.1%

EBITDA Margin
LTM
FYE +1
FYE +2
7.3%
7.5%
8.3%
35.9%
35.4%
37.9%
35.9%
36.6%
36.5%
41.8%
39.8%
40.4%
41.8%
39.8%
40.4%
37.4%
37.4%
38.5%
35.9%
36.0%
37.2%
30.2%
29.8%
30.7%
28.7%
28.4%
29.4%
7.3%
7.5%
8.3%
62.7%

59.4%

61.3%

12

Project Google

Financial Overview
($ in millions)

Precedent Transactions
Announce
Date
04/29/07 (1)

Acquiror
Yahoo Inc.

Target
Right Media

Target description
Right Media, Inc. is an online advertising company that
operates the Right Media Exchange (RMX), a marketplace
that enables advertisers, publishers, and ad networks to
trade digital media.
aQuantive is a digital marketing company with three
distinct business segments: digital marketing services;
digital marketing technologies; and digital performance
media.
DoubleClick is a provider of digital marketing technology
and services with a focus on ad serving, media, video,
search and affiliate marketing.

05/18/07 (2) Microsoft Corp.

aQuantive Inc.,

04/13/07 (3)

Google Inc.

DoubleClick

05/17/07 (4)

WPP Group

24/7 Real Media

03/15/07 (5) CISCO Systems

05/15/08 (6)

CBS Corp.

10/23/09 (7) Adobe Systems

Transaction
Value
$850.0

EV/Revenue
LTM
FYE+1
12.1x
N/A

EV/EBITDA
LTM
FYE+1
47.2x
N/A

$492.6

$129.5

$6,376.9

12.3x

9.9x

46.7x

39.3x

$232.0

$72.0

$3,100.0

13.4x

10.4x

46.7x

31.6x

24/7 Real Media provides multi-platform internet marketing
strategies including behavioral targeting, ad serving and
Web advertising.

$215.0

$20.8

$668.6

2.8x

2.2x

29.0x

22.3x

WebEX Com. Inc.

WebEx Communications Inc. provides on-demand
collaboration, online meeting, web conferencing and video
conferencing applications.

$380.0

$124.1

$3,090.5

7.2x

6.0x

22.1x

18.6x

CNET Networks

CNET is an interactive media company providing tech
product reviews, news and price comparisons, free
software downloads, daily videos, and podcasts.

$408.2

$73.3

$1,794.3

4.3x

4.0x

23.8x

20.1x

Omniture, Inc.

Omniture is a provider of online business optimization
products and services including integrated set of
optimization applications for online analytics, channel
analytics, visitor acquisition and conversion.

$335.5

$68.8

$1,771.0

4.9x

3.6x

24.1x

11.2x

$492.6
$394.1
$335.5
$304.8
$223.5
$70.0

$129.5
$98.7
$72.0
$72.4
$44.8
$18.0

$6,376.9
$3,095.3
$1,794.3
$2,521.6
$1,310.5
$668.6

13.4x
12.2x
7.2x
8.1x
4.6x
2.8x

10.4x
8.9x
5.0x
6.0x
3.7x
2.2x

47.2x
46.7x
29.0x
34.2x
23.9x
22.1x

39.3x
29.3x
21.2x
23.9x
19.0x
11.2x

Maximum
75% Percentile
Median
Mean
25th Percentile
Minimum

1)

Sample Valuation

Target LTM
Revenue EBITDA
$70.0
$18.0

2)
3)
4)
5)
6)
7)

Source: “Yahoo to buy rest of Right Media for $680mln.” (Reuters, 04/30/2007)
Note: Includes 20% stake (~$200MM) Yahoo! acquired in October, 2006.
Source: “Microsoft to Acquire aQuantive, Inc.” (Microsoft, 05/18/2007)
Source : “Google to Acquire DoubleClick.” (Google, 04/13/2007)
Source :”WPP has agreed to acquire 24/7 Real Media for $11.75 per share.” (WPP, 05/17/2007)
Source: “CISCO Announces Agreement to Acquire WebEx.”(CISCO, 03/15/2007)
Source: “CBS to buy CNET Networks.” (05/15/2008)
Source : “Adobe to Acquire Omniture.” (Adobe, 10/23/2009)

13

Project Google

Financial Overview
($ in millions, except per share data)

Discounted Cash Flow Analysis
Fiscal Year Ending

12/31/09

12/31/10

12/31/11

12/31/12

12/31/13

Revenue (excl. TAC)

$17,879.5

$20,561.4

$23,350.2

$26,275.8

$29,326.9

EBIT
Less: Taxes
Debt-Free Earnings
Less: Capital Expenditures
Less: Working Capital Requirements
Add: Depreciation and Amortization
Add: Stock-Based Compensation
Total Net Investment

$8,246.3
$3,074.4
$5,171.9
($1,984.6)
($328.6)
$1,302.2
$1,073.5
$62.4

$9,888.8
$3,694.7
$6,194.1
($1,871.1)
($515.8)
$1,557.4
$1,155.1
$325.6

$11,470.0
$4,304.0
$7,166.1
($1,657.9)
($525.0)
$1,775.0
$1,184.4
$776.6

$13,300.2
$5,010.6
$8,289.6
($1,865.6)
($577.4)
$1,973.7
$1,267.9
$798.6

$14,998.1
$5,680.3
$9,317.8
($2,082.2)
($581.3)
$2,216.0
$1,326.0
$878.6

Net Debt-Free Cash Flows:
Projection Year
Discount period
Discount Factor @ 12.1%
PV of Net Debt-Free Cash Flows:

$5,234.3
1.0
0.5
0.94
$4,944.8

$6,519.7
2.0
1.5
0.84
$5,496.5

$7,942.6
3.0
2.5
0.75
$5,975.8

$9,088.2
4.0
3.5
0.67
$6,102.1

$10,196.4
5.0
4.5
0.60
$6,109.7

Free Cash Flow Growth Rate:

Implied Share price

Sample Valuation

Discount Rate

Enterprise Value

Discount Rate

Sensitivity Analysis

10.1%
11.1%
12.1%
13.1%
14.1%

10.1%
11.1%
12.1%
13.1%
14.1%

12.5x
$180,286.2
$173,589.4
$167,209.2
$161,127.8
$155,328.7

12.5x
$631.5
$610.6
$590.7
$571.7
$553.6

13.5x
$192,310.8
$185,134.6
$178,298.1
$171,782.2
$165,569.3

13.5x
$669.0
$646.6
$625.3
$605.0
$585.6

Exit Multiple
14.5x
$204,335.4
$196,679.7
$189,386.9
$182,436.7
$175,809.9

Exit Multiple
14.5x
$706.6
$682.7
$659.9
$638.2
$617.5

15.5x
$216,359.9
$208,224.9
$200,475.8
$193,091.1
$186,050.6

15.5x
$744.1
$718.7
$694.5
$671.5
$649.5

16.5x
$228,384.5
$219,770.0
$211,564.7
$203,745.6
$196,291.2

16.5x
$781.7
$754.8
$729.2
$704.7
$681.5

DCF Assumptions
Discount Rate
Tax Rate

12.1%
35.0%

Mid-Year Conversion (Y/N)?
Terminal Multiple
Gordon Growth Approach (Y/N)?
Gordon Growth Rate

Y
14.5x
N
8.0%

Terminal Multiple Increment
Discount Rate Increment

1.0x
1.0%

Terminal Value Assumptions
Terminal EBITDA
Terminal Multiple
Terminal Value
Discount Period
Discount Factor @
PV of Terminal Value
% of Enterprise Value

$18,540.1
14.50
$268,831.6
4.50
0.60
$161,084.2

Enterprise Value

$189,713.0

Implied Equity Value and Share Price
Enterprise Value
$189,713.0
Less: Net Debt
($21,994.4)
Implied Equity Value
F.D. Shares Outstanding
Implied Share Price
Distribution of Value
Period Cash Flow
Terminal Cash Flow
Total
Implied Analyses
LTM EBITDA Multiple
NFY EBITDA Multiple
Implied Gordon Growth Rate

$211,707.4
320.3
$660.9

15.1%
84.9%
100.0%

18.1x
17.9x
13.4%

14

Project Google

Financial Overview
($ in millions)

WACC Analysis

Amazon.com, Inc.
eBay Inc.
Yahoo Inc.
Microsoft Corp.
Median
Mean
Google Inc.

Amazon.com, Inc.
eBay Inc.
Yahoo Inc.
Microsoft Corp.
Median
Mean
Google Inc.

Ticker
AMZN
EBAY
YHOO
MSFT

GOOG

Ticker
AMZN
EBAY
YHOO
MSFT

GOOG

Sample Valuation

Debt
$116.0
$200.0
$83.6
$5,996.0
$158.0
$1,598.9

Preferred
Stock
$0.0
$0.0
$0.0
$0.0
$0.0
$0.0

$0.0

$0.0

Market
Value of
Total
Equity
Capitalization
$52,915.0
$53,031.0
$30,630.3
$30,830.3
$22,220.8
$22,304.4
$260,494.6
$266,490.6
$41,772.6
$41,930.6
$91,565.1
$93,164.1
$170,879.4

Levered
Beta
1.25
1.92
0.76
0.96
1.11
1.22

Unlevered
Beta
1.25
1.91
0.76
0.95
1.10
1.22

1.10

1.10

$170,879.4

Equity
Risk
Premium
7.0%
7.0%
7.0%
7.0%
7.0%
7.0%
7.0%

Debt to
Equity
0.2%
0.7%
0.4%
2.3%
0.5%
0.9%
0.0%

Cost of
Equity
13.1%
17.8%
9.7%
11.1%
12.1%
12.9%
12.1%

Debt to
Total
Capitalization
0.2%
0.6%
0.4%
2.2%
0.5%
0.9%
0.0%

Cost of
Debt
0.0%
0.5%
0.0%
2.4%
0.2%
0.7%
0.0%

Preferred to
Total
Capitalization
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%

Equity to
Total
Capitalization
99.8%
99.4%
99.6%
97.8%
99.5%
99.1%

0.0%

Cost of
Preferred
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%

100.0%

WACC
13.1%
17.7%
9.7%
10.9%
12.0%
12.8%

0.0%

Source: Company filings, Yahoo! Finance and equity research.
Weighted Average Cost of Capital (WACC) = (Cost of Debt*(1- Tax Rate) * Debt to Enterprise Value) +
(Cost of Equity * Equity to Enterprise Value) + (Cost of Preferred *Preferred to Enterprise Value )
Cost of Equity = Risk Free + (Levered Beta * Equity Risk Premium)
Risk Free Rate is based on the 30-year treasury rate of 4.375%.
Equity Risk Premium (average) is sourced from equity research and press-releases.

12.1%

15

Project Google

Financial Overview
($ in millions)

Premiums Analysis – Technology M&A Deals Over $1 Billion with Public,
U.S.-Based Sellers Since 01/01/2007
Acquirer

Target

Date

Equity

Offer

Announced

Value

Price

Share Price History
1-Day

20-Day

Premium/(Discounts)
1-Day

20-Day

Microsoft Corp. (1)

aQuantive Inc.,

05/18/07

$6,376.93

$66.50

$35.87

$31.90

85.4%

108.5%

CISCO Systems, Inc. (2)

WebEX Com. Inc.

03/15/07

$3,090.52

$57.00

$25.98

$26.18

119.4%

117.7%

CBS Corp. (3)

CNET Networks

05/15/08

$1,794.35

$11.50

$7.95

$7.95

44.7%

44.7%

Adobe Systems, Inc. (4)
Hewlett-Packard (5)
Oracle Corp. (6)

Omniture, Inc.

10/23/09

$1,771.04

$21.50

$21.48

$21.51

0.1%

(0.05%)

EDS

05/13/08

$13,900.00

$25.00

$24.13

$17.17

3.6%

45.6%

Sun Microsystems

04/20/09

$7,400.00

$9.50

$6.69

$7.94

42.0%

19.6%

Dell Inc. (7)
CISCO Systems, Inc. (8)

Perot Systems
Starent Systems

09/21/09
10/13/09

$3,900.00
$2,900.00

$30.00
$35.00

$17.91
$34.97

$17.00
$34.39

67.5%
0.1%

76.5%
1.8%

Hewlett-Packard (9)
IBM (10)

3Com

11/11/09

$2,700.00

$7.90

$5.41

$5.84

46.0%

35.3%

SPSS

07/28/09

$1,200.00

$50.00

$35.09

$33.37

42.5%

49.8%

$66.50

$35.87

$34.39

119.4%

117.7%

Max
75th Percentile

$46.25

$32.72

$30.47

62.1%

69.8%

Median

$27.50

$22.81

$19.34

43.6%

45.1%

Mean

$31.39

$21.55

$20.33

45.1%

49.9%

25th Percentile
Min

Sample Valuation

1)
2)
3)
4)
5)
6)
7)
8)
9)
10)

$14.00

$10.44

$10.21

13.2%

23.6%

$7.90

$5.41

$5.84

0.1%

(0.0%)

Source: “Microsoft to Acquire aQuantive, Inc.” (Microsoft, 05/18/2007)
Source: “CISCO Announces Agreement to Acquire WebEx.”(CISCO, 03/15/2007)
Source: “CBS to buy CNET Networks.” (05/15/2008)
Source : “Adobe to Acquire Omniture.” (Adobe, 10/23/2009)
Source: “HP to Acquire EDS for $13.9 Billion.” (HP, 05/13/2008)
Source: “Sun and Oracle.” (Sun, 04/20/2009)
Source: “Dell to Acquire Perot Systems for $3.9Billion.” (Dell, 09/21/09)
Source: “CISCO Announces Agreement to Acquire Starent Networks.” (CISCO,10/13/2009)
Source: “HP to Acquire 3Com for $2.7 Billion.” (HP, 11/11/2009)
Source: “IBM to Acquire SPSS Inc. to Provide Clients Predictive Analytics Capabilities.” (IBM, 07/28/2009)

16

Project Google

Financial Overview

Wall Street Analysts’ Price Targets
Firm
Susquehanna Financial Group

Date
10/16/2009

Analyst
Name
Marianne Wolk

Rating
Positive

Price
Target
$625.00

$22.72

-

$25.69

Morgan Stanley

10/16/2009

Mary Meeker

Overweight

$625.00

$20.17

-

$22.87

Jefferies & Co.

10/16/2009

Youssef H. Squali

Buy

$600.00

$23.02

-

$26.54

Credit Suisse

10/16/2009

Spencer Wang

Outperform

$600.00

$22.51

-

$26.18

Collins Stewart
Median
Mean

10/16/2009

Sundeep Aggarwal

Buy

$635.00
$625.00
$617.00

$22.68
$22.68
$22.22

-

$25.89
$25.89
$25.43

Sample Valuation

Earnings Per Share

Source: Thomson Reuters One Banker and analysts‟ equity research reports on October 16, 2009.

17

Project Google

APPENDIX

Sample Valuation

18

Project Google

Appendix
($ in millions, except per share data)

Projected Income Statement
Income Statement (Exc. TAC) - Google Inc.:
Historical Statement
FY2006A
Net revenue (Exc.TAC):
Other cost of revenue:
Research & development:
Sales & marketing:
General & sales:
Total operating Expenses:
Operating Income:

FY2007A

FY2008A

Projected Statements
FY2009P

FY2010P

FY2011P

FY2012P

FY2013P

EBITDA:
EBITDA margin:
EBITDA growth:

$7,296.1 $11,660.1 $15,856.6 $17,879.5 $20,561.4 $23,350.2 $26,275.8 $29,326.9
$916.2
$1,715.2
$2,682.5
$2,826.3
$2,976.0
$3,124.3
$3,258.5
$3,380.1
$1,601.3
$2,120.0
$2,793.2
$3,071.7
$3,521.8
$3,920.0
$4,441.2
$4,942.4
$849.5
$1,461.3
$1,946.2
$2,071.5
$2,324.2
$2,692.3
$2,949.7
$3,358.1
$751.8
$1,279.3
$1,802.6
$1,663.7
$1,850.5
$2,143.6
$2,326.2
$2,648.2
$4,118.8 $6,575.7 $9,224.6 $9,633.2 $10,672.6 $11,880.2 $12,975.6 $14,328.9
$3,177.3 $5,084.4 $6,632.0 $8,246.3 $9,888.8 $11,470.0 $13,300.2 $14,998.1
4%
11%
11%
9%
10%
$4,207.3
$6,920.7
$9,251.7 $10,622.0 $12,601.3 $14,429.4 $16,541.8 $18,540.1
57.7%
59.4%
58.3%
59.4%
61.3%
61.8%
63.0%
63.2%
N/A
64.5%
33.7%
14.8%
18.6%
14.5%
14.6%
12.1%

Interest & other, net:
Impairment of equity investments: (1)
Pre-tax income:
Income tax provision
Effective Income tax:
Net Income:
Net income margin:
Net income growth:

$461.0
$0.0
$3,638.3
$933.6
25.7%
$2,704.8
37.1%
N/A

$589.6
$0.0
$5,674.0
$1,470.3
25.9%
$4,203.7
36.1%
55.4%

Weighted average diluted shares outstanding:
Diluted EPS (GAAP):

309.5
$8.74

316.2
$13.29

317.5
$13.31

317.5
$17.98

317.5
$21.61

317.5
$25.17

317.5
$29.31

317.5
$33.22

Depreciation:
Amortization:
Stock-based compensation: (2)

$494.4
$77.5
$458.1

$807.7
$159.9
$868.6

$1,212.2
$287.7
$1,119.8

$1,050.4
$251.8
$1,073.5

$1,336.5
$220.9
$1,155.1

$1,605.8
$169.2
$1,184.4

$1,844.0
$129.7
$1,267.9

$2,112.0
$104.0
$1,326.0

Sample Valuation

1)
2)

$316.4
($1,094.8)
$5,853.6
$1,626.7
27.8%
$4,226.9
26.7%
0.6%

$537.7
$667.4
$827.0
$1,015.9
$1,231.3
$0.0
$0.0
$0.0
$0.0
$0.0
$8,784.0 $10,556.1 $12,297.1 $14,316.0 $16,229.3
$3,074.4
$3,694.7
$4,304.0
$5,010.6
$5,680.3
35.0%
35.0%
35.0%
35.0%
35.0%
$5,709.6 $6,861.5 $7,993.1 $9,305.4 $10,549.1
31.9%
33.4%
34.2%
35.4%
36.0%
35.1%
20.2%
16.5%
16.4%
13.4%

Impairment of equity investments in AOL and Clearwire.
Per 2008 10K - SBC was estimated to be ~ $1.0 billion in 2009 and ~$1.4 billion thereafter.

19

Project Google

Appendix

Revenue And Operating Expenses Projections
Total Net Revenue (Exc. TAC) - Google Inc.:
Historical Statements
FY2006A
Search/Paid click revenue:
% of advertising revenue:
Display/YouTube revenue:
% of advertising revenue:
Total advertising revenue:
% of net revenue:
Licensing & other revenue:
% of net revenue:
Net Revenue:
Growth:

FY2007A

FY2008A

Projected Statements
FY2009P

FY2010P

FY2011P

FY2012P

FY2013P

$7,173.9 $11,396.8 $14,919.6 $16,553.3 $18,829.8 $21,275.0 $23,814.5 $26,422.4
99.9%
99.3%
98.2%
97.3%
96.2%
95.4%
94.5%
93.6%
$10.0
0.1%

$82.0
0.7%

$270.0
1.8%

$459.0
2.7%

$734.4
3.8%

$1,028.2
4.6%

$1,388.0
5.5%

$1,804.4
6.4%

$7,183.9 $11,478.8 $15,189.6 $17,012.3 $19,564.2 $22,303.1 $25,202.5 $28,226.9
98.5%
98.4%
95.8%
95.2%
95.2%
95.5%
95.9%
96.2%
$112.3
1.5%

$181.3
1.6%

$667.0
4.2%

$867.1
4.8%

$997.2
4.8%

$1,047.1
4.5%

$1,073.3
4.1%

$1,100.1
3.8%

$7,296.1 $11,660.1 $15,856.6 $17,879.5 $20,561.4 $23,350.2 $26,275.8 $29,326.9
n/a
59.8%
36.0%
12.8%
15.0%
13.6%
12.5%
11.6%

Operating Expenses- Google Inc.:
Historical Statements

Projected Statements

FY2006A

FY2007A

FY2008A

FY2009P

FY2010P

FY2011P

FY2012P

FY2013P

$916.2
12.6%

$1,715.2
14.7%

$2,682.5
16.9%

$2,826.3
15.8%

$2,976.0
14.5%

$3,124.3
13.4%

$3,258.5
12.4%

$3,380.1
11.5%

$1,228.6
16.8%

$2,120.0
18.2%

$2,793.2
17.6%

$3,071.7
17.2%

$3,521.8
17.1%

$3,920.0
16.8%

$4,441.2
16.9%

$4,942.4
16.9%

Sales and marketing:
% of total revenue

$849.5
11.6%

$1,461.3
12.5%

$1,946.2
12.3%

$2,071.5
11.6%

$2,324.2
11.3%

$2,692.3
11.5%

$2,949.7
11.2%

$3,358.1
11.5%

General and administrative:
% of total revenue

$751.8
10.3%

$1,279.3
11.0%

$1,802.6
11.4%

$1,663.7
9.3%

$1,850.5
9.0%

$2,143.6
9.2%

$2,326.2
8.9%

$2,648.2
9.0%

$3,746.1
51.3%

$6,575.7
56.4%

$9,224.6
58.2%

$9,633.2 $10,672.6 $11,880.2 $12,975.6 $14,328.9
53.9%
51.9%
50.9%
49.4%
48.9%

Cost of revenue:
% of total revenue
Research and development:
% of total revenue

Total operating expenses:
% net revenue:

Sample Valuation

20

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