Page 218 of 401 Thanksgiving 2008

SPSS (Nasdaq: SPSS) Chicago, IL, 312-651-3000

Technology: Software & Programming, Member of S&P SmallCap 600 http://www.spss.com

Trading Data Consensus EPS Estimates Valuation

Price: $24.30 (as of 11/14/08) Month # of P/E FYE 12/31/07 14.7x
52-week range: $21.98 - $43.36 Latest Ago Ests P/E FYE 12/31/08 12.8x
Market value: $441 million This quarter $0.45 $0.56 7 P/E FYE 12/31/09 12.4x
Enterprise value: $284 million Next quarter 0.48 0.50 7 P/E FYE 12/31/10 12.7x
Shares out: 18.1 million FYE 12/31/08 1.90 1.92 7 EV / LTM revenue 0.9x
Ownership Data FYE 12/31/09 1.96 2.11 7 EV / LTM EBITDA n/a
Insider ownership: 1% FYE 12/31/10 1.92 2.13 2 EV / LTM EBIT 5.4x
Insider buys (last six months): 0 LT EPS growth 11.9% 11.9% 5 P / tangible book 3.4x
Insider sales (last six months): 7 Latest Quarterly EPS Surprise Greenblatt Criteria
Institutional ownership: n/a Date Actual Estimate LTM EBIT yield 18%
# of institutional owners: n/a 11/4/08 $0.55 $0.44 LTM pre-tax ROC n/m

Operating Performance and Financial Position

($ millions, except Fiscal Years Ended LTME FQE FQE
per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 174 209 208 224 236 262 291 309 72 75
Gross profit 153 185 192 210 220 243 273 288 68 69
EBIT (34) (17) 0 7 28 34 50 52 13 13
Net income (26) (17) 9 6 16 15 34 38 8 11
Diluted EPS (1.90) (0.99) 0.53 0.31 0.85 0.73 1.65 1.97 0.41 0.55
Cash from ops 14 (1) 22 12 52 48 85 79 17 17
Capex 33 24 12 15 17 17 19 20 5 7
Free cash flow (20) (25) 10 (2) 35 31 66 58 12 10
Cash & investments 31 15 36 37 84 140 307 307 297 307
Total current assets 119 89 113 116 144 207 376 361 358 361
Intangible assets 92 67 73 74 73 77 80 83 80 83
Total assets 252 214 229 235 272 333 501 488 488 488
Short-term debt 1 3 3 3 3 0 0 0 0 0
Total current liabilities 93 99 96 102 106 114 139 122 119 122
Long-term debt 0 6 6 3 1 0 150 150 150 150
Total liabilities 119 112 109 107 108 116 292 275 270 275
Preferred stock 0 0 0 0 0 0 0 0 0 0
Common equity 133 102 120 129 164 217 209 213 218 213
EBIT/capital employed -116% -75% 1% >100% n/m n/m n/m n/m n/m n/m

Ten-Year Stock Price Performance and Trading Volume Dynamics

$60

$50

$40

$30

$20

$10

$0
Jan 00 Jan 00 Jan 00 Jan 00 Oct 03 Oct 04 Oct 05 Oct 06 Oct 07 Oct 08

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 Page 219 of 401 Thanksgiving 2008

BUSINESS OVERVIEW • Investors may under-appreciate underlying

SPSS provides analytics software, with “predictive analytics” growth, as revenue has grown more slowly than
technology improving processes by providing “forward license revenue. Consistent double-digit license
visibility” for business decisions. SPSS was founded in 1968. growth reflects strong adoption of SCSS software.
• Stock price implies 13% trailing FCF yield, 12x
SELECTED OPERATING DATA trailing P/E and 12x forward P/E.
YTD
FYE December 31 2005 2006 2007 9/30/08
% of revenue by type:
INVESTMENT RISKS & CONCERNS
License 46% 48% 49% 47% • “Very challenging economic times” and dollar
Maintenance 43% 42% 41% 43% appreciation have hurt YTD results. License sales in
Services 11% 10% 10% 10% Europe and Japan have not met expectations. Sales
Revenue growth by type:
License 12% 16% 15% 5%
in northern Europe have been affected by a lack of
Maintenance 5% 7% 8% 13% sales capacity, an issue the company is addressing.
Services -14% 4% 5% 6% • Primary worldwide competitor in each target
Total revenue growth 5% 11% 11% 8% market is the well-respected and larger SAS
Selected items as % of revenue:
EBIT 12% 13% 17% 16%
Institute (>$2 billion revenue). SPSS also competes
D&A 7% 6% 6% 7% against NCR, Fair Isaac and Oracle.
Capex -3% -2% -2% -2% • Recently updated poison pill. The company has a
Capitalized software -4% -5% -5% -5% shareholder rights plan in place that discourages the
% of revenue by geography:
U.S. 44% 42% 41% 40% acquisition of more than 15% of SPSS shares
Europe 42% 43% 44% 44% without the company’s approval.
Pacific Rim 15% 15% 15% 16%
COMPARABLE PUBLIC COMPANY ANALYSIS
INVESTMENT HIGHLIGHTS ($mn) MV EV EV/Rev P/TB
08 09
P/E P/E
• $3 billion market growing in low teens. SPSS
FIC 650 1,034 1.4x n/m 8x 7x
targets advanced analytics ($1.5 billion, growing at
MSFT 178,445 159,698 2.6x 9.2x 10x 9x
10%) and CRM analytic applications ($1.5 billion,
MSTR 422 295 .8x 3.7x 10x 10x
growing at 13%). SPSS has less than 10% share.
ORCL 87,110 85,326 3.7x n/m 11x 10x
• Predictive Analytics software improves processes
SAP 41,890 39,852 2.8x 119.0x 14x 13x
by providing visibility for key decision makers and
SPSS 441 284 .9x 3.4x 13x 12x
automating decisions to meet business goals. SCSS
claims that Predictive Analytics ads significantly
more value than business intelligence software. MAJOR HOLDERS
• Customer list includes 95% of Fortune 1000, all CEO Noonan 3% │ Other insiders 2% │ T Rowe 11% │
major countries, all U.S. State governments, every Barclays 7% │ AXA 6% │ State Street 6% │ Brown 6% │
branch of the U.S. Military, all top U.S. universities Ellington 6% │ Daruma 5%
and 75% of top European universities.
• Steady margin improvement from 2004-07. SPSS RATINGS
achieved EBIT margins of 3% in 2004, 12% in VALUE Intrinsic value materially higher than market value?
2005, 13% in 2006, and 17% in 2007. MANAGEMENT Capable and properly incentivized?
• Repurchased $28 million of stock YTD and $72 FINANCIAL STRENGTH Solid balance sheet?
million in 2007. MOAT Able to sustain high returns on invested capital?
EARNINGS MOMENTUM Fundamentals improving?
• Low-cost $150 million convert due 2012, with a
MACRO Poised to benefit from economic and secular trends?
conversion price of $47 per share and a fixed
EXPLOSIVENESS 5%+ probability of 5x upside in one year?
interest rate of 2.5%.
• Guiding for revenue growth of 4-6% and EPS
growth of 15-20% in 2008, with expected revenue
of $302-308 million, non-GAAP EPS of $1.90-1.98.

THE BOTTOM LINE

SPSS is a compelling magic formula selection. The impressive client roster, including 95% of the Fortune 1000, highlights
SPSS’s advantage in predictive analytics software. This niche market appears to have better long-term characteristics than
most other software segments, which tend to undergo rapid change and attract vicious competition. SPSS’s primary
competitor, the SAS Institute, has been a solid performer for many years, and we believe SPSS could achieve similar success.

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