Review of technology, media and telecom capital markets for Q1 2009.

1. Jefferies TMT Equity Capital Markets Update
2009 First Quarter Review
Jefferies TMT
ISSUE HIGHLIGHTS:
Equity Capital Markets
Alex Lehmann
• A Tale of Two Quarters: Negative sentiment in January and February is
Managing Director
replaced by cautious optimism in March
TMT Equity Origination
212.323.3946
alehmann@Jefferies.com
• Current Trends in TMT New Issue Activity:
Jefferies & Company, Inc.
– IPO activity gains momentum
520 Madison Avenue
New York, NY 10022
– Convertible Markets re-open
www.jefferies.com
– Structured Equity activity remains strong
APRIL 2009

2. Quarter in Review: The 2009 “New World Order”
We entered 2009 in the cliché of a “new world order”. After US QUARTERLY DEBT ISSUANCES SINCE 2006
the so-called “bulge bracket” had been acquired, bankrupted,
Number of Offerings
or converted into bank holding companies during the last
US High Yield Corporate Debt
600
four months of 2008, the entire sell- and buy-side landscape US Investment Grade Corporate Debt
had changed. As one example, Jefferies entered the year as 507
486
500
466
the largest independent full-service U.S. investment bank. 459
399 390
This “new world order” applied to the Technology, Media, 400
and Telecom (“TMT”) sector as well. While most companies –
289
private and public – seemed to be doing well and continuing 300
264
to grow, very few were immune to the impact of the broader 219 217
economic slowdown. Moreover, dislocations in the equity and 200 173
fixed income markets resulted in public and private valuations 110
99 93
that were substantially lower than they were just six months 82 83
77
100
67 62
49 42
earlier and often didn’t take into account the growth 24
20 14 14 4
prospects of their relevant companies or industries. 0
1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09
This attitude prevailed for much of the first quarter of 2009.
Source: Dealogic
As Q4 results – and projections – were as dismal (or perceived
to be dismal) as expected, the sector traded down with the
investor sentiment towards equities. As a result, March was
rest of the broader markets. Moreover, as credit markets
the strongest month performance-wise in six years, and TMT
continued to remain unstable and financial services
stocks benefited particularly well.
companies were deemed to be increasingly questionable,
those conditions carried over to virtually every other vertical The level of M&A activity has been particularly pertinent with
of the economy, impacting stocks, bonds, consumer a strong ‘barbell’ shape to the activity. The first quarter saw
confidence, and enterprise-level conditions. In short, the 31 U.S. deals in the TMT sector valued at less than $250
financial services industry – and the lack of resolution to its million in size coupled with the select, speculated larger
many troubles – dragged the rest of the economy down. transactions like IBM’s potential acquisition of Sun and Cisco’s
potential purchase of EMC. This level of activity has multiple
A Tale of Two Markets impacts on the financing markets. First and foremost, some
This sentiment – and its impact – prevailed through early of these deals will likely require funding, which could lead
March. At that point, a combination of the Federal to debt, equity and convertible activity. Second, as some
government’s statement regarding a detailed plan to deal companies are speculated to be potential acquisition targets,
with “toxic” loans on many banks’ balance sheets, along with investors will likely move into those stocks. Third, it re-focuses
increased levels of M&A activity, managed to turn around investors on the fundamentals of the TMT sector rather than
FIRST QUARTER TMT SNAPSHOT
TMT STOCKS PERFORMED SIGNIFICANTLY BETTER IN MARCH
Percent
120
115
110 S&P 500 Index
NASDAQ Composite Index
105
PHLX Semiconductor Index
100
S&P 500 Computers & Peripherals Index
95
S&P 500 Diversified Telecommunication
90 Services Index
85 S&P 500 Internet Software & Services Index
80
75
70
9
09
9
9
9
9
9
09
09
09
09
09
09
/0
/0
/0
/0
/0
/0
1/
/
/
7/
4/
4/
1/
14
28
18
25
18
25
11
11
2
1/
2/
3/
4/
2/
3/
1/
1/
1/
2/
2/
3/
3/
Source: Capital IQ
Jefferies TMT Equity Capital Markets Update | APRIL 2009 1

3. Quarter in Review: Drivers of the Equity Markets
the broader emotion around the equity markets – and for the MONTHLY EQUITY MUTUAL FUND FLOW DATA
most part that is a positive for TMT companies. Fourth, it
appears that private equity firms are cautiously wading back
$ in Billions
into the M&A markets, which adds to the overall tension of $10.0 $4.9
M&A processes and thus to equity valuations.
$0.0
Additionally, the attitude towards Q1 earnings has become ($10.0)
increasingly benign. First, there is a belief that earnings from ($20.0)
financial services companies could come in much stronger ($18.3)
($18.3)
($25.1)
($30.0) ($24.4) ($25.2)
than reported – due primarily to two factors: one, many of
($40.0)
the assets that they wrote down were written down to levels
where they may need to be written up; and two, their core ($50.0)
($47.4)
businesses have been profitable due to fewer active banks in ($60.0)
Sept Oct Nov Dec Jan Feb Mar
the traditional investment banking activities of trading,
2008 2009
financing, and advisory work. For TMT companies, visibility
seems to have improved and there is a growing belief among Source: Bloomberg
many buy-side investors that the current stock prices take into
account the uncertainty of how the next three quarters will
fare for these companies.
through IPOs and public companies looking to grow
Finally, the markets have turned as investors have re-focused organically or through acquisitions through equity funding.
on their desire to have growth assets in their portfolios.
In 2009, it is very likely that up to 70% of publicly-traded Equity New Issue Activity
companies will not grow; as a result “growth” companies
The TMT equity markets look like they will be led by four to
are now those that may grow 5-10% this year and “hyper”-
five products for the remainder of the year:
growth companies are those that may grow more than 20%,
• IPOs: we are seeing a re-opening of companies coming to
certainly bars that have been re-set relative to where they
market and others accelerating their IPO preparation
were just 12 months ago. As investors start to re-invest in
growth assets, this will undoubtedly help feed the equity
• PIPE and Registered Direct (“RD”) activity: this has been
funding markets, particularly in the TMT sector: those who
somewhat strong to-date and should get stronger
will benefit will include private companies raising capital
TMT ANNOUNCED M&A TRANSACTIONS 2009 US YTD
ANNOUNCEMENT DEAL VALUE
DATE ACQUIROR TARGET INDUSTRY ($ MM)
04/01/09 Fidelity National Information Services Metavante Technologies Software 2,978.3
04/01/09 Rockwell Collins DataPath Software 129.6
03/25/09 Hearst Corporation Hearst-Argyle Television Media 67.5
03/23/09 Cox Enterprises Cox Radio Media 65.2
03/23/09 Deloitte & Touche BearingPoint Services 350.0
03/19/09 Cisco Systems Pure Digital Technologies Hardware 590.0
03/12/09 Carl Icahn Lions Gate Entertainment Media 175.0
03/05/09 TriNet Group Gevity HR Services 98.8
03/02/09 TNS VeriSign Services 230.0
02/27/09 Kudelski OpenTV Services 87.2
02/09/09 CSR PLC SiRF Technology Software 128.6
01/15/09 Nuance Communications Zi Corporation Software 175.0
Source: Dealogic
Jefferies TMT Equity Capital Markets Update | APRIL 2009 2

4. Quarter in Review: Equity New Issuance Activity
• Reverse enquiry PIPEs by private equity firms: a growing
TMT IPO BACKLOG
trend that has seen some activity and should see more in
AMT. FILED
coming months
ISSUER FILING DATE ($MM) SECTOR
• Public accelerated follow-on and convertible financings: OpenTable Inc 01/30/09 40.0 Internet
a recent trend in the past month Medidata Solutions 01/26/09 75.0 HCIT
FriendFinder Networks 12/23/08 460.0 Internet
• Potential rights offerings: a lot of discussion on this topic
Bridgepoint Education 12/22/08 230.0 Internet
but there has been a minimal amount of activity in the
Rosetta Stone 09/23/08 115.0 Software
TMT space thus far
Avago Technologies 08/21/08 400.0 Semiconductors
NextG Networks 06/05/08 150.0 Telecom Services
IPOs
Open Link 05/12/08 200.0 Software
There are currently 19 TMT companies on file for IPOs,
Gomez 05/07/08 80.5 New Media
with total proceeds of approximately $3.5 billion expected.
Digitalglobe 04/14/08 250.0 Software
The mix of companies on file is reasonably well distributed
Solarwinds 03/21/08 250.0 Software
between Software, Internet, Telecom Services, IT Services,
LogMeIn 01/11/08 86.3 Software
and Hardware companies. We have not seen many
Intelius Inc 01/10/08 143.8 IT Services
semiconductor or traditional media filings.
Source Photonics 12/26/07 130.0 Semiconductors
After a lull in pricing activity (the last TMT IPO to price was
Education Management 12/21/07 500.0 Internet
the Grand Canyon IPO in November 2008), we have seen
ExactTarget 12/14/07 86.3 Software
one IPO price recently (Changyou, a Chinese mobile gaming
Broadview Networks 11/30/07 250.0 Telecom Services
company); two others that have launched and should price
Intcomex Inc 07/27/07 125.0 Computer Equipment
in mid-April (Rosetta Stone and Bridgepoint Education); and
Vitacost.com 06/20/07 57.3 Internet
many others that we expect to be priced between now and
the end of the second quarter. In total, we may see as many Source: Dealogic
TMT FIRST QUARTER PIPE TRANSACTIONS
GROSS FIXED CONVERSION
COMPANY NAME CLOSING PROCEEDS PREMIUM/DISCOUNT INTEREST OR WARRANT
AT CLOSING DATE ($MM) AT ANNOUNCEMENT DIVIDEND RATE COVERAGE SECURITY SOLD
LoopNet, Inc. 3/30/09 50.0 10.0% N/A N/A Convertible Preferred Stock
Lecere Corporation 3/30/09 7.1 N/A N/A N/A Common Stock
CommScope, Inc. 3/19/09 100.0 10.0% 3.5% N/A Convertible Senior Subordinated Debentures
China Tel Group Inc. 3/9/09 300.0 N/A N/A 0.0% Common Stock
ParkerVision, Inc. 3/3/09 6.2 N/A N/A 0.0% Registered Direct
Paradigm Holdings, Inc. 3/3/09 6.2 N/A 12.5% 167.7% Non-Convertible Preferred Stock
Advanced Micro Devices, Inc. 3/2/09 124.7 N/A N/A 60.3% Common Stock
Clearwire Corporation 2/27/09 10.0 N/A N/A N/A Common Stock
Genius Products, Inc. 2/24/09 5.0 N/A 5.0% 776.4% Promissory Notes
ImageWare Systems, Inc. 2/12/09 5.0 N/A 5.0% 17.1% Non-Convertible Secured Promissory Notes
Pipeline Data Inc. 2/2/09 15.0 103.3% 16.0% 0.0% Convertible Preferred Stock
Omniture, Inc. 1/27/09 25.0 N/A N/A 0.0% Common Stock
Nuance Communications, Inc. 1/13/09 175.2 N/A N/A 22.2% Common Stock
Dealogic, transactions below $5 million not included.
N/A - Not available or undisclosed.
Jefferies TMT Equity Capital Markets Update | APRIL 2009 3

5. Quarter in Review: Equity New Issuance Activity
as 4-6 TMT IPOs price in Q2 2009. While for the most part
PRECURSORS TO A RETURN OF THE IPO MARKET
these offerings are coming at relatively cheap pricing levels
(Grand Canyon was priced at a 30% discount to its
comparables, and Changyou priced at 8x PE, a 40% discount
to its comparables), we believe there is an increasing level ry”
cove
e
to “R
of reconciliation between the buyside and boards and s
Step
management teams around valuation expectations.
Improved
Early Stage
More Active IPO Market
PIPEs and RDs Mid/Large-
More Active Cap IPO
Non-traditional PIPE and RD activity has remained strong Follow On Market
Increased
and Convert
M&A
despite the market turmoil since last September. Some Activity
Improved Activity
Sector
examples include another investment by Warburg Pincus in Improved Valuations
Overall
Nuance Communications and a second funding by Elevation Market
Partners in Palm. Sentiment
However, more recently we have seen more traditional PIPEs
and RDs be marketed (e.g. to multiple buyers) and while this
has been less prevalent among TMT companies we do expect
that activity to pick up as issuers continue to try to avoid
market exposure and risk. That said, we are hearing more discussion among corporates
and advisors regarding rights offerings, and have seen one
Reverse enquiry PIPEs by private equity sponsors offering marketed within the TMT industry. This could be a
bellwether for future offerings.
As private equity investors continue to have reasonably strong
levels of cash, they are increasingly approaching companies
In sum, it does feel as if the market tone has improved and
directly about making investments in those companies. The
activity can pick up for at least a month or two before
structures are usually convertible preferreds and they are
potentially slowing down, depending on market conditions.
usually a 3-5 year maturity based on a cash-on-cash return
Fund flows for mutual funds have stabilized and based on
of 2.0 – 3.0x or roughly a 20-30% IRR. Depending on the
anecdotal conversations, many hedge funds are doing very
company and its relative need for capital, some of these
well so far this year. As a result, they are looking for new
suggested structures are gaining traction with corporates.
investment ideas.
We would encourage almost every public company that can
Public follow-on and convertible offerings
to get on file with a shelf to take advantage of this window
After a period in January and early February in which there
and for those with IPO aspirations to consult their advisors
were no marketed follow-on offerings and no convertible
about the viability and timing of a potential public exit for
transactions pricing since the demise of Lehman Brothers in
their companies.
September of 2008, the market for both products began to
thaw in late February. In the TMT sector, Teradyne (a test As always, please feel free to contact us if you would like to
and measurement company) raised $150 million with terms discuss any of these topics further.
of a 4.5% coupon and 25% conversion premium. In the
follow-on market, there have been very few transactions but
we do expect that overnight or 1-2 day marketed offerings
will pick up.
Rights offerings
Finally, rights offerings have become more visible. A staple
of European and some Asian countries for years, there
have been very few rights offerings of any size in the U.S.,
as investors typically prefer to take their chances with a
marketed follow-on. Additionally, the regulatory environment
in Europe and Asia is more conducive to rights offering as
opposed to the more stringent U.S. environment.
Jefferies TMT Equity Capital Markets Update | APRIL 2009 4

6. About Jefferies
Jefferies, an independent, full-service global securities and investment banking firm, has served companies and their investors
for more than 45 years. Headquartered in New York City, with offices in more than 25 cities around the world, Jefferies provides
clients with capital markets and financial advisory services, institutional brokerage, securities research and asset management.
The firm provides investors with fundamental research and trade execution in equity, equity-linked, and fixed income securities,
including corporate bonds, high yield bonds, US government and agency securities, repo finance, mortgage- and asset-backed
securities, municipal bonds, whole loans and emerging markets debt, as well as commodities and derivatives. Jefferies offers
companies capital markets, merger and acquisition, restructuring and other financial advisory services. Jefferies & Company, Inc.
is the principal operating subsidiary of Jefferies Group, Inc. (NYSE: JEF: www.jefferies.com). Jefferies International Limited,
a UK-incorporated, wholly owned subsidiary of Jefferies Group, Inc., was established in London in 1985 and is authorised and
regulated by the UK Financial Services Authority.
For corporate clients, the Firm is a top M&A and restructuring advisor and underwriter of high yield and equity new issues.
Serving institutional investors and high net worth individuals, the Firm is a leading provider of trade execution in equity,
convertible, and high yield securities and a market maker of investment grade fixed income and commodity-linked products.
Jefferies also offers top-tier private client services, prime brokerage, securities lending, correspondent clearing and NYSE
brokerage services. The Firm has an award-winning research practice, covering equity, high yield and convertible securities,
as well as a growing asset management practice utilizing a variety of asset strategies.
Jefferies was founded in the capital markets as a third-market equity trading firm and has flourished over the past five decades.
The Firm’s reputation has been built on a high level of client attention and service, and the ability to execute large block trades
with minimal market impact. Today, Jefferies is seen by many as the investment bank of choice for companies and their investors.
A creative, hands-on approach, combined with experience, expertise and widespread relationships, distinguishes the firm.
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